DOT Combines Airline Alliance Applications
The U.S. Department of Transportation combined four separate joint airline alliance appications into a single proceeding, called the U.S.-U.K. Alliance Case. That case now includes the American Airlines/British Airways request for antitrust immunity and blanket codeshare authorization, with the United Airlines/BMI British Midland immunity request also involving Star Alliance partners Austrian Airlines, Lufthansa and SAS. DOT said "the resolution of each pair of proceedings is likely to affect the outcome of the other." Comments on the consolidated case must be submitted by Dec. 11, but any DOT decision likely will be predicated on the outcome of ongoing Open Skies discussions between the United States and the United Kingdom. Last week, 20 U.S. senators from 12 states—split almost evenly along party lines—wrote letters to DOT secretary Norm Mineta and Secretary of State Colin Powell urging AA/BA rejection unless access is expanded to other carriers at London's Heathrow Airport. Continental, Delta and Northwest Airlines have banded together to make the same case to regulators.
Gangwhal Departs US Airways
Rakesh Gangwhal last week stepped down as president and CEO of both US Airways Group and US Airways Inc. to "work in the field of private equity and venture capital." Stephen Wolf, currently chairman of both companies, reassumed CEO duties and said he was "disappointed" by Gangwhal's departure. Confirming there is no "interim" qualifier in front of Wolf's reclaimed CEO title, a US Airways spokesperson said, "there is no hidden agenda and Stephen Wolf is running the show." Senior management was criticized during the past year for poor financial performance and a failed merger attempt with United Airlines, which also contributed to Jim Goodwin's departure from that airline (BTN, Nov. 12). Analysts speculated that Wolf and Gangwhal may not have seen eye to eye on the future of US Airways, which could include a bankruptcy reorganization or sale. Wolf first hired Gangwhal in 1996 as president and COO and appointed him CEO in 1998.
Hotel Downturn Hits Real Estate Values
The continuing drop in U.S. occupancies and room revenues that has plagued the lodging industry this year is having a negative impact on hotel property values. Observers cite the deal announced late last month for extended stay brand Homestead Village as a case in point. A unit of New York-based Blackstone Group last month acquired the Atlanta-based chain, which operates 112 hotels in 28 states, for $740 million. This is $150 million less than the price the two parties reportedly had settled on before Sept. 11.
United, Mechanics In Cool-Off Period
After nearly two years of contract negotiations, United Airlines and the union representing 15,000 of its mechanics and related personnel began a 30-day cooling off period ahead of a potential strike on Dec. 21. District 141M of the International Association of Machinists rejected binding arbitration from the National Mediation Board, which released the parties from mediation and said it will recommend creating a presidential emergency board to prevent a holiday work stoppage. President George W. Bush took similar action earlier this year to block strikes at other major carriers. White House press secretary Ari Fleischer said Bush "is prepared to do whatever it takes to protect the traveling public during the holiday season." In talks late last week, according to The New York Times, the carrier told union negotiators it will propose pay cuts for all employees to help minimize its daily $15 million cash burn.
Carriers Eye Corporate Jet Operations
Midwest Express Airlines has been approached by several companies interested in private corporate shuttle services. The carrier would not divulge any specifics about ongoing discussions, but confirmed discussions of a Chicago-New York route. Air Canada is among those developing separate operations dedicated to corporate aircraft services and management. United Airlines' Avolar unit, which plans to acquire hundreds of aircraft, is seeking external financing and being marketed seperately, and expects to commence operations in the spring. Delta AirElite will be a more modest operation.
Delta Unveils Small Biz Reward Program
Delta Air Lines last week introduced SkyBonus, a reward program for corporations that annually spend between $5,000 and $500,000. Similar to programs at other carriers, SkyBonus awards points redeemable for free travel, upgrades, lounge memberships and elite frequent flyer status.