Mark Pilling: October 2008 Archives

Driss Benhima, president of Royal Air Maroc, talked to me this morning here at the World Air Transport Forum about the planned privatisation of his carrier. Here is the story published on Air Transport Intelligence around midday.

Morocco ready to privatise Royal Air Maroc in 2009

Moroccan flag carrier Royal Air Maroc is on the blocks to be privatised next year. The country's government listed the carrier among several state-owned companies to be sold off in its recently announced budget bill.

The state has a 96.13% stake in Royal Air Maroc with both Air France and Iberia having small shareholdings, of 2.73% and 0.91% respectively, and the balance held by private investors.

Commenting on the announcement at the World Air Transport Forum in Paris, Driss Benhima, president of Royal Air Maroc, said: "I can't say what the privatisation of Royal Air Maroc will look like exactly as it is a process managed by the government but I understand the identification of a strategic partner is a higher priority compared with achieving a simple financial transaction."

The government's budget bill will be considered by the Moroccan parliament in the coming weeks and is scheduled to be passed by year-end. "The management of Royal Air Maroc will make its best effort to support whatever parliament and the government decide," said Benhima.

The privatisation of Royal Air Maroc is the next step in a major restructuring of the country's air transport policy and industry. Morocco began the process of liberalising its aviation market in 2001 when it signed an Open Skies agreement with the US.

The market began to open to Europe in 2003 when low-cost carriers were allowed on an individual basis. This was followed with an Open Skies deal in 2006 with the European Union opening the market completely.

In the first phase of the privatisation, expected to be completed during 2009, the government will sell around a 20% stake in the airline. A further stake could be sold at a later date and a public listing is envisaged in the second phase of the process in the coming years.

The government is seeking an airline partner for Royal Air Maroc to give the carrier access to larger global networks. The partner should also bring access to one of the global airline alliances.

This year Royal Air Maroc will make a small profit on revenues of some €1.2 billion ($1.5 billion), making it one of the few African carriers to remain in the black.

"Our fundamentals are very good but we need to work with a partner to build our management skills in areas like technology, yield management and pricing, network planning and maintenance," said Benhima.

The carrier has been steadily building its hub operations at Casablanca in recent years with a fleet of 32 Boeing 737s and 767s.

While I wait for the OK on a rather neat story I got this morning at the Forum, here are a couple fo snippets to keep me going.

Firstly, Pierre Jeanniot, WAF chairman and former IATA director general, made this observation about the changes Southwest Airlines - the original low-cost carrier - is making to its business model as it adds a business class and some frills.

"It has muddied completely the clear fundamental formula that has delivered Southwest profits for 17 years," he said. "It remains to be seen if Southwest becomes an ordinary legacy airline." My comment: GOD FORBID!

Also, Virgin Atlantic chief executive Steve Ridgway, was here yesterday. He had to rush off at the end because he had an important appointment in central London - the premier of the new James Bond film Quantum of Solace.

Virgin is one of the sponsors of the latest 007 movie. 

Watching QoS must have been a nice diversion from the press interviews Steve was giving following yesterday's announcement that Lufthansa is going to take the majority ownership of bmi, and what that might mean down the line for Virgin. 

I've just put this story across to the editors of Air Transport Intelligence, the sister online service of Airline Business, which some of you see but others don't.

Steve Ridgway, Virgin Atlantic's CEO, was very open about what might happen following today's announcement that Lufthansa is going to take majority control of bmi.

Here's the raw copy I filed:

"The next step in the ownership saga of the UK's bmi could well involve Virgin Atlantic Airways following today's announcement that Lufthansa is to gain majority control of bmi.

"You can view bmi/Virgin as one of the great undone deals in aviation," said Steve Ridgway, chief executive of Virgin Atlantic speaking at the World Air Transport Forum conference in Paris.

"Everybody expected this was going to happen - it is no surprise," said Ridgway. "The issue now is what does Lufthansa want to do going forward."

Virgin has long been advocating a link up between its own long-haul services and the short and medium haul network of bmi, which would make a strong strategic fit at London Heathrow Airport.

"It would make a lot of sense," said Ridgway, with the combined carrier providing a larger and more effective competitor to British Airways and its oneworld alliance partners.

However, there have been no formal talks between Lufthansa and Virgin on what may happen with bmi once the German carrier increases its stake, said Ridgway.

At present Virgin Atlantic is majority owned by the Virgin Group and Sir Richard Branson with Lufthansa's Star Alliance partner Singapore Airlines holding a 49% stake in Virgin Atlantic.

Ridgway was at the WAF conference pushing for cross-border investment barriers in air transport to be removed. "If barriers go it will speed up consolidation - and we may well be part of that," he said."

The potential problem posed by infectious viral disease pandemics was highlighted during his introductory speech by former IATA director general Pierre Jeanniot at the opening of the World AIr Transport Forum here in Paris.

