Mark Pilling: November 2006 Archives

Gary Rogliano, who led all-business class Maxjet into the high-end transatlantic luxury airline wars, left the year-old Washington Dulles-based carrier after an apparent dust up with his board of directors. The airline said he was "leaving to pursue other opportunities", which is press release for "shown the door".

Rogliano left shortly after the carrier began flying its 102-seat Boeing 767s between London Stansted and Las Vegas. That was its third route after New York JFK and Washington Dulles routes to and from Stansted, and the Las Vegas flight is reportedly doing box-office business. But the market is getting more crowded with a UK-based entrant, SilverJet, planning to start up next year, as well as an French all-business carrier, Elysair, also eyeing an early 2007 start.

Eos, offering all sleeping seats, began on the same week as Maxjet, and now plans an expansion with a new $75 million infusion of capital that will let it buy new Boeing 757s to convert into its 48-seat configuration.

The Maxjet marketing and selling point was "affordable luxury", which it defines as an almost lie-flat seat in an all business-class aircraft. Eos, by contrast, has full beds in small, enclosed sections. Competition in the market, though, has made fares competitive in this niche segment, chipping away slightly at the Maxjet advantage.

Taking Rogliano's place as president and chief executive is Bill Stockbridge, its chairman and one of its founders. A veteran of the air cargo industry, Stockbridge is a member of the Richmond, Virginia, group of wealthy investors who started Maxjet.

Read our chief executive interview with Rogliano.

Cancun, Mexico's fast growing tourist mecca, is half a world away from the development miracle of Dubai but they have a similar buzz: the buzz of commerce, construction and fun.
The Airline Business team are here in Cancun publishing a daily newspaper at the Latin American Airline Leaders Forum. Driving from the airport - an efficient gateway run by private company ASUR - there are rows of hotels facing the Caribbean Sea, and many more being built.
Construction is happening everywhere, night and day, just like Dubai and neighbours Abu Dhabi and Doha. Cancun epitomises the economic vibrancy of Mexico, and as such is the ideal venue for the Latin American Airline Association's annual meeting.
From tomorrow - 30 November - the ALTA Airline Business dailies will be available to read on the Flight Global website.

The Airline Business leader in our December issue was entitled "Merger mania" on the back of the move by US Airways to acquire Delta Air Lines. Just days after the magazine came out two other potential deals have been aired: a takeover of Australia's Qantas by a partnership of Macquarie Bank and the Texas Pacific Group private equity firm; and more talks between Air France-KLM about the Franco-Dutch carrier possibly taking over troubled Alitalia.

What is puzzling about the Qantas approach is that it includes Texas Pacific, which has successfully invested in Continental, America West, Ryanair and Tiger Airways. At the IATA Annual General Meeting in June its founding partner, David Bonderman questioned the wisdom of going anywhere near an industry that was past the peak as far as the cycle goes. "It's time to sell ladies and gentlemen," he said.

So now it's time to buy is it David? So what has changed your mind? Perhaps the industry is, after all, headed for a soft landing and the doomsayers are getting less gloomy.

Buying Alitalia has many more pitfalls, so don't expect this story to run anywhere as close as the Qantas one. Still Air-France-KLM is the logical partner in many ways for Alitalia and its board would be remiss if it didn't take another close look at whether a partnership could finally work.

Don't expect these moves to be the last of the merger plays as the takeover market starts to hype up.

