March 2009 Archives

Now I am the first to admit pretending to sleep to avoid the tedious questioning/conversation of the fellow traveller sitting next to me - whether it is a train, plane or automobile.

So, the ability to somehow "choose" who you sit next to on board an airliner, that is if you are not travelling with someone you want to sit with, has some attraction.

That's what the company SatisFLY is selling. It calls it the intelligent seating service. All is explained on its website.

Satisfly brought their concept to the recent Loyalty event and announced that Hawaiian Airlines is the first to give it a try.

And, the Satisfly folks are now pointing out that the Economist has picked up their story.

It's worth a read, with plenty of great comments on passenger chat avoidance, and even some promoting the idea of getting to know one another.

But, at the end of the day, sitting next to no-one (and for some that is called First Class) still remains my preferred option. But then I'm a pretty miserable sod. I wonder if Satisfly can deliver that?

We've all read about the damaging effect the global recession is having on business travel demand, but American Airlines is hoping a new TV ad campaign featuring the London-based US actor Kevin Spacey will help it attract passengers back to the front of its transatlantic cabins.

The carrier has produced two adverts featuring Spacey, both of which you can get a sneak preview of here. 

I think Spacey's a great actor and I've been meaning to go and see one of his plays at London's Old Vic theatre, where the actor is the artistic director. But I didn't really find either of the ads particularly attention-grabbing. I just don't see them whipping up the controversy and comments that Virgin Atlantic's recent ad campaign did.

Anyway, take a look and let us know what you think. Judging by the grim outlook for the airline industry given by IATA director Giovanni Bisignani this morning, I think it'll take more than a couple of ads to get bums back on airline seats!

The world banking crisis is making the risk of a major airline failure more likely because carriers will not be able to access funding for a rescue if they fall into trouble.

"Airlines are now in a very weak situation - they have debt of $170 billion so we are in a much worst position - we don't have cash," says Giovanni Bisignani, director general of IATA.

For Bisignani the most concerning issue is the risk of airlines going into Chapter 11 bankruptcy protection. After 9/11, IATA dealt with four major US carriers in Chapter 11. However these airlines were able to access financing to enable them to battle through their problems. "The banking system could help," he says.

This time around the funds may not be available to finance a major carrier that goes into bankruptcy, he says, making the prospect of failure significantly greater.

"I fully agree the risk is there," says Bisignani, in terms of the possibility of a major airline failure.

IATA was ready in the second half of 2008 to deal with a potential bankruptcy of a major carrier, which it anticipated could happen as fuel prices soared to nearly $150 a barrel. "We put in place an exceptional plan - we had all the picture ready."

That did not happen as fuel prices fell. Now the issue is "not so much on what we can do, but what the banking system can do to support our airlines," says Bisignani. "There are big, big problems."

However, he does draw some comfort from government economic stimulus packages that are being announced. These should help the industry to recover faster than it otherwise would, he says.

Although IATA has suspended nearly 40 airlines from its financial settlement programme in the past15 months, these only represent about 1.5% of total world traffic.

Bisignani says he is surprised that there had not been a failure amongst larger carriers. But the deteriorating economic and industry situation is worrying, he says, and it is worst than after the terror attacks of September 2001.

The industry will not begin to recover until 2010 at the earliest, according to IATA head Giovanni Bisignani, speaking to journalists across the globe on a conference call all this morning. "This crisis is reshaping and resizing the industry," he says.

Bisignani didn't have good news: industry losses are forecast to reach $4.7 billion in 2009, almost double the $2.5 billion loss it was predicting in December.

This crisis is of a different magnitude in terms of revenue loss compared to the last downturn, the one triggered by the September 2001 terror attacks. After 9/11 industry revenue was hit by 6% in 2002. The new forecast sees revenues diving by 12% or $62 billion this year.

In terms of passenger traffic, IATA is forecasting a drop of 5.7% this year, with cargo dropping by 13%.

Total industry revenues will fall from $530 billion in 2008 to $467 billion this year, which is significantly greater than after 9/11. "The industry is entering into serious intensive care mode," says Bisignani.

