At Paris Show, Some Signs of Renewed Demand for Big Jets

Francois Mori/Associated PressA British Airways Airbus A380 on display at the Paris Air Show on Monday.

LE BOURGET, France — After several years of intense demand for smaller, single-aisle workhorses, the European plane maker Airbus on Monday secured a customer for its twin-deck A380 superjumbo jet, in a deal the company hoped would signal a revival in interest in larger passenger jets.

CNBC: Sneak Peak At Paris Air Show Airbus’s sales chief, John Leahy, near right, and Doric Asset Finance’s chief, Mark Lapidus, announced a deal for 20 of Airbus’s A380 superjumbo jets, worth $8.1 billion at list prices.

The agreement with a little-known German leasing company, Doric Asset Finance, was for 20 planes, and was valued at $8.1 billion at list prices. Doric was Airbus’s first customer for its superjumbo plane, which typically seats around 525 passengers.

The order came on the opening day of the Paris Air Show amid a flurry of announcements of orders for wide-body planes made by Airbus’s American rival, Boeing, including a planned stretch model of its flagship 787 Dreamliner and a long-range version of its popular 777 jet.

Airbus has struggled to garner new orders for the A380, which entered commercial service in 2007, after a series of development snags. Airbus, which has sold 282 of the planes, has said it hopes to deliver 750 over the 25-year superjumbo program. Currently, nine airlines operate just over 100 of the planes.

The A380 has been a particularly tough sell to leasing companies because airlines have tended to seek extensive and costly customization of its interior to differentiate themselves from competitors. Such work can be an onerous proposition for lessors, which often roll a plane over to different airlines during its lifetime. Two years ago, International Lease Finance Corporation, one of the world’s largest aircraft lessors, dropped plans to buy 10 superjumbos as the global economic slowdown drove airlines to rein in seat capacity.

But Doric, which is based in Offenbach, near Frankfurt, said on Monday that it was talking with several potential customers for the A380 jets.

“We see how airlines that do not yet have the A380 are interested in it and approach us and ask questions, which shows us that there is pent-up demand for this aircraft,” said Mark Lapidus, Doric’s chief executive. He said he expected his company would easily place the planes with two or three airlines.

“If anything, we are perhaps under-ordering” the A380, he said.

Another leasing company, GE Capital Aviation Services, planned to order up to 10 models of a stretch version of Boeing’s 787, which the American manufacturer was expected to commit to building this week. The larger 787 is expected to seat 320 passengers, compared with the 210 to 290 seats in the Dreamliners currently in production.

Analysts said they were skeptical about a fundamental change in the market for planes with more than 400 seats, like the A380 and Boeing 747.

“Long term, the financial future for the A380 looks pretty weak,” said Saj Ahmad, chief analyst for StrategicAero Research in London. “It’s a very small niche market.”

Despite the dearth of recent A380 orders, “the basics haven’t changed,” said Christopher Emerson, Airbus’s senior vice president for marketing. He attributed the slower-than-expected uptake of A380s to bad timing, noting that the first deliveries came less than a year after the collapse of Lehman Brothers, which set off the global financial crisis and subsequent recession.

“Now that we are coming out of the downturn, you will start to see traffic growing faster,” Mr. Emerson said. “Now is the time for the A380 to do what it was designed to do: capture growth.”

On the Road: With Demand Dropping, Airlines Focus on Fees

The initiative is arguably counterintuitive because domestic airlines have been piling up money in recent years from all sorts of fees — baggage fees and the change-penalty fees among them — on top of the base fares.

American’s new coach fare options are “another example of how we’re building toward a new, innovative and more modern airline,” said Rob Friedman, the vice president for marketing at the airline, which is about to emerge from bankruptcy court protection and is in talks with US Airways.

Oddly, while American moves to incorporate some stand-alone fees into some base fares, a process known as bundling a fare, Southwest Airlines seems to be going in the other direction. Southwest, which has long bragged about having simple fare structures that don’t include fees for things like changing tickets or checking bags, recently announced plans to increase its dependence on fees, a process known as unbundling.

