Sun Country Bankruptcy; Mesa Slashing Jobs

The company that owns Minneapolis-based Sun Country Airlines filed for Chapter 11 bankruptcy protection yesterday. In a statement, the company said:

"Petters Aviation and its subsidiaries, including MN Airlines, LLC, d.b.a. Sun Country Airlines, filed for protection under Chapter 11 of the United States Bankruptcy Code. Sun Country Airlines will continue to operate and fly its regular flight schedule.

Stan Gadek, Chairman and Chief Executive Officer of Sun Country said, "We were forced to take this action as a result of recent events at Petters Group Worldwide. We do not anticipate any disruptions, and expect to operate business as usual... Customers can book their flights in confidence and know that they will continue to receive the great service that they are accustomed to on Sun Country."

I'd take issue with that "book with confidence" assertion. Make it, book with caution. And remember: If you do book on Sun Country, use a credit card because by law credit card charges are refundable for services not rendered, such as a flight that disappears if an airline suddenly goes belly-up. If you book with a debit card, or pay with any other form of currency, you are not covered.

And incidentally, the "recent events at Petters Group Worldwide" is a reference to an FBI raid last month on Petters headquarters.

Petters Aviation is a wholly owned unit of Thomas Petters, Inc., and owns MN Airline Holdings, Inc., the parent company of Sun Country Airlines.

MESA AIR, meanwhile, is "reducing staff across the board," its chairman, Jonathan Ornstein, told ATW Online, an aviation news site. Facing a projected $250 million drop in revenue this year, Mesa Air Group is finding it impossible to "support the same level of overhead," Ornstein said, without adding details.

For August, Mesa reported a 13.9 percent drop in revenue passenger miles flown on an overall drop of 24.5 percent in total passengers boarded. Delta Air Lines dropped its contract with Freedom Airlines, a Mesa unit, in August.

Mesa currently operates 159 aircraft with over 800 daily departures to 126 cities, 38 states, the District of Columbia, Canada, the Bahamas and Mexico. Mesa operates as Delta Connection, US Airways Express and United Express under contract with Delta Air Lines, US Airways and United Airlines, respectively, and independently as Mesa Airlines and go!, the Hawaiian carrier that links Honolulu to the neighbor-island airports of Hilo, Kahului, Kona and Lihue.

###

Good News for Award Travel

Airlines are having such a hard time selling tickets these days that an old joke can be adapted to fit the situation:

CUSTOMER -- "What time does the flight to San Diego leave?"

AIRLINE CLERK -- "What time can you get here?"

Good news for frequent fliers. In general, with airline traffic falling sharply, this is a very good time to redeem frequent-flier miles for award tickets and upgrades.

Meanwhile, Virgin America just upgraded its award-trip feature online. Here's the announcement.

###

Outlook Darkens at Sun Country Airlines

Minnesota’s Sun Country Airlines is warning employees that it could shut down later this fall, but hopes to stay in business.

A month ago, Sun Country joined some of the big guys in alienating customers and added a fee ($12) for the first checked bag. Not that an annoying extra fee could put you out of business in this terrible economic climate, but it sure can’t help you keep customers loyal. Basically, though, Sun Country's immediate problems are the credit crunch and the FBI investigation at its parent company. (9/25 post).

###

Southwest Introduces Elite Access Lanes

The world really is changing.

Southwest Airlines said today it will introduce priority security lane access for its Business Select and Rapid Reward A-List Customers at select airports.

Southwest said it will open the lanes, branded "Fly By," at these airports later this month:

Baltimore/Washington International, Dallas Love Field, Phoenix Sky Harbor
International, Orange County John Wayne, Denver International, San Francisco
International, and Los Angeles International.

Southwest said it plans to add more airports to the Fly By rollout starting in November, continuing to implement the priority security lane program throughout its
system on an airport-by-airport basis.

To use the lanes, passengers must have an A-List identification card or a Business
Select boarding pass.

###

Biz Jet Sales Slump Seen; More Bad News for Vegas

Two new economic indicators in a time of mounting trouble:

First, the long-booming market for business jets is softening, says Forecast International, the aerospace analysis company.

