August 2011 Archives

I spent my two-week August break cruising across the Med at an altitude of around 100ft (amsl) at a speed of 21.5kt on board Cunard's latest piece of hardware - the Queen Elizabeth.

"Getting there is half the fun" was Cunard's slogan back in the 1960s, as the dawn of the jet age threatened to bring the curtain down on the era of the transatlantic liner. Four decades on that adage still applies, with the addition of: "...and travel without the hassle too"! And there's a lie-flat bed for every passenger (pictured below)!

The great thing about a ship-borne family hol is that it starts just moments after arriving at the port. That endless queuing for long-term car park buses, check-in, security, boarding, baggage, taxis, hotel check-in etc is pretty much non-existent. It's a case of turn up, get on board and start holidaying - even before you've left the port!

Perhaps that's why the liner has enjoyed such a huge renaissance, and why we should not be surprised that those '60s rumours of its demise were greatly exaggerated!
Read my review of the Queen Elizabeth for AERBT here.

For some reason I've got it in my head that US Airways chief Doug Parker needs to be crowned the godfather of US airline consoliation that was jump started during the last decade.

I'm winding down from the Boyd Group's International Aviation Forecast Summit in Albuquerque and I'm thinking about the opening montage video aessing the industry and paying a homage to the mofia with the tagline "It's just business."

I suppose that's where Parker's godfather crown crops up since he's been pounding the consolidation drum harder than anyone else since US Airways and America West merged in 2005.

Parker and his team tried to forge other mergers with Delta and United only to see those carriers pair with Northwest and Continental.

But Parker and US Airways moved on from those misses unphased and trumpted consolidation with each deal that closed.

So it was a bit ironic when Parker told Boyd conference attendees: "I'm done talking about consolidation."  He feels good about what's transpired with consolidation during the last few years and how its helping the industry inch closer to a reliable business model that could actually achieve elusvie sustained profitability.

From now on Parker believes anything that happens within the realm of consolidation will be purely tactical. 

He's encouraged by management teams that are squarely focused on profitability instead of market share, but issues a clear warning to those execs to stay the course. Says the godfather: "We cannot lose the discipline that got us here."

If Singapore Airlines isn't naming some new airline company 'Scoot' then a lot of effort is going into throwing nosey hacks off the scent.

Not only is there apparently a Scoot-related website domain registration linked to SIA, but a trawl through the Intellectual Property Office of Singapore's trademark database turns up the following entry, listed on 20 June, under 'transport':

The application has been put forward on behalf of a company named 'New Aviation' but which gives an address which matches the location of Singapore Airlines' headquarters at Changi International Airport.

UK Government policy on the country's aviation policy, and for London and the south-east in particular, has moved back into focus with the publication of the UK Department for Transport''s latest long-term Aviation Forecast.

The UK of course has been at the centre of the environment verusus economic growth debate over recent years, and the Coalition Government scrapped the previous government's plans for an additional runway at Heathrow Airport last year.

But this, together with other factors such as the soon to be applied EU emissions trading scheme, rising oil prices and continued economic woes, has had a pretty dramatic impact on projected growth. In 2009 it was projecting 455 million passengers per annum going through UK airports by 2030. Now it is projecting 335 milliion passengers per annum by 2030 - that equates to knocking around a quarter of its forecast of just two years ago.

A number of factors are attached to this - read more on this here in this Financial Times article - but it does of course renew the debate about aviation growth in the UK.

Indeed the projections that London's airports will be full by 2030 is prompting calls for action from within London's local leadership - see this article in The Guardian for more on this.

None of this of course is news to the UK's airline sector - indeed Willie Walsh, now heading BA parent International Airlines Group, has spent much of the last year explaining why the lack of room in London means the Madrid base of merger partner Iberia provides room for its growth ambitions. 

I'd expect the environment verusus economic growth debate regards aviation policy, especially if UK economic growth remains stifled, to run and run over the next few years. 

Anyway, if you are interested here are some key documents for further reading.

• 2011 Aviation Forecast
• 2009 Aviation Forecast

Delta's decision to opt for the Boeing 737-900ER instead of the re-engined version unveiled by the airframer as part of the massive order announced by American last month might leave some scratching their heads. 

My colleague Jon Ostrower has broken a superb piece in which sources indicate the re-engined options from both Boeing and Airbus were excluded from the competition.

Why would Delta, who has openly lavished praise on the PW GTF powering the Bombardier CSeries and A320neo, opt not to include those aircraft in its final evaluations? 

One theory is that Delta puts more weight on ownership cost in aircraft purchases than on promised efficiency improvements.  The carrier has been snagging up used MD-90s like mad during the last two-to-three years, and its chief executive Richard Anderson has stated its the economics that make the aircraft so attractive -- here's what he had to say in July of 2009.

