Thursday, February 11, 2010

Frontline: Flying Cheap

I saw an internet advertisement for this program last week and it piqued my interest enough to add it to my ever growing library of DVR recordings. Like most Frontline pieces it tended to lean a little to the “left”, but that is a different discussion, for a different day, on a different blog. Nevertheless, I think the piece was mostly well done and raised a number of valid questions, but at the end of the day, as long as there is a “sort by price” filter on ticketing websites, this is all just rhetoric.

Let’s set one thing straight right off the bat, the flying public does not care what a first year co-pilot makes at a regional airline, period. Similarly, they do not care what Wal-Mart employees make or what they receive in way of benefits as long as they can still get their “roll-back” specials on the 20 dollar microwave they covet. Do those pilots deserve to be paid better? Absolutely they do. However, it’s not a matter of what anyone deserves; it’s a matter of what you can negotiate. As long as labor unions are content with allocating the lion’s share of the pool of money dedicated to pay towards the more senior component of their membership, they have no room to complain in my mind. As long as there are pilots willing to work for near poverty wages, there will be unions and companies that are willing to oblige.

The cause of the accident in Buffalo last year was pilot error. There were no maintenance issues with the aircraft and icing was not a factor. The pay rates of the pilots were not a factor. Their schedule from all accounts was not overwhelming and if fatigue was a factor, (we will never know) it was pilot induced due to commuting. I do not believe that Colgan or any other regional airline willfully disregards safety as the producers and several of the interviewees suggest. I believe that Colgan is only culpable in two areas, hiring and training. I think they should have done better due diligence in hiring the Captain who it was reported had numerous check ride failures over his career. Additionally, the actions of the pilots in the incident were the exact opposite of what they should have done in the recovery which is taught in even the most basic of aviation practices.

The industry is not to blame. They created a model that enabled them to move many people to many places for the cheapest price. The transportation industry has always had this problem. People have always wanted to get from point A to point B in the quickest and cheapest mode possible. Walking was replaced with horses, which was then replaced by boats when it was learned that horses couldn’t swim. Horse drawn carriages were replaced by railroads. Airplanes replaced boats and trains for long distance travel. The automobile became the main mode of transportation for people over short distances as it gave them unparalleled freedom and did not tie them down to preset schedules or connections and was cheaper. It then became cheaper to fly than to drive even over short distances. Wealthy people started buying their own airplanes and spending their money with fractional operators instead of flying commercially. The transportation industry continues to evolve. What will the next innovation be that completely renders the commercial aviation industry as we know it obsolete?

What does this have to do with Frontier Airlines you ask? The answer may very well be that the powers that be are sensing that things are changing and they have to position themselves to be one of the carriers that are the catalyst for the evolution instead of one of the ones that inevitably gets left behind. I am cautiously optimistic in my opinion on whether or not this team can pull it off. And as long as I am here for the ride, I hope it works out for the best. Just try not to alienate the employees in the process because they will be the ones that have to execute the vision.

Friday, February 5, 2010

Eat Mor Chikin!

It looks like we did not have to wait long from the last entry for the news storm to hit.  Several big announcements were unloaded on Thursday and the ripple effects were felt all across the company.  Obviously the biggest announcement was the forthcoming shutdown of Lynx Aviation beginning in April and concluding in September.  A prepared announcement was read to employees at Lynx headquarters by Cam Kenyon and also webcast for all employees. It was very touching to hear the emotion in Cam's voice and good to see that he genuinely cares for his employees.  With RAH, this is becoming more the exception than the rule.  Penny Parker from the Denver Post even picked up on this story in her column:

"Meanwhile at Lynx's Westminster headquarters, employees gathered in a room where Cameron Kenyon, Lynx's interim president, read a prepared statement.
Wayne Heller, Republic Airways' chief operating officer, was spotted "chomping on his chewing gum the whole time. I don't think he looked anyone in the eye," my spy said."
I can just see it now, Wayne Heller smacking on his gum, resisting the urge to blow bubbles, longing to leave so he can make his flight back to Indy for a Chick-Fil-A sandwich and day dreaming about waffle fries. Apparently his love for Chick-Fil-A is legendary according to the Indianapolis circuit of RAH.

I feel terrible for the Lynx employees.  While it may be argued that the Frontier employees were not given a fair shake in their relocation announcement/timeframe, they were at least given something.  They had the option of keeping their current jobs at their current pay.  Why are the Lynx employees not getting this same or a similar offer? There are plenty of positions that Frontier employees did not accept that would be perfect for Lynx employees who may wish to relocate to Indianapolis.  I guess they will just have to apply and be invited to a "preferential interview". 

