01 February 2008

Podcast on British Airways new Biz class LCY-NYC

For your listening pleasure....

David Bentley, IAG and yours truly discuss the BA-A318 proposed services from LCY.

Episode: BA's A318 plans - a good idea or not?




OK so its Super Bowl weekend in America and I could not resist this one.

Air Asia started its (very meagre at the moment) schedule from KUL - SIN.

AirAsia will operate 28 weekly scheduled flights between Singapore and Kuala Lumpur. AirAsia’s twice daily flights will arrive in Singapore at 1055hrs and 2055hrs and depart for Kuala Lumpur at 1130hrs and 2140hrs. Besides AirAsia, Tiger Airways and Jetstar Asia also commenced operations on the Singapore-Kuala Lumpur sector today. This brings the total weekly scheduled passenger flights between the two cities to 254.

This will rise significantly when the brakes come off towards the end of the year nd it becomes open skies on the route.

So TOUCHDOWN Tony and his crew!

Champagne all round boys and girls... Opodo makes a profit

It may seem meagre to other combatants but 7 years after its first launch - Opodo has FINALLY MADE A PROFIT.

Opodo was formed in 2000 by nine of Europe’s leading airlines. Its publicly stated two main objectives were to become a low cost distribution channel for travel products, and to become a leading player in the (then) increasingly lucrative online travel market. Opodo launched its first site, www.opodo.de, in Germany in November, 2001. This was soon followed by the launches of the United Kingdom site, www.opodo.uk, in January, 2002, and the French site, www.opodo.fr, later that year in April. Opodo currently has been launched in, and operates in ten different countries. These include Germany, Austria, the United Kingdom, Spain, France (under 3 brands), Italy, and Scandinavia under the Travellink Brand (Finland, Denmark, Sweden and Norway). The website lists 8o European airlines as co-owners with Amadeus. BA, AF/KL, EI, LH, AZ, OS, IB, FI.

Well done to the team in Hammermith. Too bad about the investment write off - but Amadeus probably needs that these days to counter its rapidly rising profits.

BA to add direct LCY-JFK Service probably 2009

British Airways seems to be having a case of the weirds.

Fresh from announcing an airline with no rationality (OpenSkies) they are now announcing a new Biz Class only service from LCY to JFK using 2 just ordered Airbus A318s configured 32 seats only. But there is a catch....

It has to stop.

As in somewhere to fuel up. Thus adding up to to 2 hours elapsed time to the schedule.

If this is a precursor in order to convince someone that he nonstop could work - then OK. BUT this doesn't make any real sense if it will permanently be a one stop flight.

Doing the Math calculations:

Its marginal from Cannery Wharf in time improvement. And actually LOSES time if you are going from the West End.

Now where are they going to stop? Bermuda? Gander? and then a nonstop into LGA instead of JFK...

Sorry this is baffling.

31 January 2008

Social Networking already peaking (peaked?)

There has been a lot of speculation in looking at the most recent numbers from Comscore for Oct/Nov/Dec 2007. We are actually seeing a downturn in MySpace users in the USA. Anecdotal evidence has been floating around for some time about usage peaking and then declining after relatively short life-cycles. This is however the first time that we have seen hard evidence of this. Here is a good thread on the Blog Creative Capital... http://creativecapital.wordpress.com/2008/01/29/its-official-us-social-networking-sites-see-slow-down/

I encourage you to read it.

My personal position on the subject is to take a balanced view. I am probably a heavy web user - like most of this blog's readers. But I find Social Networking sites like MySpace and Facebook both intrusive and in many cases annoying. I am also very leery of the recent Facebook decision to open up the platform which resulted in viruses and various forms of malware spreading around. I also found the encouragement and the use of mass mailings/messages by users a time sink. Eventually I turned off all notifications from both sites. I find myself drawn to using Linked In and Plaxo as ways to maintain my address book and retain ad hoc relationships with others. Probably more useful for my business. I know many kids however who are quite happy with the management of their social relationships via Facebook. Probably the 20 somethings in New York also find this useful. It just doesn't suit me. Dopplr, Triphub and other tools are "nice" but not a useful as a utility like TripAdvisor.

