The Skift Airline Innovation Report is our weekly newsletter on the business of airline innovation. We look closely at the technological, financial, and design trends at airlines and airports.
Brian Sumers writes and curates the newsletter, and we send it on Wednesdays. You can find previous issues of the newsletter here.
At last week’s Aviation Day USA, I kept waiting for Dr. Evil — the Austin Powers movie character — to spring from behind the stage with a mischievous grin.
I got that feeling because in front of an industry audience — the event was sponsored by IATA, a trade group, and the Wings Club — insiders mostly spoke not about how to improve the passenger experience, but how to make more money and reduce government regulation. At times, it seemed they were more preoccupied with getting governments out of their business than anything else.
No one wants to mess with safety, of course. But IATA leaders seemed to scoff at consumer protections, arguing the industry can police itself while praising the Trump administration for its regulatory approach. “We’d like to see a lot more of the same,” IATA general counsel Jeffrey Shane told Jeffrey Rosen, deputy secretary of the U.S. Department of Transportation. The two worked in the George W. Bush administration and were unusually chummy during an on-stage interview session.
Read on to see my stories from the IATA event, as well as more commentary on IATA’s positions, and a dispatch from a recent Delta Air Lines product event.
— Brian Sumers, Airline Business Reporter
Stories of the Week
Airlines May Want Higher Fuel Prices Despite How Contrarian That Seems: If U.S. airlines want to continue to record near-record profits, they might want oil prices to rise. That’s not conventional wisdom, since a huge percentage of an airline’s cost is fuel. But four panelists at the IATA event said they suspect more expensive fuel makes airlines more rational because they’re less likely to add capacity or gamble on new routes. That’s not a customer-friendly approach, but investors don’t want airlines to grow too much.
Ryanair Urges Brexit Negotiators to Eliminate the Uncertainties: Few airlines would be as affected by Brexit as Ryanair, which has historically had a robust network from London using an Irish operating certificate. The airline has warned customers that its routes could be affected as soon as next year, but Chief Marketing Officer Kenny Jacobs told Skift it looks like it should be status quo for 2019, if not slightly beyond. A panelist at the IATA event said the UK should sort out these issues, but predicted it will be a tough process.
Can You Name the World’s Largest Fokker Fleet Currently Flying? Skift Australian freelancer Allan Leibowitz writes that the largest Fokker fleet belongs to Brisbane-based Alliance Airlines, a charter carrier that also operates some wet-lease flights for Virgin Australia. Alliance flies the Fokker 50, Fokker 70 LR jet, and Fokker 100. In this airline profile, Leibowitz writes that Alliance’s business is good as Australia tourism booms.
Hawaiian Airlines Trims Schedule Because of Late Airbus Deliveries: For so long, Hawaiian Airlines executives downplayed potential problems with the engines on their A321LRs. Yes, they admitted last year, the planes would be delayed. But once they arrived, all would be good. Well, the first plane entered service in January, and not all is going according to plan, forcing Hawaiian to drop some flights from its schedule. Bloomberg has details.
Air France-KLM Isn’t Sure What to Do About Low-Cost Rivals: Air France has created a millennial-focused airline called Joon to play defense against low-cost carriers. But Air France might be considering launching yet another airline-within-an-airline. What could go wrong? My colleague, Skift Europe Editor Patrick Whyte, takes a look at what might be next for Air France.
Are Airline Rules Getting Out of Hand? American Public Media’s David Brancaccio interviews former American Airlines General Counsel Gary Kennedy to discuss some of those rules U.S. airlines are trying to get the government to relax. He said he generally agrees with the IATA positions, and notes regulators might have over-stepped. “The DOT has the authority to regulate what are called ‘unfair and deceptive trade practices,'” he said. “But they’ve simply taken it too far.”
Airbnb Has ‘Secret Plans to Launch Airline.’ Really? Airbnb leaders have spoken about whether they want to enter the aviation business. USA Today’s Ben Mutzabaugh examined whether this is possible, asking industry experts their opinions. The verdict: It seems highly unlikely Airbnb would start an airline, but it might have other ideas for how to expand to aviation.
Buffett’s Hunting for Deals and Wouldn’t Rule Out Owning an Entire Airline: You know the old joke. How do you make $1 million in the airline business? It just seems impossible that Warren Buffett would want an airline. But he’s the expert, so maybe he sees something I don’t. CNBC has some context on Buffett’s comments.
No Regulations, Please
It’s probably safe to say Alexandre de Juniac, IATA’s CEO, is not a proponent of governments meddling in an airline’s commercial decisions.
