Monday, 23 January 2012

Costa Concordia-Costa Cancellation.

Thousands of people,including a relatively small number from the UK, booked on Costa Concordia's cruises over the year will for obvious reasons not now be travelling on it. All will be offered alternatives on Costa Lines but some will inevitably decline and do something else. That's a reasonable choice in the circumstances and naturally they will get their money back.

But not all of it for all of them. If they had booked air tickets to and from the ports of embarkation and disembarkation separately, airlines will not be returning their cash. Some may be flexible on alternatives but others,reportedly including BA, are saying that they will not be doing refunds.

If you wondered what all those shiny,smiling,caring,professional people in the multi-million pound advertising campaigns are really all about when the chips are down, now you have a clue.

Friday, 20 January 2012

The parochial politics of British Transport Policy,- and what they mean.

British Transport Secretary Justine Greening's go-ahead for the new HS2 High Speed rail link initially between London and Birmingham with later extensions to Heathrow from the southern end and Manchester, Leeds and ultimtely possibly points north and Scottish from the northern, came as a welcome relief.

Two previous decisions, the one saying "Never" to the building of a third runway at Heathrow and the much smaller but still important rejection of the low cost plan for a rail link between Heathrow and the 3rd rail electric railway network south of the airport, west to Reading and east back to London's Waterloo were transparently politically orientated towards rewarding and encouraging Conservative voters in sometimes closely contested west London constituencies, not least those of Ms Greening and her predecessor, Philip Hammond.

The cancellation of the 3rd Heathrow runway, already given the go-ahead by Labour's forward looking Lord Adonis (also the prime mover of HS2), was a disastrous, nakedly political and unnecessary vote-grabbing promise by David Cameron before the May 2010 General Election. It was the epitome of vision-free Little England thinking and pointed worryingly towards the lack of any political philosophy about building for the country's future. Worse still, it did indicate any alternative other than the decline of London as a world airline and business centre and hub. It was electioneering at its worst and if uncorrected,- as seems likely to be the case short of a Labour victory in 2015,- it will cost UK Plc billions at an ever increasing rate over years to come.

The cancellation by Hammond of the southern Heathrow rail connection was also dire. A Works Order was imminent and the digging not far off when the Secretary of State brought it to a juddering halt. The problem? Traffic congestion and delays if a major level crossing in the middle of his constituency had to close 4 more times every hour. That would have cost him a few hard times at local social occasions and the dinner invitations may have dropped off a bit.

On the back of these two decisions, the prospects for HS 2 did not look good. There has been and continues to be almost hysterical opposition to the project particularly from Conservative constituencies and Councils in Buckhamshire, Oxfordshire and Northamptonshire. Some of the shock and horror statements about devastation of the landscape, noise of near Concorde proportions, frightening horses and the like have been almost beyond belief. The line is only about 22 yards wide and any observation shows that, once built, railways usually blend well with their surroundings. One pity about this one is that the tens of thousands of travellers daily will, thanks to the uproar in the Chilterns , be deprived of views of this area of outstanding natural beauty. Those will be reserved for local residents. All that though is another story. Back to the politics. Further north, where the Tory constituencies begin to thin out, most MPs and Councils unsurprisingly want the line for all its benefits in speeding links between its major cities as well as from north to south. The megaphone level opposition and disinformation will continue to flow and looks like remaining as serious background noise as the project moves tortuously forward at the speed of a constipated snail over the next four years. That's the earliest the first sod might be cut. There have been threats by MPs to resign or at least abandon their posts (The Welsh Secretary) and voters to vote for someone else at the next election. Who? Ed Miliband? In the Chilterns? UKIP? Well, maybe but not in big enough quantities to dislodge the Tories. That little calculation may have swung the balance this time in favour of ignoring the sensitivities of the local constituencies. A few sops were thrown in to placate wealthy Tory interests,- Hartwell House saw its section of line bent a bit towards the much larger number of less well off/influential people in the a big new estate on the neighbouring fringe of Aylesbury and the short bit further out past Edgcote House was gently curved away to go closer to less affluent folks instead. The views down the hill from Waddesdon Manor seem to have been well looked after too.