From a professional perspective I regard social networking as a mixed blessing. It has changed the game for content and trust. A good counter balance for some of the crap and fluff content that has been a stable for Tourism and Travel for years. However the inconsistency bothers me. Can I rely on a single site or a single resource that is rich in one part but sparse in another one? What about the grey bits in the middle? On balance i believe it is good for the market and the industry and it has changed the game - largely an improvement. The biggest downside is that it is another facet that we have to manage. Many of our clients find that hard to swallow despite some hard evidence as to its value.

n the final analysis (and I realize I am taking a huge broad brush to this)I find it a necessary evil. But remember it's called SOCIAL networking for a reason. Its a tool and a service. Use it wisely and appropriately. Adopting it to be trendy is about as useful as taking a space on Second Life. Fun but fleeting. I predict we will see a lowering of the use and the absorbing of Social Networking tools into mainstream activity. I think also we will see a strong backlash against opening up these platforms to crass commercialism. The best analogy I can think of is to compare the utility values of eBay and Craigslist. You use both to buy and sell stuff. Both are appropriate in different cases. So it will be with private social networks, pure social nets, commercial social nets, and special interest social nets. Your life changes doesn't mean that you stay loyal to the same things you used in prior stages.

If I may quote "When I was a child, I spake as a child, I understood as a child, I thought as a child: but when I became a man, I put away childish things."

(1Cr 13:11 Hey you didn't know I could quote the Bible - thanks to the web I can! So I guess my parents investment in my education wasn't entirely wasted!)

I think we shall see many more things like this. Just don't expect miracles!

BA Customer Service Model - Ryanair

You would thing that the "World's Favourite Airline" would not want to emulate the World's Cheapest Airline. But it seems that BA wants to do just that.

I am a member of OnBusiness their small business corporate account program. I could not access the account - my fault - cannot remember the password. So I follow the onscreen instructions which fail to let me reset my password. (OK I gave it a good shot 5 times for me and one for another more deliberate and less impatient human being).

OK so the site advises me to contact BA OnBusiness customer service. This is where the joke starts to get funnier. The web instructions are incorrect - redirecting me as a US account to the UK service centers. OK - I deal with that by finding the right information in another area on the website. So I do.... a nice BA agent lets call him Fred (Who is a real BA employee not a contractor). Duly takes the information and after being on the phone for 5 minutes I realize that he has to speak to another desk who has the ultimate power. Nope they dont want to help - contact us by email. We will get to it later. Of course the REASON I want to use the account is so I can make a booking. Silly me.

This process took over 20 mins including trying to speak to a Supervisor who also didn't want to help and directed me to the same (broken and lame) process.

So my only option is to follow the bouncing ball on the website. Customer service contact information - it AGAIN incorrectly directs me to the UK centers. So US customer service options of course are nothing like what I would need... the best option for logging my "issue" was "Corporate Policy".

Even Ryanair is easier to deal with - they at least tell me NO up front.

Memo to BA... you lost a biz class trip US to Europe. You will lose more unless you can figure out a way to deal with this.

Oh yes and I am a Gold Card holder on BA. Boy do I feel special.....



Neat Tool - Pinger for Voice Messages

Most of the time this blog is about ATT- Aviation Travel and Tourism. Occasionally we find things that are just too darn fun to pass up. This is one of them

Pinger is a pretty cool tool for messaging.

If you live in any of these countries and/or wish to communicate with people with mobiles in these countries then this is for you:

Australia France Norway Transylvania
Austria Germany Poland UK
Belgium Ireland Romania US
Brazil Israel Spain
Bulgaria Italy Sweden
Canada Netherlands Switzerland

Go to www.pinger.com - sign up and then send away. Send my voicemail a message in the USA: +1 425 785 4457.



Travelport's Worldspan holds onto Priceline, Expedia may have second thoughts?

Priceline and Travelport have renewed vows for Worldspan and the Priceline service allowing an uninterrupted even enhanced access to Worldspan's fares and pricing services.

Expedia on the other hand may have been a bit hasty in cutting over to Sabre too quickly. Published reports indicate that the cut over for ECT was somewhat of a nightmare. Despite ECT's admonishments to the contrary, the boys in Bellevue may be rethinking how many of their eggs they really want in the Sabre and Amadeus baskets.

Enquiring minds want to know.......


30 January 2008

Boeing "Guarded" on 787 during earnings call

According to FlightGlobal's Flightblogger blog (what a mouthful!) who listened in on the earnings call today - James Mcnerny was "guarded" And so he should be.

The 787 has a significant way to go before they will be ready to even turn that puppy on. So at this point unlike this time last year when the Boeing team was effusing about how many they would deliver in the first year... pride comes before fall.

One thing to note will be how many of the 787s end up in San Antonio and have to be "reworked..."

