Major U.S. Airlines See Strong Year Ahead
by Michèle McDonald /Although 2012 was a mixed bag for the airlines, the largest U.S. carriers came out of the year fairly well-positioned for 2013.
Certainly 2012 delivered its share of challenges: United suffered deeply from woes arising from its integration with Continental; American, still in bankruptcy, was beset by an uncanny mix of delays, cancellations and loose seats in September, and a month later Superstorm Sandy gave all the airlines a dose of grief.
(See 2012 stories: Agents Unhappy With United in Wake of Res Cutover, April 19; Can This Airline Be Saved? Oct. 4, and Air Travel Outlook: Uncertainty Reigns, Nov. 1.)
In their recent earnings calls with analysts, executives from the major carriers’ reported on their results for 2012 and outlined plans for the year ahead. Following are highlights.
UAL: ‘toughest year’
Few people at United Airlines were sorry to see the end of 2012, dubbed by chief executive Jeff Smisek as “the toughest year of our merger integration” with Continental.
“And it wasn’t any easier for our co-workers or our customers,” Smisek said during the airline’s 2012 earnings call.
The upheaval caused by the move to a single IT platform in March, is now a thing of the past, he said. “Our operations are running smoothly, and many product improvements are rolling out, and our customer satisfaction scores are climbing,” Smisek said.
Focus on customer service
To ensure continued improvement, United is rolling out a new program called, “It’s Our Job.” Smisek described the program as a “companywide integrated approach to customer service” that includes training for frontline workers on standards and expectations.
In addition, he said, United will roll out “a modernized, fully integrated suite of tools for our airport agents” throughout the year. The tools will be implemented at the gates to assist with departure management and improve the boarding experience.
“Later in the year, we’ll expand these tools to include ticketing and checking in customers in the lobby,” Smisek said.
The carrier also is investing in customer relationship management technology to better understand customers’ individual preferences, with a goal of designing tailored products and services, he said.
Smisek also noted that 70 of United’s Airbus aircraft have been fitted with new, larger overhead bins. The bins will be installed on the rest of the fleet this year. The carrier also is installing satellite-based Wi-Fi on its mainland aircraft.
US Airways: a strong year
Last year was a much different story for US Airways, which recorded the best operating reliability in its history and set new company records for on-time performance, completion factor and baggage handling.
Chief executive officer Doug Parker said the carrier also set new company records for total revenue, total traffic, load factor, yield, revenue per available seat mile and net record revenue performance.
“This is unquestionably the best all-around performance I've seen by an airline team,” he said.
US Airways is embarked on a fleet-replacement plan and will acquire 21 aircraft this year. It will take delivery of 16 A321s and five A330s. At the end of the year, only 14 legacy 737s will remain in the fleet.
Gaining share from OTAs
President Scott Kirby said the carrier’s website continues to grow by taking share away “almost exclusively from online travel agencies. It’s up to almost 30% of our revenue.”
He noted that products like Choice Seats are available on the site, “and the OTAs haven't invested in the technology to be able to sell that.”
Kirby said US Airways would be happy to let OTAs sell ancillary products, “but they’ve got to make the investment and have the willingness to do it. I think, eventually, that is going to happen.”
None of the US Airways executives would comment on any aspect of a merger with American Airlines, which for weeks has been described as “imminent.”
Delta: ‘significant advancements’
Delta Air Lines made “significant operational and customer advancements” in 2012, chief executive officer Richard Anderson said.
These included: a 99.5% completion factor, an 86.5% on-time arrival rate, a 25% improvement in baggage performance and a 40% reduction in Transportation Department customer complaints.
Delta also has seen a share shift of more than five points to its website since 2010, president Ed Bastian said, “and we expect further market penetration due to our enhanced platform.”
Joint venture with Virgin
Ben Hirst, Delta’s senior vice president and general counsel, said the carrier hoped to complete regulatory reviews for its planned joint venture with Virgin Atlantic Airways within six months.
“There are competition reviews that are under way at the Justice Department and the European Commission. We will be filing probably by the end of the month for antitrust immunity with the Department of Transportation. And there is a review in the U.K. of the shareholders’ agreement to ensure that citizenship and control remains with EU citizens,” Hirst said.
Bastian said Delta had picked up “very significant” new accounts in the financial services and the banking sectors over the last couple years. The carrier signed “one of the largest banks in the world” within the last six months, he said.
“It’s a big part of the reason behind the Virgin Atlantic transaction, because the JFK-Heathrow market is the sector that those financial services firms travel most,” he said.
AA: building a foundation
AMR Corp., the parent of American Airlines, said it completed the majority of its financial restructuring in 2012. This included reducing debt, renegotiating aircraft leases and facilities agreements, grounding older airplanes, rationalizing the regional fleet and renegotiating supplier relationships.
In a statement, chief financial officer Bella Goren said, “The strong financial foundation we are building gives us the ability to deliver returns to our financial stakeholders and make investments that create enhanced value for our customers and our people.”
Three-class service
American also is renewing its fleet, and it has unveiled a redesigned interior of its international wide-body aircraft.
It will be the first domestic carrier to offer three-class service in decades, with lie-flat seats in transcontinental premium cabins.