11 March 2008

SAS vs Bombardier Kiss and Make up… and MORE Q400s

So SK and Bombardier have resolved their nasty spat over collapsing undercarts on its fleet of Bambardier DHC8-400Qs by giving a big credit and SK taking on a bunch of CRJs and (Drum Roll) please brand new Q400s. It doesn’t seem logical but well this seems to be the OK answer to the nasty fight.

Here’s a novel thought – privatize US airports.

For more years than many of us can remember the US Government has had a secret tax on airlines. The tax 8-10% on airline tickets was designed to cover the cost of airport and airways improvements including terminals and runways. Actually it was used to provide billions of dollars in funds that went directly to the federal coffers and never to the intended purpose. When the money didn’t get to the airports – local authorities within the States and cities who own and run the airports started to institute PFCs – Passenger Facility Charges. These charges now comprise a revenue form for the airports. But not necessarily for the use they were intended. The situation of poor management by the FAA and the lack of funding has resulted in capacity constraints in the US Air Transportation System at the airport level. This is now the bottleneck and not a solution in sight.

So now I would like to suggest an alternative solution to the problem in total. Rather than yet another half hearted attempt at a solution – I think we should try and address the problem once and for all.

So my proposal is straightforward and I hope simple. Privatize the airports.

This has occurred in many different parts of the world but the US model seems to not have adopted this novel idea. However the concept is not so easy given the different ways in which funding attempts are handled. There needs to be both an obligation and a method to ensure that funding occurs on a regular and consistent basis. To this end the privatization needs to also cover a long term set of goals – meeting the needs of growth and safety. The only way this is going to happen is if there is a secure funding method that kick starts the whole process. So the recommendation is to add Government backed bonds rather than funding from the Government. But from the moment that is offered then the revenue to the Feds ceases and the funds can then flow correctly.

This will require the US Congress to be able to make some smart decisions. Lets hope that this can happen soon. Then finally we can get new infrastructure – gridlock will be relieved… sometime this century. We can but hope



The fight with BALPA turns ugly. BA Needs a new game plan.

Despite best efforts by both sides, the fight of BA’s new subsidiary OpenSkies has now turned ugly. BALPA has been looking for a fight. BA has been looking for ways to break the union’s stranglehold. To me the battle is being waged at a time that BA doesn’t need a fight. The airline is already slowing down and is highly susceptible to a number of factors that will cause its financial performance to degrade. Already the stock is down 50% and it is going to go down even further in my opinion. This should not be the case.

The missteps of the Walsh era are now coming back to haunt the management. Sir Rod left the airline in a good shape. But Walsh has done little other than to run the airline on autopilot. His tenure has been marked by several missteps including labor unrest, baggage snafus, Air France’s encroachment into LCY and the loss of 2 major franchise carriers, BMED and GB Airways. Now BA’s response to EU-US open skies is “OpenSkies” and the LCY-JFK one-stop lame flights. As a long time paying passenger with Gold Card Status – I believe that BA is just being less than smart and needs a new game plan.

Farewell Western Airlines

One of the last vestiges of a great little airline has finally gone. Delta has apparently retired the last of its 737-300s which included a batch it inherited from Western Airlines back in the 1980s.

Western Airlines was a great airline that didn’t quite manage to become a great big airline. In the merger mania of the 1980s it was swallowed up into Delta that saw DL gain a foothold into the western USA.

A few years ago when SeaTac was renovating I saw the big flying W that used to grace the ticket counters exposed for a few hours while they ripped out the counter area walls. I doubt that there are many people who remember WA. I had the priviledge of serving via the Ad Agency at McCann Ericsson for a few years.

So farewell for the last time.



10 March 2008

Will be on the road again this week - so few posts

Anyway - I think I have given you enough... to go on for a few days.

There is a lot going on right now. So stay tuned.



Road Warriors of the world unite… Roaming is getting “Free”er.

This is from jiwire (www.jiwire.com) an excellent resource for road warrior types. (Your blogger included). AT&T has captured Starbucks. But with a twist as this entry tells it, the game is now possible to provide for free. This is good news. Lets hope it works out. Even as a non-coffee (although I live mostly in Seattle) drinker, this is a good.

AT&T Takes Starbucks & Boingo Does McDonald's
Finding a "free" Wi-Fi hotspot in the US just got a whole lot easier, now that AT&T is taking over the Starbucks contract formerly held by T-Mobile. The reason is simple: the 12 million AT&T DSL and U-verse customers with at least 1.5Mbps service will now get free access at all 17,000 U.S. AT&T Wi-Fi locations, including the 7,000 Starbucks stores. In addition, any customer with a Starbucks stored-value card used at least once a month gets a free two hours per day -- money they're likely to be spending anyway. Starbucks is the crown jewel of U.S. Wi-Fi properties, and making access available to so many customers for free is a huge deal. We expect many Wi-Fi mavens to flee Comcast for AT&T broadband as a result. The handover has already started, and will be completed market-by-market by the end of the year. But T-Mobile Hotspot subscribers will not be left out in the cold -- they can continue to roam at Starbucks for at least the next five years.
Meanwhile, Boingo, the biggest Wi-Fi roaming network with 100,000 locations worldwide, has not been standing idly by. It just announced an agreement with Wayport to bring more than 9,000 North American McDonald's locations under the Boingo umbrella. And since Boingo already had a contract with AT&T, it gained all those Starbucks locations too. Now both Boingo and iPass offer access to the combined Starbucks-McDonald's juggernaut, to go with their excellent overseas and travel-oriented hotspot networks. In one heady week, the U.S. Wi-Fi scene has gone from frustratingly fragmented to near-free and friendly.