At the moment they are saying about 25. However I have private bet how many ultimately end up there in some form or another. My bet is a significant number higher than this. Why? The pipeline of parts could be as high as 100 shipsets or parts thereof. These parts will either have to be reworked or new ones built. Many of these have very long lead times.

There is of course a piece of good news. The back end supply of the raw materials for composite components now has more time to ramp up. Lets just hope there has been enough testing of these materials as to how they will stand up to ramp rash and JFK baggage handlers.

Good Luck Boeing... of course if you hadn't relocated to Chicago none of this would have happened.................

Varig Switches Gears (again)

VRG - "New" Varig has again re-tooled its business plan under new owners GOL.

For those who were looking for a strong international footprint for the "New" Varig - similar to the old old Varig you will be saddened by the decision to only connect to just 2 European cities - Madrid and Paris - all the other routes LHR, FRA and FCO will be dropped.

The route structure will however focus on more domestic and regional LATAM routes. Sadly the Brazilian Star will no longer shine over a large network that once spanned the globe from Athens to Tokyo.

Best of luck VRG - some of us are still routing for you



US Mega Mergers... Good or Bad - you be the judge

I believe that the arguments for consolidation in the US Airline market are not compelling, however I believe that the industry and the public at large needs to consider all sides of the discussion.

Here is one perspective which I believe lays out many of the issues. I encourage you all to read it.

This is provided with open permission to republish by the author.

