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

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

BA/Iberia merger into IAG- The first days........

The early days of a merger are always fascinating as the previous tribes adjust,-or fail to adjust,-to their new circumstances and the fact that those not in the overall new group are, despite earlier outward protestations to the contrary, no longer in true control of their own destiny. The penny or peseta can take a while to drop that from here on the brands will have to have their plans approved by the group and that they are competing between themselves for money and resources. The media take a while to catch up too. There are still statements that IAG is owned 55% by BA and 45%by Iberia.Not so. These two entities, now brands, own nothing. The moment trading in IAG shares began the SHAREHOLDERS of BA,not BA itself, owned 55 % of IAG and similarly those who had previously held Iberia shares owned 45%. From that second onwards and trading was under way in London and Madrid, it was irrelevant how the shares' previous owners had come by them. BA and Iberia as separate standalone financial entities with shareholders were dead and gone and had in themselves no stake in IAG.

Two weeks into the marriage is far too early to make any judgments but we can make some pretty fair judgments of what is likely to have been going on in the respective head offices of the new IAG itself at Heathrow and the two brands' lairs, just two miles away in the case of BA and 1,000 miles away in the case of Iberia. Of the two, the Iberia contingent is probably the happier as they have the benefit of time and distance. BA people are far too close and therefore more likely to experience "help from Head Office" and invitations to "come along over".

On day 1 the two new top managment teams in both the BA and Iberia brands will have come in early, eased themselves into their seats with a feelings of pride or relief, and hopefully all ready to set off at a brisk trot. They now had their hands on the controls ,-or so they thought. Real life in mergers is seldom like that though.

Over at the HQ of the merged group those selected from both companies to lead the whole entity will also have slipped into their seats with a sense of pride and probably exhilaration. From having been at the top of just one company they are now at the top of another, pretty much twice the size. This is heady stuff. Having bagged their desks, put out their array of pens,parked their laptops, found where the secretaries, loos, coffee machines etc are, they will have found themselves wondering quite what to do. The phones won't have been ringing,-at least not from their former places of work,-the filing cabinets and new laptops' memories will be empty. Where to start then? Well, of course the answer is easy,- start hassling the two supposedly standalone brands for reports, statistics, plans, budgets, business cases explanations and the rest of corporate detrius. So stand by at (BA) Waterside and (IB) Madrid to fight your corners and use the words "back off" or similar, although even those have something of the Canute about them. At least those in Madrid have a slightly better chance,- " Allo? Very bad line this. Sorry. Click". Good luck to all concerned wherever you are.

Hotels- "A bath for the night ?"

A few years go in Simonstown, South Africa we came across as new look room in a B and B. Spacious and comfortable, it was truly en suite. The toilet stood fair and rounded in the middle of the room not far from the bed. It was truly the centrepiece and it's occupant could chat to anyone present. All rather Louis XIV.
We dismissed this as some sort of quirky abberation and moved to another with a more conventional layout, thinking we were never likely to encounter similar again.

We were wrong. More and more writeups in travel magazines talk admiringly of luxurious bath and ablution arrangements of all sorts situated right there in the room along with what used to be the main reason for staying in a hotel- the bed. Some are lightly and certainly not sound proof curtained off. Some are just open plan. A writeup of a recently opened Swire owned boutique hotel in the UK says that the entrance is through the bathing area. Even in Royal Windsor a few weeks ago in a pleasant hotel overlooking the castle walls, we were proudly shown our room complete with all facilities open plan albeit with some partial glass screening. The throne itself in its glass cubicle was visible from the whole room bar a few blind spots where mirrors were thoughtfully provided to ensure that nothing was missed.

Can we expect hotels to now start offering the old airline option in the days of central IFE screens,- "Viewing or non viewing?".For those of us who like to select
a hotel for the comfort of the sleeping and lounging about arrangements the notion that some choose the best place for a public bath and pee is a little bit strange . Personally we won't be booking on the basis of bath nights. We prefer hotels which stick with bed nights. Are we alone?

Africa Warms Up.

Several recent items of good news from Africa continue the momentum in the airline business on the eastern side of the continent.

Nairobi sees a boost with Qatar Airways A320 services to double daily, giving a choice of afternoon and evening departures to Doha and onwards of course to the rest of the Qatar network. Will Emirates respond by putting in its long mooted third daily by inserting a morning departure? The city also sees SAA moving to an A340 instead of an A320 on some of its 10x weekly services to Johannesburg.

