May 2011 Archives

This weekend there will again be the puzzling sight for non-Formula 1 fans of four cars circulating in a Grand Prix carrying the name Lotus.

Thanks to AirAsia boss Tony Fernandes' success in the High Court, his F1 team has been cleared to keep using the name "Team Lotus" after a challenge from Lotus Cars, which is a sponsor of the Renault F1 team (and Lotus parent Proton is a part owner of the team).
Fernandes bought the rights to the name "Team Lotus" from David Hunt - brother of world champion James - but Lotus Cars has tried to prevent him using it in F1 as they have their own Grand Prix aspirations (through sponsorship of an front-running existing team) as part of a major relaunch and attempt to return to high-end road car production.

But why tie up with another team when there was already a perfectly good one running under the name Lotus and one which the car division had initially sanctioned? The fact is that the Fernandes outfit, starting in 2010 with a cleansheet, is simply not going to be competitive quickly enough in the eyes of Lotus Cars. It's all very well having the kudos of a name in F1, but not much of a brand-strengthening exercise if the cars are rattling around at the back of the grid being lapped by road-car rivals like Ferrari. 

But Fernandes means business, and if he can repeat the success that his AirAsia empire has achieved in the low-cost airline sector, then the F1 big guns - and Lotus Cars - need to look out.

I'm sure Lotus founder Colin Chapman would be delighted to see his racing team's name being employed by an entrepreneur with the same go-ahead spirit he showed back in the 1960s when his green and yellow Lotus F1 cars were dominating Grand Prix racing with the legendary Jim Clark at the wheel (pictured above). As Chapman used to say: "if you're not winning, you're not trying hard enough."

In June airline industry leaders head to Singapore for this year's IATA annual general meeting. Airline Business will be there as usual, producing daily papers, video inteviews, blogs and tweets from the event - which comes at a fascinating time as volatile fuels costs, geopolitical unrest and natural events threaten to destabilise the airline sector's recovery.

This year's meeting is also significant for IATA, given it marks Giovanni Bisignani's last AGM as director general - former Cathay Pacific chief executive Tony Tyler takes the helm in July - after a decade in which he has transformed IATA and the industry has faced unheralded challenges.  For more on Bisignani's impact on IATA and the industry, read the recent Airline Business comment on Giovanni's Decade here.

Toulouse had a distinctly orange tinge today when Luton Airport's favourite child celebrated the delivery of its 200th Airbus, which sort of also brings the EasyJet fleet to the double-century mark.

I say "sort of" because like all sensible LCC fundamentalists, the EZY fleet is in a constant state of flux. As new aircraft arrive, old ones (ie those that are more than around eight years of age) are disposed of.

But whatever the actual fleet count is today, chief executive Carolyn McCall (pictured above with Airbus supersalesman John Leahy (left) and easyJet head of fleet and procurement Chris Essex (right)) proudly declared that at the grand of age of 15, EasyJet is the youngest airline to ever reach the 200-Airbus-deliveries milestone.

Although EasyJet still has two 737-700s in service (they should be gone by next Summer), the first batch of Airbuses have already being retired. These comprise five A319s delivered around eight years ago on operating lease, and are now going through maintenance ahead of being returned to their lessors.

EasyJet's 200th Airbus is an A320 painted in a special reversed-out colour orange fuselage/white letters scheme as flamboyant as the Braniff liveries of old. The EZY200 delivery flight from Toulouse to Gatwick - with the roaming @MaABed aboard - was operated (via Orly) this afternoon (our flighdeck and cabin crew are pictured above with their boss Carolyn).

So easyJet has now got "about" 200 aircraft and Carolyn tells me that by the end of its current financial year (on 30 September) the fleet will number 204 aircraft (202 Airbuses and those last two 737-700s).

But how that fleet will then grow is the subject of much scrutiny in easyLand Luton at the moment. While the airline's original plan was to grow capacity at 7% a year, with so many uncertainties, such as the fuel price and the economic health of Europe, it is taking a tentative view towards the near-term. "It's all work in progress", says Carolyn, so watch this space!

Everything about low-cost airlines and a "just for fun" quiz in our interactive special which you can view by clicking here

Irish budget carrier Ryanair unveiled increased profits for 2010 yesterday - and chief executive Michael O'Leary had some very interesting things to say about the year ahead, which includes the carrier cutting capacity over the winter months for the first time in its history in a bid to hang on to first half gains amid higher fuel costs. READ AN ARTICLE ON IT HERE.

