The appointment of outsider Normand Boivin, currently operations chief at Montreal, as the new Director of Operations at Heathrow is an interesting one.
While relatively busy domestically and cross-border to the USA, Montreal has realtively little truly international business and is a fairly simple operation. He will therefore find the size and complexity of Heathrow an interesting and stretching challenge.If he doesn't he's missing something.
Mr Bovin's winning hand though must be experience and expertise in handling winter snow,- very large amounts of it although whether it is the same as the UK's seemingly unique variety remains to be seen. The arrival of an outsider with a fresh view of the airport is very welcome and if he can score an early hit by dramatically improving Heathrow's ways of handling snow and its attitude to keeping the show on the road whatever the elements may throw at it. Hopeless, hapless resignation and failure to look after customer airlines and their customers as last winter is simply unacceptable. If he is an operational man with a deep and truly passionate understanding that the airport is a service business and no longer a state monopoly "Authority" ,he will be worth his weight in avoided complaint letters, compensation claims and lost future business.
Thursday 30 June 2011
Thursday 23 June 2011
The London Airports Debate.
Speeches on Tuesday last week about London's airport capacity by Boris Johnson, Mayor of London, and Willie Walsh CEO of ICAG, owner of the BA and Iberia brands were interesting and headline grabbing. Both were advocating the building of a new airport on what would be reclaimed land somewhere ill defined along the Thames estuary to the east of London. Each though gets to the argument by a different route. The cost they say would be around £40 billion although there is no indication of how this sum is arrived at and whether or not the bill for the supporting infrastructure and rail and road links is included. Historically we should expect to see the eventual cost come in at least twice as much as the initial kite flying estimates. It is worth further examining what both Johnson and Walsh along with the UK Government and the BAA are saying,-and not saying,-on the whole issue and where they and their organisations have come from on it.
Turning first to Boris Johnson, he says "We're on the verge of making a historic mistake over the provision of airport capacity. Heathrow is perpetually struggling to fit a pint into a quart pot. It's no wonder the Heathrow experience can be so miserable." So far so good. But wait a minute. The reason why Heathrow is now bursting at the seams movementwise and can not substantially grow slot numbers is that the incoming coalition government binned Labour's go-ahead for new the third runway there. One of the noisiest opponents of the scheme was Boris acting on behalf of his and the Conservative Party's west London constituents. It was pure populist NIMBYism although dressed up as a success in the environmental war. (Let's not forget that aviation contributes just 2% of UK's emissions and that the M4/M25 contribute more to pollution around Heathrow than do aircraft.) The constituencies concerned are primarily the smarter and vociferous ones from Notting Hill westwards to around Richmond. Noise blight in Hounslow and the places right under the final rather than outer approaches , while protested about, seems to have had much less clout. Folk there tend not to be so well connected to the Westminster networks so have less leverage. Most of all affected groups have moved into the areas in which they now live well after the jet age really got going from 1960 onwards so they moved in the full knowledge of the noise issue and that the airport would continue to grow. Mr Johnson knows that the airport is bursting at the seams right now and that the new 3rd runway provided the quickest and best way to meet it. He also knows that the possibility of another airport being built is extremely remote and if it were the UK's pedestrian approach to planning, approving and building anything, would ensure that it would take at least 20 and probably nearer 30 years to open. It is obvious to all that in a development averse country every possible obstruction would be thrown in its way and the citizens of Kent and Essex are unlikely to accept a new airport on their doorstep without a massive struggle. Sundry varieties hitherto unsung wildlife would have their support groups too. The reality is that the Thames estuary idea is unlikely to fly and a new inland site is unthinkable. Either would solve London's strategic problem while not asking inner Londoners in particular to take any of the downsides. The Mayor also does not seem to have considered the issue of the loss of tens of thousands of jobs and behind that a wave of further jobs dependent on them in western London.
Next there is Wille Walsh, now no longer with the single concentrated focus on the BA brand. He is perhaps flying more than one kite. The first is final call on the government to reconsider the third runway for one last time before it is totally dead for ever. Politically this appeal couldn't have come at a worse moment. Faced with accusations of having recently done around 15 U-turns,it will not be willing to do another on what is portrayed as a vital environmental issue. They will want to play tough and square jawed on a few high profile items. Heathrow is an ideal one , albeit negative, and may be balanced out by the more positive support for the HS2 high speed rail line to the north announced by the Prime Minister yesterday. Walsh is quoted as saying "We've already lost because the growth in Dubai could have come to London" and that following the transfer of the BA and Iberia brands to ICAG "We will access growth outside the UK". In other words UK Plc is about to discover the downside of no longer having what was seen as a national airline whose success and future depended almost wholly on what it could achieve at Heathrow plus a bit of overflow at Gatwick. Foreign registered ICAG can let its investment in London stand still or decline and just make its money elsewhere. Secondly the fact is that the growth at the Gulf (and other) airports up to now has not been lost by Heathrow's overcrowding. Until very recently and even now there have been been additional and transfered (bought) slots available and airport runway capacity has not been the main constraint. BA itself has enormous potential to juggle slots between its marginal shorthaul services and its long haul ones. It has chosen not to do so. It has also chosen not to expand its long haul fleet over the last ten years despite growing markets. It has grown its dependency on trans Atlantic services and not responded to the growth of the Gulf carriers by increasing destinations or frequencies in its eastern and southern markets.It has focused primarily on hubbing to North America from Europe, the Middle East and parts of Africa rather than the rest of the world and it does that well.Elsewhere BA has been remarkably passive and unadventurous while others have feasted from its table. It has also downsized its economy cabins so that it caters less for the mass lower yielding business which has had to gravitate to other carriers, thereby fuelling the competition's growth in both aircraft size and frequencies. Completing the circle, this has increased their competitivness with BA for business traffic as well. The BA brand's passenger throughput and connectivity at London Heathrow is therefore concentrated very much on the higher end of the Atlantic market and is well below its potential in other segments including volume .The BAA and its army of concessionaires can not be delighted.