Asia is expected to be one of the worst hit areas in 2009 with losses of $1.7 billion.

To see an example of an airline tapping into the limitless potential for online dialogue with passengers, check out Southwest's new online travel community, which it has imaginatively called Travel Guide.

This new addition to the airline's website enables passengers to share with other passengers their experiences, photos, videos and reviews of the places they've visited.

As an incentive to get passengers posting on the site, Southwest is offering those who create a Travel Guide account the opportunity to win a holiday to Chicago, Fort Myers, New Orleans or Seattle.

Encouraging online dialogue and interaction with passengers is something airlines are slowly beginning to latch on to. For more on this phenomenon, which is still very much in the trial and error phase, read our recent feature on the evolution of airline marketing. 

Another day, another bleaker outlook assessment for the airline sector. Speaking today at the Malaysian International Chamber of Commerce and Industry, IATA director general Giovanni Bisignani said the airline body would issue a revised forecast in the next week after describing its existing $2.5 billion industry global loss forecast for 2009 as "very optimistic".

"Just look at the numbers," says Bisignani. "January passenger traffic was down 5.6%. Premium traffic, where airlines make their money, was off 16.7%. And cargo is a disaster with a 23.2% fall. While low oil prices offer some respite, for many hedging strategies delay the full benefits of reduced costs.

"Our last industry forecast made in December was for a $2.5 billion loss in 2009 based on a 3% fall in passenger demand and a 5% drop in cargo. This is now looking very optimistic and next week we will issue a revised forecast," he says.

IATA has already indicated heavy charges incurred in the fourth quarter related to fuel hedging strategies means 2008 global losses could reach as much as $8 billion, higher than its original forecast of $5 billion. 

For more on the slump in premium demand facing airlines, click here.

I've been doing some serious walking in the past two days. You see I've been through the new Terminal 4 at Madrid's Barajas Airport.

It's big, bold and involves a lot of footwork from kerb to gate, or vice versa. In fact, when I arrived on Monday afternoon I lost count of the number of escalators I took from leaving the BA flight from Heathrow to the taxi rank, via the train that connects the satellite to the main terminal, but it was into double figures.

And leaving on Tuesday with Iberia I was relieved that my gates - H - were only an 8 minute trek. Thank the lucky stars I didn't have gates U or R, that would have needed a slug of something frisky to cope with a 22 minute hike!

Sorry AENA but this is not a friendly airport. Yes it's a big statement. But the wayfinding experts weren't all that expert. It's confusing.

Security needs looking at too. You fill your plastic trays with laptop, liquids, jackets etc - that often means 2 of them - and then carry them to the X-ray. There's no roller tables, you struggle with the trays, dragging your hand luggage behind you.

In fact so unfriendly is this airport that some of the people I met in Madrid say they deliberately avoid this terminal, especially if travelling with children.

But I can report something special about Terminal 4: the announcement on the transfer train.

It's an English accent, and I puzzled who it sounds like because it was strangely familiar.

Then I got it: a striking resemblence to the dulcet tones of Mark Dunkerlery, the excellent CEO of Hawaiian Airlines!

Doing a spot of moonlighting Mark?

To close the blog I penned the other day, it appears it was Aer Lingus that was behind the "get naked for a free flight" publicity stunt and not Ryanair.

According to this article, hundreds of people stripped off to publicise the launch of eight new Aer Lingus routes from London Gatwick. The airline had advertised for 999 volunteers, using the offer of free return flights to one of its new European destinations as an incentive, but it appears only half that number actually turned up for the event.

I had suspected the stunt might have been a joke by Ryanair as it didn't sound like something Aer Lingus would partake in, but it turns out I was wrong.

Whether the publicity drive will have had any impact remains to be seen.

It has taken AirAsia group chief executive Tony Fernandes eight years to realise one of his long-held dreams - to launch a long-haul, low-cost carrier flying between Asia and Europe - and thus emulate a childhood hero in the guise of Sir Freddie Laker.

