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The term low-cost airline is all BS

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My colleague Brendan Sobie recently interviewed the new chief executive of Kuwait's Jazeera Airways Stefan Pichler. The former Virgin Blue exec got a little hot under the collar about the term low-cost airline.

Unprompted, Stefan said this to Brendan:

"Everybody who runs an airline always tries to have the lowest cost possible because it's a bloody asset driven business. It's just common sense.

StefanPichlerVB2.JPG"If you have an asset driven business then you try to operate it with the lowest cost possible. Everyone wants the lowest cost possible but on the other hand everyone wants the highest revenue possible. So we all chase for the lowest cost and highest revenue.

"The only one difference is a new start up company has lower costs than an established legacy airline because they are start up businesses.

"So forget about all this bull shit about low-cost airlines - everyone tries to be low-cost. Everyone! It's a stupid little label. It's a stupid label for people like you (journalists)."

THAT TOLD US STEFAN!

Actually, Airline Business has long wondered about the low-cost carrier label, but not so much that we won't stop using it.

See this leader article from June 2008: What is the real thing?

Does Malta really need its own airline?

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The answer as always is "it depends".

For instance, if the island's flag carrier Air Malta didn't exist would this tiny island off the coast of Italy in the Mediterranean find itself cut off (the photo shows Valletta the rather stunning capital of Malta)? Probably not: there are plenty of airlines willing to serve Malta with connections to the wider world via London, Paris and Frankfurt.

Malta_resized.jpgBut the government of Malta, like those in many other island states, would always be worried that it had little control over these connections.

That worry comes at a cost. The joy for airline chief executives like Joe Cappello is to try and minimise this cost, and in an ideal world make a bit of money.

See the video interview with Joe Cappello here.

As he told Airline Business last week: "I don't need to have to be a highly profitable carrier, but my shareholder does want an airline that provides sufficient capacity for an island nation [passenger and cargo]." It is seen as a "strategic asset", says Joe.

Making Air Malta profitable is Joe's current task and it involves a three-year restructuring plan that features new working arrangements with staff, including possible out-sourcing, and selling off various things like hotels, its duty free operation and its office buildings in London.

The target is to get Air Malta to a breakeven or small profit in two years.

Along the way Joe hopes this small carrier, which has 11 Airbus A320 family aircraft (all leased from ILFC), will not have to ask the government for more cash. "We have never been subsidised in 35 years," he says, and the aim is to continue that tradition.

FOR MORE AIRLINE CEO INTERVIEWS FROM AIRLINE BUSINESS CLICK HERE

For sale: bargain Heathrow slots

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Who would have thought selling slots at London's congested Heathrow airport could be this hard?

A few years back, as US, Middle Eastern and Indian carriers piled into Heathrow, slot prices boomed.

1slots_resized.jpgNow, as this interesting story from The Times says, the recession means shifting these once priceless assets is no easy matter, at least for anything approaching a decent price assuming a buyer is around.

For loss-making bmi, which is essentially built around the value of its Heathrow slot portfolio, and desperately needs cash in the next year, this is a body blow.

The fall in slot values is however only going to be a temporary measure, but it looks as if temporary could be a couple of years rather than months, and that is not good news for bmi or parent Lufthansa as they seek to revive the ailing UK carrier.

Some wise words from Oman Air chief executive and industry veteran Peter Hill, who is in London for the travel exhibition extravaganza that is World Travel Market. I asked him if there was too much capacity in the Middle East airline sector right now.

oman.bmp"The problem is there is too much capacity everywhere," he says. "It's the toughest environment I've ever experienced. Yields are under pressure everywhere, with the exception of some niche markets." While noting the roller-coaster nature of the airline business is always high and lows,he highlights the global nature of this downturn make it one of the toughest years he's even seen. "It might even get worse [for some] this winter," he adds.

What a time then to be launching a string of new international routes? Oman Air opened London last year, has recently added Frankfurt, Munich, Paris, the Maldives, while Sri Lanka -after a few delays in the process - follows in the middle of this month. This expansion is all tied to the Omani Government's tourism ambitions and Hill appreciates the benefit of having an owner with a long-term strategy. While the group will lose money during this expansion, Hill says the aim is to grow the network now so as to establish it as sustainable airline. Within five years he expects the group to at least reach break-even. You can read more on Oman's Air strategy here

Expect to hear more about Oman Air's expansion plans over the coming weeks and check out our video below as he explains some of the benefits to growing in a downturn:

Mexicana's oneworld livery shots

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Mexicana debuted a mainline A320 and a Boeing 717 operated by its Click subsidiary in the oneworld logs during a joining ceremony on 9 November. Here are some pictures I snapped quickly during the festivites at Mexicana's maintenance base in Mexico City.