The third player is the Her Majesty's Government. Labour's transport minister Lord Adonis was the most dynamic in the role seen in recent years and truly championed air and rail travel and enthusiasticaly mastered all aspects of his brief. He was determined update the infrastructure for both and to align with growth projections so that Britain remained competitive. This would probably be the first time since the 1930s that demand and facilities were in step. He was to be further helped by recently introduced Regional Spatial Strategies which would cut the red tape and speed approvals of major national projects and rid them of countless running battles with local authorities lying on the runways or rail tracks. This leading edge , cut-through-the-proceses-and-get-it-done body was quickly scrapped by the incoming coalition and the planning powers returned to the local levels. From May 2010 the very able Philip Hammond has been the new minister. He has driven rail modernsiation and capacity increases with successful vigour but has gone the other way with aviation. Not only was the third Heathrow runway abandoned but even the prosposed small slot improvement by allowing parallel arrivals and departures on its existing two was rejected. This put the cork in the movements bottle. The second runway at Stansted was also ditched and Gatwick can not build one until 2018 at the earliest thanks to a Michael Heseltine deal with the surrounding local authorities in return for the original building of the North Terminal. Now increased passenger numbers at London's two prime airports will only come from larger aircraft. New destinations may only be added at a cost to existing ones. Heathrow therefore will inevitably decline in relative importance as an aviation hub and the growth will go elswhere in Europe and/or to the geographically very fortunately located Gulf.
The Government has so far played the aviation card badly.It promises a "new aviation policy" in spring 2013 with a consulatation paper to be launched in spring 2012. A policy is not of itself a solution. It is a declaration of intent. It simply encourages investment, building of facilities, infrastructure and the rest. It doesn't guarantee anything and all these things can take years to appear, if they ever do. This makes the abandonment of Heathrow's runway 3 look even more precipitate and ill advised. There is just about time for a last minute handbrake turn. It looks unlikely though. Boris and Willie are providing a smokescreen which is distracting attention from this very urgent last chance possibility.
The fourth and final player in the Heathrow game has been the BAA and Heathrow. Until privatised it behaved very much as any monopoly supplier in a state of holding investment down and in frequent conflict with its customer airlines in particular. The relationship with the primary resident airline, BA, was for years adversarial although it improved considerably from the opening of T4 in 1986 onwards. A base carrier and its landlord often have conflicting interests and views of their own position in the scheme of things and Heathrow was no exception. The nationalised origins of both coloured and restricted their thinking .The BAA saw itself very much as an "Authority" not a service business with customers to woo and cherish. Their view of airlines and passengers tended to be coloured very black and yellow by this starting point. There have recently been encouraging changes. The opening of T5 has given the airport a facility to match the best anywhere. The demolition of T2 and Queens Building and creation of "Heathrow East" in its place promises another transformation and should enable the bulldozers to deal appropriately with T1, and by then a new T1 ,- currently not planned,- may be required . Heathrow was gearing itself to a much better future with at last some useful additional runway space to use both for expansion and to relieve some of the pressure of operating at maximum capacity for much of the day. The loss of that runway has come as a huge setback to the BAA as well as the UK itself. Again,the talk of a new aiport is a serious distraction diverting attention away from the real issue. It's not quite too late. The decision could and should be quickly reversed and building commence. Meanwhile the alternative hubs and their resident airlines are smiling from ear to ear and ICAG's UK eyes are glazing over as their future investment focus moves elsewhere. Unfortunately for UK Plc, others- and not just airlines,- will inevitably do the same.It's a rather tragic story for all concerned in Britain. If there were anything like effective strategic short, medium and long term national planning it would not have happened.
Turning first to Boris Johnson, he says "We're on the verge of making a historic mistake over the provision of airport capacity. Heathrow is perpetually struggling to fit a pint into a quart pot. It's no wonder the Heathrow experience can be so miserable." So far so good. But wait a minute. The reason why Heathrow is now bursting at the seams movementwise and can not substantially grow slot numbers is that the incoming coalition government binned Labour's go-ahead for new the third runway there. One of the noisiest opponents of the scheme was Boris acting on behalf of his and the Conservative Party's west London constituents. It was pure populist NIMBYism although dressed up as a success in the environmental war. (Let's not forget that aviation contributes just 2% of UK's emissions and that the M4/M25 contribute more to pollution around Heathrow than do aircraft.) The constituencies concerned are primarily the smarter and vociferous ones from Notting Hill westwards to around Richmond. Noise blight in Hounslow and the places right under the final rather than outer approaches , while protested about, seems to have had much less clout. Folk there tend not to be so well connected to the Westminster networks so have less leverage. Most of all affected groups have moved into the areas in which they now live well after the jet age really got going from 1960 onwards so they moved in the full knowledge of the noise issue and that the airport would continue to grow. Mr Johnson knows that the airport is bursting at the seams right now and that the new 3rd runway provided the quickest and best way to meet it. He also knows that the possibility of another airport being built is extremely remote and if it were the UK's pedestrian approach to planning, approving and building anything, would ensure that it would take at least 20 and probably nearer 30 years to open. It is obvious to all that in a development averse country every possible obstruction would be thrown in its way and the citizens of Kent and Essex are unlikely to accept a new airport on their doorstep without a massive struggle. Sundry varieties hitherto unsung wildlife would have their support groups too. The reality is that the Thames estuary idea is unlikely to fly and a new inland site is unthinkable. Either would solve London's strategic problem while not asking inner Londoners in particular to take any of the downsides. The Mayor also does not seem to have considered the issue of the loss of tens of thousands of jobs and behind that a wave of further jobs dependent on them in western London.
