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Mobile & Social top tweets from Association of Travel Marketing Executives 2011 conference - #atme11

Tue, 14 Jun 2011 22:22:00 GMT

The Association of Travel Marketing Executives wrapped up their annual conference today in Boston. Here's a picture of what the audience found worthy of sharing on Twitter:

About the visualization

We collected 1,609 tweets tagged with the #atme11 hashtag during the conference. Eliminating retweets left 779 original tweets. The size of each word or phrase indicates its frequency of occurrence in our sample. Only words and phrases which appeared at least ten times are included in the visualization.

Our analysis was performed with the R statistical environment and the WEKA data mining package. The word cloud was rendered by Jonathan Feinberg's wordle.net where you can spend a lot of time playing with it.

20 Years of the U.S. Domestic Airline Market In 20 seconds

Wed, 01 Jun 2011 03:08:00 GMT

Hans Rosling demonstrated a compelling way to present time series data in his amazing 2006 TED talk on world economic development. Google's Visualization API allows us to present a similar view of 20 years of domestic airline traffic statistics as a 20-second movie.

We only include domestic operations by airlines which enjoyed at least 2.5% market share at any time during 1990-2010. And while our calculations are annual averages, intermediate values have been interpolated to present a smooth animation:

A few highlights to note:

In 1990, Southwest, TWA, Eastern, and America West were of comparable size, measured in passengers or revenue passenger miles (RPM), and all were smaller than Continental or Northwest. Pan Am was still flying, but didn't make the cut as its domestic market share had already slipped to 1.9%.
TWA's 2001 acquisition is reflected in American's sudden growth moving into 2002, followed by an almost-as-quick decrease as it worked to shed much of the capacity it had just acquired.
2010 should be remembered as the year in which Southwest surpassed American in domestic RPMs.
Select "seats per flight" and watch how dramatically the introduction of E190s lowers JetBlue's average.
The third tab presents the data in a more traditional line chart. Using it to display load factor shows a rise of approximately 20 points in 20 years.

Please explore the data yourself and post your observations in the comments section below.

What about the recent mergers?

Our report which predicted a smooth antitrust review for the Southwest-AirTran merger also noted that the proposed merger stands in contrast to recent industry experience in that both airlines involved have enjoyed sustained market share growth. The report's Figure 5 makes the point graphically, and is reproduced to the right.

But due to the backward-looking nature of regulatory filings and the long timelines required to integrate merging airlines, neither of last year's major mergers are reflected in the above presentation. In order to include the effects of these mergers—and to eliminate sudden jumps such as when Delta started to report Northwest's traffic as its own in 2010—we present a second, contrived view in which we combine traffic from merging carriers all the way back to 1990.

Specifically, this "merged" view combines traffic for the following airlines:

American, American Eagle, and TWA
US Airways and America West
Delta and Northwest
United and Continental
Southwest and AirTran
Republic Airlines, Shuttle America, Frontier, and Chautauqua into "Republic Holdings"
SkyWest and Atlantic Southeast Airlines into "SkyWest Inc"

This view succeeds in smoothing out the merger-induced bumps and further highlights the magnitude of change in the domestic market. For example, while the race for top spot is much closer in domestic RPMs than in passenger enplanements, the addition of AirTran helps Southwest top even United-Continental in 2010.

Notes & Credits

Domestic traffic statistics are as reported on airline T-100 filings as contained in the DOT BTS T-100 domestic segment database.
Due to the strong seasonality of the industry, all calculations presented are annual averages, but the visualization engine interpolates intermediate values in order to present a smooth animation.
The JavaScript code for these visualizations were produced by the googleVis and RJSONIO packages for the R statistical environment.

Good riddance to an awful April

Sat, 30 Apr 2011 04:00:00 GMT

The fatal end to a Gulfstream G650 test flight followed the structural failure and decompression of Southwest 812 by one day, a one-two punch which set the tone for a terrible month. While U.S. commercial aviation was spared further loss of life, the headlines have brought a drumbeat of reasons for the public to suspect airlines, air traffic controllers, pilots, and ground crews alike.