It all adds up to more complexities on the chalkboard of airline fee and fare formulas.

The changes by American and Southwest suggest that domestic airlines in general are looking more closely at ways to experiment with revenue, especially from business travelers, as a new year begins with indications that demand is dropping.

In November, most airlines in the United States reported small declines in passenger demand and in load factors, the number of available seats filled by paying customers. Southwest, for example, reported that its revenue passenger-miles, a standard measure of demand, were off 3.3 percent compared with November 2011.

On Monday, the airline forecaster Michael Boyd, of the Boyd Group International, summed up his predictions for 2013 this way: “No traffic growth. Fewer flights. Less capacity.” Airlines, he added, will focus more “on revenue growth, not traffic volume.”

American’s new fare strategy encompasses two basic changes, both of which include some fees in coach fares. One is Choice Essential, which costs $68 extra for a round-trip domestic fare but eliminates the $150 penalty fee for ticket changes after purchase. It also drops the $25 fee for the first checked bag and gives the buyer “priority boarding.” (We’ll address the laughable scrum that airlines’ “priority boarding” has become in a future column.)

Another option, Choice Plus, costs $88 extra and adds penalty-free same-day standby change options, while also eliminating the change penalty. And it includes what American calls a free “premium beverage” (beer, wine, cocktail), and a 50 percent bonus on frequent-flier mileage awards, as well as priority boarding.

American’s lowest nonrefundable coach fare structure, which it now calls Choice, remains unchanged. That is, checked-bag fees and $150 penalty fees for making a reservations change remain in effect, while customers continue to have “the flexibility to purchase additional products à la carte,” as American put it.

The American penalty fee changes are aimed mostly at business travelers, the customers most likely to occasionally change plans after a ticket is purchased. Southwest’s recently announced fare and policy changes include a penalty fee on tickets that are not used and not canceled before flight time.

Southwest has long been valued by many business travelers for not charging a penalty fee to rebook a ticket, and that has not changed. Southwest said it was merely adding a “no-show fee” for customers using the cheapest fares who rebook “tickets that are not flown and not canceled by our passengers prior to a flight,” Robert E. Jordan, Southwest’s chief commercial officer, said at a recent meeting with airline stock market analysts.

But in describing initiatives that are certain to interest Southwest’s intensely loyal customer base once the details are announced early in 2013, Mr. Jordan also said, “We are increasing our ancillary fees” in general, without providing specifics. He said that Southwest hoped to raise an additional $100 million this year from new fees.

There is no indication that Southwest is considering revising its policies on basic rebooking or allowing the first two bags to be checked free. Still, an increasing reliance on fees will probably start to redefine the Southwest flying culture. For example, Mr. Jordan said, “we are testing a new revenue stream enabled by selling open and premium boarding positions, so that’s the A1 to A15 position, and selling those open positions at the gate.” Southwest also plans to increase its “EarlyBird” priority boarding fee to $12.50 from $10.

Airlines have come to depend mightily on revenue from fees. In 2011, domestic airlines raised $2.4 billion in change-penalty fees, up from $915.2 million in 2007, according to the Bureau of Transportation Statistics, an agency of the Transportation Department.

And there is even more money in fees for checked bags. In 2007, a year before most airlines other than Southwest began charging for most checked bags on coach fares, domestic carriers raised a mere $464.3 million from such charges. Last year, the total was $3.4 billion.

Summer Hiring Reflects Sluggish Demand at Most San Francisco Bay Area Firms

There seems to be no end to bad financial news for law firms: Demand is flat, revenue growth is expected to fall short of last year's small gains, billable hours and realization rates are down and costs are rising.

And judging from law firms' recruitment for their 2013 summer class, no one is expecting the landscape to change dramatically anytime soon. An informal survey of 11 Am Law 200 firms conducted by The Recorder found that the appetite for summer associates has shrunk by nearly 40 percent from 2007. For law students, the good news is that recruitment seems to have stabilized. The good news for firms is that with smaller class sizes, it's much easier than in the boom days to get the pick of the litter.

