IAGblog Podcasts

The original team of four analysts (Aaron Gellman, Richard Aboulafia, George Hamlin and Hans Weber) who wrote this report in 2002 were lambasted by Airbus boosters because of their negative views of the A380 program. In 2004 the analysts revisited the project with the same view when they updated their report. Today we had three (Gellman, Aboulafia & Hamlin) of the original four analysts to provide a verbal update on the 2004 update.

Their views have hardened. They see the A380 as an even bigger mistake today; they don't pull any punches. Not only do they see the plane as mostly an emotional, industrial policy decision, but they also point to the risk Airbus has with so many of this plane being bought by one customer.

Boeing does not get by unblemished. Its 747-8 is struggling for sales because the analysts view the VLA market as simply unattractive given the way the airline market has evolved. This is a sobering view of the A380's prospects.

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We decided to change tack today - rather than poke holes in United, we decided to discuss what we might do if we had the chance to try turn the situation around. Instead of being negative, we review what options there are to increase cash, cut costs and align the airline with the market.

We don't see the merger as positive. We see a Southwest threat everywhere we look. What does United do well that bears defending and what can the airline give up as losing propositions? The choices grew fewer as time progresses.

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Evan Sparks is a self described policy wonk and writes a respected blog at EvanSparks.com. Evan follows aviation policy in Washington and shares his view of the FAA funding problems and Congress' inability to basically get its act together.

As Evan points out this action does not necessarily mean something bad happens now. But it certainly does not help in the long term. The US aviation system is already creaking and groaning. Infrastructure is old and tired.

This action does not build confidence in the nation's political leadership. Happily, an election is coming.

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Erkan Pinar, head of AirlineStrategy.com in Munich and Timothy O'Neil-Dunne, Managing Partner at T2Impact LLC discuss the future of UK-based airline, BMI.

The story in interesting because it pits all sorts of big names against each other; Lufthansa has a big stake, SAS is trying to sell their stake and Sir Michael Bishop - who has 50% plus 1 share - may be trying to sell out.

The question is who does he sell to? How can he extract the most value for his stake when so much of the airline is already owned by Lufthansa? Does Lufthansa buy out SAS - if they do, how does this impact the value of the remaining stake?

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The IAG team does a quick review of the possible merger between United and US Airways and it looks nasty. As the table clearly illustrates United is the industry's weakest link. As stated in the podcast, the bear only has to catch the weakest - but there is more than one carnivore doing the chasing, so nobody is really safe.

Download the chart here.

That said, United and US Airways can clearly be bled to death by Southwest. The weakest are up against the strongest and the situation is dire. Merging the two weakest adds not one bit to a more secure future. Indeed, US Airways should reject United's overtures forthwith as the bear will catch United first. US Airways may be able to escape if the industry's fortunes turn within the year. For United, all things remaining the same, the year looks like being lunch.

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Ian Yeoman has podcasts with IAG before and, as usual, he offers interesting views we have not come across before. Imagine forecasting the future of tourism 25 years out? Its hard enough looking forward one year.

With so many variables, Ian takes a brave look into the future and shares some of the highlights of his new book. You can buy the book at this site: http://www.tomorrowstourist.com. Visit the site while listening because you will pick up snippets on the site that are provocative. Ian is a provocative thinker.

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Today there were strong rumors about US Airways and United Airlines doing merger talk. Discussing the news is Professor Aaron Gellman, who is the Transportation Center at Northwestern University and George Hamlin, MD of ACA Associates.

As we discussed this idea, we could not come up with any compelling reasons that the deal makes sense. US Airways is still dealing with two pilot groups and essentially operating as two airlines within one. That scene is one to avoid like a thunderhead. United on the other hand is a mess; its losing buckets of money (an American Alitalia?) What does United's stellar managers have to offer this combined company?

