November 2005 Archives

The Federal Aviation Administration is pushing hard for a rapid resolution to its air-traffic controller labour union showdown, a significant step for a federal government agency that isn't always known for moving quickly. After four months of negotiations toward a new contract with the National Air Traffic Controllers Association, FAA Administrator Marion Blakey called for a mediator to step in and resolve issues by Christmas. "They just aren't moving on the issues at the heart of the negotiations. Our call for mediation is about trying to get a voluntary agreement".

Blakey said that a 1998 contract signed by her predecessor had raised pay by 74% and that as many as 1,300 of the 15,000 traffic controllers earn more than $200,000 annually. She said that that cutting labour costs is imperative as the agency prepares for a transition to satellite-based navigation at the same time that its revenues, based in large part in ticket taxes, are falling, congressional budgets are crimped, and the agency may soon face an attrition crisis as a wave of controllers who were hired in 1981 soon face mandatory retirement. The FAA hired heavily after President Reagan fired thousands of unionized controllers who went on strike that year. Although this union, a successor to the 1980s labour organisation, cannot legally strike, a work-to-rule campaign could slow air traffic just at reaches pre-2001 peak levels. And workforce cooperation would be essential in a transition to new technology.

But a NATCA official responded that the FAA was attempting to drive the dispute away from a voluntary resolution and into the arms of a Congress that is no friend of labour. Under the law, if either side or a mediator formally declares an impasse in talks, the FAA's proposal goes to Congress for review. If the lawmakers do not act within 60 days to change it, the FAA can impose its last offer to the controllers as a binding contract. The showdown comes as the FAA girds itself for the rewriting of its basic funding formula in a process known as reauthorisation, a legislative marathon that can take more than a year.

NATCA spokesman Doug Church says, "They're trying to rush it into Congress, which won't have time to look at it, and then wrap it up before they get into FAA reauthorisation, which is going to be a bloody battle without the labour issue and even worse with it". He added, "We don't know why they're rushing now because they agreed to a negotiating schedule with talks though February and possibly even into March. And contrary to what they're saying, our negotiating team has reported fairly good progress so far and in fact were on the way to a session with them when they made their announcement. It's painstaking but there is progress," he said. Union documents that Mr. Church made available would seem to support this position.

Although the union and the agency disagree on how much controllers are in fact paid, the FAA wants to freeze base pay for 15,000 controllers while allowing increases based on merit. Controllers proposed a 5.6% annual increase that will cost $2.6 billion over five years, Blakey said. Russell G. Chew, chief operations officer of the FAA's Air Traffic Organisation, said base salary plus overtime, along with premiums such as locality pay, averages about $128,000 a year. With benefits included, he said, each controller costs the agency roughly $166,000 a year. Controllers must retire at age 59 and get more generous pension benefits than other federal workers.

The union, charged Blakey, had a motive to for delaying tactics: their contract is an "evergreen" in that it stays in force until a new pact is signed-or is imposed after an impasse. Blakey agreed in 2003 to extend this contract for two years.

For once the iconic Burj Al Arab hotel had competition on the Dubai skyline as the Airbus A380 took to the skies (pictured) as part of the Dubai Airshow. Flying low along Dubai's beachfront in full Emirates livery, the type apparently received spontaneous applause from onlookers. And reports suggest the A380 literally stole the show, receiving huge amounts of interest from visitors.

But despite all the fanfare and ticker tape, Airbus may not be having it all its own way in the large airliner market. The Dubai Airshow has now come and gone with no further orders, and Boeing has finally responded to the A380 with its stretched version of the 747, and further delivery slippages are being announced by launch customers of the Airbus super-jumbo.

Air France is the latest to revise its A380 delivery schedule. It has put off delivery of its first two A380s to coincide with the peak tourist season in summer 2008. Originally it was going to take its first A380s in November 2006. That postponement is on top of an original delay by Airbus of six months. Air France has said it is discussing compensation with the manufacturer. Virgin Atlantic and Singapore Airlines are also reviewing delivery schedules.

Tall people and travelling in economy don't mix. Even average height people and economy class on longer-haul flights can be painful.

As Airline Business will examine in its January issue, as part of our Services Special Report, an increasing number of carriers across the globe are trying to offer a suite of on board products that allow passengers to choose enhancements over and above the basic fare paid for the basic seat. More are looking to sell extra legroom seats, or even removing some of the tightest pitch seats to offer several rows with more room.

