Sunday, 18 December 2011

Happy Christmas from Airnthere,- and on to 2012.

We have had a very successful year with steadily growing readership stretching across most of the world. We have attracted interest from airline and transport professionals at all levels from CEO down and from the media and from many who are just interested in the industry. The transport business will always have an attraction and fascination thanks to its breadth of impact, economic and social importance and its technical advances, all of which make it a dynamic and exciting thing unmatched by many other businesses. It is a 24/7 business requiring high technical and mechanical skills, and positively thinking people who understand it and at the same time have visions of where it can and must go. It isn't like making biscuits.

Thankyou for your support. Very few readers feel it necessary to sign up as followers ,- and of course it isn't,-but it would help us if they did so as to give us a better understanding of who they are. Do also spread the word of our existence and where to find us on amongst your colleagues and others you think would be interested. On our part we will continue to concentrate on different angles on the subjects we cover. We do not believe in conventional wisdom or going with the flow. The realities are usually far more interesting and throw up far more questions and possibilities. That's what we do.

Happy Christmas! Then let's get on with 2012.

Tuesday, 13 December 2011

UK Airline Passenger Duty (APD) in a political headlock. It's almost impossible to get rid of.

For those hoping that the UK Government might see the error of its ways and reduce or entirely ditch its now crushing levels of APD the bad news is that the realities of a) It now producing over £ 1 billion a year to the Treasury and b) Political Britain's obsession with class, wealth and poverty therefore make it almost impossible to get rid of.

The abolition or reduction of APD would be greeted with near hysterical headlines of " £1.5 billion giveaway to wealthy travellers and foreigners" and worse. There would follow lists of how many nurses, policemen, libraries, schools, hospitals the £ 1.5 billion would pay for. There would not be a moment's thought about the lost jobs of voiceless people in a wide range of roles which depend to a greater or lesser extent on tourism. Add to that more easily identifiable jobs with airlines, airports, handling companies, concessionaries and the rest and the potential totals are into the tens or possibly of thousands. Transport for London would be one big loser of revenue. There would be thousands of others great and small up and down the land. Fred and Flossie in the airport duty free shop have never been so threatened.

In racking up the level of APD so high, both Labour and the coalition have created a monster which can not be dismantled. Initially they probably did not comprehend that in escalating it so high they were destroying the ability to reverse it later.It could probably only be done now amidst a raft of financial measures, some of which obtained an equivalent billion from somewhere else. No wonder Walsh of IAG/BA announced cutbacks in recruitment (400 out of 800) and not bringing back into the fleet one stored 747-400. Two further aircraft are believed to be in doubt and that could just be the beginning of it.

2012 will be a difficult year for the airline and travel business while many especially in Europe keep their wallets in their pockets as an insurance against yet more bad economic news. There will be distortions in the UK due to the Royal Jubilee and the Olympics and while London may do well overall, the fact that 50% of its hotel beds will be occupied (many at UK taxpayers' expense) by "The Olympic Family" during the games means that a lot of other demand will simply go elsewhere. Provincial UK, and Scotland could be particularly badly affected. Soaring APD will be whatever is the opposite to icing on the cake,- and it's almost too big now to go away.

Tuesday, 6 December 2011

Walsh slams APD Increases- on behalf of BA

IAG CEO Willie Walsh appeared on the BBC's 6 o'Clock News this evening to lay into the UK Government's insistence on going ahead with the 8% increase in Air Passenger Duty (APD) from April 2012.

What he said about it's effect on the UK's competetive position in international air travel and tourism was entirely correct and more than justifies his announcement of trimmed plans for the year with recruitment cut from 400 to 200 and one less 747-400 being returned to service from its sojourn in the dry American desert.

The Government response that aviation must take its share of the austerity tax raising burden and that it was lucky anyway in not being subject to VAT or fuel tax was entirely predictable from a beaurocratic entity (the Treasury) which is totally blind to the fact that UK Plc is in competition with Europe and the world for tourism and its share of the air traffic business. Ironically the next item on the News was about sluggish retail sales on Britain's high streets. The link between competitive pricing of air travel to encourage tourists to visit and spend money in the nation's shops, hotels, restaurants, cafes, and adding revenue to public transport and a whole host of other(mainly taxed) activities has no traction in Whitehall or amongst most MP's.

Politics apart, another fascinating aspect of Walsh appearing on the box standing in front of a stylish dark blue backdrop complete with BA logo was that it he as CEO of IAG, not Keith Williams as CEO of the BA brand,who was making the statement. We speculated earlier in the year on how the relationship between the owner,IAG, and the brands would develop once everyone had got their feet under the table and how the previously very hands-on Walsh would cope with what he might find the relatively dull hands off stratosphere of his runwayside office a mile or so away from BA's Waterside HQ.

Could it be that we are seeing here the glimmer of an answer which we suspected likely ? Add to that the question of whether Keith Williams' early expression of a new style with his "Peace in our Time" deal with Unite ending the cabin crew dispute without many of the real game changing gains Walsh had originally been going for has meant a clipping of wings. It is difficult to assess at this stage and we will have to wait for more blips to appear on the radar screen to give us a fix. The initial ones are certainly interesting and raise the antennae. Following ones boss into his/her former position while he/she moves up a notch and remains the boss demands a lot of both people. The success rate isn't wonderful.

Sunday, 4 December 2011

African Update -October/November 2011

As always lots of activity during the past two months ……..

Newly appointed DG of IATA, Tony Tyler, speaking at the AFRAA AGM, outlined his view of IATA’s role in Africa …. “Aviation is a challenging industry, so let’s work together … to meet the challenges of growth and make aviation even more successful. My focus is on IATA delivering value and innovation and being responsive to the needs of the membership”, ie, a pragmatic shift away from the practice of stripping carriers of membership for non-compliance of directives, eg, IOSA and e-ticketing.

The non-African airline presence on the continent continues to expand. Emirates announced the addition of Harare and Lusaka to the network; Gulf Air adds Entebbe in the next few weeks to be followed by Juba; Qatar has announced imminent operations to Kigali, Zanzibar and Mombasa, and United’s presence has grown with the addition of Houston-Lagos.

Increased capacity by non-African airlines has forced Air Seychelles to abandon long-haul operations and to restructure as a regional carrier. Similar loss of market share leading to worsening operating losses faces other carriers.

Diplomatic spats have soured the air in some countries: Senegal has closed its airspace to Guinea bound flights but has healed a rift with Mauritania. Nigeria and UK are tussling over Heathrow slots and frequencies for Arik and BA. Nigeria fines BA (USD135mn) and Virgin (USD100m) over alleged price discrimination against Nigerians.

The long arm of the law has touched some senior managers at Arik over alleged tax evasion and a previous CEO of Air Tanzania has been charged with abuse of office during his tenure. Parliament has sacked the Board of Royal Swazi for sitting 96 times in a year whereas the Act specifies just 4.

….. and Air Zimbabawe is reported as now being in discussion with Hainan Airlines on a possible takeover. In parallel management spent the night in their offices having been held hostage by staff demanding settlement of USD5.6mn unpaid salaries.


Air Tanzania GoTz pays SATechnic USD3mn maintenance and other bills to release the Dash8, their sole a/c. Ops to restart mid-Nov 2011. (Oct 2011)

Air Tanzania to acquire lease-purchase CRJ200 in Jan 2012. 5 year plan envisages CRJ700 and CRJ900 by end of 2013, followed by B737-800 and eventually B787 (nov11)

Air Tanzania talking to Export Dev Canada for help in raising USD500m for 8 additional aircraft, presumably Bombardiers. Embraer possibly offering E170/190 alternatives. (Nov11)

Air Tanzania former CEO David Mattaka charged in court with abuse of office over 2007 purchase of 26 vehicles. CFO,Ikomba, and Internal Auditor, Hajji, also charged. (nov 11)

Air Uganda new CEO, Kyle Haywood, announces plans for fleet growth in 2012-3 to expand regional and domestic ops to feed the growing number of EBB foreign long-haul ops. (nov11)
Ethiopian Airlines to launch ops ADD-BAH and KWI with Toronto also planned (Oct 11)
Kenya Airways contracts with GECAS for two B777-300ERs on 12-year leases (Oct11)

Kenya Airways takes delivery of its ninth E-Jet from Embraer, an E190. (Oct11)

Kenya Airways targets 107 aircraft fleet by 2020 and the CEO openly talks of hiring expat flight crew to meet the growth, a traditionally toxic topic with local unions. (Oct 11)

Kenya Airways eff 24Oct, USDollar pricing/payment introduced for domestic flights due to Kenya Shilling volatility (Oct11)

Kenya Airways rights issue due ‘in next 6 months’ to finance fleet/network expansion (Nov11)

Precision Air IPO overvalues the shares say analysts. 2010 profit 2% of rev and falling. (Oct11)

Precison Air planning new routes to Lillongwe, Luanda, Lusaka and Lubumbashi. (Oct 11)

Precision Air IPO closing date extended to 15 Dec 2011. Share take-up reportedly slow (nov11)

RwandAir takes delivery of second new B738. The 2 leased 735s are to remain for 2 years. 2x CRJ200 and 1x Dash8 also in fleet. Further 6 aircraft planned (Nov11)
Rwandair to launch service from Kigali to Lagos on 03 December 2011 with B738 (Nov11).
Southern Star (South Sudan) ceases ops 2 months after start-up. Reasons unclear. Single leased Dash8 returned to ALS Nairobi. (Nov11)
Tropical Air (Zanzibar) takes delivery of leased ATR42. Established charter operator. Started scheduled services in 2011 with Grand Caravan; DAR/ZNZ Pemba and Mafia. (Oct11)


Air Malawi suspends all ops due total fleet of 3 a/c grounded for maintenance/unpaid bills plus end of B732 wet-lease. New 737 lease plus return of ATR42 anticipated mid-Dec 2011 (nov11)