Another classy move by RAH in giving the Lynx employees almost exactly the minimum 60 days notice as required by the WARN Act before throwing them out on the street.  I wish the Lynx employees the best of luck in their "preferential interviews". I realize that Brian Bedford stated from the beginning that it would be hard to justify an 11 aircraft fleet, but 60 days notice is ridiculous and a slap in the face of many employees who worked 60 hour weeks starting up Lynx and making it a top notch airline. 

Not all of the news Thursday was negative. Seven new cities and frequency increases to several other cities were announced.  New service  includes new nonstop service to Branson MO. Grand Rapids MI, Long Beach CA, Madison WI, Newport News VA, Santa Barbara CA, and seasonal nonstop service to Green Bay WI.  Frequency increases included a third daily flight to LaGuardia, and a fifth daily flight to Portland, OR, San Francisco, and Seattle. Most of the new service will be with Republic E-190 equipment.

It appears that the plan is to grow "away" from Southwest and in some cases even United.  Also interesting to note is that there were no announcements concerning growth in Milwaukee.  I suppose this confirms the theory that the Milwaukee market is severely under-performing. I would not be surprised if some of the Airbus that have been deployed to MKE are re-deployed back to Denver in time for the summer.

I also heard that Frontier's advertising agency Sticky Grey was turned loose this week.  I have not seen any announcements confirming this, but if it is true, it's very disheartening. For eight years, Grey has created an award winning advertising program that is truly loved in Denver and known nationally.  If this turns out to be confirmed, it is my opinion that this is the death blow for the Frontier brand, and may actually be the first step in the branding and marketing decisions that are due to be announced in the near future.

I can't wait to see which road Mr. Bedford decides to go down next.

Monday, February 1, 2010

The Calm Before the Storm

It has been awhile since my last post.  There has not been much to talk about lately that has not already been said.  The news out of Indy has been sparse with even the last two weekly updates from Mr. Bedford being mundane at best.  What RAH has shown us is that we can expect periods of "inactivity" followed by an "onslaught" of news.  I fear we are in that lull now and come March 1, we will see a lot of announcements.

Most of the RAH leadership was in Denver over the past couple of weeks (touring the wreckage) and the most notable of those visits was the Station Manager meeting with Wayne Heller.  From what I understand, not much in the way of breaking news was announced, but one tidbit regarding LiveTV was discussed at length.  RAH will not be putting the LiveTV product in the Embraer aircraft due to the increased weight on the already notorious weight restricted aircraft.  It was also noted that the company cannot continue to sell the public false goods by allowing customers to pre-purchase LiveTV in a Classic or Classic-Plus package and not deliver on the E-190 flights.  I think this spells doom for the LiveTV product on all Frontier flights.  It is my belief that this will be amongst the announcements regarding the future of the brand.  He also addressed the possibility of introducing WiFi as new Inflight Entertainment.

Still no word on the payscales for the Customer Service division and knowing RAH, no word will come anytime soon.  I think they will keep dragging this out as long as they can until they can no longer hold off the angry masses at DIA. 

I hope to have a lot more to talk about in the upcoming days and weeks, please stay tuned!

Thursday, January 21, 2010

Diversions and A330's

Today, Republic found themselves in the news twice. The first article which appeared in the Denver Post, was aptly named "Republic chief has "work to do". For the most part the article was pretty mundane, but for me the most telling quote in the piece was, "Bedford said there are no immediate plans to replace Menke but that if a successor is named, the person will be added at Republic headquarters." Apparently, Bedford has obtained a copy of "Revenue Management for Dummies" and feels that he no longer needs the services of anyone with experience in that field or that moving the functions to Indianapolis will magically solve all of those issues like it has everything else. The article goes on to mention that Frontier will be receiving 3 Airbus 330's and 7 Embraer 190 aircraft. I truly hope that the A330 mention was a misquote or a typo instead of A320, but at this point I can't say I would be surprised if it was not and Mr. Bedford doesn't realize the differences in the aircraft. Most of all, I really like the title of this article, "Republic chief has "work to do". Naturally, I began to wonder what work Mr. Bedford has in store. After much searching, I was finally able to obtain this mysterious "To Do" list and as I think you will see, it offers much insight on what it takes to be the CEO at Republic Airways.

Brian Bedford To Do list:
- Check E-Mail and forward "Obama no birth certificate email" again to the non believers.
- Look up current fuel prices and figure out what can be moved to Indianapolis or who's pay can be cut as a result.
- Take a nap.
- Call CEO of Qwest and convince him to move their business and employees to Indianapolis.
- Prepare weekly letter to employees by incorporating at least 2 scriptures, 1 quote from Winston Churchill, and the evils of same sex marriage.