Jeanniot said that a year on from the 2007 Forum, where the talk was all about aviation's impact on the environment, pandemics were "another bête noir to worry about - they are a hidden problem".

Today's air transport system allows "worldwide infectious death" to circle the globe in a matter of hours potentially with devasating effect, he said.

Little has been done to develop effective drugs to combat these diseases, said Jeanniot, who bemoaned the amount of research going on in this field.

It is with this in mind that he is becoming the chairman of an international not-for-profit consortium called the Foundation on Antivirals - FAV - to invest in research to combat this problem.

Honorary patrons of the foundation are former French president Jacques Chirac and former Canadian prime minister Jean Chretien.

Berliners in the heart of the city will wake up on the first November morning to an eerie silence. The last aircraft will have landed on its runways the day before, and no more passengers will emerge from its iconic terminal building, once one of the world's biggest.

Next year, it would have been one hundred years since Frenchman Armand Zipfel made the first flight demonstration, followed later in 1909 by Orville Wright.

Even before, the land owned in medieval times,by the Knights Templars, after whom it was named when designated an airport in October 1923, was the spectacular location for the annual military parade on the German Emperor's birthday.

Its history was in many ways unique. In 1927 it became the first airport to have an underground railway connection and was the busiest airport in the 1930s, at a time when it served as the gateway to Europe as a potent symbol of Hitler's 'world capital'.

In tunnels below its halls, thousands of workers were busy assembling the Junkers Ju 87 Stuka dive bombers and later the Fokke-Wulf Fw 190 fighter aircraft that were so prominent and effective in the Second World War.

But its greatest moment, and one that will always be remembered, came in 1948. Following the imposition by the Soviet Union of a total blockade over West-Berlin, the USA and Britain initiated the famed Berlin Airlift.

During a period of almost one year, aircraft from the US Air Force, US Navy, The UK Royal Air Force, British European Airways and a number of fledgling UK charter airlines made 277,728 flights and transported 2,326,205 tons of supplies. Tempelhof and the 'raisin bombers' became a symbol for the Berliners' desire for freedom.

History, however illustrious or infamous, is no guarantee for permanency. In spite of years of protest action to halt the closure, the airport will finally shut down.

Rest in peace!.  

The dramatic decision by Ryanair to close its Valencia base in south-eastern Spain, while emphasising its formidable muscle in Europe, has produced no winners.

This is a first for the Irish low-fare airline, which prides itself on never having closed a base, but one it surely would have preferred not to have had to make. The loss of a substantial part of an eventual investment of €140 million ($180 million), which will now be diverted to another base yet to be announced, will hurt, but probably not quite as much as the immediate disappearance of 750,000 passengers and more than 250 jobs from Valencia airport and the knock-on effect for tourism on the increasingly popular Costa del Azahar (pictured is Valencia's famous bullring). 

Ryanair announced its Valencia base in August 2007 and stated that it has been responsible for the bulk of the growth at the airport over the past two years. This year, the airline projects it would account for 25%, or 1.5 million passengers at the airport.

But it says it lost patience after the continued refusal of the Comunitat Valencia to engage in constructive discussions in relation to the promotion of the airport and the routes across Ryanair's network in Europe. While telling Ryanair that no funds were available for such co-operation, it apparently gave €12m worth of marketing support to local airline, Air Nostrum.

Ryanair's deputy chief executive, Michael Cawley, bemoaned the negative attitude encountered by the Valencia authorities, adding: "This is a very black day for the airport of Valencia and the city and region it serves. Ryanair had begun to transform this once overlooked region of Spanish tourism into a powerhouse of growth and development.

"Ryanair has already shown the possibilities which are uniquely available through its low fares, and this without any assistance or co-operation from the local tourism board. However, the naked subsidisation of competitor airlines at the expense of Ryanair ... has meant that continuation of our base at the airport is untenable."

Ryanair will  maintain limited operations to Valencia, but the Comunitat Valenciana may have killed the goose that lays the golden egg.

Other secondary European airports, which may be tempted to tangle with Ryanair, take note.

Iran is a country from which very little information about it's air transport industry emerges. So, when in an interview with Amadeus the other day they tell me they've sold one of their Pioneer reservation platforms to an Iranian low-cost start-up I got very interested.

They kindly passed on the website details of the airline, which is called easeon air. I will reserve judgement about the name. No, in fact I won't, it's plain rubbish isn't it.

Apparently the carrier will begin operating later this year, but I only have this second hand so if any of you know better please tell me. Amadeus said they are migrating easeon to Pioneer at the moment.

The site tells us the carrier will fly domestically and to the UAE and will be the country's first LCC. Tehran will be its base and it will be privately owned.