Air Seychelles to withdraw from ‘seriously loss-making’ long-haul ops by Mar 2012 and become regional carrier. 3x leased 767s to be returned. New B738 being considered. (Nov11)
Air Zimbabwe continuing efforts to acquire two A340-500s from Airbus despite EU sanctions. Funds from Chinese Sonangol (Angola). Ownership fuzziness delaying a/c registrations (Oct 11).
Air Zimbabwe again suspends international ops over JetA1 shortage due unpaid bills. (Nov11)
Air Zimbabwe staff hold managers hostage overnight over USD5.6m salary arrears (nov11)
Air Zimbabwe reportedly in talks with Hainan Airlines re takeover or investment (Nov11)
Fly 540 Dem Rep Congo is planned to add to Fly540s Kenya, Angola and Ghana.(Oct2011)
LAM ceased MPM-LIS ops pending strategy review. Plans to launch autonomous LAM Internacionale, long-haul co, with own fleet and crew. Will need to overturn EU ban. (Nov 11)
SAA drops DUR-CPT ops to codeshare with LCC subsidiary Mango. Ditto Lanseria - CPT (Oct 11)
SAA eff Jan 2012 to launch 2pw A319 ops to Pointe Noire and 3pw A346 to Beijing (Nov11)
SA Express DRC Congo Express jv failed and now closed. DRC partner revealed by audit to be without capital. Write off USD4.8m. SAX ops JNB-Lubumbashi continue (Nov11)
Santaco Airlines (SA) LCC ‘proof of concept launch’, 16 Sep 2011. Project of SA Taxi Assoc. Target ‘the black community’. End 2011 op launch. Lanseria – Bhisho and CPT. (Oct 11)

Zambezi Airlines AOC revoked due to ‘safety concerns’. Airline challenges decision in courts. Re-instatement apparently agreed. Ops to restart 11 Nov. New Govt has announced pending creation of new national airline. Zambesi USD20mn outstanding debts reported. (Oct11)


Arik Air plans LOS-AUH ops with A340-500 eff Nov 2011. First WAf carrier into AUH (Oct 2011)
Arik Air announces firm order for 2x B747-8I with GEnx engines. (Oct 2011)
Arik Air to launch ops Abuja - London Heathrow on 30 October 2011. (Oct 11)
Arik Air suspended from BSP by IATA. Arik joined BSP in Feb2011 (Oct11).
Arik Air president Arumemei-Ikhide plus CFO and 2 others arrested for alleged tax evasion and related offenses. USD22mn tax owing. USD7mn also owed to Nig Airspace Mgmnt Agcy (Oct 11)
Camair-Co reduces Paris ops from 6 to 4pw. To add 3pw Lyons ops with 737-700. (Nov11)

First Nation Airways (Nigeria) , start-up, out of Bellview, ops wef 2Nov ABJ-LOS-PHC with leased A320 ex Gulf Air. AOC granted 31 Oct 2011. (Nov 11)
Fly 540 Ghana receives its first aircraft, ATR72-500. Ghana AOC awaited but expected to start by end of 2011, says parent Lonhro (Oct11)
Gabon Airlines ceased ops Mar 2011. President announces new airline to fly in 2012 (Oct11)

Ghana International Airlines GIA collapse is ‘an albatross round Govt’s neck’, says President of Ghana as court cases continue. ‘Replacement is not a priority’. (Oct 2011)

Kabo Air (Nigeria) applies to US regulators for foreign air carrier permit with plans to operate B767-300 Lagos to Atlanta, Fort Lauderdale, and Houston (Nov11)

Sika Airlines (Ghana) plans 2012 startup with leased 777. ACC – LHR and JFK (Nov11)

Starbow Airlines (Ghana) Domestic ops started Sep 2011. Regional ops to follow.
Leased 2x BAe 146-300. Six aircraft planned. CEO Bock Frieson ex Air Malta. (Oct 11)

STP Airways (Sao Tome) relaunches ops between Sao Tome and Principe with DO228. Also ops 1pw 737-800 Sao Tome – Lisbon. 35% Govt owned. (Oct11)


Royal Air Maroc to op Casablanca - Bissau via Conakry eff Dec 2011 (Oct 11)

Several carriers have now restarted services into Tripoli.


Emirates to launch 5pw A330 ops Dubai – Lusaka – Harare eff Feb 2012 (Oct 11)

Emirates SkyCargo launched weekly 744F DXB-Lome-ACC-FRA-DXB service (Nov11)

KLM will launch 2pw 777-200 ops to Luanda eff Nov 2011 (Oct 11)

Qatar Airways to launch ops to Kigali, Zanzibar and Mombasa in early 2012 (Nov11)

Royal Jordanian to op A330 AMM-LOS eff Nov 2011. ACC, NBO, ADD, A320 in 2012 (Oct11)

Swiss to drop Cameroon ops eff Mar12. Fellow LH Group SNBrussels to up to 7pw (Nov11)

THY Turkish ups IST-ACC-LOS to 7pw and introduces B737-900ER, eff Dec 2011 (Nov11)

United Airlines launches daily Houston – Lagos. Operated by Continental. (Nov11)

Yes Airways (Poland) launched service from Warsaw to Mombasa on 09 October 2011 with A320. Carrier is operated by IKATA, Poland’s largest tour operator. (Oct11)


Addis Ababa Airport expansion to be completed Dec 2011. Aircraft parking up from 19 to 44 incl 747/777. Runway upgrading plus new taxiways. Chinese contractors. (Oct 11)

Airbus predicts sub-Sahara Africa need for 528 new passenger aircraft by 2030, value USD65bn. 350 single aisle, 157 twin aisle, 21 very large. Assumes annual 5.7% pax vol growth. (Oct 11)

US FAA issues AD to increase fuselage crack checks on B733/734/735 with 40K+ cycles (Nov11)

IATA fresh approach to Africa, said by new DG Tony Tyler at AAFRA AGM ……….
“Aviation is a challenging industry, so let’s work together, where we can, to meet the challenges of growth and make aviation even more successful. My focus on running IATA is on delivering value and innovation and being responsive to the needs of the membership”. (Nov11)

India Govt keen to secure S Atlantic fifths beyond Africa in exchange for fifths beyond India for African carriers (Oct 11)

Nairobi JKIA USD500mn new terminal and ramp expansion, ground breaking scheduled for Jan 2012 for operational completion 2014. (Oct 11)

Nigeria Lagos MMA Airport new terminal under construction. Part of GoN USD120mn national airports upgrade plan. (Nov 11)

Nigeria Fed Airports Authy removes MD Mr Aisuebeogun, & Nigerian Airspace Management Agcy MD Mr Auyo. Replacements, Mr Uriesa and Mr Udoh respectively (Oct11)

Nigeria reduces BA LOS freqs to 3pw eff 31 Dec as Arik claims BASA breach in allocation of their LHR slots. Arik previously leased slots from BMI, now being sold by DLH. (Nov11).

Nigeria CAA fines BA USD135m and Virgin USD100m for alleged price fixing. Ban from Nigerian airspace possible for non-compliance. Both carriers objecting. (Nov11)

Senegal and Mauritania resolve 5th freedom spat – ‘misunderstanding’ DKR-NOU ops resumed after 3 month gap (Oct 11)

Senegal / Belgium new BASA signed but Brussels Airlines fifths beyond DKR, suddenly withdrawn on creation of new Senegal Airlines in Jan 2011, not reinstated. (Oct 11)

Senegal bans flights to/from Guinea air space following Guinea grounding an Air Senegal aircraft due unpaid bills. Guinea president says Senegal complicit in failed assassination attack. (Nov11)

South Sudan (Republic of) has become ICAO’s 191st Member State, (Nov11)

Swaziland construction of new Sikhuphe Intl Airport stalled due cost overruns. 2011 opening date postponed. Construction began 2003 east of Manzini. Part funded by Taiwan. (Nov11)

John Williams
1 December 2011

Thursday, 1 December 2011

Airline Downsizing Roundup.


There's a bit of it about.

Here are just a few current examples, big and small:

-American Airlines, frustrated at its lack of progress in negotiating a new deal with its pilots, has finally taken the path of its major US competitors and gone into Chapter 11 bancrupcy protection. This should enable it to renegotiate many of its labour and pension arrangements and downsize its cost base. Some of its international routes could get the chop too although nothing has been said yet. Had the unions been a bit more accomodating and acknowledged the airline's efforts to avoid Chapter 11 they might have protected a lot more than they now stand to lose. Unfortunately that is all to often not the way of unions. Protecting an undefendable past is their normal territory. Designing new futures and being part of these is not.

- Thomas Cook,struggling a bit right now, is to take 4 aircraft out of its UK fleet in Summer 2012. That was before its recent search for additional funds. Maybe more now? A sobering note about the future was struck by a bank today saying that unless they take drastic action they will be in the same cyclical cash flow position again this time next year. In the meantime restoration of customer confidence has to be their top priority or there won't be a next year.

-BA is reducing its long haul fleet by 2 in summer 2012 despite transfering its 3 x daily Moscow flights from short to long haul.Of five apparent new Heathrow new daily slots, 1 goes to Domestic (Glasgow), 3 to short haul and 1 to long haul to increase South American frequencies. No sign of those new Asian long haul destinations it occasionally talks about. The problem there is how to make money on routes with very high volume low yield leisure demand but not enough premium business. That's especially so when your main base (Heathrow) fleet is very largely configured with high large premium cabins and small economy ones.

- Astraeus, a highly competant largely contract operator, has closed due to lack of new business.

- Air Seychelles new CEO, Bram Stellar, hasn't wasted any time in securing Government agreement to do the previously unthinkable,- withdraw from London and Paris and concentrate on being a profitable regional carrier. The monthly fixed costs on the 3 767-300s alone was Euro 1 million, enough to ensure a loss weithout high utllisation and consistently high load factors. A codeshare deal has been put together with Etihad to give Air Seychelles access to their network with of course no attendant capital costs or liabilities. Air Malawi, Air Tanzania and a few others should take note and pick up the phone to the Gulf. There are much more pressing things for their governments to spend money on than a failing state airline.