Looking none the worse for recent heart surgery, Airbus chief salesman John Leahy was in London today (22 November) launching the European manufacturer's Global Market Forecast, it's first for two years.
Just as our recent blog with Qatar Airways chief executive Akbar Al Baker showed, Leahy is a quote machine. So here are the highlights from his packed press conference, which did, as my colleague from Flight International Max Kingsley-Jones observed, start 20 minutes late. Typical Airbus we commented dryly.
1. Leahy didn't shy away from the obvious: Airbus has had a bad year. Or has it really been that bad? Leahy observed that despite the "absolute mess Airbus is in in 2006", it will still end up being its second best ever sales performance. Current sales stand at 619 aircraft, compared to the record-setting level of 1,111 in 2005. "This surprised a lot of people in Toulouse when I mentioned it...It has been one of the best of years as well as one of the worst of years," he said.
2. Market share. Leahy's target in order terms is to keep in the 40-60% band. This year after five ahead of Boeing, Airbus will most likely fall behind again. It has 43% of the year's orders now, in unit, terms, and around 35-37% of orders by value. "In terms of deliveries it is our best ever year - we will deliver 425 aircraft."
3. A380 compensation. Asked (by me actually) if Airbus was setting an industry record for airline compensation levels on a single programme with the A380 Leahy had a straight reply: "I wouldn't know if we are setting new records. What I do know is the compensation is reasonable in many cases," he said, adding that in most cases it is capped.
4. A380 cancellations. Despite three delays to the A380, Leahy does not expect any more cancellations after FedEx chopped its A380 freigher order. Customers "get mad, but they don't talk about cancellations, they are talking about compensation...all the others are staying with us". And, in fact, carriers like Qantas, Singapore Airlines and others are talking about how many more they are buying, he said.
5. Low-cost A380. After evacuation tests that got 853 people and 20 crew off the A380, Leahy is only half-joking about the super jumbo as a real people-mover. The success of the test means "I've got to update my brochures," he said, when asked if low-cost carriers might be interested in the aircraft. Leahy revealed he was talking to a carrier interested in the A330 that afternoon that had also asked for a idea of the A380 in a low-cost configuration.
6. A350 launch. Wait for the EADS board meeting, said Leahy. But: "I've been pleasantly surprised by the fact of how many of our customers are willing to wait for it (the A350). It has slowed sales for our competitor," he said, referring of course to Boeing's 787.
7. Salesmanship. Asked if sorting out the A380 issues was taking up most of his time, Leahy replied "too much!" He is currently spending about 50% of his energy on the A380 and the rest on new aircraft sales. However, the A380 talks have had some spin-off benefits: "Part of sorting out the A380's problems is producing new sales."

Caribbean Airlines chief exec Peter Davies is drawing inspiration for himself and his staff in the run up to launching the new carrier in the New Year from an old British railway company motto: "The passenger is our business, not an interruption to our service", was used by a rail provider in 1930s, explains Davies.
The transfer from British West Indies Airways to Caribbean Airlines is going well, says Davies, but the deal has not gone without facing plenty of stick in the Caribbean. According to Davies, about 30% of the people applying to work for Caribbean Airlines are ex-BWIA staff, with the rest being new. "That's encouraging," says Davies.
As the queues form to work for this new Trinidad-based carrier, Davies is turning to another old-fashioned technique to help ticket sales: open a shop. With internet booking levels low in the Caribbean, Davies is planning to open up to six internet cafes in Trinidad & Tobago to encourage travellers to come and book their flights online. "We want to hit the market very hard," he says.

The bold move to create Caribbean Airlines out of the ashes of serial loss-maker British West Indies Airways (BWIA) took another step today with the announcement that the new carrier (launches 1 January) will axe its daily service between its Trinidad & Tobago base and London Heathrow.
The Airbus A340 route has been a flagship link for BWIA but has been leaking cash. Chief executive Peter Davies has negotiated a deal with British Airways to continue the service, with BA flying on from Barbados three times a week from Gatwick. This arrangement begins from the summer schedule from 27 March. The carriers will codeshare on the route.
All pretty routine stuff from a business point of view, albeit a controversial move for BWIA/Caribbean Airlines, as the Caribbean governments treasure their international connections. Which explains the Caribbean Airlines press release, entitled: Caribbean Airlines to start new service to London.
What? Technically, yes, Caribbean is gaining access to a new airport (Gatwick) via another carrier, but the key part of the deal has been to persuade BA to take on the route and for Caribbean to stop flying across the atlantic.
Actually that wasn't all that hard a decision for BA because the deal came with a serious sweetener - the chance for BA to buy three weekly slots pairs from Caribbean Airline. A slot pair at this congested airport can fetch around $10 million.
Heathrow is the second international route the airline has axed, following the cessation of Washington Dulles services in October.

