Thursday, 31 March 2011

O'Leary's liability surcharge: Sensible intent.

Ryan Air's imposition of a £ 2 surcharge on its fares to cover liability for factors beyond its control is a sensible one. Criticism from FlyBE and others including deriding it as in reality a fuel surcharge is misplaced especially as it is part of a campaign Europe's airlines in particular should applaud.

The notion that airlines should be responsible for getting their booked passengers from A to B with no delays completely regardless of circumstances is absurd. Originally the law was brought in to dissuade airlines from overscheduling or cancelling flights simply because the loads were low and they would avoid a loss by not operating. The legislation was loosely worded and as result allowed governments to claim that any significant delay or cancellation could be claimed for.Hence even when the problem is caused by rear-end covering government action as was the case in with grounding of flights during the volcanic ash episode, the carrier was held to be liable? Why should it be? The cause of the cancellations in that case was the government authorities refusing to allow aircraft to take off, not the airlines unwillingness or inability to do so. If there were any question of who was responsible for the inability of the airlines to fulfil their contracts it was simply the governments and if they felt that any compensation was due to passengers in a normally logical world they could have paid it themselves and their uninvolved taxpayers taken the hit. Better still they could have explained that events and actions which are not the fault of anybody do happen and in these cases no compensation is due to anybody as it is up to the user of the service to take out their own insurance if they see fit,-or take the risk.

The same is true in any weather disruption. If conditions are below national or company limits there should be no pressure on anybody to operate. Indeed any such pressure is obviously unsafe. The time element in a contract of carriage should be suspended and any compensation should be a matter between the passenger and their insurer. If uninsured they have taken the concious decision to take the risk themselves and on most occasions they will save money by so doing.

There are two problems here. The first is the lawyer-encouraged culture of "somebody (else) must be responsible for everything" and therefore a payment attatches to any non or delayed performance and secondly that this can be achieved at no cost to anyone other than the contractor who will cheerfuly say "fair cop" and absorb it. The simple fact is that if a business is forced to periodically make payments for things it can not prevent it will have to build the cost into what it charges the customer in the first place.

Congratulations therefore to Mr O'Leary for very simply expressing the facts of life. If the governments,-who no way are going to pay,-and customers want to be able to claim for uncontrollable flight disruptions they will simply have to pay an insurance fee up front.This could be hidden in fare rises, fuel surcharges or any other way, but RyanAir have simply been entirely open about it. The industry should applaud, not scorn, especially as by this action O'Leary opens the way to debating and hopefully getting rid of this absurd bit of law to the benefit of all concerned. Insurance can then revert to being a matter between insurer and potential purchaser,-as it always should have been.Airlines have already been forced by Air Passenger Duty to become tax collectors. They could do without having to be insurers as well.

Tuesday, 29 March 2011

Heathrow and UK airports and aviation policy) -Past top of descent.

Last month Giovanni Bisignani, outgoing IATA Chief Executive sounded the UK a wakeup call about the decline into which its policies,- or lack of policies,- was causing to the future of Heathrow and indeed of London as a business centre. He went on soon afterwards to warn Hong Kong of the perils of ending up like London if a third runway is not soon built at Chep Lap Kok. In a message calculated to instill deepest fear for the future he warned that they could end up like London. That's enough to jerk any Hong Konger's ears and eyes wide open. To most of them London and the UK in general is a model of complacency, lack of energy, foresight, future planning and determination, this leading to an inexcusable waste of opportunities and under performance.

Today he is followed by 72 UK business leaders writing to the Times urging a rethink about the Government's abandonment of the proposed reintroduction of a third Heathrow runway and , to make it even worse,abandonment of plans for any additional runways at all in southern England."All options must be considered, short and long term, to address growing demand" runs the letter. Absolutely right .It is many months since the Conservative led government, influenced by a new found greeness and a string of constituencies beneath the flight paths, overturned Labour's support for the third runway at the airport. At the same time Labour's new leadership is showing signs of shaking its head,tutting, and withdrawing from what was previously its remarkably enlightened view on this and other major transport initiatives.