Transport is just one area of government/political activity. If these sorts of things appear to be happening in that quarter, what ,one speculates, is going on in others where local interests of both MPs and constituents, are involved ? The expenses scandal and public outcry last year showed indignation about any whiff of less than the highest standards of behaviour being shown by the elected representatives. Expenses are just one area of activity. Determination and execution of policy in the whole national interest rather than local or personal ones is another. Mr Cameron is on dangerous ground if he allows any chinks to appear in his once stated intention of cleaning up Westminster behaviours. The need/demand is for integrity. Let's say it again and spell it out slowly so there's no mistake. I-N-T-E-G-R-I-T-Y.

Thursday, 19 January 2012

Air AsiaX's Long Haul Exit. Postscript - A warning to (European) Governments.

Further to our item last week about AirAsiaX's exit from its low fare long haul routes to Europe, the company's CEO has added a sobering warning about the effects of governmental greed on the ability of the low cost/low fare sector to operate profitably.

Very simply, he blames governments for "exorbitant" taxes and mentions in particular the new inclusion of airlines in the EU's Emissions Trading Scheme (ETS) and the UK's ever rising and punitive Air Passenger Duty (APD).

The sums are obvious. The greater the proportion of government taxes and charges to the total fare, the smaller the remaining proportion for the airline in which there is the opportunity and flexibility for lower cost carriers to undercut the high cost/high fare establishment, so the less powerful the numbers-driving price differentiator. In effect the governments are throwing the legacy carriers a lifeline they don't deserve,- and the travelling public are paying.

We have said before and will say again,-the notion that only the rich should be able to travel is so old fashioned that it's almost feudal. Outside the green lobby who don't seem to believe that anyone should be able or need to travel beyond their own town or village boundaries and the technco-lunatics who say travel is out of date in the brave new "Never leave your bedroom" video and IT world , the ability to roam the globe at will which aviation has progressively brought over the last 50 or so years with enormous benefits to people everywhere is now seen pretty much as a right. As well as being the source of great pleasure and new experiences to many, it is a necessity to many in less developed countries who have been economically liberated by the ability to go to wherever in the world the jobs and money are or to bring much needed foreign tourists and their spending power in to them.

Politically and socially, governmental strangulation of air travel by taxation is an unsustainable proposition. Ironically the first big losers could be the people who opened the doors of the recent travel boom,-the bright, innovative low cost carriers, starting with those who who have put a toe in the long haul water and found hungry, salivating crocodiles in there. The UK and European variety are the most voracious.It's tragic enough to make you weep real tears. Thankyou for trying though, Air Asia X, and good luck elsewhere.

Thursday, 12 January 2012

Air AsiaX quits Europe- The end of Low Cost Long Haul?

Tony Fernandes' Air Asia X A330 long haul low cost services to from Kuala Lumpur to Europe are to end in March.

Obvious questions include:

-Can the low cost model really work on highly competitive long haul routes?
-Was the relatively weak home base and hub, Kuala Lumpur,the problem and would somewhere else have worked better?

Quick answers point the the former with maybe a little help from the latter though if the prices and schedules of Air Asia X's own connections at Kuala Lumpur were sharp enough that itself should not have been a problem.

Short haul low cost airlines have undercut their legacy rivals by;

-Higher daily utilisation thanks to quicker turnarounds and good combinations of sector lengths to cram as much as possible into the commercially useful day without necessarily a lot of midnight/early hours fying.
-Lower turnaround costs by dispensing with most cleaning other than whatever the cabin crew could manage in the very short times allowed.
-Flexible and very cost effective rostering of flight and cabin crew to maximise utilisation and minimise/eliminate expensive and time consuming nightstops.
-Minimising Head Office and support staff levels.
-By virtue of all of these being able to profitably undercut existing carriers with prices they can not afford to consistently match.

So what's different for long haul?

-With long sector lengths and therefore a much lower number of turnarounds there is not the scope to substantially improve utliisation by tighter turnarounds. The ratio of saveable ground time to air hours is so low that this possibility is very marginal rather than a substantial boost to utilisation.

