July 7, 2020

Five More Airlines Sign LOIs for Treasury Loans

1 On the heels of American and four other airlines signing letters of intent to take advantage of a loan from the U.S. Treasury, five more U.S. airlines have joined the party. Alaska, Delta, JetBlue, Southwest, and United have now all signed letters of intent with the Treasury to receive cash from the government to improve their liquidity heading into the fall. That leaves Allegiant as the biggest U.S. airline not to have signed.

This money differs from previous CARES Act payments as it is a loan that must be repaid, but the broad level of interest indicates airlines can get this money cheaper than they could on the open market. Airlines that receive the cash must commit to certain requirements under the CARES Act to maintain employment levels and limit employee compensation, dividends, and share repurchases.

At least one unnamed airline plans to take the CARES Act loan cash, go to Vegas, and place it on red. Red hits, you’ve doubled your money. Pay the government back and all is well. It’s a simple business, really.

United Announces International Schedule Additions for September

2 United announced three additional international routes between now and October as the airline continues to slowly add service back toward pre-pandemic levels.

To start, the airline is launching a new route with 3x weekly service to Tel Aviv from its hub at Chicago/O’Hare. The flight will operate on a 787-9 and will be United’s fourth city to have service to Israel. United is increasing its flight from Newark to Tel Aviv to 10x weekly, will resume service from Washington/Dulles in the fall, and continues to operate its 3x weekly flight from San Francisco. Apparently Israel is doing incredibly well for United despite still being off limits to US tourists.

Two other routes will resume in September, as United sees once weekly service from Chicago/O’Hare to Hong Kong and 3x weekly flights from Los Angeles to Sydney. We’ve tried to figure out the rationale for these, but we’re at a loss. It could be related to cargo, maintenance routings, or it’s just where the dart landed.

GoGo to Provide Wifi from 3,000 Feet and Above

3 GoGo announced that its wifi service will be available on most commercial aircraft once the plane reaches 3,000 feet, as opposed to the current 10,000 feet the plane must reach prior to wifi kicking in.

Customers all over the world rejoiced over this change, as the 3 minutes it takes a plane from getting from 3,000 to 10,000 feet on climb out are often very crucial for Very Important Businessmen. Very Important Businessmen are often seated next to you both on board and in an airport lounge. They carry on Very Important Business Conversations on their phones and do so very loudly. They often are on their phones long after the aircraft door is shut and the cabin crew has told them to get off the phone.

This change will allow them to fail to connect to wifi 3 minutes earlier upon departure. It will have no impact upon arrival since the service will have already cut out long before.

The change will be effective on July 20.

New Canadian Airline Waiting in the Wings

4 In a move that someone, somewhere in the world thinks makes sense based on the current economic climate, Montréal-based charter airline Nolinor Aviation is ready to launch a new commercial airline, OWG, in the coming weeks.

The airline received permission to operate international routes by the Canadian Ministry of Transport on July 6. It plans to offer 737 service from Quebec to “southern destinations,” geared at leisure travelers from the French Canadian province headed to the Caribbean. The airline will announce destinations and routes “shortly,” whatever that means.

OWG says “Unlike many airlines, the aircraft used by OWG will be tracked in real-time using a sophisticated communication system.” Apparently OWG just invented GPS and radar. The airline also says it will be amongst the first airlines in the world to offer seats on its aircraft along with seat belts and restrooms.

Israel’s Government Will Take Majority Stake In El Al

5 It’s been a challenging few months for Israel’s flag carrier, El Al, and the Israeli government has made the decision to nationalize the airline once again. The airline lost $140 million in Q1 with Q2 expected to be much worse — and Q3 isn’t off to a great start either with the airline having ceased operations for the time being.

El Al, which was government-owned until 2005, is receiving $400 million in funding from Israel. The money is coming in the form of a $250 million loan and a $150 million purchase of stock along with $100 in a savings bond from El Al’s bubbie. The government does not plan to hold the airline indefinitely; instead hoping that it can sell its stake to an outside bidder once the airline is stabilized.

The deal is pending the approval of El Al’s labor unions, and is not a slam dunk as the government and airline plan to slash 2,000 jobs as a condition of the sale.

Airline Potpourri

  • Aeromexico plans to reduce its fleet size as it emerges from bankruptcy. The airline is returning its entire fleet of nine E170s plus five of its 11 737-700s and 5 of its 35 737-800s.
  • Air Canada has resumed service to Dublin with 3x weekly service from its Toronto/Pearson hub.
  • Air New Zealand has placed a temporary hold on international bookings.
  • Austrian will receive €150 million in aid from the Austrian federal government.
  • Emirates has ended service to Adelaide (ADL) indefinitely.
  • Lion Air is cutting 2,600 jobs across its three brands.
  • United has requested an extension of its service exemption to Aguadilla, PR (BQN) through August 6. The request seems reasonable since the airport is closed and will remain closed through August 5.

Andrew’s Moment of Levity

“I have a split personality,” Tom said, while being frank.

June 25, 2020

American Announces Several Health Measures Overshadowed by Removal of Booking Cap

1 American announced a slew of health-related measures this morning along with a change fee waiver extension, but all were overshadowed by word that the airline would stop regulating booking levels on its flights beginning July 1.