Let's review just how bad the month's news has been:

April 1: Southwest 812 experienced rapid decompression after a six-foot rupture developed in the top of the fuselage and performed a successful emergency descent and diversion to Yuma, AZ. As a result of the NTSB's on-scene investigation, emergency inspections were ordered for older 737s, disrupting schedules for days.
April 2: A tragic blow to Gulfstream's G650 test program came as one of five test aircraft crashed during takeoff tests, killing all four aboard. The preliminary NTSB report notes wing tip scrape marks on the runway and that the fully-engulfed plane stopped just 200 feet from the base of the control tower.
April 7 (and 13 and 14 and...): Already under scrutiny after March's incident at Reagan National, came reports of two more controllers sleeping on the job in Reno and Seattle. But the prize goes to a Knoxville controller who made a bed out of couch cushions so he could nap in comfort during his shift. He was later fired, along with a snoozing controller in Miami. And as you know, FAA Air Traffic Organization chief Hank Krakowski will also be spending more time with his family.
April 11: Cell phone cameras are everywhere, so we can watch as an Air France A380 clips—and dramatically spins out of its way—a Colgan (Delta Express) CRJ700 at JFK:
April 17: A Cleveland center controller had a stuck mike of the Hollywood kind, as for three minutes he broadcast the soundtrack of a movie he was (apparently) watching, Samuel L. Jackson's 2007 movie Cleaner.
April 19: The problem with losing the public's confidence is that assurances of "the aircraft were never in any danger" can't compete with headlines like "Plane carrying Michelle Obama aborts landing because of controller error" and "Michelle Obama's Plane Has Near Miss At Andrews Air Force Base".
April 20: FDA inspectors find rat droppings too numerous to count on Delta Air Lines plane. Gross.
April 22: Tornado hits Lambert Field in St. Louis, seriously damaging Concourse C.
April 26: At Chicago Midway, site of a 2005 fatal runway overrun, Southwest 1919 slid off runway and got stuck in the mud, coming to rest about 100 feet from Cicero Ave. and 63rd.
April 28: While the traveling public, our children, and our flight crews endure increasingly intrusive and spectacular screening procedures, ground crew personnel bypass the security theater and (in most cases), badge directly onto the tarmac. It is therefore disturbing on several levels to learn of organized smuggling by baggage handlers. This time, it's in Detroit with the seizure of 284 pounds of marijuana and 35 pounds of cocaine and the arrest of 12.
April 30: Jet fuel prices continue their climb through pre-crisis levels. U.S. Gulf spot prices increased another 5.2% in April, closing at $3.37 per gallon, according to the St. Louis Federal Reserve. With fuel and labor accounting for about half of an airline's operating costs, spiking spot prices could cause the industry to look back at 2010 as "the good old days".

Here's hoping for a better, safer, and more professional May.

Highlights from the FAA's 2011-2031 Aviation Forecast

Fri, 04 Mar 2011 05:00:00 GMT

The FAA recently hosted the 36th Annual FAA Aviation Forecast Conference to present their latest view of the next 20 years of commercial and general aviation. FAA Executive Director of Aviation Policy and Plans Nan Shellabarger kicked off the conference by presenting the new forecast's highlights.

A few points stand out:

The system will have to handle one billion annual enplanements around 2021. Even with a sub-3% annualized GDP growth rate, the FAA sees one billion passenger enplanements in 2021. Domestically, regional carrier enplanements grow at 3.4% annually through 2020, just ahead of the larger carriers' 3.2% anticipated rate.

(full size)
Busy hubs get busier. A larger share of the growing passenger base will increasingly be traveling through the nation's already-busiest airports. The FAA sees a whopping 80% passenger increase at large hubs between 2010 and 2030 compared to 67% and 61% growth for medium and small hubs respectively. But despite this further concentration of travelers, the FAA assumes only a modest increase in number of seats per aircraft: +2.1 seats per aircraft domestically and +9.7 seats for international operations -- neither enough to return to 2000's levels.

(full size)

This seems like a good time to mention one important detail about the FAA's forecast: it assumes that future demand is not materially constrained by external factors like congestion at these busiest airports.
Crowded airplanes are here to stay. The days of chronically half-empty flights are gone for good. The uncertainty of fuel prices have forces airlines to get serious about capacity management. Airports take note -- now is the time to add more seating at gates -- and power outlets would be greatly appreciated, too, while you're at it.