Forecast International says it expects annual business jet production to reach nearly 1,400 units in 2008, and exceed 1,600 units in 2009. But the company projects that annual production will then suffer a three-year decline, dropping to a level of 1,515 units by 2012. Growth is expected to resume in 2013, with yearly production exceeding 1,700 units by 2017, the final year of the time period covered by the study.

Overall, Forecast International projects that 15,936 business jets, worth an estimated $223 billion, will be produced from 2008 through 2017. This total includes about 5,600 Very Light Jets (VLJ). "The VLJ sector is expected to be a very dynamic portion of the market," Forecast said.

I’d exercise real caution, by the way, in very-light jet projections, given the flame-out earlier this month by DayJet, the air-taxi startup that was the biggest customer for the Eclipse 500 (with 28 deliveries and 1,400 orders representing about half of the Eclipse order book).

Eclipse, which recently announced a new manufacturing deal in Russia, has also been saddled with production problems in the U.S. affecting deliveries of the jet, whose price for available delivery in 2010 is now $2.15 million, according to the Eclipse Web site.

On his Web site, Michael Boyd, the aviation forecaster, recently said that the very-light jet “revolution” has ended, though the various models of VLJs are attractive small planes. One big problem, Mike says, has been the disappearance of the “breakthrough low-acquisition cost” for VLJs and especially the Eclipse 500, which originally was marketed at just under $1 million.

***

Meanwhile, more bad news in Las Vegas:

According to the AP, Morgans Hotel Group cut its capital commitment to its portion of the already sidelined $4.8 billion Echelon mega-development, creating another serious setback for the joint venture project with Boyd Gaming, the casino company.

Boyd stopped work on the Echelon project on the Strip in July, citing the credit crunch -- and in doing so, Boyd exacerbated fears in Vegas about a growing economic turndown. Boyd said that construction on the project might resume in a year or so.

###

Brazil Crash, 2 Years Later

Above: pilots Joe Lepore and Jan Paladino on their return to the U.S. in December 2006.

Two years ago today, I was quietly working on my laptop on a Legacy 600 business jet flying routinely at 37,000 feet over the Amazon in Brazil when hell broke loose.

With a horrific crash that I still feel in my bones today, the business jet collided in mid-air with a Boeing 737 operated by Brazil's Gol airlines. The 737, its left wing shorn off, went down in the jungle, killing all 154 on board. The Legacy, its left wing severely damaged and its horizontal stabilizer chewed up, flew on somehow, losing speed and altitude until its two pilots, through a stroke of breathtaking luck, found an airstrip in the jungle and wrestled the plane down.

Through skill and courage, those pilots saved my life and the lives of the four other passengers on the brand-new, $27 million, 13-seat private jet, which was on the first leg of a delivery flight from its Brazilian manufacturer, Embraer, near Sao Paulo. (The pilots, Joe Lepore and Jan Paladino, pointed out, as pilots will, that they also saved their own lives.)

When the crash occurred, no one on board knew what had happened. Both planes were flying on a collision course at 500 miles an hour each. At such closing speeds, you just don't see it coming.

Three hours after our landing, while in custody at the obscure military base in the jungle, word came that a 737 had gone down.

For Joe and Jan, the world collapsed.

After what seemed like endless interrogations, the other passengers and I were released two days later, but the pilots were kept in Brazil for over two months. After a judge finally ordered their release, Brazilian military and police authorities hastily cobbled together criminal charges alleging that the pilots had been negligent.

It very quickly became clear to me, shortly after the landing in the jungle, that a coverup and a scapegoating was under way. The accident occurred two days before a heated presidential election in Brazil, with a subsequent lengthy runoff period where Anti-American hysteria was palpable in the rush to criminalize the accident and blame the U.S. pilots.

It also quickly became clear to me that Brazil's air traffic control system was notoriously unreliable, an assertion made to me by more than a dozen international pilots and since fully confirmed by the evidence. The system, strangely operated by the Brazilian Air Force, depended on unreliable equipment and poorly trained controllers. There also are well-known radio and radar blind spots over the Amazon.

Both planes were flying where they'd been told to fly by air traffic control. A separate element was the malfunctioning on the Legacy of a piece of equipment called the transponder, which triggers the anti-collision warning that would have been the last chance to avoid the hideous accident.

