February 2007 Archives

Remember back in 1997 when British Airways opened its new Waterside headquarters in Harmondsworth near London Heathrow airport? Back then, it cost a cool £17 million (equivalent to £22 million today) to develop and was one of the UK's largest building projects, featuring a health centre, hairdressing salon, florist, travel centre, supermarket, bank, restaurants and an auditorium.
Fast forward to today, when low-cost carrier easyJet has just opened its new headquarters. Compare and contrast: refurbished at a cost of £3.1 million, Hangar 89 at London Luton airport (see bottom picture) was built in 1974 and retains what easyJet calls its "traditional" 1970s office style. But it has also been customised to fit easyJet's "open culture and principles of simplicity". Hangar 89 features 300,000 sq ft of office space and though it doesn't have a supermarket or bank, it can house three Airbus 319s or Boeing 737s.
But even the modest surroundings of easyJet's new headquarters are luxurious compared with "easyLand" (see top picture) - the rented Portakabin that until now has served as easyJet's base.
Hangar 89 and easyLand are just 150 metres apart, making relocation relatively easy - just as easyJet likes its operations.

Remember last year when we had a giggle at the expense of EVA Air's Hello Kitty jet? I mean, just look at this picture!

Well, now it seems EVA Air is having the last laugh. Not only is the Hello Kitty livery an out and out success with passengers - flights on the Hello Kitty Jet book up months in advance - but Wallpaper* magazine has just awarded EVA Air the Best Livery award at its annual design awards.
Wallpaper* were particularly impressed by the "total Kitty experience": with Hello Kitty branding on the interior and exterior, toiletries, meals and uniforms.
Wallpaper* travel editor Jeroen Bergmans: "Although airlines do try to be innovative in terms of design and luxury, often their first class lounges end up looking bland, corporate and at best like a modern furniture showroom. The food in first and business class may be Michelin-starred, the service of a very high standard and the seats may convert into flatbeds, but it is rare to come across a product that is fun and quirky. The EVA Air Hello Kitty Jet is camp, crazy and quintessentially Asian and will also keep those wailing children entertained throughout the flight!"

Spirit Airlines, which went to south Florida to bring low fares service to the warm weather from throughout the northern States, is going farther and farther afield, adding destinations deep in Latin America to its growing Caribbean network. It wants to add flights to Lima. Peru, in May, using 144-seat A-319s from its Fort Lauderdale hub; the airline would also serve Chiclayo, which is on Peru's northern coastal plain, with weekly flights in addition to the daily Lima service. Chiclayo is the fourth largest city in Peru and has more than a million residents; as importantly, numerous Peruvian expats live in South Florida, and many of them are from secondary cities in Peru.

The Peruvian cities would be Spirit's second and third destinations on the South American mainland, after Caracas, Venezuela, to which it has rights from US authorities (but not yet from the Venezuelan aviation agency). That too is an ethnic or 'VFR' (visiting friends and relatives) market as much as a business route, like so many other Spirit routes such as planned service between Fort Lauderdale and Port-au-Prince, on Haiti, which is not an island attracting a lot of US vacationers or business executives.

Fred Reid came to Washington the other day to offer to quit. Reid, who used to be the number two at Lufthansa and then was the number two at Delta, now is the number one at Virgin America, where he overseas a fleet of 11 Airbuses that aren't allowed to fly anywhere.

That's because the Transportation Department has refused to give Virgin clearance to begin operations, citing the fact that Richard Branson's UK-based Virgin Atlantic interests are among the chief backers of the San Francisco-based Virgin America. As with most nations, the United States limits foreign investment in and control of airlines based in the country and flying its flag.
To satisfy the DoT, Virgin (America) has arranged new backers, rejigged its financing and limited Virgin Atlantic's presence on its board. And Reid has offered to resign if that will make the regulators happy enough to clear Virgin (America). The DoT regulators had cited Reid's close ties with UK citizens in the Branson group as signs that the Brits had a pervasive influence on Virgin (America) management.

Reid added with considerable emphasis that having been born and bred in the San Francisco bay area, he was probably a US citizen, but insisted that he would resign if he had to. The airline would still continue seeking to fly. "The patience and tenacity of our investors is legendary. They are not willing to give up. It is too good of an idea. We have come too far to stop."

