Neha Jain: http://philippinesaviationnews.blogspot.com/26

1. AIRLINES AND AVIATION
Rising oil prices may ground airlines' hopes for profits
Like everyone else filling up a gas tank these days, airlines are feeling the pain at the pump.
Jet fuel spot prices have jumped 19 percent in just the past two months, and with continued political unrest in the Middle East and elsewhere, industry analysts can only guess how much higher the prices will go.
But they know that if the price of jet fuel reaches 2008 peaks, the airline industry could be in for a year of red ink.
"Price movements of 9 percent in a day are exactly what this industry does not need," said Bill Swelbar, an airline researcher at the Massachusetts Institute of Technology.
Airlines seem to be adjusting, although not in a way passengers would likely prefer.
Since the beginning of the year, domestic carriers have raised airfares five times. In addition, two successful fare increases have targeted last-minute business travelers. On Wednesday, United Airlines added a $20 fuel surcharge on round-trip tickets.
"If jet fuel prices remain at current levels [$3.10 per gallon], capacity and jet fuel consumption will be reduced further, controllable costs shaved more, airfares raised again, and new fees and fuel surcharges added," CRT Capital Group analyst Michael Derchin wrote last week in a note to investors.

2. Southwest Airlines, AirTran, others testify before Senate panel about Southwest-AirTran merger
* AirTran is a more aggressive discounter than Southwest on average. "The pricing data ... reveals that AirTran's discounts are some of the deepest in the industry; in fact, higher than Southwest's, which has been considered the industry "maverick" for many years," Moss said.

* Southwest has grown less aggressively than AirTran in recent years.

"The reason for AirTran's maverick-like behavior on the entry front may be obvious, namely that Southwest - with a larger market presence - may be reaching saturation levels in terms of the airports it can serve using its hybrid system," Moss said in her prepared remarks.

"This likely reflects the fact that Southwest, which is far larger and more mature than AirTran, has experienced nearly as much organic growth as possible. Merger may be the only way to extend this growth platform while AirTran may still be in expansion mode."

* While AirTran has shown that a low-cost carrier can enter a market, LCCs in the future may not find it so easy to enter a market versus Southwest-AirTran.

"Those players are likely to be the remaining LCCs," she said. "But the best markets for LCC entry will already have been entered by Southwest and AirTran which, when merged, will be a more formidable competitor for an entrant."

Fares may go up in Milwaukee, once Southwest -- the less aggressive discounter -- takes over AirTran.

"The merged airline will be in price competition against legacy carriers, but no longer against each other," Moss said. "While they may continue to be the low fare operator, their fares could edge closer to legacy fares and their influence on legacies' pricing could diminish."

The hearing by the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights included appearances by Gary Kelly and Robert Fornaro, Southwest's and AirTran's chairmen, presidents and CEOs, respectively, who saw only good things for Milwaukee and competition if Southwest and AirTran were allowed to merge.

Also speaking were the Milwaukee airport director and president of the Metropolitan Milwaukee Association of Commerce.

Southwest and AirTran are awaiting the U.S. Department of Justice's response to their proposed deal. They reiterated this week that they expect to close the merger in the second quarter of 2011.

3. Rapid Rewards revamp is just one of Southwest Airlines' big changes
Reporting from Chicago — Southwest Airlines rebooted its popular Rapid Rewards program this week, and the transition to a more sophisticated frequent-flier program is much like the makeover the carrier itself faces: a necessary, risky upgrade that is certain to alienate some die-hard fans.

Passengers won't be able to check their rewards or request free trips for two days, Sunday and Monday, while the new awards program is loaded to Southwest computer systems. Travelers flying on previously booked awards tickets won't be affected by the outage, Southwest spokesman Chris Mainz said.

The $100-million revamp of the program will tie travel awards to the amount that passengers spend to fly, similar to programs at JetBlue Airways and Virgin America. While critics claim the Texas-based carrier will shortchange passengers who take short trips, Southwest Chief Executive Gary Kelly maintained that most customers would reap greater benefits.

4. Rapid Rewards revamp is just one of Southwest Airlines' big changes
Reporting from Chicago — Southwest Airlines rebooted its popular Rapid Rewards program this week, and the transition to a more sophisticated frequent-flier program is much like the makeover the carrier itself faces: a necessary, risky upgrade that is certain to alienate some die-hard fans.

Passengers won't be able to check their rewards or request free trips for two days, Sunday and Monday, while the new awards program is loaded to Southwest computer systems. Travelers flying on previously booked awards tickets won't be affected by the outage, Southwest spokesman Chris Mainz said.

The $100-million revamp of the program will tie travel awards to the amount that passengers spend to fly, similar to programs at JetBlue Airways and Virgin America. While critics claim the Texas-based carrier will shortchange passengers who take short trips, Southwest Chief Executive Gary Kelly maintained that most customers would reap greater benefits.

NEHA JAIN

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