The reality is dire. In 1948 there was a visionary plan for the airport to have nine runways, six in a star of David pattern south of the A4 ,and a triangle of three between the A4 and what was then the planned South Wales Motorway, the M4. Indeed the alignment of the M4 was moved northwards to form its northern perimiter. The star of David briefly happened but was quickly eroded by the misplaced development of the terminal complex in the central area .Abandonment of the northern triangle came in 1953 and the threat to the two villages, Harmondsworth and Sipson, was removed. Wartime imagination about future infrastructure developments was already being ground to death by the dead hand of Whitehall. Aviation would never grow that much and anyway financially exhausted Britain couldn't afford it. A preview of now maybe. The vision has gone and what was the world's most prolific international airport is condemned to function with just two runways, severely restricted night operations and virtually no new slots left to be had,-ever.Its rivals meanwhile grow and plan to keep doing so. The outcome is inevitable even if gradual.Top of descent.

As if the lack of runways were not a big enough problem, the UK has deliberately embarked on suppressing demand by the imposition of the world's highest airport charges/taxes.Originally intended to fund airport services such as security ,these are now just another general tax and the revenue from them is not red ringed for recycling back into airports or other areas of transport. The recent budget delayed a further increase for a year but even without that the levels are high enough to deter foreign tourists particularly from finishing their European holidays,- and therefore their shopping,- in the UK even if they bother to include it at all. The requirement for a separate UK visa is already adding £65 a head to the cost of entering the country and the lowest medium haul departure level is £60 against £15 in Paris and zero in Amsterdam. Move up a class to Premium Economy and the level jumps to £120, rising to £170 for Australasia. Self strangulation? Aviation contributes 2% to UK pollution levels so even if that were halved in the name of environmentalism its effect would be negligable.It contributes an much more to Britain and London's economic activity and prosperity.

The UK has a remarkable tendancy to develop an industry and then kill it off by loading it with taxes, restrictions, beaurocracy and other impediments. Education for foreigners is another current example. The UK's private schools and universities have developed a huge foreign currency earning industry in importing people from across the world for education.The money they bring to pay for it is an export for UK Plc. Now, thanks to concerns about permanent immigration levels, mostly an entirely separate issue as most students return home at the end of their courses, visa restrictions are set to choke this off too. With that will go long term assosciations with the UK of many of the individuals concerned together with the future business and tourism that may bring. Joined up thinking? The lack of it is dismal. The position of Heathrow and of Britain itself as a major player in the airline and world and as an international business centre generating wealth, jobs and energy looks severely threatened. This is not by accident or misfortune but myopic short termist political design. We can be sure that with this horrifying prospect set out before it, Hong Kong will be calling in the dredgers, landfill teams and runway builders before UK could say "Policy Review"

Postscript: Talking of policy Reviews,the UK Government will be this week be announcing one. The Times advises that the Minister, Philip Hammond, who is doing well in championing HS2 and other transport projects will be publishing a "scoping document for a sustainable framework for UK aviation", balancing arguments for economic growth nd the impact on the environment. A review will take until 2013. Any by now remedial action would take until...........? Do we hear a rubbing of hands in Paris ,Amsterdam and the Gulf?

Thursday, 24 March 2011

Aviation History:- The false dawn of jet travel: The early Comets

The demise of most of the Nimrod (based on a 1960s Comet 4C fuselage) fleet is a good moment to look at some of the orginal Comet history.

First flown on July 27th 1949 when BA predecessor BOAC's fleet comprised piston engined aircraft, of which the Avro York and Solent flying boats were unpressurised , the Comet 1 was revolutionary and far ahead of anything else in the sky. Remarkably for a British airliner of its time and bearing in mind that everything about it was new including its speed, cruising height and operating proceedures, it was delivered much to schedule and introduced into service on the London-Rome-Beirut,-Khartoum-Entebbe (Nairobi Eastleigh at 6,000 + feet was too high and its runways were too short)-Livingstone-Johannesburg route on 2nd May 1952. Its initial operations were highly successful and the network quickly expanded to reach Singapore, Columbo and Tokyo, the latter via Manila as Hong Kong Kai Tak was too constrained by hills and runway length).