The second bit of news today was the Republic operated flight from LaGuardia to Louisville that diverted to Philadelphia which made nearly every major national media source. The first thought in my head was that there must have been someone looking at porn on the flight.

From Brian Bedford weekly letter ending 11/13/09:
"Let’s be clear, if you see anyone on any of our aircraft viewing porn, not only do they have to put it away immediately, but if they refuse we should warn them the captain will divert the plane and they will be removed from the aircraft for interfering with the crewmembers' duties."

I then learned that the flight was diverted due to security issues concerning a 17 year old Orthodox Jew and his
tefillin being confused for a bomb. For those of you unfamiliar with tefillin, they are a set of small boxes containing biblical passages that are attached to leather straps. I will reserve judgement on the necessity of the diversion itself as I trust the Republic crewmembers did what they felt was in the best interests of the passengers. Maybe Mr. Bedford will use those biblical passages that were in that young man's tefillin in this week's letter. Stay Tuned!

Tuesday, January 19, 2010

Return On Investment

Brian Bedford is a genius. No seriously, he is a very intelligent man. His idea to diversify a one trick pony like Republic Airways by buying not one, but two branded airlines was truly a stroke of master class. He raided the piggy bank and bought a currently profitable Frontier Airlines along with an established, loyal followed Midwest Airlines and paired it with his cash generating fee-for-departure business. Even though the piggy bank is largely depleted, he has guaranteed profits coming in to subsidize any small short term losses that may occur on the branded side of the business. In the sense that he is a genius, he may also be the "dumbest smart person" I've observed lately.

Mr. Bedford may ultimately succeed in this endeavor, but I think the combined entity will go though some serious growing pains in the process. I'm not sure he realized the amount of effort and challenges go into running a branded airline. Don't get me wrong, I think there is no one out there better at running a fixed-fee operation. However, you can run a successful fixed-fee airline while ignoring three of the most important aspects of a branded business; fuel, customers, and employees.

How do you make money in fixed-fee operations? It's simply really and can be explained in one simple equation: Income - Cost = Profit. The equation becomes much simpler when you do not have to factor in fuel into your cost. Income is simpler when you don't have to actually market, price, and sell to your customers. The employee impact on the bottom line is also eased when those employees only expectation is for the job to be a short jaunt or stepping stone to bigger and better things. This keeps your unit costs low because you are continually trading senior employees who move on for new employees at the bottom of the wage scale. Republic leadership have run a successful company in spite of themselves, not because of.

Republic now has to buy fuel, take care of customers, and please employees whose expectation is that their company is a career destination, not a stepping stone. Let's grade the performance of Republic Leadership so far in these three areas.

First let's talk about fuel. To be fair, there is not a whole lot of control one has on the price of fuel. However, one does have immense control on how much fuel is used. A long time employee of Frontier doesn't have to look back far to remember all of the fuel savings initiatives that were put in place over the past few years. Where are those initiatives now? I hear stories of pilots getting asked to fly faster, which burns more fuel, to make up time in the air to save a 10 minute delay. Avoiding delays is admirable, but at what cost? Don't shrug your shoulders and blame your woes on fuel, do everything in your power to burn less of it within reason.

Next, let's take a look at customer service. It seems that Republic has not fully grasped the customer concept yet. On the fixed-fee side of the business, the major airline partners dealt with the customers. During irregular operations and when aircraft divert, you can just dump the passengers off and let the major airline station personnel deal with the aftermath. In a branded operation, you actually have to think before you do anything like that. You can't just send 4 diversions to a small station that only has 2 agents working at that time and leave all of the passengers stranded in the terminal or on the aircraft itself for hours at a time like what happened this week. The communication between operations, the station, and the flight crew must be precise. You can't downgrade an aircraft and take 70 denied boardings because you are not willing to take a delay to wait for an aircraft to clear maintenance or to arrive from a weather delay. Customer Service is chess, not checkers. You need to think three moves ahead, you can't trash your customers and then say "King Me!".

The most important element are the employees. The old mantra is take care of your employees and they will in turn take care of your customers. Just saying "be glad you have a job" is not good enough anymore. Talk to your employees, get to know them. No one is asking you to make us the highest paid employee group in the industry or anywhere remotely close. You however will lose any good will you could have had when you systematically cut front line employees pay scales by close to 30%, or give them 30 days to make a life altering decision regarding uprooting their lives. Everything you have done so far screams that you are willing to sacrifice long term employee good will for short term monetary gains. If you invest in your employees in the long term, the return on that investment will be greater than any gains made in the short term.