Passenger numbers for February - back on the up?

Tracking numbers fro Air4casts and other sources we are seeing a return into positive territory after a slow down at the end of last year and a bad January. But I will caution before looking at this too hard - remember that February this year has an extra day's worth of revenue. With this fact and also Easter being early - we may still see some more positive signs.

BA is still looking a little sickly loosing the BMED and GB Airways for the first full period of time. In the USA market United still looks a little pale. Southwest and other players are looking a lot healthier.

In 2007 we saw also that the hotel market managed to have positive numbers in Yield, occupancy rates and ADRs. But the softness is showing in certain areas. Specifically we see small business groups, leisure (non-VFR) slowing. The continuing fall of the dollar is benefiting perversely the top ed of the market as Europeans flex their financial muscles.

Suffice to say - we think the market is "volatile"



09 March 2008

FAA fines Southwest $10.2 Million for Safety Violations

I am a huge fan of the low cost model it is what is saving the airline business model in general. Airlines became too complicated. On a recent trip to Europe I flew on 3 legacy carriers (Delta, BA and Lufthansa) – 2 LCCs (Easyjet and Ryanair) and one regional airline (VLM now part of Air France). The LCCs have done a great job of changing how things are done but relentlessly asking the question WHY DO I NEED THIS?

However clearly Southwest made that not just a question of the above the wing activity but also in some maintenance by failing to inspect some 46 aircraft when they were due. That is a no-no. Full stop period or what ever you want to say. This is bad for everyone. There is never any issue about below the wing safety. Shame on WN for this. Irrespective of if you do not like the FAA process or procedures - that is NO EXCUSE for this failure. Since this occurred from March 2007 when WN themselves reported the issue to the FAA - then also shame too on the FAA for not forcing the issue earlier and actually enforcing the rules by grounding some or all of the affected aircraft, 6 of which were ultimately found to have real cracks.

This is bad for everyone. I actually hope that the FAA is able to levy the fine in final judgement and then use the money to hire more inspectors. It is a dark secret that there are not enough of them.



Wide ranging reports - 787 Delayed again - implications

Sadly as we have reported frequently here, the 787 is running late again. The project is still not hitting its milestones. While Boeing was quietly crowing last year when the full extent of the A380 delays became apparent and insisting that there aggressive time line was solid, it now becomes clear that this was off base.

So I will reiterate our position on the situation with the 787. It will take years to bring the project to full production run rate. Our estimate is that this will not occur until well into 2010 possibly even later. The issues yet to be resolved are numerous and complex. Even after they are solved turning the solutions into a viable production line with smooth processes is far from being assured. Boeing is very fortunate in that after the design issues are resolved they have a cadre of execs who have solid moving production line experience who came from Toyota and Ford etc. But the hump to get over is/will continue to be a big/long one. We will continue to monitor the situation and hope to report some estimates on impact later.

Lest it seem that we are beating up on Boeing alone, let me just say that these are issues that will face Airbus in much the same way with the A350. Unlike Boeing with a single current project to worry about - Airbus has 4. The A380, The A330 Tanker/Military, The A350XWB and do not forget the A400M which is a pretty sick project at the moment.

I say again...

Take the time and its actually OK to add fudge factor to the overall project. Take a deep breath and really think hard. For Boeing - you have one more chance for a schedule correction. Get it right this time. For Airbus - learn and don't get too aggressive with the schedules. For the suppliers - you have two years of missed schedules and delivery lines. Spirit in KS will be particularly vulnerable having a strong dependence on Boeing.

Is Singapore picking off Europeans one country at a time?

Portugal last week joined the UK in a simple Open Skies bilateral treat treaty with the Republic of Singapore.

What is interesting about this is not that it happened but the fact that the EU has been trumpeting its common aviation policy stance particularly with the USA, yet individual countries still make deals like this.

The EU should be much more consistent on these matters.

The USAF Tanker deal - some thoughts

Quite frankly I was shocked to learn that the US Air Force had decided to select the Northrup Grumman/EADS team over Boeing. The decision had a seam of inevitability in it that was a train going to Abilene.

However in today's global economy where the words "National" and "Interests" are not always synomomous, this is a positive trend. But the decision criteria was not based on anything but the previously stated (and in my understanding) and fair set of rules. According to the statements from the USAF committee, Airbus won on all criteria accounts. The fall out in both Washingtons is going to reverberate for a long time.

Boeing would do well to accept the decision. If the criteria was flawed or if the result were not so clear cut then a protest should be conducted. However given the background and the time taken to make the decision, one can only believe that the review was conducted in the most strict of circumstances.

One of the arguments I have seen against the award has been the notion that high tech jobs are being outsourced to foreigners. Frankly I believe the opposite is the case. An industrial base of additional understanding especially in composites will be a direct result of this award.

Perhaps now that the decision has been made then we can only hope that there are some lessons to be learned here. One of the biggest lessons that should be learned is that the US Defense Acquisition process is flawed and needs rework.

One final thought is that there is a bad knock on effect within the airline industry. The 767 production line has been hanging on with some cargo based sales but very little new sales as customers wait for the 787. There is already a very big shortage of 767-300 size aircraft and the probably 18 month to 2 year total delay in the 787 program means a strong shortage of this size equipment. This is not good and will need monitoring in the coming months.