BOAC's original order had been for 14 Comet 1s and 6 Comet 2s, the latter with a marginally lengthened fuselage and more powerful Rolls Royce Avon engines replacing the De Havilland Ghosts. This was ammended to 8 Comet 1s and 12 Comet 2s , with the first 2s scheduled for delivery in April 1954.All 8 Comet 1s were delivered by 31st March 1953. In that year De Havilland also finalised plans for the Comet 3, later to be the Comet 4. BOAC's board authorised the purchase of 6, subject to guarantees about suitability for North Atlantic operations.Pan American also ordered 6 and a number of other airlines including Air India were interested. Qantas were unimpressed despite a lot of political pressure from the UK.

The optimum payload range of all 3 versions was remarkably limited, which meant multiple short sectors and the loss of some of the jet's speed advantages as well as higher costs. The figures were:

Comet 1 1,200 miles
Comet 2 1,950 miles
Comet 3 2,150 miles.

The operational learning curve was steep and there was one early loss near Calcutta, then a major BOAC station, in May 1953 during storm assosciated turbulence.

The end of the Comet 1 and 2 commercial era,- came with the loss of G-ALYP en route from Rome to London near Elba on 10th January 1954 followed on 8th April by another near Naples while operating a South African Airways service. All Comet 1s, including those operated by Air France, UAT of France and Canadian Pacific were immediately grounded and neither they nor the Comet 2, the first two of which were on the point of delivery to BOAC, flew again as carriers of paying passengers. BOAC did in fact take delivery of the two Comet 2s which became 2Es and used them for route development and training . The remainder of the 2s, went to the RAF where they were successfully used for passenger carrying though with customers who had no choice. The Royal Canadian Air Force also used two modified Comet 1Es for troop carrying.

There was then a four year gap in commercial passenger jet operations until 4th October 1958 when the first of 18 BOAC Comet 4's entered service on the London-New York route, shortly followed by the much larger 120 seats plus future-defining initial short fuselage version of Boeing 707.

Despite the recent RAF grounding and very swift destruction of most of the Nimrod fleet, a very few of the surveillance version remain in service alongside the 707-derived AWACS aircraft so the basic but much modified and strengthened 1947 Comet airframe isn't quite dead yet, but the writing must be on the wall even for them.

Saturday, 19 March 2011

"There was an air of enthusiasm.........."

"There was an air of enthusiasm with every man and woman prepared to do their own and any other job 24 hours a day if need be"

A wonderful quote from Sir Keith Granville, later Chairman of BOAC ,on joining Imperial Airways as a ten shillings a week trainee. (Source, researched by John Williams, is "Speedbird", the British Airways Overseas Division staff magazine in April 1974 celebrating the 50th anniversary of the creation of Imperial Airways.)

And then there came unions ostensibly to better the lot of the employee. Restrictive working practices,limited hours, sharp demarcation lines,meal breaks, rest periods, higher wages, all presumably to make the employee better paid and happier.

Or maybe not. Compare the happiness/smile factor of some highly unionised legacy airlines with their high pay,plethora of additional allowances, generous rest periods, lengthy layovers,and highly specific working practices with some of the more recent,lower paid and harder working and much less unionised and union minded ones. Which are the less strike prone and are the most pleasant to fly with? Which come over as the most human?

It's about ethos,- and a realisation that hard work can be more interesting and satisfying than taking it easy. It can be argued that, far from making people's lives better and happier, the unions have disempowered them and turned interesting jobs into drudgery. Barriers between jobs and between employees and their managements have been artificially erected and exploited. Not surprising as unions need unhappy, not highly motivated, people. Where this demoralisation has happened it shows and nowhere more so than in the airline industry. Sir Keith and his colleagues had it right, ten shillings a week and all.

Tuesday, 15 March 2011

The Late Delivery Nightmare,-Some light in the 787 and 380 tunnels.