(full size)
Yields recover to pre-crisis levels, but then fail to keep up with inflation. Real yields are predicted to resume their historical slide due to continued advancements in technology, productivity gains, favorable fuel prices, and increased competition. Domestically, fares will be driven lower as market overlaps continue to grow between legacy and low cost carriers. In addition, liberalization is expected to continue to provide downward pressure on international prices. And remember -- yield calculations generally only include fares, not ancillary fees which have accounted for so much of the industry's recent profit.

(full size)

Videos and presentations are now available for most of the conference's sessions. We gratefully acknowledge the hospitality and assistance of the FAA and the co-sponsoring American Association of Airport Executives.

The top three antitrust concerns related to the proposed Southwest-AirTran merger

Mon, 15 Nov 2010 18:50:00 GMT

As the title of our new report suggests, we expect a relatively easy antitrust review for the proposed Southwest-AirTran merger. But while researching "Southwest's proposed merger with AirTran likely to pass antitrust review," our analysis of the two carriers' overlap markets surfaced a few areas of concern worth highlighting:

The proposed merger will push 16 overlap routes into monopoly. The combined carrier would gain a lock (greater than 90% market share) on 16 routes which served nearly 6.1 million passengers during the twelve months ending June 30, 2010. The following airports are affected by at least one new monopoly route: Baltimore (BWI), Chicago Midway (MDW), Columbus (CMH), Fort Lauderdale (FLL), Fort Meyers (RSW), Indianapolis (IND), Kansas City (MCI), Milwaukee (MKE), Orlando International (MCO), New Orleans (MSY), Pittsburgh (PIT), Seattle (SEA), and Tampa (TPA).
Baltimore alone accounts for half of the new monopoly routes affecting 3.3 million passengers. During the twelve-month period studied, 3.3 million BWI passengers traveled these routes to Fort Lauderdale (FLL), Fort Meyers (RSW), Indianapolis (IND), Milwaukee (MKE), New Orleans (MSY), Seattle (SEA), and Tampa (TPA). Just over one million passengers would be affected by one route alone: the combined carrier's second-busiest route between Baltimore (BWI) and Orlando (MCO).
Even the highly competitive Orlando market could see six routes pushed into monopoly. Orlando passengers would lose airline choice to six cities: Baltimore (BWI), Chicago Midway (MDW), Columbus (CMH), Indianapolis (IND), Kansas City (MCI), and Pittsburgh (PIT). The 3.1 million passengers carried by the combined carriers on these routes accounted for 10.5% of Orlando International's domestic passengers during the same period.

With close to 20% of BWI's domestic passengers losing airline choice, any DOJ intervention in this merger is likely to involve the Baltimore market. When the United-Continental merger threatened to cause an over-concentration at slot-controlled Newark, the remedy involved transferring slots to a new entrant (Southwest). Without slots to trade, that tidy solution is not available to regulators.

But BWI is no Newark, and such intervention may not be deemed to be necessary. We assume that at least some of AirTran's 10 gates will be freed up as Southwest integrates and streamlines operations at BWI. These gates could be made available to any of a number of competitors already established at the airport. The question is whether there will be any takers, or if DOJ will have a hand in engineering any incentives.

"Not available in stores" might work for Southwest, but American needs Orbitz

Fri, 05 Nov 2010 17:02:00 GMT

American is threatening to pull its flights from Orbitz at the end of the month. This threat constitutes a marked escalation in American's attempt to push its AA Direct Connect platform as the sole means to access its inventory. While there are many good things to say about the modern, XML-based system, the bottom line for this effort is... well, the bottom line... as American attempts to reduce its distribution costs.

Cutting out middle men, such as global distribution systems and online travel agencies, is an obvious way to reduce what are essentially commission expenses. But the surest way to reduce commissions? Reduce bookings—exactly the risk American is facing if unable to come to an agreement with Orbitz this month:

American will be "out of sight, out of mind" for millions of Orbitz users. According to Compete's site comparison, Orbitz received nearly 8.4 million unique visitors in September. With its inventory pulled, American will simply disappear for millions as Orbitz offers and books alternative itineraries.
AA.com is no Southwest.com. Southwest famously shuns indirect distribution channels with no OTA presence and very limited GDS access. But Southwest has been focused on driving consumers directly to its web site for years. The Compete data show Southwest with nearly double American's web traffic. JetBlue wasn't able to match Southwest's success in web-only distribution despite its relatively small size and strong brand. How can American hope to change consumer behavior in the next three weeks?
Orbitz is only the first to fall. American is serious about Direct Connect and about cutting its costs. Expect American to take an equally hard line with other OTAs as existing agreements allow. Next up, at least by web traffic, could be Sabre's Travelocity, but Expedia is the big fish online.