With the Euro rocking about, fuel price prospects looking only northwards especially if export sanctions are imposed on Iran and potential customers feeling wary about spending money once the Yuletide splurge is over, we can expect to see some more belt tightening by many ,- specially the smaller carriers,- leaving the growing high quality, high frequency network Asian and Gulf airlines and their hubs in ever stronger positions.

Tuesday, 29 November 2011

UK Chancellor's Autumn Statement-Gloom for the airlines.

They probably never could have hoped for much from George Osborne today but it turned out worse than that.

First of all there was no mention at all of Air Passenger Duty (APD) which can only mean that it will not only remain at the current suffocating level but increase early in 2012, now by twice the rate of inflation. Band A, its lowest rate for journeys up to 2,000 miles from London is currently £12 for Economy passengers and £24 for all higher classes, including any premium economy. Within the UK of course there is a double hit since it applies in both directions whereas to points outside the UK it is only imposed on the outward flight. Band D, the highest level which covers places over 6,000 miles from London,- eg New Zealand,- is £85 for basic Economy and a massive £170 for all other classes. The problem is that the government income from this source is now so high as to be significant (Over £1bn) so it is very difficult for them to ditch it. The danger is that the golden goose will become sickly and stop producing.

Secondly, although there was a commitment to look at southern England airport capacity ,there was an absolutely specific statement that Heathrow's third runway isn't even up for consideration as a possibility. Not many wide ranging, open minded, strategic studies of national economic importance start off with the outright rejection of the most cost effective and soonest available option. This was a chilling moment. Many would like to see the building of Britain's Thames Estuary Chep Lap Kok or Incheon in Asian double quick time, even at a cost of £50 bn. It wouldnt though be like that. Time to completion would look more like 20 years at best and the cost with accompanying infrastructure would be more like £100bn. The drawings so far, while interesting, have not reached beyond a four runway airport whereas for the long term at least 6 would be advisable plus a massive amount of land for terminals. Most heavy engineering would probably be done elsewhere as metal aircraft structures and sea water don't get along well.

It looks therefore that London airport growth for the next 20 years will depend on squeezing more movements and more passengers through the existing Heathrow site. Gatwick can play its part, but Heathrow is where everybody wants to be. Terminal capacity can be expanded considerably but more movements will depend on more flexible use of the runways. More night movements would help but are very unlikely to be granted.

The two resident British airlines, BA and Virgin Atlantic, will therefore see the day in Westminster as a bad one. Foreign airlines who do well at London will feel the same about the APD though the continentals should be able to work their way around that by separate ticketing for the cross-channel sectors. The Gulf fraternity will see improved prospects for their links to provincial cities on the one hand or the possible routing of large chunks of business via Amsterdam, Brussells or Paris, also with separate ticketing or by using Eurostar . Almost any way one looks at the situation, it is the British airlines and UK Plc which will take the biggest hits.

Footnote: Could the enthusiasm for a Thames estuary airport in the media and amongst politicians be something to do with how few of them live in north Kent or south Essex? They, along with noisy "celebreties", seem much more prolific in central London and out to the west under the Heathrow flight paths. Funny that.

Wednesday, 23 November 2011

Qantas takes another Industrial Relations Leap.

The Qantas dispute, which CEO Alan Joyce a few weeks ago threw into the lap of Fairwork Australia ,is now headed to arbitration. This could take a while and certainly will kick the ball well past the Christmas and New Year holiday period. Joyce's view is that it also delays any industrial action for however long the process takes.

It looks another high risk move but the CEO seems to enjoy those. He has to be a casino operator's nightmare. There's just a chance..........

Although arbitration is arbitration and intended to be thoroughly neutral, the fact is that the people involved in are largely Labour-connected in varying degrees, some directly. That has to raise some risks. Also the unions may not accept the outcome if they don't like it. On top of that, a couple of the Qantas unions are talking about challenging in the Supreme Court the original involvement of Fairwork.

While the whole arbitration process could take months and Joyce is resolutely saying that there can be no industrial action in the meantime, many would not bet on that.

The government does have an interest in the whole affair both because of Qantas' iconic national and international standing and because Prime Minister Gillard was the author of the legislation. There is also an independent Senator who has got a review of the Qantas Sale Act under way with the primary aim of preventing the airline from doing anything offshore or hiring cheaper labour. The government has no shareholding in Qantas but that does not prevent some MPs from feeling that they can run the company by playing around with the Act which was designed during the trade sale process to prevent foreign businesses like BA gaining control. It was certainly never meant to inhibit Qantas' ability to run its own business.

The story continues............

Tuesday, 15 November 2011

Business Travel- The false economy of long haul Economy.

The western world's financial woes have brought inevitable spending cuts in businesses large and small. Not only has it been necessary to satisfy the accountants by removing anything that looks like a self serving extravaggance but also to show colleagues an egalitarian and hair shirted "We all share the pain" approach. Many cuts have been across the board rather than targeted .Essential and non essential spend has been hit equally and in many service businesses the customers as much as the staff. This is all at a time when peak performance by everyone, especially when out and about looking for more business, negotiating deals and visibly looking after customers is more important than ever.

As part of their austerity packages many companies have downgraded employees class of travel and accomodation .Some gone right to the quick by insisting on buying "This flight only" inflexible tickets. None of these things is sensible. Moving down from First to a flat bed Business class is fair enough as the traveller still flies comfortably and arrives in reasonable shape. From long haul Business to Economy is a completely different story. To expect a person to "enjoy" an economy seat on a long overnight trip and then bounce into peak performance immediately on arrival or even the following morning is unrealistic. Absurd would be a better label. The effect can cost the company literally millions although it will never show up directly in the accounts. Why jeopardise very large sums of money for very little additional spend?

Putting a person who is tired, excessively and unnecessarily jetlagged into a serious business meeting is an enormous risk. Host companies are not stupid and will use any weaknesses/signs of fatigue and pressing deadlines to their advantage. A few seemingly friendly questions at the beginning of a series of meetings will usually give them all the information they need. "Did you have a good flight?" ,"When are you home next?". These two alone will expose the vistor's position. Oriental companies are particularly adept at getting and using this sort of information. They also have the advantage of the visitor often being jetlagged and accordingly can arrange programmes to devastating effect. Any company willingly putting its person into the arena in a worn out state reaps what they sow.

The problem isn't only on long haul travel. The short haul redeye and daytrip business market is huge and fuelled by a sort of misplaced macho culture. The first wave of 0600-0700 departures is usually like the great migration. This will have meant early risings of around 4am. For the cost of a night's hotel and a meal or two, the individuals concerned could have arrived the night before and go into their meetings as bright eyed as the home team and yet accounts departments frown and ordain the redeye in the back of the aircraft.

There are signs that some lessons have been learned as business travel in premium cabins has been enjoying a recent resurgence particularly on long haul. On short haul travelling Economy but getting a night in a hotel is a reasonable compromise so that does leave scope for the Low Cost airlines to follow Easyjet and seriously bid for business travellers. On long haul where Business Class ticket prices can look much more costly there is a lot of education and persuasion still to be done. BA's original Business Class ads showing an overnight traveller changing from being the lamb to the slaughter to the man who wins the contract because he travelled Club remains still probably the simplest and most effective message every delivered on the subject. There are tens of millions for airlines to gain by returning to the subject so it's no surprise that many are upgrading their front and middle end products and going for it.

Monday, 14 November 2011

WTM-London World Travel Market. Davids and Goliaths do battle.

Usually a contestant for The World's Largest Rugby Scrum award, London's World Travel Mart this year seemed less crowded than usual although all the way on the Jubilee Line and then the DLR and into Excel's halls there were plenty of people about. The world's travel trade en masse are not the most impressive or considerate of travellers and their sharp elbows probably did little to improve the "journey experience" for others heading east during the week. The big hitters tend to be in evidence and doing the big deals on the Monday and Tuesday while the rest of the week sees a slide towards brochure collectors and a downward move in the pecking order. Long standing exhibitors, great and small, often query the value of being there at all but then stay with it lest absence might prove even more costly. Having the world under one roof all at once does give the well organised the opportunity for fast and effective networking and for the big brands to reach across a very wide audience. In this the brochure collectors can also have a commercial value. For the disorganised and unfocused though it can be a rather expensive week away from the office clouded,- or maybe enhanced,- by high consumption of alcohol and other after hours entertainments.

The UK, Europe and USA are all rather predictable in their offerings and are assured of reasonably high volumes of business almost whatever happens. Surprisingly this year the U.K. did not seem to give particular weight to either the Royal Jubilee or the Olympics. Perhaps it felt that these don't need further promotion and are more concerned with the side effects of London accomodation being fully booked and overpriced thus choking off non Olympic demand and the percolation of UK tourists through to the provinces. On top of this there has to be a concern that the astronomic and rising cost of the APD will drive the traditional multi country itineraries which provide much of the Asian and Chinese bulk business away totally or at least mean that they make their final hop home from somewhere other than UK. Not only would that be a loss to UK airlines but as these tourists tend to do most of their very substantial shopping at the last point on the itinerary ,this spend would also be a big loss to the UK retail trade. Not only London and Edinburgh should be worried but also the new cut price designer store outlets such as Bicester Village. Overall the British tourism effort looks haphazard and uncordinated and indeed it is. That's not new and no governmemt has yet understood its value in money and jobs. All have simply thrown money at the BTA and assumed that would solve everything. It won't.

The Middle East and Asia offer high quality and often reasonably priced products which the rest of the world should pay attention to as a model. The standards of their offerings in accomodation, service,furnishings, decor and cuisine both on the ground and on many of their airlines are now the world's benchmarks.

Against all these areas with big budgets and large stands one would expect Africa to struggle for attention. Happily it doesn't as its unique combination of a wild (animals) side coupled with big scenery and exotic beach holiday possibilities and the opportunity to combine the two within a two week stay is a guaranteed draw. Especially right now,the continent should though watch the competition for clues about expected service standards and value for money and not rely simply on carrying on doing what it has been doing for years.

So what did the African offering at WTM look like? John Williams was there asking the question of whether the signs for the next few years were encouraging or worrying. Here are his impressions.............