The MD-90 has "far superior economics to a 737-800 and a very similar range and customer attributes". Furthermore, Anderson says the capital cost of the MD-90 is "a small fraction of the capital cost of a new Airbus or Boeing 737-800". 

So let's just say Boeing gave Delta a deal it couldn't refuse on the -900ERs. That could suddenly diminish the attractivness of a re-engined aircraft that so far (with the exception of some fan size estimates) remains largely undefined.

And let's not forget the strong message Anderson sent to sharholders during the carrier's Q2 earnings call desribing the upcoming order. 

"Let me be crystal clear about it, because it is important to our shareholders. We're not buying shiny objects here. Our goal is to improve our P&L [profit and loss] with a modest order of airplanes."

One final thought to remember is American hasn't firmed up its pledge for 100 of the re-engined 737s yet, nor has Boeing's board given the official go-ahead.

Fresh from his company's high profile link-up with Malaysia Airlines, AirAsia founder, Lotus F1 team principle and all-round entreprenur Tony Fernandes has joined the English football premiership jet-set by today formally completing a deal to buy west London football club Queens Park Rangers. Fernandes has taken a 66% stake in the club, which returned to the top tier of English football (at least for now) after a 15-year absence last week - with a less than encouraging 4-0 home defeat to Bolton.

Undeterred (and maybe having knocked a pound or two off the purchase price after that result), Fernandes completed the deal for the majority stake in the club today. Here he is enjoying manager Neil Warnock's autobiography and with his new QPR shirt hanging in the background - we'll ignore the fact that number one should really have been the goalkeeper's shirt.

Keen followers of Fernandes might be surprised to see him turn up at Loftus Road rather than his beloved West Ham - who he was previously linked to buying. "Everyone knows I've followed West Ham all my life," he says, "but I've always had a soft spot for QPR."

The deal keeps up the airline connection at QPR - Gulf Air having only just ended its three-year shirt sponsorship of the club - indeed QPR kicked off the new season without a shirt sponsor.

It joins a string of airline connections with English football clubs - ranging from Etihad at free-spending Manchester City, the Emirates name for Arsenal's home ground to EasyJet's sponsorship of English conference league team Luton Town.

It remains to be seen whether Fernandes has as much success guiding QPR - whom he describes as a raw diamond -  to success as he has AirAsia. 

Even for a man who has made a habit of being an industry trend-setter, today's coming together between Tony Fernandes' AirAsia and Malaysia Airlines marks something of another first for this industry. The proposed co-operation between AirAsia, its long-haul unit AirAsia X and Malaysia Airlines, including minority cross-shareholdings, could bring network carrier and low-cost rivals together in a way seldom seen in this industry before.

Exactly how the partnership unfolds between Malaysia's biggest airlines remains to be seen. It will initially focus on initial synergies between the two with limited impact on each party's operations, but envisages deeper co-operation once an anti-trust review is completed by the companies. Certainly the aim appears to be to enable Malaysia Airlines to focus on its network business, and the AirAsia units to grow in the low-cost sector - a move evident in the intention to reposition MAS' low-cost unit Firefly as a full-service regional operation.

Co-operation between network and low-cost carriers within Asia has become increasingly prominent - note for example ANA's move to work with AirAsia on its Japanese low-cost operation and Thai Airways turning to Tiger Airways to develop a low-fares presence. 

Similarly a dual approach operating model is not new. Indeed the positioning of Malaysia Airlines and AirAsia as partners in some ways mirrors the combination at Qantas with its Jetstar short and long-haul operations (a further twist is provided here as Malaysia Airlines is a new partner of Qantas having recently opted to join it in Oneworld, while AirAsia struck a loose partnership with JetStar last year).

But there are few examples poacher and game-keeper coming together. In Belgium, Brussels Airlines was born out of a merger between SN Brussels and low-fares carrier Virgin Express - though the latter had already moved towards the business middle ground by then - while Brazilian low-cost giant GOL's acquisition of national icon Varig out of administration was pretty much in name only.

One interesting comparison is with Ireland. Malaysia Airline has, like Aer Lingus, had to grow up with one of the region's dominant low-cost operators on its doorstep. Both have had to do so with larger than life leaders, Fernandes at AirAsia and Micheal O'Leary at Ryanair, driving their rivals forward. And, once the planned share swap is completed, Malaysia Airlines will like Aer Lingus find itself minority-owned by its low-cost rival.

The similarities though end there. Aer Lingus, the Irish government, Irish unions and European regulators continue to resist a future life as part of Ryanair. But with Tony Fernandes joining the Malaysia Airlines board as non-executive, non-independent director, and part of the team overseeing management of the company, the low-cost innovator is set to be embraced by the establishment.

For more on AirAsia and Tony Fernandes, read the Airline Business cover interview with him from May 2009 here.