The initial delays to Boeing's 787 deliveries were probably at least secretly welcomed by many of the early recipients in particular as they avoided substantial new payments and stretched out the front line service of well written down 767s and other types by a year or two.

Since then the progression of the aircraft from Dreamliner to Nightmareliner has been made worse by the impact it has started to have particularly on those customers with competitively based expansion plans. They have been faced with potentially expensive and less satisfactory dilemmas of whether to put these plans on hold and risk losing out or whether to lease in or even buy short term solutions in the form of additional aircraft. This sounds easy but actually isn't. It usually gives the operator a handful of non standard aircraft, with non brand consistent, interiors, seating configurations and types, IFE systems and all sorts of great and small engineering differences. Renewing or even refreshing cabins is expensive and difficult to justify for a short lifespan but if not done can leave the lessor with a sub standard product. Alternatively, putting growth on hold risks competitors strengthening their hubs, networks or frequencies while you stagnate and costs rise. Some of these costs will have been recovered through compensation paid by Boeing but the competitive disadvantages produce deeper and longer lasting scars which are very difficult to quantify. The effect of being known for unreliable, tatty or otherwise unattractive aircraft can last way beyond the eventual introduction of the new standardised shiny new brand consistent fleet.

We are probably now in territory where many 787 customers in particular are feeling increasing frustration and champing at the bit for the earliest possible deliveries.

With this in mind, Boeing's recently notified delivery schedules for at least the first batches of some customers' aircraft will have been welcomed but maybe as only the first glimmer of light in a still lengthy tunnel. LOT will have welcomed firm delivery dates for its first five aircraft starting in 2011 , but what of the remaining three? Air Canada have 2013-2014 dates for their first five, but what of the remaining 32?

Airbus meanwhile are clearly worried that any slack in their A350 design, production, certification and delivery programme has now been taken up so any delays or holdups from here on land them with the same problem. The costly and cashflow-sapping experience with the A380 is not something they would wish to repeat. Both manufacturers, driven by their respective bids for competitive advantage, have been wildly over optimistic on one major project each(let's call the 747-800 minor for the moment). The A380 with around 43 delivered is at last beginning to look like getting on track but it also has a way to go yet.The airline industry will not forgive a perpetuation of this behaviour on another generation of new aircraft .Meanwhile airlines are likely to grow more demanding in their calls for compensation for the effect of late deliveries of these key new fleets have done to plans and market positions.

Wednesday, 9 March 2011

African "Hubs",- Visions, Realities and the real way forward.

Kigali , Rwanda is the latest African airport to declare itself to be in the hub business, a little optimistic maybe for a place with just twelve destinations, half of which are served less than daily. Hardly a great proposition if there is a chance of a misconnection but more a worthy declaration of aspiration or long term intent. A huge amount of additional investment will be required to make the dream come anything like true. The intent is though encouraging and helped by Brussels Airlines and KLM operating nonstop to Europe and Kenya Airways and Air Rwanda providing 42 flights a week between the city and Nairobi.At least those provide an alternative onward routing to anyone who does misconnect. They don't though at this very early stage encourage customers to make Kigali the focal point of their African travels.

The term "hub" is often misunderstood by aspirants to the title. By dint of longevity and huge investment, Dubai has become almost a rolling hub for Emirates though with clear main banks of arrivals and departures. Even without the foreign operators' contributions, the seven daily departures to London (Heathrow and Gatwick combined)for example make this spoke virtually a shuttle and of course those at Heathrow plug into Europe's best hub for onward connections to places not served by Emirates direct. This one could call "double hubbing" when the carrier's main hub is supported and strengthened by someone else's. Even major carriers can ride on the back of each other's hubs although interestingly the grouping of many large and medium sized airlines into inward looking alliances has hindered rather than helped this process. More of this in a separate article soon.

On the eastern side of the African continent Cairo,Addis Ababa, Nairobi and Johannesburg have built up dominant and difficult to challenge hubs over an even longer period of time. On a lesser scale "double hubbing" linkage is what smaller airlines everywhere can achieve,- and thereby strengthen rather than undermine,-their own mini hub. It can be done gradually as and when resources become available rather than as a potentially disastrous "big bang".