UK-based low-cost carrier Monarch Scheduled is doing just that. It has taken out a row of seats across its Airbus A320/321 and Boeing 757 fleet. An A320, for example, will feature 54 seats with 34in pitch compared to the normal 29in for standard economy. It will charge ｣15 ($26) one-way for the privilege.

It is certainly a service the local basketball team - the Milton Keynes Lions - will appreciate, as several players, ranging up to 6ft 9in tall, demonstrated recently when Monarch began reconfiguring its fleet.

Lessors at this week's Dubai Airshow have been digging deep into their pockets once again with millions of dollars of aircraft orders. AerCap, formerly known as Debis AirFinance, has signed a letter of intent for 70 Airbus A320s, ILFC has committed to 12 A350s and 20 Boeing 787s, and newcomer Low-Cost Aircraft Leasing has ordered six 787s.

The spending spree began earlier this year at the Le Bourget show, where ILFC began ordering Boeing aircraft again with 777 and 737 commitments while GECAS went for 737s and Embraer 190s and pencilled in some Airbus A350s. After a hiatus in spending, Singapore Aircraft Leasing Enterprise came back to the table in the first quarter of 2005 with a 20-strong 737 order.

Bolstered by orders from lessors and from low-cost carriers, 2005 promises to be a bumper sales year for both manufacturers: an amazing feat in some respects when you consider the poor financial performance of the airline industry as a whole. Look out for accelerating retirements for old, and for not so old, aircraft models over the next few years.

Malaysia Airlines says it is in no hurry to follow many of its peers into global alliances. The carrier's regional manager for the UK and Europe, CH Lim, talking to Airline Business at this year's World Travel Market event in London, was playing his cards pretty close to his chest. He said, however, that the carrier is prepared to take its time.

"Everybody is ganging up these days," he joked. "Alliances are just like an exclusive club - everyone wants to be a member."

He notes, however, that alliances have sometimes struggled to agree on future strategy, and some alliance members are more active than others. "Some are just sleeping partners," he says.

Malaysia has a close relationship with KLM - now part of SkyTeam. The latter would seem to be a possible end destination for Malaysia, given that the group has no "home" carrier in South-East Asia and a weaker Asian presence than either oneworld or Star.

Five years ago or so, Malaysia was linked to the global grouping that never was - the wings alliance based around KLM and Northwest. This never amounted to much more than a codeshare agreement, however.

Despite the close relationship with KLM, Malaysia has also held discussions with other alliances in the past, including oneworld. Indeed, back in the early part of this decade, when KLM was in talks with British Airways about a possible merger, a senior Malaysia Airlines executive joked that one way or another, the carrier would end up in oneworld.

With JAL joining oneworld, and even Middle Eastern carriers starting to abandon their non-aligned status, the day of alliance reckoning may be closer than Lim suggests.

In the meantime, the carrier is preparing for the entry into service of the Airbus A380 - hopefully in summer 2007. Technical problems have seen A380 delivery schedule slip, but Lim warns, "Airbus has a schedule to keep."  

They haven't changed the Wright Amendment yet, even though they're debating it a lot, but they're whittling away at it. A little noticed clause in the just-passed transportation appropriations bill adds Missouri to the list of states that are allowed to have non-stop service to and from Dallas Love Field, the others being those states that border Texas, as outlined in the original late-1970s amendment, plus Mississippi, Alabama, and Kansas, added in the 1990s. All other states: change planes before flying to or from Love Field. The Missouri rider, slipped in, it is believed, at the behest of Senator Kit Bond, the Missouri Republican who is on the appropriations committee, just makes another exception to the unchanged rule. But it willl probaly give Southwest another argument that Wright is wrong: in a year, after Southwest has carried thousands of flyers between Love Field and St. Louis,  it will be able to argue that it has saved them millions of dollars after it forces down fares. Ditto for Kansas City, which despite its name is in Missouri and is the largest city in the western half of the state.

The US proposal to loosen the rules on foreign investment in US carriers -an administrative proposal that's been put forth in lieu of changing the law itself - is now key to unlocking a new US/EU aviation relationship. The principle negotiators of possible transatlantic open skies said late Friday they had agreed to end restrictions on where airlines could fly, on nationality clauses and other restrictions after two years of talks toward an EU/US open skies deal. But they insisted that the tentative agreement, possibly effective in time for the 2006 fall season, would rest on progress on the ownership-rules reinterpretation.

The tentative agreement would create a single "open skies" treaty for the entire 25-nation European bloc, clearing the way for carriers such as the Air France-KLM Group fly to any US city from any European city, and it removes limits on the number of carriers that can fly between the US and London's Heathrow Airport, the world's third busiest. It also would end restrictions on the types of equipment airlines can use and on prices they can charge.

