Europe: October 2008 Archives

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 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.

The airline industry must be feeling like it's been put in stocks on the village green in medieval times.

Instead of being pelted with rotten fruit, it's pelted with high oil prices, a credit crunch, a global economy that is in meltdown and now the news that a European Parliament committee has voted to make Europe's planned inclusion of aviation in its emissions trading scheme even tougher on the industry.

The committee wants the level of emissions permits to be auctioned to increase from 15% in 2012 to 20% in 2013 to 100% in 2020. This would mean no freebie carbon dioxide emissions permits - you have to pay to pollute.

Airline groups are up in arms, with the Association of European Airlines accusing members of the European Parliament of being "so dogmatic that they have lost touch with reality". The International Air Carrier Association says it is "dismayed" that MEPs have decided to "inflict more damaging and extreme measures on the aviation industry, especially at a time of great economic uncertainty for the sector, airline bankruptcies and weakening demand".

What are your opinions on this? Should the focus on the environment wane while we're all in the midst of an economic crisis? Or should it remain as important, if not more important, as unlike the actions of the banks, the extent to which the world's temperature rises is actually something that we can control?

Or are you of the same mindset as Sarah Palin (and hopefully there aren't TOO many mindsets like that in the world!), who remains unconvinced that our actions have had an impact on climate change? 

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.

British Airways chief Willie Walsh has hit out at a plan put forward by the UK's Conservative party to scrap plans for a third runway at London Heathrow in favour of a new high-speed rail link.

If the Tories win the next general election, says Conservative shadow secretary of state for transport Theresa Villiers, they will build a high-speed rail link from London to Birmingham, Manchester and Leeds instead of providing congested Heathrow with a third runway.

Walsh's reaction includes the following gems: "The latest idea that a rail link from Leeds and Manchester to Heathrow would be an adequate substitute for a third runway beggars belief", and "The Conservatives may have an election win. But they must not forget that if they are successful, they will have a country to govern."

Being a northern lass who lives in London, I'm all for high-speed rail links to my homeland (although my vote would be for one that went to the north east rather than the north west!). However, I can't really see what this has to do with a third runway at Heathrow. Any thoughts?