The real question is whether American is bluffing, hoping to win a few percent savings. But dogged with high costs across its operation, American needs more than a few percent here and there. American may well feel it has no choice but to carry out its threat... and shoot itself in the foot.

AirTran acquisition offers glimpse of a new Southwest

Mon, 27 Sep 2010 14:00:00 GMT

Southwest's acquisition of AirTran sets the carrier's course for the next decade. With a stroke of the pen, Southwest has simultaneously undertaken three new challenges:

1. Operate a multi-aircraft fleet. In addition to its 52 737-700s, AirTran brings 86 717-200s—and two-class configurations—to Southwest's all-737 fleet. All indications are that Southwest fully intends to keep the smaller 717s, and, moreover, that some smaller AirTran markets would not be viable without the flexibility afforded by the smaller aircraft. But make no mistake: adding a second aircraft to a fleet is no small matter. Maintenance, aircraft and crew scheduling, and revenue management procedures and systems are all in for upheaval. And there's no "differences course" for pilots seeking to transition between aircraft; they must add on a new type rating. Southwest wouldn't even consider taking on these hurdles if it weren't serious about retaining the bulk of AirTran's service footprint.

2. Serve international destinations. "But they're domestic only" is one of the few remaining "buts" with which legacy carriers can comfort themselves in comparisons to Southwest. With the release of June's domestic traffic data, Southwest finally surpassed American in domestic revenue passenger miles for a 12-month period, having long ago eclipsed the pre-merger legacies in total number of domestic passengers. AirTran's experience serving Aruba, Cancun, Montego Bay, Nassau, and Punta Cana will greatly assist their new colleagues through this important learning curve. Chief among the limitations of Southwest's current reservation system—already marked for replacement—is its inability to handle international operations Does AirTran's use of Navitaire's New Skies seal the deal for the Accenture company?

3. Attract more business travelers. An airline won't win a customer if it doesn't fly where he needs to go. And while Southwest CEO Gary Kelly highlighted Atlanta as a "gaping hole" in their current destinations for business travelers, AirTran brings signiificant and much-needed presence in Milwaukee, Boston, LaGuardia, Indianapolis, and DC's Reagan National. With this move, Southwest has a shot to increase its share of the business travel spend where it's already strong, like Chicago, Baltimore, Denver, Houston, and Dallas. Just don't expect the airline without assigned seats to retain AirTran's Business Class.

Much of what will be written about this merger in the days to come will no doubt focus on Atlanta—and rightly so. The drama couldn't be higher with giants Delta and Southwest battling it out at the world's busiest airport. But the real story is how this merger helps Southwest transform for its next phase of growth.

Travel advertisers: Beware Google Instant's instantly increased impressions

Fri, 10 Sep 2010 14:00:00 GMT

Google has released its new Google Instant search-while-you-type interface. But the big news is not the slick new interface or the purported five seconds it can save searchers; if it's from Google, it's all about ads. For while Google is guessing what you're intending to search for, it's displaying ads—and counting impressions—every step of the way.

For travel advertisers, "close" usually isn't good enough

But more impressions is only consistently good for Google. For location-specific searches—like travel—matching partial searches by the text alone is not helpful: "from Boston" is a lot different from "from Baltimore"—or "from Bangalore"—even though the first six characters match perfectly.

To illustrate, let's conduct a common, travel search. According to Google's AdWords Keyword Tool, "flight" is the most common keyword in Travel & Tourism searches, as you might expect, with over 20 million searches each month. (N.B.: Google has created a complicated, dynamic, and adaptive system. Results can vary from moment to moment, and from location to location. This example, while genuine, is presented as an illustration only.)

