Airline Executives Discuss Foreign Ownership, Unbundling, Partnerships, and Consolidation

(MoneyWatch)  Here we are, back with part two of my coverage of the executive panel at the Phoenix Aviation Symposium. On Friday, I wrote about the first part of the panel which focused on oil and the economy. The back half, under Randy Babbit's direction, touched on some other very interesting topics. Let's dig in.

Foreign Ownership JetBlue CEO Dave Barger said he fully supports foreign ownership of US airlines as does TUI Travel Aviation Director Christoph Mueller. But when the question of re-regulation came up, nobody was interested in that. Christoph put in his vote to have government not worry about regulation and instead worry about building quality infrastructure, a point with which many would agree.

Unbundling When the topic of unbundling came up, Qatar Airways EVP Commercial Ali Al Rais had no interest. He said that Qatar's customers don't want that, and they have no plans to do anything along those lines. Of course, the other carriers felt otherwise.

Dave suggested that Air Canada and Frontier have the right model, one that allows for fare products. Fare X includes nothing, fare T includes some frills, and fare Z includes everything, for example.

Ali brought up the point that the US is different from everywhere else. "From what I've seen, Americans use the airline purely as a means of transportation. The rest of the world uses it as an experience of travel."

Christoph agreed, "We tried to unbundle with our German carrier a couple years ago and fell flat on our face. People would not pay for a meal, they expect it. But we can make more money in auxiliary revenues onboard."

Partnerships When it came time to talk about linking up, Dave was feeling talkative, "I just wish Glenn [Tilton, CEO of United] was here or Dermot [Mannion, now former CEO of Aer Lingus]. If you're going to fly an Aer Lingus plane from Dulles to Madrid - that one was fascinating. There were some other ones that were interesting but that Aer Lingus/United - I'd love to hear the answer to that one."

But while he seemed somewhat confused by that partnership, he was very high on working with Aer Lingus. "What we've thought of as unnatural relationship, we're now seeing 100 people a day connecting into our system. Those customers weren't there previously. Aer Lingus is not a traditional alliance. It's seamless. It's one stop check-in. It's a very positive experience. There has to be a ton of those kind of relationships."

Consolidation On consolidation, US Airways President Scott Kirby was out in front waving the flag that US Airways has always waved; they want to see more of it.

We're very public on record as being big fans of consolidation. It's painful but the reality is that I don't think America West or US Airways would be flying today if not for that. It's necessary in the US airline industry. Why can't US carriers get the fares up? It's because we don't exist in a rational industry. Aircraft manufacturers, there's two of them, but in our industry, it's not rational.

Scott said that he expects there will only be three large US network carriers in the end with one as part of each major alliance. That certainly would seem to leave US Airways as an odd man out now that you have Delta/Northwest and the Continental/United partnership. That's probably why US Airways is so high on consolidation.

Dave also thought consolidation was a good idea, but,

. . . we don't have any plans to participate. The reason for that, you could really start to make the case, but we fundamentally take a look at labor and looking at history of how you merge. You can merge. You can integrate op specs, fleets, signage, etc, but doing the same with culture, which is so key to our company, is really difficult. You can integrate seniority lists but to truly integrate culture, there's a huge question mark and we'd rather not go down that path.

And with that, it was time for drinks.