"But there have only been 2 kidnappings and we've now sent in our army to sort it out" enthused an optimistic Kenyan local tour operator. No problems ahead for Kenya volume then. The adjacent Tanzanian stand looked busier which is interesting as the country has always followed a high yield/low volume approach compared to Kenya's general,- though not exclusively,-lower yield and enormous volume policy. It could be that in a time of tight money Tanzania holds its business better as the wealthy are having to tighten their belts less than the aspirant middle classes. Kenya's Presidential elections next year could be another tourism turnoff. They have a lot to think about and some of their pricing for what are really middle range products is looking heavy. The current weakness of the Kenyan shilling against sterling though makes it generally relatively good value for the UK market.

Eastern Africa neighbours Rwanda, Burundi and Uganda were also present and aiming to pull some of Kenya's business further west. All showed their growing confidence with bigger stands and larger staffs than in previous years. They were much higher profile than before. Unsurprisingly, Somalia was not present other than as a worry in East African minds that it is all too often labelled internationally as part of the region. To the other regional nations it never has been and never will be. Unfortunately the BBC, the Aid agency industry and even Royalty never seem to grasp that and talk emotively about "The East African Famine Crisis". This is hugely damaging to the image and business of the largely or totally unaffected countries of real East Africa.

Malawi, always one of the smaller players also had an upgraded stand. It offers some stunning scenery, the beautiful Lake Malawi and some interesting but not prolific pockets of wild animals at Liwonde and Kasungu but is not an easy or competitively priced place for the individual traveller to get around. Its near neighbour Zimbabwe has everything in abundance except , thanks to its politics, anyone's interest in going there. As result its neighbour Zambia gets nearly all the Victoria Falls business and links this up with its excellent South Luangwa Valley national park. It does not however have the volume of accomodation to take much off Kenya.

As always the biggest African player at WTM was South Africa. Its traditional estate of a stand looked as busy as ever despite the realtively strong Rand. The mood was one of business holding up well and the country seems largely remote from the economic turmoil of much of the world. The 2010 World Cup was a success and the afterglow lingers in the national mind giving confidence to tour operators and other tourism players. Violence levels which grab western headlines from time to time and were swiftly dealt with during the World Cup have not increased. Worries about next year's elections have yet to surface internationally.

Slightly guarded optimism from most countries in Africa then and no real signs of depression or panic, but where were the really positive signs?

The big one is the arrival of Chinese and other Asian tourists. A recent report talked of 2,500 Chinese dollar millionaires who are now becoming high spenders in the travel market. In their wake are large numbers of the fast growing new Chinese middle classes and the signs of them are already apparent in Indian Ocean resorts and top end safari camps. They have different needs to travelling Europeans and some fast footwork, especially on the catering score,not to mention gambling and ever more golf, is a must. There are also now over a million Chinese from laborers to managers working in Africa. Some leading Kenyan operators have already got the message and Chinese guides are being trained as part of their effort. They will be increasingly be in demand and there is massive potential here.

Back to the Davids amongst the Goliaths, perhaps the most positive new green shoot was the first appearance of a Democratic Republic of Congo stand. They were never going to find it easy but their response to the enquiry about ease of getting there and around "You will need to buy a ticket" was a tiny but significant step forward. Whatever the reaction, they will have gained from the experience of being there. At least they were saying "You can come". That is a true beginning and from what they saw in London they will go home with a view of what it is they have to do next. That's how all good things begin,- with a bit of courage and a view of what might be one day possible. Welcome DRC and we hope you got home safely despite all the jagged elbows along the way.

-John Williams and Peter Woodrow.

Friday, 4 November 2011

IAG/BA Bid for BMi. - A "must do".

BA watchers will be delighted to see that, if nothing else did it, UK Secretary of Transport, Justine Greening's statement last Monday that the proposed new 3rd runway at Heathrow is dead and buried has jolted IAG/BA into doing the only thing it can do to avoid continuing into further progressive relative decline. The holding company is bidding to buy failing BMi from Lufthansa who rather extraordinarily have always looked strangely short of ideas about what to do to reverse its aquistion's steadily and alarmingly increasing losses.Big bold moves and a possible move to strong Lufthansa or Lufthansa UK branding was expected but never happened.

BMi's wandering in the wilderness has continued with little sign of direction since the airline's founder and builder, Michael Bishop, bailed out by forcing the sale to Lufthansa. Since abandoning the simple British Midland tag, the brand has been weak in most respects and it has never really set out its stall as to what it really is. When relaunched as BMi most thought that it meant British Midland International. Strangely the airline denied this and said it didn't mean anything at all,-they were just nice initials. Its new light and lighter blue corporate scheme was nebulous and weak and the name BMi almost invisible and that became the character of the airline. Its trans Atlantic ambitions were never realised and its costs were high, a toxic and depressing mix. Although some redundancies are inevitable, BMi's remaining staff and particularly its pilots if they can obtain anything like the deal their Cityflyer Express colleagues obtained when taken over by BA in 2000, should be happy enough to be absorbed into BA despite the very different and not unproblematical big company culture they will now be entering.

For BA, the big prize for the modest outlay said to be around £300 million, is BMi's 53 slot portfolio which would take them and Iberia from 45% of the Heathrow total to around 53%. The inevitable shouts of "not fair" and "anti competitive" are already coming from the Virgin quarter and from others who don't like the idea of a dominant home based carrier, would like a few of those slots themselves or just see a weaker, more fragmented industry as more likely to deliver cheaper fares. The latter group have little to fear as even with 53% of total slots , IAG will still face enormous competition from an array of direct and high and better service quality sixth freedom alternatives on every significant route. A larger Virgin Atlantic,for some time touted for sale, would become more attractive. However as most of its own current activity duplicates the fatter bits of the BA network ,an expanded company would probably add little to the UK's overall strength in the air transport business notwithstanding the fact that the BA brand is not in fact British owned.

Taking over all or the core of BMi won't be all plain sailing for BA. It will need a very clear idea of how best to reorganise and absorb its new aquisition and its people and how to deploy the slots. Rebuilding its seriously depleted Asian coverage, substantially abandoned during the Ayling era, should be a priority but this will need the right aircraft in the right configurations. BMi's Middle East and African networks also fill a gaping hole in BA's portfolio and many of the routes could suit the substantial order for B787s,-particularly the -8,- very well indeed. If the Competition Regulator becomes involved they should stipulate that agreement to the takeover requires a guarantee that a percentage of the slots gained must be used for these routes rather than adding to BA's already disproportionate dependence on serving the USA.

The other problem for BA will be finding the managment expertise initially to run and then quickly absorb its new aquisition. The shadow of the Dirty Tricks allegations has hung over its corporate culture for at least twenty years and blunted its competitive approach to business. As result it has been the giver in the One World alliance and, amongst other things, more or less abandoned Australia and South East Asia to Qantas and North East Asia to Cathay Pacific, instead focusing even more disproportionately on the Atlantic as its core business. Alliances and codeshares are all very well but the fact is that seats sold on the partners earn only tiny commissions and in no way equate to sales on any member's own services. BA and other major hub based worldwide airlines probably did better in the world of IATA interline ticketing and fares than in the new more restricted world of alliance member to alliance member connections where 40% or more of their home hub's potential connecting business may be unavailable to them as it is ring fenced by rival alliances. There is little of the former free flow traffic where the operator with the biggest network or highest frequencies disproportionately took most of it. Strategically the major carriers should have avoided alliances and codeshares like the plague but most were seduced by them and as result lost a lot of their fire power. Tim Clark of Emirates in a recent interview by Airline Management says that they have been absolutely clear about the risk of losing their independence and ability to compete in their own right and have been determined to avoid it. With at least 40 new slot pairs to play with, assuming they have to give some away, BA has a one off opportunity here to reassert itself and its own interests. It will need a culture change and some highly competitive, probably new,tough and internationally minded strategy driven people to achieve that. It has to do it or its future is elsewhere.

Tuesday, 1 November 2011

UK Transport,-Airports and HS2,- 2 Statements and some Realities.

Media focus over the last few days on the Eurozone crisis and other miseries has meant that two very important statements on transport policy,- one by new Conservative Secretary of State, Justine Greening and the other by her Labour opposition equivalent, Maria Eagle, have gone largely without comment. Both are of major significance for the UK's economic and social future and deserve much wider publicity.

Firstly there was Ms Greening, MP for Putney and Roehampton's declaration to a meeting of aviation people that "The political reality is that the (Heathrow 3rd runway) decision has been made and it is done". Contrary to hopes that with the last election now well behind them and over three to go before the next, the Conservatives might review their fatal electioneering promise to axe what was then Labour's plan for the additional runway, this has to be the end of the last chance of its resurection. The British airline industry has reacted with predictable dismay and it does mean that either it goes into relative decline or one of the Thames estuary options is swiftly taken up and undertaken with un-British haste regardless of what birds, insects, rare plants etc it may come across. A byproduct of this stance is that it makes talk of bending the proposed HS2 railway from London to Birmingham and the north to take in Heathrow an even less sensible proposition than it is now. Thanks to the efforts of European, Middle Eastern and Asian airlines offering excellent high quality links to the world via their home airports, Heathrow is fast diminishing in importance to northern England and Scotland. It is though still significant for southern and western England and south Wales.

Ms Eagle speaking for Labour discarded their previous position of championing Heathrow's third runway by also declaring it dead and buried. For once cross party agreement but unfortunately on an issue where both are now wrong. She did though reaffirm Lord Adonis' support for HS 2 though in a changed form. With an over optimistic glance at gaining support from disgruntled Tory voters in the Amersham/mid Chiltern Misbourne Valley/Wendover corridor, she declared, Miliband style, that they they were not Nimbys and she in effect shared their pain, environmental concerns etc. She and the party are now for HS 2 following a deviation which most of its customers do not want so as to loop via growth- stymied Heathrow thereby adding to the journey time and cost per person per journey for evermore.

