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.
During nearly five decades, Southwest Airlines has built a reputation as a lovable airline passengers can trust.
That goodwill has been tested over the past two weeks, as Southwest recovers from its first passenger fatality since it started flying in 1971. On April 17, a Southwest Boeing 737-700 suffered an engine failure, with debris from the engine hitting the fuselage. The airplane lost pressurization, and one passenger, who later died, was pulled partially through a broken window.
No matter the story, most media outlets prefer to follow the pack. And when tragedy occurs, reporters can go one of two ways. They can spend most of their time trying to find out who was at fault, “investigating” an airline for its maintenence practices or the Federal Administration for its oversight. Or they can go the other way, producing stories commending an airline’s crews for professionalism.
Yes, journalists tried both approaches here, with some reporters wanting to know why Southwest jets suffered two similar engine failures in two years. But mostly, the “hero” narrative has taken hold. That’s appropriate since it will take years before safety regulators release a report on what happened.
The narrative didn’t go this way by chance. Southwest made it happen because it spent decades branding itself as a safe, reliable airline that passengers love. Passengers are willing to give it the benefit of the doubt. That’s why, outside of a short-term blip, Southwest doesn’t expect the incident will have a long-term affect on its fiscal health. Customers, who may have avoided the airline briefly, will be back. (That’s probably still true even after another Southwest jet made an unscheduled landing Wednesday after a window cracked in flight, an incident that, while not serious, may spook some consumers)
— Brian Sumers, Airline Business Reporter
Stories of the Week
Southwest Airlines Says Last Week’s Tragedy Will Hurt Revenues: Southwest executives admitted last week that fewer passengers were viewing the airline’s website and booking tickets. But airline leaders and analysts expect this will be a short-term hit. And they generally blame not the April 17 incident, but Southwest’s decision to reduce marketing after the event. We’re guessing everything returns to normal soon.
Ryanair Executive Predicts Higher Fuel Prices Will Tank Some Competitors: At big conferences, Ryanair’s top executives love to make bombastic comments about competitors, and last week’s Skift Forum Europe in Berlin was no exception. “The backdrop for the next three years is that more European airlines are going to go out of business,” Chief Marketing Officer Kenny Jacobs said. “That’s going to happen because aviation fuel is about $75 dollars a barrel.” Do you agree?
American Airlines Lowers Profit Projections as Fuel Prices Rise: Ah, so much fuel talk. Oil prices are increasing, and investment analysts are getting skittish. Eventually, higher fuel prices can mean only one thing — higher average airfares. But there’s often a lag, as airlines generally can’t pass on all their cost increases to consumers at once. In the short term, before airlines can raise prices, airline profits could fall slightly. But American Airlines executives last week said they’re not worried. They note the fundamentals of the U.S. airline industry remain strong.
Frontier Airlines Pilots Ask Feds for OK to Pursue a Strike: U.S. airline strikes are rare because of federal regulations designed to prevent them. Pilots at Frontier Airlines are asking the National Mediation Board to release them from negotiations, a required step before they could strike. Let’s hope the sides can sort things out before pilots walk off the job.
Allegiant Air Expects No Long-Term Hit to Earnings After 60 Minutes Report: Unlike Southwest, Allegiant has not spent decades building up goodwill with passengers. But it has cheap fares, and it flies routes that other airlines do not. The airline is expecting this niche will help insulate it from fallout from the recent 60 Minutes news report about its safety culture. On Allegiant’s recent earnings call, executives said bookings had briefly fallen off, but said they’re nearly back to normal.
JetBlue Tweaks Its West Coast Route Map as It Focuses on Profit Margins: JetBlue isn’t quitting at its Long Beach, California, focus city, but it is doing something unthinkable just a couple of years ago — returning slots at the capacity-controlled airport. JetBlue hasn’t always flown a full schedule in Long Beach, but it has been diligent about using slots enough to keep them. That’s ending, and Southwest likely will be the beneficiary. As it shrinks in Long Beach, JetBlue will focus on adding routes to other airports in the Los Angeles area.
Southwest and Marriott Dominate Annual Loyalty Program Awards: Southwest Airlines has the best overall frequent flyer program, according to the Freddies, the annual awards for travel loyalty programs. Southwest also won for best customer service, best redemption ability, and best promotion. Skift freelancer Grant Martin has the scoop on other winners.
Why Airline Credit Cards Have an Enduring Appeal: Consumers love airline credit cards. But why? The New York Times takes a look at this phenomenon, which is big business for airlines. Delta Air Lines said it made about $3 billion last year from its relationship with American Express.
Coming Up: What’s up With Gogo?
Normally, Gogo’s earnings calls aren’t interesting. Usually, we’re told the company is not yet profitable, but that it is on its way, and executives note they’ve secured inflight Wi-Fi contracts from more airlines.
But the next one, set for Friday, could be different. It’s the first since former Gogo CEO “stepped down” — there one day, and gone the next — and was replaced by Oakleigh Thorne, who does not have airline or telecommunications industry experience, but does, through his family office, own approximately 30 percent of Gogo’s stock. Thorne had served on Gogo’s board and previously was CEO of eCollege.com.
I don’t think he has done any interviews, so this will be the first time we’ll hear from Thorne. Airlines passengers surely want to know what he’ll do to make Gogo’s onboard systems more reliable. And investors will want to know his plans for the company. Can Gogo make it as a stand-alone entity? Will it need to merge? Will it need to be acquired?
What do you think? What is Gogo’s future?
Skift Airline Business Reporter Brian Sumers [firstname.lastname@example.org] 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 him an email or tweet him.