29 December 2007

2007 - The Year In Review

The year in review

This year 2007 has been yet another period that confirms the old French adage Plus ça change, plus c'est la même chose

So here are Plaudits and Brickbats for well the Aviation, Travel and Tourism Industry.

r Fuel – price thereof. UGH…. Proves that what goes up – must keep going up. Biggest impact has been the actual lack of impact. The global economy has learned to accommodate rising oil prices.

r Slime Green – Cloaking one selves in Green has become a popular past time. So far the industry has done very little actual work to mitigate the effects of Climate Change. The goal has to be the REDUCTION not just the amelioration of Climate Change gases and effects. We advocate the following:

1. Zero footprint. Leave no footprint after you leave.
2. Reduce all your energy consumption (replace light bulbs etc etc)
3. Reduce your energy footprint – use less devices and use them more efficiently
4. Carbon offset more than you use.

r The decline of the greenback. The dollar took a huge tumble. Well someone finally figured out that the Bush strategy of mortgaging the future wasn’t going to work. Blame all round for the subprime mess. Did we learn anything? Yes – a castle is not a home.

a US Airlines – the patient recovered enough to take a walk and in fact even run a little in 2007. However they are catching a cold from the overall US economy. Stay the course chaps – be wise.

a A380/787/A350XWB – new planes! The A380 finally entered service. Airbus launched the A350 formally and Boeing while stumbling on delivery looks like it has racked up 800 orders for the 787.

a Money – Part 1 – New Money – the Arab states, China and other Asian markets are flexing their economic power and buying into the US depressed economy. There will be a HUGE impact in 2008.

a Money – Part 2 – Private Equity – while credit dried up in the latter parts of the year – we still saw a blistering pace of PE deals. Blackstone for Travelport acquiring Worldspan, Harrahs, Closing Sabre, MidWest Airlines, etc etc. Adam Aaron joined Apollo and set about building a very nice Cruise Portfolio. Instead of 2 now there are 3?

a Money – Part 3 – Acquisitions – Airline Consolidation – didn’t really happen – but its coming – well maybe. Air France bought VLM, Lufthansa bought into jetBlue and Air France looks like its going to win Alitalia. Vanguard was acquired by Enterprise. Finally a home for the much travelled Alamo and National brands. The end of Wayne Huizinga’s travel dream.

a OpenSkies – Its going to be ugly at London Heathrow on March 30th with all the new airlines and the opening of T5. EU Open Skies has actually focused all the attention on LHR but it applies across the board. We are going to see a significant battle for market share into and out of the UK mostly transatlantic. However Open Skies also applies to Singapore and other markets. Asean nations are accelerating their own Open Skies and we will see free competition SIN-KUL by the end of 2008. Other markets across Asia will also become free and open.

r Commissions and remuneration – the move to consumer paid distribution continues. GDS distribution is well and truly changed. There are no easy deals for distributers. Cruise commissions – long regarded as being best for the few remaining Travel Agencies out there are now being subject to death by a thousand cuts. The latest being the removal of commissions for Cruise based Air. And lets not talk about Fees!!!!

a Ancillary Revenue – looks good to me – lets unbundle and charge for everything. Would you like to pay for that barf bag or not?

2 Industry Giants left the industry – Gerald Grinstein retired after successfully piloting Delta out of bankruptcy. And only took his salary. Way to go Jerry! You are a scholar and a Gentlemen. Now of only some of your former peers had been not so greedy…. Bob Dickerson after 35+ years retired from Carnival. Obituaries – Bill Misunas, Warren Avis you will be missed.

28 December 2007

First Salvo Fired in New Transatlantic Fare ware

Air France and Delta have launched the first assault on LHR with their first fare promotion effective March 30th 2008. $222 OW based on RT LAX-LHR.

As noted previously we anticipate a pretty hefty fare war for Coach passengers beginning March 30th.

With 4 Carrier groupings offering new Nonstop flights from LHR (NW-KL, CO, US and DL-AF)this is going to be a great boon for travellers to Europe next year.

So mark you calendars. Seats are now available for sale and will likely be common rated along the West Coast from flights to LHR. The ripple effect will be significant. Yields will be trashed.



Who was naughty at UK Airports? Slot Abuse!