On Wednesday 11 March the dream airline - AirAsia X - made its first flight. The Airbus A340-300, an ex-Air Canada example, arrived at London Stansted Airport 20 minutes early after the 10-hour flight from Kuala Lumpur.

The party to celebrate the launch kicked off at Altitude 360, a venue 29 floors above the London skyline.

Listen to the edited highlights of Tony's speech at the event, including how the idea came up in the first place, what he owes to Sir Freddie Laker and how West Ham United and tatoos come into the story.

Listen over the din of the party to what AirAsia X chief executive Azran Osman-Rani had to say about the plans for the carrier.

Girl band The Saturdays turned up to join in the fun and sing a tune or two.

Here's what the AirAsia bloggers made of it all, with lots of pictures.

And here's what Tony Fernandes said after taking delivery of AirAsia X's Airbus A340-300 on his blog.

And finally, Tony shares a joke at the party with HRH The Duke of York, the UK's Special Representative for International Trade and Investment, who is said to have been instrumental in helping persuade AirAsia to buy International Aero Engine V2500s for its A320 fleet (Rolls-Royce has a stake in IAE).

Imagine working in a pet shop and opening a package you expect to be a shipment of tropical fish, and finding instead a human body.

That's what happened to Mark Arabia, the owner of Pets Plus in Philadelphia. Apparently US Airways sent the body to the pet shop by accident - it was actually bound for a research laboratory 70 miles away.

US Airways, which says it is deeply sorry for the mix-up, explains that it was down to a "verbal miscommunication between a delivery driver and the cargo representative".

As for the tropical fish, sadly the pet shop owner says they were left at the airport and probably died.

Our good friend, occasional Airline Business video interviewer and generally high-class airline exec Peter Davies is already stirring things up down in the south-west of England.

Five weeks ago the former DHL, Brussels Airlines and Caribbean Airlines boss took on the job of running little known UK regional airline Air Southwest. It operates a fleet of five Bombardier Dash 8 Q300s on routes mainly within the UK from Newquay and Plymouth.

After five weeks and what Peter describes as "my usual airline diagnostic", which resulted in a seven-page report for the private owners of the airline on the best business and strategic options for the carrier, today saw the first fruits of his labours: the announcement of a new route between Plymouth (with an extra hop to Newquay) to London City Airport. It opens on 20 April.

This route is the first to London City for Air Southwest. It will fly the route twice daily allowing virtually a full business day in London giving the train a run for its money.

Now I can remember reporting on the opening of London City back in the late 1980s and this route was one of those started by Brymon Airways, but perhaps stopped later when BA bought the carrier.

Can anyone dredge back in their memories and illuminate us? Or share any photos? 

Well, judging by the 50+ comments on the route announcement story in the local Plymouth paper, this is a big deal for the region. Most comments are favourable, although some wonder if the cheap lead-in fares will be easy to get.

Peter says the Plymouth route is aimed at business passengers while the Newquay "tag" brings in the leisure market.

Air Southwest will continue operating its four times daily service to London Gatwick, says Peter. This route has new competition in the face of large UK regional Flybe, which began service between Plymouth and Gatwick in February.

Peter also has his eyes on other routes but is keeping these ideas to himself for the moment.

Good luck!

A strange article on The Times' website today says the paper has received an email telling it that an unnamed airline wants 999 people to take their clothes off to publicise a new airline launching in the UK.

The email apparently included a link to this website, which says 999 members of the public will be given two free flights to one of eight European destinations from London Gatwick if they take part in the nude-fest.

The Times rightly points out that Aer Lingus is about to launch service to eight destinations from Gatwick. The carrier announced in December that it would open a Gatwick base in April with flights to Munich, Zurich, Vienna, Malaga, Faro, Nice, Knock and Dublin.

But the newspaper also points out that this could all be a stunt by Ryanair to try and undermine its bitter rival's attempt to open a European base outside Ireland. It certainly has the hallmarks of a Ryanair publicity stunt, and doesn't sound like something you'd typically associate with Aer Lingus.