Daniel Calleja, the European Commission director for air transport, told reporters in a conference call that the European transport ministers will await the outcome of the US foreign ownership proposal before acting on the tentative pact. Calleja said that if the outcome is "positive", he expects all 25 nations to approve the preliminary accord. The US ownership proposal is open for comment and consultation until early January.

John Byerly, the State Department official who is the chief US negotiator, was enthusiastic about the possible competitive benefits of the deal, saying a deal would "open the gates for vigorous competition." It would be followed by a second-stage agreement to address any other issues that arise. The first stage deal also establishes a dispute-resolution panel to address questions of capacity restrictions or excess capacity; side deals tentatively agreed upon would significantly advance transatlantic cooperation on aviation security issues, clearing the way for harmonising of rules. Significantly, the agreement does not require any US changes in rules on military airlift obligations of carriers or on the so-called Fly America rule. This last mandates that government travelers use US-flag carriers but has been interpreted to allow federal flyers to use foreign code-share partners when they book through a US alliance member. Both policies have been highly contentious.

But Byerly stressed that the framework did not include a "Heathrow carve-out" and that carriers would still have to obtain slots there. Heathrow of course has been the single largest obstacle in the past two years of US/EU negotiations, and the pact does not explicitly address the UK scheduling regime. Although a de facto slot market exists, the carriers thirsty for Heathrow access say it is hardly an open or thriving market, and Continental, Delta, and Northwest would still have to buy, bargain, beg, or negotiate their way into LHR.

The silence on Heathrow would leave undisturbed the incumbents there, American, United, British Airways and Virgin Atlantic, but the two UK-flag carriers were wary of the deal. "Nothing has fundamentally changed", Virgin Atlantic chief executive Steve Ridgway said in a statement. Andrew Cahn, the director of government and industry affairs for British Airways, said, "Right now, the US proposal falls short of the legislative solution that could have delivered a very real transformational change to the restrictive ownership and control rules".

Cahn's stance points up the central fact: the entire package rests on the US Transportation Department's proposal to relax the investment rules, a proposal that is not a statutory change or a rewrite of the law. The DoT undertakes to make as liberal as possible a regulatory interpretation of the existing 25% limit by formalising guidelines and recent precedent. But the DoT offer does not offer the certainty of new legal language-which only the Congress can offer. And in the nearly three years since Transportation Secretary Norm Mineta asked Congress to consider changes to the law, nothing has happened except for a minor tightening of the legal language and senatorial statements that the books were closed.

The ownership-and-control proposal has attracted opposition not just from labour, as anticipated, but from a wide swath of the lower chamber, the House of Representatives, where a strong declaration of opposition came Friday from 75 members, including 22 Republicans nominally aligned with the Bush administration. While paying an obligatory nod to liberalisation, their letter says the investment proposal is "a backdoor effort to accomplish what the Department (of Transportation) has failed to accomplish by legislation". The signers, including one respected authority, former aviation subcommittee chairman Jim Oberstar, say the DoT "has overstepped its authority in this proposal with its revised interpretation" of the rules of ownership and control. Interestingly, the Democrats' objection is similar in language and thesis to objections raised by Continental, and is signed by numerous members of the delegation from New Jersey - where Continental has its Newark hub. Still, Byerly and Calleja were optimistic that the case would be won when the parties weigh the benefits to the $18 billion transatlantic market and the 750 million citizens of 26 countries compromising the larger market.

The bankruptcy reorganisation and (anticipated) shutdown, sale, or liquidation of Independence Air has excited some analysts and observers, who think that its exit would take some capacity out of the super competitive East Coast market and so eliminate some of the low, low, below-cost fares that have bled airlines flying up and down the eastern seaboard and At Washington's Dulles, the Independence base.

Not so fast. Within hours of the Independence bankruptcy filing, AirTran said it would expand its Dulles operation with new service to Boston Logan and added flights to Orlando. Both have been routes on which Independence relied. Now comes one of the most feared challengers in the business, jetBlue, which plans to add Logan flights to its Dulles roster. Its eight daily roundtrips rival Independence frequencies at their height. All these services begin in January. The clear beneficiary may well be Logan and Boston travellers, but the moves are nails for the anticipated Independence coffin. And they boost the boast of the many Dulles backers: the Virginia airport is going to be a low-fares bastion. Independence may well go away, but that doesn't mean competition is going away, too

The launch of a new aircraft type is pretty rare. It is even less common that the launch is reliant solely on orders for the cargo version.

