American and US Airways Unite... For Better or Worse?

A little less than five years ago, breaking news around the United States was the merger of Delta and Northwest.  This announcement verified all the rumors and talks throughout the industry.  This past week, we saw two more airlines, American and US Airways, announce a merger that would create the "World's Largest Airline."  With this announcement, a number of questions arise; these questions are not only from employees within the companies, but from consumers who utilize the airways.

The American Airlines and US Airways merger, like the Delta/Northwest, did not come as a surprise to many of those who follow the commercial airline industry.  The question is, will this merger be beneficial to the consumer, the person deciding whether to fly American/US or with another airline.  There are some who believe the merger will not provide any additional benefits to fliers of AA/US, only higher prices and a nice story.  Even with the articles stating the pros and cons, as a consumer I know what I look for.  There are three major things that many people look for when shopping for an airline ticket: out-the-door price, duration of flight or number of stops, and departure/arrival time.  In my opinion, consumers are going to go for the best deal.  Before the internet, airlines relied on loyalty and returning customers.  In today's world, I can set up alerts for low-fares, "bid" on seats, and get refunds from some travel sites claiming the lowest fare.  Despite the fact that the merger reduces the number of major airlines in the United States from five to four, the big three (American, Delta, and United) still must contend with Southwest, who are known for their cheap flights and limited travel fees.  Looking at the big picture, with fewer carriers, consumers have fewer options in terms of who to fly with and cities they service in addition to the possibility of higher ticket prices. (Mouwad, 2013)

Another topic that has been covered in past mergers and one that has already been mentioned in this merger is the question of how pilot seniority will be dealt with.  The merger of any two companies, regardless of the industry, will see this in some way; the aviation community, however, has to deal with pilots.  Different companies have different requirements as far as experience and time with the company.  Before the merger was even announced, both unions representing the pilots of American and US Air had drafted memorandums of understanding.  There are already talks of how the seniority integration will work and, while both sides are optimistic, US Airways is still tied up with seniority issues from their last merger with America West.  The reason why seniority is so important is because of promotions, it determines what plane a pilot flies, whether that pilot is captain or first officer, the ability to get advantageous scheduling and time off, and pay for certain assignments. (Carey, 2013)  While this part of mergers is important, I think it would be hard to set an industry standard.  There are a lot of different factors in regards to how the unions work together, the sizes of the companies merging, and what each side is willing to give and take in the process.  Ultimately, a common ground must be reached, I just don't feel as though the industry can step in and say, "This is exactly how you will set up the seniority list."

The final step for the merger is to be approved by the Justice Department's antitrust division.  Many are confident that the merger will pass through without a hitch, however US Airways has been stopped from merging before.  In 2001, the merger between United and US Airways was stopped.  The Justice Department said that the merger would limit choices to consumers and raise prices.  While both of these are concerns today, mergers similar in size to this have been approved with no problems.  The Justice Department antitrust division is an important part of the process because of their ability to prevent companies from monopolizing a certain market.

I am fortunate enough to already have a job lined up after graduation that has nothing to do with airlines but it is something that I have taken interest in.  With all of the mergers that are already in place, it makes me question whether or not "big corporation" life is for me.  I know that with big companies comes a lot of room for advancement and growth, but that can also allow people to slip through cracks. With mergers, pilots are most likely to keep their jobs; management, on the other hand, is not an area that will also need to be doubled in size.  While commercial aviation will grow over time, I believe corporate aviation will grow as well.  When looking at the two, I would go with corporate.