Top ten false claims about the need for U.S. airline mergers
By Hubert Horan
January 29, 2008
1. “There’s a strong, growing groundswell of support for airline mergers.” This is complete nonsense. Only three very narrow groups are arguing for Legacy airline mergers in the U.S.—(a) individual hedge funds who don’t understand industry fundamentals but have made big speculative gambles on consolidation, (b) a handful of very senior airline executives who are finding it very difficult to generate sustainable profits but would realize multi-million personal payouts in most merger scenarios and (c) Wall Street firms, lawyers and consultants lusting after big fees. No one with any long-term stake in these airlines is advocating mergers. There is no objective, quantitative analysis showing competitive or efficiency gains, or long-term improvements in corporate value. These same three groups generated huge publicity for the “pro -merger” case in early 2006. Nothing happened then, and no one else has taken up the cause since. The Big 6 Legacy carriers have been intensively studying merger/consolidation scenarios for ten years, but the only carriers that could justify merging (America West-US Airways) were bankrupt and on the verge of liquidation.
2. “Airline mergers would be part of a natural industry shakeout process.” A wholly dishonest claim. “Natural” industry shakeouts involve wiping out the managements and investors of small, weak, inefficient competitors in a declining industry, and the displacement of companies using obsolete technologies and business models. These mergers would protect and entrench weak airlines such as United and Delta that haven’t generated returns for shareholders for over a decade and would enrich many of the same managers that drove them into bankruptcy. A true shakeout might consolidate smaller airlines with limited scale or network scope, but does anyone actually believe that United and Delta are too small to compete? Does anyone believe that aviation is a declining, shrinking industry? A true shakeout would allow more efficient carriers such as Southwest and AirTran to grow faster by dramat ically shrinking unprofitable Legacy capacity. The misrepresentations about “natural shakeouts” can also be seen in Europe where very large airlines with high costs and traditional business models (Air France and KLM in Europe) are using mergers to make it harder for airlines with lower costs and lower fares (such as Ryanair and Easyjet) to compete.
3. “Airline mergers would be a necessary response to $100/bbl fuel and a downturn in the business cycle.” This is the exact opposite of the truth. If no one could justify a Legacy merger when revenue, cash flow and access to capital were extremely strong, then they certainly can’t be justified now. Cash flow becomes incredibly critical to airlines during an economic downturn, and multi-billion dollar merger costs would rapidly drain needed reserves. The revenue risk of implementation problems becomes much greater when demand is weak. The argument that mergers are needed now assumes that airline mangers had already been doing a fantastic job optimizing fleet, network structure, information technology, employee relations, operational efficiency, customer service, brand marketing, supplier relationships, capital structure, and things like that, and therefore, the only option left as conditions worsen is to change the number of airlines. Wall Street analysts and airline executives are pushing the same merger PR arguments that they did when fuel was $50/bbl and when demand and prices were extremely robust, and the money to finance deals was practically falling off of trees.
4. “Airline mergers could be implemented with limited risk.” It is hard to believe that anyone could make this general claim with a straight face. A merger between two big 6 US Legacy carriers would cost something on the order of $5 billion to implement, and there has never been a merger between large airlines that was both an operational and financial success. There have been mergers between large airlines where strong potential synergies were wiped out by terrible implementation (Northwest-Republic, Continental-People Express) and mergers with careful, expensive implementation that generated no long-term financial benefits (Delta-Western) and mergers that were across the board failures (American-TWA), and all past cases involved smaller operations than cases like Delta-Northwest or United-Continental would today. The slightest hiccups while integrating complex computer systems, aircraft maintenance programs, employee operating practices and seniority lists and the like could cause huge disruptions that would alienate customers for years. More importantly, the financial structure these mergers would follow appears designed to ensure the worst possible implementation. All of the big financial gains (stock price bump triggered by the merger announcements, management change-in-control bonuses, fees to investment bankers, lawyers and consultants) would be realized prior to implementation, and none of these people would have any financial incentive to manage the operational and customer service risks.
5. “Airline mergers would generate significant operating synergies and strengthen efficiency.” None of the merger advocates have presented an iota of evidence supporting this claim. Any merger could generate some savings, but no airline merger has ever been justified primarily by cost synergies, and these savings could never cover the multi-billion dollar implementation costs and disruption risks. All of the costs are 100% certain, and need to be paid for up front while the synergies are much less certain and might take years to realize. Legacy carriers have very little potential for further scale economies, unless you believe that Aeroflot under the USSR was a model of efficiency. If you merge airlines in bankruptcy (as with last year’s proposed Delta-US Airways merger) you can maximize cost synergies by restructuring hubs, fleets, and union/vendor contracts as part of the reorganization proc ess (although you’d still face significant implementation challenges and risks). The cost of merging Delta and Northwest outside of bankruptcy protection is much higher because they have much less ability to shed the assets and staff that would become redundant after a merger.
6. “Mergers are required to rationalize excess industry capacity.” Once again, this is the exact opposite of the truth. The industry does have “excess” (structurally unprofitable) capacity, and higher fuel prices mean that even more capacity is unsustainable. But nobody needs expensive, risky mergers to cut this capacity, and consolidation will actually make it more difficult to bring supply and demand back into line. Mergers give disadvantaged employees, lessors, local airports and politicians greater leverage to block or disrupt capacity cuts, all of whom can point to select insiders (hedge funds, senior executives) making big short-term gains at their expense.
7. “U.S. Airlines need to merge in order to compete with foreign airlines that are better financed and offer better service.” The claim that US carriers have a distinct competitive disadvantage against foreign airlines contradicts all recent evidence—Legacy hubs provide a highly efficient means of serving many international markets, international routes are highly profitable and U.S carriers are shifting capacity to them as fast as possible. Obviously US carriers can’t compete on some routes, but foreign carriers can’t compete on others. Nothing in these long haul/overseas markets has changed in recent years that created a competitive deficiency that would be fixed by a Legacy merger. If US carrier service isn’t as good as it could be, disruptive mergers that reduce competition will only make the problem worse.
8. “Airline managers have an obligation to pursue mergers in order to boost their falling stock prices.” The people arguing this do not seem to understand the difference between sustainable growth in shareholder value and short-term stock price manipulation. This is not a plan to strengthen airline finances, but a scheme to enrich one narrow group of investors at the expense of every other group of investors. Many merger advocates (including certain hedge funds, day traders and their Wall Street supporters) know that steady press speculation about merger battles and bidding wars can pump up prices and trading volumes, as was witnessed following the merger PR campaign last year. The merger advocates are looking for speculative profits and trading fees that contribute nothing to the financial strength of the airlines. Senior executives can pocket both multi-million dollar “performance” bonu ses (which are tied to short-term equity swings rather than sustainable gains in corporate value) plus multi-million dollar “change-in-control” payments following the merger. The merger does nothing to improve fundamentals such as competitiveness or efficiency, and potential savings are dwarfed by implementation costs, operational disruptions, and other problems. Corporate value is destroyed, reducing returns and increasing the risk faced by lenders, lessors and bondholders. As witnessed with US Airways and Delta after last year’s merger mania died down, the stock price quickly collapses, creating huge losses for many investors, and making it even more difficult for airlines to attract long-term investment in the future.
9. “Consolidation would strengthen the entire industry.” Widespread consolidation is actually the biggest threat to consumers, employees and investors. It hasn’t happened yet, but hypothetically one could design an isolated Legacy merger that actually created long-term corporate value based on improved efficiency or competitiveness. But the “mergers would be wonderful” PR arguments ignore the economics of each case because the real objective is to create a general merger frenzy. The first megamerger proposal could quickly trigger additional defensive mergers permanently reducing the number of airline competitors. The stock speculators who have been demanding mergers are clearly gambling on this scenario, and it produces a massive payday for the lawyers and investment bankers. Thus you can’t evaluate a potential merger such as Delta-Northwest in isolation; you have to look at h ow the entire wave of consolidation would affect industry efficiency and performance. Two or three megamergers in quick succession, just as an economic downturn hits, each incurring multi-billion implementation costs and huge operational risks, each entrenching weak management teams, each unleashing union hostilities and systems integration nightmares, could greatly accelerate the next round of industry bankruptcy cases.
10. “Airline mergers would increase long-term corporate value without harming consumers.” Legacy megagmergers won’t increase the level of service operated, won’t improve the quality of customer service, could easily increase costs and reduce efficiency, and would increase overall financial risk while seriously damaging certain portions of the capital structure. The only way megamergers could overcome these problems and generate a net increase in corporate value is by artificially distorting competition, or to put it directly, by screwing consumers. Big profits from consolidation depends on artificial barriers to LCCs and other more efficient competitors (so less efficient airlines can raise prices with impunity) and a level of overall market domination that makes it easy to discipline and challenges to the oligopoly status quo. In the domestic US market, consolidating the 6 Legacy carrier s into 3 larger ones wouldn’t create enough artificial market “power” to drive fares high enough to justify these expensive mergers (although consumers using the constrained airports of the Northeast would undoubtedly suffer). The real threat to consumers is in international markets, especially the North Atlantic. These markets are rapidly growing, are already highly profitable, but have huge entry barriers that make it impossible for new, more efficient airlines (such as LCCs) to compete. The “industry consolidation” that has been actively advocated by United, Air France, Lufthansa and big airlines would quickly create a North Atlantic oligopoly where two competitors had 90% of all service between the United States and continental Europe. The artificial profits from rigging these long haul markets could easily justify the multi-billion cost of industry consolidation. Much of the Wall Street/industry discussion about alternative mer! ger pairings (United with Continental or Delta?) focuses on how this oligopoly might emerge, and how quickly it might spread to the Pacific and other markets. Much of the discussion about “natural industry shakeouts” or how mergers are the only way to shed excess capacity or respond to high fuel prices is simply a PR smokescreen for megacarriers hoping to radically reduce international competition.

