Mark Pilling: September 2006 Archives

Security and who pays was not surprisingly the hot topic at the European Regions Airline Association (ERA) general assembly in Barcelona this week, writes Airline Business deputy editor Brendan Sobie.

ERA president and Aegean Airlines chief operating officer Antonis Simigdalas said there was "an endless discussion during the presidents meeting" on security costs and a top ERA priority is to push for state funding of the extra layers of security which were added first after the September 2001 terrorist attacks and the August 2006 terror scare in the UK.

"There is a big percentage of agreement the latest security measures have serious cost implications for all of us," he says.

In the keynote address, Iberia chairman Fernando Conte joined ERA in advocating for public funding of security. "We're not talking about airline or airport security. We're talking about public security. And our customers are paying their taxes and our European customers are paying their taxes in Europe. We must convey this message."

He says European carriers need to join together and urge European government to harmonise their policies on security costs. He complained the airline industry is often overlooked by European Union politicians and airlines have no influence despite its importance to European economies. "We are easy pray," he says.

Conte says the UK terror scare from August resulted in "a major distortion to our operation" and the extra security has since been a big inconvenience to Iberia's best customers, business class connecting passengers. Conte says many airports do not enough equipment to handle the current security requirements and the passenger really needs a "one stop security in Europe".

"We need to take into consideration higher security measures are here to stay. We need to make sure infrastructure and resources are (put in place at airports) for that scenario."

Aer Arann executive chairman Padraig OｴCeidigh said the additional security over the last several weeks has "cost implications for all ERA members and all airlines and airports". He adds "it's our companies that carry the can".

In an odd move, the European Regions Airlines Association (ERA) is leading an initiative to improve the transparency of prices on airline websites.

The ERA board approved at its annual general meeting in Barcelona on 28 September a resolution urging member and non member airlines to adhere to its recommendations for making clear on their websites how much tickets cost. Those airlines which adhere to the ERA standard for transparency of ticket prices will be permitted to publish a special logo unveiled by ERA at a press conference during its annual general meeting.

The logo (see below) looks similar to the ERA logo but instead of saying ERA it says "plain fares". The ERA plans to later make the logo available in several foreign languages.

ERA director of air transport policy Andy Clarke says the ERA decided to launch the initiative to mitigate passenger confusion caused by the omission of taxes and charges on some airline websites. Some airline websites do not display taxes and charges until the end of the transaction. To qualify for the "plain fares" logo, airlines must display a fully inclusive ticket price with equal prominence as the base fare. If the airline charges a booking or credit card fee for internet transactions, this fee must also be displayed prominently.

Clarke says the campaign is a step ahead of new European Union regulations which will take effect at the end of 2007.

The ERA is hoping other industry association will follow its lead and launch similar initiatives. "We cannot think of any precedence for this," ERA president Mike Ambrose says. "We think the idea should be picked up by other associations and airlines that are not part of any association."

But what value does this new ERA logo give passengers? ERA or any airline association does not have a recognisable brand outside the industry and ERA does not have the budget to launch a public awareness campaign. So what incentive does an airline have to listen to ERA, especially those that are not members and are even from different regions of the world?

Airline Business deputy editor Brendan Sobie asked Ambrose if it was unusual for an airline association to launch a campaign geared towards the passenger and he responded it was not only about building a profile for ERA with passengers but with the European Commission. "We want it to become a universally recognised hallmark," he says.

We will have to see if airlines now rush to prove to ERA they are worthy of the catchy "plain fares" slogan.

One day, perhaps sometime soon, travellers wishing to transfer seamlessly from one low-cost carrier to another may be able to do so. The key word here is seamlessly.

At present, do-it-yourself travellers who want to connect from say Canada's Zoom Airlines to Ryanair or easyJet at London Stansted Airport have to collect their bags after their transatlantic flight and recheck them in for the European leg of their journey. Sounds pretty painful, but a surprising number do it.

There is no baggage transfer, or through ticketing, because there is no-one to pay for it. Certainly not the airlines involved. Many are seeking a way of "interlining" passengers where at least one leg of the journey involves a low-cost player, but the stumbling block keeps coming back to the payment question.

