03 November 2007

Gol completes commitment for Varig's interim Fleet, Private Equity talk swirls

To celebrate the re-launch of the UK service, (GIG-GRU-LHR) Gol CEO Constantino de Oliveira "Junior" announced that they had secured 14 767-300s and 14 737-800s for the starred but ill-fated former Brazilian national carrier. The new fleet should be fully operational by the end of next year when all the aircraft are refurbished to VRG's specifications. In a very tight market for 767-300s where these planes came from is somewhat of a mystery. There is no one disposing of them at the moment especially with the delay of the replacement craft 787 Dreamliner.

At the same time - rumors are now swirling that with a reduced stock price - down nearly 50% on the year - Gol is looking to take the 30% in public hands back private. Gol has confirmed that it has received private equity interest in assisting in such a move. With Brazil's travel market starting to boom - despite the ongoing air traffic control mess - there is much to be enthusiastic. Whether the original players in Varig's bankruptcy - Mattelin Patterson and Cerberus are among those interested remains to be seen.

01 November 2007

US (Mobile Carriers) halting advances in Mobility

Far be it for us to pick on another business sector unless there is a significant impact on ours. Well today I am mad and getting madder about the US Mobile carriers.

What's the problem?

Advances in mobile technology especially in the area of Mobile Data Services is enabled by technology. It is adopted by consumers if they see a benefit. That benefit is driven by usually two factors - Keeping competitive (my phone is cooler) or convenience/functionality. Classic examples are the iPhone for the former and Blackberries for the latter.

Unfortunately this means that we need contracts that are competitive and don't discriminate. Phones last for about a year. In my case I am probably pretty hard on my devices but still - each year I need to change to accommodate both drivers. Not so fast say my providers.... Sign here for a 2 year contract and oh by the way you may not have an equipment upgrade. I pay extra now for that facility so that all the people on my contracts can upgrade and get new phones every year.

Still... I see people with old phones using them because of the two drivers: They are afraid of their contract and they are afraid to change. This makes the US market a laggard in adoption of advanced mobile data systems.

Thanks - AT&T, Sprint Nextel, T-Mobile, Verizon et al for keeping us as Luddites.

31 October 2007

787 Program still not out of the woods - Bair points a finger

The outgoing, recently ousted, Boeing 787 Dreamliner program manager Mike Bair has publically pointed the finger at the much vaunted Global Supply Chain system for delay problems with the new wonder plane. At this week's scheduled quarterly meeting of the Snohomish County EDC, Bair kept a pre-arranged date to give a breakfast address in Everett. He didn't hold any punches.

Much like then head of Boeing Commercial, Alan Mullay's famous comment on Washington State' competitiveness in 2003 (Quote "We suck"), Bair pointed the finger at key players in the supply chain. Afterward, Bair declined specifically to name the suppliers Boeing "won't use again." He said he was referring not just to the six first-tier airframe partners — Alenia of Italy; Mitsubishi, Fuji and Kawasaki of Japan; Spirit of Wichita (spun out from Boeing), Kansas.; Vought of Texas — but also to some of their suppliers in the second tier.

Bair made his comments pointedly at the key global supply chain partners and of course Boeing's own management of it: "That whole production system is built for 1,200 pieces. ... Everything about it was designed for 1,200 parts," he said. "We threw 30,000 at it, " indicating the Chicago based company's misunderstanding of the complexity of the processes.

It has been well understood by industry insiders that Boeing's management process was built around a system of delegation and responsibility of the individual supply chain partners. IE that the partners had to be totally responsible for design, fit and functionality of each of their chunks of the process. Boeing would then have hit teams who would act as fire fighters flying to supply chain hiccoughs and fixing the problems. The idea looks great in the boardroom and on a white board. Not so easy in practice as Airbus has learned throughout the years.

So who are the guilty parties? While we have no definitive information, we can speculate through process of elimination. Sources inside Boeing have indicated that there has been a lot of activity of Boeing engineers making European trips. With the Japanese partners being well show cased by Boeing we can only imagine that there has been less than satisfactory performance from other of the vendors.

So what is the impact on the 787 program and Boeing for the future?

Immediately we anticipate that Boeing managers will be taking a hands on role in resolving some of the issues at the problem partner/suppliers. At this stage they cannot bring the production facility back in house because there is no "in-house" facility to bring it to. With Spirit (Formerly Boeing Wichita) a separate company - there are no production capabilities that could be added without long lead time and factory facilities being created. As for a reason, " ...some of them proved incapable of doing it," Bair said. In the interview after his speech, he expressed frustration that some partners seemed "unwilling, for whatever reason." "They just didn't do what we thought they could do," Bair said. "Who knows why?"

For the long term future his will impact the 737 Replacement narrow body designed for launch and in-service by approximately 2015. Some news reporters regarded this as a boost for the Puget Sound (Seattle) region. Not so fast. For a 2015 date, selection of the manufacturing site would likely be made at least five years earlier. At one point, explaining the reason for the 787's global supply chain, Bair said it was difficult to ask the Japanese to invest money and then build their sections somewhere else than Japan.