It seems clear that the merger talk is emotionally driven now; there is a fear of being left out. But only the weak airlines have this fear. American, Southwest and Continental are above the fray and are likely to be the best US airlines to fly because of the minimal indigestion they will be suffering as time goes on. No wonder BA is rumored to be quietly talking with American and Continental. Its funny how the US' strongest airlines are in Texas.

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The IAG analyst team is back this Friday to discuss the apparent merged fleet news - the CEO at both airlines are touting this as an advantage. This view flies in the face of every other airline cost issue - rationalizing fleets are gospel everywhere else. But apparently not at these two airlines.

In addition, looking at the cost of fuel, no matter how the management packages it, fleet cuts must come because there too many seats. The merged airline looks like it has no plans to cut any routes. Perhaps this is grandstanding for Congress. Or perhaps, these people really believe this? Surely they cannot; but who knows? Little makes sense these days.

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Chris Elliott, syndicated travel columnist and Ombudsman for National Geographic Traveler magazine is a travel maven. Google his name if you need to verify this; then visit his site www.elliott.org.

Chris describes the travel mess facing consumers - especially those in the US - this summer. Horrible gas prices will hit both air and road travelers. Chris thinks many people will simply vacation at home.

Its interesting that the obvious low cost of the US as a destination for overseas travelers may not be enough to overcome security fears.

Commercial aviation does not like blogs much at all. Just this week we have yet another case where a company (Eclipse) has gone after a blog that has sometimes been critical of the company. We discuss this issue with Rob Mark from Jetwhine.com.

This follows an increasingly well worn path. Holly Hegeman's excellent Planebusiness blog is embroiled in legal issues with Mesa Airlines. Without naming names, there are other cases we are aware of where a large aerospace firm has tried to shut down a sometimes critical blog. This is likely to continue.

If you cannot control the information, don't fight it, embrace it. All bloggers want to do (most of the time) is tell a story. That means bloggers want content and companies can supply this content. If companies want to battle bloggers they will lose - the Internet is a massively disruptive technology which does not favor corporate views of information control. Bloggers are at the sharp end of using the Internet; if you doubt this ask Dan Rather. It really does not have to be this way.

The team is back with a review of the primary challenge facing airline executives; its about profitability NOT market share. How does one get airline executives to break their market share thinking? Can an airline shrink to profitability? How about increasing the product level?

Taking seats out of the market does not necessarily mean parking planes - but will anyone try this? Is there an airline brave enough to go against the ingrained thinking?

Brett Snyder, from CrankyFlier.com, shares his thoughts about the airline he (and many others) refer to as the world's worst. Pay attention to his comments about the new LAX-Rome flight launch event; read about here (http://crankyflier.com/2008/04/18/alitalias-lax-reception/).

This airline has become such a bad joke, one wonders how it has survived this long. Can one measure brand values in negatives?

Ted Reed, airlines reporter at The Street.com, explains what's been happening at USAirways and the infighting going on at the airline among its pilot groups. What a horrible to fight this out. The airline industry is being brought to its knees by fuel costs - how many of these people stand to lose their jobs if the airline cannot sustain?

Another question not asked in this podcast is this: What is it with pilots and seniority? Who invented this awful thing that makes seemingly irrational behavior rational? Clearly a subject for another day.

A three way discussion with our "unknown analyst" and Timothy O' Neil-Dunne (managing partner T2Impact) - reviewing the merger information so far and the rising rumors about United and Continental or United and USAirways. Our general summary is that these are all shotgun weddings - there is no inherent love here.

These company cultures have been trained to fight with each other tooth and nail for every dollar and every customer. How one welds such diverse cultures into a new entity is, we believe, beyond the abilities of these firm's leaderships.

There is an opposing view in today's WSJ you might want to read as you listen to this. (http://online.wsj.com/article/SB120830669812418021.html)

Our team of four analysts discuss where the industry goes from here - an awful week and the future looks very distressing. No airline looks ready to handle the status quo. What are the alternatives to the status quo?

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