In a story that will be published in a week or so, AirInsight lays out the case for looking at Southwest Airlines differently these days.  But even now there is evidence that market realities are forcing changes on the US airline industry's golden child.  This view should certainly not be seen as a criticism – the airline remains remarkable for its tremendous growth and history of success.

But with its success came growth. Buying AirTran proved more complicated than everyone thought. Prior to this investment, Southwest last bought an airline (Morris Air) a long time ago – probably too long ago for many of the current team to remember.

Yesterday came news that Southwest is deferring  30 737-800 deliveries for four years.   This comes as Ryanair's monster order from years ago starts to dry up – only 11 to go to complete that order.  We bet the deferred 737-800s won't be delivered as is. Our thinking is these orders will be converted to -8 MAX.

Southwest is now behaving like its industry peers. Its sheer bulk is such that it is probably better to slowdown growth a bit.

jetBlue and Turkish Airlines announced an interline agreement to connect the carriers’ networks at JFK  and Washington Dulles International Airport.  The deal is interesting because it is called "interline", not the more typical codeshare.  But both airlines will be offering the ability for their customers to exploit the joint network.

For Turkish the advantages are obvious.  For jetBlue the deal is intriguing because of its Lufthansa connection. Lufthansa is a codeshare partner for jetBlue.  So why would a jetBlue customer end up on Turkish if Lufthansa offers the same destination choices? Note both Turkish and Lufthansa are Star Alliance members.

If one mentions these two firms, the first thing most industry watchers think is "CSeries".  Look here for a recent example of that story.

But there is a more interesting example of the evolving relationship between the airline and the OEM. Take a look at the news about FlexJet.

Note that FlexJet is owned by Bombardier. So while talk of the delayed CSeries order by Qatar gets the most attention, there is another side of the story. The takeaway for us is that the airline is on very good terms with Bombardier. Good enough to partner on a project that is both innovative and significant.  If Qatar had any qualms about Bombardier it would be be a customer for its bizjets or partner with it in such a way.  The relationship between the two appears to be good. Of course Bombardier wants a CSeries order. Qatar is following a process that is not transparent and the absence of a CSeries order to date is frustrating, but not negative.

News out today suggests the EU airline consolidation continues. This should not come as a surprise.  Airlines are discovering that when a competitor goes under, this is not a moment to celebrate. Why? Because it is rare that airlines actually die.  Therefore if you don't swoop quickly another competitor might.  Then you will face an even bigger rival.  We expect to see more airlines fold, and in most cases be absorbed into another company.

Airline economics is a strange thing.  Often what would make sense to a non-airline does not make sense to an airline. Pricing is a good example.  Airlines offer cheaper prices the more in advance you buy.  Last minute fares are highest.  This logic apparently flies in the face of decaying product pricing.  But that's how the business runs.

If Flybe gets its hands on Cimber there are interesting things to watch. Obviously the mixed turboprop fleet. Flybe is a big Q400 operator whereas Cimber uses ATRs.  You can imagine that both OEMs are watching this one closely.  For Flybe the deal makes sense and provides a quick route and network increase.  It is probable that Danish interest would like to see the deal go through too – they don't want to lose the Cimber network either.

Airlines can't die easily because they create so much inherent non-finance momentum and support.  It is truly an odd industry.

The splitting of Gatwick from Heathrow appears to be working as hoped.

Nick Dunn, Gatwick Airport’s chief financial officer said: “The year-on-year decrease in passenger traffic is largely accounted for by the timing of public holidays in April 2011, including the late Easter holiday weekend, the additional holiday to mark the royal wedding and the early May bank holiday. Despite this, planes were flying fuller with load factors up 1.2 percentage points. This month we were given a vote of confidence by Korean Air and Air China as they launched operations to Seoul and Beijing respectively. With room to accommodate more flights, we are in a strong position to help London remain one of the best connected cities in the world.”

Even limited with one runway (remains a serious impediment) Gatwick is doing some interesting business – Korean Air commenced services between Gatwick and Seoul on April 28th, followed by Air China, which started flights to Beijing on the May 2nd. Air Nigeria confirmed it will commence daily flights to Lagos from May 17th. Gatwick will also welcome Caribbean Airlines on June 15th who are planning to operate a six times per week service Port of Spain, Trinidad.

Clearly these new flights are O&D focused and do not require Heathrow's connections. Road and rail services enable people to get to Heathrow if that is what they need.  On balance these new services demonstrate that competition works. Even when both airports have structural limits. London is likely to be the first city to see manifest changes in gauge because of its limits. We suspect Heathrow handles more A380s than any other airport already.

Emirates announced its 2011 results and it saw a 72% decline in profits.   Predictably the airline points to fuel costs. Its fuel bill rose over 44% over 2010. In addition the Arab Spring did the airline no favors.

But sit back and consider this performance. Twenty four years of profits. Tremendous fleet growth. Global coverage.  Even with the fuel shock and Arab Spring, Emirates made a profit.  If and when its regional competitors announce their numbers we will have a reasonable yardstick by which to measure the numbers.