Sources

Carey, S. (2013, February 8). US Airways pilots approve merger integration process. Retrieved from: http://online.wsj.com/article/SB10001424127887324590904578292401183882548.html

Koenig, D. (2013, February 14). American, US Airways merger creates world's largest airline. Retrieved from: http://business.time.com/2013/02/14/reports-american-airlines-us-airways-to-merge/?iid=biz-article-latest-ap-widget

Maxon, T. (2013, February 8). US Airways pilots approve transition deal for prospective American Airlines merger. Retrieved from: http://www.dallasnews.com/business/airline-industry/20130208-us-airways-pilots-approve-transition-deal-for-prospective-american-airlines-merger.ece

Mouwad, J. (2013, February 14). Service cuts may follow merger of airlines. Retrieved from: http://www.nytimes.com/2013/02/15/business/airline-consolidation-may-be-costly-to-travelers.html?pagewanted=all&_r=0

Tuttle, B. (2013, February 14). What can consumers expect from the American-US Air merger? Nothing good. Retrieved from: http://business.time.com/2013/02/14/what-can-consumers-expect-from-the-american-us-air-merger-nothing-good/

Corporate Aviation... Pros and Cons

In today's fast-paced world, business and corporations have come to rely on getting from one place to another complete deals, market their name, and expand the reaches of their business.  One thing that a number of corporations rely on is corporate aviation.  There have been a number of publications stating the benefits corporations can gain from a corporate aviation division; on the other hand, there have been just as many exploiting the select few that abuse the idea of corporate aviation.

By definition, corporate aviation is the use of aircraft by companies for the transport of passengers or goods for business purposes (McMurchie).  Over the last decade, however, abuse of these business-purposed services have been brought in to the publics eye on numerous occasions.  In 2004, a study was conducted and found that over 250 CEOs logged personal flight time valued at $50,000 in addition to over 100 CEOs logging personal flight time valued at over $100,000; in comparison, the same study was conducted in 2002 and found that the numbers of CEOs utilizing these services for personal flight time was drastically lower, 140 and 33 respectively.  In addition to the flight time being covered, some CEOs received additional benefits for utilizing business aircraft for personal use.  On the other hand, companies encourage the use by CEOs because of the efficiency and speediness corporate aviation provides (getting from city A to a more remote city B that would otherwise be out of the way financially impractical).  (Strauss, 2005)

While I think Corporate Aviation does play an important role in the success of some businesses and do in fact benefit out economy, I think the abuse of corporate aircraft that we are constantly reminded of makes people question the importance and necessity.  With all the questions and doubts brought up with corporate aviation, information sharing is important; there are very few companies, however, that choose to disclose the type of aircraft, flight hours, and cost CEOs spend on trips, be it personal or business.  (Strauss, 2005) There are a number of Fortune 500 corporations that utilize corporate aviation and quite a few that do not.  Ron Sargent, the CEO of Staples, flies upwards of 170,000 miles a year, most of those miles are flown on commercial airliners, saying "It's not like there's a security risk if I'm flying (commercial). Besides, if you're the CEO, you have to set an example. I usually fly coach." (Strauss, 2005)

Since entering office in 2008, President Obama has made numerous mentions of eliminating tax breaks for corporate and general aviation, even adding to fees in an attempt to help balance the governments deficit.  During the presidential debates this past Fall, President Obama made numerous statements that fired up business jet companies and companies with corporate aviation divisions.  In President Obama's generalization, he said that if a company can afford a corporate aircraft, they should pay more taxes.  While large corporations may not have been happy with this and could probably afford any taxes levied on them, a majority of businesses with corporate aircraft are small to mid-sized business owners.  These small business owners do not have a fleet of jets and are typically not using these for frilly vacations; these business owners are trying to spread their name, branch into new markets.  Following the debate, the president and CEO of the NBAA, Ed Bolen, wrote a letter to the President, saying "Your comments seemed to illustrate a complete lack of understanding about the importance of business aviation in the U.S., and appear to be at odds with your stated interest in promoting job growth, stimulating exports, driving economic recovery and restoring America to its first-place position in manufacturing."  (Patiky, 2012)

The current tax break that President Obama is trying to eliminate is the accelerated depreciation applicable to certain corporate aircraft.  This law allows businesses to write off the cost of the aircraft over a period of five years in comparison to commercial or charter aircraft which can be written off over a seven year period. While President Obama's idea of eliminating tax breaks, and even making additional fees and taxes, would provide funds, these funds would total $3 Billion over the course of 10 years.  (Frank, 2013)  

Today's world demands businesses to leave their comfort zone.  Everyday, companies are ordering supplies, manufacturing their product, and turning those products around, selling them not only to their local cliental, but to customers across the nation.  Growth is necessary for a business, and many businesses find growth, marketing, and stability through corporate aviation.  Corporate aviation is important to businesses, whether a business owns or leases an aircraft or a company they do business with utilizes these amenities.

