Mark Pilling: March 2009 Archives

Now I am the first to admit pretending to sleep to avoid the tedious questioning/conversation of the fellow traveller sitting next to me - whether it is a train, plane or automobile.

So, the ability to somehow "choose" who you sit next to on board an airliner, that is if you are not travelling with someone you want to sit with, has some attraction.

That's what the company SatisFLY is selling. It calls it the intelligent seating service. All is explained on its website.

Satisfly brought their concept to the recent Loyalty event and announced that Hawaiian Airlines is the first to give it a try.

And, the Satisfly folks are now pointing out that the Economist has picked up their story.

It's worth a read, with plenty of great comments on passenger chat avoidance, and even some promoting the idea of getting to know one another.

But, at the end of the day, sitting next to no-one (and for some that is called First Class) still remains my preferred option. But then I'm a pretty miserable sod. I wonder if Satisfly can deliver that?

The world banking crisis is making the risk of a major airline failure more likely because carriers will not be able to access funding for a rescue if they fall into trouble.

"Airlines are now in a very weak situation - they have debt of $170 billion so we are in a much worst position - we don't have cash," says Giovanni Bisignani, director general of IATA.

For Bisignani the most concerning issue is the risk of airlines going into Chapter 11 bankruptcy protection. After 9/11, IATA dealt with four major US carriers in Chapter 11. However these airlines were able to access financing to enable them to battle through their problems. "The banking system could help," he says.

This time around the funds may not be available to finance a major carrier that goes into bankruptcy, he says, making the prospect of failure significantly greater.

"I fully agree the risk is there," says Bisignani, in terms of the possibility of a major airline failure.

IATA was ready in the second half of 2008 to deal with a potential bankruptcy of a major carrier, which it anticipated could happen as fuel prices soared to nearly $150 a barrel. "We put in place an exceptional plan - we had all the picture ready."

That did not happen as fuel prices fell. Now the issue is "not so much on what we can do, but what the banking system can do to support our airlines," says Bisignani. "There are big, big problems."

However, he does draw some comfort from government economic stimulus packages that are being announced. These should help the industry to recover faster than it otherwise would, he says.

Although IATA has suspended nearly 40 airlines from its financial settlement programme in the past15 months, these only represent about 1.5% of total world traffic.

Bisignani says he is surprised that there had not been a failure amongst larger carriers. But the deteriorating economic and industry situation is worrying, he says, and it is worst than after the terror attacks of September 2001.

The industry will not begin to recover until 2010 at the earliest, according to IATA head Giovanni Bisignani, speaking to journalists across the globe on a conference call all this morning. "This crisis is reshaping and resizing the industry," he says.

Bisignani didn't have good news: industry losses are forecast to reach $4.7 billion in 2009, almost double the $2.5 billion loss it was predicting in December.

This crisis is of a different magnitude in terms of revenue loss compared to the last downturn, the one triggered by the September 2001 terror attacks. After 9/11 industry revenue was hit by 6% in 2002. The new forecast sees revenues diving by 12% or $62 billion this year.

In terms of passenger traffic, IATA is forecasting a drop of 5.7% this year, with cargo dropping by 13%.

Total industry revenues will fall from $530 billion in 2008 to $467 billion this year, which is significantly greater than after 9/11. "The industry is entering into serious intensive care mode," says Bisignani.

Asia is expected to be one of the worst hit areas in 2009 with losses of $1.7 billion.

I've been doing some serious walking in the past two days. You see I've been through the new Terminal 4 at Madrid's Barajas Airport.

It's big, bold and involves a lot of footwork from kerb to gate, or vice versa. In fact, when I arrived on Monday afternoon I lost count of the number of escalators I took from leaving the BA flight from Heathrow to the taxi rank, via the train that connects the satellite to the main terminal, but it was into double figures.

And leaving on Tuesday with Iberia I was relieved that my gates - H - were only an 8 minute trek. Thank the lucky stars I didn't have gates U or R, that would have needed a slug of something frisky to cope with a 22 minute hike!

