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As another year passes, and a pretty awful one for the airline sector, the Airline Business editors take a look back at some of the key moments and stories of the year just gone and look at some of the stories that might make the headlines in the year ahead.

 

Mark Pilling, Airline Business, editor

As a reporter 2009 has been a brilliant year. That's what I always tell people when we bemoan the health of the Airline Business.

I say this because a crisis always sorts out the strong and weak, the best leaders, the worst leaders, the winners and the losers. And the stories that follow from this excitement are always more interesting in my experience than those during the good times.

And this crisis has been spectacular. In particular I would point to the staggering falls in business class traffic and the equally tragic (for the airlines, not the travellers) falls in yields. This more than anything else has holed the fortunes of the network carriers well below the water line.

Another big topic for 2009, and one that had threatened to be overshadowed by the recession, was the environment. It is deeply ironic in my view that the industry is fighting its corner on the environment, and essentially what green measures will cost in the longer term, when it is fighting for its short-term survival.

From the industry's point of view the adoption of a common position across airlines, airports, ATC etc was a ground-breaking move and did a lot to establish it on some moral high ground, at least for the time being. And it seems to have fought off punitive taxes for now.

I give a special mention to the strongly performing Latin American air transport industry in 2009, and especially Enrique Cueto and Pedro Heilbron, the CEOs of Chile's LAN and Panama's Copa Airlines respectively. Both were deserving winners at this magazine's 2009 Airline Strategy Awards and run two of the best airlines around.

 

Graham Dunn, Airline Business managing editor

 

For a journalist I think it is harder to look any further than Lufthansa for stories in 2009. The Star Alliance carrier led the consolidation trail with its acquisitions of Austrian Airlines, bmi and Brussels Airlines - and if the latter deal provided little in headlines, the purchases of Austrian and BMI certainly kept us busy. The deal for Austrian, with its last minute dealings with the EC on concessions accompanying the purchase, went right to the wire during the summer. Similarly not only were the twists and turns aplenty in its acquisition of bmi, having acquired it, there were just as many questions about what it intended to do with it - the long-term plans for which are still to be decided. Throw in that also launched two new airlines in 2009 - Milan Malpensa-based Lufthansa Italia and cargo joint venture Aerologic - no airline was busier than the German national carrier.

 

For the year ahead, I think the focus - especially in Europe - has to be on labour and to what extent the network carriers are able to push through the changes they are seeking to adjust their cost-bases. We've already seen the strain across various airlines in Europe, notably cabin crew strike at BA - aborted at least into the new year. My feeling is it won't be the only run-in airlines have with labour this year.

 

Lori Ranson, North America Editor - Air Transport Intelligence

Big stories for 2009. Captain Sullenberger's historic ditching of a US Airways A319 into New York's Hudson River. Sullenberger dedicated part of his time in the limelight to express concern that low pilot pay rates could be driving talent away from the industry.

The February 2009 crash of a Colgan Airways Bombardier Q400 that unleashed a wave of scrutiny of US regional airline fatigue management, training and hiring practices.  A proposed pilot fatigue rule is scheduled for publication in January.

Larry Kellner's surprising announcement in July that at 50 he would be vacating the top post at Continental Airlines at year-end. It was interesting to sit down with Kellner and his successor Smisek, who have worked in tandem at Continental for roughly 15 years together and see them interact first hand. .

Southwest's failed attempt to buy its rival in Denver Frontier Airlines, which ultimately led to US regional Republic Airways Holdings buying two branded airlines.  Talking to Bedford in the middle of the competition for Frontier, he hinted at both the cross fleeting planned between Frontier and Midwest and plans to shed Midwest's excessive costs.

The planned merger of El Salvador's  TACA and Colombian carrier Avianca will create the fourth largest airline group in Latin America, and combined will serve over 79 destinations.

Air Canada's previous CEO Montie Brewer steps down suddenly and is replaced by a former executive with the carrier Calin Rovinescu, fueling widespread speculation that a second formal restructuring this decade was imminent. But Rovinescu and Air Canada's management eventually won key concessions from labour groups, won a key reprieve on pension funding and secured a financing package to build a foundation to weather the current economic downturn.