I guess it will all become clear soon. I just have two questions: If it is a stunt by Ryanair, does the airline really not have anything better to do with its time than this? And are there really 999 people willing to strip off in public, in winter, just for a crumby free flight to Europe?

Akron-Canton Airport, a mecca for low-fare carriers in the north-east USA, is making a name for itself as a leader in the US airport industry when it comes to online innovations.

As its ebullient senior vice-president Kristie Van Auken explained to Airline Business editor Mark Pilling at this week's Network USA event, the airport is blogging and Twittering, has a Facebook group and uses Flickr.

Kingfisher Airlines chairman and Indian billionaire Vijay Mallya has splashed the cash on a totally different kind of purchase, far removed from the bling he's normally associated with. Mallya has spent $1.8 million on a selection of possessions belonging to Indian peace activist and political leader Mahatma Gandhi.

The possessions, which were controversially auctioned off in New York, include a pair of sandals, a pocket watch and Gandhi's trademark round spectacles.

I'm not sure what Gandhi - who was assassinated in 1948 - would make of the fact that somebody has spent such an enormous amount of money on these few possessions. After all, he lived very simply and did not embrace materialism. But maybe he'd be pleased that such a major part of India's history is being returned to India.

Mallya - often referred to as India's Richard Branson - is more commonly associated with spending his millions on things like Formula 1 motor racing, but perhaps this latest purchase shows a more spiritual side of his flamboyant personality.

Take a look at our cover interview with Mallya from 2006, and also our web video of the man himself from last year's Farnborough air show.

"It was a stupid investment." A typically frank assessment then from Ryanair chief Michael O'Leary on the airline's acquisition of a 29% stake in Irish rival Aer Lingus, reported in the Irish Independent following a press conference in Dublin yesterday.

Ryanair built up the stake to support two failed attempts to takeover Aer Lingus. After giving up on its second attempt to take over the carrier earlier this year, O'Leary described as an "optimistic assumption" that it would make a third move for the carrier. He reiterated this yesterday by describing such a move as "very unlikely".

"It was a stupid investment," he is reported as saying during yesterday's media conference. "At the time, it was the right strategy to go for one combined airline but it [the investment] has now proven to be a disaster."

Aer Lingus shares hit a low last month and ended trading yesterday at €0.76 on the Irish stock exchange.

For more on Aer Lingus, see for our recent article:  What does the future hold for Aer Lingus?

If you haven't seen it yet - or if you just want to see it again - take a look at this video on Sky News of someone throwing green custard in the face of UK business secretary Peter Mandelson to protest the government's approval of a third runway for London Heathrow.

And just in case you want to see it again in slow motion:

Plane Stupid protestor Leila Deen attacked Lord Mandelson with a cup of green slime this morning, and she says unrepentantly: "The only thing green about Peter Mandelson is the slime coursing through his veins.

"That Mandelson is today trying to make political capital out of climate change just days after reports that he met BAA's top lobbyist several times in the run-up to the Heathrow decision is an insult to our intelligence and to our whole generation that will suffer from climate change."

And while we're on the subject of politicians having stuff hurled at them, what an opportune moment to once again watch former UK deputy prime minister John Prescott responding to having an egg thrown at him by smacking a member of the public in the mouth.

Not aviation-related, I admit, but heck it's Friday and it's one of those clips you never tire of watching!

In a strongly-worded press release sent out this morning, easyJet has made clear its disgust at what it calls "a few legacy airlines appealing for state aid through the back door".

Explaining what's got its hackles up, easyJet says: "Some legacy network airlines, led by their self-serving, wholly-unrepresentative club, the Association of European Airlines, are asking the European Commission to consider a suspension of the rules governing slot usage at Europe's major airports - particularly to prevent other European airlines from using scarce slots that would be freed-up by the cutbacks expected this year."

So to get the other side of the story (which, after all, is what I'm paid to do), I went to the AEA's website and found this press release, which has a different take on the matter in its headline: "Airlines say no to state aid, but seek relief on infrastructure costs." As a journalist, it's always interesting to see how two different sides can manipulate the same words to set out their opposing stances on the same issue.

