While the Battle of Britain will forever hold the title of the greatest air battle of the 20th century, the 21st century dawned with an entirely new form of combat at 20,000 feet. Instead of Spitfires vs. Me-109s, this form of combat involved the battle for supremacy of America's skies; its chief combattants carriers like TWA, United, and Northwest. Throw in the challenges caused by international terrorism, OPEC, and fraught labor relations in addition to the battles waged between the likes of Airbus and Boeing, and one has what just might be the most interesting business story of the last decade and a half. Our story begins at the crossroads of America in St. Louis, MO on a cold February day, where the beleaguered TWA, a shadow of its once glorious self began the epic struggle for control of America's airways, airports, and routes.
February 7th, 2001
St. Louis, MO
"Good morning, here at KSDK St. Louis we're tracking the breaking news that Phoenix based America West Airlines has reached an agreement to buy TWA's assets out of Chapter 11 bankruptcy. The report states that the combined airline will maintain hubs in Phoenix, Las Vegas, Columbus, and St. Louis as well as focus cities at JFK and San Juan. No word yet on where the new airline will be headquartered. Some airline analysts see large upside in the deal, which will allow TWA to get out from an unfavorable ticket agreement signed with Carl Icahn, renegotiate lease rates on aircraft, and the complimentary nature of their route networks."
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In Fort Worth, Donald Carty was mired in frustration. American had also been looking to buy TWA's assets, which it saw as a much needed relief valve for its perpetually packed operation at Chicago's O'Hare; it's megahub at DFW could only handle so much more. AA had also been kicking the tires of Minneapolis based Northwest, but that was buying way too much Midwest capacity; the combined airline would have a line of almost continual hubs from Detroit to Dallas, though he'd love to have the Tokyo route authorities. In the mid term, now that TWA was out of play, his focus shifted to growing what was already a goldmine at Miami International Airport.
Meanwhile in Chicago and Crystal City, things were not going well for James Goodwin and Steven Wolf either either. United had suffered through the “Summer of Hell” in a dispute with ALPA over in 2000 which had driven the airline's reputation through the floor. Furthermore, the megamerger between United and US Airways was all but dead due to labor issues and regulatory hurdles, which left both airlines geographically in the lurch. United's only East Coast hub was at Washington Dulles and was the region's third choice for domestic traffic, although it's transatlantic operations were largely profitable. Conversely, US Airways lacked a hub west of Pittsburgh, though it was the carrier of choice for Northeastern businessmen; the airline was also stuck with the world's most complex fleet and operated no fewer than seven different families of narrowbodies from museum worthy DC-9s and 727s to new state of the art A320s; somewhere in between were the airline's 737, 757, MD-80, and F100 fleets.
At Delta's headquarters outside of Atlanta Hartsfield, things were swimming along. The airline had largely consolidated control of the Atlanta market following the collapse of Eastern, and had built a huge success story with its ever expanding Regional Jet hub at Cincinnati/Northern Kentucky. Delta had a robust European network and was making inroads into South America from Atlanta; the immense connection opportunities and ease of use available made it a stronger hub when compared to American's Miami hub, although Carty was expanding there like crazy. What Delta did not have and wanted very badly was anything resembling an Asian operation; in fact its sole route was Atlanta-Tokyo. Compounding matters, it had by far the weakest Asian partner of the big six in Korean Air.
Northwest had that extensive Asian operation and a strong transatlantic alliance with KLM to manage traffic to Europe. Of the 6 legacy carriers, it had the weakest set of hubs, but it used them to its advantage. Unlike Delta, United, and American, its strength was predicated on being the dominant carrier in the Midwest, which was bracketed with hubs in Detroit, Minneapolis, and its Southern toehold in Memphis. Outside of Chicago, Northwest owned the region.
Continental had emerged from the rubble of Frank Lorenzo's empire and had managed to turn itself around from a laughingstock to a much more respected carrier. It had turned the former Peoples Express hub into the New York region's only comprehensive airline hub and was poised to start a series of new Asian routes that bypassed hubs like San Francisco and Los Angeles on the West Coast. It was also vigorously expanding from its Houston hub using regional jets to serve previously inaccessible long, thin routes where larger 737s would have lost an ocean of money. It had also been highly aggressive in expanding into second tier Mexican destinations that had never seen transborder service.