Late in the year American and Delta started a heated competition to take a stake in struggling Japan Airlines, with both carriers and their partners offering substantial financing packages to JAL.  If Delta succeeds JAL will join the SkyTeam alliance, leaving Oneworld with a significant and strategic geographical gap in Asia.

United's decision to split its widebody fleet revamp between Airbus and Boeing ordering a total of 50 A350s and 787s. The carrier heads into 2010 examining its narrowbody options and has reportedly invited Bombardier and Embrarer into those discussions.

What might be in store for 2010. Oneworld carriers seeking anti-trust immunity will weigh accepting DOT's tentative approval of the deal that includes carve-outs. I expect DOT will follow a similar pattern from its approval of the Star Alliance joint venture, which ultimately required carve outs after the US Department of Justice voiced concerns over competition.

Both the Transportation and Justice will co-operate more closely during evaluations of antitrust applications on transpacific routes filed by members of the Star Alliance and Japan Airlines and its yet-to-be antitrust partner.

If JAL chooses Delta, American will mount a ferocious campaign to block anti-trust approval for those carriers.

Overall for the industry the one wildcard is sustained capacity discipline. It will be interesting to see if carriers continue to adhere to conservative growth targets if current positive revenue trends continue.

 

Victoria Moores, Features Editor, Airline Business

My personal highlight of 2009 would have to be back in February, when I travelled "around the world in eight days" with Virgin entrepreneur Richard Branson. The trip was to flag up the launch of V Australia, which joined the transpacific gap in the Virgin long-haul network.

It's not every day that an opportunity like this comes along, but this trip also stands out because it marked my personal leap into our various social media channels and video content, which became increasingly important as the year progressed.

On the Virgin trip I travelled with our mascot, Stefan the Pilot, who has his own cult following. I began to write for the Airline Business Blog and Twitter through my @VictoriaOnAir account, which I later used to cover the World Low Cost Airlines Congress in Barcelona in real-time.

I also dived into the deep end of video presenting, interviewing Branson on very little sleep, marking the first of many video interviews throughout the year. Our latest Airline Business Debate programme shows just how far we're come and you can be sure we'll be pushing things along still further in 2010.

For the year ahead, I'm keen to see how the relationship between short- and long-haul operations evolves. Low-cost carriers have aggressively taken short-haul market share, putting intense pressure on legacy airline yields and pushing their focus on to long-haul routes.

For a long-haul carrier to be successful you need feed, but for the low-cost model to work you need simplicity. With carriers like British Airways having scaled back their short-haul presence, partly in response to low-cost competition, there's an obvious disconnect there.

How will these two contradictory objectives tie together as we move forward? That's my question for 2010.

We were in Barcelona for the recent World Low Cost Airlines Congress and interviewed some of the leading airline executives about key issues facing their airlines and the industry in general.

Watch the videos here:

The LCC model: We ask whether low-cost carriers are better placed to survive the economic crisis than network carriers?

 

Ancillary revenues: What will low-cost carriers charge for next?

 

AirAsia X:  Chief executive Azran Osman Rani tell us about the carrier's US ambitions:

 

Vueling Airlines:  We talk to chief executive Alex Cruz about merged life at the Spanish budget carrier:

 

Brussels Airlines: Chief executive Bernard Gustin tells us about the opportunities the carrrier gets from being part of the Lufthansa Group:

 

Stelios: Watch clips from easyJet founder and shareholder Stelios Haji-Ioannau's keynote interview:

 

Click here to check out all our blogs and tweets from the event, and to take a look through some of our recent coverage of the low-cost airline sector.

 

Lots of talk during the World Low Cost Airline Congress about budget carriers and business traffic, and to what extent carriers are catering for it and picking it up.

The different scope of low-cost carriers means some are already pitching themselves pretty much directly against network carriers on high-frequency routes between primary airports, and Norwegian chief executive Bjorn Kjos - off the back of record results for the carrier in the first half - told us the airline has definitely benefited from passengers trading down from network carriers in the tough market conditions.