For years protectionist African governments fought hard via restrictive bilaterals to avoid such linkages. They saw anyone travelling short haul to a nearby African state to catch someone else's long haul onward flight as a loss to their own actual or ultimately intended services and as result choked off the development of their own position, not to mention tourist and other businesses. The realisation that expensively protecting struggling national carriers almost invariably produced a minus on the national balance sheet has been slow in coming. Uganda's President Museveni was one of the first to understand this and said "We don't have a national shipping line or need one." Writing the inevitable fate of Uganda Airlines on the wall, he continued " We don't need to have a national airline and if it doesn't make a profit it can close down",- and so it did.

The message for the smaller states and legacy national airlines in Africa and elsewhere is clear. The establishment of a major airline hub in the accepted sense of the word probably isn't worth the effort and money it will require and divert from other national priotities for decades to come. To make your base city more accessible and successful in terms of movements and passenger numbers and boost employment and revenue in the tourism and other business related industries forget about very expensive long haul dreams which will leave you without roads,schools, hospitals and much more important things you need, but link into someone else's already thriving hub. We will look again at the train wreck that is most of West African aviation on another occasion, but on the eastern side of the continent that means Cairo, Addis Ababa, Nairobi or Johannesburg and at a stretch Dubai. That in no way prevents the gradual build up of more and more spokes (daily please) until a regional hub is almost imperceptably born. This should be the short/medium term aspiration coupled with and aided by a declaration of open skies.Hopefully AFRAA, which under its new Director General, Elijah Chingosho, says it is working on a new dynamism in African aviation, will be able to provide some of the understanding and impetus for this and get away from the fearful, pride driven and highly costly protectionism and conservatism which has blighted the past sixty plus years. It got in the way even during the colonial era and has been an albatross around the continent's neck ever since.

(Peter Woodrow and John Williams)

Monday, 7 March 2011

IAG- The owner of the BA and Iberia Brands, a month on.

On February 11th Airnthere speculated about how life might be for IAG in its new Head office on the northside of Heathrow and its constituent brands, BA and Iberia. How independent would they be and how much would they be ruled from within the owning company? IAG's CEO Wille Walsh is not after all known for a hands off approach.

A month or so on we now have a few blips on the radar screen to help us start to fix a position. Both confirm that life at Waterside (BA) and in Madrid (Iberia ) could get a little stressful.

The first blip is an interview of Walsh by FLIGHTGLOBAL which confirms that he has not wasted much time in his new office,-or corner of the office,-watching the arrivals and departures on Heathrow's northern runway. He says "The way we see IAG impacting on BA and Iberia is partly about co-ordination but also where necessary CONTROL" .(The capitals are ours). That's a word that Keith Williams and his Spanish oppo in Madrid will not have wanted to hear, though they will certainly have expected it.

Interestingly , further into FLIGHTGLOBAL's interview comes the IAG stage 1 Mission Statement. Usually these things provide the clear and inspiring vision, the banner to which all staff can rally and for which they enthusiastically leap out of bed on Monday mornings. They encompass pledges like "To be the best/biggest/most profitable/have the widest network/be most loved by customers/innovative/ staff friendly" and so on. They provide the bedrock of an ethos which determines style energy and sense of purpose and mean that everyone knows the starting point for decisions and actions. Sadly, not so in this case. He says "The stage 1 mission for IAG is fairly clear-cut, to achieve 400 million Euro in annual synergies by year five". Stretch ,yawn. Functionally correct maybe but nothing here to enthuse,excite, motivate, guide the staff at all levels upon whom success will depend. It all sounds a bit graunchy and possibly unpleasant.Anything remotely emotional, warm or cuddly appears to be out.

Walsh also says he believes that IAG's constituent members have a lot to offer potential partners". Hmm,-like "Please step into our web but forget about any chance of being the Spider or even the Spider's deputy". Maybe we are missing something but on the face of it it doesn't have a persuasive ring about it to a Board of another successful independent business.Maybe IAG just doesn't quite understand people and their motivation yet?

