Airbus raises A320 output, pays record dividend

by
Geoffrey Smith

@FortuneMagazine

February 27, 2015, 6:29 AM EST

Shares in Boeing Corp’s BA biggest rival Airbus Group NV EADSY rocketed as the company said it would increase production of its single-aisle A320 airliner by nearly 20% to meet surging demand .

The Toulouse, France-based company also said it would increase its dividend to a new record high of €1.20 a share after a sharp rise in net income to €2.3 billion. The shares rose over 7% in Europe in response to the news.

Airbus currently makes 42 A320s a month at sites in France, Germany and China, and is also in the process of setting up facilities in Alabama. It will raise this to 50 a month from 2017, reflecting a full-to-bursting order book or single-aisle planes that had risen to over 5,000 by the end of January.

Reuters quoted chief executive Tom Enders as saying that it may raise production even more.

“The demand is clearly there to move the rates to 60-plus,” Enders said. “There are studies underway.”

At the same time, though, Airbus said it will cut the number of wide-body A330 planes it makes to 6 a moth from nine currently. The company aims to introduce a new version of the A330, known as the A330neo (“new engine option’) from 2017. The only fly in the ointment remained the company’s military business, where it took a €551 million charge due to delays on its A400M transport plane project.

Both Airbus and Boeing are enjoying a sweet spot in a famously cyclical industry. With air travel in Asia expanding rapidly, and financing costs for airlines in developed markets at record lows thanks to ultra-low interest rates in the U.S. and the Eurozone, conditions have rarely been as favorable for airlines. On top of that, the collapse in oil prices has also improved the longer-term outlook for the industry, by slashing one of its biggest cost components.

International Airlines Group ICAGY , the parent company of British Airways and Spanish-based Iberia, provided further evidence of that trend Friday, saying 2014 operating profit rose 95% from a year earlier, and saying it expected it to double again next year.

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United to pilots: Please don’t crash our planes

by
Geoffrey Smith

@FortuneMagazine

February 25, 2015, 5:49 PM EST

United Airlines sent a sternly worded safety reminder to its pilots after a series of mistakes in the cockpit, the Wall Street Journal reports.

The early January memo mentioned a handful of recent near-accidents involving United aircraft, including a pilot who had to perform a last-minute maneuver to avoid crashing.

A spokesman for the company told the Journal that the memo represents an effort to be “direct, clear and open with our pilots” about aviation safety.

United Airlines merged with Continental Airlines in 2012; the two now operate under the banner United Continental Holdings. United’s last serious accident was in 1991; Continental’s was in 1987.

United posted $9.3 billion in revenue for the fourth quarter of 2014, a drop of 0.2% year-over-year.

Southwest’s Latest Move Is Shocking to Long-Time Customers

by
Geoffrey Smith

@FortuneMagazine

February 25, 2015, 9:53 AM EST

Southwest Airlines jets will continue flying over the next few days despite missing scheduled inspections.

The low-cost carrier failed to perform required rudder checks on 128 of its planes, the Wall Street Journal reports. The Federal Aviation Administration, though, agreed to let the aircraft keep flying for five days while the inspections are completed between routes.

Southwest told the FAA on Tuesday afternoon that it missed the inspections. It then took the jets out of service voluntarily, resulting in 80 cancelled flights. By early Wednesday morning, the FAA and Southwest had worked out a plan to allow the aircraft back in the skies while the inspections were done.

Minimal disruption of Southwest’s flight schedule is expected for Wednesday.

United accidentally offers transatlantic first-class flights for $75

by
Geoffrey Smith

@FortuneMagazine

February 12, 2015, 9:10 AM EST

If a deal seems too good to be true, it probably is, at least for United customers.

According to a Bloomberg report, the Chicago-based airline has voided the tickets issued to thousands of customers who bought them at incredibly cheap prices online. The tickets were priced cheaply due to a glitch in the pricing software. For instance, a first-class ticket from Newark, N.J., to London went for just around $75. On the United website right now, a first-class ticket for that route is going for more than $5,000.

In order to get the low rate, customers had to take a series of steps, the story notes, including saying they were in Denmark.

“United is voiding the bookings of several thousand individuals who were attempting to take advantage of an error a third-party software provider made when it applied an incorrect currency exchange rate,” Rahsaan Johnson, a spokesman, said in an e-mail to Bloomberg. He noted that United filed its fares correctly.

Requests for further comment from United UAL by Fortune received no immediate response.

This isn’t the first time for this type of event, Bloomberg notes. In the past, airlines have actually allowed passengers who got cheap — or even free — flights to keep their tickets, the report said.