For 18 months, I wrote extensively and too passionately about all of this on the now inactive Brazil portion of this blog. I have no desire to revisit that commotion now or re-fight those awful battles.

But I do need to provide an update, because people keep asking me: What ever happened to those two pilots? The story, real all the time to those of us who lived it, quickly disappeared from the U.S. media radar screen.

Joe still works for Excelaire, the Long Island charter company that owned the Legacy. Jan left the company to work for an airline.

Both pilots are still on trial, in absentia, in Brazil. If they are convicted of the charge of negligent homicide, they will become international criminals. If they are convicted, the United States will not extradite them to Brazil because we don't have a treaty covering that. But they will need to be careful, for the rest of their lives, about where they travel.

The Brazilians are about to release their long-in-progress report on the crash, and it is expected that the pilots will be squarely blamed, although it is also expected that a small group of Brazilian air traffic controllers will also be blamed and some concessions will be made about faults in the Brazilian air-traffic system.

Once the Brazilian report is officially released, perhaps as early as this week, the National Transportation Safety Board in the United States, which has been conducting its own parallel investigation, will be able to release its report. The N.T.S.B. report is expected to be far more fair and accurate.

I'll make note of it and post both reports here when they are available.

Two years ago, with adrenaline pumping in the initial surge of survival, the seven of us who survived pledged that we would meet every year on the anniversary.

We never kept that promise because, as time passed, there has been no closure (I cringe to write that awful word) -- and there is, of course, no joy, because so many died while luck favored us, for no good reason at all. There is survival for the lucky ones -- for me, for Joe and Jan, for David Rimmer, Ralph Michielli, Henry Yandle and Daniel Bachmann, for the Amazon 7.

###

Shuttle Rebuttal

Everyone who's written about Delta's announcement that it is adding a first-class section to the MD-88s it uses on its Shuttle operation -- myself included -- has overlooked one obvious reason for the move, pointed out to me today by Joe Brancatelli: Fleet flexibility as the Shuttle market shrinks.

"With a standard configuration of first/coach, the planes no longer have to be dedicated to the shuttle runs," he notes. Instead, they can be redeployed, as needed, on the regular fleet for longer-route service.

As I said on Friday, the roundtrip Shuttle fare between New York and Washington or Boston is nearly $700. Whoa. This, of course, is exactly what individual fliers and corporate travel departments have been saying as well, and Shuttle traffic has been softening. The Wall Street collapse will only add to that.


I don't think Delta's move had much if anything to do with the extra $100 to $200 it might theoretically wring out of Shuttle users for first-class seats, because the coach fare is already so daunting. As Delta made a big point of saying, the new first-class section will enable elite-status fliers to get free upgrades.

So it's a perk and a ploy.

As to the bus: Obviously, a cheap ride on one of those new bus shuttle boutique services is an option for business travelers, but it takes half the day on the bus, so it's not for someone who has to rush to Washington (or New York) at the last minute, which is where the core of the Shuttle market is -- or was.

Amtrak isn't a lot faster than the bus, but it's a lot cheaper than the Delta or US Air shuttles. And, of course, it's a lot greener than either.

###

Delta Adding First-Class Seats to Shuttle: New Elite-Status Perk?

In the go-figure file, add this:

Delta is reconfiguring the MD-88 planes in its Shuttle fleet to accommodate 14 seats in a new first-class section. There will be 128 coach seats. It's effective Dec. 1 and here's the Delta announcement.

Who is going to pay for first-class seating on the Shuttle's short hops between La Guardia and Reagan or La Guardia and Boston? (The New York-Washington route, by the way, is the most popular route for private jet use, also under the go-figure file.)

Well, Delta seems to make a big point in this announcement of saying that "SkyMiles Medallion members will be eligible for complimentary upgrades on Delta Shuttle fleets." Sounds to me like Delta is adding an elite-status perk to juice Shuttle traffic.

By the way, the Delta Shuttle roundtrip fare between LaGuardia and Reagan right now is a thought-provoking $689. That's a coach seat, of course.

For further reflection, I refer you to this piece in the Escapes section of today's New York Times, about the popularity of new boutique shuttle-bus services along the same routes served by the Shuttle. These buses are starting to attract business travelers, says the Times article — which I am assuming got urgent attention this morning at Delta headquarters in Atlanta.