Next there is Wille Walsh, now no longer with the single concentrated focus on the BA brand. He is perhaps flying more than one kite. The first is final call on the government to reconsider the third runway for one last time before it is totally dead for ever. Politically this appeal couldn't have come at a worse moment. Faced with accusations of having recently done around 15 U-turns,it will not be willing to do another on what is portrayed as a vital environmental issue. They will want to play tough and square jawed on a few high profile items. Heathrow is an ideal one , albeit negative, and may be balanced out by the more positive support for the HS2 high speed rail line to the north announced by the Prime Minister yesterday. Walsh is quoted as saying "We've already lost because the growth in Dubai could have come to London" and that following the transfer of the BA and Iberia brands to ICAG "We will access growth outside the UK". In other words UK Plc is about to discover the downside of no longer having what was seen as a national airline whose success and future depended almost wholly on what it could achieve at Heathrow plus a bit of overflow at Gatwick. Foreign registered ICAG can let its investment in London stand still or decline and just make its money elsewhere. Secondly the fact is that the growth at the Gulf (and other) airports up to now has not been lost by Heathrow's overcrowding. Until very recently and even now there have been been additional and transfered (bought) slots available and airport runway capacity has not been the main constraint. BA itself has enormous potential to juggle slots between its marginal shorthaul services and its long haul ones. It has chosen not to do so. It has also chosen not to expand its long haul fleet over the last ten years despite growing markets. It has grown its dependency on trans Atlantic services and not responded to the growth of the Gulf carriers by increasing destinations or frequencies in its eastern and southern markets.It has focused primarily on hubbing to North America from Europe, the Middle East and parts of Africa rather than the rest of the world and it does that well.Elsewhere BA has been remarkably passive and unadventurous while others have feasted from its table. It has also downsized its economy cabins so that it caters less for the mass lower yielding business which has had to gravitate to other carriers, thereby fuelling the competition's growth in both aircraft size and frequencies. Completing the circle, this has increased their competitivness with BA for business traffic as well. The BA brand's passenger throughput and connectivity at London Heathrow is therefore concentrated very much on the higher end of the Atlantic market and is well below its potential in other segments including volume .The BAA and its army of concessionaires can not be delighted.
The third player is the Her Majesty's Government. Labour's transport minister Lord Adonis was the most dynamic in the role seen in recent years and truly championed air and rail travel and enthusiasticaly mastered all aspects of his brief. He was determined update the infrastructure for both and to align with growth projections so that Britain remained competitive. This would probably be the first time since the 1930s that demand and facilities were in step. He was to be further helped by recently introduced Regional Spatial Strategies which would cut the red tape and speed approvals of major national projects and rid them of countless running battles with local authorities lying on the runways or rail tracks. This leading edge , cut-through-the-proceses-and-get-it-done body was quickly scrapped by the incoming coalition and the planning powers returned to the local levels. From May 2010 the very able Philip Hammond has been the new minister. He has driven rail modernsiation and capacity increases with successful vigour but has gone the other way with aviation. Not only was the third Heathrow runway abandoned but even the prosposed small slot improvement by allowing parallel arrivals and departures on its existing two was rejected. This put the cork in the movements bottle. The second runway at Stansted was also ditched and Gatwick can not build one until 2018 at the earliest thanks to a Michael Heseltine deal with the surrounding local authorities in return for the original building of the North Terminal. Now increased passenger numbers at London's two prime airports will only come from larger aircraft. New destinations may only be added at a cost to existing ones. Heathrow therefore will inevitably decline in relative importance as an aviation hub and the growth will go elswhere in Europe and/or to the geographically very fortunately located Gulf.
The Government has so far played the aviation card badly.It promises a "new aviation policy" in spring 2013 with a consulatation paper to be launched in spring 2012. A policy is not of itself a solution. It is a declaration of intent. It simply encourages investment, building of facilities, infrastructure and the rest. It doesn't guarantee anything and all these things can take years to appear, if they ever do. This makes the abandonment of Heathrow's runway 3 look even more precipitate and ill advised. There is just about time for a last minute handbrake turn. It looks unlikely though. Boris and Willie are providing a smokescreen which is distracting attention from this very urgent last chance possibility.
The fourth and final player in the Heathrow game has been the BAA and Heathrow. Until privatised it behaved very much as any monopoly supplier in a state of holding investment down and in frequent conflict with its customer airlines in particular. The relationship with the primary resident airline, BA, was for years adversarial although it improved considerably from the opening of T4 in 1986 onwards. A base carrier and its landlord often have conflicting interests and views of their own position in the scheme of things and Heathrow was no exception. The nationalised origins of both coloured and restricted their thinking .The BAA saw itself very much as an "Authority" not a service business with customers to woo and cherish. Their view of airlines and passengers tended to be coloured very black and yellow by this starting point. There have recently been encouraging changes. The opening of T5 has given the airport a facility to match the best anywhere. The demolition of T2 and Queens Building and creation of "Heathrow East" in its place promises another transformation and should enable the bulldozers to deal appropriately with T1, and by then a new T1 ,- currently not planned,- may be required . Heathrow was gearing itself to a much better future with at last some useful additional runway space to use both for expansion and to relieve some of the pressure of operating at maximum capacity for much of the day. The loss of that runway has come as a huge setback to the BAA as well as the UK itself. Again,the talk of a new aiport is a serious distraction diverting attention away from the real issue. It's not quite too late. The decision could and should be quickly reversed and building commence. Meanwhile the alternative hubs and their resident airlines are smiling from ear to ear and ICAG's UK eyes are glazing over as their future investment focus moves elsewhere. Unfortunately for UK Plc, others- and not just airlines,- will inevitably do the same.It's a rather tragic story for all concerned in Britain. If there were anything like effective strategic short, medium and long term national planning it would not have happened.