Although both parties have linked the abandonment of the Heathrow runway to the case for building HS 2 there is less and less relationship between the two. Thanks to European, Asian and Gulf airlines providing ever increasing links to the world via their efficient and attractive hubs, northern England and Scotland do not need Heathrow so providing an expensive rail link to it from those places is not worthwhile. The rail links the airport does need are to the south, west and Wales. These do not have significant airports offering extensive and high frequency connections to other people's hubs. The most obvious, short and therefore relatively cheap link would be from Terminal 5 direct to the Great Western mainline heading west. Now that the GW line is to be electrified and the T5 platforms are already built and unused ,it becomes particularly easy and both for Crossrail and long distance trains from Paddington to Reading and beyond, north to Birmingham, west to Bristol and Wales and south west to Exeter, Plymouth and Penzance.

HS 2 and the 3rd Heathrow runway remain the greatest strategic transport needs for the UK. Politicians need to understand that they are separate not conjoined issues and take action on both. Talk of a new airport in the Thames estuary for £50 bn in ten years is airport pie in the sky. This is UK, not Hong Kong or Korea. Apart from the upheaval it would create for the whole Thames Valley corridor economy from west London to at least Swindon, out to the east birds live in the Thames estuary. People around there want to sleep. There will be unique mosses, badgers and who knows what else? It would take decades to circumnavigate these via countless enquiries, reviews, appeals and the rest. £50 bn would quickly morph into £100bn and keep going while Britain's transport systems went the other way.

Sunday, 30 October 2011

The Qantas Lockout, - Risks and rocks all round down under.

Qantas' bolt from the blue,- the unheralded immediate suspension of their services wordwide is spectacular even in the rough knockabout world of Australian politics, unions and industrial relations. The stunning immediacy of CEO Alan Joyce's action makes Willie Walsh look like a silver tongued diplomat.Clearly this was not a spur of the moment decision. Both it and its timing must have been carefully considered and agreed by the Qantas board whose Chairman Leigh Clifford had a robust record in handling disputes during his time with mining giant Rio Tinto.

A comprehensive lockout by an airline is probably unprecedented. Strikes are almost always visible a long way off , giving governments time to decide whether they can or want to intervene and customers and staff the chance to make their own arrangements to deal with the situation. Historically strikes have also been ex base so that aircraft competed their whole itineraries and passengers were not suddenly left stranded around the network. Halting checkin and departures systemwide within minutes is something entirely new and adds to the dramatic effect. It is also bound to elicit adverse customer reaction. It must have been considered worth the risk.

So what's going on here?

Qantas is faced with an ever less regulated world. The core historic long haul airline was overwhelmingly protected from overseas competition by extremely restrictive Air Service Agreements between Australia and foreign governments. These started to fall away from the 1970s with the emergence of the new high quality but lower cost Asian airlines and bit by bit the access wall was eroded until with the arrival of the new generation of Middle East carriers it has all but collapsed to the enormous benefit of Australia's tourism and other industries. It is not going to be rebuilt. Qantas' only viable future therefore is to go out and compete, focus more on Asia, and move some labour intensive activities such as engineering to lower cost locations. Old fashioned wage rates and low productivity are not an option.

Union reaction to the new necessities has not been positive. A fierce and sometimes bitter rearguard action has been developed into a running battle against almost any change to the status quo. Life could not go on like this and somehow a new deal has to be forced and accepted. Recent progress has been zero and animosity has increased.

The airline has clearly decided that it can no longer live with the ongoing targeted industrial action of the last few months and that drastic and indeed dramatic action is the only way through. The last straw has probably been cashflow sapping union warnings to the customers that they risk disruption if they book on Qantas over the Christmas/New Year period.

Desparate times, desparate-but considered,-measures.

The timing can not have been accidental. Qantas has certainly gained the attention of Prime Minister Julia Gillard by threatening the smooth return home of the high profile delegates, entourages and media from the Perth Commonwealth Heads of Government Meeting. As host she has probably swung between acute embarrassment and fury. Bearing in mind that many of her cabinet have trade union backgrounds her attention may or may not be helpful to Mr Joyce.Risky.

Next up this week is the Melbourne Cup. Disrupting tens of thousands of the airline's domestic passengers, including its most loyal and influential customers, is again high risk. They may not be inclined to support the airline's action,- or timing.

The third group with whom relations are at risk is the non involved staff who could move from supporting their management to at least questioning it. Stopping flying removes the rallying flag for supporters and demoralisation can follow.

The word which keeps recurring here is risk. The Chairman, CEO and Board must believe that they can force government support for an enduring industrial settlement whether they like it or not. Their gamble is that the government will accept that Qantas is just too important to Australia to be seen to fail and the case for it to mimic Asian costs and service quality is irrefutable. If it doesn't it will be replaced either by its own Jetstar subsidiary, a thing the unions fear greatly and are fighting against, or another operator entirely. That's why the Board has thrown the dice. It has landed rather decisively in the government's lap.

Friday, 14 October 2011

Ryan,- Taking the p---??

Maybe yesterday's story that Ryan Air is considering removing 2 of the 3 toilets on some of its 189 seat 737-800s , giving them them 6 more potentially saleable seats is just another headline grabbing exercise unlikely to actually see the light of day.

It is though an interesting and risky piece of customer psychology. Ryan have long made it clear that they don't seek to be loved, or even liked, by their customers and that they see price and range of destinations being all they need to continue on a roll.

Few accountants,- and airline ones in particular,-have ever been able to see much value in product improvements or even simple warmth or cuddliness of image. The stockmarket has taken a similar view with anything looking like additional cost often resulting in an immediate shareprice drop even if it is a real investment. The human reality is though that being liked and even better having stronger emotional bonds with the customers must have a value in achieving real loyalty and repeat business. This was recognised twenty plus years ago when the concept of stakeholders or a three cornered relationship between company,staff and customers was in vogue. Earlier than that, from the 1950s at least, being the link between being liked by the customers and thereby being their first choice was well understood by the airlines. Just look at the old ads. The first customer loyalty programmes were probably the very simple young frequent flyers' logbooks and badges introduced by Pan American with their Junior Clipper Club and BOAC with its Junior Jet Club. Both appeared in the mid 1950s, were extremely effective at a very low cost and sought to bind child travellers in for life. In doing so they achieved this emotional link, not just with the children but also with their parents. It was very clever. More recent loyalty programmes involving air miles and similar have been about financial rather than an emotional reward . They are therefore a different animal. There is a separate question as to whether they increase or just distort and even displace real competition.

Ryan, like any airline or business depends on keeping the incoming cash flow running ahead of the following tsunami of bills demanding payment. Being sure of continuing to attract large numbers of customers crucial in the current economic situation. BA's £ 20 million "To Fly to Serve " campaign is about reaching out to be liked as well as to be respected as innovative, safe and customer orientated. Easyjet is in full persuit of the higher yielding business market. Others are putting a lot into making themselves as attractive as possible. It is a strange moment therefore to be offering customers the prospect of serious physical discomfort should an incumbent of the sole remaining toilet not be a short stay customer. The visual, materiel and aromatic impact on those sitting nearby should the desparate decide to relieve themselves in the nearby door or other areas would be dire. It has happened on other airlines who have pushed up queuing times by reducing the number of loos.

Maybe this latest "initiative" is a step too far for Ryan and they would do well to stop and think about it. There comes a point where people say "Enough is enough". Then the flow of bodily waste can reverse direction.

Tuesday, 11 October 2011

London's Airports: Heathwick-the daftest idea yet.

Airnthere is very much up for new ideas and things which move the transport industry and business in general forward. We are seldom swift to condemn and only do so after much thought.

The latest UK Government idea to try to mitigate some of the effects of its David Cameron ordained pre election promise to cancel the third Heathrow runway project by building a £5bn high speed train link between it and Gatwick is in the 1st April catageory though. The response to it does not require more than a moment's thought, so condemnation comes easily.

Quite simply who would transit through a hub whose runways are 30+ miles apart and connected by a train trip when at Amsterdam, Frankfurt, Copenhagen, Helsinki,the Gulf airports and others they can simply walk from gate to gate or at worst take a brief trip on a people mover/mini train?

That's before one even begins to contemplate the real logistics and costs. Unlike Hong Kong, the UK hasn't grasped the idea that the train has to be brought to the customers not the customers,-via a lengthy hike,-to the train. A Heathrow-Gatwick rail link would probably have to be either customs and immigration bonded, not to mention escape-proof. It would therefore be inaccessible to purely domestic passengers. Alternatively it could be landside and available to all. Its airline transfer users would then have to have to have visas (price £45 a head),and, via queues, go through arrivals controls at one airport and departure controls at the other. Either option would make the volumes of passengers so low that huge subsidies would be required for the train which would have to be free to users to even be considered. For many of the same reasons plus conflicting runway alignment, Northolt does't cut it either.

The other options of a Hong Kong, Osaka or Seoul type new airport built on "Boris" or any other Thames Estuary new or existing island also don't look likely flyers. This is UK, not Asia. The single minded dynamic focus on projects of national importance simply isn't British. Whatever is proposed will be fought by armies of environmentalists, planet savers, lovers of rare species of butterflies only to be found in Boris' left ear and countless others. The planning battle alone would take years.

At the time of the General Election in 2000, Heathrow's third runway was nearly ready to proceed. With Transport Minister, Philip Hammond now saying clearly "never", it now looks lost and will very soon become impractical or vastly more expensive unless the Conservatives are prepared to say those unimaginable words "Sorry, we got it wrong. We have to do it after all".

Trains might fly.

The whole saga is a man made national disaster for London and UK's role in air transport and for its long term position in worldwide business and tourism. It is extremely bad news for the struggling UK economy and employment. There will be many beneficiaries, but they won't be Britain or the British.

Sunday, 2 October 2011

To Fly to Serve,- But be careful what you say.

IAG/BA's new £20 million "To Fly to Serve" campaign, probably aimed as much at some of its staff as its customers, is now under way. Presumably warm and fuzzy feelings are the objective along with a new confidence in a warm, friendly service ethic.