Alex Cruz, chief executive at recently merged Spanish budget carrier Vueling (pictured here on the left next to Kjos during one of the panel debates), says his carrier puts a lot of emphasis on dependability in terms of catering for business passengers. "There are a lot of attributes they want, of which [onboard] freebies are are the end if the list," he says, saying punctuality and being able to book tickets in their normal channels are the keys.

A business product is even more obviously part of the equation on the long-haul model. Ryanair chief executive Michael O'Leary, who has floated the subject of one day setting up a long-haul low-cost operation (separate to Ryanair), has always said a premium cabin would form part of such a product, while Malaysian long-haul, low-cost carrier AirAsia X is already making a move to lie-flat beds. Chief executive of the carrier, Azran Osman Rani says around 10% of its seats are premium, but says the carrier focuses on the seat rather than the other elements of traditional business class. "What people want is a comfortable seat," he says. "There is a huge gap between what carriers charge for business class against the cost."

He says in addition to the direct benefit of securing higher paying fare, "the intangible benefit is you broaden your brand's reach beyond price-sensitive customers".

Click here to see some of our video interviews with leading airline executives attending the World Low Cost Airlines Congress.

Ancillary revenues has been one of the hot topics at the congress this year, with much discussion given to the respective opportunities through both unbundling and creating new streams.

Yet despite this, the much-written about Michael O'Leary tongue-in-cheek (we assume) suggestion that Ryanair was considering charging passengers to use toilets onboard - a concept universally dismissed by speakers during a session here in Barcelona - continued to take up air time, even if it was to say we should stop giving it air time (at this point I should apologise for my own contribution to a world already over-flowing with pun-laden headlines on the subject).

"Charging for the toilet is going too far," said easyJet founder and shareholder Stelios Haji-Ioannau. "You are captive. It is not like you have anywhere else to go"
 
"We continue talking about things that are not real," complained Vueling chief executive Alex Cruz. "This is the perfect time to find the next holy grail area [in ancillaries], without necessarily paying to use the toilet."

While headline grabbing - whether it be the outlandish suggestions of charging to use the toilets to today's reality of paying to check-in bags or to sit in particular seats - it is an ever-more important part of the business and not just for low-cost carriers.

And there was an interesting perspective on the whole subject from Flybe chief commercial officer Mike Rutter. "I do think as an industry we need to find the right balance and if we don't we will find ourselves overcome in regulation," he warns. "It's important we have self control."

Remember Spring Airlines. The Chinese low-cost carrier hit the headlines earlier this year when it put forward a proposal for standing-only seats on aircraft, a concept left-field enough to land on Michael O'Leary's radar for publicity ideas.

Well Spring were in Barcelona for the Congress, insist the idea is feasible and are calling for the low-cost carrier industry to come together to look further into its development.

Spring Airlines spokesman Zhang Wuan told delegates the idea was aimed at tapping into the roughly 70% of the Chinese population - which they term the 'grass roots people' - who will never be able to afford to fly. He talks of an aircraft concept using the half-standing concept - which Spring dubs the X322 - which could take capacity from 180 on its existing A320s to 258 seats under the new aircraft concept.

 "This caused tremendous debate after our proposal," says Waun, pointing to the global coverage the concept provoked, indeed citing amongst others comments from Flightglobal's very own IFE and interiors guru Runway Girl.

"A number of people have shown their support for half-standing," adds Wuan, pointing for example to a survey carried out in China. Indeed he cited one respondent as saying, "as long as it is cheap enough, I will buy half-standing tickets, even if I have to sit on my luggage".

Spring says safety and meeting regulatory requirements are key to the project, and acknowledges the challenges to the concept. But it believes it is feasible.

"Despite the feasible idea and technology, the difficulty lies in industrialisation," says Waun. "A few orders from one airline obviously is not able to attract aircraft manufacturers to design a new aircraft type. But if all low-cost airlines made an alliance and place a large order, the new aircraft type is no longer just a dream on paper." And he urges the low-cost airline industry to come together to further research the project.

