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| Tuesday, July 7, 2009 | | 0 comments


Airbus unsurprisingly announced that it would lower the amount of A380 aircraft it produced this year to 14, down from 18. Originally, the company had planned to increase production this year compared with last (and still is expected to deliver 20 next year), but the weakened economy and recent scare over swine flu has had an impact on travel demand, causing airlines to defer/delay some aircraft deliveries. IATA has estimated that air traffic, which started declining back in September, fell by 11% in March. (The figures for April will be released soon.)

It's only the latest bump in the A380 program, which has not only seen cost overruns (development spending is now at $18 billion, up from the originally planned figure of $12 billion) but also substantial delays. Singapore Airlines, Qantas and Air France are expected to be among the airlines that take delivery of A380s this year. And Airbus is also scaling back production of other models, too - a move that competitors Boeing and Embraer have also followed.


Robert Fornaro, AirTran's CEO, was recently interviewed by the Associated Press. He mentioned how the airline had faced a troubling time last year when oil prices shot up. But in the first quarter of 2009, despite a weak economy and lowered travel demand, AirTran managed to post a profit. I'll post a clip from the interview at the end of this post, and more can be read in the original article, but here are some interesting points:
  • He doesn't see further consolidation, at least for a while: " Clearly we've seen Northwest and Delta come together, but I'm not sure we're going to see another merger over the next two or three years. The financial condition of the carriers now is weak, and there's probably some real big issues that need to be resolved with the labor contracts."
  • Even though AirTran attempted a hostile takeover of Midwest Airlines a few years ago, Fornaro (who has been in the top job for a year) is moving away from acquisitions: "We now feel that we can be much more successful going in on our own. Over the next two years, thinking about acquisitions will be very very low on our priority list."
  • How did AirTran responded to the economic crisis? "We stepped back, we reassessed our operation, we adjusted our capacity and obviously managed our costs and have very quickly rebounded."


Canadian carriers Air Canada, Air Canada Jazz, Air Transat, and WestJet have come up with new legally binding operating rules, or "airline tariffs," that give passengers more options if their flight is delayed or canceled. As part of the new set of rules, the four airlines must:
  • Distribute meal vouchers for delays of four hours or longer
  • Let passengers off the aircraft if the plane is delayed on the ground for more than 90 minutes
  • Pay for hotel rooms for passengers affected by overnight delays or cancelations
Not bad - if I was a delayed or stranded passenger, I'd say that those rules are a pretty good improvement. But the four airlines, which have formed a lobby group known as the National Airlines Council of Canada, aren't exactly doing this unprovoked, however. A Canadian MP proposed a bill that would fine airlines $1200 per traveler who was bumped off of a flight longer than 3500km (about 2175 miles). Airlines would also have to start giving $500 an hour to passengers stuck on a plane on the ground for more than 60 minutes after the doors close.

Naturally, the airlines are keen to avoid having to pay such exorbitant fines, and are thus rolling out their own "bill of rights" in advance. And it's doubtful whether the proposed bill would actually pass; as the lobby group's president stated: "The compensation requirements are grossly punitive and do not recognize the cost/revenue environment that air carriers face today. In the current economic downturn, airlines are already struggling to provide service to their customers." The fines outlined in the proposed bill do seem rather "grossly punitive"; but at the same time, passengers who are stuck for hours on a plane on the tarmac should be compensated fairly. The National Airlines Council of Canada is proof that even if it takes the threat of a harsh bill to do it, airlines still have the capability to ensure that their customers are compensated in a fair manner.
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