Unlike Delta or Southwest, American did not have strict capacity restrictions on its flights. It did, however, limit bookings to try to keep numbers lower onboard. That restriction will go away on July 1. We have also learned that United, which has no booking limit, will start allowing employee pass travelers even when loads rise above the previous 70% limit.

It’s unknown what kind of impact on COVID transmission potential this will have, but if mask-wearing is enforced along with basic hygiene — which we all know can be challenge for some passengers — it may not be significant. There already was no true social distancing onboard since several people were seated within 6 feet of each other. That being said, the timing of the announcement — when the US is hitting record new highs in COVID cases — is not ideal.

The following was also announced:

  • American has created a Travel Health Advisory Panel including Vanderbilt University Medical Center to advise on best practices.
  • The airline expects to receive GBAC STAR accreditation from the Global Biorisk Advisory Council for its fleet and lounges by year-end.
  • Customers will be asked to answer a health survey beginning June 30.
  • The change fee waiver has now been extended to all bookings made through September 30. (It was June 30.)
  • American will continue to notify travelers when flights are full and allow them change to less full flights at no cost.

Major US Airlines Offer Refunds for Passengers with Fevers

2 Airlines For America (A4A) said on Thursday that its member airlines plan to offer customers a refund if they are found to have an elevated temperature of 100.4° F as defined by the CDC during screening at the airport. A4A members include: Alaska, American, Delta, Hawaiian, JetBlue, Southwest, and United.

Last month, A4A and its member airlines came out in support of the TSA conducting temperature screenings on passengers as part of the flying process. The airlines are putting their money where their mouths are — quite literally — by agreeing to refund passengers which show a reading above the CDC’s recommended guidelines.

The airlines settled on this plan after an earlier two-step draft was discarded. In that plan, airlines would first attempt to lower fevers with cowbell. Only if that failed would a refund be permitted.

There Can Only Be One: Bain Capital Wins Virgin Australia Bid

3 After Cyrus Capital bitterly dropped out of the contest to take over Virgin Australia, Bain Capital was announced as the winning bidder to bring the airline out of administration.

In an interview with The Australian Financial Review, Bain Capital Managing Director Private Equity in Sydney, Mike Murphy, laid out the airline’s surprisingly-familiar new strategy. “I think largely the positioning from a customer perspective will be very similar to where it is, but maybe a little more value focused.”

The slight tilt towards value means there will be less focus on elite travelers and lounges. Murphy appears content on ceding that market to Qantas, citing a study in which he says the company “interviewed six or seven thousand customers… to figure out what they really care about.” The result? “…price and scheduling, convenience are No. 1 and No. 2 by a country mile.”

Upon seeing this, every airline employee in the world immediately sighed deeply and said, “They needed to waste a ton of money interviewing thousands to learn what we’ve known forever?.” That was followed with, “has Vegas posted the odds for when the airline will go bankrupt again yet?”

Foreign Regulators Insist on Substantial Changes to 737 MAX Controls

4 Aviation safety regulators in Europe and Canada are demanding design changes to the flight control systems on Boeing’s 737 MAX that going beyond fixing the flawed system that tragically brought down the aircraft in two fatal crashes.

The FAA has sided with its fellow regulatory bodies, telling Boeing it must come up with design upgrades to satisfy the requirements from Canada & Europe. Despite this, the three regulatory bodies are allowing Boeing to make the extra upgrades on the honor system as they will allow MAX back into service without the additional fixes already in place.

It is rumored that the first draft of design changes specified that Boeing “make a new airplane that’s better,” but that was rejected.

Existing U.S. certification requirements don’t mandate the enhancements Europe’s regulatory body, EASA, and Transport Canada are requiring. The FAA’s belief that Boeing must address the three specific issues raised is aimed at achieving harmony among the main aviation regulators, which at earlier points in the discussions over the MAX crashes have been unusually at odds.

40% of Pilots in Pakistan Have Fake Licenses

5 No, this isn’t the Onion. Of the 860 active and “licensed” pilots in Pakistan, 262 did not take the pilot licensing exam and instead had someone take it for them. This scheme, which high schools and colleges across the U.S. sniffed out decades ago, appears to be in full effect in Pakistani Pilot Academies.

The news came out following an investigation leading to an inquiry report made to Pakistan’s National Assembly in reference to the deadly crash of Pakistan International Airline’s Flight 8303 that went down near Karachi in May.

It was revealed during the investigation that many pilots were appointed on a “political basis” and not on merit. At least four pilots for PIA were discovered to have fake degrees. When asked to comment, neither Chief Pilot Ferris Bueller or Assistant Chief Pilot Zack Morris had any comment.

Airline Potpourri

  • Allegiant will be the last big carrier in the US to finally require masks for passengers beginning July 2.
  • Emirates is thinking about narrowbody aircraft in the future. This would be the first time since it retired its 727s in 1995.
  • KLM has secured a mix of government loans and loan guarantees worth €3.4 billion.
  • Munich Airport will reopen Terminal 1 on July 8.
  • Ryanair is preparing to battle Austria and Lufthansa Group with an onslaught of new Vienna flights.
  • Tonga has extended its ban on foreign airlines flying to the country until September 12.
  • United will return to China with Wednesday and Saturday flights from San Francisco to Shanghai/Pudong beginning July 8.

Andrew’s Moment of Levity

I saw a sign on a deli that said “cured meats.” Out of curiosity, I went in to check it out. Inside, I saw a salami take its first steps since the accident. A prosciutto learns to forgive.