Recognizing the rising demand for such connections, airports are at least trying to help. Denmark's Copenhagen is the latest. It has designed a page on its website called "Via Copenhagen" that shows the 130 or so connections available. London Stansted created a similar page some while ago but after a quick check it seems to have disappeared.

Copenhagen has also gone a step further by tying up with an insurance company to offer travellers insurance against missing a flight.

But, as the Emerging Allies feature in Airline Business October suggests, the time when some traditional and low-cost players will need to resolve this issue, as their commercial ties grow, is approaching.

Seat backs that is. Europe's low-cost giant Ryanair is exploiting yet another opportunity for ancillary revenue generation by selling advertising on the seat backs across its fleet.

It has announced a deal with a company called InviseoMedia to install seatback advertising on its entire current and future fleet of 239 Boeing 737-800s. The "Inviseo Table" is a special tray table with an advertising panel built into it. Ryanair stresses that this latest money making venture will only make a couple of million Euros annually, but that every cent counts.

Ryanair is an arch exponent of raising ancillary revenues, which it is growing rapidly. The mainstays of this area are website click-through bookings for car hire, hotel and insurance. Other plans in the pipeline are the use of inflight mobile phones and inflight gambling.

In the seat back initiative, the trays are significant pieces of advertising real estate, being seen by the carrier's 40+ million passengers for an estimated minimum of 40 minutes per flight. Several advertisers are already interested, says Ryanair.

The first carrier to use this type of advertising was germanwings, which began installing them last year. Daimler Chrysler, Nikon, Pentax, Canon and Microsoft have bought space. The revenue is shared with the airline, with Inviseo handling the installation, handling and marketing costs. "Costs to the airline are virtually non-existent," says Inviseo. Now that is music to the ears of the Ryanair boardroom.

"We talk about the Far East - it's not the Far East any more - it has come very close to us." This was Lufthansa chief executive Wolfgang Mayrhuber addressing assorted local dignitaries, ex-pat customers and European journalists in Beijing (seen below), during a three-day tour to celebrate the 80th anniversary of the German carrier's first flight to China, and its involvement in the country ever since, writes Helen Massy-Beresford, business reporter of Flight International, the sister title to Airline Business.

Back in 1926 the trip from Germany to China took 10 days. Now it takes more like 10 hours, and Lufthansa operates 52 flights a week between Germany and China, and has 8,000 of its 92,000 employees based there.

Mayrhuber himself has been to China six times already this year, a statistic that serves to underline how important the carrier's engagement with this market is to its strategy.

As its economy booms, China has become a byword for future sales potential in aerospace, providing a significant proportion of the expected growth in passenger numbers, and Western airlines are increasingly committing to the market, not just by flying there, but by creating their own footprints in the region.

Lufthansa is at the forefront of this journey east - the trip began with a ceremony to lay the foundation stone for the Lufthansa/Air China joint venture Ameco's Airbus A380 maintenance hangar at Beijing airport. Mayrhuber says Lufthansa's "stronghold" is Europe, but China is clearly an extremely significant market too.

Its investment in China over the last 80 years began early on with joint venture, Eurasia and today includes its Ameco maintenance and training joint venture with Air China and its investment in Jade Cargo International, a new cargo carrier.

Amid the flurry of positive comments about the Chinese market during the visit, however, Mayrhuber kept coming back to one sticking point for the airline's future development, taking the chance to call for a resolution to the issue of US-Europe Open Skies, as he wondered aloud how there could even still be debate over Open Skies when Lufthansa was able to form a joint venture in China all those years ago.

But the overall theme of the visit was of celebration of the airline's ongoing success in the Chinese market, in which Mayrhuber insists it is important for the airline to be a "corporate citizen". As well as helping to lay the a foundation stone for the A380 hangar, Mayrhuber presided over the opening of a Lufthansa gallery at the Imperial Art Museum, with a selection of photographs documenting the last 80 years of the carrier.

