John Williams has flagged up a recent news item from Africa.
Egyptair, Ethiopian and South African are discussing a range of possible cooperative moves including a regional low cost joint venture in Central Africa, which we take to mean primarily Zimbabwe, Zambia and Malawi although their definition may go a country or two outside that. Lufthansa, who currently have no services to East or Central Africa are also said to be interested in possible financial support.
As he observes, all are or will be Star members.Ethiopian has an investment in Lome, Togo based ASKY and itself operates extensively across the the east-west Africa axis as well as from its Addis Ababa hub to points south, central and east, notably Nairobi,Entebbe,Dar es Salaam,Kilimanjaro,Bujumbura,Kigale ,Lilongwe,Lubumbashi, Lusaka,Kinshasa,Libreville,Luanda,and Harare, mirroring much of rival Kenya Airways' Nairobi based network.Egyptair has reasonable reach into East Africa's Nairobi, Dar es Salaam and South Africa's Johannesburg but has never served the general Central Africa region. SAA on the other hand reaches expensively north into many of the same cities.
All three airlines serve each others home bases though SAA's presence in Cairo is only via an Egyptair operated codeshare and overlap at numerous points. in the middle sits part KLM owned (27%)Kenya Airways who will not be keen to see more incursions into what it sees as its own natural hunting ground.
Assuming that the "Central Africa" they are referring to is indeed Zimbabwe, Zambia and Malawi, only Zimbabwe has in normal times,-ie not now,-a strong national carrier. The Zambian Government sensibly stood aside long ago and let the original Zambia Airways go under when their losses became unsustainable, while Malawi almost inexplicable in terms of the drain on its Treasury and foreign exchnage continues to hold the non commercially viable Air Malawi above water. For all three countries the sensible solution would be a revival of a joint airline along the lines of Central African Airways, but as anything labelled as federal carries an unacceptable post-colonial stigma, that is very unlikely to happen.
City pair linkages and frequencies throughout Central Africa, while improved on a decade ago, are relatively infrequent and haphazard and do not encourage travel.If you miss your flight there may not be another along soon, or today,or tomorrow........In the 1970s during Rhodesian UDI and deep in the South African apartheid era there was a unique hubbing operation at Blantyre every Monday and Saturday when SAA,Air Rhodesia, Air Malawi, Zambia Airways, East African and latterly DETA of Mozambique met to exchange passengers,many holding two passports,travelling between places which forbade direct contact. Later, in the early 1990s, Brian Pocock of Air Botswana implimented with BAe 146s his dream of a multi-stopping spinal service knitting together the main southern, central and eastern Africa with a Johannesburg-Gaberone-Harare-Lusaka or Lilongwe-Nairobi-Entebbe route. Neither of these ventures have survived so there is a gap in air service provision right across the three countries and the adjacent territories, particularly within central Africa itself.
Potentially the rewards are good. With high yields and Dash 8/ATR/Embraer 170/190 series aircraft there is business to be had and generated by a well run, well financed and safety driven airline. Already (new)Lonrho owned Fly540 have seen this and begun cross border services from Kenya and started a subsidiary in Angola. Central Africa lies conveniently between the two. Substantially Kenya Airways owned Precisionair of Tanzania also has the ability to grow into a pan East and Central Africa low cost carrier. Provision of capacity via frequency is essential to success. A twice weekly operation from anywhere to anywhere is doomed as it doesn't give flexibilty. Again, one missed connection and a whole business itinerary is blown out.
The question for SAA,Egyptair and Ethiopian is whether they have the stomach, money and people for this kind of an operation when it comes to putting the resources on the table. Undercapitalisation is the bugbear of any new startup anywhere and even for a modern three turboprop operation a good £25 million is needed to support the first three years of buildup. It's not petty cash.
This proposal apart,a lot is happening in Africa right now. More of that shortly.
Thursday, 21 October 2010
Air New Zealand-The Passenger's Friend.
Full marks to long hauler Air New Zealand for their product relaunch scheduled for full introduction on April 11th 2011.