In the AEA press release, LOT Polish Airlines president Dariusz Nowak points out that LOT has reduced its winter capacity by 10% due to the economic downturn, but under current European Union rules it could not get those slots back once the market recovers. His argument, therefore, is that airlines should be able to "make capacity cuts with confidence that they would not be penalised by slot confiscation".

Quite what the EU will make of this argument remains to be seen. What is clear is that easyJet will not take this lying down - nor, I suspect, will Ryanair, which loves nothing more than writing letters of complaint to the EU. 

Further signs of how tough it is right now in the premium traffic sector as British Airways today disclosed its premium traffic was down a fifth in February compared to the same month last year. Direct comparison though is distorted due to the impact of heavy snow in the UK south east last month causing several flight cancellations and by 2008 being a leap year, meaning an additional day in February last year (worth around 3.5%).

Overall the fall in passenger traffic of 8.3% was in line with the 9% reduced capacity in February, meaning its passenger load factor was fractionally higher than the same month last year at 72%. But notably while non-premium traffic was down 5.5% in RPKs, BA's key premium traffic fell 20.2% compared to February 08.

No let-up on cargo either. December and January saw heavy drops in air-freight figures across the industry. For BA, cargo, measured in CTKs, was down more than a fifth. This compared to a near 17% fall for the carrier in January.

BA says market conditions remain "challenging but broadly in line with previous expectations". It comes after BA chief Willie Walsh yesterday issued a stark warning on the likely impact of the recession.

Other early reporting European traffic stats for the month out today come from Ryanair. It reported a 7% increase in passenger numbers for February to 4.13 million - rare single-digit growth for the Irish carrier given its usual double-digit monthly growth rate. This reflects the carrier's relatively scaled back capacity growth this winter - monthly passengers numbers have been growing around 11% in recent months after it grounded aircraft predominantly at Stansted and Dublin compared to 18% for 2008 overall - together with February having one less day this year and the snow impact. Ryanair load factor for the month though was up three points in February to 78%

Closed down for two weeks following Hurricane Katrina in 2005, Louis Armstrong New Orleans International Airport is on the way back.

Manager Commercial Developments Larry Johnson tells Mark Pilling how the airport is rebuilding its traffic base and beginning to benefit from the development money being poured into the city and region that was so devastated by the hurricane.

If you feel you haven't heard quite enough bad recession-related news and you're looking for a bit more, check out this article in London's Evening Standard about British Airways.

Quoting BA chief executive Willie Walsh's (pictured) comments in the airline's in-house newspaper, the article says BA faces two years of losses and shouldn't expect any bailout from taxpayers.

The article goes as far as to quote an analyst who says BA is "in danger of taking on the attributes of Royal Bank of Scotland, with wings".

In case you've been living in a cave for the last couple of weeks, Royal Bank of Scotland recently recorded the largest annual loss in UK corporate history while its shameless former boss Sir Fred Goodwin retired from the bank at the age of 50 and is refusing to give up any of his hefty £650,000 a year pension.

Does this comparison strike any of you as being a slight exaggeration, or could things really be this dire for BA?

The 9th Airline Business Network USA airline-airport route planning event began on Monday in Fort Worth, Texas.

Editor of Airline Business Mark Pilling introduces the event, which is being hosted by Dallas/Ft Worth International Airport.

Bob Montgomery, vice-president of properties at Southwest Airlines talks about the airline's move into larger hubs like Minneapolis St Paul, New York LaGuardia and Boston, how airports are responding to airline calls for lower charges and whether his airline is going to charge passengers to use the on-board toilets.

Peter Bowler, the president and CEO of American Eagle Airlines, is interviewed by Mark Pilling, editor of Airline Business, at the Network USA event.

Bowler, a keynote speaker at Network, discusses the carrier's capacity reductions in 2009, what it would like airports to do to help airlines in these tough times and how the carrier sees its fleet changing in the coming years.

Organised by Airline Business, Network USA is being held in Fort Worth, Texas and is hosted by Dallas/Ft Worth International Airport.

