Weekly Digest - August 1st, 2011
American Airlines and Travelport Extend Distribution Agreement
The existing full-content agreements between American Airlines and Travelport's Apollo, Galileo and Worldspan were renegotiated on Friday and are no longer due to expire in 2011. The terms of Travelport's opt-in programs for AA remain the same. Both companies declined to give more information on the deal.
American Airlines is still to renegotiate its distribution contracts with the other big distribution operator in the US - Sabre.
Air India's Star Alliance Candidacy Suspended
India's national carrier and the Alliance had agreed on a set of minimum joining conditions back in December 2007, which were not met by the deadline at the end of July, Star Alliance reported. The news came as a surprise to India's ailing airline, which has been counting on a Star membership as a key part of the country's turnaround plan for the carrier.
The Center for Asia Pacific Aviation estimated that Air India lost $1.75 B in its last fiscal year and may need more than $2 B for a successful turnaround. Joining the global alliance was expected to bring a 9% to 15% increase in revenues. The abundance of good low-cost alternatives in the region, however, might prove Air India's revitalization a strenuous task.
FAA's Authority Expires
Political disagreements in the US Senate let the mandate of the Federal Aviation Administration expire on July 22nd. As a result, the agency is no longer able to collect taxes on tickets, fuel and cargo until Congress passes legislation to extend its authority. The agency had collected $11 B in revenue 2 years ago which would put the current federal losses at about $30 M a day.
Despite customers' hopes, however, most airlines decided to assume the unexpected tax benefit through an increase in airfares of more than 11% on average. As a result, tickets rose between $16 and $60 round trip, according to FareCompare.com.
Virgin America was one of the few airlines to quickly come up with a promotional campaign, giving its customers the full benefit of the tax break. Through its twitter and facebook pages the airline announced that tickets sold after July 22 will have no federal taxes added to them.