Baseline: With Google Instant turned off, the search flights to hawaii from boston shows just four ads, from Delta, United, Expedia, and Continental:

But with Instant turned on, Google shows results—and ads—for no fewer than six different permutations of searches:

1. flights

Eight ads are displayed from FlyJerk.com, Expedia, Travelocity, Fly.com, Southwest, Orbitz, Booking Buddy, and Travelzoo. Note the Miami campaign from Expedia:

2. flights to miami

Eight ads are displayed, most Miami-specific from FlyJerk, CheapOair.com, United, Southwest, FareSpotter.net, TripMama.com, RedCoachUSA.com, and Cheapflights.com. United's Honolulu campaign sticks out for going against Google's guess:

3. flights to hawaii

Oh, the difference an "H" can make! (And it's a good thing we're not searching for Maui specifically; Mexico and Miami come before Maui).

We see eight more ads, all Hawaii-specific campaigns, from United, Expedia, Continental, iFlyGo.com, LowFares.com, Cheapflights.com, Hawaiian Airlines, and FareSpotter.net. Twenty-four impressions into the experience, these are the first eight worth paying for:

4. flights to hawaii from dc

Fortunately, only two ads suffer from this bad guess, and only Expedia's appears to be a DC-specific campaign:

5. flights to hawaii from baltimore

Surprisingly, no ads are displayed for this bad guess:

6. flights to hawaii from boston

Finally we have the results we intended and see three ads from Delta, United, and Expedia:

Final score: 29 ad impressions for Google Instant vs. 4 (+625%)

Saved by the three-second rule?

While results and ads are guessed and displayed immediately, Google only counts ad impressions if displayed for three seconds. "Google Instant changes the way we think about [and count] impressions," says this post on Google's Inside AdWords blog:

With Google Instant, an impression is counted if a user takes an action to choose a query (for example,presses the Enter key or clicks the Search button), clicks a link on the results page, or stops typing for three or more seconds.

It's possible that this feature may increase or decrease your overall impression levels. However, Google Instant may ultimately improve the quality of your clicks since it helps users type queries that more directly connect them with the answers they need.

In our example, most of the guesses were bad enough not to pause over. If we only count the impressions generated for the intermediate "flights to hawaii" and the ultimate "flights to hawaii from boston", that still contitutes a 200% increase in measured impressions.

What's an advertiser to do?

Any large-scale bidding system is a game (as in "game theory" not as in "fun"), and Google Instant just changed many of the rules advertisers have been working under.

1. Change your thinking. Take Google at its word; if Google Instant changes the way they think about impressions, it should change the way you think about impressions, too. Don't underestimate the effect of this change on your campaigns—or your search advertising budget.

2. Monitor your impression-to-click-through ratios carefully. Expect to spend some quality time over the next couple of weeks with Google's analytical tools. Be on the watch for sudden increases in your impressions without corresponding click-through increases.

3. Be prepared to decrease your bids on impressions accordingly—perhaps to zero. Most AdWord campaigns are not brand-building exercises. You need click-throughs. If Google Instant dilutes your impressions with bad guesses, vote with your dollars and decrease your maximum bids for impressions.

Airline transparency doesn't end with Twitter

Sat, 12 Jun 2010 14:00:00 GMT

Twitter, Facebook, and other social networking and communications channels continue to command an increasing amount of mind share among marketing and communications pros. And justifiably so. These informal communication channels are uniquely suited to convey time-sensitive operational and promotional messaging and to increase transparency by facilitating public conversations.

Sometimes, however, your message won't fit into 140 characters, so today we salute two "long form" communication channels which engage their audiences and reinforce their brands:

United's "From the Flight Deck" audio on Channel 9

United endears itself to aviation geeks and passenger pilots by routinely carrying the radio chatter from the cockpit on Channel 9 of their in-flight entertainment (IFE) systems. And Channel 9 has some die-hard fans; passengers go so far as to track the availability of the channel (which is operated at the captain's discretion) on a dedicated thread on the FlyerTalk discussion forums.

The Wall Street Journal's Scott McCartney profiled this service in 2008, and correctly highlighted its potential downsides, such as causing passenger angst when flight crews miss radio calls. But savvy listeners understand that's part of life in the analog world of air traffic control—and just as easily heard on the ground with a hand-held radio or a LiveATC.net stream.

It's hard to demonstrate that United wins many customers due to Channel 9, but that's the case with many brand-building experiences. At least the price is right, and its availability clearly resonates with many passengers. One positive sign for its longevity: Channel 9 is included in United's just-launched Zune-branded IFE.