Naturally, to measure progress, post flight customer comments are sought. Passengers may receive a questionnaire via email. Excellent idea. All goes well until the end where there are two boxes,-one for favourable comments with no upper limits on adulation. The other,-for less favourable comments ,- comes with a severe warning that any containing material that is unlawful,obscene,threatening or offensive will not be accepted.


Wednesday, 28 September 2011

Testing Times for British (Ground) Transport

The first Boeing 787 Dreamliner was delivered to All Nippon Airways yesterday, 26th September.

Its first commercial service with passengers is scheduled to be just a month later on 26th October on a charter from Tokyo to Hong Kong. Normal scheduled domestic services begin on 1st November.

Meanwhile down on British soil, today's Evening Standard reveals that the first of Boris Johnson's new Routemaster buses for London will be delivered in December but not in service until late March despite the fact that a prototype has been running since last May.

The same pattern is repeated on the rails. New trains, even of existing designs already operated by another company, take months from delivery to being in service.

In addition training drivers how to cope with even minor differences in operating techniques is nothing like as quick and straightforward as for example a differences course between different models/generations of Boeing 737s or between 757s and 767s. Even learning what would appear to be simple things like how to operate the doors in selective door operating mode (ie when some are kept closed when short platforms are being used) seems to take for ever. Even at the outset of their careers, UK train driver training takes longer,-18 months,-than the 14 months minimum for an ab initio pilot's frozen ATPL. Incidentally ,once qualified, their starting pay of £40k upwards, often involving inflexible shift lengths and,-incredibly,-not making Sunday working compulsory, is higher than for many new First Officers, particularly on turboprops.

Whether ground transportation's problems are international v domestic, aviation being highly competitive and the earthlings not very, union influence, domestic legislation including the infamous tripall "Health and Safety" or other factors is not clear .On the face of it it does though say something favourable about the highly complex, high technology based, aviation industry compared with its earthbound cousins,- at least in the UK.

Saturday, 24 September 2011

Emirates,- Clever Moves in Africa,- and Ireland,

Emirates' announcement of a 5 x weekly Dubai/Lusaka/Harare A330 service from 1st February is another good one by the Gulf carrier. It fills in a central African gap in their African network and offers Zimbabwe and Zambia useful high quality, high frequency links to China for the substantial numbers of worker and business traffic originating there. Tourism by the fast growing numbers of relatively affluent Chinese and other Asian professionals will be an added bonus. The one-stop routing to the UK and Europe's secondary cities via Dubai will also take some business away from existing flows via London,Johannesburg, Nairobi and Addis Ababa. There will also be some traffic to the Indian subcontinent and even Russia. Together these hubbing possibilities should give Emirates a more than satisfactory result. It would also benefit Zimbabwe and Zambia if they give the Gulf carrier local rights on the short sector between Lusaka and Harare as every additional frequency by any airline stimulates local business. Traditionally such sectors have been "blinded " to protect local carriers which is always to the detriment of other businesses which thrive on frequent air links so rare in most of sub Saharan Africa other than within South Africa.

The five frequencies of this operation leave Emirates with another gap which would logically be plugged by adding two more frequencies from Dubai to Lusaka but continuing to or triangulating with Lilongwe, which has no direct long haul services of its own and is a natural for attention from the Gulf airlines. Landlocked Malawi is often desparate for inbound cargo capacity while outbound it needs regular reliable outlets for its vegetable products. A connection to the world's air routes via the Gulf would be a significant benefit for the country and its economy.

In line with the simple hub formula that every new spoke needs another balancing one, Emirates is following Etihad and Qatar in starting a daily Dubai/Dublin service in January. This will not only appeal to travellers from the Irish Republic but also those to and from Northern Ireland who will use it to bypass the UK's prohibitive and still rising Air Passenger Duty charges. Dublin Airport is an easy drive from Belfast. An hourly coach link through most of the day takes 2hrs 5 mins for a fare of £17.50 return (£12.40 single). With that option available for travel to points east or south of the Gulf why would any cost conscious customer travel via the traditional routes from Belfast via London? It is surprising that the usually canny KLM is not already in Dublin chasing even wider hubbing opportunites both beyond the Gulf and between there, most of Europe, and points south (eg Africa) to which it could offer faster, more direct routings.

Tuesday, 6 September 2011

Turkish Delight or Hard Rock?

THY-Turkish Airlines' recent half year figures have raised eyebrows and led to mutters about the airline's borrowings being too high. In the meantime the company is pushing ahead with adding more desitinations to its network. What is really going on and is the three dimensional reality as bad as it looks at first sight?

The half year result shows a swing from a 115 million Euro profit last year to a 248 million loss this year. That's a 363 million Euro difference to the worse. So far, so bad. Total liabilities have also grown by 50% in the same period and short term bank borrowing (usually expensive) by 40% . Again that doesn't look good. "Analysts" don't like debt and don't define between its good and bad forms. Turkish has quite a lot of both.

Again, how did all this red ink get there? Being squeezed between European legacy carriers with long and shorthaul networks to the west, new European including other Turkish low cost entrants all around, and the fast growing dominance of the Gulf carriers to the east ,Turkish Airlines has had to think seriously about its future strategy. To remain static wasn't an exciting option.

The conclusion was clearly for the airline to fight its way out of its traditional corner and take on the Gulf airlines by adopting their recipe and high levels of investment. The Turkish network has therefore rapidly expanded to 145 international and 41 domestic destinations. Like the Gulf bretheren, it reaches deep into Europe's secondary cities which home based national carriers always find difficult to serve profitably as domestic to international connections are never as seamless as the best international to international. The operating costs have therefore risen sharply and the figures tell us that the revenue has not yet caught up. Those losses are serious as they cost interest payments and cumulatively can become crippling. They may be a necessary sort term pain barrier to be gone through to fund the expansion but they can not be allowed to continue for long. Revenue must catch up quickly. The level of apparent liabilities, although high is less worrying. Much of it is self liquidating so long as the airline continues in business. Modern purist accounting insists that amounts outstanding on future leases are shown as debt. The actuality is that, provided the scheduled payments are made throughout their duration the amount outstanding reduces year by year to zero on the day of the final payment. "Wonderful,- well done" exclaim the analysts. "But we've no fleet left" say the airlines... Operating leases could reasonably be seen as an operating cost and it appears that the Gulf airlines, unworried by private shareholders, take this view. If so, it is one factor that has enabled them to grow way beyond the capability of their long established rivals who have looked on with their financial hands more or less tied behind their backs.

Turkish's problem is that it is neither a large legacy carrier nor a new Gulf one. It is trying the straddle the gap between the two. Its origins, structure , financing and accounting are similar to the former, whilst for its expansionist strategy to work it has to emulate the latter. Its network gets more comprehensive by the day and it is geographically well placed to add both long and short spokes. Only nonstops to Australasia are beyond its reach, the Gulf being better located for those, but otherwise it can do pretty much all they do and a bit more in the eastern Mediterranean area. It needs to enhance its ground and air service offerings and style and invest even more in international brand marketing . The tough bit is that while those will bring in the revenue there is always a lag between the investment and the rewards. Also the investment has to be ongoing, not a one-off. Bridging the time gap between investment and the returns flowing into the bank is the difficult one. It has to be as short as possible or there is a danger of doing the financial splits, the risk and need for ongoing additional funds just getting too great for the backers to bear. On the other hand once the potential effects on backers and creditors of a collapse becomes catastrophic the debtor regains the upper hand. It's going to be an interesting one to watch.

Thursday, 1 September 2011

Malaysia Airlines look again at A380 and A330 product. The customer wins.

A refreshing piece of news from Malaysia is that, ahead of its first A380 delivery next year, MAS is to look again at its onboard product particularly on its new flagship and on its A330s. The aim, says Air Transport, is simply to ensure that it is "the best in class".

From this we can assume that MAS will seek to maximise the attraction particularly of their A380s in line with the approach taken from the outset by its neighbour Singapore Airlines and the Gulf airlines led by Emirates. They have redesigned particularly the premium class hard and soft offerings from cabin layout and design of furnishings to catering style and routines. Thereby they have offered the customers something new, refreshingly different and very stylish.

Qantas, Air France and Lufthansa have taken an alternative tack. Although their cabins are also pleasant and service and catering reasonable, they are not spectacular but more traditional and don't move the game on at all. Their First cabins in particular are much more open and less compartmentalised than those of the eastern group and their catering is generally less interesting. IFE systems are state of the art amongst all the A380 operators. Perhaps the traditional group rely more on IFE and frequent flyer programmes rather than service and cabin environmemt "wow" factors to keep the customers loyal? If so it's a missed opportunity and once again demonstrates the more progressive and customer focused thinking of the Asian and Middle Eastern airlines compared to their older legacy" competitors. It leads on to the question as to whether the power of the major frequent flyer programmes is now really in the customers interests or whether in fact these schemes seriously distort and reduce rather than sharpen competition. We will return to this one on another occasion.

UK Railways,- Overcrowded stations identified but do we sense inertia here?

Network Rail has according to the BBC identified eleven stations which need action to ease overcrowding. Note the use of the word "ease" rather than "solve".

Those listed include the predictable suspects, London's Victoria, Charing Cross, Clapham Junction along with Basingstoke, Liverpool Lime Street and Preston.

In what looks like a frightening demonstration of its corporate culture, customer orientation and sense of urgency it says that measures to reduce the problem "should be identified by 2019". Note here the words "should be" and "identified" rather than "will be" and "fixed". If those are the words of Network Rail rather than the interpretation of the BBC we should be shaking our heads with disbelief.

No signs of a sense of frantic activity, the quick summoning of an action orientated group of its young graduates to come up with quick commonsense solutions which can then be implimented and followed through to completion. How on earth can eight years be considered reasonable and what is preoccupying Network Rail for all those years? What goes on in their offices after,-or even before,-lunch? Maybe there is a good answer but on the face of it it looks awfully like that great bugbear of monopoly businesses, particularly those in or formerly in the public sector,- inertia. If that is so, what chances have they got of keeping the brightest and best of particularly the younger brains who should be their future?