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Ahead of this month's Dubai Air Show, Flight International's Max Kingsley-Jones has been out in the Middle East talking to the major Gulf carriers about how they have been riding out the economic storm. You can check out the feature here and also watch short video interviews with Tim Clark at Emirates, James Hogan at Etihad and Akbar Al-Baker at Qatar Airways. Click here to read the article and see the videos.

Emirates.gifThe article is part of a wide-ranging special report on the Middle East aerospace sector published by Flight International, while you can also read the recent Airline Business stories on how the Middle East airline sector continues to grow and interviews with the new chief executives at Egyptair, Gulf Air and Royal Jordanian.

 

Interesting insight from Willie Walsh today into the possible future of BA's operations at Gatwick airport, as he indicated the days of it operating two-class cabins on short-haul flights from the airport could be numbered.

After BA posted first half losses today, the carrier reiterated its belief there were structural changes taking place in the industry, particularly relevent to its short-haul premium business where yields have been hard hit. Asked during a conference call with analysts today about the long-term future for premium in short-haul, Walsh outlined the robust future role he envisages at Heathrow.

Thumbnail image for WillieWalsh.jpg"We believe we can continue to justify two-class service at Heathrow for some considerable time. Ten years from now I would expect we will still be operating a two-class service at Heathrow," he says. "I think the nature of the change we've seen primarily relates to point-to-point short-haul premium. I think that is structural. We see that where the short-haul leg is part of a combined short-haul/long-haul product, there is still demand for that product. So even with the most pessimistic outlook on this, we still believe this is a viable proposition for us, though it will be at a lower level and so the revenue stream will reduce, so we need to say a structural change."

But he acknowledges Gatwick provides a different challenge."I'm not convinced we can continue to provide it at Gatwick, because I think the demand at Gatwick is very different to the demand at Heathrow. We don't get as much transfer from short-haul to long-haul, so I think its probably a question of time, and sooner rather than later that we would address the issue of potentially moving to a single cabin configuration for short-haul at Gatwick."

Talking of Gatwick, Walsh said he had already spoken to the new owners of the south London airport. "I still see Gatwick as an opportunity for us," he says. "We've head early discussions with the new owners. We see the change of ownership as an opportunity," he says, noting this was not a criticism of previous management, but his believe Gatwick would benefit from more focused management.

New Alitalia lodges first profit

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We've not seen the words 'Alitalia' and 'profit' in the same sentence for a while, but owners of the new look, combined Alitalia/Air One operation have at least lodged their first profitable quarter since relaunching the carrier at the start of the year - the airline announcing a €15 million operating profit for its third quarter for three months ending 30 September.

Alitalia 2.jpgDirect comparison with 2008 is nigh on impossible, given the complexities of trying to come up a with a like-for-like comparison of this year against a combination of slimmed down versions of Air One and Alitalia, even if figures for Alitalia in 2008 were readily available - which they are not. But the profit follows losses of €210 million and €63 million incurred in the first and second quarters respectively and outstrips its own target of reaching breakeven for the third quarter.

And while it might only be a modest profit, it must be a boost to the carrier given the tough market conditions and bearing in mind the old Alitalia racked of net losses in excess $3 billion between 2003-07 alone.

"The ability which Alitalia is demonstrating to be able to deal with a scenario of a market in great difficulty proves the validity of the industrial operation and of the investment made by the stockholders," says Alitalia chairman Robert Colaninno, who led the group of Italian investors which formally took control of the carrier early this year "The challenges that lie ahead are again many and complex, but today we know that we have the means to face them."

Virgin app to help the flying fearful

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Virgin Atlantic Airways has got into the act on mobile phone applications with the launch of its "highly acclaimed" Flying Without Fear course as an app for iPhone or iPod.

virgin_screenshot_01_05.JPGVirgin says the app, which features an introduction by Richard Branson, is designed to help people cope with the anxiety at the prospect of flying and overcome their personal fears.

The app explains questions that people commonly have like "what happens if all the engines fail" or "what are all the onboard noises".

It has a video-based explanation of a flight from start to finish, relaxation exercises and fear therapy and a fear attack button for emergencies with breathing exercises.

It's a nice idea to make this mobile from Virgin, and comes with a small price tag of £2.99 (not sure if there is a US$ or € price?)

Now I want someone to invent an app that can tell you if you are sitting near someone was has this app so you can move seat accordingly.

 

Tilton's take on the recovery

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So how does United Airlines chief executive Glenn Tilton think the recovery will pan out? Well he's been talking to CNN Money and reckons we're on course for a gradual U-shaped recovery. Check out his take on the current conditions here.