Spring's half-standing concept is the bit that attracts the headlines, but the story of Spring is already interesting enough as a private, low-cost carrier trying to carve a niche in the Chinese market. Their chief executive Zhang Xiuzhi, who also spoke during the Congress, attributed developing their own distribution system as being key to their success. "It was the first time an airline in China had used its own distribution system, " she says.

EasyJet founder and shareholder Stelios Haji-Ioannau outlined his belief more modest growth during current conditions offers a better return for shareholders than chasing market share, in a keynote interview at the World Low Cost Airline Congress in Barcelona. 

A well-publicised boardroom spat at easyJet over the pace of future growth was settled earlier this summer when easyJet adopted a new medium-term growth rate of around 7.5%. Speaking at a keynote session, Stelios played down talk of a boardroom rift saying people should not believe everything they read in the paper. But he also set out his view as to why he supports more modest growth plans. 

 "I generally believe the growth rate of any company, not just an airline, is something that needs to be debated," he said, noting companies cannot grow without capital expenditure. 

He says the more modest growth rate plans for easyJet will provide a better return for shareholders and, alluding to continued strong growth plans from other carriers such as budget rival Ryanair, questions the merit in chasing market share. 

"It remains to be seen which growth rate will provide higher returns for shareholders," he says. "Is market share in Europe that relevant? You need to concentrate on market share from A to B, preferably A being somewhere people live and B being somewhere someone wants to go. If you go for passenger count and market share, there is a risk. I think our business model is safer because we have lower risk."

AirAsia X chief executive Azran Osman Rani was in good form at the World Low Cost Airlines Congress in Barcelona, where he was a keynote speaker. He not only vigorously defended the long-haul low-cost business model, but suggested short-haul carriers that did not address connectivity with long-haul passengers did so at their peril.

 

"Connectivity is very important in our model," he told delegates at the conference, pointing to the high proportion of traffic on its own Kuala Lumpur-London Stansted route that make their own connections out of the north London airport. "30% of our passengers [on the route] don't end in Stansted and ignoring that can make the difference between a route working and not working.

 

"You have got to keep your eyes on the what the legacy carriers are doing," he added. "They will evolve the model and they will go after the customer passenger base of the low-cost carriers. It is going to be very difficult if you don't have access to 30% of the volume someone else has access to."

 

Osman Rani argues there is no need for a sophisticated booking engine to achieve this connectivity, noting passengers are easily now able to buy different segments together and that some price sensitive customers would rather save money on the fare by having to get off at Stansted and check in again on another flight. "We are still seeing that connectivity without taking onboard all the complexity," he says.

 

The Malaysian low-cost long-haul operator will continue its expansion later this year by adding flights to Abu Dhabi and Chengdu in China, and Osman Rani says there is an opportunity for a low-cost long-haul model.

 

"People seem fixated that you can't have a big utilisation or seat density difference. Of course you can," he says. "You just have to think differently. The key is, how are the legacy airlines operating today and is there a different way of doing it. I think you just have to look at things from a fresh perspective and find where are the value opportunities."

 

Check out more blogs, videos and tweets from the World Low Cost Airline Congress here

As the World Low Cost Airlines Congress kicks off in Barcelona, Flight journalist Chris Hall shares his tips on what to do and see in this vibrant Spanish city... 

Barcelona is one of those cities that reveal more and more of themselves on repeat visits. Home to some of the world's most impressive architecture, museums and scenery, not to mention a truly excellent atmosphere throughout, it's almost impossible to characterise neatly. This city is modern, traditional, colourful, bohemian and mainstream all at once. Being the Catalan capital gives it a distinct identity within Spain, yet ironically it probably represents most foreigners' views of Spain. Most places claim to have something for everyone; Barcelona really does.

Gaudi

Antoni Gaudi's mind-bending architecture is one of the most obvious reasons to visit Barcelona, but that doesn't make it any less worthwhile. The Sagrada Familia, in the central Eixample district, is a must-see for newcomers, but take the time to check out Gaudi's Parc Guell. Situated further north, it's a popular spot for reflection and people-watching as you sit surrounded by surrealist sculpture and landscaped gardens.

