For the first time since oil prices began their meteoric rise this year, airlines are slashing fuel surcharges on a major international route: most flights between the U.S. and Europe.

It's the first roll-back of the largest of the bewildering new fees that have driven up the cost of flying this year, while making it increasingly difficult for airline passengers to get a handle on travel costs.

In the last week, carriers have dropped their fuel surcharges by 18 percent, to $280, on flights from Chicago and other U.S. cities to Rome, Amsterdam, Madrid and Zurich.

On flights departing to London from cities west of the Mississippi, fuel surcharges have declined 17 percent, to $366.

Crude oil prices have plummeted in recent weeks to about $80 per barrel, driven down by concerns that a global economic slowdown will slate the world's thirst for fuel over the next year.

Now, airlines are starting pass along some of the savings to those with the means and inclination to travel to Europe this fall.

The trend means passengers heading across the Atlantic over the next few months will pay less than they would have this summer, when oil was near $140 per barrel. But even so, they aren't likely to see bargain-basement fares.

The drop in fees and low base fares may signal that airlines are having difficulty attracting passengers to Europe as a result of the market mayhem, analysts said. As they cut back domestic flying this year, U.S. carriers have been shifting planes to trans-Atlantic routes, where prices remained high through the summer.

The deal announced April 14, which would create the world's biggest carrier, still requires Justice Department approval. One other potential hurdle for the deal is a federal lawsuit seeking to block the deal that is set for trial Nov. 5 in San Francisco.

Delta Chief Executive Richard Anderson, who will keep his position after the combination, would not discuss the lawsuit, but he indicated the carrier maintains its goal of completing the deal by the end of the year.

Northwest shareholders will get 1.25 shares of Delta stock for each share they own if the combination is completed. That values Northwest at roughly $2.8 billion, based on Delta's current stock price and the 277 million Northwest shares outstanding or still to be issued as part of its bankruptcy reorganization plan. That's about $800 million less than the value when the deal was announced April 14.

The combined airline would be called Delta and keep its Atlanta headquarters. Northwest would become a wholly owned subsidiary of Delta during the integration process. Delta hopes to obtain a single Federal Aviation Administration operating certificate in 15 to 18 months.

Delta Chairman Daniel Carp would become chairman of the new board of directors and Northwest Chairman Roy Bostock would become vice chairman. The new board would be made up of 13 members - seven from Delta's board, five from Northwest's board, including Northwest CEO Doug Steenland, and one from the Air Line Pilots Association. A current Delta pilot would take the pilots' seat on the board.

If the deal is completed, Delta plans to issue a nearly 13.4% equity stake in the combined airline to employees. Delta's shareholders approved at their meeting Thursday a proposal to amend the company's performance compensation plan to allow Delta to issue the equity to employees.

Delta has already reached an agreement with pilots of the two airlines on a joint contract, though a deal to integrate the seniority lists of the two pilot groups remains elusive. Arbitration hearings on the seniority issue are set to begin Oct. 2 in Los Angeles. The pilots are the only major union at Delta, while Northwest is heavily unionized.

The two airlines had 85,071 combined full-time employees as of June 30, the last time they reported the figures to the Securities and Exchange Commission. Earlier this year, each carrier announced plans on their own for job cuts. Delta said it would shed 4,000 jobs, while Northwest said it wanted to cut 2,500 jobs.

The new airline would be the biggest in the world in terms of traffic and biggest in the U.S. in terms of annual revenue, which was a combined $31.7 billion at the end of last year.

At the Northwest meeting in New York, 98% of Northwest shareholders who voted approved the stock swap.

Approval from shareholders at both companies had been expected, with the only real potential obstacle being the Justice Department, which is scrutinizing the Delta-Northwest plan for antitrust considerations. Northwest President and Chief Executive Doug Steenland said they still expect to get approval and close the deal by the end of this year.

Pilots at Delta Air Lines and Northwest Airlines have approved a joint collective bargaining agreement. Ratification has been a key element of Delta's efforts to achieve a smooth integration of the two companies when it acquires Northwest later this year.

The agreement covers roughly 12,000 pilots of the two airlines.

Of eligible Delta pilots who cast a ballot, 61.74% voted in favor of the new agreement, while 86.76% of eligible Northwest pilots who cast a ballot voted in favor.

With ratification by both pilot groups, the joint agreement will become effective when the merger between Delta and Northwest closes, which is expected by the end of the year, Delta's pilots union said in a message to its pilots.

The pilots still do not have a deal to integrate their seniority lists, but have agreed to submit to binding arbitration if they cannot come to terms on their own. A three-member panel has already been chosen in case arbitration is needed.

Pilots value their seniority because it determines their schedule, the aircraft they fly and layoff protection.

Delta's stock-swap deal to acquire Northwest, announced April 14, is subject to shareholder and U.S. regulatory approval. European regulators cleared the deal last week.

The combination, being proposed at a time of persistently high fuel prices and airline industry financial woes, would create the world's largest carrier in terms of traffic.

The pilot agreement, together with a previous one reached between Delta pilots and management, calls for compounded raises for pilots over 18% over four years, a summary provided to Delta pilots says.

In exchange, the company will be able to place the Delta code and brand on Northwest flights and retain Northwest's large stake in Midwest Airlines, while maintaining those two carriers' separate operational status. The scope clause of the Delta pilot contract could have prevented Delta from doing those things had it not been amended.

