March 2006 Archives

Refreshingly honest is the only way to describe Aer Arann chairman Padraig O'Ceidigh. "What you see is what you get with us," he says, addressing the Airline Business/UATP Airline Distribution conference here in Dublin yesterday (29 March). What you do get is one of Europe's fastest growing regional airlines which O'Ceidigh's team has turned around from a small Irish island-hopper back in 1994 to a business than will turn revenues of some Euro100 million this year.

And there are no flash powerpoints or consultant plans to woo the audience on Aer Arann's great strategy to achieve this feat. "Our model was put together on the back of an envelope," he said. "If you'd told me 10 years ago we are going to have an airline that is European regional airline of the year I would have said we're not going to get there. But we have done it, one step at a time. One of the key fundamentals I had was to keep it as simple as we possibly could."

The transformation has been achieved largely by going from being totally dependent on selling its tickets via the Aer Lingus distribution system to direct sales. It was a move forced on it after the market crisis following 9/11. "In 2001 I realised all our cash is with Aer Lingus - it's not with us." In a downturn that spelt bad news for Aer Arann. "You've got a problem when suppliers start looking for upfront cash and your cash is with another carrier."

"We'd hit a wall, our money was being drained from us. We decided on a radical change - to be standalone. It was a big risk but we made a bold call and decided to be a point-to-point regional airline." It has not been an easy ride, said O'Ceidigh. For two years he didn't take any salary out of the company.

But the leap of faith has worked. Aer Arann now sells 92% of its tickets directly, compared to 15% four years ago. It sold just 8,000 seats on its old interline arrangements last year. With its fleet of 12 ATR turboprops it carried 1 million passengers in 2005. This will rise to some 1.3 million passengers this year, he said.

Aer Arann's achievement is all the more impressive because it has taken place in the backyard of two of the industry's most competitive carriers: Aer Lingus and Ryanair. So what of the future: "All I can tell you is we're going to do our best," said O'Ceidigh.

With all the recent hullabaloo about Ryanair, following a UK television programme in mid-February about safety lapses, there can only be one way to find out the real truth behind what really goes on during a flight with the Irish low-fares giant - try it yourself.

That's what I have just done for the first time as I travelled over to Dublin this afternoon to attend the Airline Business/UATP Airline Distribution conference. I must say I am disappointed, for Ryanair's product and service did just about exactly what it claims on the tin (to paraphrase a UK commercial for Do-It-Yourself products).

It was cheap: the London Gatwick-Dublin return cost a mere ｣57.10, with only ｣23 of that attributable to the actual airfare. Some ｣30 of taxes gobbled up most of my money.

It was on-time to the minute. In fact, I timed the turnaround at Gatwick, which was an impressive 31 minutes from the Boeing 737 stopping at the gate to the departure for Dublin. It only took this long because of refuelling, we passengers were all settled and ready well before.

There were no-frills, but that is to be expected with Ryanair.

And on the safety and security side it all seemed to go like clockwork. All passports were checked properly, all procedures were followed to the letter.

My only gripe is that it was almost a non-experience. The staff could have been robots they were so disinterested and perfunctory about their task. This is the one area that Ryanair could do better - some simple warmth, a smile, some interest in the customer costs nothing and generates plenty of brand loyalty.

But I did get value for money didn't I, so I can hardly complain. Which is just what a Ryanair executive would say.

I've got another flight on thursday with Ryanair when I go home. I suspect the truth will be much the same. We'll see.

It's the stuff that journalists love, and so do lager louts, college boys, and wiseacres around the world, but Hooters Air may be about to go bust. (Ho ho.) The carrier, related to the restaurant chain of the same name, is premised on the appeal of the SCF, or scantily clad female, as its young woman waiters and staff, uniformed in short shorts and tight tee shirts, are called by more demure writers. These SCFs are a trademark of the restaurant chain, which is known for such menu items as beer, lager, and stout as well as chicken wings and (ha-ha, are you ready) breasts and thighs. The eatery began the airline as a public charter in 2003, offering flights to and from Myrtle Beach, South Carolina, a coastal resort. The tiny airline has attracted inflated publicity since its inaugural flight between Myrtle Beach and Atlanta Hartsfield/Jackson. On each flight, two 'Hooters Girls' dressed in the same skimpy outfits as their restaurant counterparts serve food and play trivia games with passengers; real FAA-certified flight attendants also man, or staff, the planes. Boarding passes look like little restaurant menus.

But the business runs on margins that are as skimpy as those tank tops and has expenses that have to be watched as closely as tight-tights. (Hah, hah.) With fuel costs going up and the solely discretionary market watching pennies as if they were posteriors, Hooters Air ran into trouble. It has ended most of its flights and left unpaid bills at secondary airports such as the Lehigh Valley airport in Pennsylvania. Hooters Air is owned by Robert Brooks, chairman of Atlanta-based Hooters of America, which bought all trademark and licensing rights from the restaurant's original owners. Brooks has told South Carolina media outlets that if he shuts the airline, he could write off some of its losses as a marketing expense for the nearly 400 Hooters his company owns or franchises worldwide. Washington-based consultant George Hamlin says the Hooters downfall shows the problem of basing an airline's marketing on so narrow a niche: "It's easy to make money targeting the leisure market if you're a restaurant, but not if you're an airline. Maybe they should have stayed in the kitchen". Send your jokes and puns to this spot.

It is perhaps rather appropriate that chief financial officers (CFO) are generally pretty somber chaps. I mean who wants a bean-counter that's cracking the funnies when there's the fuel hedging programme or the latest yield figures to discuss?
So, the assembled German media (plus the odd interloper from the airline press corps) were initially baffled and then pleased to hear the personal observations of Dr Karl-Ludwig Kley (seen left at the press conference with Wolfgang Mayrhuber), CFO of Frankfurt-based Deutsche Lufthansa AG, at the aviation giant's annual press conference on Thursday 23 March. The normally dour Kley (although I am told he has a wicked sense of humour when off-duty) allowed himself this liberty as, after all, he is leaving. "I have mixed feelings standing here," he said wistfully, addressing the packed house of reporters. "A little bit of me will remain here at Lufthansa."

He didn't elaborate which bit, but certainly not his ambition, which is hopefully going to be satisfied with the deputy chief executive's job (and perhaps later the top job) at German pharmaceutical conglomerate Merck.
"Lufthansa is a fantastic company, it has fantastic products…and a management team that is the envy of others," grinned Kley, who has been with the carrier over eight years. That team has stuck it out through thick and thin. "The executive board has always held together and never had any disagreements on strategic matters," he said. What never? Come on.
But being the CFO of Lufthansa is naturally a 24-hour job. "I can't remember any day when I was able to sit back and relax - in particular the past 12 months has been very challenging." As I consult the 141-page annual the small matter of a pay check for Euro 475,000 ($570,000) and last year's bonus of Euro 385,500 is his not ungenerous yearly compensation for all this hard work.
Kley, who is being replaced as CFO by insider and rising star Stephan Gemkow (latterly of Lufthansa Cargo's executive board and seen below), says the company has "reached new heights and will continue to climb".

Somewhat needlessly he added: "I will remain a customer of yours," with a nod to his soon-to-be-former boss and executive board chairman Wolfgang Mayrhuber. Well that was nice to hear, and I imagine Merck has a nice juicy corporate deal with Lufthansa too so that Kley can still enjoy plenty of upgrades to first class.
Mayrhuber was taking this all very well. I mean who likes their CFO to hand in his cards just a few weeks before the main financial event in the calendar? But Mr Mayrhuber is nothing if not an absolute gentleman and a professional. "Dr Kley was a very spontaneous and imaginative colleague…we could rely on him…and his work has always been excellent," he said, paying tribute to his outgoing finance guru.
Now, what else? Oh yes, a little about that work. In 2005, Lufthansa Group revenue rose by 6.5%, operating profits grew by 50.7% and net profits climbed by 12.1%. But that's another story.

Delta called in European journalists to talk up its planned transatlantic expansion, but the scribes and scribblers focused more on short-term matters such as the increasingly public pilot rhetoric threatening a strike if the Number Three carrier and the Air Line Pilots Association can not reach a new concessions deal by 15 April. Chief executive Gerry Grinstein said the airline is already seeing 'the book-away' effect in reservations for the next two months "as people become more concerned" though he said he couldn't and wouldn't specify amounts. If the pilots do strike, "we're cooked," he said. The airline's debt covenants let its lenders call in their $2 billion in financing after the first 48 hours of an interruption, and after that "we'd be gone. There would be no Delta." But Grinstein said he still thought a deal would be done this spring.

This is a photograph guaranteed to scare the life of most mortal airline chief executives worried about the market power of Emirates. And it doesn't contain any potentially game-changing 500-plus seat Airbus A380s yet.

The carrier, shown here with a large chunk of its fleet gathered at its Dubai hub and powerbase, recently took delivery of its 90th aircraft, a Boeing 777-300ER. By the end of the year it will reach the magic 100-aircraft mark, and will easily exceed it during 2007. What this means is that aircraft in Emirates livery will soon be visited a major city near you, or if they are already in town, they will be upping frequency.

Such seemingly unstoppable, and by all accounts profitable, growth, makes others nervous and jealous. And the story is far from over. As its chairman, HH Sheikh Ahmed bin Saeed Al-Maktoum, says: "The Emirates fleet, which started on a humble footing of just two leased aircraft in 1985, has since doubled in size every five years on average."

That progress will continue it seems because the airline has over 100 aircraft on order, including 45 A380s and 60 777s, and more orders to come.

Ryanair boss Michael O'Leary was a happy man on Friday 16th March (quite appropriately St Patrick's Day) as his horse War of Attrition won the prestigious Cheltenham Gold Cup in one of the UK's richest races.

O'Leary says he was given the horse by his brother Eddie four years ago and it has gradually been improving since then, culminating in its scorching performance in the Gold Cup. A delighted O'Leary also commented on the horse's apt moniker 'War of Attrition': "He's well-named - like his owner, always causing trouble!"

The Cheltenham Racing Festival, which takes place over four days in the south-west of England, will prove to be a winner for O'Leary in another way for his airline will have carried hundreds of Irish racing fans over the Irish Sea to the meeting. It is no surprise to see Ryanair dedicating a special page on its website for racegoers.

An invitation to an airline chief executive's home for a press reception is a rare thing. So it was with relish that I accepted the kind offer of Naresh Goyal, the irrepressible founding chairman of India's Jet Airways, to attend a little soiree at his house in London earlier this week.

At the behest of his new PR gurus, London's Cohn & Wolfe, Mr Goyal was bubbling about his Airbus A340 services between London and India, which only started up in May 2005 and are already achieving about a 75% load factor and capturing some 23% of London-India marketshare.

I imagine Mr Goyal does not have your average airline chairman's pad. In fact, the London home of this Indian entreprenuer, who is on paper a billionaire, is in one of the capital's most exclusive locations overlooking Regent's Park. The entry road is packed with black BMWs, Mercedes-Benz's, Range Rover's and all manner of large cars. Next door to his house a plaque tells visitors that British composer Ralph Vaughan Williams lived there during the middle of the last century.

The lavishly furnished reception room at Mr Goyal's house is bustling with activity. The delicious scent of the food, prepared by its London-based in-flight caterer Bombay Brasserie, wafts around the gold mirrors and opulent sofas. The wine is taken from its on-board selection. Everyone is there, including Mrs Anita Goyal, the head of the house, and Jet's executive vice-president marketing & sales, except Mr Goyal. Guess what, this workaholic is on the phone. And there is nothing better that he likes to do than talk - mostly about his airline, definitely about doing deals and making connections, and always with the enthusiam of a newly born pup.