Their reach around the world from New Zealand -Asia-UK-USA-New Zealand, with many passengers on board for the best part of 24 hours requires special thinking,- and they have done it.With new seating concepts in all classes,-notably the sofa idea in Economy,and the innovative new Economy Plus arrangement and snacks anytime to order via the seatback touch screens they are setting the long haul pace.
In the front of the aircraft BA has just upped its First Class cabin and improved its Club World to try to cope with the very high quality Gulf carriers' offerings ,though it will have to think again about its visibly thrifted catering too, while Emirates' highly imaginative First and Business cabin layouts on the upper deck of the A380 are particularly stunning.
This is all good news to passengers who have suffered from real product competition being stifled by over-simplistic accountants ("everyone must share the pain,- the customers too")and the huge distortion of choice caused by the big frequent flyer programmes. Good on Air New Zealand for leading new thinking about "the back of the bus".If they can add to their hardware advantage by delivering their offerings with a consistently good, upbeat and cheerful service/hospitality style too, they will give particularly the long established European and American carriers a hard run for their money on the routes where they compete.
Their reach around the world from New Zealand -Asia-UK-USA-New Zealand, with many passengers on board for the best part of 24 hours requires special thinking,- and they have done it.With new seating concepts in all classes,-notably the sofa idea in Economy,and the innovative new Economy Plus arrangement and snacks anytime to order via the seatback touch screens they are setting the long haul pace.
In the front of the aircraft BA has just upped its First Class cabin and improved its Club World to try to cope with the very high quality Gulf carriers' offerings ,though it will have to think again about its visibly thrifted catering too, while Emirates' highly imaginative First and Business cabin layouts on the upper deck of the A380 are particularly stunning.
This is all good news to passengers who have suffered from real product competition being stifled by over-simplistic accountants ("everyone must share the pain,- the customers too")and the huge distortion of choice caused by the big frequent flyer programmes. Good on Air New Zealand for leading new thinking about "the back of the bus".If they can add to their hardware advantage by delivering their offerings with a consistently good, upbeat and cheerful service/hospitality style too, they will give particularly the long established European and American carriers a hard run for their money on the routes where they compete.
Tuesday, 19 October 2010
Aviation Taxes-Here they (EU) go again.
The Times reports that Janusz Lewandowski, the Polish EU budget commissioner will today present his proposals to reform the EU budget, 40% of which is gobbled up by Europe's farmers.
He is expected to suggest new taxes to fund the EU and its ever growing and expensive activities including salary increases and the translation of all EU documents from any of the 23 or so languages involved into any of the others. These taxes will include new ones on carbon emissions and air transport. Aviation, far from being a sacred cow to be looked after has become everyone's cow to be milked to exhaustion. While aircraft and engine manufacturers and airline managements have driven for ever more efficient products and hugely expanded their markets to the benefit of the world's electorates, politicians continue to snatch the benefits from under their noses to fill gaps in their often grossly mismanaged national coffers.The airlines, fearful of noisy and fashionable environmental lobbies have so far been very muted, even hand-wringingly cooperative in their responses. It is time they woke up to the dangers to their growth and survival that these national highwayman acts pose. Already many governments are making far more profit from airlines than the companies themselves are.Indeed they make this profit even when the airlines are making losses.
Barricades folks? And, oh yes, anyone for sorting out the gross overspend costs of the EU administration rather than just pouring ever more money into it so that it doesn't have to face its own realities?
He is expected to suggest new taxes to fund the EU and its ever growing and expensive activities including salary increases and the translation of all EU documents from any of the 23 or so languages involved into any of the others. These taxes will include new ones on carbon emissions and air transport. Aviation, far from being a sacred cow to be looked after has become everyone's cow to be milked to exhaustion. While aircraft and engine manufacturers and airline managements have driven for ever more efficient products and hugely expanded their markets to the benefit of the world's electorates, politicians continue to snatch the benefits from under their noses to fill gaps in their often grossly mismanaged national coffers.The airlines, fearful of noisy and fashionable environmental lobbies have so far been very muted, even hand-wringingly cooperative in their responses. It is time they woke up to the dangers to their growth and survival that these national highwayman acts pose. Already many governments are making far more profit from airlines than the companies themselves are.Indeed they make this profit even when the airlines are making losses.
