At a City Club of Chicago Forum, held last Thursday, United Airlines President and CEO Jeff Smisek vocalized that there is “no need” to build an extra runway at Chicago O’Hare International airport, appearing at odds with Chicago Mayor Rahm Emanuel on the subject.
Mayor Emanuel and the City of Chicago have not only pushed for the runway, but also advocated moving up the negotiation timeline by a full calendar year. City politicians believe that adding a 4th runway would help reduce delays by 80 percent and boost capacity by 300,000 additional passengers annually by 2015.
However, Smisek argued that the current expansion efforts are sufficient to meet the needs of passenger demand, and that financially strapped airlines would benefit more from modernizing air traffic control systems rather than from “pouring concrete,” into the ground at O’Hare, as he was quoted in an article published in the Chicago Sun Times last week.
Airport improvement projects, such as this one, ultimately incur higher landing fees for the airline tenants serving that airport. To cover those costs, the airlines will ultimately pass them along to the revenue-paying passengers in the form of higher ticket prices.
Smisek’s opinion obviously reflects the interests of United Airlines and its shareholders, but it could also be argued that he is bringing a critical need to light: enhanced Air Traffic Control systems which inevitably remain at the helm of high-priority, long-overdue fixtures that the US aviation industry merits.
Of course, on the other side of the fence, Mayor Emanuel’s stance represents the people of Chicago who obviously deserve a modernized O’Hare. There are also the intangible benefits in the form of prestige, control and money that can come from these expansion efforts.
Read more here.
Yesterday, Matzav.com reported that El Al Israel airline was considering splitting into two separate companies, as part of a new strategic plan to diverge into a low-cost carrier and a premium carrier.
El Al, which posted a $49 million loss last year, feels that it needs to scale efficiency measures especially as it will likely face a rise in competition due to the open-skies agreement that Israel signed with the European Union.
Under the new plan, the carrier would launch one long-haul company, using El Al’s new wide body planes, such as the Boeing 777, to specialize in premium long-haul flights to destinations in the United States, Canada and Far East. Meanwhile, the airlines’ low-cost component would fly smaller jets, such as the 737, to Europe.
Both carriers would share the same management.
According to TIME magazine, a merger tie-up between American Airlines and US Airways is “more likely than finding a frequent flier award seat to Europe this summer.”
In an article published yesterday, TIME reported that American’s unions would pretty much “prefer to work for any other airline” other than the one that currently employs them, which is why they have been open to a takeover bid by US Airways.
It’s a sign pointing towards a potentially painful road of negotiations between AA’s management and its unions.
American has proposed to eliminate 13,000 jobs, as well as adjust wages and benefits to save $1.25 billion annually. Three unions, representing the Transport Workers Union (including most of AA’s ground workers), the Allied Pilots Association and the Association of Professional Flight Attendants, have stuck their noses up at the new contract proposals. Instead, they’ve signed deal sheets with US Airways that will go into effect if US takes over AA. The deals include benefits such as a 5.5% raise for pilots, and only half the number of layoffs which AA has proposed.
In a letter to employees, CEO Tom Horton wrote: “There is real substance in our plan to build American with our industry-leading aircraft orders for 460 new narrow body jets, up to 100 787s and 16 777s,” as a means of assurance that these new aircraft orders should benefit the careers of American’s pilots and flight attendants.
Nevertheless, the short-term pain appear to cut too deep for AA’s unionized workforce. Too many people seem to have little faith in American’s ability to remain a viable standalone competitor after it emerges from Chapter 11. Given that consolidation has become the name of the game in the airline industry, the question now becomes, who should decide the fate of American’s future? It, or US Airways?