Tuesday 21 June 2011
Paris moments- and media nonsense.
The Paris Air Show got off to an awkward start for Airbus yesterday when its display A380 damaged its wingtip on one of those buildings placed just a little too close to the taxiway for comfort. Not a big deal but of course an opportunity for the thing some members of the media like best,- a bit of derision.
The Times, describing the incident as "a spectacular own goal" relates that it "was in danger of eliminating the A380 from the aviation industry's premier event". It does then get back on track with relating that "Airbus has been able to borrow an aircraft from Korean Air" and then veers off again by finishing up with ."... to perform stunts" as the original aircraft "can still fly but would not have been capable of low altitude stunts". What, we wonder, did they have in mind ? A high profile airline supremo and a clutch of stewardesses standing on the wing as it ballel rolled past the enclosures? Short take offs ,steep climbs and tight turns yes, but stunts? We think not. Come on the former top people's paper,- could we be just a little less tabloid?
Meanwhile, far more grimace-forming in the Airbus box will have been the news that Air China has ordered 15 of Boeing's ultimate stretch of the 1960s 747,- the -8i. That order would have been a nice little booster for the state of the art A380 which is only just beginning on what looks like a long life of further development and stretches towards being the definitive 1,000 seater.The wings are there so it's just for engines and fuselage length to follow. Airbus should not fret though. This one looks far more to do with a nod towards the US/China trade imbalance arguments than necessarily the merits of one aircraft against the other.
The Times, describing the incident as "a spectacular own goal" relates that it "was in danger of eliminating the A380 from the aviation industry's premier event". It does then get back on track with relating that "Airbus has been able to borrow an aircraft from Korean Air" and then veers off again by finishing up with ."... to perform stunts" as the original aircraft "can still fly but would not have been capable of low altitude stunts". What, we wonder, did they have in mind ? A high profile airline supremo and a clutch of stewardesses standing on the wing as it ballel rolled past the enclosures? Short take offs ,steep climbs and tight turns yes, but stunts? We think not. Come on the former top people's paper,- could we be just a little less tabloid?
Meanwhile, far more grimace-forming in the Airbus box will have been the news that Air China has ordered 15 of Boeing's ultimate stretch of the 1960s 747,- the -8i. That order would have been a nice little booster for the state of the art A380 which is only just beginning on what looks like a long life of further development and stretches towards being the definitive 1,000 seater.The wings are there so it's just for engines and fuselage length to follow. Airbus should not fret though. This one looks far more to do with a nod towards the US/China trade imbalance arguments than necessarily the merits of one aircraft against the other.
Friday 17 June 2011
Airborne today,17 June,- Korean Air next up with the A380- but not to London.
Korean Air ,the sixth airline after Singapore, Emirates, Qantas, Air France and Lufthansa to get the A380 into service launches its inaugural services from Seoul to Toyko's Narita and Hong Kong today, 17th June. The hop to Tokyo is definately short haul territory but Hong Kong is four hours away. Next destination from early July will be Bangkok, another popular mass travel destination in the 4-5 hour flight time bracket.
The choice of these nearby destinations is sensible firstly because of the very high traffic volumes on each, secondly because it means that any initial technical problems occur not far from home base and thirdly because it provides a reasonably high number of landings and takeoffs per flying hour so that crews can accumulate flown sectors quickly.
European operations will begin on 26th September with Paris CDG the selected destination .Again this makes good business and operational sense as fellow Skyteam member Air France is based there with its own fleet of A380s and a comprehemsive spares holding. London may be disappointed but from the point of view of Korean's group tour operators,-the source of most of its leisure business,-Paris is a much better option both for a starting, and as we have discussed before, departure point for the "Round Europe 10 capitals in 10 days " kind of of itinerary. Either London and its additional £65 visa fee can be avoided altogether or, if it has to be included at least its penal levels of long haul departure tax can be avoided by making Paris the jumping off point for the final and long haul sector on the way home. It is unlikely that the UK Government in its precipitate chase for greener-than-thou credentials as well as generating as much revenue as possible from what they see as a captive business will worry too much. The possibility that Korean's choice is an early warning blip on the radar screen or instrument panel is unlikely to be understood. It's a bit like a doctor not recognising a small sign of future trouble and therefore not acting to head it off from the start. For the time being at least UK Plc is unlikely to be deflected from its current discouraging aviation policy.
Meanwhile congratulations to Korean today. The only other new A380 operator this year will be China Southern while 2012 also sees only two further additions, the neighbours Thai and Malaysia. Airbus are probably reasonably happy with that number while they further build other existing fleets, particularly Emirates',as it enables them to focus all their new operators support in a limited number of places at any one time while total fleet time and experience grows steadily across an increasing number of aircraft in service. Yesterday, 16th June, saw the much anticipated delivery of the 50th A380,Singapore Airlines 12th aircraft.