The key factor though is fare levels already offered by high frequency good quality operators. The Asian and Gulf airlines in particular are very good at fine tuning
loads to meet a target load factor by dynamic pricing. They have done it for years. They mainly offer at least double daily frequencies on major traffic flows and all provide full service catering and amentities. On the Atlantic, despite alliances having reduced competition to some extent, there are also usually reasonably low fares to be had. As result, particularly between Europe and Asia there is very limited headroom for a new low cost, no frills operator to consistently offer substantially lower fares than the incumbents. Add to that some customers' iritation at having to carefully navigate around low cost carriers' secondary charges, some of them punitive from their short haul experiences,and the low cost long haul proposition just isn't attractive enough. Unlike on short haul there is very limited scope for raising the basic selling price to higher levels as the bookings on a flight build up because as soon as they get even closer to those of full service airlines why should the customer proceed with the purchase?

What does this mean for other genuinely low cost entrants to the medium to long haul market? Jetstar with its longish but essentially medium hauls from Australia into Asia might look an obvious case. The reality though is not that. Jetstar's longer haul business is very different from its geuinely low cost type offerings within Australia. Once it flies beyond the continent it becomes more Qantas-lite rather than low cost and that indeed is its purpose. Qantas long haul with its plethora of high cost union agreements and inhibitors to productivity can not compete with the Asian carriers on Australia-Asia and Intra Asian routes. Its only choices were either to shrink into defending its position on traditional routes between Australia and Europe (mainly London),Japan and West Coast USA,- which Qantas mainline long haul essentially has done,- or to create a LOWER but not LOW cost version of itself. Hence the appearance of the medium/longer haul part of Jetstar. This is a very different animal to genuinely low cost Air Asia X. There has been talk of it extending its reach further,-eg into non UK Europe,-but the ability to make a profit despite the very high costs of the second sector from Asia onwards will be the issue.

It looks therefore as if the end of Air Asia X's services into Europe could mark the end of true LOW cost long haul but it in no way marks the end of LOWER cost long haul opportunities on routes between Europe and Asia. There is a gap for an Asian based Jetstar or similar operation but it will be keenly fought off by the existing encumbents who have high capacity and the ability to price as they wish.

Game not over,-just changed.

Tuesday, 10 January 2012

Emissions Trading :The EU gets up China's (and other peoples' ) nose cone

China has been unequivocal in its condemnation of the EU's inclusion of airlines in in its Emissions Trading Scheme from 1st January this year. It will refuse to pay and nor will it pay any resultant unilaterally imposed "fines". Good for the Chinese.

The notion of one area of the world unilaterally imposing its own ETS on any others wishing to fly into or over it is disturbing and extraordinarily arrogant.It does the EU and its standing in the world no good at all but it does show how this massive and barely democratic beaurocracy can behave when it thinks it can get away with it. In short just like any other massive and barely democratic beaurocracy. It also shows a supreme insensitivity to the needs in particular of many poorer non EU states. For decades ICAO, IATA and others have fought for the opening rather than closing of international airways and the reduction of charges. Russia and China which stand astride the fastest routes from Europe to Asia had been particularly restrictive and only truly opened up in the last 15 or so years. Now all carriers are able to fly these fast routes and recently even more over the North Pole have been opened up, albeit some of the very recent only to selected operators.

The benefits in terms of international business travel and the tourism on which many tropical developing countries depend have been enormous. Added to the manufacturers' and airlines' efforts to build ever more efficient aircraft and to operate them more cleverly these have lowered fares and made air travel affordable to much wider and more socially diverse markets. Air travel has boomed as result.

Now it's as if all these efforts have been wasted. An unholy alliance of stay-at-home-with-the-lights- out environmentalists and rapacious tax-thirsty governments are doing all they can to bleed the industry dry and leave what is left of it as the preserve of the wealthy, a notion which if they gave it a moment's thought is socially and politically highly objectionable.

