November 2009 Archives

My colleague at Flightglobal David Kaminski has written an in-depth piece on the future of Gulf Air following a briefing by the carrier's new CEO Samer Majali.

Check out the article, which appeared in this week's issue of Flight International, and read what the magazine's leader writer feels about this latest strategy designed to make Gulf a viable and profitable carrier again.

One of the most startling facts to come out of the briefing is the revelation that the carrier is likely to make a $512 million operating loss this year. Ouch! We knew the losses at Gulf Air were bad but we never had any real numbers until now.

Here's our story of about a year ago on what Gulf Air's strategy was....

....and the Airline Business cover interview with Samer Majali when he was CEO of Royal Jordanian (look for parallels with his new Gulf Air strategy in here).

It's not often you hear an airline arguing for more legislation (unless it's to do with airports and their charges), but easyJet chief executive Andy Harrison is suggesting exactly that in the carrier's latest salvo on aviation emissions.

EasyJet has been a vocal proponent of tackling aviation's impact on climate change through new technology, notably developing its own eco-friendly aircraft design concept a couple of years ago to demonstrate the potential. Now, in a briefing ahead of the key EU climate change summit in Copenhagen next month, Harrison says legislation is needed to phase out the use of older aircraft and to fast-track development of the next generation technology.

"We need to set minimum standards of emissions from aircraft," he says, suggesting this is the key tool to remove older generation aircraft from the current world fleet.

"We think emissions trading is good, we think a global scheme would be good, but it's not going to happen for decades. And even if it happens, it is not the most important lever to pull," he says, noting emissions trading impacts airlines but not manufacturers. "We want to bring forward the next generation of technology."

Harrison proposes minimum emissions standards be implemented in three steps
• All new aircraft types to meet the standards by 2015
• Airlines to no longer add new aircraft that don't meet the standard by 2024
• Airlines to be barred from operating these aircraft by 2030
While this is timetable is based on short-haul aircraft, Harrison believes a similar phased approach could apply to long-haul aircraft.

"The pressure needs to be brought to bear on the people who manufacture aircraft. These companies are under no pressure to bring forward the next generation of aircraft," he says, noting noises from manufacturers on a narrowbody successor are now not before 2020. "If we are not careful we will find the next generation of aircraft will not be flying before 2030. It requires a much stronger approach. They [legislators] must introduce minimum standards of efficiency; otherwise I don't think that aviation will play its role in tackling climate change."

We can expect to see plenty more of this as airlines try to influence the debate on aviaiton emissions and press the case for sustainable growth of the sector ahead of Copenhagen next month. IATA, together with other industry associations, has been pushing for a common approach through ICAO. Read more on this here.

AFRAA's annual general assembly in Maputo, hosted by LAM Mozambique Airlines, has just come to a close and I'm left questioning whether this is the "same old, same old" or whether change could be glinting on the savannah horizon.

All the regular issues were all there: safety, foreign carrier invasion, slow progress on liberalisation and the need for greater intra-African co-operation. But that last issue - the need for co-operation among African airlines - was the talk of the conference, both formally and informally. "Less talk, more action" was the phrase of the day.

And we did see some action. Nigerian Eagle (formerly Virgin Nigeria) and Ethiopian Airways signed a codeshare deal, building on a recent agreement between Nigerian Eagle and Kenya Airways. There was also early inklings that AFRAA might be looking to set up some sort of Arabesque-style partnership scheme. Meanwhile, LAM Mozambique is joining the co-operation throng, with South African Express registering an interest in its forthcoming privatisation.

Then there's ASKY, a Togolese start-up which is part-owned by Ethiopian Airways, and Tanzania's Precision Air, in which Kenya Airways has a 49% stake. These last two are not new, but they are moves in the right direction towards big carriers teaming up with their smaller siblings.

The idea is this. African carriers are being "attacked" by Middle East and European Airlines. And now it's not just on long-haul. Emirates is getting involved in the new Senegal Airlines and Air Arabia has Air Arabia Maroc. As the cake gets divided and eaten, the African carriers continue to bicker among themselves. "We have already missed the boat," said one delegate.

Along the way we had some colourful analogies. Big African airlines were equated to lions and smaller carriers became antelopes. The suggestion was that they should be transformed into big lions and smaller lions, as part of one pride aiming for survival. "But then what will we eat?" was the retort.

Maybe new blood is the answer to boost co-operation. African aviation journalist and consultant Nick Fadugba (pictured below, right) has been named as the new AFRAA secretary general, replacing Christian Folly-Kossi (below, left) who has held the role for a decade.