But Reid did acknowledge in response to a question from AB that the carrier had begun leasing out on short-term contracts some of its 11 Airbus A320s while it awaits clearance. It has negotiated two leases with a start-up US carrier that Reid would not name, and is negotiating two more leases to a foreign carrier he declined to identify.

Reid also pointed out that Virgin had added a good American to its board, having named Sam Skinner, the former US transportation secretary, former White House chief of staff who is an executive for a Chicago- based utility, as its vice chairman. Reid also urged people at the Aero Club of Washington lunch where he spoke to sign Virgin's online petition urging the DoT to clear it. http://www.letvafly.com.

Thank goodness for that, Air Berlin has made a profit.

After an initial public offering last May that, to put it mildly, didn't get off to a flying start, amid some financials that revealed the German scheduled/charter hybrid was somewhat lacking on the profitability front, Air Berlin is feeling rather pleased with itself, reporting that it is now in the black: To the tune of €50 million ($66 million) at the net level.
This is on revenues of €1.57 billion in 2006, a tidy rise of 28.6% over 2005. Operating profit was €64.1 million.
Some critics are already pointing to some clever treatment of tax to create the positive result. More on this will come out after the airline's annual general meeting at the end of March.
Following that, Airline Business will examine the airline's past, present and future with its founder and chairman Joachim Hunold. Most probably in our May issue.

On the face of it Spanish low-cost carrier Vueling Airlines (pronounced "welling" I am reliably informed) is doing pretty well, turning in an operating profit of €28 million ($36.8 million) for last year.

Not bad for only the carrier's second full year of operations, and a big improvement on a €1.6 million operating profit in 2005. This is a creditable performance for a start-up of any kind. It's also not bad in a country that has seen low-fare competition go from a cosy Iberia dominated scene just a few years ago to one of Europe's most fiercely competitive markets. EasyJet is a big player in Spain and Ryanair is bolstering its presence too.
Close watchers of airline financials will be keen to see the hear and see the full picture from Vueling. It was hoping to more than double its revenues to €260 million in 2006, but fell short by €25 million. Perhaps that tough competition is beginning to bite?
Barcelona-based Vueling says it has a cash in the bank of €136 million after a successful initial public offering in Spain in December. Some of this cash will be used to open a base outside Spain (its third) and to buy up to 40 aircraft.
The carrier carried 3.5 million passengers in 2006 to 41 destinations with 16 aircraft. Revenues are forecast to rise to €425 million plus.

Has Tiger Airways lost its mind?

Clearly that is what some industry insiders are thinking following Tiger's announcement that it plans to launch a domestic carrier in Australia around mid-year.

At first glance it seems there are already enough low-cost carriers in Australia given the size of Australia's domestic market and the country's small and isolated population. There seems to be far more potential in Asia, where Tiger is based, given the larger populations and the relatively small size of the domestic and regional markets.

But Australia is simply too easy of a market to access for Tiger to ignore. Any carrier from any nation can operate domestically in Australia regardless of where their owners reside. Australia's open door policy, initially introduced to encourage competition after Ansett collapsed six years ago, is completely the opposite of the policies Tiger has been unsuccessfully trying to fight in Southeast Asia since launching in 2004.

The airline passenger bill of rights is what's caught the imagination, as several very powerful members of Congress, from the chairman of the House Aviation Subcommittee to a pair of senators, one Democratic and one Republican and one from California and one from the state of Maine, to various outraged and angered members of congress, are scribbling out new rights for all. The last time Congress was ready to pass a bill of rights for beleaguered flyers in the wake of the now legendary 1999 Detroit debacle in which Northwest stranded hundreds of flyers within sight of their gates, the solons came within hours of getting a bill out there that the airlines couldn't live with; it was only a last-minute compromise brokered by Sen. John McCain that established a voluntary code of conduct. This included promises of better communication and other steps to avoid kidnapping the customers. It held off more serious legislation for a while, but back in December the DoT's Inspector General found that airlines were not living up to their promises. So here we go again, but this time it may well happen. People have been angry since December, when an American Airlines jet sat on the Austin, Texas, tarmac did hours, launching a blogging and internet passenger rights campaign. Newspers have found other underreported incidents around the country and pushed them.