But it is clear that having a young, fuel efficient, fleet has played well for Emirates.  It has been able to compete with the world's best airlines.  Many of those competitors will not reports 2011 profits.  For example, if Air India were allowed to die a dignified death, Emirates would clean up in India. Emirates is also a factor in the struggles at Qantas to achieve financial results. Emirates offers superb service levels and products and market rates. Because it is well run, the airline is able to offer deals to premium travelers who otherwise would not fly them.  Finally Emirates is opening new routes and drawing traffic away from traditional routes and carriers.

That's the upside. The downside is that Emirates is no longer a small airline easily ignored. It has a huge fleet of 777s and the world's most A380s.  Everywhere they go these days they run into ever stiffer  competition.  Some competitors are manifestly threatened by Emirates. These carriers will not go down without a fight. Probably we all need to readjust our profit expectations for Emirates. Competition is everywhere and this will curtail profits, but we expect the airline to keep on rolling, albeit a bit slower.

First item – A new threat by Al-Qaeda to blow up a plane that was bound for the US using an ‘underwear bomb’ has been foiled, according to reports. The device, which was seized by CIA in the Yemen, is thought to be an upgraded version of the device that failed to detonate on boart a Detroit-bound plane on Christmas day in 2009. It is being investigated by the FBI. The plan was supposed to be carried out around the first anniversary of Osama bin Laden’s death. So if the CIA found the device and the FBI is investigating – do we need the TSA? Somebody has to ask this question because the TSA keeps growing its footprint and that surely is a threat in its own right. The US has met serious budget constraints and we don't see a need for the state to grow to such a large part of the economy. This is America after all. The nation's security and defense spending is enormous plus we are paying crooks in Afghanistan.  Probably other places too.  Count us square on the side of those screaming "enough!".

Second item – News just in suggests SuperJet has lost their demo airplane over Indonesia. It was carrying its crew and 44 other people on a demo flight. News like this has to leave anyone associated with aerospace and aviation with a knot in the stomach.  The possible loss of life is awful – on a human level of course. But also because the people on this flight probably includes those with special and specific skills; test pilots clearly but likely also airline people whose presence has to do with considering the airplane for their fleet.  This story is upsetting for the industry on many levels.

When we see an headline that we expect something unfortunate and we were not disappointed.

So 100 pilots did a "sick out" today.  The fight is over gets to fly the airlines 787s when they arrive. The original Air India pilots want exclusive rights to the 787 over the Indian Airways pilots absorbed after the merger.  Once again the amazing lack of vision at work. Is this thinking endemic to pilots or any union member? Their airline is on a death watch that has stretched for years; one would think the pilots might want to consider what they can do to help the airline make money.  Or perhaps save money.

As the linked article points out, its not Air India that is suffering. Kingfisher has one foot (wheel?) in the breakers yard.

Perhaps it is time that India's airlines start to give big stakes to their employees. By putting everyone on the same side we might see less "us and them" thinking.  India's airline business remains a mystery. The market has so much potential.  There are some well run operations.  But then there is the dysfunctional government interference, weak infrastructure and wobbly big airlines.  Not a place to do business for the fainthearted.

This morning's news that the airline is canceling more A350-1000s is bound to appear startling. To some anyway.

Yes the airline has now halved its A350-1000 orders. But this was to be expected after its announcement in December that its 787 orders should make it the largest operator of the 787-9.  It would seem the airline is possibly changing its focus and this does not mean there is anything "wrong" with the A350-1000.

Moreover we have to consider that the news is only dropping the first shoe – every order comes with deposits.  The deposits on the A350-1000 are not going to be forgone.  The other shoe could easily be applied to some other order in the works.

So even as the news at first blush looks hard for Airbus, lets wait and see what else might be going on.

For years the management at American Airlines seemed untouchable. Crews were unhappy, employees were restless and the company seemed to try tough out everything that came its way.  Years of playing the industry tough guy ensured huge losses and the inevitable Chapter 11.  Now that the management team has the company in Chapter 11, things actually look worse for them than anyone else.

US Airways is clearing stalking the airline.  US Airways' management team has already done one merger. CEO Doug Parker has made it clear he wants to merge with American and has made all the right moves.  Now three of American's unions have appealed directly to their board of directors to support such a merger over the resistance of American's management.

American's unions are not toothless. They are part of the creditors committee and have a say in any restructuring. In addition US Airways has other supporters and or sympathizers.  The PBGC has seen every airline Chapter 11 deal lead to their taking over pension obligations that are underfunded.

American's management team is trying to tough it out again. They are going to try to abrogate union contracts.  But there is a sense that American's management team might not have as much momentum as its opposition. Moreover, the future for American after emerging from Chapter 11 as a relatively smaller airline competing with merged giants at Delta and United do not look especially attractive.  Merging with US Airways would ensure the combination becomes the world's biggest airline.  Airlines seem to do better with greater economies of scale.  Going from six majors to three massives is a lot more understandable for many observers.

As the merger inevitability forms in people's minds, the parties with major decision power over the Chapter 11 process are likely to see the benefits of the merger as greater than allowing American to emerge as is. If that is the case, US Airways has presented a some sort of vision to move in that direction. And given that, the current management team at American looks short on vision and out of touch.