Why buy? Southwest's new Frontier

Maybe it's better to buy something because you want it instead of buying to collect a debt. That may be the lesson in Southwest's surprise bid for Frontier, the Denver carrier that ageed in June that it would be taken over by Republic Airways. Frontier owed Republic money and this way it could satisfy its creditor and keep flying. With Southwest ownership, Frontier flies for another year or two and likely gives way to Southwest's own Boeings after Frontier sells off its Airbus fleet.
What does Southwest get? It gets to bump United even further out of Denver, where UAL was always the big player. UAL now has about 35% of the Denver business, while Frontier has some 20% and Southwest has just 12%. Granted, that 12% is a lot more than Southwest's share at Denver just three years ago when it started up in the Mile High City.

United in card game, agents up in arms

A move by United Airlines to shift some of the cost of selling tickets is setting off the very type of reaction that United doesn't need just now. The once-largest airline, number two United told many travel agents that they'd have to absorb the fees imposed by credit-card issuers in ticket sales. The fees, amounting to 2% to 3% of the total, are just part of the total $710 million bill that United pays each year, but for travel agents, who make little more than that on each ticket they sell, it's a real threat.
Agents, already burned by cuts in the ticket-sale commissions paid to them by airlines, have naturally rebelled. If the move pushes travellers to shift further from buying through travel agents to buying at an airline's own website, they'll lose opportunities for comparison shopping, Steve Tracas of vacation.com says. Agents can offer the widest spectrum of price information, says Tracas, a former US Airways sales executive.
But it could have further implications: on-line travel agencies like Orbitz and Expedia would likely have to start charging booking fees, fees that they had once charged but began cutting earlier this year, says PhoCusWright, a travel consultancy. Kevin Mitchell, the airline gadfly from the Business Travel Coalition, says the move is a way for United to lower its credit costs and so build its cash reserves in preparation for another bankruptcy filing.

Legs, more or less

Economy, plus 10%? United Airlines, in retrospect, may have done something very smart. Back in the late 1990s, United said it would separate as much as one-third of its regular coach seats by as much as five inches more, dub it Economy Plus and set an additional fee on a sliding scale over regular coach fares. The carrier has never promoted Economy Plus heavily, but it it may be on to something.
Evidence of that comes from seatguru.com, the on-line service that just completed a survey that found its members would pay as much as 10% more for a little extra legroom. Some 42% of seatguru.com readers would pay for about five inches of added legroom. The same seatguru.com readers said that JetBlue has the best economy seats. That leads to the question, do they know that a chunk of JetBlue seats (in rows 11 through 25 in the all-coach cabin) just happens to have as much as five extra inches? And the carrier charges extra for only some of these seats?
(Illustration from United's website section on Economy Plus.)

Mergers, buying and selling

What a bad week - again. Layoffs and route cuts at American and Delta, a plea from US Airways. Some of it seems like a rerun, but this time there is something different. and it's not the repeated prediction/plea from the US Airways chief executive, Doug Parker, who again urged merger and consolidation throughout the industry. Parker has previously urged this course of consolidation, and went so far as to do one of the industry's few big mergers, the takeover of US Airways by Parker's America West.
But when you mention that, you pretty much have to mention the aborted merger of the old US Airways into United Airlines. Didn't happen (twice), ain't gonna happen. That's the difference: the other big voice for industry consolidation, United Airlines chief Glenn Tilton, has been quiet and his actions speak louder than words.
Tilton moved the other week toward making a major aircraft purchase, a multi-billion move that would effectively take United out of the running as a merger partner. (You don't buy a new fleet if you're going to merge because you have to know what kind of planes your merger partner flies.) Tilton may have other motives, including waving a really big pacifier before his unhappy pilots, promising them new planes if they'll just deal. But Tilton's big buy, even if you have some doubts about how real it is, seems to be United's declaration of independence.
(Illustration from the Association of Flight Attendants, which has some strong feelings about mergers and consolidation.)