The Senate bill comes from Baraber Boxer, a California Democrat, who is pals with the House leadership of speaker Nancy Pelosi and who is a determined legislator. Read about her bill here.

This growing clamour for more rights for more people more of the time has the airlines really worried, especially since some of the bills would mandate procedures to get people off of planes stuck out on the tarmac. While the carriers may well have their pocketbook and bottom lines at the top of the mind, they also make the point that have Plane Mate mobile lounges or mobile gates zipping out on snow-covered or iced-in runways to bring people back the terminal may not be exactly what you want to have going on in a crowded airport in the middle of a blizzard.

That's not the only thing he has to worry about: at about the same time that Neeleman was apologising to investors, American Airlines said that it liked New York, too, and would beef up its service in the Big Apple. In a move that presents as serious a threat to JetBlue as any force of nature like the weather. American will finish a $1.1-billion terminal expansion at JetBlue's home base of JFK, starting flights to Las Vegas, adding cross-country frequencies and in general making itself a bigger presence. Neeleman says he's not too worried since a lot of the new American flights are from LaGuardia, which JetBlue doesn't consider its home base, and others are from Newark, where the big guy is Continental Airlines.

The Bog Apple or Gotham is big city. Continental leads, carrying 20.7 million passengers, for a 19.9% market share at the three New York airports. American, the long-time No. 2 in the New York region, had a 14.2% share, with 14.8 million passengers. JetBlue, which began flying in February 2000, carried 13.6 million passengers, for a 13% market share. Measuring just domestic service, JetBlue is second only to Continental in the market, with 13.2 million passengers to Continental's 14.4 million. American is third, with 10.8 million domestic passengers. In total traffic, JetBlue has surpassed American at JFK, with 11.6 million passengers to American's 7.9 million last year.

And he thought the ice storm was bad....Stuff keeps falling on JetBlue chief Dave Neeleman's head and he keeps apologising. Perhaps rightly so, after an operational foul up during a snow and ice storm stranded dozens of JetBlue planes on its New York JFK tarmac for as long as 10 hours, outraging 130,000 passengers and getting the airline five days of non-stop negative media coverage. That's the sort of thing that happens when you're in the media and television capital of the US, and the home to every major television network, and that's the sort of thing that happens when you tick off those mild, mellow, ever-tolerant New Yorkers.

So Neeleman, a devoutly sincere fellow, has been apologising ever since. Repeatedly, anywhere and everywhere that will let him, from cable TV to youtube.com, that online arbiter of taste, and in some six million emails, some of which have been sent out repeatedly. Part of Neeleman's apology consists of a new offer, refunds of about $10 million plus $16 million worth of vouchers to delayed flyers, plus a promise to do better, a promise conveyed in full-page newspaper ads as well as on the TV. You can see one of Neeleman's apologies here. The crisis, which lasted for several days as JetBlue "pre-cancelled" some 1,200 flights, could cost the airline as much as $30 million this quarter, Neeleman told investors. Listen to Dave talking with investors and analysts in a webcast. JetBlue is also promising something it calls the Passenger Bill of Rights.

Those northern raiders from Iceland are at it again. Fresh from forays into the shareholdings of Finnair, easyJet, Icelandair and Sterling Airlines, FL Group is now setting its sights on America.
American Airlines to be precise. The Icelandic investment company has revealed that its shareholding in the US major has jumped to a significant 8.63%. That makes it the biggest single shareholder in the company it believes.
"We have been following the airline industry in the United States and we believe AMR Corporation (the parent of American Airlines) presents strong prospects for 2007," said FL Group chief executive Hannes Smarason yesterday at its annual general meeting.
The strong recovery strategy being pursued by American, led by its award-winning CEO Gerard Arpey, is clearly being closely watched by the investment community. Only a few days agorumours surfaced that another group, supposedly including Goldman Sachs and British Airways was sniffing around American.
There will be some sharp eyes on American's stock price over the coming days and weeks.

Maxjet Airways has had a rocky few months, with a change of chief executives and a route cancellation, but the all-business class start-up is confident it can fight off a new wave of competitors.

Last week Maxjet's newly revamped management team was in London, promoting its product to the press. A new sale, with one-way fares that start at only £299 or $499 before taxes, and a new advertising campaign is clearly a reaction to Silverjet, which launched all-business class services in January and hosted its own reception in central London the previous week.