Most of the firms will welcome Bay Area summer classes next year of about the same size as in 2012.

But several firms did diverge from last year's precedent. An above-average acceptance rate yielded an abnormally large 2012 class of 43 summer associates in the region for Wilson Sonsini Goodrich & Rosati, law school recruiting manager Stacy Trzesniewski said. The firm's Bay Area class for the coming summer will be about half that size.

Jones Day, meanwhile, is doubling down. To power its plans for expansion in California, the firm hired 44 percent more summer associates than last year in the Bay Area, said Robert Mittelstaedt, partner in charge of the San Francisco office. As many of its competitors are retrenching, the firm sees a chance to claim a greater share of the talent pool, Mittelstaedt said.

"We think we will grow in the future as much as we have in the past, and we want to be ready for it," he said. "We have a hard time passing up good talent."

Yet even a firm set on growth like Jones Day is hiring far fewer summer associates than it did before the recession. And most firms have slashed their recruitment further. Among the 11 firms surveyed, summer hiring has fallen by 38 percent on average from 2007 to 2013, which is consistent with nationwide statistics.

And for some firms, the decline was even steeper. Pillsbury Winthrop Shaw Pittman will have seven associates in its Bay Area offices in 2013, less than a third of the 25 it recruited for summer 2007. Orrick, Herrington & Sutcliffe will have 17 summer associates in the region in 2013, a 59 percent decline from the 41 it brought on board for 2007.

Anemic recruiting was among the factors that led the National Association for Law Placement to deem 2011 the worst entry-level job market in more than 30 years. Although it is too soon to produce statistics for fall 2012, NALP executive director James Leipold said he expects the volume of hiring done by firms to be "flat to a slight uptick" compared to last year.

Powered by demand for legal services in Silicon Valley, the Bay Area appears to be marginally outperforming other markets, Leipold noted. Career development officials at UC-Hastings, UC-Berkeley, UC-Davis and Santa Clara University said they saw a slight uptick in the number of employers who came to campus for formal recruitment.

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Post-Recession Demand Drives Strong First-Year Hiring at IP Firm

With all indications pointing to a tepid-at-best job market for 2012 law graduates, Knobbe Martens Olsen & Bear is a hot spot.

The intellectual property law firm, based in Irvine, Calif., recently hired 30 entry-level associates from the class of 2012 -- an especially high number considering the midsize firm totals 265 attorneys.

Managing partner Steven Nataupsky attributed the number mainly to high demand from clients pursuing applications with the U.S. Patent and Trademark Office. Most of the new hires will work on patent prosecution, as opposed to the firm's patent litigation side, he said.

"It's just a direct result of so many clients emerging from the dark days of the recession," Nataupsky said.

The new associates represent 11.3 percent of all of Knobbe's attorneys, based on the data it reported for the 2012 NLJ 250 survey. Last year, the firm hired about the same number -- 34 first-year associates, or 12.8 percent of its attorney totals. The NLJ 250 is The National Law Journal's annual ranking of the nation's largest law firms by headcount.

Knobbe's hiring percentages top some of the most prestigious law firms in the country. For example, first-year hires from the class of 2012 at Skadden, Arps, Slate, Meagher & Flom totaled 106 associates, according to a firm spokeswoman -- about 6 percent of its overall attorney headcount. Chicago-based Kirkland & Ellis hired 155 law graduates from the class of 2012, representing 10.7 percent of its total attorneys.

Another IP firm, Finnegan, Henderson, Farabow, Garrett & Dunner, also showed respectable first-year hiring. The Washington-based firm with 371 attorneys brought aboard 30 first-year associates, said managing partner Barbara McCurdy. That's 8 percent of its attorney total.

More than client demand is driving the associate numbers at Knobbe, where they have remained steady for the last three years. It's essentially a lockstep shop, paying attorneys based on years of experience -- a system that can scare off potential laterals, especially litigators, who are accustomed to merit pay.

To stay competitive by having enough lawyer talent, the firm's strategy is to grow organically rather than hire lateral partners, Nataupsky said.

"Our value system is different," he said.