The choice of these nearby destinations is sensible firstly because of the very high traffic volumes on each, secondly because it means that any initial technical problems occur not far from home base and thirdly because it provides a reasonably high number of landings and takeoffs per flying hour so that crews can accumulate flown sectors quickly.
European operations will begin on 26th September with Paris CDG the selected destination .Again this makes good business and operational sense as fellow Skyteam member Air France is based there with its own fleet of A380s and a comprehemsive spares holding. London may be disappointed but from the point of view of Korean's group tour operators,-the source of most of its leisure business,-Paris is a much better option both for a starting, and as we have discussed before, departure point for the "Round Europe 10 capitals in 10 days " kind of of itinerary. Either London and its additional £65 visa fee can be avoided altogether or, if it has to be included at least its penal levels of long haul departure tax can be avoided by making Paris the jumping off point for the final and long haul sector on the way home. It is unlikely that the UK Government in its precipitate chase for greener-than-thou credentials as well as generating as much revenue as possible from what they see as a captive business will worry too much. The possibility that Korean's choice is an early warning blip on the radar screen or instrument panel is unlikely to be understood. It's a bit like a doctor not recognising a small sign of future trouble and therefore not acting to head it off from the start. For the time being at least UK Plc is unlikely to be deflected from its current discouraging aviation policy.
Meanwhile congratulations to Korean today. The only other new A380 operator this year will be China Southern while 2012 also sees only two further additions, the neighbours Thai and Malaysia. Airbus are probably reasonably happy with that number while they further build other existing fleets, particularly Emirates',as it enables them to focus all their new operators support in a limited number of places at any one time while total fleet time and experience grows steadily across an increasing number of aircraft in service. Yesterday, 16th June, saw the much anticipated delivery of the 50th A380,Singapore Airlines 12th aircraft.
Friday 10 June 2011
One World wins Malaysia Airlines.What now for Skyteam in S.E. Asia?
Malaysia Airlines Qantas sponsored bid to join the One World Alliance strengthens both parties and leaves the Skyteam alliance short of options in South East Asia. Star, with Thai and Singapore Airlines now dominates the Bangkok and Singapore hubs, though Qantas' own Europe-Australia hubbing operation in Singapore is also significant. One World with Cathay Pacific and now Malaysia dominate Hong Kong and Kuala Lumpur. That has to give Skyteam a headache.
Skyteam will have hoped that the long standing KLM Amsterdam-Kuala Lumpur- Australia codeshare, with each airline providing a daily Amsterdam-Kuala Lumpur service would have stood them in good stead. Most less enterprising European airlines have found it difficult to simultaneously serve profitably the leisure rich but premium deficient Malaysian market while also being competitive -ie high frequency with nonstop services- and Singapore. As result all the European majors other than KLM and Lufthansa have in the last ten or more years either ignored Malaysia or left it to a codeshare operated by Malaysian aircraft. From this they gain a small presence but only a few percentage points of codeshare commission and not a big slice of the revenue.
So how come that, up against KLM undoubtedly championing Skyteam, an airline with no operation of its own to Malaysia has brought Malaysia Airlines into its own alliance group? The answer lies in two things,- a long history and a significant present and future. Qantas was involved with MAS since before its formal separation in 1971 from the original highly successful,IATA mould-breaking Malaysia Singapore Airlines. Its biggest rival for early favour was BA's predecessor BOAC and for a while the two ran neck and neck and would have been happy to break each others'. Qantas and Australia had two major advantages though. One was that its unusually long term country manager ,John Hill, had built up strong and deep relationships in the upper levels of Malaysian politics, so much so that he was eventually rewarded with the title "Dato", the Malaysian equivalent of a British knighthood and one infrequently given to foreigners.The second was that Australia had never been the colonial power so was better liked politically. BOAC hadn't got the same depth of relationships and against the UK there was enormous resentment that at the split all the MSA traffic rights to London were initially given to new arch rival and much resented Singapore Airlines. BOAC did pull back a few points by getting MAS visibly airborne in double quick time and ahead of its "real" domestic and regional operations by operating ostensibly jointly with the infant MAS a series of "exempt charters" between London and Kuala Lumpur. These were low cost scheduled services on universal sale rather than being restricted to often pretty bogus affinity groups. Participants in these had to be members of at least six months standing of a club or assosciation set up for a purpose other than travel. The greatest example was probably the Trowbridge Caged Birds Society which mushroomed from a few bird cage owners in Britain's rural west country into a tens of thousands strong club offering its members high frequency flights between the UK and USA. Naturally ,they would say, people interested in birds are interested in flying. Nothing strange about that. To give MAS a further boost, BOAC painted one side of one of its Boeing 707s in the brand new MAS livery, albeit only for the first month. The colonial legacy though increasingly grated in Malaysian politics culminating in a "Buy British Last " campaign in the later 1970s.
So much for the history. What about the present and the future? Qantas is back in Malaysia from Australia with its low cost medium haul Jetstar operation. Add to that the fact that Australia is a much more important trading partner than the Netherlands and also has much more regional political significance and it is no surprise that, disappointed though KLM and Skyteam will be, the Australians and One World have prevailed. This is despite the group containing the old irritant,-the British/BA who now currently have no aviation toehold in Malaysia of their own but are substantially submerged in a joint service agreement with Qantas between Australia, South East Asia and Europe. This itself is ironic in view of over seventy years of Qantas/BA internecine rivalries interspersed with a series of periods of cooperation.For the last fifteen or so though the relationship has been in the good mates phase, achieved in no small part from BA withdrawing its own Australia services from everywhere other than Sydney. (BA now goes to Australia 14 times a week. Emirates 63).