You just have to love the Internet... there is so much fun filled facts available.

From Airport Coordination Ltd (ACL) who run the slot committee at LHR and other BAA managed airports - they have complied with UK and EU law regarding he abuse of slot times.

5 Airlines ran afoul of the regulations. Surprisingly Easyjet and Ryanair were slapped with the initial largest fine GBP 20K each for transgressions at LGW and Stansted respectively in a very short period of time - 3 weeks in 2007. Smaller airlines ThomsonFly (now TUIFly), Flybe and Thomas Cook Airlines (soon to be Air Berlin) were each hit with a GBP 1,000 fine for transgressions at different airports.

The latest fine was for October 2007 so we can assume that there will be more next quarter.

There should be some consideration for the fact that the two LCCs are the largest players at their respective airports - but the fines will definitely make people sit up and pay attention. It would be interesting to see if the USA applied this rule especially at JFK and other slot restricted airports.

I can just hear Michael O'Leary getting a copy of his fine. I bet he wont be quite so naughty next time.

27 December 2007

Ready for 2008 LHR Passenger Changes?

Here is the official LHR Change Schedule for 2008.

So if you are travelling in, through, near or on a LHR transiting carrier - better make a note of these changes:

New Words for 2008

Troogle -
"n1" Google's cash sucking sound from the Aviation, Travel and Tourism Sector.
"n2" Previously a secret search project inside Google now just their cash register.

"v3" as in "I am troogled by this..." Getting into trouble with Google and loosing certain privileges.

"v1" as in "I used to have a reasonable competitive niche until Air France/KLM came in and bought my competitor - now I am in deep Hushanga."

"v1 - usually past tense" as in - "I got a great deal on Ryanair only to pay more than twice the amount of fares, taxes and fees for Baggage Handling, Check-in and a measly cup of coffee."

"n1" the new color pseudo eco friendly brands like to paint themselves in to make them sound and look like they are really helping the planet. Can also be a verb.

"v1" usually past tense - the state used to describe any situation that occurs to American or other nationalities after they encounter a problem directly related to the current lame duck administration of G. W. Bush. ... as in "my vacation to Europe was great except the prices really bushed me". See also former words like "Roved and Libied"

"v1" usually past tense - the state you feel when you realized you have been shot.

"v1" meaning mislead - synonym. As in "Wow I was really wolfowitzed that time."
"n2" meaning I am in total control here and do not interfere in my activities. Usually used to describe the actions of a person who does not like interference. As in "He is being a real Paul Wolfowitz with the board".

"n1" This decades version of Gekko as in Gordon.

"n1" The massive Google corporate campus that is making 1 Microsoft Way look like a subdivision.

"v1" To be acquired by Singapore.

More words available on request to timothyo@t2impact.com (c) T2impact Ltd 2007.

"Sir Francis Drake - Sire! The French Have Captured The CIty What Are We To Do?"

It bad enough that the major UK airports are now run by a Spanish Construction company, now comes news that the French have captured effectively control of London City Airport by acquiring 50% of all the slots there. Air France/KLM Group have swooped in an acquired VLM Airlines (Belgium operator) who with a fleet of F50s and a single BAe 146 was the largest single carrier at LCY.

Over the past few years as UK road and public transportation has degraded, the Docklands development has improved and of course LHR has become more of an embarrassment than an airport - LCY has slowly grown. It is now handling over 2.5 Million passengers on a single runway with no aircraft larger than an AVRO 100 currently servicing the place.

AF/KL was already almost joint #1 at the airport having acquired Irish player CityJet in 1997 and through its upcoming codeshare relationship with the #3 player at LCY - Scot Airways (the former Suckling Airways).

Shut out!

BA acquired a nice footprint at LCY when it acquired CityFlyer and then subsequently sold off most of the business to Flybe. However its ambitions are now well and truly thwarted after BA was unable to prevent the Franco-Dutch juggernaut from picking up VLM. BA will have to make do with very few slots and pickings at LCY.

So sorry Willie.

26 December 2007

In case you missed it... AZ Board Recommends AF/KL; Approves Slot Sell-off

This is a wonderful case of DUH!

The Alitalia Board (who have proved themselves to be both largely incompetent and ineffectual) has recommended Air-France KLM Group as the recommended bidder from the remaining 3 duly qualified combatants. (A/KL, AirOne Consortia and an independent financial team from Italy).