Hubert Horan has been in aviation for over twenty years, directly involved with multiple waves of airline mergers and restructurings, from the perspectives of both consulting projects and senior management positions at Northwest, America West, Swissair and Sabena. Previous articles on airline competition included two detailed analyses of the economics of industry consolidation, “Airline Consolidation-Myth and Reality” (Aviation Strategy November 2006), and “An Update on Industry Consolidation and EU-US Treaty Negotiations” (Aviation Strategy March 2007). He is based in Phoenix and can be contacted at huberthoran@hotmail.com .

Consolidation - European Style LH+TUI combine LCCs

TUI's TUIFly aka Hapag Express bright yellow taxi planes, and Lufthansa's German Wings (Yellow Tails and we don't mean fish) have agreed to merge to present a potent force to counter the growing strength of Air Berlin's conglomerate.

This is likely to see some realignment of routes and probably a cut back at CGN airport whose locals have been enjoying some really good fares lately.

It is unlikely that LH would allow the name TUI on the new venture so the likely surviving name is German Wings. Although I really thought the HEX planes were a great idea.

Net result - LH gets MUCH bigger. Don't forget they have a small stakeholding in the other guys at TC through the merging of TC's airline operations with Condor - LH's former charter susidiary. Almost overnight - OK in a year... the German market has consolidated from 4 players into 2. Once again the big yellow of LH casts a huge shadow over the whole market. Peace is restored and life goes on. Of course there will be a lot of work for those people who negotiate pilot seniority lists.

I always say Germany Inc. would never pass the USA's RICO act.



29 January 2008

Ryanair does it again... Sarkozy objects to ad featuring him

Te he....

The French are not amused. At least the Elysee Palace is objecting to the current ad that appeared today in Le Parisien.

It features Sarkozy and his main squeeze who has a little speech bubble that says - now all my family can come to the wedding. It is actually very funny.


Some people have no sense of humour