What do Malaysia and Kuala Lumpur mean to One World other than keeping other alliances out? Thanks to nearby Singapore and to Malaysia's late opening in 1998 of a global quality airport, Kuala Lumpur has struggled to build up services by foreign carriers. Malaysia Airlines has probably been reasonably happy with this as it has limited direct competition and pushed the European airlines in particular to do codeshares on its metal. Malaysia itself, despite a tendancy towards nationalism and protectionism ,has probably been less happy as it would like to have been seen as more of a true international crossroads. The sight of all those varied tails down at Changi has been very annoying.
Finally, what does One World offer Malaysia and its national airline? At the very least it will greatly strengthen the airline's frequent flyer programme which has been competing especially with Star's much more powerful global one out of Singapore. This should significantly reinforce Malaysia Airlines in its home market and particularly amongst frequent flyers in the premium cabins.Secondly it should encourage more codeshares on Malaysia's own services. Even BA might sign up despite possible diversion of small amounts of traffic from its own and Qantas' joint London services to and from Singapore. Qantas would have to agree but within One World that is more likely than before. Thirdly , other One World carriers may look again at putting their own aircraft into Kuala Lumpur. The Malaysia Airlines hub there offers a good range of city pairs at reasonable frequencies. Good quality hotels are close at hand for any misconnections and delays. The ground service at Kuala Lumpur could do with some polish to achieve Singapore's usually excellent mix of courtesy, care and a "can do" attitude and it is up to One World to put the pressure on for that to be achieved.
All the parties to this linkup should be pleased with it. It gives them some interesting opportunities and should be welcome to the Malaysian Government in its ceaseless quest to avoid Singapore running away with all the goodies. It is also an excellent launch pad for some new thinking about Malaysia Airlines' and Kuala Lumpur International Airport's place in the world. Shame for Skyteam but they will have to smile and think of something else.
Skyteam will have hoped that the long standing KLM Amsterdam-Kuala Lumpur- Australia codeshare, with each airline providing a daily Amsterdam-Kuala Lumpur service would have stood them in good stead. Most less enterprising European airlines have found it difficult to simultaneously serve profitably the leisure rich but premium deficient Malaysian market while also being competitive -ie high frequency with nonstop services- and Singapore. As result all the European majors other than KLM and Lufthansa have in the last ten or more years either ignored Malaysia or left it to a codeshare operated by Malaysian aircraft. From this they gain a small presence but only a few percentage points of codeshare commission and not a big slice of the revenue.
So how come that, up against KLM undoubtedly championing Skyteam, an airline with no operation of its own to Malaysia has brought Malaysia Airlines into its own alliance group? The answer lies in two things,- a long history and a significant present and future. Qantas was involved with MAS since before its formal separation in 1971 from the original highly successful,IATA mould-breaking Malaysia Singapore Airlines. Its biggest rival for early favour was BA's predecessor BOAC and for a while the two ran neck and neck and would have been happy to break each others'. Qantas and Australia had two major advantages though. One was that its unusually long term country manager ,John Hill, had built up strong and deep relationships in the upper levels of Malaysian politics, so much so that he was eventually rewarded with the title "Dato", the Malaysian equivalent of a British knighthood and one infrequently given to foreigners.The second was that Australia had never been the colonial power so was better liked politically. BOAC hadn't got the same depth of relationships and against the UK there was enormous resentment that at the split all the MSA traffic rights to London were initially given to new arch rival and much resented Singapore Airlines. BOAC did pull back a few points by getting MAS visibly airborne in double quick time and ahead of its "real" domestic and regional operations by operating ostensibly jointly with the infant MAS a series of "exempt charters" between London and Kuala Lumpur. These were low cost scheduled services on universal sale rather than being restricted to often pretty bogus affinity groups. Participants in these had to be members of at least six months standing of a club or assosciation set up for a purpose other than travel. The greatest example was probably the Trowbridge Caged Birds Society which mushroomed from a few bird cage owners in Britain's rural west country into a tens of thousands strong club offering its members high frequency flights between the UK and USA. Naturally ,they would say, people interested in birds are interested in flying. Nothing strange about that. To give MAS a further boost, BOAC painted one side of one of its Boeing 707s in the brand new MAS livery, albeit only for the first month. The colonial legacy though increasingly grated in Malaysian politics culminating in a "Buy British Last " campaign in the later 1970s.
So much for the history. What about the present and the future? Qantas is back in Malaysia from Australia with its low cost medium haul Jetstar operation. Add to that the fact that Australia is a much more important trading partner than the Netherlands and also has much more regional political significance and it is no surprise that, disappointed though KLM and Skyteam will be, the Australians and One World have prevailed. This is despite the group containing the old irritant,-the British/BA who now currently have no aviation toehold in Malaysia of their own but are substantially submerged in a joint service agreement with Qantas between Australia, South East Asia and Europe. This itself is ironic in view of over seventy years of Qantas/BA internecine rivalries interspersed with a series of periods of cooperation.For the last fifteen or so though the relationship has been in the good mates phase, achieved in no small part from BA withdrawing its own Australia services from everywhere other than Sydney. (BA now goes to Australia 14 times a week. Emirates 63).
What do Malaysia and Kuala Lumpur mean to One World other than keeping other alliances out? Thanks to nearby Singapore and to Malaysia's late opening in 1998 of a global quality airport, Kuala Lumpur has struggled to build up services by foreign carriers. Malaysia Airlines has probably been reasonably happy with this as it has limited direct competition and pushed the European airlines in particular to do codeshares on its metal. Malaysia itself, despite a tendancy towards nationalism and protectionism ,has probably been less happy as it would like to have been seen as more of a true international crossroads. The sight of all those varied tails down at Changi has been very annoying.
Finally, what does One World offer Malaysia and its national airline? At the very least it will greatly strengthen the airline's frequent flyer programme which has been competing especially with Star's much more powerful global one out of Singapore. This should significantly reinforce Malaysia Airlines in its home market and particularly amongst frequent flyers in the premium cabins.Secondly it should encourage more codeshares on Malaysia's own services. Even BA might sign up despite possible diversion of small amounts of traffic from its own and Qantas' joint London services to and from Singapore. Qantas would have to agree but within One World that is more likely than before. Thirdly , other One World carriers may look again at putting their own aircraft into Kuala Lumpur. The Malaysia Airlines hub there offers a good range of city pairs at reasonable frequencies. Good quality hotels are close at hand for any misconnections and delays. The ground service at Kuala Lumpur could do with some polish to achieve Singapore's usually excellent mix of courtesy, care and a "can do" attitude and it is up to One World to put the pressure on for that to be achieved.
All the parties to this linkup should be pleased with it. It gives them some interesting opportunities and should be welcome to the Malaysian Government in its ceaseless quest to avoid Singapore running away with all the goodies. It is also an excellent launch pad for some new thinking about Malaysia Airlines' and Kuala Lumpur International Airport's place in the world. Shame for Skyteam but they will have to smile and think of something else.
Thursday 9 June 2011
Subsidies and Liabilities:- It's the farmers get the pleasure. It's the airlines get the pain.
The EU has agreed to pay £ 170 million in compensation to farmers who claim to have lost money due to the German E-coli episode. Agriculture consumes nearly 50% of the growing EU budget (otherwise known as an overhead on Europe's overall balance sheet). The reason for the compensation is said to be that E.Coli's appearance in the food chain is an eventuality beyond the farmers' control
It's a different story for the airlines then. Volcanic activity is beyond their control and yet they held entirely responsible for the costs their disappointed customers incur when through no fault of their own EU directives ground them. The over-the top panic EU response Icelandic flareup in spring 2010 cost the airlines around £2.2 billion. They were again held liable to compensate passengers affected by the recent smaller scale repeat and there are no signs that the EU will change that in the future although the original legislation was aimed at an entirely different purpose,- to prevent or discourage the cancellation of services simply to save operators money or inconvenience.
This difference of approach by the EU is blatantly unreasonable. Why further protect the very expensive, protectionist and powerful farming lobby but not the mainly (in Europe) unsubsidised airline business which at no cost to governments provides countries with the enormous social and economic benefits of quality, frequent and often low cost transportation for businessmen, tourists and other leisure travellers?
Those like former British Prime Minister Tony Blair who recommend expansion of the EU's barely democratic powers need to understand the crushing effect of its attitudes to successful forward looking private businesses. Aviation brings very real benefits all over the world and at the moment is in danger of being discouraged by an unholy alliance of stay-in-your-own-village environmentalists and governments who see a successful industry as a easy source of revenue. Currently these governments make far more money out of airlines than do the airlines themselves. In the EU this adds to the funds available to further subsidise farmers so the successful are subsidising the unsuccessful. No wonder the industry isn't happy.
It's a different story for the airlines then. Volcanic activity is beyond their control and yet they held entirely responsible for the costs their disappointed customers incur when through no fault of their own EU directives ground them. The over-the top panic EU response Icelandic flareup in spring 2010 cost the airlines around £2.2 billion. They were again held liable to compensate passengers affected by the recent smaller scale repeat and there are no signs that the EU will change that in the future although the original legislation was aimed at an entirely different purpose,- to prevent or discourage the cancellation of services simply to save operators money or inconvenience.
This difference of approach by the EU is blatantly unreasonable. Why further protect the very expensive, protectionist and powerful farming lobby but not the mainly (in Europe) unsubsidised airline business which at no cost to governments provides countries with the enormous social and economic benefits of quality, frequent and often low cost transportation for businessmen, tourists and other leisure travellers?
Those like former British Prime Minister Tony Blair who recommend expansion of the EU's barely democratic powers need to understand the crushing effect of its attitudes to successful forward looking private businesses. Aviation brings very real benefits all over the world and at the moment is in danger of being discouraged by an unholy alliance of stay-in-your-own-village environmentalists and governments who see a successful industry as a easy source of revenue. Currently these governments make far more money out of airlines than do the airlines themselves. In the EU this adds to the funds available to further subsidise farmers so the successful are subsidising the unsuccessful. No wonder the industry isn't happy.
Friday 3 June 2011
Heathrow's threat to increase charges ,-Life on the horns of a financial dilemma.
Heathrow Airport last week bluntly warned airlines that their failure to grow passenger numbers sufficiently risks charges being increased to maintain their revenue needs.
Their problem is easy enough to see and has several ingredients.
Firstly the airport is now effectively slot limited for much of the operational day. As result passenger throughput growth can only come from larger aircraft and higher density configurations rather than increased frequencies. Against this, some short haul operators have reduced aircraft size while the largest base operator,BA, has for the last ten years concentrated on higher yield business so that on long haul services it has relatively low density overall configurations with small Economy cabins. At the same time BA has not increased its active long haul fleet size for over ten years and ,despite the arrival from 2013 of drip feed of A380s replacing elderly B747-400s and B 787s doing the same for 767s ,has no dynamic plan for large scale growth. Neither of the other two base carriers, Virgin Atlantic and BMI appear to have substantial growth plans either. This has to be of particular concern to the airport operator who needs to maximise passenger numbers to boost per capita fees and duty free shop sales.