"We were the first ones with an all-business class product. We now have so many copycats," chief executive Bill Stockbridge said at the reception he hosted near Trafalgar Square.

Personnel Today magazine described it as one of the most challenging human resources jobs in the UK. The position to be filled: HR director of British Airways.
In the most normal of times, whatever counts for normal in airline business, this is not only a big role in UK terms, but a big role in industry terms.
In today's high-octane business climate, and with the many challenges BA faces in its industrial relations, it is a hugely important appointment for the carrier.

Deep breathes and the odd snicker at Airline Business with the announcement that Ryanair will be making German airport Weeze its next base.
It might sound like a breathing difficulty, but Weeze Airport has been open for commercial airline services since 2003 and Ryanair has served it throughout.
From June 2007, Ryanair will invest €140 million in two new aircraft and 10 routes from Weeze: Alghero, Alicante, Barcelona, Glasgow, London, Palma, Rome, Shannon, Stockholm and Venice.
Weeze - originally known as Niederrhein Airport - will be Ryanair's third base in Germany. The carrier already has a base at Frankfurt Hahn and plans to use Bremen as a base from April.
The airline expects to carry 1 million passengers in its first full year operating to and from the base, rising to 2 million from 2008.
In 2003, a German court blocked Ryanair from referring to the airport as Dusseldorf Niederrhein. Niederrhein, which is 70km outside of Dusseldorf, rests of the Dutch/German border. The decision meant Ryanair could only refer to Niederrhein in relation to the closest town, Weeze.
Please tell us your favourite airport with a name that has a double-meaning.

US and indeed world markets were rocked late last week with the news that the British were coming. British Airways, that is, was coming to buy AMR Corporation, the parent of American Airlines. The UK flag carrier would team up with Wall Street powerhouse Goldman Sachs to take AMR private for a sum between $8.2 billion and $11.1 billion, said a stock-touting columnist in the widely read Business Week magazine.

After the recent round of airline merger talks in the States, some people thought the report made sense, and others bought into it because the power of private equity has been demonstrated repeatedly by deals in the news, not the least of them the proposed $8.7 billion Qantas buyout by private equity.

And AMR and BA had done business with each other before. The two carriers are partners in the oneworld alliance and had sought a grant of bilateral antitrust immunity back in 2002 until the regulators blocked it. Airline shares shot up as frantic investors scurried to get in on the gold rush. By late Friday they were surrendering their gains to profit-takers, and to reality.

Saudi Arabian low-fare start-up NAS Air is making sure its costs are kept as low as possible by having its chief executive captain some of its initial flights.

NAS Air has begun accepting bookings on its colourful website, powered by Navitarie, ahead of its 25 February launch of flights connecting the capital Riyadh with Jeddah. On its recently launched website, NAS Air claims it will be the first airline in Saudi Arabia with a chief executive "who will pilot his own planes".

The chief executive, Peter Griffiths, is a former director of safety and security with easyJet and used to fly Boeing 737s. Griffiths will now be switching to Airbus A320s - NAS Air will start with two A320s ordered by its parent, corporate jet operator National Air Services (NAS).

In addition to Riyadh-Jeddah the new carrier's schedule will include from 31 March flights from its Riyadh base to Madinah. Promotional introductory website-only fares start at just SR9 ($2.40). One-way fares purchased from the call centre or travel agents start at SR99.

NAS Air will be Saudi Arabia's first budget airline and only the third in the Middle East after Sharjah-based Air Arabia and Kuwait-based Jazeera Airways. The carrier's vision is to "give people equal right to fly" and its tagline "hayakkum" means "welcome".

The ever entertaining Dr VJ Mallya, founder and chairman of Kingfisher Airlines, was in London yesterday giving an address to the Aviation Club.
His first task was to explode a misconception about his home country that it is a poor, emerging nation. Not quite true, says Mallya, typically talking without notes. India is "incredible", he says. "India has always been an exceptionally wealthy country," he says, with huge natural resources and a long history of royal dynasties where huge wealth was taken for granted.

Per capita income for millions is also not as low as some might think. There are some 100 million people that have the earning power equivalent to those in Europe or the US, says Mallya.
Now India is forging ahead. "What is new is that we have broken loose of the shackles of our socialist economy to free and global market integration," says Mallya. "This is unleashing a power always resident in that economy but never allowed to flourish."

It is against this background that Mallya launched Kingfisher Airlines 21 months ago. Now it flys 24 aircraft on 156 flights a day, with another 20 arriving in 2007. This Indian entreprenuer, millionaire and member of parliament, did not take the low-cost airline route for his airline. Mallya believes low-cost and India do not sit well. He believes that high fuel taxes and airport parking charges, along with airport and air traffic control congestion that makes short turnarounds difficult, means following a low-cost model in India is tough. "That's why I say there is no room for a low-cost carrier in India because there is nothing low cost about running an airline in India."

2006 was a good year for Copenhagen Airport with overall passenger growth up 4.4% on the previous year. And good news for Copenhagen Airport is good news for the airlines that fly from there.
Copenhagen Airport has just paid the airlines a cash bonus under a deal that rewards passenger growth. The bonus is calculated as one half of the aggregate traffic growth, measured in per cent (i.e. 4.4%), multiplied by the amount that each airline has paid to Copenhagen Airport in passenger charges during the year. Copenhagen Airport would not reveal what that amount was for the airlines.

The majority of airlines at Copenhagen Airport recorded growth in their passenger numbers in 2006, and more than half the 20 largest airlines by passenger number reported double-digit growth rates.

Scandinavian Airlines retained its position as the largest airline at Copenhagen Airport. Half of all the passengers who travelled through Copenhagen Airport last year flew Scandinavian Airlines. Sterling came in second, flying 10% of all passengers through the airport. Of the network carriers, KLM recorded 14% growth and Air France 22%.
With total passenger growth at Copenhagen Airport up 4.4% overall, all airlines that used the airport in 2006 will receive a cash bonus. The scheme was introduced to promote traffic growth at the airport.

Airbus today completed the first media flight on the A380 without any major hitches but the event was not totally blunder free.

Several oxygen masks accidentally became deployed at takeoff and landing, capturing the attention of television crews including CNN. Airbus technicians quickly responded by re-installing the oxygen masks (see picture), explaining the masks had been tested on the previous flight.

Journalists descended on Toulouse today as Airbus for the first time took the wraps off an A380 with a completed cabin.

Singapore Airlines (SIA) has becoming one of the first Asian carriers to join the growing debate over the aviation industry's impact on the environment.

At SIA's annual parliamentary reception at the House of Commons in London yesterday, general manager of UK and Ireland Marvin Tan told politicians, reporters and industry partners that SIA advocates "an integrated approach to managing the industry's impact on the environment".

"We need to do our bit, but we must also keep the scope of the problem in perspective," Tan says, pointing out the aviation industry's contribution to carbon emissions is only about 2% of the world's total.

You gotta' admire Marion Blakey, the FAA chief in the U.S. of A. She's always been what the call a 'steel magnolia', all Southern charm beneath which lies a mind like a steel trap and a firm personality that takes no gruff from nobody.

She wended her way to the National Press Club in Washington the other day, and Airline Business was lucky enough to get a nearby seat to hear Blakey discuss the FAA's plans to open up the mandatory airline pilot retirement age of 60 to debate and comment with an eye to raising it to age 65 for pilots on the major US-flag carriers.

This has been a hotly debated issue in the States, with most portraying the Age 60 rule as unfair to a generation of pilots who are exercise freaks, pre-dawn joggers and who are like the rest of us, or most of the rest of us, are living longer and healthier. All of which would seem to have near universal acceptance, except by the major pilot union, ALPA. ALPA, which represents about 60,000 pilots at almost every major airline (except American Airlines) opposed any rule change, arguing safety but in reality fearing that the adding five years to pilot careers would upset the apple cart for younger members who make sacrifices early in their 'back-loaded' career so they can get promotions over to the left seat and higher paying jobs.

The airlines had been wary since adding five years to what is often a career of just 25 years does weird stuff to actuarial tables and would probably raise the pilot salary ceiling even higher, though they didn't fight it the way ALPA did. (ALPA actually reversed its position on the issue a few years back after serious internal debate).