It was inevitable that safety became a topic of heated discussions during November's Annual General Assembly of the African Airlines Association (AFRAA) in Cairo. While it is true that cold statistics clearly show the safety record among airlines on the continent to be considerably worse than that in other, more developed regions of the world, airline chiefs insist that this creates an entirely false picture.

Their ire is directed particularly at the European Union (EU) whose blacklist of nearly 100 African airlines has caused consternation and has been detrimental to the air transport industry, and the loss of income incalculable.

The countries with the greatest number on the banned list for flying into the EU - Democratic Republic of Congo, Equatorial Guinea and Sierra Leone - said AFRAA secretary general Christian Folly-Kossi are "tarnishing the whole of Africa, creating an [undeserved] perception that safety on the whole continent is poor". Furthermore, said another leader, "most of these airlines are not even owned or managed by Africans, and it is governments that must get a grip on licensing".

No one disputes that airport and air navigation infrastructure is badly in need of upgrading and that more modern aircraft have to be introduced. But, says Gabriel Gbenga Olowo, executive director at Nigeria's Bellview Airlines, it is wrong to suggest that ageing aircraft are to blame for the poor safety record.

Not one of the major accident investigations has found any technical fault with the aircraft, he insists, adding that "the real problem is the human factor". Airlines have inherited pilots and maintenance staff from the largely unregulated early days of a fledgling industry, from the failed Nigeria Airways and Air Afrique and others.

"Old pilots and engineers are complacent and unwilling to adapt to new methods and technology," he says, "we need to train a younger generation of pilots and engineers, but it will take time."

In spite of the negative publicity about safety standards in Africa, there are encouraging signs of progress. The more established carriers are engaging in IATA's six-point Operational Safety Audit (IOSA). Five African airlines have already passed IOSA, three more have been audited, another eight have contracted for an audit, and 11 more are currently in negotiation with one or more audit organisations.
IOSA, says Air Mauritius chairman Sanjay Bhuckory, should be seen as a "certificate of morality".

British Airways chose the centre of one of its main customer bases - London's Docklands close to the financial heartland of the UK - as the venue to launch its new Club World business class.
BA is following hard on the heels of Singapore Airlines and Cathay Pacific in unveiling its next generation business class flat bed. For chief executive Willie Walsh, five years after the carrier "revolutionized" the industry with the first flat bed, "now is the time for BA to take a decisive step forward".
The ｣100 million ($190 million) investment sees BA keeping its patented "ying yang" arrangement where half the seats face backwards. The bed is 25% wider and there is a new privacy screen and on-demand in-flight entertainment system.
The roll-out of the new Club World will take 18 months with the first aircraft in service at the end of November. Only Boeing 777s and 747-400s are slated to receive the upgraded beds for now.
As part of the roll-out BA is increasing the number of business class seats from the 38 today to 52 in 31 of its 747-400s. This will produce an extra 8% more business class capacity.