Sorry AENA but this is not a friendly airport. Yes it's a big statement. But the wayfinding experts weren't all that expert. It's confusing.

Security needs looking at too. You fill your plastic trays with laptop, liquids, jackets etc - that often means 2 of them - and then carry them to the X-ray. There's no roller tables, you struggle with the trays, dragging your hand luggage behind you.

In fact so unfriendly is this airport that some of the people I met in Madrid say they deliberately avoid this terminal, especially if travelling with children.

But I can report something special about Terminal 4: the announcement on the transfer train.

It's an English accent, and I puzzled who it sounds like because it was strangely familiar.

Then I got it: a striking resemblence to the dulcet tones of Mark Dunkerlery, the excellent CEO of Hawaiian Airlines!

Doing a spot of moonlighting Mark?

It has taken AirAsia group chief executive Tony Fernandes eight years to realise one of his long-held dreams - to launch a long-haul, low-cost carrier flying between Asia and Europe - and thus emulate a childhood hero in the guise of Sir Freddie Laker.

On Wednesday 11 March the dream airline - AirAsia X - made its first flight. The Airbus A340-300, an ex-Air Canada example, arrived at London Stansted Airport 20 minutes early after the 10-hour flight from Kuala Lumpur.

The party to celebrate the launch kicked off at Altitude 360, a venue 29 floors above the London skyline.

Listen to the edited highlights of Tony's speech at the event, including how the idea came up in the first place, what he owes to Sir Freddie Laker and how West Ham United and tatoos come into the story.

Listen over the din of the party to what AirAsia X chief executive Azran Osman-Rani had to say about the plans for the carrier.

Girl band The Saturdays turned up to join in the fun and sing a tune or two.

Here's what the AirAsia bloggers made of it all, with lots of pictures.

And here's what Tony Fernandes said after taking delivery of AirAsia X's Airbus A340-300 on his blog.

And finally, Tony shares a joke at the party with HRH The Duke of York, the UK's Special Representative for International Trade and Investment, who is said to have been instrumental in helping persuade AirAsia to buy International Aero Engine V2500s for its A320 fleet (Rolls-Royce has a stake in IAE).

Our good friend, occasional Airline Business video interviewer and generally high-class airline exec Peter Davies is already stirring things up down in the south-west of England.

Five weeks ago the former DHL, Brussels Airlines and Caribbean Airlines boss took on the job of running little known UK regional airline Air Southwest. It operates a fleet of five Bombardier Dash 8 Q300s on routes mainly within the UK from Newquay and Plymouth.

After five weeks and what Peter describes as "my usual airline diagnostic", which resulted in a seven-page report for the private owners of the airline on the best business and strategic options for the carrier, today saw the first fruits of his labours: the announcement of a new route between Plymouth (with an extra hop to Newquay) to London City Airport. It opens on 20 April.

This route is the first to London City for Air Southwest. It will fly the route twice daily allowing virtually a full business day in London giving the train a run for its money.

Now I can remember reporting on the opening of London City back in the late 1980s and this route was one of those started by Brymon Airways, but perhaps stopped later when BA bought the carrier.

Can anyone dredge back in their memories and illuminate us? Or share any photos? 

Well, judging by the 50+ comments on the route announcement story in the local Plymouth paper, this is a big deal for the region. Most comments are favourable, although some wonder if the cheap lead-in fares will be easy to get.

Peter says the Plymouth route is aimed at business passengers while the Newquay "tag" brings in the leisure market.

Air Southwest will continue operating its four times daily service to London Gatwick, says Peter. This route has new competition in the face of large UK regional Flybe, which began service between Plymouth and Gatwick in February.

Peter also has his eyes on other routes but is keeping these ideas to himself for the moment.

Good luck!

Akron-Canton Airport, a mecca for low-fare carriers in the north-east USA, is making a name for itself as a leader in the US airport industry when it comes to online innovations.