An industry panel that was supposed to tell Blakey if it was a good idea to raise the retirement age broke down in a stalemate late last year, sending her not a recommendation but study. So for Blakey, now in the final year of a fixed five-year term, it was risky to make any decision. To come out for raising it would seem to be a brave decision, but here she had political cover; after all the advisory committee punted, giving Blakey no political cover, one way or the other.

She could however find justification in the ICAO position. "I'm a big fan of international co-operation and we're going to do what ICAO recommends", she told the Press Club. When people asked about individual waivers, about retroactivity or about the guys who will be caught in the gap during the year of two of debate that is bound to follow, Blakey's response was the same: "we're following ICAO". Discretion is after all a part of valour. Read the advisory committee's pros and cons and the FAA's reasoning: http://dms.dot.gov, search for docket 26139.

The bigger and heavier you are (or at least, the aircraft you are operating) the greater the savings you are going to make from Vancouver International Airport Authority's decision to cut landing fees for international passenger and cargo flights to match charges for domestic services.

Vancouver is bucking the general trend of airport fee increases, which have received so much criticism from airline bodies in recent years.
The new rates, effective since the beginning of the year, mean that cargo operators flying Boeing 747 freighters into the airport will pay 32% less in landing fees this year than they did in 2006.

The annoucement chimes with stipulations in open skies agreements such as that between Canada and the USA that require international and domestic landing fees to be the same.

The unusual thing is that the authority feels that it is a sufficiently strong financial position to be able to reduce international fees rather than increase domestic ones to even them out.

"This is a strategic move to help increase Vancouver's competitive advantage and stimulate related growth and economic benefits for the region," says chief executive Larry Berg.

'Coincidence? You be the judge', the announcer would boom in conspiratorial tones on the radio ortelevision programs heralding the latest unidentified flying objected or other phenomenon.

Two flash headlines from the other day brought this to mind: 'US Airways Ordered to Stop Serving Alcoholic Drinks' and US Airways Withdraws Bid for Delta'. Not to put too fine a point on it, but the bosses at US Airways seemed to have sobered up, and quickly, after they ran into roadblocks from the Delta creditors who were the deciders of the Airways $10 billion bid for the number three Delta.

A "disappointed" US Airways Chairman and Chief Executive Officer Doug Parker said, "We would have created a better and more financially stable airline that offered more choice to consumers and increased job security to its employees".

Parker was much more mellow about the alcohol problem; it seems state liquor authorities in New Mexico found that the airline did not have a licence to serve booze there, and until it gets said state permission, the carrier may not serve or sell beer, wine, or hard stuff to people on any of its flights that take off or land there.

But seriously, folks, as the announcer might say, does this mean an end to consolidation? Some observers think that the legacy carriers will just breathe a sigh of relief and go back to their restructurings now that they don't have to pursue merger negotiations begun largely as defence manoeuvres in response to 'Deltaways', as some dubbed the hypothetical US Airways/Delta combination.

Meanwhile the ever-reliable Ray Neidl of Calyon Securities says big deals are probably off for the next six months but after that "consolidation will occur". Neidl notes that Parker and the US Airways management team have clearly established themselves as credible with the financial powers-that-be and would probably be an acquirer.

But Parker's entire rationale for going after Delta was that it was easier to do a deal within the context of bankruptcy, so one has to ask if US Airways will abandon this strategy. On the other hand, they're making so much money at US Airways that they can afford champagne when other carriers are still on a beer budget.

Stay tuned.

Normally reserved easyJet chief executive Andy Harrison does not usually go for the sort of publicity stunt favoured by Virgin's Richard Branson or Ryanair's Michael O'Leary. Such is the strength of his carrier's antipathy to the doubling of the UK's air passenger duty, however, that he is obviously prepared to ham it up to make a point.
Passengers arriving at London's Gatwick Airport today would have seen the head of easyJet dressed as a "Man from the Ministry" and clutching a briefcase labelled "Tax Collector". 

Travellers at airports all over the UK have been faced with demands for payment for the additional tax - levied without Parliamentary approval to boost Chancellor Gordon Brown's treasury coffers in the guise of a "Green tax" on flights that they had already booked and paid for.
"As the government has, in effect, made easyJet the tax collector, this is exactly what the airline has done today," says easyJet.
So well done Andy, for letting your hair down and getting stuck into the publicity merry-go-round.