Update: Monday, August 30, 2010

With the United-Continental merger all but a done deal, blogger Jon Ostrower (@FlightBlogger) has launched an informal Twittter campaign to save Channel 9 using the #SaveCh9 hashtag. We hope this campaign fares better than #SaveTheTulip's influence on the new fleet livery.

Delta's Flight Operations Weekly Update podcast

Each week, Captain Steve Dickson, Delta's Senior Vice President of Flight Operations, records a brief message to update flight crews on a handful of timely issues. While some topics are clearly inside baseball, such as a recent reminder of changes to the bid process, others are of more general interest, such as a discussion of Delta's fleet-wide efforts to minimize the use of fuel-thirsty APUs.

Over the past months, these weekly updates have provided fascinating insight into the operational details of merging two operations: "Delta North" and "Delta South", as Capt. Dickson consistently refers to the legacy Northwest and Delta fleets. With its "adopt-and-go" process behind it, Dickson's team has turned its attention to process improvement and streamlining. Being able to listen in to this process is a rare treat.

To their great credit, Delta management releases an appropriately edited version for public consumption, available as a free podcast subscription from Apple's iTunes Music Store or from Delta's DALpilot.com portal.

United-Continental management, repeat after me: "We're Number 3"

Tue, 18 May 2010 14:00:00 GMT

Our recent Quick Take report, "Antitrust Concerns Unlikely to Derail Proposed United-Continental Merger", studies the impact of this proposed merger on competition at the industry, airport, and route levels. Using the Herfindahl-Hirschman Index (HHI) to quantify increases in market concentration and applying the Department of Justice's published guidelines, we "red-flag" fewer airports and routes for this merger than for the just-completed Delta-Northwest combination.

But times have changed. While the "government is cool" meme of President Obama's first 100 days may have lost its luster, there is no doubt of the administration's commitment to an environment of "reinvigorated regulation".

Just ask Delta CEO Richard Anderson who pointed out during an earnings call that their proposed NY-DC slot swap with US Airways "has been pending longer than the merger of Delta and Northwest." And today's Wall Street Journal brings us an article by Susan Carey, "Airline Deal Faces a Tough Review"—in which we are honored to be mentioned—citing former DOJ lawyer Makan Delrahim who predicts "a tough and lengthy review process."

What's management to do? Our advice is simple:

1. Don't take approval for granted. In its May 4 story, "Continental-United merger to get hard look from regulators", The Washington Post reports on the attitude conveyed by management during a conference call held on the day of the announcement:

Continental chief executive Jeffery A. Smisek, who would become the head of the merged company, told analysts and reporters in a conference call Monday that the deal should "readily pass muster" with regulators.

"We know what the process is, we know what the law is, we know how the markets are defined. We have done a very rigorous analysis," he said. "There are no two carriers that you could put together in a more complementary way than United and Continental."

As long as the petitioners are experts on the law and have "done a very rigorous analysis", there's really nothing left for the DOJ to do but rubber-stamp the application, Smisek seems to intone. And that's simply not the sort of attitude which plays well with regulators under any administration.

2. Repeat after me: "We're Number 3!" You've seen the headlines and read the coverage: "Behemoth", "Mega-merger", "World's Largest", etc. Such superlatives can help excite employees and investors in these early days, but here again we counsel a more muted tone when meeting with the Antitrust Division.

While the combined United-Continental will clearly capture the #1 slot in gross revenue and revenue passenger miles (RPMs), use to your advantage that the new airline will still carry fewer passengers domestically than either Delta or Southwest. You might want to bring along this picture of a decade of eroding passenger share from our report:

Seen in this light, after a decade of steady losses, the proposed merger merely sets the clock back and restores United's market share to that of 2000.

3. Be proactive. You already know where the combined airlines will be over-concentrated—though feel free to buy our report if you could use a handy list of red-flagged airports and routes. Take Newark as an example; you clearly have more capacity—in slots, gates, and other facility leases&dash;than you could possibly want. Why not demonstrate a willingness to work with regulators and airport officials by volunteering to surrender some of this excess capacity proactively? It's a win-win and builds some much-needed good will. And in this new environment, you're going to need all the good will you can find. Your goal of achieving SOC in the ﬁrst half of 2012 doesn't leave much time for a trip through the federal court system.