Along with a couple of keen scribes I corner Mr Goyal, firing off questions about his international ambitions and the pending takeover of Air Sahara. He is in his element, chatting about his airline's plans, calling across the room and breaking into the conversations of his other staff for details we ask for that he doesn't know.

So what did we learn?
* Jet is going to begin serving Amritsar to the north of capital Delhi in June with daily services from London with an Airbus A330 leased from ILFC.
* Mr Goyal expects to obtain Indian regulatory approval for its $500 million purchase of Air Sahara in a few weeks time.
* The Air Sahara purchase is mainly to acquire 22 aircraft parking slots at Mumbai, Delhi and Chennai, and other infrastructure like hangars and landing slots, giving Jet "five years of growth" in India's capacity constrained market. It includes no liabilities.
* The combined Air Sahara and Jet Airways will have annual revenues of around $2 billion.
* Jet has $445 million set aside in an escrow account to finance the deal.
Mr Goyal says a few words to the assembled gathering as the evening comes to a close. He has a lot of time for the UK press: "We like you because you don't write bad things about us." Compared to the Indian press corps that is - anyone who has been on the receiving end of the Indian media, which makes a pack of hyenas look friendly, knows what he means.

And within five years he wants Jet to emulate his airline idols - Cathay Pacific Airways and Singapore Airlines.

So I say my goodbyes, and look forward to the next invitation to look through the keyhole at an airline CEO's house. To be honest, I think I might have a long wait.

JetBlue founder and chief executive David Neeleman has a become something of an apologist now that the darling of the low-cost, low-fare airline industry has shown its feet or landing gear of clay by racking up a major deficit for 2005 and predicting another for this year. Out in Las Vegas at a Citigroup-sponsored investor conference the other day, Neeleman said he'd been telling anyone who would listen that fares really have to up another $5 or $10 bucks or so if jetBlue is to avoid more red ink. Antitrust-fearing lawyers, he told the analysts, had urged him to be a little more vague about the dollar figure, but the message was getting out; "people are writing in, and I got one letter with a cheque for $100 saying, 'here's for my last 10 trips'," he recounted at the gambling city's Four Seasons hotel. That may not have been the type of support Neeleman was looking for, but every little bit of green helps jetBlue fly closer to the black ink.

Speaking seriously, Neeleman said jetBlue would consider feeder-type agreements with international carriers serving the airline's New York JFK hub now that its new Embraer E190 fleet gave it economic access to smaller cities throughout the East. "We've been approached by many international carriers," he explained, but some have no feed, such as Richmond or other markets jetBlue to which will be flying. The airline will open seven new gates there by June, bringing its total gates at JFK to 21 and giving it room for another 10 to 15 new cities. "We're going to diversify the route system into a lot of new routes," he told the Citigroup Small and Mid-cap Conference. "I really believe we'll be a much stronger company because of the rough patch we're going through now," he said.

You wouldn't usually look upon a flight with easyjet as a near-death experience, but I have to admit that on this particular occasion it felt rather like it.
On a visit to Milan Malpensa to mark the setting up of  an easyjet base there and to meet recently appointed chief executive Andy Harrison, part of the day's programme, which also included a football match between members of the press, easyjet staff and Italian journalists, was a flight "around the skies of Milan, offering breathtaking views of the Alps and the city".
What I hadn't expected was to be admiring the Alps from below the level of the peaks. In a flying display that would surely rival any at Farnborough or Paris, our pilot threw the A319 around the skies and at times our wingtips looked to be no more than a couple of feet away from the side of the mountain.This photo was taken by my journalistic colleague Richard Maslen of Airliner World magazine, who came along on the white-knuckle ride too.

