What we’re reading: AA’s record profits — again, new cruise laws proposed, JetBlue goes upscale

by Charlie Leocha on August 28, 2013

AA-New-Tail
American Airlines (yes, bankrupt American Airlines) just reported a second quarter of record profits underscoring the Department of Justice’s claim that they can fly on their own without a merger. Rockefeller proposed new cruise line laws to protect passengers. JetBlue decided to add premium seats to its planes for transcontinental flights.

Bankrupt American Airlines posts record monthly profit

American Airlines (AA) has reported another record-breaking profitable quarter even while in bankruptcy. This underscores the Consumer Travel Alliance (CTA) contention that neither US Airways nor AA need to merge to stay in business. The Department of Justice agreed with CTA, stating, “A revitalized American is fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for growth.”

The airline said in a securities filing Monday that it earned a record $349 million in July, or $292 million when reorganization costs were taken into account.

“[W]e are completing one of the most successful turnarounds in aviation history,” Tom Horton, chairman and CEO of American parent AMR, said in a memo to employees.

The Rockefeller cruise bills

The sweeping Cruise Passenger Protection Act of 2013 (S. 1340) will change the world of cruising and passenger protections by setting strict new safety standards for cruise ships. It will give DOT enforcement power and rulemaking power with the cruise industry similar to what it wields in the aviation industry. And, it will affect travel agents as well as it comes into effect.

Here are some of its major provisions:

• Gives the Department of Transportation (DOT) one year to develop standards for how cruise lines summarize for prospective passengers the key terms in the passage contract. Ship operators would then have six months to post the standards on their websites and to include them in any promotional literature or advertising.

• Empowers the DOT to impose fines as high as $25,000 per day for violations of this passenger notification provision, rising to a $50,000 daily cap for “continuing violations.” Individuals found “willfully” skirting the regulations would face fines as high as $250,000 as well as up to a year in prison.

• Requires the DOT to develop a consumer complaints hotline and website and empower it to investigate complaints and “refer any complaint … to the Attorney General or relevant federal agency for action.”

• Creates a DOT Advisory Committee for Passenger Vessel Consumer Protection to make recommendations to improve existing consumer protections, similar to the current Advisory Committee on Aviation Consumer Protection.

Now the multimillion dollar question — will it make it through Congress?

JetBlue decides to add elite lay-flat seats

One of the airlines that focused on common fliers is changing its tune. JetBlue is now planning on adding premium seats to its transcontinental flights and squeezing those in the back a little bit more. Will they keep loyal customers who the airline claims want to sleep between the coasts? Or, will they lose those customers who are being squeezed in coach?

Starting next year, the all-coach, discount airline plans to offer 16 lie-flat seats on those flights, which are the most profitable and highly contested domestic markets for airlines, with first- and business-class tickets frequently selling for $4,000 round trip.

CEO Dave Barger said in a “Squawk Box” interview that passengers on these routes will “pay for that seat as opposed to being upgraded in the seat based on loyalty programs.”

Long Island City, N.Y.-based JetBlue said the seats will debut on its new Airbus A321 planes in the second quarter of 2014. The planes will have 16 in the front cabin and 143 regular seats in the back. Four of the premium seats will have doors and are being marketed as “private suites” similar to what Dubai-based Emirates and Singapore Airlines offer their top customers.

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  • Rick

    CTA just doesn’t seem to get it…… AA is ONLY achieving those results BECAUSE it is operating under Chapter 11 BK protection. It doesn’t have to pay it’s bills, honor it’s debts, nor provide a pension nor medical benefits for many employees. The employees only agreed to the draconian concessions as a short term fix towards a merger with USAir. Absent that merger, the employees will not agree to any more concessions and will demand a fair and equitable wage and benefit package that reflects AA’s “record profits” that CTA continues to flaunt. Such short sighted vision is what caused AA to file Chapter 11 and is rampant in the aviation industry. It is rampant, too, in aviation media circles. Watch what happens if the DOJ wins. You may think CTA won, but I guarantee you, AA will not survive, long term.Who will come in and take over DFW? Who will have the assets to take over MIA and it’s South American and Caribbean routes? Watch Delta and United double or triple in their current market share. Then what will you do?

  • Skeptic

    ““[W]e are completing one of the most successful turnarounds in aviation history,” Tom Horton, chairman and CEO of American parent AMR, said in a memo to employees.” Then he proceeded to give himself a huge bonus while permanently zeroing out pilot, flight attendant, maintainer, baggage handler, and customer service pensions.

    *Any* business can be made hugely profitable if it is allowed to write off billions of dollars in obligations. Society will be picking up the tab when some of the affected employees have to seek public and charitable assistance.

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