On the other side of the DFW Metroplex, Southwest was still kicking everyone else's butt and taking names. It had managed to establish a hub at Baltimore/Washington where it has causing US Airways no amount of grief with in the Northeast. It was also expanding slowly but steadily out of its Midwest base at Midway and was running circles around United in California. It was even beginning to tiptoe into the New York City market. The news of the America West/TWA deal was something of a disappointment; Southwest had been hurting TWA badly with a strong operation in St. Louis. With Karabou gone and a management team in Phoenix who knew how to take on Southwest from first hand experience, things were about to get much more interesting in the near future.......
February 7th, 2001
St. Louis, MO
"Good morning, here at KSDK St. Louis we're tracking the breaking news that Phoenix based America West Airlines has reached an agreement to buy TWA's assets out of Chapter 11 bankruptcy. The report states that the combined airline will maintain hubs in Phoenix, Las Vegas, Columbus, and St. Louis as well as focus cities at JFK and San Juan. No word yet on where the new airline will be headquartered. Some airline analysts see large upside in the deal, which will allow TWA to get out from an unfavorable ticket agreement signed with Carl Icahn, renegotiate lease rates on aircraft, and the complimentary nature of their route networks."
__________________________________
In Fort Worth, Donald Carty was mired in frustration. American had also been looking to buy TWA's assets, which it saw as a much needed relief valve for its perpetually packed operation at Chicago's O'Hare; it's megahub at DFW could only handle so much more. AA had also been kicking the tires of Minneapolis based Northwest, but that was buying way too much Midwest capacity; the combined airline would have a line of almost continual hubs from Detroit to Dallas, though he'd love to have the Tokyo route authorities. In the mid term, now that TWA was out of play, his focus shifted to growing what was already a goldmine at Miami International Airport.
Meanwhile in Chicago and Crystal City, things were not going well for James Goodwin and Steven Wolf either either. United had suffered through the “Summer of Hell” in a dispute with ALPA over in 2000 which had driven the airline's reputation through the floor. Furthermore, the megamerger between United and US Airways was all but dead due to labor issues and regulatory hurdles, which left both airlines geographically in the lurch. United's only East Coast hub was at Washington Dulles and was the region's third choice for domestic traffic, although it's transatlantic operations were largely profitable. Conversely, US Airways lacked a hub west of Pittsburgh, though it was the carrier of choice for Northeastern businessmen; the airline was also stuck with the world's most complex fleet and operated no fewer than seven different families of narrowbodies from museum worthy DC-9s and 727s to new state of the art A320s; somewhere in between were the airline's 737, 757, MD-80, and F100 fleets.
At Delta's headquarters outside of Atlanta Hartsfield, things were swimming along. The airline had largely consolidated control of the Atlanta market following the collapse of Eastern, and had built a huge success story with its ever expanding Regional Jet hub at Cincinnati/Northern Kentucky. Delta had a robust European network and was making inroads into South America from Atlanta; the immense connection opportunities and ease of use available made it a stronger hub when compared to American's Miami hub, although Carty was expanding there like crazy. What Delta did not have and wanted very badly was anything resembling an Asian operation; in fact its sole route was Atlanta-Tokyo. Compounding matters, it had by far the weakest Asian partner of the big six in Korean Air.
Northwest had that extensive Asian operation and a strong transatlantic alliance with KLM to manage traffic to Europe. Of the 6 legacy carriers, it had the weakest set of hubs, but it used them to its advantage. Unlike Delta, United, and American, its strength was predicated on being the dominant carrier in the Midwest, which was bracketed with hubs in Detroit, Minneapolis, and its Southern toehold in Memphis. Outside of Chicago, Northwest owned the region.
Continental had emerged from the rubble of Frank Lorenzo's empire and had managed to turn itself around from a laughingstock to a much more respected carrier. It had turned the former Peoples Express hub into the New York region's only comprehensive airline hub and was poised to start a series of new Asian routes that bypassed hubs like San Francisco and Los Angeles on the West Coast. It was also vigorously expanding from its Houston hub using regional jets to serve previously inaccessible long, thin routes where larger 737s would have lost an ocean of money. It had also been highly aggressive in expanding into second tier Mexican destinations that had never seen transborder service.
On the other side of the DFW Metroplex, Southwest was still kicking everyone else's butt and taking names. It had managed to establish a hub at Baltimore/Washington where it has causing US Airways no amount of grief with in the Northeast. It was also expanding slowly but steadily out of its Midwest base at Midway and was running circles around United in California. It was even beginning to tiptoe into the New York City market. The news of the America West/TWA deal was something of a disappointment; Southwest had been hurting TWA badly with a strong operation in St. Louis. With Karabou gone and a management team in Phoenix who knew how to take on Southwest from first hand experience, things were about to get much more interesting in the near future.......
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