They held off announcing their decision. Government sources told the Financial Times earlier this week that Air France-KLM was the preferred option but that threats of protest action by unions over Christmas had led to a postponement of a formal decision. Please note that it is not the board who will make the decision but the Government in who will win the bidding for the 49.9% Government share.

Over the Christmas Holiday, the ailing Italian airline also sold off 3 slot pairs at LHR for a record price. One slot pair each went to US Airways and Continental for $60 Million each. A minor slot pair went (as reported in the FT) for $20 million to BA. With Ryanair now the largest carrier from Italy to the UK - the AZ Slot pairs at LHR are no longer as meaningful. This will bolster the airline's balance sheet.

Once the smoke clears a little more we will write another posting on the latest of the slot pair trading that is still on-going at LHR.


Maxjet RIP - Does this mean Premium Niche is dead?

Maxjet after struggling for the last month to find new sources of credit to keep the airline afloat succumbed on Christmas Eve and grounded all flights.

Our assessment...

Not enough capital, too much competition and not a good enough product. The official reasons were "Anemic Credit Market" and "Skyrocketing Fuel Costs". We believe that the management must also take some blame for not focusing on developing a core market fast enough and also misjudging the consumer in what they want.

Under capitalizing the airline meant that normal features that business folk want (eg InSeat power was not offered). For flights on the routes they flew - STN-JFK, LAS, LAX and IAD the business person was mostly king yet the product did not match up. I flew Maxjet LAX-STN and the service product was at best mediocre. The focus on inflight amenities such as video and food rather than the core product did not make the investor community feel good.

So what finally killed Maxjet?

AA's 2 nonstops a day JFK-STN and the credit crunch. Basically they ran out of money.

Let this be a lesson to Silverjet, L'avion and to EOS. You need to have a better product in order to compete. Business folk can accommodate a clunky old 767-200 if they get what they want to do business. With massive competition coming in March of 2008 from the US airlines coming into LHR - the survivors better start looking for making their product a little better.

Sadly the purple planes will grace the skies no more.

25 December 2007

Did the Rabbi steal Christmas - You be the judge

Last year (December 2006) Rabbi Elazar Bogomilsky got his 10 minutes of fame for asking for equal time for a Menorah to be displayed at SEATAC during the holiday season. The result? The Port of Seattle removed all Christmas trees from the airport in a story that reverberated round the web mostly for its absurdity.
This year - 2007 - we have a very imaginative (not) display of unidentified trees and snow making. With nary a religious nor festive symbol or icon in sight.
So congrats to the Port of Seattle for being overly PC. Congrats to the Rabbi for ensuring that Seattle will NEVER have a festive icon or remotely religious symbol of any kind in its airport.

Next year we will have scenes from the Grinch and a permanent display of Jim Carey to guide us through our holiday (non-festive) season.

And so for everyone - Merry Christmas from all of us at T2. No matter what your religion, or preferences are - you are always welcome with us. Revel in your individuality and lets enjoy our differences rather than hiding them!

Cheers and to all a good night!


Selling America by the Dollar - Saudis think BIG very BIG

OK so this is a paraphrase of the 5th Genesis Album for those of you old enough to remember when Peter Gabriel fronted the band!

The Saudi Government has established the largest Sovereign Fund ever created. http://www.ft.com/cms/s/0/412752ae-afa4-11dc-b874-0000779fd2ac.html?nclick_check=1
According to the FT the new Saudi fund will dwarf even the very large $1.8 Trillion fund being set up by Abu Dhabi.

So thanks to Geo Bush and Co, America is now going to be old piece by piece. Whether or not this helps the US economy is yet to be seen, however entities from Europe to Asia and the Middle East see big bargains in the US economy.

Some of this will undoubtedly be in the Aviation Travel and Tourism Sectors. So far we have seen very little impact with perhaps only the traditional players making any noises - for example like Lufthansa's investment in jetBlue. However this will undoubtedly change.

Stay tuned folks this is going to be an interesting season

24 December 2007

Merry Christmas

To all our readers friends and associated persons....

Wishing you all holiday cheer and happiness this season

Peace to you all


The T2Impact Team