In our May issue of Airline Business we published our latest annual low-cost airline survey - based on airline results over the last 12 months. Taking a snapshot of a global industry, with differing financial years, is always something of a moving target. The picture will vary slightly depending on when the music stops. Our survey comes out before those airlines with a March ending financial year had reported their results for 2010/11, and because the last year featured a strong traffic recovery and as Ryanair has introduced some longer, higher-yielding routes, its interesting to see how the Irish carrier compares with its latest results.

The answer is, while already number two low-cost carrier the world by passenger number, Ryanair also moves up from fourth biggest to second behind US low-cost giant Southwest Airlines by revenues based on the 2010/11 financial year figures. It also underscores its profitability - operating profits increased from $568 million in 2009/10 to $686 million - again behind only Southwest. 

Top 5 low-cost carriers after December 2010 financial year closed

Airline                          Revenue         Op result    Year ending

Southwest Airlines         $12.1bn          $988m        Dec 10

Air Berlin                       $4.9bn           -$12m         Dec 10

EasyJet                        $4.6bn            $271m        Sep 10

Ryanair                         $4.2bn            $568m        Mar 10

Gol                               $4.0bn            $387m        Dec 10

Top 5 low-cost carriers after March 2011 financial year closed

Airline                          Revenue         Op result    Year ending

Southwest Airlines         $12.1bn          $988m        Dec 10

Ryanair                         $5.1bn            $686m        Mar 11

Air Berlin                       $4.9bn           -$12m         Dec 10

EasyJet                        $4.6bn            $271m        Sep 10

Gol                               $4.0bn            $387m        Dec 10

It will be interesting to see how things stand when easyJet completes its financial year in September.

For much more on the leading low-cost carriers, the evolution of the sector, future challenges and to test your own low-cost carrier knowledge with our cryptic picture quiz, check out our interactive special, the essential guide to low-cost airlines here.

At last week's EBACE business aviation show in Geneva, Hawker Beechcraft (HBC) announced a strategic alliance with Group Lotus which will see the two companies collaborating on engineering initiatives.

But more importantly for customers, a Lotus road car is being given away with each aircraft purchase made until the end of next month! Customers for the Hawker bizjets will receive a Lotus Evora, while purchasers of King Air turboprops will receive an Elise.

As HBC points out, "this strategic collaboration brings together two of Britain's best-known performance brands, representing a combination of 140 years of innovation, performance and craftsmanship".

While Lotus's British credentials are obvious (its road car plant is at Hethel near Norwich in East Anglia), HBC's heritage might be less apparent to some. As those in the know will point out, the "Hawker" name originates from "Hawker Siddeley", the British onetime manufacturer of the (nee de Havilland) HS 125 which, more than 1,600 deliveries later, remains in production as HBC's Hawker 750 and 900XP family of mid-size bizjets.

The HS 125 first flew in 1962 (meaning that the Hawker family celebrates its half century next year), the same year the original Lotus Elan made its debut on British roads. And as the Evora and Elise are spiritual successors to that little two-seater, so the Hawker 900XP shares much DNA with the original HS 125.

The photographic comparisons illustrate the engineering and design progress by these two great names over the last 50 years (above: 1960s Lotus Elan versus 2010 Lotus Evora; bellow: 1960s HS 125 versus 2010 Hawker 750). Both current models have clear lineage to their "swinging sixties" counterparts. 

If you can't conjure up the $12 million or so for a new Hawker with an Evora thrown in, then you could always just go for the Lotus on its own, which is a snip at just £60k on the road...

You can check out all the news from EBACE by clicking here

All the tools needed to assemble this huge model of a Hawker Beechcraft business jet are laid out on the company's stand here at the EBACE show.

The show is coming together on this press day ready for the grand openng tomorrow when all Hawker's aircraft will be assembled, shiny and pristine, along with the scores of others (models and the real thing).

For full coverage of the show from Flightglobal - videos, news, Twitter, blogs and images - visit our EBACE landing page.

Can't recall a more imaginative way of detecting turbulence than this one, which suggests using astronomical observations to pinpoint areas of rough air.

The patent document, which lists Boeing as an applicant, describes a method of capturing images of celestial features - lunar craters, sunspots, or stars - using cameras mounted on a platform, such as a ship or a building.