I referred to this on Twitter (#AFRAA) as a "surprise, but obvious" selection. "Surprise" because Nick has never been an airline chief executive, but "obvious" because Nick knows the African aviation industry inside out from a realist's perspective. He has a huge network of contacts and is an exemplary diplomat. Fadugba will be backed by new AFRAA president Girma Wake, who is an industry veteran and chief executive of Ethiopian Airlines.

With these new appointments, strong words about real urgency for change and all the talk about co-operation, there is real potential for progress.

But all this good work was undermined by one of the administrative sessions. The task was simple: to agree on the wording for a co-operation resolution. But the question of which airline co-operation examples should be cited gave rise to the most heated debate of the conference. In the end, the decision was deferred. It was beyond irony.

Maybe the glimmer is nothing more than the mirage of the boat which has already left.

Check out the January edition of Airline Business for my formal write-up of the AFRAA AGA.

Akbar Al Baker, the chief executive of Qatar Airways, was on hand last night to hand out the journalist of the year award at the London-based Foreign Press Association Media Awards.

Seen here before the ceremony (right) with His Royal Highness the Prince of Asturias (left and guest of honour), Mr Al Baker handed over the main award to Martin Hickman of the Independent newspaper for his article Palm Oil.

Hickman was also pleased to receive two business class tickets for Qatar's new service between London and Melbourne, Australia. The airline begins serving the Australian city from London on 6 December.

In the murky world of slot sales, trades or leases at London's Heathrow Airport it is often tough to find out what really is going on.

That is currently the case for the announcement today that Swiss is returning to the Heathrow-Geneva market after a six year hiatus with a six-times-a-day schedule.

Now my assumption is that these slots are coming from fellow Lufthansa Group partner struggling UK carrier bmi - that's not a tough call really is it! And quite frankly using these slots on the profitable UK-Switzerland market makes sense from the group perspective.

The interesting background to this story is that Swiss pulled off Geneva and sold Heathrow slots to British Airways in 2003 as part of the price for entering the oneworld Alliance and securing some much-needed cash from BA.

Swiss UK country manager Gregor Koncilja (below) is careful not to say anything about the slot issue, but regardless he is clearly delighted to expand his Heathrow offering with the Geneva route.

Swiss also operates six times a day to Zurich from Heathrow, as well as seven times a day from London City Airport to Zurich. Its six time daily service from City to Geneva will go down by two flights when Heathrow begins.

Rather uniquely Swiss can sell both airports on one ticket, with some travellers jetting off from City to Switzerland directly from the offices in downtown London, but returning to the west of London Heathrow for more convenient access to home.

The new route will be operated with one Swiss Airbus A319 and a bmi A320 and the two carriers will also forge a wider codeshare pact for UK-Switzerland flights.

http://www.flightglobal.com/articles/2009/08/10/330767/picture-latest-heathrow-terminal-2-design-unveiled.html

My colleague Brendan Sobie recently interviewed the new chief executive of Kuwait's Jazeera Airways Stefan Pichler. The former Virgin Blue exec got a little hot under the collar about the term low-cost airline.

Unprompted, Stefan said this to Brendan:

"Everybody who runs an airline always tries to have the lowest cost possible because it's a bloody asset driven business. It's just common sense.

"If you have an asset driven business then you try to operate it with the lowest cost possible. Everyone wants the lowest cost possible but on the other hand everyone wants the highest revenue possible. So we all chase for the lowest cost and highest revenue.

"The only one difference is a new start up company has lower costs than an established legacy airline because they are start up businesses.

"So forget about all this bull shit about low-cost airlines - everyone tries to be low-cost. Everyone! It's a stupid little label. It's a stupid label for people like you (journalists)."

THAT TOLD US STEFAN!

Actually, Airline Business has long wondered about the low-cost carrier label, but not so much that we won't stop using it.

See this leader article from June 2008: What is the real thing?

The answer as always is "it depends".

For instance, if the island's flag carrier Air Malta didn't exist would this tiny island off the coast of Italy in the Mediterranean find itself cut off (the photo shows Valletta the rather stunning capital of Malta)? Probably not: there are plenty of airlines willing to serve Malta with connections to the wider world via London, Paris and Frankfurt.

But the government of Malta, like those in many other island states, would always be worried that it had little control over these connections.

That worry comes at a cost. The joy for airline chief executives like Joe Cappello is to try and minimise this cost, and in an ideal world make a bit of money.

See the video interview with Joe Cappello here.

As he told Airline Business last week: "I don't need to have to be a highly profitable carrier, but my shareholder does want an airline that provides sufficient capacity for an island nation [passenger and cargo]." It is seen as a "strategic asset", says Joe.

