American Airlines: we can be stupid, too

American Airlines (AA) is my favorite
U.S. carrier. This is partly because I flew with them several times, but mainly in light of what I consider as their position in the airline industry. 

 

AA represents a conservative approach to airline managing, which basically says: we’re here in order to fly people from point A to point B. We’re not going to get carried away by vanishing fashion trends, either those of aircraft liveries or those of corporate policies. 

 

And indeed, the scheme painted on AA’s planes tells it all. This is one of the few airlines in the world that hasn’t changed its livery for more than 30 years, and it’s probably the only one of those that its livery remains fresh, fashionable and glamorous as if it was designed last month. 

 

Never the less, it appears that AA is not immune to the disease of stupidity in business. Earlier this month AA announced that it is changing its bid for a new service route from the U.S. to China, transforming it from a non-stop Dallas – Beijing route into a Dallas – Chicago – Beijing one.

No question that the story of the new route from the
U.S. to
China is one of the most interesting ones in the last few months, and it’s going to get even more interesting in the near future, when the Department of Transportation is planned to announce its decision by which airline this service is going to be held. I intend to refer to this issue in a separate blog entry when the decision is made public. 

 

AA is one of four major
U.S. carriers which placed a bid to operate a new
China route. Its proposal was a non-stop service from DFW to
Beijing, and it was showcased to the public and to the decision makers as a vital connection between the Asian economic giant and the American south, a much needed connection, according to AA. 

 

But all this time when AA has been running a fierce PR campaign, including by a special web site dedicated to the bid.

The truth is that within its own organization, AA was not ready to operate the new route. The reason is that flying directly from
Dallas to
Beijing will take more hours than is permitted by the current contract between AA and its pilots. As the deadline for the bid got closer and closer (the end of the year), and AA hasn’t managed to get the pilots’ concession, the airline chose the worst possible solution: The plane will take off from DFW to
Chicago, change the crew there, and take off to
Beijing. The total flight time will be around 18 hours. 

 

It’s not hard to assume that a person from Texas would prefer to fly to Beijing via places such as Los Angeles or San Francisco, which are actually placed west of Texas, rather than fly 3 hours eastward to Chicago and than head west. 

 

The fact of the matter is that AA messed things up. They placed their bid with the DOT despite the fact that they could not back it. The grim results are (a) they have no chance of getting the service and (b) they look like fools. 

 

The worst part is that the whole situation cast a shadow of labor unrest on AA, and from this to chapter 11 the road is quite short. You may ask the employees of United, Delta and Northwest. 

The revolution of Arkia

On December 5^th, 2006, Boeing announced a deal for selling two 787 airliners to “Nakash Group of America“.

The Nakash Group is the owner of a small Israeli airline called Arkia. For comparison, learning that this airline is going to get two new 787s is like an airline such as German-Wings or AirTran will announce it is purchasing ten new A380 and starting a Tokyo-Paris route. 
 

Israel is a small country, with a small airline market. For 55 years, the only international airline, EL AL, was owned by the government, as in the European model. For most of those years, Arkia was a tiny airline, which operated mainly domestic routes from Tel Aviv to the resort town of Eilat, on the Red Sea coast. In addition to that, Arkia have been operating international charter flights from Israel to European destinations such as
Paris, Berlin and the Greek islands. Those flights were made with three B757 owned by the company. 

For the last few decades, Arkia was owned by the Borowitz brothers, Israel and David. In 2005, they bought EL AL from the government, and were forced to sell Arkia due to the trade regulator’s demands. After long and messy proceedings, the airline was purchased by the Nakash group. 

Who are those Nakash brothers? To tell the truth, I really didn’t know up until now. Here’s what I found about them in this site:

Nakash Group is a New York City-based, multi-national, multi-billion-dollar conglomerate that owns Arkia Israeli Airlines and Jordache Enterprises, which designs and manufactures a wide variety of denim, apparel and accessories. Jordache has earned a distinguished reputation for quality and excellence. Brands owned by Jordache include
Jordache, US Polo Association, Earl Jean, KIKIT Jeans and Fubu Ladies. Nakash Group of America also has significant real estate holdings in New York City, Los Angeles, Chicago and Tel Aviv. The Nakash family also owns a number of private jet companies.    

Unlike the Borowitzs, who tend to stagnation in business, as you can read in the December 6^th entry to this blog, the Nakashes seem to hold a different approach. Judging from the 787 deal, which took place only months after they bought Arkia, their vision of this airline is not made of worn out, aging 757, shuttling in the summer between TLV and Anatalya. Apparently, they do not see EL AL’s control of international scheduled flights from
Israel as the eleventh commandment. You don’t buy brand new 787s, the most advanced airliner in the market, just to maintain your place as a retarded airline. You buy them in order to make a major breakthrough. 

The new 787s are due to be delivered in 2012. In the next five years, the new Arkia management must transform this airline from a ramshackle charter airline into a robust, competitive one, which can operate its new planes on routes to North America and Southeast Asia, just like in the Boeing press release. In business terms, this is a revolution, and a much anticipated one at that. All I can say is that this is going to be the most interesting story in the Israeli aviation scene in the next few years, and that I will have my fingers crossed for them. 