That is what Boeing has done with its long-awaited announcement that it will build an advanced 747. The launch customers are cargo carriers Cargolux, with 10 firm orders, and Nippon Cargo Airlines, with eight commitments. The Luxembourg-based carrier will take the first stretched 747 - called the 747-8 to show the connection between the new jumbo and its smaller 787 cousin - in the third quarter of 2009.

Next year Boeing says it will secure its first orders for the passenger version of the 747-8, which will seat around 450 people in a three-class configuration. Potential customers are British Airways, Cathay Pacific and Japan Airlines.

Although still significantly smaller than the 550-seat Airbus A380, Boeing's move will heat up the battle for large airliners that the US manufacturer at one time looked like it was not going to enter.

The first 100-seater regional jets, the Embraer 190, began service in the US Tuesday with jetBlue's first flights with the type -- an inauguration that came a day after the type's 50-seat sister saw another setback with the bankruptcy of CRJ operator Independence Air.

JetBlue's long-awaited 190s made their first flights out of Boston on one of eight daily services between Logan and New York's JFK with, the carrier says, every seat filled. The entry of the crowd-pleasers on the highly competitive Northeast Corridor will be a test of the type against larger airliners used in shuttle service between the two cities, though jetBlue says it expects many of passengers on 190 routes to transfer at its JFK hub to flights on its jetBlue A320 longer distance routes. The Embraer can achieve routes of up to 2,100 nautical miles; the Airbus, cross-country nonstops.

The UK aviation industry enjoyed an amusing talk over lunch in London from ILFC founder and president Steve Udvar-Hazy last month.

Recounting with some regret how the airline industry has lost the glamour of the 1950s and 1960s, as well as some of the household names from the era, he commented that the overcapacity that exists today results from "the availability of irrational capital…that makes it very easy to start an airline but very difficult to kill one". He added that aviation bankruptcy rules are too lenient, allowing ailing airlines to "trample around the jungle indefinitely, doing damage".

Udvar-Hazy joked that with the industry in such dire straits, particularly in North America, ILFC plans to patent a six-point plan to ensure the industry returns to good health:

Air Berlin's announcement that it plans to set up a low-cost transfer hub at London Stansted is a potentially ground breaking development in the European low-cost sector.

It is an extremely aggressive move - and a brave one too, given that Stansted is home to both Ryanair and easyJet. Low-cost carriers in Europe have tended to avoid each other like the plague, but with all three carriers taking deliveries of massive aircraft orders, more direct competition is likely to become increasingly common.

Of the two connecting destinations announced so far, Glasgow International will see the German carrier going head-to-head with easyJet and Globespan, while Ryanair flies to nearby Glasgow Prestwick.

No carrier flies from Stansted to Manchester other than regional cairline Eastern Airways, but bmiBaby and Monarch have bases at Manchester, while the big charter carriers have a strong presence - and are also after the seat-only market.

The move is also interesting because Air Berlin is replicating the successful business model developed at its low-cost transfer operation at Palma de Mallorca. This offers 12 German cities connections with airports in the Mediterranean, mainly the Spanish mainland. Air Berlin was flying around 200 flights per week to its Palma hub this summer.

There is clearly plenty of scope for yield-destruction, but Air Berlin has built itself up into Europe's third low-cost force, and, so far at least, has made strategic innovation work.

If any confirmation of the limited outlook for 50-seat regional jets were needed, long-troubled Independence Air has given it with its long-awaited bankruptcy reorganisation filing on Monday. Its parent FlyI gave in to pressures months after most airline observers gave up on its strategy of low-fares on very frequent 50-seater flights. It has lost more than $395 million since it began flights in June 2004, when it ended its Atlantic Coast feeder operation for United Airlines.

The foreigners are coming, the foreigners are coming. Well maybe next year.  At least not just yet if they're here to buy US airlines. That's despite a big blast by US transportation officials that made a lot headlines about the US lowering barriers to foreign investment in airlines.

It comes at an interesting time: the US and its major airline partner, the EC, are in the midst of the most recent last chance attempt at an Open Skies agreement, and airline ownership and control is one of the key stumbling points. In the next-to-last last chance, the US offered rules recognizing common European ownership in return for relaxed landing and gate restrictions for airline wanting to fly into London Heathrow. In the last one before that, back in spring 2003, Transportation Secretary Norm Mineta asked Congress to change the law that keeps non-US citizens from owning more than 25% control of an airline here. But the 2003 ownership change proposals have simply sat and languished with no one in Congress willing to act on them. Now though they're trying again, with a plan not to change the law itself but to change the rules about how they interpret the rules; the details are important but perhaps important as the message being sent: we're trying to change.