Barricades folks? And, oh yes, anyone for sorting out the gross overspend costs of the EU administration rather than just pouring ever more money into it so that it doesn't have to face its own realities?
Sunday, 17 October 2010
Etihad Plans,- The "I" Word.
Today's Sunday Times(17/10/10)carries an interview by Karen Robinson with James Hogan,CEO of Etihad.
Mr Hogan says much what one would expect and starts off well enough with the simple statement "We are right at the crossroads of the world" So far so good. That is exactly where the Gulf is and a glance at the departure boards of Dubai, Abu Dhabi or Doha,- particularly Dubai,- airports at any time of their 24 hour days will confirm that they are making good use of it and must be causing furrowed brows in airline board rooms especially in Asia, Africa and Europe. An hour or two spent airside watching the flows of passengers and who they are, (everybody from everywhere) will reaffirm the fact and provide much food for thought.All the flows and cross-flows seem to work.It's most impressive.
The interview then continues well enough with a few more "our"s and "we"s until about the half way point when these are replaced by "my" and "I". A small thing maybe, but if this is how the interview went,then dangerous. Always "we" and "our", Mr Hogan or "they" might get a bit upset.............
Mr Hogan says much what one would expect and starts off well enough with the simple statement "We are right at the crossroads of the world" So far so good. That is exactly where the Gulf is and a glance at the departure boards of Dubai, Abu Dhabi or Doha,- particularly Dubai,- airports at any time of their 24 hour days will confirm that they are making good use of it and must be causing furrowed brows in airline board rooms especially in Asia, Africa and Europe. An hour or two spent airside watching the flows of passengers and who they are, (everybody from everywhere) will reaffirm the fact and provide much food for thought.All the flows and cross-flows seem to work.It's most impressive.
The interview then continues well enough with a few more "our"s and "we"s until about the half way point when these are replaced by "my" and "I". A small thing maybe, but if this is how the interview went,then dangerous. Always "we" and "our", Mr Hogan or "they" might get a bit upset.............
Monday, 11 October 2010
International Airline Group,-Willing brides?
Willie Walsh of BA recently announced his vision of expanding International Airlines Group ,which will be the holding company of the merged BA and Iberia, to include up to maybe ten additional airlines. Amongst the specified possibles were the strong and independent minded Cathay Pacific and Qantas.Both are used to close control of their own geographical territories,tactics, strategies and ultimate destinies. It seems out of character and therefore unlikely that either would be happy to surrender this freedom of action and control of all they see in return for an uncertain slice of a bigger cake and for seats at the Board table of a distant Madrid based conglomerate. They are also very selective about the company they keep and some of the other possible members mentioned by Walsh would have little attraction for them. Why,-in addition to this loss of control,- marry into hassle,potential dilution of profits to support weaker members, and Europe style labour laws? Walsh could well be disappointed on this one.
Tuesday, 28 September 2010
Not so Global Brand?
Last Sunday's papers carried an eyecatching full page ad announcing a tie-up between the rapidly growing Etihad and the three Australasia Virgin-related airlines,Virgin Blue, Virgin Pacific and V Australia. It showed graphically the extended reach into Australia and the western Pacific that the arrangement gives Etihad. A clear and useful message, but wait a moment, how does this read with Virgin Atlantic who operate a daily London-Sydney flight in direct competition with Etihad? Wouldn't one have expected strong promotion of all four Virgin branded airlines flying in formation rather than the three Australasian brands standing with their arms around a very effective and fast growing competitor?
On the subject of new generation Australasian airlines, a recent observation of Virgin Blue cabin crew pausing at an airside coffee stall en route to their first flights of the day was illuminating and cheering. Bright young people, pleased to see each other. Lots of chat and cheerful expressions. They were out to have a good day which meant a good day for the customers too. Not a mutter about " Managment, rosters, "imposition" and the like. They will fit well with the high standards of on board service provided by the Gulf airlines.Together they have an attractive and powerful customer proposition.Others beware!