This employee group thirsts for leadership. I wonder if Brian Bedford remembers the first time he addressed the employees in Denver after the purchase at the Embassy Suites. I wonder if he remembers the standing ovation, thunderous applause, and heroes welcome he was given. I wonder now, at this point in time, would the employees of Frontier Airlines give him the same adulation if he were to address us again? I personally don't think so, because he and the rest of the Republic Airways leadership has bumbled every decision since then. At every decision making crossroad Republic has encountered, the wrong fork was taken. By my count, only 2 or 3 director and above level Frontier employees have been retained for the combined company. These are the people that know how to run a branded business, that successfully navigated the waters of Bankruptcy when all said it was not possible. You had a chance to take a highly experienced, highly motivated group of employees that are fiercely loyal to their company and ride that wave of enthusiasm to a very promising and prosperous future. Instead, you chose the quick buck instead of the greater long term rewards.

Monday, January 18, 2010

BS Translator

So I was reading Brian Bedford's latest letter today and could not help but wonder what was REALLY going through his mind as he was writing it. I quickly realized that with the aid of technology and a few of his quotes, we can figure out what exactly he was thinking. So without further ado, it is my honor to present the BS Translator/Filter v1.1. This can be yours for the low, low price of $19.99!

BB Quote #1:
"In another shake up closer to home, Sean Menke, our EVP and CMO, has tendered his resignation effective at the end of March. I am sure our co-workers in Denver are saddened and disappointed by this development and I personally share that disappointment. I understand and respect Sean’s decision and wish him well in whatever endeavors he decides to pursue in the future."

BS Translation #1:
"Sean Menke quit on me today because because he realized I don't know shit about running a branded airline. He's sticking around till March so maybe I will be able to take a look at his airline running playbook. He keeps the playbook next to his "Denver Businessman of the Year Award". Man that thing is big. It is much bigger than my "Milwaukee Foot in Mouth Award". Anywho, I hope he doesn't get a job with a competing airline!"

BB Quote #2:
"However, we have a serious amount of hard work ahead of us to execute the transition program and we have 11,000 co-workers depending on us to deliver results. So in spite of our collective disappointment, we need to remain fully focused and committed to the difficult work at hand to move forward on the integration project and support our employees in the field so they can continue to take great care of our passengers."

BS Translation #2:
"I got to find someone else who knows how to run a branded airline to take Sean's place that is willing to relocate to Indianapolis. I don't know why we are having such a hard time convincing people to move to Indy. Wayne Heller told me that he made an impassioned speech to the employees in Denver the day he told everyone their jobs were moving to Indianapolis in 4 months. I especially liked the part when he said that it was all Chris Collins' fault. That was a nice touch."

BB Quote #3:
"Sean’s departure undoubtedly raises questions and concerns for our Frontier employees. I wish we did not have to take on this distraction at this critical point in the integration process; however, I can assure you Republic is just as committed to this undertaking today as we were in September when we won the Frontier bankruptcy auction. Our vision for the integration and development of the branded business has not waivered. Our belief that we have great people, great products and great opportunities to develop the branded business beyond Denver and Milwaukee has not diminished. However, before we can move forward with the exciting work of extending the brand into new territories, we have to work through the very difficult tasks of combining the leadership teams, the technology and the brands."

BS Translation #3:
"Now that Sean has quit, we can begin moving those jobs to Indianapolis too. I just need to keep telling people that we haven't made a decision yet. Yeah, that will keep them from looking for other jobs. I guess we need to pull out the ole dart board and U.S. map again until we can find someone that knows what the hell they are doing. I hope we don't get another errant dart again like the one that hit Hawaii last time. Man it sucks that Hawaii didn't work out, and just as I was getting the hang of pronouncing Mokulele."

BB Quote #4:
"Walking around the corporate offices in Denver, it is becoming clear that we have some “trust issues” between the Frontier management team and the Republic management team. Frankly I’m a little disturbed by this. During the bankruptcy process, we worked very closely with Sean and Ted to define the combination synergies (also known as the elimination of redundant overhead functions) we could expect to obtain were we the successful bidder for Frontier."