"In 15 years there will be more than 4 billion people flying - this is not a dream, this is reality," said Mayrhuber during the trip, and there's no doubt that China will make a significant contribution to this growth as its economy booms. Lufthansa is taking advantage of this growth already, but it remains to be seen whether other European carriers will follow suit to the same degree.

Low-cost carriers will finally be welcomed with open arms at Dubai when the ambitious Jebel Ali airport complex - branded Dubai World Central - opens in early 2008. At present, a lack of capacity at over-crowded Dubai International Airport means that low-cost services are not possible.

"We have turned away low-cost carriers because we don't have the facilities," said Anita Mehra Homayoun (above), director of marketing and communications for Dubai Civil Aviation, speaking at this week's World Route Development Forum in Dubai. The main low-fare player operating in the emirate is Air Arabia, which is based at nearby Sharjah International Airport.

The emphasis on low-fare services will change at Jebel Ali, she said, where DCA is building a low-cost terminal able to handle at least five million passengers a year in the first phase of the airport's construction. "The first phase of Dubai World Central will be for logistics services and low-cost carriers," said Mehra Homayoun. Although prices at the current Dubai International Airport are competitive, rates at the new airport will be lower and "definitely not be the same prices we are asking to pay there", she said.

Dubai urgently needs the extra capacity because its current terminal complex, designed to handle 22 million passengers annually, is now over the 25 million level, with some 29 million passengers expected this year, she said.

The new terminal being added at Dubai will take the airport's capacity to 60 million passengers by 2008. This airport could eventually be dedicated to home carrier Emirates. "I'm thinking that all other airlines will probably go to Dubai World Central," said Mehra, although no firm decisions have been reached yet.

One of the most impressive stands at Routes was a huge model of the vast Dubai World Central site (see below). With its six runways, monster airport, dedicated cargo and logistics centre, two 18-hole golf courses, industrial zone, residential city and commercial centre, it is a staggering undertaking, and one that only Dubai could seemingly envision.

The world of airline networking planning is gathering this week in Dubai as the World Route Development Forum touches down for its annual get together. Over 2,000 airlines, airports, suppliers and interested parties are here. These include Airline Business with a daily newspaper - Routes Daily News.

Naturally the region's airport groups are making a big splash, with Dubai taking centre stage with its incredible Dubai World Central project. The 140 sq km complex is not merely an airport but a logistics, business and leisure destination.

The ambitious plans for Qatar's New Doha International Airport and the expansion at Abu Dhabi International Airport are also prominently featured here.

The event officially opened yesterday (Sunday 17 September), and the Gulf's leading aviation lights were there to kickstart proceedings. This picture from the opening shows Sheikh Ahmed bin Saeed Al-Maktoum (right), and Akbar Al-Baker, sharing a friendly word at the New Doha International Airport stand. Al-Baker, the chief executive of the Qatar Airways group, greeted his counterpart from Dubai, who is the chairman of Emirates Group and president of Dubai Civil Aviation, as Sheikh Ahmed conducted a tour of the exhibition hall.

Al-Baker, who is here to help showcase Qatar's plans for the New Doha International Airport, told Routes Daily News that he hopes to begin services with his carrier's newly delivered Airbus A340-600s to New York's Newark Airport in the first quarter of 2007. By then the carrier will have taken delivery of four A340-600s.

Al-Baker said he prefers Newark with its convenient rail link to downtown New York over "congested" JFK.

For years the prospect of the Caribbean's multitude of island nations, and other interested neighbours, clubbing together and creating a pan-Caribbean carrier has been the topic of debate. Seldom has the debate got past the "in principle that sounds like a good idea" stage. As Peter Davies, the chief executive of BWIA West Indies Airways, observes: "This part of the world could do with one airline."

The latest attempt to find common ground between carriers around the region saw the resurgent Latin American Airlines Association - ALTA - gather leaders from several airlines in the Cayman Islands in July. Air Jamaica, BWIA, Caribbean Star, Cayman Airways, Panama's COPA, Antigua's Liat and El Salvador's TACA were all there.

At this stage the discussion centred on issues like sharing resources and using the collective mass of the players concerned to purchase suppliers and services. The Caribbean players would do well to share the experiences of the Arab carriers which have been working effectively through the Arab Air Carriers Organisation to jointly buy services like ground handling.