On the subject of new generation Australasian airlines, a recent observation of Virgin Blue cabin crew pausing at an airside coffee stall en route to their first flights of the day was illuminating and cheering. Bright young people, pleased to see each other. Lots of chat and cheerful expressions. They were out to have a good day which meant a good day for the customers too. Not a mutter about " Managment, rosters, "imposition" and the like. They will fit well with the high standards of on board service provided by the Gulf airlines.Together they have an attractive and powerful customer proposition.Others beware!
Sunday, 26 September 2010
Spanish Omelette
Press Reports last week carried the news:"Iberia agreed not to block the merger with British Airways after reviewing BA's pension recovery plan".
How good of them.Very considerate.Surely they can hardly wait for the two companies to be wrapped into one Spanish omlette, the 60/40 holding company?
Amazingly ever since the merger was first mooted there has hardly been a bleep of a query, let alone a challenge from "analysts", BA's shareholders or anywhere else. Many have fallen over themselves to praise its supposed merits and not an eyebrow has been raised. The line has been that this is a "must do" as it opens up wonderful opportunities for BA without which the company will be lost for ever.
Why? Why? Why?
Let's examine the entrails more closely.
Until the 1990s, BA had the world's most extensive international network bar none. Its range of destinations and frequencies made it "The World's Favourite Airline" in terms of passengers carried across international borders, even though its service levels and style were hardly ever "favourite" particularly from the day Malaysia-Singapore Airlines started flying to London in the late 1960s.Bit by bit this network dominance has been imitated and eroded by the growth of codeshares (one of the greatest customer cons of all time but we will come back to that another day), frequent flyer programmes and more recently alliances, all things which the airline should have strenuously fought against from the outset.
There have been possible mergers which would have made good sense for BA, notably the twice aborted one with KLM, its most natural partner. KLM fitted in nearly every way, culturally,geographically and networkwise. Amsterdam and London are near neighbours, just an hour apart.Flowing transfer business between pleasant easy-to use-Schipol and BA's excellent Heathrow Terminal 5 is simple. Just look at a map.
Seemingly thanks to a breakdown in the chemistry between BA's Chairman Lord King and then CEO Sir Colin Marshall and the KLM leadership who saw them as arrogant ,KLM eventually went off with Air France. Lufthansa, the other big hitter in Europe, is far too independent minded and has ploughed its own furrow in expanding through aquisitions, not mergers.
Iberia, with its main base Madrid in the south west corner of Europe sits two hours from Heathrow and away from the shortest routes to anywhere apart from Europe to South America and southern Europe and parts of Africa to North America.Flowing business from the UK and central/northern Europe to other places in the world via Madrid means extra time spent en route while competitors flying nonstop will be well on their way home by the time the BA/IB option is back in the air again from Madrid. Why, other than a lower price, would anyone choose the indirect option? Talk of great new network opportunities therefore looks over optimistic. What is Iberia's network? Very good to Spanish speaking and USA orientated South America but BA covers the main cities nonstop from London anyway. A bit to North America and a lot all over Europe from Spain. South America is interesting but is unlikely to be big in terms of BA's network needs in the next ten years.Why would BA be interested in a share of Iberia's European routes? Do they make a lot of money? Unlikely as they are up against shoals of low cost and charter carriers. Why put BA's much more profitable long haul routes into a revenue pool in exchange for a share of that and primarily Iberia's business to South America?
What then does Iberia bring to the party in efficiency, costs,innovation, product or service style? Something new and dynamic that BA desparately needs or is it just a distraction? Iberia is a legacy carrier, unionised,not low cost, not known for outstanding service and has a limited international network. Would the merger bring most Spanish business heading to other destinations to travel via Heathrow,- and is there a lot of it? In relative terms it looks unlikely and how much is there to play for in total? Silence.
There is cheerful talk of huge management,overheads and joint purchasing savings from the merger.Several hundred million a year even after BA's own slimming purges. Well exactly where? Already both carriers will have been big enough to get the best purchasing deals available and the other savings are notoriously difficult to achieve through mergers .They should not be taken as guaranteed.
