Airnthere in the sun............

We apologise for a dearth of recent posts. The writer is currently absorbing the African sun as well as continuing to observe and line up new items. Normal service will resume at the end of next week,- on the weekend of Saturday/Sunday 10/11 March.

BA/JAL Poposed joint services deal,- Time for a serious review.

The news that IAG's BA and JAL are proposing a joint services arrangement between Japan and the UK and will be referring it to the regulators,- presumably the UK/EU and Japan,-for approval and anti trust immunity is interesting.

This would be BA's 3rd joint services arrangment,the oldest being the mid 1990s one with Qantas which has seen the BA brand almost eliminated in Australia, Melbourne, Perth and Brisbane services abandoned and just a single daily operation to Sydney remaining from summer 2012. This hardly suggests the arrangement as a dynamic development for the airline or its customers. True, a number of Qantas services carry the BA flight code but what does that really mean to the traveller who likes and wants the BA brand and maybe even thinks that's what they have bought? In fairness the economics of this ultra long 2 sector route dogged by low yields and a plethora of high quality 6th freedom competitors offering very similar end to end journey times and a better spread of UK and European destinations are pretty impossible for operators based at either end of the route and especially those with traditional legacy airline high costs . In this case the approval of the joint service deal as the only way in which BA (and Qantas) can remain in viable business on the route is probably acceptable as it leaves them still in the game as competitors and that has to be be good for customer choice.

The second deal is the BA/Iberia/American Airlines trans Atlantic pact .Again this is probably unobjectionable as there is plenty of high frequency competition of similar or better quality on most of the routes involved and certainly on the North Atlantic overall. The question of the codeshare element being at best highly misleading and actually of no benefit to the man or woman in seat 32J remains as strong as ever and needs attention and a furrowed brow. In most other industries it would raise issues of mislabelling and probably be unacceptable.

This third deal comes at a time when BA have long abandoned their substantial presence in the Japanese market . They have long quit Osaka and Nagoya and retreated into a simple double daily operation to Tokyo. A joint services deal will not increase customer choice or on past perfomance induce BA to be a more aggressive player and open up new routes. More likely is that it simply regularises a retreat and leaves JAL an open field via, depending on the terms of the deal, something that is in reality a kind of royalty for BA not operating. The nonstop competition on the route comes from ANA and Virgin but this does not give the same level of comparable alternatives or frequencies available between the UK and Australia or the UK and the USA.

The answer therefore on this occasion should be a very definate "No,-this isn't good for competition, the industry or the customer. You need to fight this market out and not get cosy". Perhaps more importantly, the regulators should take this opportunity to challenge the so far largely passive governmental response to codeshares. The benefits are convenient to airlines in disguising the extent of their real operations,-or often non operations,-on a route but the whole concept is highly misleading to the passenger , certaily as to what they may expect on a flight. Many services carry more than one additional codeshare, thus cluttering up airport departures and arrivals boards, confusing baggage systems and leaving passengers not receiving the style and substance of service they thought they had booked. Think for example of an oriental code between London and Glasgow and dreams of Asia style cosseting compared with what you are likely to get and you have the picture.

Regulators,-it's literally in your court. It's time to apply the handbrake and to stem the drift towards less and less real choice via alliances and codeshares and to challenge to those too often heard words from alliance and airline head offices announcing yet another tie-up as "More great news for customers" when actually the news is a further slide along the road to less competition, less choice and higher fares.

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.

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.

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.

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.

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.