In the past, US officials have stretched the rules a little so that a carrier in dire straits could raise money by selling non-voting shares --as was the case when it allowed the first big infusion, by KLM, into Northwest n 1991. That cleared the way for the sale of UP to 49% of a carrier so long as voting power remains one fourth or less in foreign control. But in other cases, they have been strict, in one instance, actually shutting down a carrier in Hawaii named Discovery because its real owners were not US citizens. Some airline chiefs in particular United's Glenn Tilton have been vocal in calling for an end to the foreign investment rules, as have many in the EC, but noting has happened. After all, labour (as in the pilot unions that give political and campaign contributions to many members of Congress) is opposed, opposed opposed, and the administration hasn't been able to find anyone in Congress who really wanted to carry water on this. Some in the Pentagon are also opposed, because they don't want any possible interference when they draft airlines for special airlift emergencies. And after The DoT concluded a very lengthy and complicated review of the Deutsche Post investment in DHL and Astar, the air cargo carrier, that allowed the investment to go ahead, lawyers and others were unsure what the rules really meant.

The proposal that DoT officials published in the official list of US regulations, called the Federal Register, does little to change the language of the law; what it does do is to make formal the recent interpretations such as that in the KLM/Northwest investment (big stake, limited control) or the DHL case (being a major customer doesn't mean actual control). The US insists that everyday airline decisions such as marketing, routing, etc. would be the same no matter the citizenship of the owners. ABN AMRO securities analyst Andrew Lobbenberg also sees the importance in the subtext, since "it appears rather surreal that allowing Europeans greater access to owning US carriers could be so important". His conclusion: the US is "moving towards a concept based on an airline's principle place of business being the US" rather than considering equity stakes, direct or indirect, as crucial tests of control.

While some like bmi/British Midlands cautiously welcomed the US move, others did not; Continental Airlines blasted the move as "a blatant attempt" to bypass Congress. Although the SkyTeam member supports congressional action to change the existing law, it accused the DoT of being "blinded" by the desire to secure a deal with the EC. And Virgin Atlantic called the move "a transparent device to fool the EU into agreeing to an imbalanced deal" and said, "In simple terms, the EU must not trade access to Heathrow - its most valuable asset - for anything less than a true open aviation agreement. Each side has a number of cards in its hand but the EU holds the ace (Heathrow) and it should only play it to end the game".

The new rules would apply only to countries with Open Skies deals with the US and with matching investment rules. This fact, however nuanced, though it could increase pressure on the EU to reach a deal with the US, would still leave barriers in place for investors from Japan and China, both of which lack Open Skies deals.

Doom and gloom predictions that the anticipated boom in air travel will be a major factor in climate change are wide of the mark, according to UK aviation technology group Greener by Design. It insists that advances in airframe and engine technologies will, in fact, contribute to a drop in aviation emissions by 2050 to well below 2000 levels.

Greener by Design boasts members ranging from manufacturers to government agencies and research institutions. They include Airbus, Rolls-Royce, Cambridge and Cranfield universities and research body QunetiQ.

According to the group's chairman John Green: "Relative to 2000 world fleet fuel burn and CO2 emissions per passenger kilometre in 2050 could be reduced by a factor of 3, NOx emissions at altitude by a factor of 10 and contrail and cirrus cloud formation by a factor of between five and fifteen."

You could argue that, well they would say that, wouldn't they? To achieve such ambitious targets any technological advances would need to be accompanied by operational improvements and air traffic management developments aimed at reducing contrails, which in certain conditions go on to develop into cirrus clouds -  a little understood aspect of climate change and the subject of a considerable amount of research.

A mere 18 years after it opened, London's fourth airport, and the only one that is actually really close to the city itself, is poised to be served by a rail link.

From 15 December, the over ground Docklands Light Railway will extend to London City Airport. This will mean travellers to the airport, which is just 10km from the UK capital's business district, will no longer have to take that final irritating bus shuttle from nearby rail stations to arrive at the terminal.
London City Airport was the perfect example of a airport project that completely ignored joined-up thinking when it came to inter-modality. This journalist remembers the opening day of the airport, when airlines like Brymon Airways with de Havilland Dash 7 short take-off and landing aircraft were the pioneers. Getting there was a nightmare. There actually were not any proper public transport links.
Here was a terrific little airport, marooned in the east end of London. Those early years were tough. But now London City is thriving. It handled nearly 1.7 million passengers last year and is growing fast. How fast would it have grown if that rail link had been in place two decades ago?