As its ebullient senior vice-president Kristie Van Auken explained to Airline Business editor Mark Pilling at this week's Network USA event, the airport is blogging and Twittering, has a Facebook group and uses Flickr.

Closed down for two weeks following Hurricane Katrina in 2005, Louis Armstrong New Orleans International Airport is on the way back.

Manager Commercial Developments Larry Johnson tells Mark Pilling how the airport is rebuilding its traffic base and beginning to benefit from the development money being poured into the city and region that was so devastated by the hurricane.

The 9th Airline Business Network USA airline-airport route planning event began on Monday in Fort Worth, Texas.

Editor of Airline Business Mark Pilling introduces the event, which is being hosted by Dallas/Ft Worth International Airport.

Bob Montgomery, vice-president of properties at Southwest Airlines talks about the airline's move into larger hubs like Minneapolis St Paul, New York LaGuardia and Boston, how airports are responding to airline calls for lower charges and whether his airline is going to charge passengers to use the on-board toilets.

Peter Bowler, the president and CEO of American Eagle Airlines, is interviewed by Mark Pilling, editor of Airline Business, at the Network USA event.

Bowler, a keynote speaker at Network, discusses the carrier's capacity reductions in 2009, what it would like airports to do to help airlines in these tough times and how the carrier sees its fleet changing in the coming years.

Organised by Airline Business, Network USA is being held in Fort Worth, Texas and is hosted by Dallas/Ft Worth International Airport.

AirAsia has taken a one-off charge of RM426 million ($115 million) in its fourth quarter to get completely out of fuel hedges going forward.

"We've taken all the hedges out," group chief executive Tony Fernandes told analysts in a conference call last week. All of its fuel needs from now will be paid for at spot market prices.

The one-off hit is large, but unwinding its hedges means "we won't have a noose around our necks going forward over this year", says Fernandes. Over a period of 2-3 years AirAsia was at risk of paying three times the price of the hedges if it hadn't taken this action, he explains.

As it "rides the market" on fuel this year, the airline is looking at returning to some hedging in 2010 and 2011. "But they will be clean vanilla swaps and we'll pay cash for them," says Fernandes.

AirAsia described the move to unwind its hedges, as well as some interest rate swaps relating to aircraft loans, as a "bold decision".

"We believe this is a prudent approach as its shields the group from the burden of mark to market, frees up equity and protect our cashflow," says the carrier. However the total impact of the charges meant AirAsia fell to a net loss for the quarter of RM177 million.

More good stuff on fuel hedging from Airline Business:

* Ryanair details its fuel hedging plans

* How fuel hedges have cost airlines millions 

Other good stuff from the AirAsia conference call:

• AirAsia is close to a "much more cost-effective deal" with Kuala Lumpur International Airport, which includes resolving old disputes between the carrier and the airport operator, says Fernandes. "The cost of operating in KLIA will come down (for AirAsia)." The airline will remain at the airport at the government's request and not move out as it had threatened.
• Commenting on the signing of a deal last week with Barclays Capital in London to finance 13 Airbus A320s, Fernandes said the commercial terms of the deal were "not far away" from those it had previously signed for narrowbody airliner finance. "There is not a huge additional [financing] cost," he says.
• The Airbus financing deal was "something to shout about" for AirAsia, says Fernandes. "Most airlines are struggling to find finance," he notes, and the fact that AirAsia has succeeded demonstrates the strength of its business model.
• As Ryanair has recently announced, AirAsia too plans to get rid of all check-in desks. "This is our eventual aim," says Fernandes.
• AirAsia is busy adding routes in Singapore and in Indonesia as those markets open up and demand has been strong. Just days after opening its Singapore to Jakarta and Bali routes the airline has sold 30% and 22% of its seats in these markets for the coming three months, says Fernandes.
• AirAsia is forecasting it will carry 22 million passengers in 2009, with Fernandes personally expecting the number to be higher.