The joint contract agreement also calls for pre-merger Northwest pilots to receive a 2.38% equity stake in the new Delta. Current Delta pilots would receive a 3.5% equity stake. The summary sent by Delta union officials to Delta pilots says the two amounts are proportional given the size of the two pilot groups. There are about 5,000 Northwest pilots and about 7,000 Delta pilots.

Note: If they cannot accomplish this in a timely fashion, they have agreed to binding arbitration.

Union Urges Government To Stop NWA-Delta Merger
Source: copyright 2008, Travel Weekly

Responding to Northwest shareholders' approval of the airline's merger with Delta, the International Association of Machinists and Aerospace Workers (IAM) urged that federal authorities not give the deal a green light.

IAM represents 12,500 Northwest employees, including ramp workers, customer service personnel and reservations agents.

"The machinists union believes Northwest and Delta will be unable to successfully combine their businesses without adversely impacting customers, suppliers, employees and shareholders because of the two airlines' vastly different corporate cultures and mismatched aircraft fleets," said Robert Roach Jr., IAM's general vice president.

Furthermore, Roach said that Delta won't resolve issues related to union representation, job security, pensions and seniority to the satisfaction of Northwest employees.

"Delta refuses to address these and other employee concerns," Roach said. "Delays, expenses and other challenges to integrating the workforces are likely to have a significant impact on the financial performance of the combined company."

Northwest Profitable With Oil at $100: CEO
Source: nytimes.com

Northwest Airlines Corp, which is set to be acquired by Delta Airlines, can be profitable with oil at $100 per barrel, Doug Steenland, the company's chief executive, said October 1.

Despite the turmoil in credit markets, Steenland said he was confident the merged airline would have sufficient liquidity to manage its operations well into the future, noting that the airline would have $6 billion in cash on closing.

"Our bookings have been keeping pace with our anticipation," Steenland said at a news conference in Tokyo.

"But obviously we are concerned and mindful of whether we will see impacts coming from challenges in financial markets and contractions of credit over months ahead."

Crude oil was trading at about $101 on October 1st, well off the record high above $147 reached in July.

Northwest is in the process of being acquired by Delta to form the world's largest carrier. Regulatory approval for the deal, which has been approved by shareholders, is expected by the end of the year.

Starting in October, American Airlines will offer AAdvantage® elite status members and other top customers more control, convenience and ease when they travel - PriorityAAccess privileges. From check-in through boarding, PriorityAAccess benefits will improve the airport experience, making every trip as hassle-free as possible.

• Exclusive boarding lanes at every gate.
• Eligibility designation on your boarding pass.
• Expedited check-in and security screening.

• First Class and Business Class passengers.
• AAdvantage Executive Platinum®, AAdvantage Platinum® and AAdvantage Gold® members.
• AAirpass® travelers.
• Customers traveling on a full-fare Economy Class ticket booked in Y.
• oneworld™ Emerald, Sapphire and Ruby members.

Frontier
Effective for tickets purchased on or after Sept. 13, 2008, Frontier Airlines (F9) will charge a $15 fee, each-way, for the first bag checked for travel on or after Nov. 1, 2008. This fee is in addition to the $25 each-way, second bag fee.

• A designated laptop-only section
• The laptop-only section completely unfolds to lay flat on the X-ray belt
• No metal snaps, zippers or buckles inside, underneath or on top of the laptop-only section
• No pockets on the inside or outside of the laptop-only section
• Nothing packed in the laptop-only section other than the computer itself

Alaska Airlines has laid out plans to reduce capacity 8% and eliminate 850 to 1,000 jobs, starting Nov. 9.

The airline is axing low-demand flights on Saturdays and holidays; reducing frequency in major markets, typically by one round trip per day; operating certain flights between Portland and the Bay Area with regional jets and turboprops flown by Horizon Air instead of larger Boeing 737s flown by Alaska; and ending seasonal service from San Francisco to Cancun, Mazatlan and Ixtapa/Zihuatanejo.

The carrier also ended Portland-Orlando and Vancouver-San Francisco service on Aug. 24.

Alaska said 850 to 1,000 operational positions will be eliminated, including pilots, flight attendants, aircraft technicians and reservations, customer service and ramp agents. Alaska earlier this summer announced a reduction of 80 management positions -- slightly more than half the reduction, largely completed in August, involved layoffs while the remainder was achieved by eliminating open positions.

Alaska said it was working with unions representing operational employees to offer early-out programs and six-month to two-year leaves of absence to minimize the number of layoffs.

Petters Aviation and its subsidiaries, including Sun Country Airlines, have filed for Chapter 11 protection under the U.S. Bankruptcy Code.

Sun Country will continue to operate and fly its regular flight schedule. The low-cost airline flies to 10 destinations year-round, and several others seasonally, from Minneapolis-St. Paul.

Southwest has fallen victim to volatile fuel pricing, forcing the airline lose money for the first time in 17 years.

The airline reported a third-quarter loss of $120 million -- even with a 17.7% increase in revenue -- because the airline had to take $247 million in charges mostly because the company had to write down the very fuel-hedging charges that made it the financial star of previous quarters.

Without those charges, the company would have reported a profit of $69 million, which would have been its 70th consecutive money-making quarter.

In the third quarter of last year, Southwest reported a profit of $162 million.

New reporting rules, the company said, require Southwest to constantly update the potential value of some of its fuel-hedging contracts. When the quarter ended on Sept. 30, those contracts were worth about $2.5 billion, down from $6 billion on June 30, just as oil was to spike at $147 a barrel.