These images would be compared to one another to check for distortion caused by atmospheric refraction, evidence of high-altitude turbulence. The data, uplinked to meteorological stations, would then be relayed to aircraft in the vicinity.

All very well until the cloud rolls in, of course. Then what?

Some interesting lines out of the China earlier today on the growth over the next five years of its airline market. Here's a little taster and you can check out the full story here

Chinese airlines are expected to carry 450 million passengers in 2015, with passenger traffic growing at an annual rate of 11% from now until 2015.

The Civil Aviation Administration of China (CAAC), in its latest five-year masterplan on China's aviation sector, expects airline RPKs to increase 13% annually from 2010 to 2015.

For much more on the China's vision for developing its airline industry, in particular its internationalisation, let me point you in the direction of a feature written by Chinese air transport specialist Jane Pan that ran in the May issue of Airline Business, which goes into lots more detail about China's long-term strategic aims and some of the challenges it faces. Check out China's air transport plan: rising dragon here

Schedules specialist Innovata has helped regional airline lobby group the ERA create a funky interactive online route map of its members' networks.

The ERA says that the map uses the latest version of the mapping service from Innovata, which incidentally also supplies schedules data to Flightglobal.

The service has been specially configured so that routes, schedules, and timetables can be displayed for ERA member airlines, and dynamically plotted by interrogating the database.

The map highlights that ERA airline members collectively serve 483 cities across Europe linking over 3,000 city pairs and that route distances range from 13nm to 2,833nm.

Click here to try out the ERA's interactive map.

As the financial crisis hit a couple of years ago we heard much from Willie Willie, now chief executive of British Airways holding company International Airlines Group, about how the slump in premium traffic was a mix of cyclical and structural factors. He argued that while long-haul premium was likely return to previous peaks, the short-haul premium market had structurally changed and would not again reach those peaks.

So as IAG today, in posting a halving of first quarters losses and forecasting significant growth in operating profit for the year, trumpeted the improvement in unit revenues, how does Walsh see premium traffic having developed over that time. Speaking during today's IAG results conference call he said the mix of cyclical and structural change is pretty much what happened.

"The recovery has been quicker than we expected at that time. So we are not quite back to the peak levels on volumes for long-haul premium traffic, but we are getting close to where we were at the peak. So we think there is still scope for growth in the long-haul premium element in particular.

Short-haul premium has recovered stronger than I thought it would, but its still below where we were at the peak and we don't believe it will ever get back to the peak figures, and that's why we thought it was a structural shift. But it has actually come back stronger than we had expected.

And here is a quick IAG - which also includes Iberia view from Walsh on the premium traffic outlook.

"That trend in premium growth, primarily in long-haul, has continued into April and looking at the forward booking environment for both British Airways and Iberia, that trend continues. So I think there is still some upside in long-haul premium going forward."

You can read loads more from Willie Walsh with the Airline Business cover interview he gave us in March this year - follow this link to read more

Photo credit: Billypix.com

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A quick footnote to our recent article on the challenges facing airlines in cross-border investments (Finding a new Frontier Airline Business May 2011) - here are some thoughts on the subject from Brian Havel - director of the International Aviation Law Institute at DePaul University Chicago - you can find this and other thoughts at the Aviation Law Prof Blog

David Knibb has an informative piece in the latest issue of Airline Business on the incremental movement toward crossborder investment in the airline industry and the formidable challenges which remain.  See Ownership: Finding a New Frontier, Airline Bus., Apr. 18, 2011.  As the article discusses, the tolerance for foreign ownership of airlines varies from region to region and, thus far, has often been allowed on an ad hoc basis.  So long as States retain the right under their respective air services agreements (ASA) to limit or revoke the traffic rights of airlines which are not owned and controlled by the citizens of their home countries, international air carries which ingest foreign capital or come under the control of a foreign entity risk losing valuable market access privileges.  For instance, once the merger between Chile's LAN and Brazil's TAM is approved, the United States could, under the terms of its ASA with Brazil, lock-out TAM on the grounds that it is owned and controlled by Chileans.

In an effort to inject a high-level of stability into the international aviation investment regime, the United States has proposed a Multilateral Convention on Foreign Investment in Airlines.  See Facilitating Airline Access to International Capital Markets, ICAO Working Paper No. A37-WP/190 (Sept. 13, 2010).  Under the agreement, signatories would provide a list of partner States against which they will not enforce the nationality clauses in their ASAs.  This would have the benefit of providing greater legal certainity with respect to which air carriers could freely engaged in crossborder mergers and acquisitions without potentially forfeiting their traffic rights.  While a final draft of the Convention has yet to appear, the International Civil Aviation Organization is currently assessing its terms and whether or not to open the treaty up for formal ratification.

For more from Brian Havel, check out this piece he wrote as part of Airline Business' 25th anniversary issue on why open skies is a milestone and not the culmination of liberalisation

Bahrain's national carrier Gulf Air is boosting capacity in its summer schedule through increased frequencies and new destinations, but will have to wait another month to hear whether its flagship Formula 1 Grand Prix will be reinstated this year.

The F1 race, which had been due to open the season in March, was postponed as the political unrest spread across the kingdom. The 1 May deadline given to Bahrain by Formula 1's governing body the FIA to devise a rescheduling plan has come and gone, and this has now been extended to 3 June amid the continued threat of more unrest.

The race, for which Gulf Air has been the title sponsor since it began in 2004, is a vital status symbol for both the airline and the country in what is a fiercely competitive region for civil aviation. It also provides a significant boost in traffic and profile for Gulf Air.

In a statement, the race organisers reiterated that they intend to re-instate the grand prix, but stopped short of a commitment to running a race in 2011: "Clearly our national priority is to find a resolution to the difficulties that the kingdom of Bahrain has experienced," said circuit chairman Zayed Rashid Alzayani: "The national situation has moved on in a positive manner, the situation is evolving all the time; our day-to-day life is gradually improving under the current State of National Safety."

Despite the ongoing uncertainty over the political situation, Gulf Air is adding over 1,700 seats per week to meet seasonal demand with the launch of its summer schedule. It has started services to three new destinations - Kabul, Copenhagen and Nairobi.

Capacity increases will result from increased frequencies and larger aircraft on some routes. The Istanbul service grows from four to five flights a week, with an A320 replacing the current Embraer 170 regional jet. Bangkok sees frequencies increase from seven to nine per week from 1 June and the introduction of a bigger aircraft - an A330. Milan flights are increasing from four to six per week with an A320 replacing a Boeing 737, offering 117% more seats each week.

Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organisation, was in Washington DC late last month addressing the International Aviation Club, and there was a bit of extra spice in the timing, coming just a few months after Ulrich Schulte-Strathaus - his counterpart at European network carrier grouping the Association of European Airlines addressing the same forum cited the growth of the Gulf carriers while calling for ICAO to help create a level competitive arena.

Schulte-Strathaus in January said the three major Gulf carriers' huge commitment to fleet expansion made him uneasy."In a market of double-digit growth, airlines that have long-haul aircraft fleets which dwarf those of their international competitors are being driven by a policy which is not compatible with that of the USA and Europe [and other countries]," he added.

This has already prompted responses from Qatar Airways and Emirates, and Teffaha used the opportunity of his speech to provide a robust defence of expansion in the region. Here is a flavour with a couple of extracts from the speech.

"The land of the Pharaohs was the one to create mythology. Apparently, this art is being perfected with regards to Arab aviation by some of our neighbors in Europe. Lots of myths have been created. That doesn't make them true, such as a myth of over-capacity although history shows that Arab airlines have been meeting their expansion with actual growth, our average capacity deployment per aircraft is above 200 seats. Our load factor is in the high 70's , year round.

The second myth is that we are out to conquer the world of aviation. The reality is the only conqueror in aviation is the customer. If an airline was able to respond to the requirements of customers by providing him or her with value for money and a good service, then that customer will definitely put his or her confidence in that airline. If your cost base is high, if your obligations are making you slow to move, and if you're losing your competitive edge, beware that the customer is not a charity, and will not stick with you as an act of kindness."

And here is another extract:

"Yes! Our market share is growing on a global scale, but do you think we do that by subsidising customers? Do financial institutions give the excellent ratings they do to Arab airlines if these airlines are throwing money at their customers by selling below cost? And even for the few government owned Arab airlines that do not publish their financial reports as yet; do you think that any of the Arab governments accept subsidising travelers between Europe and Asia? Or any other traveler for this matter. Our competitiveness doesn't stem from government subsidies nor is it a bi-product of national or vertical integration. Arab airlines competitiveness starts with what technology and geography enabled us to do: To provide truly global connections with one stop."
 