Wednesday, 31 August 2011

17th African Aviation Business Leadership Conference, - A touch of the surreal?

Dar-es-Salaam is this week hosting the 17th African Aviation Business Leadership Conference.

Not a single delegate arrived by Air Tanzania. Their sole aircraft, a Dash 8 300, is impounded by SAA Technical for non payment maintainence bills.

In his opening address Tanzania's President, Mr Kikwete called for more private sector investment in aviation and more cooperation all round. He bemoaned the absence of professional leadership and good management in African airlines. Meanwhile he continues to throw his people's money at the remnants of the once proud state owned Air Tanzania whilst the private sector Precision Air awaits the promised construction of the new taxiway allowing access to their recently completed maintainence hangar.

Has anybody briefed him on the true state of his national airline? It would be a good moment for him now to display the professional leadership he hankers after and to take decisive action over Air Tanzania. Lufthansa Consulting are attendees this week. No doubt they will offer assistance.

(John Williams)

UK Railways, -those German trains , political nonsenses and the need for bold transport policies.

Much steam and smoke has been generated from the UK's Labour Party camp following the award of the contract for the rather late running Thameslink 2000 project.

The terms and conditions attatched to the bidding process by the former government headed by one Gordon Brown, late of these columns, whose two closest henchmen were Eds Miliband and Balls did not create a level playingfield for British companies. Indeed they favoured other non UK EU bidders. It was no surprise therefore when Germany's Siemens, already a supplier of high quality trains to the UK defeated Canada's Bombardier (European HQ:Berlin) who happen to have an assembly plant at Derby. They won fair and square. Indeed some factors were not taken into account but that was down to Labour's own legal stipulations. Once the bidding parameters and conditions were issued to all parties and they had responded there was no way they could be ammended without risking enormous damages being awarded to whoever produced the best deal under them. Labour know that full well although they seem to be telling the public that it's not true.

The next big contract pending is for Crossrail trains to operate on the route being created between Shenfield in Essex and Maidenhead in Berkshire. It was due to open for bidding on much the same terms in December this year. The government has now announced a delay to the process to enable the conditions to be rewritten so as to give companies with building facilities in the UK an equal chance, but no guarantee, of winning thanks to a broader range of considerations.

One would have thought that would have brought widespread acclaimation from the Opposition. How naive can we get? Not so. Anna Eagle the opposition spokesperson shreiks : " If ministers are now saying it's possible to review the Crossrail contract how do they explain why they have cost British jobs by refusing to do the same for the new Thameslink trains as Labour has repeatedly demanded?"

How does one explain to Ms Eagle and colleagues that it was her party who made it unlikely that Bombardier could win the Thameslink contract and it is the wicked Tories (primarily, though the Lib Dems might be in there somewhere) who are now enabling them to bid for the next big one on equal terms?

The whole question of Britain's future transport infrastructure deserves a much higher quality,-and objectivity and veracity,-of debate than it is currently getting. Labour when in power, with Lord Adonis as Minster of Transport,were doing very well at least for rail and aviation. Heathrow's third runway and its rail link to the southern network were both confirmed and would have happened if they had won the may 2010 election. On the railways the country's south-north high speed rail project HS2 was solid and would have been pushed through regardless of screams of pain from the well heeled and well connected London orientated Chiterns "Over our dead bodies" lobby. The lesser but still significant northern triangle electrification project around Liverpool-Manchester-Preston- Blackpool was confirmed .Only the road network needed more thought and investment.

Right now Labour seem to have abandoned the quiet sensible Adonis era in transport and have decided just to pitch in with "yah, boo" politics whenever they see an opportunity. The Tories have been disastrous on aviation by throwing away the Heathrow runway and its southern rail link and promising increases in taxes on air travel planned for next year. So far though they have been much better on the railways, pushing ahead with HS 2 despite noisy and unpleasant hostility from its Chilterns and Oxfordshire local parties (ironically using government money to oppose the government). The moment of courage and truth will come in December when the decision on HS2 is announced. That apart, they are set to produce a paper on other transport plans, including resumed road and motorway building, this autumn. They need to hold their nerve and tough out opposition from within their own ranks and from those out there who see it as green or environmentally desirable that Britain winds down rather than increases its transport capacity. The supporters of that approach would be happy to see the country quite quickly strangle itself in increasingly inadequate and antiquated networks. The visionary Victorians did well in overcoming or bypassing the obstruction to railways and roads put in their way by powerful landowners.

Needed right now are new infrastructure visionaries and high level, well informed debate followed by action (that's called building) rather than more studies, enquiries and the like so beloved of British beaurocrats,naysayers and indecisive politicians. Layers of obstacles across the tracks, roadways and runways have to be challenged and reminded of what the country would have looked like (very poor for those who didn't get it) if the Victorian planners had been less persistant.

Friday, 26 August 2011

City Checkin on the way back? Some people are thinking about the customers.

Some remember with nostalgia the days of BOAC, BEA, British Eagle, British United,Pan Am and others Central London checkin. First introduced by BOAC (All over the world we take good care of you) in its wonderful art deco style towered building in Buckingham Palace Road, it was the entry point to a much more relaxed style of air travel. Once there and checked in, the passengers' pre flight hassles were largely over.From that point they were either taken effortlessly to the airport by coach (each flight had its own),or, in flying boat days by train from the building's own platform. Airlines large and small across the world had similar city centre arrangments.

Unfortunately as airport terminals improved and accountants became more powerful these became just too tempting a target for cost cutting and nearly all disappeared from the scene.

Encouragingly for those interested in genuine service and meeting passengers needs, downtown checkin has begun to reappear over the last ten or so years. The UK has toyed with it again in assosciation with BAA's Heathrow Express at Paddington but it hasn't taken firm root. Europe, with its relatively low service ethic, lags behind. As was predictable, Asia led the way in the revival. Hong Kong and Kuala Lumpur's new airports of 1997/8 both had bright modern rail linked facilities which enabled passengers to get rid of their bags at the earliest opportunity and go straight to departures at the airport. What a difference that can make both for business travellers and families lugging several pieces between them.
Literally less persperation and less anxiety.

So who and where is next? Not perhaps the who and where many would have named if asked. The answer is Brussels Airlines, now with 19 destinations in Sub Saharan Africa (BA has 9, Virgin 5). They have instituted city checkin at 5 of these,- Conakry,Freetown, Kigali, Kinshasa and Monrovia which are not the easiest places in which to make the logistics and the required security arrangements work. Maybe they will prompt some rethinking amongst others. To satisfy the nowt for nowt accountants it's a service for which many would pay a reasonable extra charge. (Note reasonable is key before you get too excited in the Finance Departments). Meanwhile several cheers for the Asians and the Belgians.

Wednesday, 24 August 2011

Railways,- Hopeful signals in East Africa.

For many years East Africa's railways have been crying out for renewal, refurbishment and increases in capacity and for those then to be fully utilised. Taking traffic off the congested Mombasa-Nairobi-Kampala road is a priority both to save the heavy wear imposed by slow moving heavy lorries and trailers heading not only for Nairobi but onwards to Uganda and then south into Rwanda and Burundi. Moving a proportion of this traffic to rail would not only speed up transit times but reduce the vehicles' susceptability to the attention of various authorities at numerous check points throughout Kenya. These seem to find an extraordinarily large amount of reasons for imposing on the spot fines of one sort or another. Receipt forms often seem to be in short supply so there are probably many in Kenya very happy to see the traffic stay where it is,-on the roads.(or maybe just a little to one side of them while "cashpay" terms for alleged trangressions are discussed).

The concession to run Rift Valley Railways, as the network is now called , was some years ago allocated to a South African consortium, Sheltam, and there was great initial optimism that dramatic improvements in stock, track and performance would follow. The same optimism had accompanied South African Airways' successful bid to run Air Tanzania. Unfortunately both involvements turned out to be disappointing and both have now exited with little to show for their involvement

The website of RVR's 51% owners, Cairo based Citadel Capital Platform Company African Railways, dated 2nd August, and "The East African" newspaper in its August 8th edition have however given new glimmers of hope of progress. Firstly, 5 year loans totalling $164 million for the refurbishment of the existing track, locomotives and rolling stock have now been agreed. Amongst those contributing is International Finance Corporation, the private sector lending arm of the World Bank. Hopefully this will enable the metre gauge line to be restored to something like its former capability and it will become again a credible means of long haul freight transport.

Much more exciting for the longer term though is the planning of a new parallel standard gauge line which would eventually replace it. An agreement to develop this was concluded between Kenya and Uganda in 2008. Another standard gauge line is also being planned by Tanzania and Uganda more or less along the alignment of Tanzania's Central Line from Dar es Salaam to Dodoma and on the Mwanza on Lake Victoria whence goods would be taken by a proper train carrying ferry to Uganda's Port Bell. Metre gauge lines were much easier and cheaper to build than higher specification standard gauge ones during the earlier colonial era. Speed was less important then and the total tonnages of freight were much lower. Passenger trains which do not fit well with heavy freight ones on any railway line were infrequent and slow but just about adequate for the numbers wishing to use them. The development of standard gauge lines could revolutionise rail transport in East Africa, making the flow of commerce quicker, easier, up to 35% cheaper and less prone to en route interference. The Tanzanian line would cost about $ 2 billion, a huge amount for the country, but less huge for donor and supporting countries wishing to invest in a real project with ongoing tangible benefits( assuming appropriate ongoing maintainence support was also put in from the beginning). Railways and their performance are tangible and visible and their construction can be monitored every yard of the way. They are therefore a much better bet for the international aid industry and lenders than many other projects which seem to involve large sums of money with little to show for them. There is a chance here that Kenya's famed "Lunatic Line" could become sane. Both projects will require urgency and commitment to ensure that they do not get bogged down in endless complications, political wrangles and delays. Also essential is top quality enthusiastic management and not a bunch of mercenaries whose hearts aren't really in the tasks.

Tuesday, 23 August 2011

Qantas -The Kangaroo's bounce gets dampened, but it's in the DNA.