There is nothing better the Qatar Airways chief Akbar Al Baker likes to do, it seems, is spar with the press.
He was positively beaming as he took his seat at the airline's annual press conference at World Travel Market in London the other day. The room was packed, for Al Baker is good value. He says stuff: Often controversial stuff.
But what's this, he starts with an apology. He had promised last year that his airline would launch 10 destinations during 2006. It didn't, it only launched one (in March it kicked off a daily service between its Doha hub and Hong Kong).
The reason was because "of protracted negotiations with Boeing and Airbus for our next aircraft order", said Al Baker. Those negotiations were fruitless and Qatar could not get its hands on the airliners to launch its new routes.
That will all change in 2007 as all four of its A340-600s come into service and first of 20 777s start flying towards the end of the year.
Now what: green taxes? Al Baker is not in favour. He favours putting collection boxes at airports so that people can contribute voluntarily. "The biggest polluters are countries that have a total disregard (for climate change)," he says.
Also, he believes, green campaigners should look harder at those dirty military fast jets rather than bleating on about the more fuel-efficient civil airliners. I felt the PR team wince at that one.
Next: low-cost carriers in the Middle East. Now Al Baker's been asked that one a few times before. "I'll have to record my answer," he says, and play it back the next time. The answer is that low-cost carriers are a no-no for Al Baker in his region. A lack of market access and strong passenger demands to carry a lot of luggage are just two good reasons why it won't work.
What about access to Australia? Unfortunately not yet, he says resignedly. "Australian carriers are very troubled by competition from Middle Eastern carriers. We are being restricted by the government of Australia which is putting up unacceptable hurdles."
The way out question. Sometimes at press conferences you get a question from the left field. Al Baker's came from a journalist determined to pin him down about a recent trip he had made with Qatar. The vegetarian meal he had ordered did not come, there was some sort of delay at Singapore Changi that was down to Qatar and his application for a frequent flyer card had not been processed.
Al Baker took this in his stride, apologizing and promising to look into these matters. In fact, his commercial general manager, Peter Spencer, who was also on the podium, took the chance to e-mail Doha HQ and find some answers while the conference continued. Later he passed the reply back to Al Baker. His boss could reply right away to the miffed journalist, at least on one point. The answer: he had not filled in the application properly - no address was supplied. Oh no, said the scribe, I did fill it out. Puzzled looks all round.
Al Baker turns to Spencer, who is confident his team has unearthed the errant form, and says it will all be checked, and adds: "If he's giving you the wrong information, you know what happens!" We all snigger in jest, for Al Baker is alluding to his reputation of something of a tough task master. We all know however that he is only half joking.
Roll on the next Qatar Airways press conference. They are top value.

"We have a very strong compensation clause with a limited excusable delay beyond which Airbus will have to give me loads of money and the aircraft as a gift," said Akbar Al Baker (centre), with only a hint of pathos, speaking at his annual press conference at London's World Travel Market show yesterday about discussions between his airline and Airbus about A380 deliveries.

Over the past few weeks, all the customers of the Airbus A380 have been nagged by journalists over how much the manufacturer is giving airlines for delays to their deliveries. "As far as compensation is concerned we have a very rigid mechanism in our purchase agreement which I cannot disclose," said the head of Qatar Airways.

A press conference held by Al Baker is always an entertaining affair, and his appearance at WTM did not disappoint. Although his central message was to announce his carrier is getting back on its ambitious growth track with a whole load of new route launches next year, after just one (Hong Kong) this year, the hour-long discussion ranged over topics as diverse as the Airbus A380, the environment, passenger service, Australian routes, in-flight catering monopolies, female pilots, Live TV and financial results.

Among the highlights was the clearest indication yet about when Qatar will take its first of the Airbus superjumbos. The airline had already delayed its first delivery from 2007 to 2009 because of delays to the construction of the New Doha International Airport, said Al Baker. Already "disappointed" with a further delay, Qatar now knows it will receive its first A380 in late 2010 and the second in early 2011. Two options will follow a year later if exercised.

Maxjet, the year-old all-business class carrier that plies its trade across the atlantic, launched its latest service - between London Stansted and Las Vegas - with all the razzmatazz you would expect with the world's gaming and fun capital at one end of the route.

And none other than the King himself was tempted to turn out and endorse the new service.

Maxjet's twice-weekly Boeing 767 service will compete with Virgin Atlantic for travellers wishing to travel directly between London and Las Vegas. Virgin flies daily 747-400s between its Gatwick base and the US city.

Las Vegas becomes Maxjet's third route, adding to those from Stansted to New York JKF and Washington Dulles.