Press Release: Antitrust Concerns Unlikely to Derail Proposed United-Continental Merger

Tue, 11 May 2010 04:00:00 GMT

California concentration could prove a speed bump to approval

Cambridge, MA - May 11, 2010 - The proposed merger between United and Continental is unlikely to be blocked on antitrust grounds according to a new report from Cambridge Aviation Research. The Quick Take report "Antitrust Concerns Unlikely to Derail Proposed United-Continental Merger" uses domestic market share data to estimate the effects of the proposed merger on competition at the industry-, airport-, and route-levels. The report quantifies these effects using the Herﬁndahl–Hirschman Index and compares them to guidelines published by the Department of Justice, "red-flagging" markets of concern.

"With relatively little overlap in their route structures, the proposed merger of United and Continental raises red flags at only 17 domestic airports," said Jeffrey Breen, president of Cambridge Aviation Research and primary author of the report. A similar study conducted last month found 26 red-flagged airports caused by the potential combination of United and US Airways. "But with more than a third of the red-flagged airports in California, management needs to address these markets proactively and publicly," advised Breen.

Key findings include:

After years of losing domestic market share, this merger merely turns back the clock for United to early 2000. Even on the heels of the just-completed Delta-Northwest merger, this proposed combination would only restore the industry's market concentration to its levels of 2002-2003.
At the airport level, 17 U.S. airports are red-flagged for increases in market concentration, exceeding the DOJ guidelines. From most-affected to least: Newark (EWR), San Francisco (SFO), Vail (EGE), Houston (IAH), Los Angeles (LAX), Yampa Valley Colorado (HDN), New Orleans (MSY), Cleveland (CLE), Denver (DEN), Chicago (ORD), San Diego (SAN), Orange County (SNA), Honolulu (HNL), Ontario California (ONT), Las Vegas (LAS), Tampa (TPA) and Sacramento (SMF).
More than a third of red-flagged airports are in California. Airport officials and existing or potential airline partners should be engaged proactively to begin to address the imbalances in these and other highly visible markets.

The Quick Take report is 12 pages long, contains 5 figures, 4 tables, and 3 spreadsheets and is available for purchase and download from http://www.cambridge.aero/store

About Cambridge Aviation Research

Cambridge Aviation Research has provided custom research and analysis services to the aviation industry since 2005.

Contacts:

Cambridge Aviation Research media relations, media@cambridge.aero

In the news: Washington Post 5/4: DC Airports' Post-Merger Market Shares

Tue, 04 May 2010 04:00:00 GMT

We had the privilege of working with the great design team at The Washington Post to help illustrate the effect of the proposed United-Continental merger on the D.C. market. The result is this companion graphic to today's article "Continental-United merger to get hard look from regulators." (The thumbail is linked to the full-sized version at washingtonpost.com.)

In the news: New York Times 5/3 "United and Continental Said to Agree to Merge"

Mon, 03 May 2010 04:00:00 GMT

In "United and Continental Said to Agree to Merge", The New York times cites our market share calculations from our Quick Take report on the United-Continental merger.

Merger Matchup Series announced and available for pre-order

Tue, 20 Apr 2010 04:00:00 GMT

Cambridge Aviation Research is pleased to announce this upcoming report series.

The perceived success of the Delta-Northwest merger has airline executives again eyeing consolidation as a response to the current environment of economic uncertainty, slashed capacity, lowered yields, and renewed security concerns.

Our 2010 Merger Matchup report series will analyze each likely pairing of major U.S. carriers, scoring each potential match by geographic & fleet compatibility, financial health, and potential cost savings. Any overlap markets with antitrust concerns are flagged by comparing pre- and post-merger Herfindahl-Hirschman indices (HHIs) to the market concentration thresholds published by the U.S. Department of Justice and the Federal Trade Commission in 1992’s Horizontal Merger Guidelines.

We explore these critical issues for each potential merger:

Geographic and network compatibility. Which airports are likely to lose out as the combined carriers rationalize their networks?
Fleet harmony. How do the fleets compare from operational, efficiency, and training perspectives?
Antitrust concerns. Which markets and routes should planners prepare to sacrifice capacity to stave off regulators?

Normally $9,995, orders received by May 14 will receive the complete series for $7,995 with delivery starting in May.

The series is available to pre-order at http://www.cambridge.aero/store.