News that Qantas International's bounce was to be curbed so as to switch immediate future investment to regional operations and a new full service airline venture in Asia has been greeted with less than wild enthusiasm by most Australians. In fact it has gone down like a lead kangaroo. To the national psyche Qantas has been the Australian flag bearer across the world, spanning all of Asia and Europe on the way to primarily the UK and the Pacific to West Coast USA and on to New York. The proud red tail has been an expression of Australia and all good things Australian and a vital statement that the country is part of the world and a significant player in it. Many Australian heads are hanging in a sense of despondency and gloom. The unions are characteristically making a meal out of it.It is very hard to take.

Australians should not though be too surprised or even upset at this turn of events. It was part of Qantas' DNA from the very outset and bound to creep up on them over the years as technology developed ever bigger and longer range aircraft. At the same time the people in the middle of the route emerged as major players in the global aviation scene and demand for travel to and from Australia with its relatively affluent 22.6 million population ,many with strong historic family connections in Europe and Asia, mushroomed. The notion that Australian and other end carriers could protect all this traffic for themselves even if they could afford to invest in all the fleets needed to carry it was and remains unrealistic and unsustainable. They can not be blamed though for trying to hang onto it for as long as possible. Why would any business be voluntarily enthusiastic about losing even one passenger to upstart competition?

So where did this slide away from monopoly begin? Not long after day one is the answer and at some point it was bound to become overwhelming. Fingers in the dyke would have to be replaced by arms, legs, full bodies, sandbags, concrete, until eventually it would break whatever anyone did to reinforce it.

The story of what was built into the DNA goes like this.............

The "Kangaroo Route" to Britain has been a keystone of Qantas activity since the 1930s. For most of the time it has been flown in a series of differing and developing partnerships, both loose and close, with BA and its predecessor BOAC. During these and in between there have periods of intense disagreement including until the 1970s constant pressure to buy often unsatisfactory British aircraft. To its credit Qantas never yielded to this arm twisting and occasionally serious unpleasantness. It was also capable of some acid responses.

Pre 1939 the Qantas/British Airways (Mark 1 pre BOAC) was tentative at best and very low volume. Shipping companies rather than other airlines carried the bulk of the largely migrant passengers. From early days though, the always fleet of foot KLM was pushing on the European door and Pan Am and later the the largely opportunistic Canadian Pacific on the trans-Pacific to the Americas.

After 1945 the arrival of new, faster and pressurised airliners soon gave the airlines the upper hand and Qantas, with the elegant Constellation set the pace. BOAC, short of dollars, struggled on with flying boats for a year or two before a small batch of Constellation 049s became available from Aer Lingus/Aer Rianta whose Atlantic operation had failed and these could be paid for in sterling. From that point it was game on and the two partners from each end of the route presumed that the business was almost exclusively theirs. They saw it as their entitlement and resented any attempts by others to take any of it. Hence early efforts to fight off the enterprising Dutch in the form of KLM already well established just to the north in Indonesia.

The first Asian incursions into the business were on a small scale by Philippine Airlines in the 1950s with DC6 flights Manila-London but their effect was insignificant. Air India was the first serious entrant as it was in a tripartite revenue pooling partnership with Qantas and BOAC. Very much a high quality and rather exotic carrier, it was not slow in the 1950s in demanding a place on the Australian route. It was accomodated but both the other partners saw it as primarily a predator. The real Asian awakening though was in 1971 with the very first and very high service quality Malaysia-Singapore Airlines Boeing 707 services from Sydney to London with a change of flight number in Singapore. MSA were progressively followed by Thai,the separated Singapore Airlines and MAS,and Cathay Pacific until almost all the north east and south east Asian players entered the fray. They have gone from strength to strength and probably didn't expect to be too seriously challenged.

While Qantas and BOAC/BA sought to tightly control fares/yields through rigid enforcement of IATA fares on the one hand and capacity/frequency limitations on the other, the Asian carriers saw things differently and viewed fare reductions ("Cheating" or "non compliance" in IATA parlance)and operating as many frequencies as they could get through Air Service Agreements as key to driving traffic increases and market share. They persued this line vigorously. No sacred kangaroos for them.

The other big factor was simple geography. Most of Asia is about a third of the way to Europe which meant that it was cheaper for Asian carriers to add additional European and destinations as spokes to their hubs than it was for Qantas who were located 8 hours away down at the end of the route. The Asians therefore took more and more of the business to points not directly served by the Australian airline and it was very difficult for Qantas or BA to fight back. At the northern end of the route BA could feed European business over London but it was outplayed particularly by KLM as Amsterdam was less of a backtrack (and none from the UK provinces) and the one terminal simple and pleasant to use layout of Schipol was infinitely better than Heathrow's multi-terminal and messy transfer arrangements. For Qantas the problem of profitable direct access to a plethora of European cities became ever more difficult as the demand for two stop services grew from the mid 1970s and the initial Boeing 747 era. Intermediate stops in Europe became uncompetitve in the end to end market to the UK. The arrival in the late 1980s of the longer range 747-400 meant that the demand moved from 2 stop to one stop and Qantas' problem of how to serve continental Europe became even more acute.

In 1977/8 Australia with some support from the UK had attempted one last fling at trying to stuff fingers into the leaking dykes of ever growing totals of passengers and revenue flooding to foreign carriers. In an extraordinary move called the International Civil Aviation Policy (ICAP) they sought once and for all to restrict the ability of intermediate foreign carriers to carry UK/Europe to Australia traffic through their home airports, primarily in Asia. It was as if there were tunnels with no intermediate entrances or exits all the way between Australia and UK/Europe and within these all end to end business could be exclusively contained for the benefit of the two national carriers involved. To facilitate this it was proposed to restrict Air Services Agreements, particularly those with Malaysia, Thailand, India, Austria, Canada and France.......In the event the proposal was dropped as impractical and the big surge towards liberalisation became unstoppable.

The Asian carriers very quickly gave Australia's cities more and more links to the world than Qantas and BA who, with their joint Services Agreement in the early 1990s consolidated rather than expanded their offerings and chose not to increase their capacity in line with potential demand. The reason is simple. The very long route has huge low yielding leisure demand but relatively little high yield business traffic to help produce a viable average. Making money is therefore difficult. Add to that the problem for legacy airlines based at either end of the route of the added inefficiencies of their night jet bans as well as higher costs and lower productivity and the finances begin to look daunting. Even worse the fact is that however they schedule their services they can not avoid long layovers or long dead times at either end of the route. Maximising aircraft utilisation therfore becomes impossible. The Gulf carriers on the other hand can turn around quickly and once home find other useful work within an hour or two.

Finally came the biggest boost to capacity between Australia and anywhere north, west or south of the Gulf. The Gulf's own new airlines arrived. Gulf Air had been a minor player but Emirates, followed by Etihad and Qatar have proved to be something else. Adding spokes into Europe, Africa and the Middle East has, thanks to the shape of the world, been relatively simple and not too expensive for them. Seven or less hours will take them pretty well anywhere in all three regions. That means two man flight deck crews, quick turnarounds and high utilisation through their 24 hour a day airports . As noted above, when the aircraft return home at any time of day there are plenty of 2/3 hour regional sectors that can be flown to top up utilisation. There is no enforced overnight grounding in Asia or the Middle East. UK/Europe and Australia want quiet nights but they have to buy them at a high price in the competitive world of aviation. That's their choice, along with the costs of generous state welfare schemes, restricted working weeks, moves towards inefficient green power generation, high travel taxes (UK) and the rest. They can't complain if more business orientated parts of the world choose to behave differently in the interests of producing more at lower costs and gaining market share. It's not unfair.
It's called competition. The consumer benefits.

What Qantas and BA are now doing in slimming down their Kangaroo route services almost to a minimum presence is not an abdication. It is a simple acknowledgement that this was always the way it was going to be end up unless they and their base countries were going to significantly change the way they do things and their very cautious approach to investment.The world is also the shape it is, the distances, costs are what they are and on this particular route it is game over for the end of route veterans. Despite a limited hubbing operation in Singapore and an even smaller one in Bangkok, they were already on pretty much a hiding to nothing from the Asian carriers but the Gulf newcomers have become overwhelming. Short of investing potentially billions and risking losing their shirts or at best making a minimal return on expenditure ,they can not fight the tide. There is no sensible chance of persuading Australia's regulators to clip the foreigner's wings. Very restricted capacity and high fares are not in the interests of Australia and Australians . The country being where it is, both need to welcome every new flight to anywhere they can get regardles of who provides it. Protecting Australian airlines at the expense of other national interests just isn't on without wrecking the tourism and other industries. The old protectionism has simply been overrun by the legitimate demands of the market. Qantas and the European carriers can still play a part in it but the big future of the Kangaroo route is sandy. All credit to Qantas and the Australian government for having courageously having bitten the bullet rather than the Gulfies. They have read the DNA right.

Thursday, 18 August 2011

One is better than two,-a dynamic of customer service

A good quality UK train operator who is currently going through two weeks of planned major disruption to enable them to shortly introduce a substantially improved service has flooded its stations with people to advise would-be passengers of alternative ways of getting to their destinations.

They have done it well and there are plenty of feet on the ground. However, a familiar dynamic of well intended measures which allow most of them operate in pairs or with other staff reveals that other very human dynamic which affects even bodies such as the Police. They talk to each other. Indeed they get so involved in talking to each other that they face inwards and not outwards to the customers. Police walking in pairs must inevitably miss a percentage of what they would notice if alone, transport customer service agents become preoccupied with last nights TV, tonight's match, date or whatever . They don't notice the potentially struggling customer, the one who if not helped a little might miss or hold up the flight. Bigger groups are even worse. Airline cabin crew tend to gather in inward facing gaggles almost totally involved with each other and unaware of the impression they are making on the onlookers. On board that pulling of the curtains as they swarm to the gallies for a chat says "Don't come in here,- you've had your service".

The truth is that the larger the group becomes above the number of one, the less effective each member of it tends to become. Draw that on a cost effectiveness graph and there is only a single conclusion. In most situations one is best. Two is very rarely twice as good and a swarm............