IATA is now indicating industry-wide global losses for the year could reach up to $8 billion for 2008, largely driven by heavy losses in the fourth quarter on fuel hedging contracts. IATA has been forecasting a likely $5 billion loss for the industry in 2008. While it has not formally changed its forecast, its latest Airlines Financial Health Monitor says heavier than expected 4Q losses suggest this forecast looks low and points to an overall global net loss of up to $8 billion for 2008.

One of the key factors behind the likelihood of larger global losses is heavy losses stemming from fuel hedging contracts in the fourth quarter, as a host of airlines locked into hedging contracts came unstuck in the volatile fuel market after the rapid fall in oil price during the second half of last year. AirAsia is the latest carrier to reveal a hit - it took a one-off Rm426 million ($115 million) hit in the fourth quarter to unwind its hedging positions (read our recent blog on this here) - adding to a string of carriers to report hedging losses. Click here for our recent article on hedging losses.

It comes on top of the recent grim reading traffic figures issued by IATA for January which showed no let up in the decline of air freight and a sharper decline in passenger traffic as the global economic crisis continues to take hold.

V Australia's Sydney launch party at Cockatoo Island is still in full swing as we cross midnight and the airline's launch day finally arrives. The party forms part of my Virgin 'round the world in eight days' adventure, which I am sharing with a small group of journalists, Stefan the pilot and Sir Richard Branson.

We have already travelled from London to Sydney, via Hong Kong. We've been to Virgin Active's Australian launch event and looked on as Richard unveiled Virgin's new round the world fares.

Our fly on the wall Virgin press trip diary - which I am also covering live via Twitter - continues...

AirAsia has taken a one-off charge of RM426 million ($115 million) in its fourth quarter to get completely out of fuel hedges going forward.

"We've taken all the hedges out," group chief executive Tony Fernandes told analysts in a conference call last week. All of its fuel needs from now will be paid for at spot market prices.

The one-off hit is large, but unwinding its hedges means "we won't have a noose around our necks going forward over this year", says Fernandes. Over a period of 2-3 years AirAsia was at risk of paying three times the price of the hedges if it hadn't taken this action, he explains.

As it "rides the market" on fuel this year, the airline is looking at returning to some hedging in 2010 and 2011. "But they will be clean vanilla swaps and we'll pay cash for them," says Fernandes.

AirAsia described the move to unwind its hedges, as well as some interest rate swaps relating to aircraft loans, as a "bold decision".

"We believe this is a prudent approach as its shields the group from the burden of mark to market, frees up equity and protect our cashflow," says the carrier. However the total impact of the charges meant AirAsia fell to a net loss for the quarter of RM177 million.

More good stuff on fuel hedging from Airline Business:

* Ryanair details its fuel hedging plans

* How fuel hedges have cost airlines millions 

Other good stuff from the AirAsia conference call:

• AirAsia is close to a "much more cost-effective deal" with Kuala Lumpur International Airport, which includes resolving old disputes between the carrier and the airport operator, says Fernandes. "The cost of operating in KLIA will come down (for AirAsia)." The airline will remain at the airport at the government's request and not move out as it had threatened.
• Commenting on the signing of a deal last week with Barclays Capital in London to finance 13 Airbus A320s, Fernandes said the commercial terms of the deal were "not far away" from those it had previously signed for narrowbody airliner finance. "There is not a huge additional [financing] cost," he says.
• The Airbus financing deal was "something to shout about" for AirAsia, says Fernandes. "Most airlines are struggling to find finance," he notes, and the fact that AirAsia has succeeded demonstrates the strength of its business model.
• As Ryanair has recently announced, AirAsia too plans to get rid of all check-in desks. "This is our eventual aim," says Fernandes.
• AirAsia is busy adding routes in Singapore and in Indonesia as those markets open up and demand has been strong. Just days after opening its Singapore to Jakarta and Bali routes the airline has sold 30% and 22% of its seats in these markets for the coming three months, says Fernandes.
• AirAsia is forecasting it will carry 22 million passengers in 2009, with Fernandes personally expecting the number to be higher.