Sources

Frank, R. (2013, February 6). New dogfight between Obama and private jet industry. Retrieved from: http://usatoday30.usatoday.com/money/companies/management/2005-04-26-corp-jets-cover_x.htm

McMurchie, J. What is corporate aviation?. Retrieved from: http://www.ehow.com/facts_6849315_corporate-aviation_.html

Patiky, M. Zinger from the president stings business aviation. Retrieved from: http://www.forbes.com/sites/businessaviation/2012/10/05/zinger-from-the-president-stings-business-aviation/

Rubin, R & Zajac. Corporate jet tax gets six Obama mentions, $3 billion estimate. Retrieved from: http://www.bloomberg.com/news/2011-06-29/jet-tax-break-cited-six-times-by-obama-would-cut-debt-by-about-3-billion.html

Strauss, G. (2005, April 26). The corporate jet: necessity or ultimate executive toy. Retrieved from: http://usatoday30.usatoday.com/money/companies/management/2005-04-26-corp-jets-cover_x.htm

Commercial Future for UAVs?

Remote controlled objects have had great success throughout the last century, particularly with kids under the age of 15.  Over the last few decades, with a little imagination, innovation, and plenty of engineering brains at work, we are now in an age that, in essence, kids have grown up and are going into jobs that encompass their childhood loves.   There are many that question the ethics and use of the drones and other Unmanned Aerial Vehicles in the military and many more that question whether or not they belong in the commercial industry.

UAVs have seen a lot of action flying the US-Mexico border, supporting Customs and Border Patrol, and plenty of action flying missions in the Middle East, with the military starting a transition into forming complete squadrons.  The commercial side of UAVs is something that the many don't understand.  The main push for the entrance of UAVs into commercial airspace came last year when the Senate approved the $63 Billion Reauthorization Act, providing the FAA with four years of funding for UAVs, NexGen, as well as airport improvement.  While the UAVs won't enter into US airspaces until 2015, there are still a lot of questions as to the safety of drone aircrafts.  With the advancement in NexGen, however, the idea of drones entering the airspace may be more palatable.  NexGen will introduce a new way of flight control and organization and the introduction of UAVs would make sense solely because of these improvements. (Waggstaff, 2012).

The safe flying of drones is not the only concerns raised with the the idea of UAVs, but it is one of the largest.  Training is probably the most important aspect of the safe operation of UAVs.  With the idea of drones being made for commercial use, schools throughout the United States are now offering courses specifically for UAV operation.  While initiative is great, in all my research, I have not been able to find a standard by which operators would control and fly UAVs.  Even throughout the military, different services have different training and varying operating procedures.  When taking the human out of the air and throwing him/her into a room with a control stick, one would think that the first thing to do would be to develop a standard or preliminary guidelines.  In 2008, the FAA issued the Interim Operational Approval Guidance 08-11, which states that the pilot in command will be required to abide by 14 CFR 19.3 (Responsibility and Authority of the Pilot in Command).  In the FAA's FAQs, the question was asked, "Are FAA issued pilot certificates required to operate civil UAS?"  In response, they said that additional training would be required for UA operations.  If that is the case, shouldn't there be a push for a standardization of training?

In all, there are still a lot of unanswered questions when the topic of UAVs is brought up.  While there are still a couple years until we actually see drones flying in with the commercial traffic, there should be an proactive emphasis on the safety and training of UAVs.

Sources

Waggstaff, K. (2012, February 8). Congress paves way for unmanned drones in U.S. commercial airspace. Retrieved from: http://techland.time.com/2012/02/08/congress-paves-way-for-unmanned-drones-in-u-s-commercial-airspace/

Federal Aviation Administration. (2008, March 13). Unmanned Aircraft Systems Operations in the U.S. National Airspace System. Retrieved from: http://www.faa.gov/about/initiatives/uas/reg/media/uas_guidance08-01.pdf