Back to the Chinese though. Already by way of retaliation a Hong Kong order for 10 Airbus A 380s has been put on hold. Boeing will be salivating at the prospect of becoming a near monopoly supplier to the world's greatest buyer of new civil aircraft. It is also reasonable to assume that if Chinese aircraft were banned from the EU there would be immediate retaliation, not only for EU operated flights between the two areas but those taking by far the shortest routes between Europe and Asia which of course overfly China. What then? The beneficiaries would be non Chinese Asian airlines and the ever growing Gulf ensemble flying via intermediate points.

Hopefully by creating the possibility of an ever escalating and expensive (mainly to the EU) impasse and crisis ,China has forced an eventual sensible resolution and a Brussels rethink. The USA and others who have objected to the unilateral imposition of the scheme but been less clear about their response should now come out from behind their couches and declare quite simply "No",-and then not blink.

Monday, 2 January 2012

Here and There.....Snippets from sea, air and land.

CRUISING:(And the question of a good value ethos)

-Royal Caribbean Lines' Chairman and CEO (The USA is less concerned about the separation of these 2 roles than is the UK) Richard D. Fein in an interview with Carol Lewis of the Times has expressed the view: "Frankly, I think we offer too good value today.I would rather be offering less value". This is very different from saying that the company needs to keep doing what it is doing but more efficiently and thereby at lower cost. We understand though where he is coming from. In theory that's fair enough. Every £ or $ unnecessarily spent is one less for the pockets of the shareholders. Particularly to the blinkered type of accountant this is a wasteful and "not good business". These good folk though never see the £ and $ that companys don't get.There are no statistics or graphs about that. Nobody loses their bonuses over the invisible customers who see "thrifting", don't like it and drift away .A minority but profitably significant element of the cruise market is long standing and brand loyal and notices any erosion of what they see as "their " product. Far more worrying though is the fact that if the CEO is known to be keen to give the customers less a cynicism creeps in. Passengers/customers become "punters" and something to be humoured rather than embraced.A corrosive culture easily takes root amongst staff. Just ask some of the legacy airlines about it.

Mr Fein might do well to think more about what he is saying, where it might lead and what it might cost.


-Boeing 787. ANA's first ever Boeing 787 commercial flight from Tokyo to Hong Kong on 26th October was well but not overwhelmingly applauded. The fact is that this is a workhorse not a spectacular "wow" new aircraft with staircases and waterfalls like the A380. It is simply a carbon fibre replacement for the unglamorous 767. It is not huge and for the man or woman in 24E it isn't very different from what has gone before. The much vaunted larger windows don't give an uninterrupted view past the maybe generously endowed people in the way. This is not a Viscount or Vanguard where the knees of those inside could be seen by those outside. The windows are a bit bigger but not enormous. The cabin has a nicely shaped ceiling but we've seen some of those before and even the early Boeing 707s had a sort of starry light effect along the cabin sides beneath the hatracks. Forgetting the green wash option, mood lighting can be nice but it doesn't improve feelings in the back of the bus after 12 or so hours aloft and real additional legroom there isn't. Maybe ANA were mistaken to show off a short haul version of the aircraft with short(er) haul cabins and seating on a longish 4 hours plus sector. For whatever reason ,nobody seems to have come running off shouting "Eureka". Sitting in a plastic rather than metal tube again doesn't mean anything much to seat 24E. This is no disrespect to Boeing in producing what is a real step forward in design, construction materials and economics. Any mistake has probably just been in the type rather than amount of hype.

One other thought. Who has the master control for darkening the windows? The man in 24 A, or B or C or D....or the cabin crew? If the latter, the battle to watch in daylight some of the world's most spectacular views versus the cabin crew's determination to minimise service demands by insisting that the blinds be down "So people can see the IFE screens" is about to move to another level. There could be a lot more air rage about.

-Virgin America:On 21st December Virgin America's flight attendants rejected representation by the Transport Workers Union. 547 voted and of these 324 or 59% voted against and 233 or 41% voted for leaving the rejected union to lick its wounds. Having during the staff wooing stage said that relationship between unions and managments need not necessarily be confrontational, the union quickly dropped the mask and accused the company of pressurising staff to vote "No".
In general unionisation and service businesses, airlines in particular, are not a happy mix. Cultural work ethic is another factor but the often deadening effect of unions on initiative and "going the extra mile" is significant. The tighter and more specific the contracts the worse the attitude to providing service and the more loaded and meaningful that dreadful statement beloved of some legacy airlines staff,-especially American ones,- "We are here primarily for your safety". Virgin America will be happy to have escaped this problem,- at least for now.


