October 2009 Archives

Here are a couple of shots from the official ceremony marking Continental's entry into the Star Alliance.

Continental President Jeff Smisek likened the carrier's entry into Star to a first class upgrade while United's CEO Glenn Tilton stressed Star is an alliance that treats "all members as true and equal partners."

Flightglobal's very own Max Kingsley-Jones features in this excellent CNN video of last week's biofuel powered flight by Qatar Airways.

Max was on the flight - as is obvious from the video - and wrote this story on Flightglobal.

Here's the full Qatar Airways release on the flight too.

Who knew Milwaukee could breed such intense passion? 

Well it has certainly stirred AirTran CEO Bob Fornaro, who today during the carrier's earnings call spoke very passionately about the carrier's prospects in the market.

Since US regional operator Republic Airways Holdings closed on its purchase of Midwest Fornaro has not shied away from voicing his opinion of Republic's chances of preserving the Midwest brand.

"Republic's not fooling anyone," Fornaro declared today. He argues any business traveller in Milwaukee is savvy enough to know the old Midwest doesn't exist.

"We'll give it a year," says the AirTran chief as he continues to stress Republic has no track record in terms of marketing experience.

Fornaro warns Republic has a real challenge on its hands. They've "done a few paint jobs, cut a few costs and laid off some people....but ultimately they've got to start carrying customers."

Of course Fornaro believes this give AirTran a prime chance to strike. "It gives us an opportunity to make inroads in the market. It really opens the door for us."

All change at CSA Czech Airlines as seven of its eight board members, including CEO Radomir Lasak, have resigned. CSA supervisory board chairman Vaclav Novak has also quit.

It comes after Lasak's long efforts to push through wage cuts.CSA's board had in August offered to resign if unions would a agree to a wage cut deal. While CSA's statement does not mention the reason for the resignation, Lasak is quoted in the Czech press as saying the board agreed to resign after an agreement with unions on wage cuts saving the company around $35 million. These wage cuts, including a 15% cut by pilots, still fall short of those originally sought by the company. You can read plenty more about this here in a detailed article in the Prague Daily Monitor.

Lasak took the helm of CSA nearly four years ago at a particularly dire time for the carrier. He first stabilised the carrier, in part through the sale of a number of assets, before setting out on restoring its profitability. I interviewed Lasak three or four times during his time at CSA, latterly early this year for a cover interview for Airline Business. I asked him just how close they were to the edge when he took the helm. "Close," he said. "I started to read about bankruptcy law." You can read the article here.

But market conditions have turned against the carrier - the airline is expecting losses this year - just as the state has been attempting to privatise the airline. A consortium, including Czech airline Travel Service, is the only bidder still in contention.

In the meantime, new board chairman Miroslav Zámečník says the existing restructuring projecSt are continuing as before.

And in an unusual sign of airport and airline harmony, new man at the helm of CSA is Miroslav Dvorak - who is and will remain head of another Czech privatisation target, Prague Airport. "The appointment of Dvořák, until now the CEO of Prague Airport, does not constitute a conflict of interest.  Both companies are controlled entities according to the applicable legislation, whose common shareholder is the State," says Zámečník.

The BBC broadcast its Panorama programme about Ryanair yesterday - please feel free to comment about it here as we'd love to know what you thought of it. For me the whole programme was overshadowed by the sideshow around Michael O'Leary's terms for doing an interview (live or uncut) - which the BBC would not agree to for the 30-minute pre-recorded Panorama broadcast. Last night's show did include some clips from when Panorama reporter Vivien White approached O'Leary after the carrier's AGM in Dublin last month and the BBC have put the full interview (unedited) on their website - all nine and half glorious minutes of it (that's about a third of a Panorama programme) - so judge for yourself whether it was cut to meet "Panorama's agenda" as O'Leary suggests it would be.

My two favourite bits are:

1. When O'Leary says he can't do the interview now as he has to go and defend the airline in an interview (live) he is doing for another BBC programme (You and yours).

2. The casual, but slightly puzzled look of the guy with the moustache standing in the background - he doesn't look like he is with Ryanair or the BBC to me, so just who is? And I love the way at one point he actually moves to his right, just to make sure he is still in shot. 

Anyway expect O'Leary, who had his say last week before the programme aired, to give the BBC somre more feedback during a press conference in London this morning.

Here's the link, enjoy:

Uncut: Ryanair's Michael O'Leary

It's not every day you get to shake the hand of a president.