###

Analyst: Airlines Becoming Mid-Priced Luxury Product

I think this guy at Stifel Nicolaus has it generally right, that the airlines that survive this shakeup will emerge with a fundamentally different model, selling a mid-priced product for the moderately affluent and affluent, rather than a cheap transportation commodity.

Based on that assumption coupled with generally declining oil prices, the brokerage issued a buy order on American, Continental, Delta and United. That's not a bet I'd be rushing to make, but still, the assessment of the new air-transport model seems about right to me.

With airlines slashing domestic capacity, we're witnessing the end of a 25-year-long era of dirt-cheap, wildly abundant air-transportation options. And it's not going to return.

Totally left un-addressed in Washington: What kind of a national air-transport system will we be left with, once the new model emerges? Who gets left out? What options will they have, if any? What is the overall effect on the hugely important tourism industry?

Airlines are busily parking planes. Mostly, it's regional jets and older single-aisle mid-sized jets that are ending up in the Sonoran and Mojave deserts -- each one reflecting a diminution of domestic capacity that won't be replaced.

Meanwhile, airlines are now figuring, anxiously, that they might be able to reconfigure themselves and make it, barely, if oil dips to around $80 a barrel. But as Kevin Mitchell, the chairman of the Business Travel Coalition, told me the other day: "Operating with $80 oil, nobody is going to be replacing fleets."

###

American Airlines Two-Fer on UK Fares: Another Sign of Weakening Trans-Atlantic Market

In another sign of growing concern among airlines about the softening trans-Atlantic market, American Airlines is offering a free companion ticket for travel later for customers who fly between the U.S. and the U.K. before the end of the year. The offer is restricted to purchasers of first-class, business class and higher-priced coach seats (Y, B or H).

This is another small tick in a story to watch. The trans-Atlantic markets are glutted with capacity, and a fare free-for-all is brewing until it all shakes out.

###

Sun Country Airlines: 'Business As Usual' Despite FBI Probe At Parent Company

Sun Country Airlines says it's "business as usual" despite an FBI raid at its parent company, Petters Group Worldwide. Petters is a holding company that also owns Polaroid, Fingerhut and other enterprises.

Incidentally, I suppose this has been remarked on before, but what's an airline based in Minnesota doing calling itself "Sun Country?" Oh, wait, I get it: The pitch is we'll take you out of this miserable weather to some place where there's sun.

###

Conde Nast Business Travel Poll: Singapore, Virgin Atlantic, Virgin America Top-Rated in Premium Classes

Here are some rankings from the annual Conde Nast Traveler business-travel awards, based on a readership survey:

Top Trans-Atlantic Business Class
1. Virgin Atlantic
2. Singapore Airlines
3. Emirates
4. British Airways
5. Continental

Top Trans-Pacific Business Class
1. Singapore Airlines
2. Cathay Pacific
3. Air New Zealand
4. Thai Airways
5. Korean Air

Top U.S. First and/or Business Class
1. Virgin America
2. Alaska Air
3. Continental
4. Hawaiian
5. Delta

Top U.S. Hotel Chains
1. Peninsula
2. Four Seasons
3. Ritz-Carlton
4. Mandarin Oriental
5. Park Hyatt

###

Delta Offers Double Miles to UK, France, As All Airlines Expect Softening on N. Atlantic Routes

Delta Air Lines is offering double miles for flights between New York or Los Angeles and London and, with code-share partner Air France, between New York and Lyon and Salt Lake City and Paris. The offer is good for flights through Dec. 15. Here are the details.

And here is my current take on the transatlantic market: Traffic is falling, especially on the U.S.-European routes and especially to London, including premium traffic. The breakdown on Wall Street and the resulting shock wave in London's financial markets have airlines that invested heavily in first-class and business-class capacity very, very worried because the financial industry has been the most resilient in buying premium seats.

Look for widespread business-class fare sales soon.

Delta itself admits that London is an industry problem. "Heathrow is a bit of a bloodbath currently," Ed Bastian, Delta's president and chief financial officer, said last week at the Calyon analysts conference.