The gloom at Canadian-owned Bombardier UK's Derby factory since losing the Thameslink contract to Germany's Siemens fairly and squarely under the bidding terms imposed by Gordon Brown's late government has been alleviated by a new £188 million contract for 130 electric coaches for UK's Southern Rail. Entirely coincidentally these will amongst other things relieve commuter over crowding in Transport Secretary, Justine Greening's Barnes constituency. The deal will probably secure about 1,400 Derby jobs for a year. To the unions for whom no price is too high to save their membership numbers and fees the shot in the arm is inevitably too little too late whatever the simple sums say.

Strategically the contract gives Bombardier the opportunity to quickly get its act together on some other possible UK contracts and for the parent company to consider putting some export business into its UK plant. It also needs to put some recent quality issues behind it. Deliveries of new London Metropolitan underground trains have been halted due to quality issues. Other recent deliveries of diesel Turbostar units to London Overground and Chiltern Railways have also been late and had build problems. Siemens on the other hand has had a good record of on time deliveries and their high quality products working straight from the box. In the terms of the wonderfully simple and sensible Scottish legal maxim: "Res ipsa loquitur" (The thing speaks for itself).

Thames estuary airport for London?-Dream on,- there are bats in the belfry and everywhere.

For those promoting the idea of a quickly built new airport for London in the Thames estuary there is sobering news from the UK rail industry. The notion of a Chep Lap Kok (though that is already capacity limited and needs a third runway) or Incheon built in time to meet unconstrained growth needs looks less likely by the day. In a perfect world an island site close to London with 4 but potentially 6 runways would be ideal but the world itself doesn't live in a perfect world and the UK even less so. In Britain bats and newts and other heavily protected wildlife other than humans stalk the land. Humans collectively aren't reckoned to stack up to much but other creatures certainly are.

Less than 100 miles to the west of the islands of Roberts and Olsen/Moudarri there is a disused railway tunnel, one of 2 parallel ones on a line between Oxford and Bicester. It is proposed to reopen this tunnel to enable the line to be redoubled and become a new route between Oxford and London and to reopen part of the long closed Oxford- Cambridge line which would enable many tavellers to avoid having to travel via London. It is in airport terms a tiny, obvious and low cost project but a good and sensible one.

It has a problem though. Bats and newts. The bats have taken a liking to the disused tunnel and to taking a short cut through it to "commute". Apparently like humans they go to work and have urgent business as well no doubt as leisure travel and also a teenager style propensity to hang about in dark places with their mates. "Today's Railways" tells us that as result the local planning inspector has therefore rejected Chiltern Railways planning application on the basis that the tunnel is used by the bats "for swarming, commuting, foraging and a temporary roost site" and trains running through would damage their environment. An allied proposal to warn bats of approaching trains via a special lighting system is also rejected as unproven. He or she also identifies " a potential threat to a nearby colony of great crested newts". In fairness, the Transport Secretary, Justine Greening, has told Chiltern Railways and Natural England to go away and resolve the issue as quickly as possible, but rather like the judiciary, planning authorities and their officials tend to be very independent minded and stubborn. Such are the dangers of passing democracy down to the lowest level, something about which this government waxes lyrical.

With only bats and newts to worry about this show stopping short tunnel is very small beer. The Thames estuary is crawling with wildlife including resident and migratory birds. Every attempt to develop it in any way has previously been met with howls of protest. Any notion that a new airport could even get through the planning, objections and appeals processes, UK and EU, within 15 years is fanciful. All this underlines the fact that the coalition's binning of the nearly ready-to-go Heathrow third runway after the May 2010 General Election was a tragic mistake which is set to cost UK Plc billions over many years. Its obstinate refusal to even consider the runway as a possibility in the current review, likely to report in 2012 or 2013, is emotional, illogical and downright bad business.