Further south, from 1st May SAA moves to a daily nonstop A340-600 from Johannesburg to New York, omitting the current en route Dakar call.This will make the SAA offering more attractive from all East and Central African points from four hours distant Nairobi southwards and challenge the North American offerings of the European and Gulf carriers. Currently, by virtue of its choice of USA destinations, BA leads the pack with its best ever range of connections over London Heathrow Terminal 5, but to New York itself it's anybody's game with choice of schedule, overall time,the convenience and attractiveness of the connecting terminals,price,and service content and style all in play. Already Johannesburg has the edge over the Gulf carriers to Australasia and South America and clearly SAA seeks to build on this.It needs to do something about its on board service though as this falls well below Gulf standards.

A little further west, as John Williams points out, we see further evidence of SAA's declared policy to focus on growth within the high volume/high yield markets in Africa. The airline last month announced the signing of an MOU with the Central Africa Eco Community for the creation of Air Cemac, a regional carrier which will presumably cover the francophone Central African states including Congo Brazzaville, Central African Republic and Gabon. It looks like the same project as announced earlier by the Star African grouping of SAA, Ethiopian and Egyptair for the 2011 launch of a new West/Central African carrier.

All developments in Africa which see more seats, city pairs, frequencies or improved airport facilities and capacity(Nairobi needs to speed this up)are welcome and exciting. Unfortunately, although the above Star venture in Central Africa nudges things a little further west,it doesn't penetrate West Africa as such. The airline business on "the west coast" remains largely a chaotic shambles, albeit with the occasional patch of optimism. The Virgin Nigeria project looked as if it could ride to the rescue but without the massive funds required to set up a Kenya Airways or Ethiopian lookalike from scratch and with an over cautious approach to the necessary rapid development it did not and Virgin pulled out. Nigeria, with its huge oil revenues, should be a first rate hub. It is not. Accra is well positioned to take advantage of this but doesn't really. Abijan is the furthest point west which could fulfil a real hub role but political turmoil has prevented this. In all three places, the airports although modernised in parts are basically decades old.Nigeria adds to its own problems with visa requirements for passengers making international connections so straight away puts itself out of that business. Asky with its simple figure of eight operation with two aircraft provides some useful local connections via Lome, and intruders from the east, Ethiopian and Kenya Airways provide some very useful and good quality city pair connections within the region.These are a drop in the ocean though. There is huge latent demand for air travel to/from and within West Africa but it lags far behind the eastern side of the continent.

The Rolls Royce A380 Problem- 2 Airlines. 2 Reactions

The respective reactions of the two leading Rolls Royce powered A380 operators to the Singapore event were interesting and reflected significant differences in opinion between Qantas and Singapore Airlines graphically illuminated cultural differences between two near neighbours in the Southern Hemisphere as well as causing furrowed brows in operators further north.
Qantas' CEO personally took a high profile all guns blazing line with the first objective being to secure Qantas' own reputation ahead of any concern about the reputation of the aircraft or its engines or the approaches of other owners.To most people an A380 is an A380 and they have no idea what is slung under the wing of the aircraft in which they are flying. Qantas risked blackening the reputation of all A380s to the detriment of all their operators. It is unlikely that Airbus or Emirates, the operator of a 14 strong fleet of the GE powered version, were happy with this and Lufthansa and Air France with their smaller initial fleets were probably not too delighted either.
Singapore Airlines, the longest standing A380 airline was, in very Singaporean style, highly restrained, kept a low profile on the issue, took no PR risks with the aircraft or engines and had most of its fleet swiftly returned to service after checks had been carried out and Airbus issued temporary operating instructions. What was said behind the curtains to Airbus and Rolls Royce and what arrangements and agreements may have been reached is not known, but there minimal risk was taken with shaking public confidence in the hardware.
Which approach secured the better response and any compensation undertakings from Airbus and Rolls is unknown. Airbus has taken the line that keeping the existing in-service aircraft flying is more important than meeting the next six months delivery schedules and Rolls powered aircraft still awaiting delivery have been held back to achieve this. That though would probably have happened anyway, shouting or no shouting. There were also implications from Australia, though not the airline itself ,that maybe anyone other that a (very heavy) Qantas crew would have been hard pressed to deliver a better result in landing the aircraft safely. They certainly did an excellent job but others would question the notion that the Qantas way is the only way just as they would question whether their very self-focused PR response to the whole affair was the right way for the industry.