And considering the throng of those interested in a few seconds with Panamian president Ricardo Martinelli today I was lucky. Here is Mr Martinelli showing his Italian heritage with some effective arm gestures during a speech today.

The occasion was the official announcement of the latest expansion of Panama City's Tocumen International Airport. This is a big deal for Panama which is building up a reputation as a transportation node that is not simply notable for having a famous waterway.

Now Martinelli is a gregarious chap as far as I could see and his ease with people helps explain why he swept to victory in Panama's elections in May with a majority of someone told me 60% of the popular vote.

I was at Tocumen by accident really as I am visiting Panama's Copa Airlines and Tocumen airport officials on my way to the ALTA Airline Leaders Forum in Cartagena this week.

It just so happened the announcement of Tocumen's expansion was today - so I went with Copa CEO Pedro Heilbron to witness proceedings at first hand.

The event started with airport general director Rafael Flores (left) telling us about the expansion plan. That will see another pier being built adding 12 gates. This will give the airport 34 gates altogether. It should be finished in 15 months or so and will cost some $60 million.

This will position Tocumen very nicely with plenty of capacity for Copa to grow into and you never know even welcome a few other carriers.

Mr Martinelli, with one eye on tourism, was keen to encourage international carriers to serve Panama.

He particularly nudged Copa to think about serving Rome. Remember Mr Martinelli's Italian heritage.

After the formalities the party made for a specially prepared area where the new North Pier will connect with the existing terminal.

But not on foot for Mr Martinelli for he spied the electric cart that Vice President Juan Carlos Varela was using. Now Varela wasn't being lazy: the poor chap had injured his foot tumbling down some steps after a late night press briefing and was on crutches.

Mr Martinelli jumped into the driving seat and escorted his number 2 to the next stop.

Bemused travellers watched as a procession that included woman dressed in ethnic dress, a band, plus a crowd of press, moved to the unveiling.

After pulling the rope on a visual that showed what the new pier will look like Mr Martinelli grabbed the mike and dived into the press scrum to take questions.

This kind of thing takes a long time so I grabbed a snap of Pedro Heilbron (right) with Copa chairman and prominent Panamian business figure Stanley Motta. The Motta family founded Copa and still holds a significant interest in the publically quoted carrier.

Now that was a fun day out in Panama!

Some links:

Airline Business cover interview with Pedro Heilbron.

Airline Business citation for Pedro Heilbron's 2009 Airline Strategy Award.

Last week Colombia's Avianca and El Salvador's TACA announced they were getting together to create new Latin American airline force. Big news and a journalistic dream just one week before the ALTA Airline Leaders Forum when all the major players gather in Cartagena, Colombia for their annual meeting.

As it happened, I had scheduled to visit Panama on my way to Cartagena with meetings planned with Copa executives and officals from the city's Tocumen International Airport.

No better time then to ask Copa CEO Pedro Heilbron what he thinks about Avianca-TACA.

Here's Pedro being interviewed on the same subject during a ceremony today to mark a new phase of expansion at Tocumen Airport (see related story here).

Here's the story that I'm going to post to our sister service Air Transport Intelligence later, but you are getting it first fine Airline Business blog reader because this blog is working but my VPN to send this story is not!

Network strength will enable Copa to resist merged Avianca-TACA

Mark Pilling, Panama City

The strong position Copa Airlines has built up over the past decade at its hub in Panama will prove its best weapon to combat any increased competitive threat from a combined Avianca-TACA, chief executive Pedro Heilbron told Airline Business in an interview at his headquarters in the central American city.

Speaking a week after Colombia's Avianca and El Salvador-based TACA announced their strategic tie-up, Heilbron acknowledges that Copa will carefully watch how the new entity moves forward but will not alter the disciplined business plan.

Over the past several years Copa has grown to become one of Latin America's most profitable airline groups.

"When they get together they clearly become our main competitor, but the truth is our own network is solid enough and unique enough and highly defensible," says Heilbron.

Copa competes with TACA's hubs at San Salvador in El Salvador for Central American traffic while its 100%-owned unit Aero Republica is expanding in the Colombian market.

The Avianca-TACA deal was not unexpected, says Heilbron. "We knew given the financial situation in the world at present and in particular of those two airlines that it was in their best interests to do something.

"The way we see it is that it is still in our hands to remain the leading intra-Latin American carrier," says Heilbron. "It is up to us to keep doing the necessary investments to maintain our leadership position."

Copa and Aero Republica have built up a fleet of 58 Boeing 737s and Embraer 190s and a handful of MD-80s and have more 737s and 190s on order.

In Panama Copa also has an advantage because the state-owned airport operator is investing in expanding the airport and keeps its charges competitive. "Having an airport that plays ball is important. It has new facilities and is being expanded again," says Heilbron.

In contrast, Colombia's Bogota El Dorado airport is congested as is another TACA base at San Jose in Costa Rica, he says.

"We feel our space and opportunities are not dependent on what they do. So what we are going to do is more of the same. We are going to stay the course," says Heilbron.

So, can Avianca-TACA unseat Copa? To be honest I think that's a tall order.

Single-minded Copa has build a strong fortress at Panama and a well-functioning hub system. It has four banks a day at Tocumen with a hour connecting time max. Around half of its traffic connects.

Let battle commence!

IATA director general Giovanni Bisignani is keeping the pressure on states meeting at ICAO to ensure it adopts a "credible" common position to take into December's key UN environmental summit in Copenhagen.

Efforts continue at ICAO's high-level meeting on international aviation and climate change to establish a common position for aviation to take into the Copenhagen summit. The three-day meeting in Montreal is expected to end late this evening.

"Let me be very honest and very blunt," said Bisignani at the end of yesterday's session."At the end of a very difficult day, I am concerned for the outcome of your work. This meeting is in danger of two things: being held hostage by the desire for consensus and missing a great opportunity. You have 24 hours, to rise above the obstacles of a few and deliver results.

"If you fail to agree and declare a credible position for ICAO to take to COP 15,  it will not be the responsibility of industry or of ICAO. It will be the failure of those gathered here who lost an historic opportunity."

IATA has submitted a joint paper with airports grouping ACI, navigation services body CANSO and the International Coordinating Council of Aerospace Industries Associations (ICCAIA) putting forward a common position for aviation.

Specifically they are calling for ICAO to adopt a three targets: 

• Improving fuel efficiency by an average of 1.5% annually to 2020
• Stabilising carbon emissions from 2020 with carbon-neutral growth
• Reducing net carbon emissions 50% by 2050 compared to 2005

The outcome of the meeting will no doubt be closely watched in Brussels, as the EC moves ahead with its controversial inclusion of aviation into its emissions trading scheme.

Picture credit: Billypix

Read what happens when one simple computer glitch turns a $40 increase in British Airways fares from the US to India, to a $40 bargain fare. A couple of detailed reports on the how and the fallout here from the NY Daily News and The Guardian:

Oops! British Airways offers $40 round-trip from U.S. to India - by accident

BA sells $40 plane tickets from US to India - by accident

It's no suprise Republic has named Sean Menke to head marketing for both Frontier and Midwest, who are now officially subsidiaries of the US regional operator.

While Menke was on the executive team at Air Canada the carrier introduced several initiatives inclucing a la carte pricing and subscription packages, which allowed passengers to pay for an unlimited number of flights for three-to-six months.

Frontier's wild animals on the tails of its aircraft have won a large following in its hometown Denver market.

But Menke has a challenge in re-establishing the credibility of Midwest. Republic CEO Bryan Bedford has said the distress Midwest has undergone during the last 12 months has resulted in some erosion to the Midwest brand, and the carrier needs to relaunch service to the places customers want to fly.

Menke's assumption of responsibility for marketing is a continuation of pattern. Bedford has always surrounded himself by shrewd people. The majority of Repubic's managment team has been intact for close to the last decade.

Bedford also hinted during an interview with Airline Business in July during the hype surrounding Southwest's bid for Frontier that if Southwest succeeded in acquiring the carrier Menke would be "welcome to come here and lend us his expertise".

Well Republic eventually acquired Frontier, but Menke's expertise is still welcome.

Today Bedford said : Sean brings us a strong track record of developing innovative revenue management strategies at Frontier and Air Canada. In his role of managing the entire brand business for Republic, that experience will be invaluable."  

Irish carrier Ryanar has reiterated it is highly unlikely to make a third bid for Aer Lingus, saying there is no substance to a report which suggested it could take control of Aer Lingus through a rights issue in around 18 months time.

 "Our position on Aer Lingus was recently confirmed at the Ryanair AGM, which is that we are 'highly unlikely' to make a third offer," O'Leary said, in a short statement issued to the stock market.

Ryanair, which already holds a near 30% stake in Aer Lingus, has twice failed with takeover offers for Aer Lingus amid opposition from the Irish Government and unions. O'Leary has since maintained a third bid is unlikely. But he does suggest the carrier will ultimately be called upon sometime in the next 18 months by the Irish Government if Aer Lingus keeps losing money.

"The Irish Government will need someone to rescue it [Aer Lingus] and I predict we are probably the only people there who have either the desire or the plan to rescue Aer Lingus," he said during a recent press conference in London. "We could turnaround Aer Lingus and make it profitable."

New Aer Lingus chief executive Christoph Mueller, who took charge of the loss-making carrier at the start of September, is embarking on new efforts to turn round the airline's forturnes. He has warned unions of the need for more drastic action than just "cosmetic surgery" and is expected to announce new cost-cutting measures shortly.

We were in Barcelona for the recent World Low Cost Airlines Congress and interviewed some of the leading airline executives about key issues facing their airlines and the industry in general.

Watch the videos here:

The LCC model: We ask whether low-cost carriers are better placed to survive the economic crisis than network carriers?

Ancillary revenues: What will low-cost carriers charge for next?

AirAsia X:  Chief executive Azran Osman Rani tell us about the carrier's US ambitions:

Vueling Airlines:  We talk to chief executive Alex Cruz about merged life at the Spanish budget carrier:

Brussels Airlines: Chief executive Bernard Gustin tells us about the opportunities the carrrier gets from being part of the Lufthansa Group:

Stelios: Watch clips from easyJet founder and shareholder Stelios Haji-Ioannau's keynote interview:

Click here to check out all our blogs and tweets from the event, and to take a look through some of our recent coverage of the low-cost airline sector.

Ryanair has come out fighting in advance of a BBC Panorama programme on the carrier, due to air in the UK shortly.

In a similar approach to that taken by the budget carrier over a Channel 4 Dispatches programme back in 2006, Ryanair has today published correspondance between the programme makers and the airline, and hit out at the programme makers. 

"To date Panorama have made two false allegations about Ryanair, the first of which is that we apply hidden charges - when everybody knows that all Ryanair charges are published and must be agreed to by passengers before they are allowed to make a booking," says chief executive Michael O'Leary. "And secondly that Ryanair reached agreement with Airbus on an aircraft order back in 2001, when the facts and the correspondence patently show we didn't."

The correspondance published by Ryanair shows the carrier rejected an initial approach for an interview with Michael O'Leary, saying it did not want to be involved in "yet another BBC programme which clearly looks to portray Ryanair negatively". O'Leary later offered to appear on condition the interview was either live or broadcast uncut - conditions rejected by the programme makers on principle, who insist the programme will be "fair and balanced".

You can see the correspondance for yourself here

I had a quick chat with Trans States VP of scheduling Fred Oxley after the big announcement today the company signed on as the second customer for the Mitsubishi Regional Jet.

It's a huge boost for Mitsubishi to get a foothold in the key North Amrerican market. And Oxley is pretty confident in Mitsubishi's ability to support the aircraft.

St. Louis based Trans States is also making by bold move by choosing the MRJ over product offerings from Bombardier and Embraer. The companies subsidiaries fly aircraft built by both manufacturers.

One the aircraft's attributes cited by Oxley was the MRJ's interior. Mitsubishi has dedicated a signfiicant amount of attention and effort early on to refine the cabin. I had the chance to tour the mockup at this year's RAA show and chat with company executives about the interior...

"I think if you are at a Ryanair press conference for logic, you are at the wrong place," joked Michael O'Leary, when one question at a London media briefing today began with the words "surely it would be logical to..."

O'Leary was in town briefing journalists today, ostensibly to put in a pre-emptive strike against a BBC Panorama programme which airs shortly. Something that does appear to defy logic is the sight of O'Leary in agreement with the Irish Government and European Commission.

But sure enough O'Leary has been banging the drum for a yes vote in Ireland on the key EU Lisbon Treaty referendum, and this has left him with some unlikely allies.

"I am on the same side [on this] as the Irish Government, the EC, the Irish Congress of Trade Unions and three majors unions with whom I haven't agreed on anything in the last 25 years," he said. "I almost don't know which way to turn when I look at who I am on the benches with."

But as he also used the words 'hopelessly' and 'incompetent' in close proximity to "Irish Government", I think it's safe to say normal service will resume before too long.

They weren't quite punching the air in celebration, but the wide grins on the faces of Etihad Airways head James Hogan and his CFO James Rigney said it all in London yesterday.

This fast-moving, fast-growing, new wave (their words) carrier has won the support of the US, the UK, France and Germany to help finance their new aircraft deliveries.

From left to right at the Etihad dinner: James Rigney, Etihad's CFO; Lester Wynne-Jones, CEO, HSBC Abu Dhabi & Al Ain; James Hogan, Etihad CEO; Dr Matthias Neugebauer, senior vice-president LBBW; and Nigel Addison Smith, finance director of the ECGD.

VIDEO: James Hogan on Etihad's big finance dash

The ins and outs of the story are well explained by the Australian's Steve Creedy here, but the bottom line for Hogan and Rigney is that their business plan has been validated at the highest level and been found to be gold-plated.

The message is that this move proves Etihad is not a state-subsidised carrier, but a valid business with a robust corporate governance framework and a balance sheet that can withstand the closest scrutiny.

Hogan and his finance team have been grilled in Washington by the US Ex-Im bank and more recently by Europe's Export Credit Bodies as to why their airline should obtain their guarantees for loans that will finance a lot of Boeing and Airbus airliners.

And they got the green light, which hasn't always been the case for every carrier from the region of late.

The ability to raise such serious cash in a market that is supposed to be tight is tremendously significant for Etihad.

And it will mean the airline's borrowing for these aircraft will quite simply be cheaper than if it went purely to the commercial market.

Hogan held a dinner at London's glitzy Dorchester Hotel to celebrate the announcement of the deal.

Lots of talk during the World Low Cost Airline Congress about budget carriers and business traffic, and to what extent carriers are catering for it and picking it up.

The different scope of low-cost carriers means some are already pitching themselves pretty much directly against network carriers on high-frequency routes between primary airports, and Norwegian chief executive Bjorn Kjos - off the back of record results for the carrier in the first half - told us the airline has definitely benefited from passengers trading down from network carriers in the tough market conditions.

Alex Cruz, chief executive at recently merged Spanish budget carrier Vueling (pictured here on the left next to Kjos during one of the panel debates), says his carrier puts a lot of emphasis on dependability in terms of catering for business passengers. "There are a lot of attributes they want, of which [onboard] freebies are are the end if the list," he says, saying punctuality and being able to book tickets in their normal channels are the keys.

A business product is even more obviously part of the equation on the long-haul model. Ryanair chief executive Michael O'Leary, who has floated the subject of one day setting up a long-haul low-cost operation (separate to Ryanair), has always said a premium cabin would form part of such a product, while Malaysian long-haul, low-cost carrier AirAsia X is already making a move to lie-flat beds. Chief executive of the carrier, Azran Osman Rani says around 10% of its seats are premium, but says the carrier focuses on the seat rather than the other elements of traditional business class. "What people want is a comfortable seat," he says. "There is a huge gap between what carriers charge for business class against the cost."

He says in addition to the direct benefit of securing higher paying fare, "the intangible benefit is you broaden your brand's reach beyond price-sensitive customers".

Click here to see some of our video interviews with leading airline executives attending the World Low Cost Airlines Congress.

Frontier Airlines has officially emerged from Chapter 11 as a wholly-owned subsidiary of Republic Airways Holdings.

Republic's pruchase of Frontier was part of acquisition spree the US regional operator had this summer after buying Midwest Airlines on 31 July.

Republic is keen to get some of Frontier's Airbus narrowbodies into Milwaukee for operation on long-haul, high-density, low-yield markets. Company chief Bryan Bedford outlined that strategy during an interview with Airline Business in July.

Southwest threw an interesting twist into Republic's purchase of Frontier -- announcing its interest in buying its rival in Denver. But a failure by Southwest and Frontier pilots to swiftly reach a seniority agreement ultimately unraveled the Southwest bid.

The next chapter for Frontier should be interesting as it optimises its network with Midwest and continues to compete with a chastened Southwest at its Denver hub.

Southwest has made some interesting moves in Denver since the auction process ended. It is adding flights to Reno, Spokane and Boston. Southwest is only competing with Frontier in one of those markets -- Spokane.

Frontier, meanwhile, is launching direct competion with Southwest on flights from Denver to Fort Myers, Florida next month.

It's likely that both carriers are ready to compete fiercely, as they've been doing since Southwest entered into the Denver market in 2006. And the market will rationalise itself somehow. 

But at least the animals are sticking around  --