Making Air Malta profitable is Joe's current task and it involves a three-year restructuring plan that features new working arrangements with staff, including possible out-sourcing, and selling off various things like hotels, its duty free operation and its office buildings in London.

The target is to get Air Malta to a breakeven or small profit in two years.

Along the way Joe hopes this small carrier, which has 11 Airbus A320 family aircraft (all leased from ILFC), will not have to ask the government for more cash. "We have never been subsidised in 35 years," he says, and the aim is to continue that tradition.

FOR MORE AIRLINE CEO INTERVIEWS FROM AIRLINE BUSINESS CLICK HERE

Who would have thought selling slots at London's congested Heathrow airport could be this hard?

A few years back, as US, Middle Eastern and Indian carriers piled into Heathrow, slot prices boomed.

Now, as this interesting story from The Times says, the recession means shifting these once priceless assets is no easy matter, at least for anything approaching a decent price assuming a buyer is around.

For loss-making bmi, which is essentially built around the value of its Heathrow slot portfolio, and desperately needs cash in the next year, this is a body blow.

The fall in slot values is however only going to be a temporary measure, but it looks as if temporary could be a couple of years rather than months, and that is not good news for bmi or parent Lufthansa as they seek to revive the ailing UK carrier.

Some wise words from Oman Air chief executive and industry veteran Peter Hill, who is in London for the travel exhibition extravaganza that is World Travel Market. I asked him if there was too much capacity in the Middle East airline sector right now.

"The problem is there is too much capacity everywhere," he says. "It's the toughest environment I've ever experienced. Yields are under pressure everywhere, with the exception of some niche markets." While noting the roller-coaster nature of the airline business is always high and lows,he highlights the global nature of this downturn make it one of the toughest years he's even seen. "It might even get worse [for some] this winter," he adds.

What a time then to be launching a string of new international routes? Oman Air opened London last year, has recently added Frankfurt, Munich, Paris, the Maldives, while Sri Lanka -after a few delays in the process - follows in the middle of this month. This expansion is all tied to the Omani Government's tourism ambitions and Hill appreciates the benefit of having an owner with a long-term strategy. While the group will lose money during this expansion, Hill says the aim is to grow the network now so as to establish it as sustainable airline. Within five years he expects the group to at least reach break-even. You can read more on Oman's Air strategy here

Expect to hear more about Oman Air's expansion plans over the coming weeks and check out our video below as he explains some of the benefits to growing in a downturn:

Mexicana debuted a mainline A320 and a Boeing 717 operated by its Click subsidiary in the oneworld logs during a joining ceremony on 9 November. Here are some pictures I snapped quickly during the festivites at Mexicana's maintenance base in Mexico City.

Ahead of this month's Dubai Air Show, Flight International's Max Kingsley-Jones has been out in the Middle East talking to the major Gulf carriers about how they have been riding out the economic storm. You can check out the feature here and also watch short video interviews with Tim Clark at Emirates, James Hogan at Etihad and Akbar Al-Baker at Qatar Airways. Click here to read the article and see the videos.

The article is part of a wide-ranging special report on the Middle East aerospace sector published by Flight International, while you can also read the recent Airline Business stories on how the Middle East airline sector continues to grow and interviews with the new chief executives at Egyptair, Gulf Air and Royal Jordanian.

Interesting insight from Willie Walsh today into the possible future of BA's operations at Gatwick airport, as he indicated the days of it operating two-class cabins on short-haul flights from the airport could be numbered.

After BA posted first half losses today, the carrier reiterated its belief there were structural changes taking place in the industry, particularly relevent to its short-haul premium business where yields have been hard hit. Asked during a conference call with analysts today about the long-term future for premium in short-haul, Walsh outlined the robust future role he envisages at Heathrow.

"We believe we can continue to justify two-class service at Heathrow for some considerable time. Ten years from now I would expect we will still be operating a two-class service at Heathrow," he says. "I think the nature of the change we've seen primarily relates to point-to-point short-haul premium. I think that is structural. We see that where the short-haul leg is part of a combined short-haul/long-haul product, there is still demand for that product. So even with the most pessimistic outlook on this, we still believe this is a viable proposition for us, though it will be at a lower level and so the revenue stream will reduce, so we need to say a structural change."

But he acknowledges Gatwick provides a different challenge."I'm not convinced we can continue to provide it at Gatwick, because I think the demand at Gatwick is very different to the demand at Heathrow. We don't get as much transfer from short-haul to long-haul, so I think its probably a question of time, and sooner rather than later that we would address the issue of potentially moving to a single cabin configuration for short-haul at Gatwick."