Olympic village

Dating back to the 1992 olympics, Barcelona's Olympic village has been successfully turned into a tourist attraction that must have more than paid for itself by now - London take note. The modern architecture now houses a selection of shops, restaurants and cafés, as well as being a good spot from which to start a walk along the seafront.

Tibidabo

At 542m (1778ft), Tibidabo is the highest hill in the wooded range that forms the backdrop to Barcelona. If the weather's clear - and in Barcelona that's a fair bet - it's a great place for views over the city. The locals come up here for some thrills at the amusement park Parc d'Atraccions, with an array of rollercoasters. Equally breathtaking, however, is the glass lift that goes up 115m to a visitors' observation area at Torre de Collserola telecommunications tower. The more grounded among you can find solace in the Temple del Sagrat Cor, Barcelona's answer to Paris' Sacré Coeur. Looming above Tibidabo's funicular station, it is actually two churches, one on top of the other. The top one is surmounted by a giant Christ and has a lift to the roof.

Las Ramblas

A tourist magnet, Barcelona's de facto high street (actually five streets end-to-end) has nonetheless got more to recommend it than overpriced restaurants and street hawkers. Check out the colourful bird market, the Palau de Virreina and the Gran Teatre del Liceu - the old opera house - as you walk down towards the Placa Reial, one of the cities grandest open spaces.

Museums

Barcelona has more than its fair share of museums dedicated to the arts: one good way to make sure you don't miss any masterpieces is to buy an 'Articket' from the tourism board, which covers you for seven of the city's foremost galleries, including the Museu Picasso, Fundacio Joan Miro and Gaudi's Caixa Catalunya.

Museums - articket deal

Food Markets

Barcelona is full of traditional markets selling fresh Catalan and Mediterranean food. La boqeria is one of the grandest, oldest and best known, the latter owing largely to its situation just a couple of minutes off Las Ramblas. As well as providing excellent picnic material, you can - and should - sit and sample the quesadillas made there and then. For something more formal, try the nearby restaurant El Quim

Restaurants

Les Quinze Nits is a stylish tapas restaurant which is definitely one to consider if reviews are anything to go by: it overlooks the grand Placa Reial, serves delicious yet reasonably priced food and, not surprisingly, is very popular as a result. They do not take reservations, however.
Fans of fine dining will feel right at home in Alkimia, one of Barcelona's most fashionable and talked-about restaurants. Nestling in the shadow of la Sagrada Familia, it has quickly made a name for itself serving ultra-modern interpretations of typical Catalan cuisine.

For less extravagant dinners, avoid the tourist traps around Las Ramblas and head into the old quarter, Barri Gotic: explore the narrow, winding streets and you should find plenty of authentic tapas restaurants and cafés.

This is a useful list of some traditional Catalonian dishes that you might like to try if you get a chance.

Barcelona deserves its reputation as a party town, even in a country that lives for late nights. The best areas to target are Raval, Barri Gotic, or Born: that's where you'll find the best bars and clubs. Be prepared to go the whole hog; with clubs that don't open until the early hours of the morning you might find yourself a little stretched if you're working the next day.

Outside of Barcelona

If you have time, or fancy getting away from the busy city, the surrounding area has plenty going for it. The nearby town of Sitges is a popular mix of medieval and modern cultures; Figueres, a little further afield, is the birthplace of the world's favourite surrealist, Salvador Dali, and has an excellent museum devoted to him; or for something entirely different, why not take a trip to Montserrat? Ascending the mountain by cable car to arrive at the 16th century monastery makes for quite a pilgrimage.

This week, the great and good in low cost airlines are coming to Barcelona for the snappily titled World Low Cost Airlines Congress 2009, which to save my fingers I'll call WLCAC for short. As a team that prides itself on being first to the news, the Airline Business/Flightglobal team are here already. Unfortunately, it seems that no-one else is yet:

Hopefully this is because we are the first to the party rather than a metaphor for the current state of the aviation industry.

The exhibition hall is also situated right next to a fairground, just in case anybody wanted a go on the big wheel in between conference streams. I'll let you decide if there's an appropriate caption for this: