Airline Downsizing Roundup.

Downsizing?

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.