Talking of Gatwick, Walsh said he had already spoken to the new owners of the south London airport. "I still see Gatwick as an opportunity for us," he says. "We've head early discussions with the new owners. We see the change of ownership as an opportunity," he says, noting this was not a criticism of previous management, but his believe Gatwick would benefit from more focused management.

We've not seen the words 'Alitalia' and 'profit' in the same sentence for a while, but owners of the new look, combined Alitalia/Air One operation have at least lodged their first profitable quarter since relaunching the carrier at the start of the year - the airline announcing a €15 million operating profit for its third quarter for three months ending 30 September.

Direct comparison with 2008 is nigh on impossible, given the complexities of trying to come up a with a like-for-like comparison of this year against a combination of slimmed down versions of Air One and Alitalia, even if figures for Alitalia in 2008 were readily available - which they are not. But the profit follows losses of €210 million and €63 million incurred in the first and second quarters respectively and outstrips its own target of reaching breakeven for the third quarter.

And while it might only be a modest profit, it must be a boost to the carrier given the tough market conditions and bearing in mind the old Alitalia racked of net losses in excess $3 billion between 2003-07 alone.

"The ability which Alitalia is demonstrating to be able to deal with a scenario of a market in great difficulty proves the validity of the industrial operation and of the investment made by the stockholders," says Alitalia chairman Robert Colaninno, who led the group of Italian investors which formally took control of the carrier early this year "The challenges that lie ahead are again many and complex, but today we know that we have the means to face them."

Virgin Atlantic Airways has got into the act on mobile phone applications with the launch of its "highly acclaimed" Flying Without Fear course as an app for iPhone or iPod.

Virgin says the app, which features an introduction by Richard Branson, is designed to help people cope with the anxiety at the prospect of flying and overcome their personal fears.

The app explains questions that people commonly have like "what happens if all the engines fail" or "what are all the onboard noises".

It has a video-based explanation of a flight from start to finish, relaxation exercises and fear therapy and a fear attack button for emergencies with breathing exercises.

It's a nice idea to make this mobile from Virgin, and comes with a small price tag of £2.99 (not sure if there is a US$ or € price?)

Now I want someone to invent an app that can tell you if you are sitting near someone was has this app so you can move seat accordingly.

So how does United Airlines chief executive Glenn Tilton think the recovery will pan out? Well he's been talking to CNN Money and reckons we're on course for a gradual U-shaped recovery. Check out his take on the current conditions here.

Amid all the gloom in the European airline sector right now, Ryanair's increased first half profits published yesterday showed further signs that at least some of the region's budget carriers are not only surviving, but seeing profit growth.

Ryanair increased first half net profits to €387 million from €225 million at the same stage last year, and while it expects to lose money over the second half of its financial year, is still targeting increased full-year profits net profits at the lower end of its €200 million to €300 million target range. This comes on top of Spanish budget carrier Vueling - recently merged with fellow Barcelona carrier Clickair - which has just announced a trebling of it third quarter operating profits to just under €70 million, while growing Scandinavian budget carrier Norwegian more than doubled its third quarter operating profit to NKr475 million ($85 million).

While Ryanair's yields have been sharply hit by the recession - average fares down 17% in the first half and the carrier is projecting yields falling by up to 20% over the second half - its unit costs were down 27% in the first half driven by the sharp reduction in fuel costs (down from €422 million in the third quarter last year to €246 million this time around).

A further sign of the carrier's growth - the long-term future of which O'Leary has raised a question mark over in relation to his attempts to secure a new aircraft deal with Boeing - is shown by his belief it will shortly become the number one carrier in three of Europe's most important markets. This he says is a result of the carrier's own growth and the short-haul capacity cuts of major European carriers.

"We really are growing very rapidly in some of the big markets," he says, in particularly of its position in the UK, Italy and Spain. "We will shortly be the number one airline in the UK, Italy and Spain," he predicts.

Picture credit: Billypix 

Flightglobal's Dan Thisdell was lucky enough to sample Air France's first Airbus A380 the other day, and there's lots of coverage all about it on Flightglobal (see links below).

But I am puzzled by one little area, which I assume is top deck front, at the entrance to the stairs. Air France calls this the gallery. I would call it a dead zone. There is no room for proper seats so it has become a kind of hanging about area.

Can anybody think of a better use for this area?

A few suggestions:

* Another loo - there are never enough on an aircraft are there?

* A shower

* An arcade area - a couple of playstation type games or a slot machine could be a good ancillary revenue source

* Table football / hockey etc

Here are those links:

Air France A380 will get fourth class later on

Air France rolls out first A380

The Air France A380 website with lots of photos, video and press kit