Korean ‘nut rage’ princess gets 1 year in prison

by
Geoffrey Smith

@FortuneMagazine

February 12, 2015, 7:31 AM EST

This article is published in partnership with Time.com. The original version can be found here.

A Seoul court on Thursday sentenced a former Korean Air executive to a year in prison for aviation law violations that stemmed from her inflight tantrum over how she was served macadamia nuts.

The court said Cho Hyun-ah was guilty of forcing a flight to change its route and two other charges.

Cho, the daughter of Korean Air’s chairman, achieved worldwide notoriety after she ordered the chief flight attendant off a Dec. 5 flight, forcing it to return to the gate at John F. Kennedy Airport in New York.

She was angered she had been offered macadamia nuts in a bag instead of on a dish and had a heated confrontation with members of the cabin crew.

The court also found Cho guilty of obstructing the flight’s captain in the performance of his duties and forcing a crew member off a plane. It found her not guilty of interfering with a transport ministry investigation into the incident.

Cho, in custody since Dec. 30, wiped away tears as a letter expressing her remorse was read to the court by head judge Oh Seong-woo.

The letter included details about how Cho, one of the richest women in South Korea who regularly flew first class, was adjusting to the basic conditions of her prison and finding time to reflect on her life. “I know my faults and I’m very sorry,” Cho said in her letter.

Prosecutors had called for three years in prison.

Cho’s behavior, dubbed nut rage, caused an uproar in South Korea. The incident touched a nerve in a country where the economy is dominated by family-run conglomerates known as chaebol that often act above the law.

These airlines are offering in-flight college classes

by
Geoffrey Smith

@FortuneMagazine

February 5, 2015, 6:48 PM EST

This post is in partnership with Money. The article below was originally published at Money.com.

By Kim Clark, Money

Just because you’re on an airplane doesn’t mean your head has to be in the clouds.

In addition to the usual fare of straight-to-DVD movies that will certainly rot your brain, two airlines have recently begun serving up some smarter in-flight entertainment to their passengers: complimentary audio and video of interesting college lectures.

In December, Jet Blue started streaming recorded lectures from some of the nation’s most elite courses, including marketing classes from University of Pennsylvania’s Wharton School, a Brown University archeology class, and an introduction to guitar and rhythm from the Berklee School of Music. The college lectures are pieces of full courses that are available free through Coursera, a platform for massive open online courses (a.k.a. MOOCs).

Jet Blue also offers video cooking lessons such as “How to brine meats” and “How to read labels on chocolate,” provided by a company called Rouxbe.

On February 1, Virgin America started offering audio and video from the “Great Courses,” a series of recorded lectures from top-shelf professors. Among the talks available: Neil deGrasse Tyson, director of the Hayden Planetarium on “The Inexplicable Universe: Unsolved Mysteries” and David Christian, history professor at Macquarie University in Sydney, Australia, on “What is Big History?”

Both airlines said they would rotate in new lectures every month or two—about how often some college kids attend class.

Gary Leff, a frequent business traveler who blogs at Viewfromthewing.com, says that while he usually works during flights, the college lectures would be at the top of his list for distractions. And he thinks they may be a pleasant surprise for many travelers: “People seem to like the serendipity” of unexpected audio and videos on long flights, he says.

Of course, the free lectures also allow organizations such as the Great Courses and Rouxbe, both of which charge for their entire courses, to market their content to a very captive audience. On the upside for passengers, that likely means other airlines will announce educational content alliances, Leff predicts.

Unfortunately, you won’t get a degree from attending school in the sky. But at least while you’re onboard you can learn something besides the appropriate way to apply an oxygen mask.

Fake Twitter bomb threats to airlines on the rise

by
Geoffrey Smith

@FortuneMagazine

January 28, 2015, 2:07 PM EST

This post is in partnership with Time. The article below was originally published at Time.com.
By Nolan Feeney, TIME

Airline bomb threats on Twitter have disrupted at least sixteen flights in the past five days, prompting new concerns about aviation security — and the way pranksters can cause serious trouble with social media.

Most recently, an American Airlines flight landed in Chicago safely Tuesday after a tweet claiming to be from the Islamic State of Iraq and Greater Syria (ISIS) claimed there was a bomb on board, USA Today reports.

That same day, another (now suspended) Twitter account called @RansomTheThug also claimed there was a bomb aboard a United Airlines flight that had already been canceled days earlier due to blizzard concerns. “In terms of the quantity of threats we’re seeing now, you just haven’t seen it,” Glen Winn, former head of security at United Airlines and Northwest Airlines, said.

But as was the case with the 14-year-old Dutch girl who threatened American Airlines as a joke last year, not every tweet is serious. “In the history of aviation sabotage, I don’t believe there’s ever been a threat called in where there’s actually been a bomb,” Douglas Laird, a former security director at Northwest Airlines, said.