BS Translation #4:
"Since I happened to be in Denver at the Stock Show last week, (bought a nice big belt buckle with my name on it) I decided to swing by the Frontier G.O., or "the graveyard" as it will be known as soon. I quickly discovered that these people were giving me dirty looks. I guess they don't trust me anymore. I only told people we were looking for synergies. I guess it depends on what they interpret the meaning of synergy to be. I should probably look it up. Maybe I should not have told everyone that it would be a "jump ball" for positions with the combined company. I could not in good conscious tell them it was actually going to be a game of "dodge ball" but with Frontier's allotment of dodge balls getting cut from the budget because they were synergized with ours."

BB Quote #5:
"While in Denver this week, I’ve heard some conversations along the line that “Frontier was profitable before these guys bought us why does anything have to change?” Yes Frontier was profitable in 2009 when the price of oil was under $60. At $80 oil, Frontier’s cost of fuel will be $100 million higher, and despite what we might wish, the fares in Denver (and Milwaukee) are just not going up. Whether you trust me or not, I can assure you we need all the synergies we jointly defined before the merger and then some to offset the increased cost of fuel."

BS Translation #5:
"Why do these people keep asking me about changing stuff if they were profitable? I know, it gives me a good chance to do something I have never had to do before with the fixed-fee side of the business, blame fuel prices and fares! I really like this excuse, it works better than the other fixed-fee excuses. I should remember to use fuel price excuse again when we tell the Customer Service employees that the new pay scales will remain."

BB Quote #6:
"As for the brand question, this opens a very thorny set of issues as both Midwest and Frontier employees (and equally important their customers) are rightfully very invested in their respective “hometown” brands. We want to respect those feelings and help coach both sides to a mutually beneficial yet unified brand solution. I don't have all the answers today but we are doing the hard work to get the information we need that will allow our employees and our customers to decide the product attributes they want for the merged brand."

BS Translation #6:
"The Frontier and Midwest brands are screwed! The animal advertising is stupid and the cookies are not even oatmeal raisin! . Who ever heard of talking animals on airplanes, I don't get it. I can't wait to tell everyone that the new airline is going to be called "Hoosier Air"! We will be Indiana's hometown airline with a total of 10 flights a day in and out of Indianapolis."

So there you have it, select quotes from Brian Bedford as seen through the BS Translator/Filter v.1.1. Stay classy Mr. Bedford!

Things Fall Apart?

Anyone who has worked at Frontier Airlines for the past 2+ years knows what the company and employees have gone through to ensure they have a place to call home. I know countless employees and the families of those employees that have sacrificed much to see their beloved airline succeed. Bankruptcy, pay cuts, lost friends, and broken promises are the steps involved for an organization in financial trouble to turn itself around and appear to be only a shadow of its once proud self. Some have said, and rightfully so, that this is the price of business mismanagement. For myself, Frontier Airlines truly represented the first employer that made me feel like a member of an extended family, that gave me a sense of ownership in the business, and gave me a voice.

Frontier Airlines employees are fiercely proud of their little airline. We know we are not the biggest or the most flashiest airline in Denver, let alone the entire country. We were not the highest paid or had the best benefits in the industry (far from it!). What set us apart was the camaraderie and the feeling that we were truly all in this together. A lot of people think that this is not "Show Friends" but actually "Show Business", that in the business world, the only thing an employee should be loyal to is a paycheck, because when the chips are down, the business will not be loyal to you. What set Frontier Airlines apart for me what that the business was operated largely with the employee's interests in mind and that if you take care of the employees, they will take care of your customers.

I started this blog because I had some ideas I wanted to jot down. I started seeing some cracks in the old foundation and noticed that ambivalence was starting to be substituted instead of compassion. People who loved coming to work now started to dread it. Work simply stopped being fun.

When thinking about what was going on at Frontier, the circumstances started to remind me of a book I read a long time ago: Things Fall Apart by Chinua Achebe. Anyone who has read this knows the story of a villager named Okonkwo who rises to power of his tribe only to be exiled from the village after various misdeeds and one tragic accident. He later returns to find his village vastly different than when he left due to the colonization of the British which ultimately leads to his on self inflicted demise when trying to fight the conflict that one alien culture brings to another established culture. I can't help but notice the symbolism in that story and comparing it to the current events at Frontier Airlines. Does Republic Airways represent the British colonists? Does Bryan Bedford symbolize Reverend James Smith (no pun intended!)? Is Sean Menke actually Mr. Brown or Okonkwo?

The truth at the end of the day is that Frontier Airlines is now a wholly owned subsidiary of Republic Airways Holdings. A new culture is clashing with an established culture. What remains to be seen is if the new culture can succeed even if it means driving away the reason the original culture was successful, the employees. Based on what I have seen so far, the colonists have not succeeded in winning over the hearts and minds of the conquered.