What’s wrong with EL AL? - part 2

A couple of weeks ago there was an item in the Israeli media, which told that EL AL informed Boeing that it is dropping its purchase options for the new B787 airliner. Like many other airlines, EL AL registered for those options in the beginning of the 787 project, but since the project is now approaching the reality phase, and airlines are supposed to back their options with money, EL AL backed off. 

 

This move on EL AL’s part is interesting and alarming at the same time. EL AL has a fleet of about 8 B767. The 767s are serving a wide range of routes, both short and medium range such as Tel Aviv to
Paris and
London, and both long range like
Toronto,
Miami and
Beijing. In other words, it’s a real work horse. 

 

But non the less, the 767 is an aging plane, which have already reached its twentieth birthday. Every airline which has 767 must have a plan to replace it with a new aircraft before it comes to its 25^th birthday, or, in the most extreme case, before its 30^th one. 

 

In some cases, an airline would chose to replace a 767 with a larger plane like B777, but if the airline wants the replacement to match more or less the older aircraft – after all, it is probably designated to operate the same routes – there are very few options available. In fact, since Boeing stopped producing the 767 a while ago, the Airbus 330 is the only airliner in that category which is still on the production line. 

 

The problem is that when your new plane is going to get into service in, let’s say, 2010, it’s probably going to serve well into the 2030s, and you would like it to be a state of the art airliner. The A330 is not that kind of plane. In terms of fuel efficiency, composite materials and pollution, the 330 belongs to the 1990s generation. 

 

The replacement for the hundreds of 767s which are flying today all over the world lies with the next generation of airliners: the Boeing 787 and the Airbus 350. Both aircraft are currently in the drawing board phase, but the 787 is due to fly its first flight only months from now, while Airbus are still trying to figure out the basic configurations for the 350. 

 

From EL AL’s point of view, there shouldn’t have to be a question in the first place. Being a small airline, with less than 40 aircraft, EL AL can’t afford a dual fleet, with both Boeings and Airbuses, along with their maintenance tail. In fact, even today, when EL AL operates five types of Boeings, it’s already too much. At least, that’s what EL AL’s chairman, Israel Borrowits, told Globes newspaper recently. EL AL should have no more than three types of airliners, all from the same manufacturer. 

 

The ideal fleet of EL AL should look like this: B737 for short haul flight from TLV to
Europe; B787 for medium and long haul flights; and B777 for long and ultra-long haul flights, especially those with high capacity of passengers. In the long term, there is even the possibility of dumping the 777 in favor of next generations of 787, especially if this plane will live up to Boeing’s promises of unusual fuel efficiency. 

 

By canceling its options for 787s, EL AL is entering a period of uncertainty. Its 767 fleet is getting older by the day, and ordering new 787 tomorrow will result in deliveries circa 2020. In my opinion, EL AL doesn’t have a real option of buying A350s, but even if it had such an option, the timetable is grim. One way or the other, instead of replacing its 767s throughout the next decade, EL
AL can find itself in a position, where the core of its fleet is made out of “antiques”. 

 

Again, what is going in EL AL executives’ heads, only god knows. 

What’s wrong with EL AL? - part 1

Take a look at this picture.

It shows a Boeing 737-800 flying under the name of EL AL Israeli air lines. But the livery of the plane is not EL AL’s. The livery belongs to North American Airlines, a company that usually deals with leased flights of
U.S. troops etc. 

 

This is the oldest picture of this plane that I have found on jetphotos.net, and it’s from January 1^st, 2003. Of course, the plane’s service with EL AL must have started before that, meaning four years ago or more. 

 

When I flew on board this plane from TLV to MAD, about two months ago, it was still painted in North American’s livery. 

 

It’s hard for me to think of another national, respected and veteran airline that operate a used plane, painted in another airline scheme, for such a long period. 

 

More than that: this 737 is not the only plane in EL AL’s fleet which is not painted yet in the airline’s livery. There are at least three more planes in EL AL that are still not painted in its colors, one of them a B747-400. Luckily, those are painted in white, which is the dominant color of EL AL. 

 

As you can understand by now, EL AL is leasing planes according to its capacity demand, but even when those planes are planned to serve in the airline for years to come, EL AL does not consider it important enough to paint them with its livery. 

 

Now, it’s not so hard to comprehend what the role of livery is. Since the early days of the airline industry, airlines painted their planes with distinguishable schemes and colors, making the planes a crucial part of their branding. In legacy airlines, the livery becomes more and more important, because it’s supposed to represent the airline’s history and seniority compared to the growing number of younger, so-called low cost airlines. 

 

The B738 that I was referring to above have been serving a number of routes from TLV to European cities:
Madrid,
Budapest,
Geneva,
Frankfurt and so on. What impact does EL AL’s management think the view of this plane all across
Europe is making, in terms of brand preservation? What image can EL AL get in light of the fact that more than 10% of its fleet looks like bumped up charter planes, made at best to carry refugees from disaster areas? 

 

This issue is only one symptom of an unprofessional conduct in EL AL’s management. EL AL is not the worst managed airline in the world, of course, but it’s not on the right track, to say the least. All over the world, EL AL has been a known brand for decades, and the way its management treats this brand does not imply for a good business approach. 

 

In my next entry I will discuss a far more serious of EL AL’s problems.