Secondly the abandonment of the third runway or even the idea of mixed mode operation on the existing two, mainly to please environmentalists and Conservative constituencies in West London, has condemned the airport to gradual erosion its market share by European rivals. Its position as a global interlining hub will be particularly hard hit and BA's overall market share will also slip as it concentrates on being mainly a point to point carrier serving primarily London and south eastern England.
UK Plc. has effectively decided on a strategy of relative managed decline or at best low growth for its hitherto highly successful airline industry. The north and Scotland have already been largely surrendered to foreign carriers' direct flights and last February Willie Walsh,now CEO of ICAG ,in welcoming "the competition" effectively declared himself to be happy with that. For UK Plc.the connection between the need to encourage inbound business and tourism, things the country is good at and desparately needs, does not seem to be understood by its politicians.
Thirdly,the effects of Britain's absurdly high rates of Air Passenger Duty are now beginning to kick in and discourage both outbound and inbound leisure traffic particularly on long haul. Overseas tour operators who thrive on round-Europe groups will sensibly plan either to avoid the UK altogether (and thus save the extra £65 UK-only non Schengen visa fee as well) or at least ensure that the UK is not the last place on the itinerary. The final port of call is usually where the bulk of tourists' shopping is done. BA in its yield chase is probably not too bothered about that but Heathrow Airport in particular will be and again see its only chance of remaining profitable as being in increasing fees to the airlines. Its investment in new terminal capacity including the current total rebuilding of Terminal 2 and Queen's Building into Heathrow East demands higher passenger throughput,- or increased fees to maximise returns from both imposed and self inflicted capacity constraints.
BAA Plc must feel trapped in an unholy pincer movement between an unsympathetic or simply oblivious high taxing green tinged Government, the environmental lobby and base carriers broadly marking time, both voluntarily and involuntarily, rather than vigorously or even subtly persuing global market share. Add to that the current general "don't spend" pressures particularly in Europe the UK and USA and the airport has only one albeit risky way out of the corner,-higher charges. How they must long for a tax removing Government like the Dutch, a runway building one like the French or even the impossible dream of a Gulf or Oriental one not only building furiously but also being open for business 24 hours a day.An aggressive and expanding base carrier would be nice too.
Their problem is easy enough to see and has several ingredients.
Firstly the airport is now effectively slot limited for much of the operational day. As result passenger throughput growth can only come from larger aircraft and higher density configurations rather than increased frequencies. Against this, some short haul operators have reduced aircraft size while the largest base operator,BA, has for the last ten years concentrated on higher yield business so that on long haul services it has relatively low density overall configurations with small Economy cabins. At the same time BA has not increased its active long haul fleet size for over ten years and ,despite the arrival from 2013 of drip feed of A380s replacing elderly B747-400s and B 787s doing the same for 767s ,has no dynamic plan for large scale growth. Neither of the other two base carriers, Virgin Atlantic and BMI appear to have substantial growth plans either. This has to be of particular concern to the airport operator who needs to maximise passenger numbers to boost per capita fees and duty free shop sales.
Secondly the abandonment of the third runway or even the idea of mixed mode operation on the existing two, mainly to please environmentalists and Conservative constituencies in West London, has condemned the airport to gradual erosion its market share by European rivals. Its position as a global interlining hub will be particularly hard hit and BA's overall market share will also slip as it concentrates on being mainly a point to point carrier serving primarily London and south eastern England.
UK Plc. has effectively decided on a strategy of relative managed decline or at best low growth for its hitherto highly successful airline industry. The north and Scotland have already been largely surrendered to foreign carriers' direct flights and last February Willie Walsh,now CEO of ICAG ,in welcoming "the competition" effectively declared himself to be happy with that. For UK Plc.the connection between the need to encourage inbound business and tourism, things the country is good at and desparately needs, does not seem to be understood by its politicians.
Thirdly,the effects of Britain's absurdly high rates of Air Passenger Duty are now beginning to kick in and discourage both outbound and inbound leisure traffic particularly on long haul. Overseas tour operators who thrive on round-Europe groups will sensibly plan either to avoid the UK altogether (and thus save the extra £65 UK-only non Schengen visa fee as well) or at least ensure that the UK is not the last place on the itinerary. The final port of call is usually where the bulk of tourists' shopping is done. BA in its yield chase is probably not too bothered about that but Heathrow Airport in particular will be and again see its only chance of remaining profitable as being in increasing fees to the airlines. Its investment in new terminal capacity including the current total rebuilding of Terminal 2 and Queen's Building into Heathrow East demands higher passenger throughput,- or increased fees to maximise returns from both imposed and self inflicted capacity constraints.
BAA Plc must feel trapped in an unholy pincer movement between an unsympathetic or simply oblivious high taxing green tinged Government, the environmental lobby and base carriers broadly marking time, both voluntarily and involuntarily, rather than vigorously or even subtly persuing global market share. Add to that the current general "don't spend" pressures particularly in Europe the UK and USA and the airport has only one albeit risky way out of the corner,-higher charges. How they must long for a tax removing Government like the Dutch, a runway building one like the French or even the impossible dream of a Gulf or Oriental one not only building furiously but also being open for business 24 hours a day.An aggressive and expanding base carrier would be nice too.
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