Still, all threats are taken seriously and evaluated by airline security according to confidential criteria. Airlines are also required to report threats to Transportation Security Administration.

[USA Today]

Major airlines cancel thousands of flights due to East Coast blizzard

by
Geoffrey Smith

@FortuneMagazine

January 26, 2015, 8:03 AM EST

Major airlines cancelled thousands of flights scheduled to come into and out of the East Coast of the United States as a potentially historic blizzard is expected to dump as much as three feet of snow and snarl transportation for tens of millions of people.

The National Weather Service issued a blizzard warning for New York City and surrounding areas beginning 1 p.m. ET on Monday, and warned of two days of winter storms across the East Coast, from Pennsylvania to Maine.

“This could be the biggest snowstorm in the history of this city,” New York Mayor Bill de Blasio said.

Flight-tracking website FlightAware.com noted in a social media post Monday morning that around 4,000 flights have been cancelled for Monday and Tuesday. The post also said that almost all New York City flights will be cancelled Tuesday.

American Airlines Group AAL canceled all late afternoon and evening flights scheduled for Monday from the New York area, Philadelphia and Boston, spokeswoman Andrea Huguely said.

The cancellations affect flights of American Airlines, US Airways and all regional partners, Huguely said in an email. The company plans to resume operations “as soon as it is safe to do so,” she said.

As of early Monday afternoon, the company had canceled 626 flights that were scheduled for Monday and 970 scheduled for Tuesday, she said.

Delta Air Lines DAL said on Sunday it planned to cancel 600 flights because of the blizzard warning, while United Airlines UAL said it will cancel all Tuesday flights at airports in New York, Boston and Philadelphia. Beginning on Monday night, the carrier will limit operations at Newark, LaGuardia and John F. Kennedy airports in the New York area, a spokeswoman said.

Southwest Airlines LUV said Sunday evening it would cancel more than 130 of 3,410 flights scheduled for Monday due to the storm, an increase from its earlier plan to cancel about 20 flights.

Nearly all of the major U.S. carriers have waived the change fee for customers flying from affected cities during the storm, reported USA Today earlier Monday.

The Greater New York Taxi Association, an organization of taxi operators in New York City, said its members will offer free taxi rides to emergency workers unable to get to work and the elderly who might be stranded by the snow.

Airlines are passing fuel savings on to shareholders, not customers

by
Geoffrey Smith

@FortuneMagazine

January 22, 2015, 5:24 PM EST

After three airlines reported earnings Thursday, one thing is clear: the recent drop in oil prices has been a boon for the airline industry.

Southwest LUV , for one, noted on its earnings call that, given expected market prices for aviation fuel and already in-place derivative contracts, it would save around $500 million year-over-year in the first quarter alone. Rival United UAL reported that it saw the price of fuel drop nearly 15% in the fourth quarter of 2014, and more than 5% for 2014 as a whole, representing $670 million in savings for the airline compared with 2013. Alaska Airlines ALK , a smaller carrier based near Seattle, said it spent 13% less on fuel in the quarter and 3% less for the full year.

Earlier this week, Delta DAL announced it was expecting fuel savings of $2 billion in 2015 due to dropping oil prices. The price of a barrel of oil has fallen by about 60% to below $50 since last June.

With all that extra money in their coffers, airlines appear focused on rewarding shareholders, but not customers.

Southwest has long focused on sending excess profits back to shareholders, and CEO Gary Kelly said on CNBC Thursday that he thinks other airlines have copied that strategy.

“I think shareholders are more active and have demanded that,” he said.

In a conference call after the airline’s earnings were announced, United CEO Jeff Smisek said the carrier would use fuel savings to speed up the company’s long-term goals, including share buybacks.

Paying down debt is also a popular use of the savings. Carriers are currently carrying $70 billion in debt, according to Jean Medina, a spokeswoman for industry trade group Airlines for America.

Although fuel costs are declining, ticket prices are not seeing the same big drop.

In the Consumer Price Index report issued last week, the airline fares index fell just 4.7% year-over-year in December. The daily price of a gallon jet fuel, meanwhile, went from $2.96 to $1.80, a drop of nearly 40%.

There have been a few isolated attempts to give customers a break. Earlier this month, Alaska offered a 20% savings for customers who put in the promo code “FUELSAVINGS” when purchasing a ticket.

Customers who own airline stocks could see some benefit, however. Airline stocks should start to gain altitude as a result of the airlines’ fuel savings, said JPMorgan analyst Jamie Baker.

“The market is only putting a fraction of value on these fuel savings,” he told CNBC Thursday, adding that, despite a healthy 2014, the biggest U.S. carriers could still see “market trouncing returns.”

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