However, Delta, which has been expanding its international capacity at a heady clip for a year, is in effect hedged somewhat against the ongoing softening on the North Atlantic routes with its concentration on routes to Africa, the Middle East and Latin America, which Bastian said have "dramatically higher growth rates" than the European market.

Delta's projections for the rest of this year continue the international expansion and the concurrent reduction in domestic capacity. According to Bastian, international capacity is up 15 percent and domestic capacity down 12 percent in the third quarter, which ends next week. For the fourth quarter, Delta projects international capacity to also be up 15 percent and domestic capacity down 14 percent. Comparisons are to the 3rd and 4th quarters, respectively, of 2007.

###

Airline Group: Today's Oil Price Surge Proves Intense Market Speculation

The Air Transport Association takes note of today's remarkable jump in the price of oil and says it's the smoking gun proving its contention that speculators are intensely manipulating the oil market.

On the other hand, the Financial Times has a more nuanced explanation.

Here's the ATA statement:

"The Air Transport Association (ATA), the industry trade organization for the major U.S. airlines, today reacted to oil’s largest one-day price gain in NYMEX history, stating that this record increase reaffirms that speculation is playing a significant role in driving up the price.

"Reversing recent price decreases, today oil spiked at $130 per barrel, closing at $120.92 per barrel – the largest one-day price gain in NYMEX history. Although ATA recognizes the impact of the financial crisis on Wall Street, the weak dollar and the aftermath of Hurricane Ike, the unprecedented 16 percent jump over the weekend – from $104.55 per barrel last Friday to $120.92 per barrel today – also reflects the impact of excessive energy speculation.

"'The market’s extreme volatility suggests that speculators, who withdrew tens of billions of dollars from the commodities markets when Congress threatened to tighten oversight of excessive and harmful speculation, breathed a sigh of relief last week when action in the Senate seemed unlikely, and returned to the energy markets in full force,” said ATA President and CEO James C. May. “Well, speculators are back and prices are up.'"

"May again called for a bipartisan approach to reining in excessive energy speculation, stating that Congress must pass a comprehensive energy plan or all Americans will pay the price as oil prices return to or exceed this summer’s record levels."

###

AA Flight Skids Off O'Hare Runway, No Injuries; 757 Had Been Diverted to O'Hare By Electrical Problems

American Airlines Flight 268 from Seattle to JFK was diverted to Chicago today after experiencing electrical problems in flight. The 757-200 then skidded off the O'Hare runway as it landed. There are no reported injuries.

###

Continental Reverses Course on 500-mile Elite Status Minimum Credit

Continental Airlines has overturned a boneheaded decision earlier this month that greatly PO'd many of its elite-status members and seemed, to me at least, not to offer any concurrent real cost benefit to Continental itself.

The 500-mile minimum credit provision for trips of less than 500 miles has been reinstated, Continental said in an e-mail message today to many of its elite-status members. Several other airlines had earlier whacked the 500-mile minimum, but Continental frequent fliers expected better -- and got it.

Nice to see an airline admit a mistake and, mirable dictu, actually fix it.

Here is the Continental e-mail:

"Earlier this month, we announced that OnePass members will earn the actual miles flown rather than a minimum of 500 miles per flight for tickets purchased on or after Nov. 15, 2008.

We've listened, and our Elite members think this change unfairly dilutes the benefits of the OnePass program. Therefore we are exempting you from this change, and Elite members will continue to earn the 500 mile minimum on all segments flown under the current policy."

--end

Air Taxis Seek to Fill DayJet Gap

{Above: The Cirrus SR22}

Incremental news on air taxis may be pretty small beer on a day that begins with me reading the following sentence in the Wall Street Journal: "With the move, Wall Street as it has been known will cease to exist."

Excuse me while I grab another mug of coffee and assimilate that.

Anyway, a group of air-taxi providers who mostly use Cirrus SR22 propeller planes says it can fill the service gap left in the Southeast by DayJet, the pioneering air-taxi company that suddenly ceased operations on Friday.

Here's the Wikipedia entry on the Cirrus SR22, which is best known for a unique feature, a parachute designed to ease the plane -- which has only one pilot -- to the ground in a dire emergency.