“Under the Obama administration, the Department of Transportation retreated from some of the principles of free and open market competition in favor of a more heavy-handed approach to regulation,” he told attendees at last week’s event, adding the current climate is more hospitable.
What were these Obama-era overreaches? He gave three examples:
- That airlines have to advertise their full ticket price is unfair. “Why should air travelers be treated any differently than other consumers in a country where tax is almost universally applied on top of the advertised price?” he said. Perhaps true, but this is a nice consumer benefit. Maybe the rest of the U.S. should adopt the same policy?
- The government should not ban cell phone calls on planes. “Absent a safety issue, it is hard to see how DOT had authority to regulate in this area,” he said. Maybe not, but again, not a bad rule.
- The U.S. government had considered requiring airlines to distribute flight and fare information to metasearch companies and global distribution systems. The problem, he said, was that there would be “no restrictions on how the information was presented to consumers.”
Those are all reasonable enough complaints. But among consumer groups, there’s concern the Trump administration may roll back a slew of regulations designed to protect passengers. In February, The Wall Street Journal reported many U.S. airlines want the administration to weaken tarmac-delay rules, end the mandatory 24-hour grace period for airline tickets, and stop requiring airlines to advertise the full ticket prices, including taxes and fees.
At the event, Jeffrey Shane, IATA’s general counsel, suggested that the government had overstepped with some of its Obama-era rules.
“By deregulating the industry, we democratized it,” he said. “So everybody is an expert in this industry. Before they couldn’t afford to be, now they are. The net result is that it has become a political issue so any time any bad thing happens to anybody on any flight, it becomes a political opportunity. Somebody strikes out for justice and a new law is written and we have a regulation following shortly thereafter.”
Rosen, the deputy secretary of the U.S. Department of Transportation, said he agreed.
“It is not ultimately in the consumer’s interest to have burdens that they in some sense wind up paying for, but may not fully benefit from,” he said.
New Delta Food
I attended lunch at the restaurant Animal in Los Angeles earlier this week to preview Delta’s menu from Los Angeles-Sydney. These are odd events, because an airline is trying to persuade an unusual crowd — lifestyle and food bloggers, plus Instagram personalities — that their brand is at the vanguard of food culture.
That’s not easy. We know airline food is produced in bulk, and cooked, then chilled, then re-heated and served onboard. So even when an airline like Delta contracts with celebrity chefs — in this case it’s Jon Shook and Vinny Dotolo, who are big deals in L.A. — the food is not much better than the usual flight kitchen fare. That can be disappointing for a consumer who books based on food — a classic case of over-promising and under-delivering.
Here’s what I liked about Delta’s partnership with the two chefs. Shook and Dotolo never promised they’d produce the same quality food as at their restaurant empire. Shook spoke about several challenges, including how food is re-heated on board in poor-quality ovens and how airline food may be no more than two inches high.
Shook and Dotolo are starting small, catering only three routes from L.A. — Sydney, Washington Reagan, and New York JFK. They use their own catering kitchen near LAX, and then truck the food to Delta’s usual caterer, which transports it to the plane. Shook told an amusing anecdote about how the real caterer reacted when he said they would not use powdered eggs. “They were so shocked that we were going to use real eggs,” he said. The two chefs also were proud that even their parsley is hand-picked.
Delta’s not the only airline catering this way, but it is still an unusual approach. Often, airlines have a celebrity chef “design” the menu, but turn over the real cooking to the flight kitchen. Shook and Dotolo said they’re keeping ownership over everything, and while it may not be restaurant quality, I believed them when they said they were competitive people who want to make the best plane food they could.
Having tasted it, I can say it was fine. But even here, I’ll credit Delta and the chefs. I’ve been to airline events where chefs make the food taste better than in the air, using techniques not available to flight attendants. But Shook and Dotolo insisted on cooking the food as on the plane, chilling and re-heating the food per Delta’s standards.
Delta has a similar relationship with Danny Meyer’s Union Square Hospitality Group for New York departing flights. At last year’s Skift Global Forum in New York, my colleague Kristen Hawley asked Meyer about the relationship.
“There’s just no way the gnocchi is going to taste exactly like at the Union Square Cafe,” he said. “But if you say yes, but relative to what people expect to eat on an airplane, can we elevate that?”
Skift Airline Business Reporter Brian Sumers [email@example.com] curates the Skift Airline Innovation Report. Skift emails the newsletter every Wednesday. Have a story idea? Or a juicy news tip? Want to share a memo? Send me an email or tweet me.