My colleague at sister media outlet Air Transport Intelligence first go a sniff of an LCC in Iran a couple of years ago. Here's what David Kaminski wrote back then:

Iran said to approve first low-cost carrier
London (10Jan06, 16:02 GMT, 126 words)

Source: Air Transport Intelligence news

So there you have and you read it here first. Fill free to add more details to our scanty knowledge of easeon air (not easy to write) and if you are from easeon do get in touch and tell us more about yourselves.

They've both got big egos and have not been shy of giving the other a good verbal bashing from time to time, but Naresh Goyal and VJ Mallya have proved they are men for the big occasion by putting aside their differences and teaming up.

It is a remarkable bonding after a brief affair that has been wholly brought on by spiralling losses in India's domestic makret. Goyal, the founder of Jet Airways, has warned of even deeper losses this year, while Mallya has been finding it tough to find a good use for several Airbus wide and narrowbodies parked up in France.

So, the announcement today of a wide-ranging alliance is a sensible move from the two, who have risen to prominence because of business acumen, strong personal drive, and now, clearly the ability to swallow their pride, swallow their losses and make the bold steps necessary for survival.

I for one will be fascinated to see the details of this new alliance. Already I'm wondering what the eventual merged carrier will be called, for surely that is the end game.

JetFisher?

KingJet?

This is today's Jet Airways press release headline:

JET AIRWAYS ANNOUNCES OPTIMIZATION OF ITS
LONG-HAUL INTERNATIONAL NETWORK

What!? Don't you mean CUT BACK? Of course they do, I didn't even need to open the release to know this. But have the good grace to tell it how it is. And as one of my learned colleagues mentioned, cutting back is hardly a big sin in these tough times is it?

Here's the text of the actual story:

October 10, 2008: In light of the downturn in major economies worldwide, more specifically in the USA and UK, Jet Airways plans to optimize its network, focusing more on its established international gateways and routes.

As part of the same, the airline's Mumbai-Shanghai-San Francisco route will be discontinued effective January 13, 2009.

Passenger traffic between India and San Francisco will be served via Jet Airways' London gateway in cooperation with partner airlines.

Jet Airways has already announced a code share partnership with United Airlines with convenient connections between Mumbai and several US points via London in both directions. This will enable Jet Airways to continue to serve its San Francisco customers, under a 9W flight number, in a more economically viable manner. 

OK, so this route is bleeding money and despite the fanfare with which it was launched it's got to go - fair enough Jet. But tell it like it is please!

Pass him on the street and you wouldn't look twice - a normal looking middle-aged bloke with an opened necked shirt, chunky black shoes and greying hair.

But Michael O'Leary is exceptional. Quite unlike any chief executive in any industry, let alone aviation. Take this week's Ryanair press conference in London.

The topic: Ryanair blasts fuel surcharges of network carriers. A well worn drum for O'Leary.

The start is 10.30. Nobody there except a goodly crew of scribes and a projector. At 10.45 in rushes the middle-aged bloke, apologising profusely to the audience for being late. Something about delays at Dublin (he flew Aer Lingus as his own airline was full) and Gatwick and the tube.

He grabs a plastic packet and says he'll be back in minute. The PR guy meanwhile tries to get the laptop up and running. O'Leary returns with a T-shirt brandishing the words Aer Lingus and BA fuel surcharge: 1 million free seats on Ryanair.

The laptop isn't working - is O'Leary going to lambast his PR? No, he's got a reprieve as O'Leary is personally handing out the presentations. He jokes that we should pay for them.

Ah, the computer is working, and without a pause O'Leary sets off on a 15 minute, high-octane, machine-gun blast at anyone who needs a good kicking around the industry.

Targets:

* Fuel surcharges - rip off

* CAA failure - (regulator) Harry Bush must go (incompetent)

* BAA monopoly - must sell Gatwick and Stansted

* NATS - staff shortages

* Ban screen-scrapers - "scam artists"

And this is just a taster. O'Leary then answers questions on any topic (including possible long-haul low-fare opportunities) for a good 45 minutes until we are exhausted - he's ready for more of course and strides out to do some TV.

It is an admirable performance.

I met the chairman of Arik Sir Joseph Arumemi-Johnson and his son Dr Michael Arumemi-Ikhide, the leading lights of this Nigerian carrier, at Farnborough in July, and good value they were too. By that I mean a good story.

At the show they were confirming and upping orders for Boeings, and talking about refining their own fuel to keep costs low. I liked that story.

Now they've ordered the Airbus A340-500, probably one of the most unpopular long-haul aircraft out there at the moment. It has taken over Kingfisher's order for three of the aircraft as it fulfils its long-haul ambitions.

Let's just comment on that deal by saying Arik will have got a good deal and Airbus chief salesman John Leahy can be complimented on his fast footwork to offload some metal that could easily have ended up as whitetails.