What makes a low-cost carrier a low-cost carrier? And how does it differ from a network airline? The two worlds, once chalk and cheese, have been orbiting ever closer over the years and the line between the two is more blurred than ever before.

This has been one of things we've been looking at as we've been throwing ourselves into the sector at Airline Business this month with our annual low-cost carrier financial and traffic survey and, for the first time this year, an interactive edition of magazine covering low-cost sector.

If you've missed it, you can check out The Essential Guide To Low-Cost Carriers - which features an interactive treatment of annual financial rankings, a groovy timeline where you quite literally open a window to find out more about the evolution of low-cost carriers, and a cryptic picture quiz to send you down low-cost carrier memory lane.

Of course you could argue a better reflection of the sector might have been The Essential Guide to No-Frills and Hybrid Carriers. Okay it doesn't quite have the same ring about it, but does reflect that one size no longer fits all when it comes to low-cost operators.

The sheer variety of their operations - including long-haul flights - means a Virgin Blue or Air Berlin for example is a very different animal from a Ryanair. And the move to lure more lucrative business travellers over to low-cost carriers has seen many move into network carrier territory, such as embracing distrubition through GDS systems for example. And the different models make comparing like-with-like more complicated. Ryanair, for example, based on revenues for its March 2010 financial year, is the fourth largest operator behind Southwest, Air Berlin and easyJet - which have higher yielding traffic. But by passenger count Ryanair is by some distance larger than both Air Berlin and easyJet, and behind only Southwest. 

So how to define a low-cost carrier? For me, while you can frame it with some tangible low-cost carrier ingredients - namely predominantly operating short-haul, point-to-point routes with a single fleet in a single class with a simple fare structure often to secondary airports - few low-cost carriers still tick all these boxes. Instead I think it is more about a low-cost carrier ethos and which side of the line the airline grew up on. And keeping this ethos will be key for low-cost carriers to retain their identity and cost advantage, as their models grow ever more sophisticated and their network counterparts bring their own costs down. 

For more on low-cost carriers, open our interactive edition of Airline Business here 

For more on the challenges facing low-cost carrier growth, read our recent analysis feature here

Journalists from around the globe last Monday finally made it to Tulsa last after the ripple effect from weather around Dallas caused massive delays around Dallas Fort Worth. But eventually we all arrived and embarked on a two day journey of Tulsa and Oklahoma City's aerospace bastions.

The largest being American's massive maintenance base in Tulsa --  a staple in the city since the 1940s.  Spanning 300 acres and 3.3 million square feet, work performed by American technicians focues on the carrier's Boeing 737s/757s and MD-80s. The work scope also includes powerplant, landing gear and component repair, and a composite centre housing an antoclave that strategically positions Tulsa to potentially land maintenance of American's 787s due for delivery beginning in 2014.

American and its 6,800 employees in Tulsa represent an anomaly among airlines by performing a majority of its own maintenance, rather than outsourcing.  The carrier is also starting a measured push to grow third party business, with prime targets being its fellow oneworld alliance carriers. American has already performed work for fellow oneworld carrier Cathay Pacific and plans to start work on some Japan Airlines' 767s being returned to lessors. American even counts Aeromexico -- a member of rival SkyTeam -- as one of its third party customers.

American spends roughly $80 million with Oklahoma-based vendors annually -- and Tulsa also looks after its flagship employer. In 2003 American received about $23 million to preserve jobs and purchase through Tulsa's "Vision 2025" package featuring minor increases to sales taxes to offer economic incentives and fund capital improvments.

The throughput rate at American's Tulsa base in 2010 included 549 heavy and light modificaitons and checks and 248 individual landing gear overhauls.

Currently one of American's largest projects in Tulsa is a retrofit of 76 older Boeing 737-800s to add 12 additional economy seats for a total of 160. The reconfiguration also makes those aircraft uniform with the interior of current delivery -800s.  It's not clear how American plans to balance current and retrofit interiors on the -800s, with the new Sky Interiors offered by Boeing. American is due to take delivery of its first aircraft featuring the new "Sky" package later this month.

Here are a few shot I hastily took while scribbling notes at American's Tulsa site, whose interior is rarely photographed.  They include seat refurbishment shots, a thrust reverser snapshot and other pix.