BA Strike Vote- The Real Figure and Two Origins

Despite new Unite leader Len McClusky's claims of a resounding victory against BA's evil management the facts are rather different on both scores.

First the vote:
Total BA cabin crew : 13,350
Total vote of a strike: 5,751
% in favour of a strike: 43

Of that 43% in favour ,only a minority is likely to take strike action when it comes to the day.

Putting aside the problems of old fashioned behaviour by unreconstituted unions and nearly four decades of confrontation averse "Peace in our time" CEOs on the mangement side,there are two fundamental underlying causes of this ongoing and unnecessary dispute. One is sociological and centres around group behaviours, cultures, self image and attitudes which have built up over years. The other is the accumulation of old fashioned heavy industry type detailed contracts and agreements covering almost every aspect of the job which link to a complex system of cash allowances and concessions which reinforce slavish compliance to the rule book and the exinction of anything like a deep and proactive service culture.They also help to destroy loyalty to the employer as they create the basis for everlasting conflicts, great and small.

BA has for the last two years been trying to deal with the contracts issue and is probably now close to a conclusion by one means or another. Once that is dealt with they and other legacy airlines should to look very closely at the the first question and figure out how to get from where they are to where the newcomers are.Just don't let anyone with "Human Resources " in their title be part of the study though.

BA/Iberia Merger- The Stealth Galleon.

Considering that presuming all is still on track, there is a deafening silence around the BA/Iberia merger which, if on schedule, is just a week away. It's as if its creators would rather that analysts, staff and customers just didn't notice it. It has progressed this far almost unchallenged. At BA's AGM questionners were far more concerned about whether cabin crew should be asked/told to work harder/cheaper/differently than whether they liked any or all of the aspects of the merger. Board members arrayed across the stage were happy to leave it that way and do nothing to encourage any sort of debate on the subject.

Neither the aviation press nor the usually excitable British media rushing to get out of their prams on the slightest half pretext have been shouting about the fact that IAG, BA and Iberia's Spanish registered new owner,while comfortably headquartered in the UK, will not be paying its taxes to HM Treasury but to Spain. BA's Chairman has been clear about the tax advantages of so doing. Financially therefore next week the core company moves offshore.Usually that would arouse at least some attention and shouts of "unfair, offside, how could they do that?" etc but in this case again silence.

The vast majority BA and Iberia shareholders seem to have no idea what their shares will be worth when exchanged for new IAG replacements or even the formula. No wonder the Board looked pleased when they eventually filed off to lunch . A long morning but not so much as a popgun in the potential armory ranged aainst them when they filed in. No need for flak jackets to survive,- just a low boredom threshold and lots of patience. The lack of knowledge about a formula makes decisions on whether to buy or sell right now very difficult.One wonders what has driven the recent rise in share value to around the £ 3 mark. Who is reading what tealeaves?

Credit where credit is due. Wille Walsh and Martin Broughton have steered this stealth merger with great skill. The so called analysts have enthusiastically bought any argument that " a bigger grouping is better/inevitable". Lufthansa have interestingly taken a different, more self interested and focused, path of both being a leading member of Star while growing their own position through the purchase of other airlines . In the BA case ,- which will be a fascinating potential business school study for years to come,- nobody has so far questioned the series of strategic miscalculations which have allowed the once very dominant company to have its position as the world's largest international airline with the most extensive global network to be eroded via a naive belief in the warm fuzzy aspects of alliances. It may be that the Government's decision not to further develop Heathrow or any other runway capacity in the London area, coupled with other travel unfriendly decisions such as to raise Air Passenger Duty through the roof is read as one to withdraw from the big league of air commerce but simultaneously milking its legacy to death while the supremacy of London/Heathrow/UK and BA are allowed to erode.In this case a shrugged acceptance that to see BA slide away into a larger foreign owned conglomerate could be seen as selling at the top of the market/while the going's good does make shrewd financial sense. In fact it's probably the only way it can be seen as that and in the long term national interest. If UK civil aviation, currently one of its most successful growth industries,has been selected to follow the shipyards, car manufacturing and a host of other once leading industries onto the downhill slope of decline, then the peak is the right time to offload it while the going's good. Is that what we really want though? Has anybody really thought about it? Where's the promised new joined up thinking and business orientation? Whatever happens now though is too late for BA. The stealth galleon is inside the harbour walls and about to dock.