October 2010 Archives

Delegates at the Airline Business World Air Forum (WAF) in Cannes were today treated to a rare guest appearance from Niki Lauda, former racing driver and chief executive of flyNiki.

Lauda seldom attends industry functions and a show of hands in the conference room revealed that only two WAF delegates have seen him present before. The three-times Formula 1 champion flew in by business jet specially to present at the event.

But what do you ask such a charismatic character, with so many experiences under his belt?

How about quizzing him on which is more frightening - motor racing or trying to make a profit in the airline industry:

"Racing today is safe and can earn you a lot of money. Aviation is dangerous and can lose you a lot of money," said the smiling entrepreneur before dashing back off to his waiting business jet.

The editorial team has decamped to Cannes in the south of France for the Airline Business World Air Forum.

Stay updated in real-time as managing editor Graham Dunn (@ABDunn) and features editor Victoria Moores (@VictoriaOnAir) tweet some key quotes from the conference.

Also, check out our introductory video below and keep an eye on this blog as we post all the videos from the conference!

We'll be hearing from the chief executives of Vueling, Aer Lingus, Royal Jordanian and Oman Air, along with US government official and regulation guru John Byerly.

Listen to the next video to hear Vueling chief executive Alex Cruz's somewhat controversial views on how the stripped down airline product does not have a future... 

I also caught up with Aer Lingus chief executive Christoph Mueller on how traditional and low-cost airline products are increasingly converging to the middle ground.

John Byerly, deputy US assistant secretary for transportation affairs, voices his views on how ownership and control should "not be a bargaining chip" and how China, South Africa, Russia top the USA's Open Skies wish list.

Oman Air chief executive Peter Hill talks about how his mandate is to "put Oman on the map".

Everyone loves insight into landmark merger deals --- Jeff Smisek called Glenn Tilton on his birthday to talk about what now is United-Continental Holdings, the America West Cactus call sign remains as a symbol of the brand that faded with the US Airways merger.

AirTran senior vice president marketing and planning Kevin Healy earlier this week at the Boyd Group's International Aviation Forecast Summit gave a few more details into the landmark deal that ushered in consolidation in the US low cost sector.

By now everyone knows Southwest chief executive Gary Kelly placed a call in April to his counterpart at AirTran Bob Fornaro as the firs step in the process of Southwest acquiring AirTran.

Healy says only about six people at AirTran were aware of the negotiations, and it wasn't really until the last couple weeks prior to the announcement that the parties were sure they could firm up a deal. "There were a lot of issues to work through," Healy told Summit attendees.

Healy has been with AirTran for 11 years, and remembers when the carrier's managment led by Joe Leonard was trying to revive the fortunes of what was once Valujet.

Laughing, Healy says "if any of us would have done due diligence, none of us would have come".  During one of his first meetings at the airline Healy recalls hearing the company's cash balances were roughly $9 million. "We were a snowstorm away from going out of business," Healy recounts.

AirTran eventually became a formidable challenger to Delta in Atlanta and recently recorded a third quarter operating margin of 8.5%, its best since 2003.

Healy says his personal view is perhaps he's not ready to write the last chapter for AirTran. But he realizes "there aren't a lot of happy endings in the airline industry. But as last chapters go, this is a good one

As US carriers post record third quarter profits JP Morgan analyst Jamie Baker is asking the chiefs of those airlines to philsophize about a term used generously by airlines executives -- discipline.

An underlying theme in some earnings discussions is another question -- has the airline business model changed for good? That is, will carriers remain focused on return on capital as the good times seemingly return, or will they fall into the trap of vying for market share that will ultimately drive carriers back to the black?  Now more than any time in the history of the airline business it seems like a strict focus on the bottom line is prevailing among management teams througout the industrsy.

Here's what US Airways chief Doug Parker has to say --

Discipline. I think in the generic term, discipline is a focus on what you're supposed to do and not succumbing to temptation. And those that are disciplined do just that, and those that don't remain disciplined end up succumbing sometimes to temptation. What that means for business, for the airline business, I think what you're supposed to do is clearly defined for us. It's to work for the people that own the company - our shareholders - and to maximize their long-term value. And that's what we're supposed to do.

So those that are disciplined remain focused on that. Temptation, I guess, in our business comes in all sorts of different shapes and sizes from time to time. Sometimes the temptation is, as opposed to creating value it's you know, wanting to be the biggest or caring more about market share than you do about profitability. We've certainly seen that happen in the past in our business. We're competitive people and you don't like to see someone else getting more share than you do sometimes - that's temptation.