Very simplistically, just take BA's financial results and combine them with Iberia's. Look at the revenue of both companies,deduct the costs, add in some inefficiencies and cost increases of a 2 base operation, throw in some identifiabhle savings and then split the result 60/40. What does the current BA gain as a return per anything from the new joint holding company? How does this compare with what BA could achieve if instead of a merger it spent its management resources,time, energy and money sorting itself out, making its products and style second to none and resuming profitable growth,- while retaining control of its own destiny?
How good of them.Very considerate.Surely they can hardly wait for the two companies to be wrapped into one Spanish omlette, the 60/40 holding company?
Amazingly ever since the merger was first mooted there has hardly been a bleep of a query, let alone a challenge from "analysts", BA's shareholders or anywhere else. Many have fallen over themselves to praise its supposed merits and not an eyebrow has been raised. The line has been that this is a "must do" as it opens up wonderful opportunities for BA without which the company will be lost for ever.
Why? Why? Why?
Let's examine the entrails more closely.
Until the 1990s, BA had the world's most extensive international network bar none. Its range of destinations and frequencies made it "The World's Favourite Airline" in terms of passengers carried across international borders, even though its service levels and style were hardly ever "favourite" particularly from the day Malaysia-Singapore Airlines started flying to London in the late 1960s.Bit by bit this network dominance has been imitated and eroded by the growth of codeshares (one of the greatest customer cons of all time but we will come back to that another day), frequent flyer programmes and more recently alliances, all things which the airline should have strenuously fought against from the outset.
There have been possible mergers which would have made good sense for BA, notably the twice aborted one with KLM, its most natural partner. KLM fitted in nearly every way, culturally,geographically and networkwise. Amsterdam and London are near neighbours, just an hour apart.Flowing transfer business between pleasant easy-to use-Schipol and BA's excellent Heathrow Terminal 5 is simple. Just look at a map.
Seemingly thanks to a breakdown in the chemistry between BA's Chairman Lord King and then CEO Sir Colin Marshall and the KLM leadership who saw them as arrogant ,KLM eventually went off with Air France. Lufthansa, the other big hitter in Europe, is far too independent minded and has ploughed its own furrow in expanding through aquisitions, not mergers.
Iberia, with its main base Madrid in the south west corner of Europe sits two hours from Heathrow and away from the shortest routes to anywhere apart from Europe to South America and southern Europe and parts of Africa to North America.Flowing business from the UK and central/northern Europe to other places in the world via Madrid means extra time spent en route while competitors flying nonstop will be well on their way home by the time the BA/IB option is back in the air again from Madrid. Why, other than a lower price, would anyone choose the indirect option? Talk of great new network opportunities therefore looks over optimistic. What is Iberia's network? Very good to Spanish speaking and USA orientated South America but BA covers the main cities nonstop from London anyway. A bit to North America and a lot all over Europe from Spain. South America is interesting but is unlikely to be big in terms of BA's network needs in the next ten years.Why would BA be interested in a share of Iberia's European routes? Do they make a lot of money? Unlikely as they are up against shoals of low cost and charter carriers. Why put BA's much more profitable long haul routes into a revenue pool in exchange for a share of that and primarily Iberia's business to South America?
What then does Iberia bring to the party in efficiency, costs,innovation, product or service style? Something new and dynamic that BA desparately needs or is it just a distraction? Iberia is a legacy carrier, unionised,not low cost, not known for outstanding service and has a limited international network. Would the merger bring most Spanish business heading to other destinations to travel via Heathrow,- and is there a lot of it? In relative terms it looks unlikely and how much is there to play for in total? Silence.
There is cheerful talk of huge management,overheads and joint purchasing savings from the merger.Several hundred million a year even after BA's own slimming purges. Well exactly where? Already both carriers will have been big enough to get the best purchasing deals available and the other savings are notoriously difficult to achieve through mergers .They should not be taken as guaranteed.
Very simplistically, just take BA's financial results and combine them with Iberia's. Look at the revenue of both companies,deduct the costs, add in some inefficiencies and cost increases of a 2 base operation, throw in some identifiabhle savings and then split the result 60/40. What does the current BA gain as a return per anything from the new joint holding company? How does this compare with what BA could achieve if instead of a merger it spent its management resources,time, energy and money sorting itself out, making its products and style second to none and resuming profitable growth,- while retaining control of its own destiny?
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