DayJet, which had 28 Eclipse 500 very-light jets and had orders for about 1,400 more, had established a market in Florida and nearby states with its on-demand, per-seat model. But DayJet badly needed investment capital to expand in order to make its business model work, and the dry-up in the credit markets finally brought the company down. Meanwhile, with the collapse of its major customer exacerbating growing production and other problems, Eclipse Aviation, maker of the Eclipse 500, has an uncertain future.

Still, given service cutbacks by major airlines that make a simple trip from, say, Tampa to Tallahassee an day-ordeal, usually with a stopover in some place like Atlanta, it's apparent to me that the air-taxi business has a market. The question is, will that market be served by small jets like the Eclipse 500, or will it be served by propeller planes and turbo-props, with proven reliability, known availability and better fuel efficiency?

###

Many Dead in Terrorist Attack at Islamabad Marriott

At least 40 people and probably more were killed today in what initial reports are calling a terrorist suicide car-bomb attack at the Marriott Islamabad hotel in Pakistan. The 280-room, 5-story hotel is popular with American tourists and as a dinner and meeting spot for Americans and others in the Pakistan capital.

Here is Marriott's statement this afternoon, in the company blog written regularly by Bill Marriott, the CEO, who is the son of the founder and the man who built Marriott into a major worldwide presence in the hotel industry. Marriott's statement also lists phone numbers for information on guests at the Islamabad hotel.

I remember meeting a palpably grieving Bill Marriott not long after the 9/11 attacks. At least 50 of the nearly 3,000 killed in Lower Manhattan that day were inside the Marriott at 3 World Trade Center, which firefighters were using as a staging area before the towers collapsed. The hotel, which sat between the Twin Towers, was destroyed along with the Twin Towers and 7 World Trade Center on 9/11.

(I also remember that my neighbor, employed by a Wall Street investment firm, was working out in the rooftop gym at the Marriott World Trade Center when the first plane hit on 9/11. He staggered home that night to a distraught wife and family who had no idea whether he was alive, after wandering in shock for hours through the maelstrom. To this day, he doesn't know how he got out of the hotel or how he made his way home, covered in grime and soot, his suit pockets stuffed bits of paper containing phone numbers jotted down by New Yorkers who had offered him help and a place to stay. In the New York area, memories of 9/11 are often personal and still quite raw.)

Anyway, here's a Web site with basic information about the Islamabad hotel.

###

4 Dead in Business Jet Crash in S. Carolina

There's been another fatal business jet crash, late last night, involving a Learjet 60 that apparently went off the runway on takeoff at an airport in Columbia, S.C.

###

DayJet Ceases Operations

DayJet, the most ambitious of the new "air-taxi" services, has ceased operations. DayJet was the chief customer for Eclipse 500 very-light jets, and Eclipse itself has been struggling with production and other problems

The credit crunch, which had earlier caused DayJet to curtail expansion plans and lay off half of its 250 employees in May, was cited as the main reason for halting operations. The trouble at Eclipse Aviation was another.

DayJet is based in Boca Raton, Fla., and operated flights in Florida and adjoining states.

The news of DayJet's closing is stunning to those in the industry who envisioned a new era of personal air transport on cheap little jets like the Eclipse 500s, with air-taxi companies that served smaller regional airports with point-to-point on demand flights, selling tickets either by the seat (as DayJet's extremely complex business plan did it) or by the entire plane, as a kind of charter-service.

Here is the sad announcement from DayJet, and here is the FAQ notice the company sent out this afternoon.

At its closing, DayJet had taken delivery of 28 Eclipse 500 aircraft and had about 1,400 outstanding orders, which accounted for more than half of Eclipse's total order book.

Customers holding tickets purchased through credit cards (and not debit cards, which don't carry the same legal protections in the event of a service not rendered) can their contact credit card companies for refunds.

And whither Eclipse Aviation? Here's a report with some links for background on Eclipse's troubles.

{Update Sept. 20 -- The Albuquerque-based aircraft manufacturer issued a statement today saying that "while DayJet was Eclipse's largest customer, Eclipse's business model and success has [sic] never relied solely on DayJet. Eclipse still has hundreds of orders to fill independent of DayJet, and existing customers will be happy and eager to move up in line. Eclipse also anticipates ongoing interest in the United States as well as fulfilling the strong demand for the Eclipse 500 in the global markets."}

###