Putting these obeservations aside, the other interesting radar blip was Walsh's recent statement that the fleet priority is doing something about Iberia's 36 strong A340-300 and -600 fleets. Some of the latter are very recent and neither fleet is likely to command a good resale price. This may disturb those at BA whose 57 (7 "resting") strong 747-400 fleet's oldest members are now 20+ years old with little other than 6 777-300s and , over time from 2013, 12 A380s coming along to increase capacity or even just replace them. The 787s on order look like straight one for one replacements for the 767s. Clearly competition for the resources they want is going to be a major concern for the two brands and it is clear that they are in reality, just that, two divisions of an overarching company which will be calling the real shots. Again not a very attractive proposition for potential future "partners". More of all this before long we are sure as more blips appear on the screen and the picture becomes more three dimensional. These are very early days.

Thursday, 3 March 2011

USAF Tanker Deal Escapes EADS,- No surprise there but some past precedents and an irony or two.

Indeed no surprise when the US press revealed that the $35 Billion tanker deal initially won by EADS with its new tech A330-200 derivative but subsequently challenged by Boeing and then subjected to some subtle changes/downgrading to the specification and the expected life extended from 20 to 40 years, is now going to the doyen of the US manufacturers with its version of the old tech Boeing 767. Who ever thought that EADS could really hang on in despite the weight of the long established giant?
Apart from that,and some initially uncharitable thoughts, there some interesting parallels and ironies in the story.The primary irony is that if Boeing had not slipped up so badly with its Boeing 787 programme and manufacturing and management processes, the production line would probably have closed now and the price of reopening it even for a programme this size would have been very high. Thanks to the 3 year delay,767 production has dribbled on and the new contract gives Boeing the opportunity to revitalise it with most of the aircraft platform costs written down and off years ago.
Despite the exception of Boeings' long haul large jet programme, the 707, having originally started in the early 1950s as the 367-80 jet tanker programme, tankers and maritime patrol aircraft have often been been bonus run-ons from long standing programmes. In the UK the Avro Shackleton and its Rolls Royce Griffon engines were the ultimate development of the wartime Lancaster/Lincoln and Merlin engine lines. The RAF choice of the Nimrod extended the production run of the basic DH Comet 4C airframe and probably just about saved the economics of Comet programme right back to the late 1940s. The government owed it one for having for a while given Britain the lead in passenger jet development. If metal fatigue hadn't turned the Comet 1 into a false dawn the lead could have lasted well into the 1960s and beyond. Was this the payback? A fairly won commercial deal or a government lifeline and payoff to a beleagured manufacturer? Like the 767 now, the Comet 4C platform was adequate in technology and just about in size when a 707 would have been bigger,better and a more comfortable, more modern alternative with room for more equipment and development. The UK's tankers have been converted bombers and more recently superannuated VC10s and Tristars. The purchase from BAe of the four returned ex East African Super VC10s got them out of an expensive hole while the subsequent purchase of BA's retired fleet for tanker conversion all gave BAe, Rolls Royce and BA a cash boost at welcome moments. Fair deal or really a subsidy? In the USA, the USAF 707s derivative orders must have helped Boeing to amortise development and production costs over much longer runs. The morphing of the end of production Lockheed Electra into the long lived maritime reconnaisance Orion was a more than welcome lifeline to Lockheed out after a marginal commercial success with the aircraft. The engine manufacturer, Allison who were significant on the Hercules too must have been happy too.
All these things enable Boeing to say that there is nothing unusual in a slighly sub optimal old technology airframe progressing to a new and very long life as a military tanker or transport against a much newer, larger and more flexible rival.They could claim that the proven reliability of long standing programmes can give greater reliability against newer and bigger higher technology aircraft so EADS have nothing to complain about. EADS might have a case that moving the goalposts after the race is over is unfair, and they may well feel they have suffered a costly injustice. It's unlikely though that a court case or reference to the WTO would profit anyone other than the salivating lawyers.