What was even more worrying was the fact that there was a stream of visitors to the cockpit eager to record the event on digital cameras. All I know is that with that sort of precision flying, I don't want the pilot distracted by visitors elbowing him aside in their eagerness to get the best shot.
Clinging to the side of one mountain was a cable car station, which was higher than we were! What its occupants must have thought as we hurtled past them a few feet away I can't imagine. The pilot was so keen for us all to see the cable car, in fact, he turned the aircraft on a sixpence and came back the same way so that people sitting on the other side could get a good look.
Add together the closeness of the snowy mountains, the bursts of turbulence, the G-force pinning you to your seat during a couple of turns and the constant stream of passengers wandering up and down the aisle, I was glad to get back to the press conference, and it's not often I can say that. It was a stunning experience but not one I would necessarily want to repeat!

No, not on the runway, happily. The Dubai-based Emirates has just announced another sports sponsorship deal. Beginning with this weekend's Bahrain Grand Prix, the distinctive "Fly Emirates" logo - in evidence at an increasing number of top global sporting events - will appear on the Team McLaren Formula One cars at motor races across the world, as well as on the uniform of drivers Kimi Raikkonen and Juan Pablo Montoya. 
This is the latest example of a stream of sponsorship contracts for the carrier which believes itself to "reflect many of the values embodied by top sporting events and teams - an ambition to be the best in the field, international appeal, and an unwavering commitment to its fans and customers".
Soccer fans in the UK, however, are eagerly awaiting premiership side Arsenal's move to its new venue in north London to be known as the Emirates Stadium, which is scheduled for the start of the new 2006/7 season.
This is the biggest club sponsorship agreement in English football history and is worth ｣100 million ($175 million).
The agreement provides the Dubai-based international airline with naming rights to Arsenal's new ｣357 million stadium for the next 15 years.
In addition, Emirates will take over as the club's title sponsor - including "Fly Emirates" shirt sponsorship - for eight years, starting from the 2006/07 season.

Other events with which Emirates has strong links include the 2006 FIFA World Cup to be held in Germany and the Melbourne Gold Cup horse race, as well as the Dubai World Cup horse race and the Dubai Desert Classic golf tournament.

The axe is falling fast at Japan Airlines (JAL) as the carrier confirmed last week's stories (covered by our blog of 20 February) of deep rifts among its senior managers by announcing that chief executive Toshiyuki Shinmachi is resigning.

After a board meeting on this first day of March JAL said that Shinmachi will step down late in June to be replaced by 58-year-old company veteran Haruka Nishimatsu, the airline's senior vice-president finance and purchasing. Shinmachi, who was only made chief executive last year, is still on board however, as the airline's chairman.

Other executives to fall victum to the cull are executive vice-president Katsuo Haneda, senior managing director Hidekazu Nishizuka and managing director Takenori Matsumoto.

It's a mess at JAL at the moment.

Asia is in the forefront of the low-cost long-haul race at the moment with a number of startups on the horizon. One of these is Viva Macau, which says it plans to inaugurate "Simply different" services this summer to an international network across Asia, Australasia, the Middle East and Europe with a fleet of twin-engined widebody aircraft.

To begin with, Viva Macau will lease either Airbus A330-200s or Boeing 767s, before expanding its fleet to 12-15 aircraft by 2010. It will also wet-lease aircraft from other airlines in the region. Viva Macau hopes to break even in the first or second year of its operation, according to chief executive Andrew Pyne.
Carriers operating from Macau airport pay lower fees than they would at other airports in the region, especially in neighbouring Hong Kong, he adds, and anticipates the lower airport fees, the relatively lower salaries in Macau and a high aircraft utilisation rate will enable Viva Macau to achieve costs  40% lower than those of established Asian carriers such as Cathay Pacific Airways and Singapore Airlines.
The topic of low-cost long-haul has been aired for some time, with other examples appearing or planned such as Canada's Zoom, Hong Kong's Oasis, due to start services from June, and Australia's Jetstar. Read also our comment on the subject, as well as the views of Emirates' Tim Clark.