So is the supersite concept that he outlined — supplier factories located alongside final assembly — really practical? "I don't think it's outside the realm of what may have to be done," Bair said in the interview afterward. "Toyota builds as many cars here in the U.S. as in Japan." A supersite approach would make the next aircraft assembly operation a bigger prize than the 787 plant, which has not attracted many supplier jobs to Washington. Boeing has spent millions in hiring in ex-Toyota managers as well as sending engineers and managers to Japan to understand a car like production platform for its aircraft.

So we can expect for the next 2 years a lot of PR war of words flying around as Boeing is courted to build the next gen production facility for the 737FG (Future Generation) aircraft. One thing is for certain - it won’t be Renton. I will lay bets on that one. There just isn’t enough space at the current production line for that. Since the sale of land nearby for a shopping mall and office development; only if Paccar (ironically builders of Mack and Peterbilt brand trucks) could be persuaded to move would there be anything like the room for such a supersite. Highly unlikely when there are so many other competing and suitable sites. Plus with many states itching to land the supersite - we can be assured that Texas, Alabama and California would be in the running.

"The right way to do this would be to have all those big parts across the street so you could just roll them in," Bair told his audience. "We'll see on the next airplane programs whether we can accomplish something like that." And who says it has to be in the USA?

Hertz owes it all to Ryanair?

Well not quite but the numbers are pretty good. Outpacing both domestic and international regular growth by a factor of at least 2 - Hertz cozy relationship with Ryanair goes from strength to strength. So far in their best quarter of the year for Leisure activity - Hertz went as far as to comment on the value of the exclusive relationship between the two companies.
PS Sorry if the image is a bit fuzzy... use your glasses!

AZ - the final drumbeat calling the faithful?

The final round of choices for the perennial life supported Italian Airline seems to be approaching. However the final choices seem to be somewhat mundane. Approved for the final round was AF/KL, LH, SU and Air One. TPG having been unable to persuade their first partner (Mattelin Patterson) or find another one, officially threw in the towel over a week ago. Besides they have several other shiny new projects to worry about.

Now it appears there is only LH and AF/KL in the running with SU a long shot. Call it part of the fallout from the liquidity/mortgage crisis but the numbers don’t look so hot now to the potential suitors.

Realistically AF/KL has to be the lead. Remember there is so much emotion and politics wrapped up in this one - logic and commercial common sense does not really work. At least AF/KL won’t close down the Alitalia brand (even though perhaps they should!).

We just can’t imagine Prodi's somewhat shaky coalition approving a Russian or a German ownership.

We can hear Michael O'Leary's cackle from here......... Cheers Timothy

30 October 2007

American Prevails in first stage of battle with Google over Names

The first stage in the battle between Google and AMR's American Airlines over the use of brand names in Paid Search went to the plaintiff.

Google sued to dismiss the case andthe judge without any comment dismissed the attempt.

However things are going to be hard for AMR going forward. So far not one single suit has been resolved by a judgement in favour of the plaintiff. But then again - the suitors have all been pretty light weight.

Let see what happens. We are predicting nothing more than a messy fight and at least one unhappy result


Roundup Since I was away last week

Dear Readers... sorry for the silence.

I spent the last weeek exploring the great American West. Driving a UHaul (aka a large 10,000lb capacity truck) between Seattle and Big Sky Montana was an experience. You get a definite appreciation for the size of the American continent. Some of those things you see from the air are hard to make out at ground level. If you want to rent a REALLY great truly ski in ski out in the Largest Ski area in the USA - then send me a ping.

But this has been an interesting week. the A380 finally started shuttling lovers (oops I mean passengers) in First Class Suites playing chess behind closed doors on SQ. But there were lots of other stories:

Kitty Hawk Airlines stopped service - flying priority freight head to head against the logistics mega carriers of UPS and Fedex is a tough battle. It just goes to show its a business of scale. Remember those little old converted prop planes we used to see around the US country side - well most of them are going bye bye - just like the Supplementals before them.

Northwest rounded out the huge profits of the spectacular second quarter.

Merril Lynch dumped their grumpy Goldman Sachs hating CEO (No relation) O'Neal. Imagine living in the same building as your sworn enemy!!!! No truth to the rumour that his payout is in United stock.

Despite all the advice - people still havent booked their Winter Vacations. In the USA - that means you are going to PAY and PAY!!! Alternatively for about the price of a one way ticket in 1st class on SQ - you can rent my condo in Big Sky!

ILFC finally commited to the Airbus A350XWB. There is no truth to the rumour that the XWB stands for Xtra Weight onBoard as a reference to the new size wize for humans in the USA. However they did up the number to 20 from 16 original orders.

SAS Dumped their Q400 Fleets. Imagine reading the story of the 3rd crash landing by SK when you are flying in said aircraft doing 3 take offs and landings to get from BZN-SEA. SK has just had enough

BA lost it 3rd franchise partner in 6 months with GB airways selling out to EasyJet and Loganair (the Trislander carrier) dumped their contract. No truth to the rumour that Kulula will dump BA when they start flying to the UK next year.

And what about those slots at LHR - 4 of them (not part of the GB airways sale) are on offer to the highest bidder. BAA/LHR has allowed EI to transfer its slots for SNN-LHR to the new service to LHR from Belfast. That story will run for a while.

More insight and analysis starting tomorrow.