I mean the history of our industry has been crises forced discipline upon us. That's certainly been the case for the past three years. And then unfortunately when the crisis subsides we tend to, at least sometimes, succumb to temptation. And I think that's what everybody's worried about right now. Is this industry going to do what it's done in the past, kind of what I was getting at in my introductory comments, and succumb to those temptations? Or are we going to keep focusing, or have we finally learned that what we had to do to get through this is exactly what needs to happen in good times, too, to make sure that we actually generate the kinds of returns other businesses do instead of having survival as our objective?

I think that's where we are this time. I think it's dramatically different this time through. I don't see the same sort of return to you know, to succumbing to temptation that we've had in the past. I do see some discipline as I've just defined it - certainly from US Airways. I can speak much better about us than I can about anybody else, but obviously in our industry it matters if others have similar views, or if the industry's restructured, more importantly. I think that's what's happened. This consolidation that's occurred is a huge issue, and that's dramatically different than we've been before.

 

Delta's Richard Anderson was the first chief executive to answer Baker's discpline question, and he also dismisses trying to chase market share.

It is pretty much an overused term. I think it means that your growth, whatever growth you have in the business has got to be below GDP and can't be at the expense of yield and RASM improvement. So basically you keep up with demand, don't worry about chasing share, but instead focus on operating, what is going to increase the operating margin of the company.

 The other piece you got to look at is fleet. The way for us to de-lever the business is to avoid big capital outlays if at all possible for modifications to equipment or buying new equipment, and so you've got to also take into account how your capital deployment is working and what the fleet plan looks like. 

The episode of Republic Airways chief Bryan Bedford on Undercover Boss has just aired in the US - in which he works on the front line incognito for a week - for more details check out this blog from Flightglobal's Will Horton here - if you have seen the programme we'd love to know what you think.

To read more about Bryan Bedford and Republic, read the Airline Business cover interview with him from September last year here.

What do you think are the landmark events that have helped shape the course of the airline industry over the last 25 years?  We're looking right now at that question as we are working on a special timeline graphic we are producing as part the Airline Business 25th anniversary - a special edition and online package will be coming out in December. With only limited space to play with, I'm already predicting arguments here in the Airline Business newsroom about what makes the final cut. But what do you think? What are the airlines, the people, the deals or even the crises which have shaped this industry? We'd love to from hear from you.

Fellow carriers be on notice -- JetBlue is watching you.

As part of its new "You Above All" marketing campaign debuting on October 15 features an online portion of hidden camera scenarios called "Ground Rules."  Here's what JetBlue has planned --

The unscripted videos point out the shortcomings of much of the airline industry by bringing other airlines' service policies and procedures to light on the ground. They feature real people in real situations being deprived of things they've come to expect, such as legroom in a taxi, a full can of soda from a street vendor and free luggage storage in the trunk of a taxi.  The videos will debut in a YouTube homepage takeover on Friday.

The new campaign is the first developed in conjunction with JetBlue's new ad agency Mullen.

image credit -- www.people-clipart.com  

Interesting story in UK daily paper The Guardian today about how BBC news is having to cutback travel plans after spending more than £100,000 on its coverage of the rescue of the Chilean miners. These cuts include now planning to send just one person to cover the Cancun Climate Change summit later this year.

"It's vital that the BBC doesn't compromise the quality of coverage when ministers meet in Cancún this December," Friends of the Earth's executive director Andy Atkins tells the paper. Kind of a novelty to hear environmentalists worried about a corporation cutting down on their long-haul flying plans don't you think? 

That bit of facetiousness aside, it does seem to illustrate how climate change has slipped down the wider news agenda since the frenzy (and the anti-climax) of Copenhagen a year ago - for more on this here's a good blog from The Guardian.

And in case you missed it, here's some analysis of how the aviation and the emissions picture looks following last week's ICAO global framework agreement - which as far as airlines entering the EU emissions trading scheme from 2012, appears to be much as it did before the agreement.  

Interesting piece in the WSJ from Scott McCartney about a row brewing in the US about where sky marshals sit onboard the aircraft - which apparantly on security grounds is mostly up in the front rather than that at the back of the bus.

It raises an interesting debate, which you could either cynically view as cost-cutting airlines and sky marshals fighting over whether they get a hot towel or not, or as a debate over the most effective location to post sky marshals onboard the aircraft, and indeed the overall importance of sky marshals in countering terrorism plots.

Anyway, here's a quick taster of the WSJ piece and a link to the full story.

To protect the nation's air travelers, federal air marshals deployed after the 2001 terrorist attacks try to travel incognito, often in pairs, and choose flights identified with the potential to fall under threat

And they almost always fly first class--something some airlines would like to change. With cockpit doors fortified and a history of attackers choosing coach seats, some airline executives and security experts question whether the first-class practice is really necessary--or even a good idea. It could weaken security by isolating marshals or making them easier for terrorists to identify, airline executives say.

With more threats in the coach cabin now, first-class clustering may not make as much security sense. Security experts say bombers are a bigger threat today than knife-wielding attackers trying to get through secure cockpit doors, and Transportation Security Administration checkpoints are heavily focused on explosives, whether hidden in shoes, liquids or under clothes. Some believe bombers try to target areas over the wing--a structurally critical location and also the site of fuel storage--to cause the most damage to the aircraft.

Like buses, you wait all day for a long-haul, low-cost Scandinavian airline, and then two come along at once. It is almost a year since initial details first emerged of the ambitions of Norwegian start-up Feel Air and the touted long-haul project from Norwegian, though it will be 2011 at the earliest before either take to the sky

Kai Holmberg - chief executive of planned Norwegian (the place, rather than the airline) start-up Feel Air - was at the recent Low Cost Airlines Congress in London. His airline has identified initial routes connecting Oslo Gardermoen and Stockholm Arlanda with New York JFK and Bangkok and had originally hoped to begin flights in the spring of this year. Holmberg said recently the airline has now secured funding for its first phase and is in talks with investors for further funding.

Asked about the progress of the project during a panel debate at the LCC Congress, Holmberg said Feel Air would begin flights next year - but would not specify beyond that. He though says in the meantime the carrier has strengthened the robustness of its plan. "I think it is a much more robust business plan. From two destinations, we have identified an opportunity for nine aircraft [in the longer-term], including some medium haul routes to balance utilisation and seasonality.

"And from an external side, I think the market opportunity has grown stronger. I haven't seen lease rates go up much. I think it is good timing for this opportunity."

He says the carrier has learnt lessons from previous successful and not so successful operators in the field.  "Staying out of any lion's cages is one of the lessons. Feel Air is staying focused on the leisure flows and we are really dependent only on Scandinavian flows [of passengers]." And he sees big potential in the market. "It is a market that is so well educated about travelling low-cost and how to self-connect, and has high propensity for travel."

Scandinavia's largest existing low-cost carrier Norwegian has also floated the idea of beginning a long-haul operation, which would though operate as an independent entity to the short-haul carrier. It has previously said it envisions acquiring up to 15 widebodies for the long-haul operation to begin in 2011 and has listed New York and Bangkok as being the most likely initial destinations. Its chief executive Bjorn Kjos was recently quoted as saying it would make a decision on fleet type this month

"We have not made a final decision and we are talking with Airbus and Boeing about possible deliveries," Norwegian's chief commercial officer Daniel Skjeldam said in London at the LCC Congress. "We have a very good feeder platform. You need a good feeder [for the long-haul], although its not a feeder [network] in the traditional feeder sense."

Skjeldam meanwhile was talking up the carrier's forthcoming debut of connectivity onboard its aircraft; the airline is working with Row 44 on the project and will start on two aircraft before a fleet-wide deployment. "One ancillary [service] we believe will be very ground-breaking is wireless network, hopefully starting in October and we believe that will change the preferences for business passengers. It will be so ground-breaking that even FFPs won't be so important as whether we have wi-fi onboard," he suggests, at least until other carriers follow suit.

To find out more about fast-growing Norwegian check-out the Airline Business cover interview I did with Bjorn Kjos in January 2009 (which includes by some distance the most stunning backdrop for a CEO photo-shoot I can remember - see below).

Okay, up until a year ago, you mention double-dip, and I think of that episode of Seinfeld when George breaks social etiquette norms again by dipping a potato chip (okay, crisp), taking a bite, and dipping the chip again. But double-dip these days means the uncertainty surrounding the economic recovery in Europe and the US. 

While in London for the formal unveiling of their transatlantic joint venture with Iberia (read more here), American Airlines and British Airways bosses Gerard Arpey and Willie Walsh were both asked for their takes on the state of the recovery. And while hardly jumping up and down and generating a wave of feel-good optimism that the good times are here, both did at least believe things are improving and do not see signs a double dip recession is on the way for either Europe or the US. Here is what they had to say:

Willie Walsh (after BA's September premium traffic grew 4.3%)

"They [September traffic results] were clearly positive from a premium volume point of view and that's very encouraging to see. As well as seeing positive volumes in our premium cabins, we also continue to see a more positive yield environment in the premium and non-premium classes So things have improved from where they were 12 months ago, but it is an improvement off a very low base and we are still a long way away from where we were in the peak. But there is no question in my mind that things are improving and that the general economic environment continues to move forward, in some cases moving forward at a slower pace, but it is moving forward and I'm not seeing any evidence to support concerns that are being expressed in some quarters of a double dip."

Gerard Arpey

"Clearly business has improved and we have seen return of business traffic, and that is encouraging. The industry has always been and remains, highly dependent on the economies around the world. I'm encouraged that it increasingly doesn't look like we
are headed for a double dip in the US, and that is encouraging, but I would have to describe the recovery as fragile and heavily dependent on economic activity in the US and around the world."

And for those of you not familiar with George and the double-dip, here's the exhange from Seinfeld.

[At a wake (!): George takes a chip from the bowl, dips it, takes a bite, and then dips again. Timmy (the brother of George's girlfriend) hurriedly comes over.]

TIMMY: What are you doing?
GEORGE: What?
TIMMY: Did ... did you just double-dip that chip?
GEORGE: Excuse me?
TIMMY: You double-dipped the chip!
GEORGE: "Double-dipped"? What are you talking about?
TIMMY: You dipped the chip. You took a bite. And you dipped again.
GEORGE: So...?
TIMMY: That's like putting your whole mouth right in the dip! From now on, when you take a chip - just take one dip and end it!
GEORGE: Well, I'm sorry, Timmy ... but I don't dip that way. [George takes a chip]
TIMMY: Oh, you don't, huh?
GEORGE: No. [dips the chip] You dip the way you want to dip ... [takes a bite of the chip] I'll dip the way I want to dip. [double-dips the chip]
TIMMY: Give me the chip! [Grabs George and the chip goes flying.] Give me the chip! [George and Timmy start to struggle.]

The Simplyflying-Airline Business Social Media for the Aviation Industry got off to a flying start with a room full of delegates. However, the venue's capability to cater to wifi needs wasn't top notch unfortunately and ironically.

The Social Media conference provided the ideal opportunity to launch the inaugural Simplyflying-Airline Business Social Media Excellence Awards for Airlines. 

Left to right: Shashank Nigam, CEO SimpliFlying, Aurelie Valtat, online communications manager, Eurocontrol, Dr. Torsten Wingenter, Lufthansa's global coordination for social media marketing, Christian Kamhaug, manager ancillary services, Scandinavian Airlines, Hisham Saleh Mohd, Malaysian Airlines' e-marketing manager, Sergio Mello, CEO SATISFLY, Mary Kirby, Flightglobal senior editor Americas and RunwayGirl blog author

Categories and winners

Best Social Media Campaign - Lufthansa's "innovative" MySkyStatus

Best Use of Social Media for Crisis Management - SAS Scandinavian Airlines - for communication during the #ashcloud chaos

Best Use of Social Media to drive Revenue - Malaysia Airlines' 72 Hours Merdeka promotion

Simplyflying Hero of the Year - Aurelie Valtat, Eurocontrol's online communications manager for her social media management of the ashcloud chaos to the aviation industry

Shashank Nigam, CEO SimpliFlying said: "It is important to recognise the social media best practices in the industry. These awards do just that. The winners showed innovation and persistence to pursue results."

You can still join in the conversation - just look up trending topic #SMairlines on Twitter and let us all know your thoughts on the issues brought up at this inaugural conference.

Helsinki Airport is hosting an exhibition of fantastic images from US photographer Carolyn Russo for the next six months.

Carolyn Russo is a photographer and curator from the Smithsonian National Air and Space Museum. Her shots will be exhibited in Arrivals Hall 2A at the Airport from October to April 2011.

Russo's style is described as a "unique approach that turns aviation technology into art".

"Her closely cropped images of the shapes, structures, materials, colours and details of aircraft and spacecraft transform aviation technology and aircraft design into fascinating photographic art," says the release from the airport.
.
The exhibition is organised by Finavia, the Aviation Writers of Finland, Finnair, Kameralehti magazine and Eirikuva.

The photos are, top, of a McDonnell Douglas F-4S Phantom.

Above, a Sabre S-86.

Above - Spitfire details - lovely stuff!

Above - A Wittman copy.