Taking a greater step requires a more radical policy shift from carriers and governments around the region, whether in the Arab world or in the Caribbean.

There has been talk of mergers before. In 2003, a combination of BWIA and Liat was mooted (BWIA has a 9% stake in Liat). Back in 1994 there was a plan for an operationally merged Caribbean carrier.

There are fewer greater joys in a Bavarian's life than drinking beer: Lots of it. And perhaps most remarkably, for many observers, at lunchtime after a mornings work and before a full afternoon's toil.

So it is with pleasure that we comment on the southern German tradition of beer drinking after a prompt from Munich Airport. It is gearing up for tomorrow's launch of the 2006 Oktoberfest, the world's largest beer festival.

The airport runs Airbraeu (see above), what it claims to be the world's only airport microbrewery and authentic Bavarian biergarten in the world. Airbraeu has brewed up 36,000 litres of fresh beer to thirsty Oktoberfest visitors so they can begin quaffing as soon as they step off the plane. This includes a batch of its own creation - Jet A1. If anybody gets a taste of this brew please tell us what it is like.

The airport has also outlined its top 10 - unofficial - survival tips for the festival. My favourite suggests dressing in traditional Bavarian garb to make the experience all the more memorable. So don't forget the lederhosen (for men) or dirndl (for women) if travelling to Munich.

In terms of marks out of 10 for succession planning Boeing gets a solid 7, Embraer warrants a glossy 10, while Airbus only merits a paltry 2.

It is quite remarkable that all three of the world's major aerospace manufacturers have undergone radical transformations at the top of their management trees all within a couple of months of each other. There is a stark difference between each however.

At July's Farnborough Airshow Alan Mulally must have known that his annual press briefing was to be his last. Soon the roar of the turbofan would be replaced in his world by the hum of the automobile engine, as Boeing's commercial airplanes supremo mulled a transfer to the troubled Ford Motor Company.

Mulally's move was hardly a surprise after he was overlooked by Boeing's board to lead the entire corporation in favour of 3M and GE executive James McNerney a year ago. Luckily for Boeing a ready-made replacement was waiting in the wings in the shape of Scott Carson, its head of sales. The affable Carson was brought in to revive Boeing's flagging sales efforts in late 2005. The only potential blot on his copy book is that he ran Connexion, which Boeing is now axing, although to his credit he did get it up and running and left well before the in-flight communications service came under scrutiny.

Mulally leaves Boeing with a coherent product strategy, with the 777 coming into its own and the 787 selling like hot cakes. Its production costs also appear to be well under control. Carson takes over a solid looking platform from which he can weave his sales magic.

In succession terms, Carson has most likely been lined up for months. In fact the press release has probably been sitting on a desktop just ready to go.

Boeing's peaceful transition jars with the woes at Airbus in the weeks running up to Farnborough. Flightglobal covered the departure of Noel Forgeard and arrival of Christian Streiff in great detail. Suffice to say, succession planning did not play a great role in the affair. The only reason Airbus gets a score of 2 out of 10 is that it responded quickly to bring Streiff in.

The most impressive succession is at Brazil's Embraer. The smooth handover of Mauricio Botelho to Frederico Curado is virtually by the book.

The appetite for aviation acquisitions among Iceland's hungry investment community has again been highlighted with the purchase by Swedish budget carrier FlyMe of a majority stake in UK charter operator Astraeus.

The Icelandic link in this deal comes from investment company Fons Eignarhaldsfelag, which has a 20% stakeholder in FlyMe. It also owns Iceland Express, another low-cost carrier.

FlyMe says there are plenty of synergies to be gained from moving aircraft efficiently around the three carriers. It has a network of European routes from its Gothenburg base. Astraeus meanwhile flies to leisure destinations in Europe and Africa.

As the award-winning article Northern Raiders, written by Gunter Endres in the February 2006 issue of Airline Business, explains, Icelandic investors have been extremely active in the aviation market in recent years.

And there are short odds that there will be more action from this quarter in the not too distant future.