02 May 2008

Whither BMI

Another lively podcast moderated by Addison:


Couple of points to note.

I am a firm believer that Sir Michael Bishop has a few cards yet to play. If LH thinks this is a done deal then they are sadly mistaken. In the podcast we debate the possibilities. I encourage you to listen. If you wish to comment please feel free.



01 May 2008

Its May Day - do you know where your economy is?

So this is supposed to be the day when all workers (I presume that means all the readers of this blog at least) are enjoying the fruits of their sweat and toil.

But as uncertainty clouds everything - here is a survey published today of the state of at least one country- the USA. Remember this is the country that takes the LEAST amount of holidays, i have put in bold the relevant statistic:

Price of Gas, Groceries, Home Heating and Taxes Impacting Budgets

COLUMBUS, OH – 5/1/08 – Thunderstorms remain on the radar for the U.S. economy and consumers continue to feel the pinch. According to the latest American Pulse™ Survey of 4,055 respondents, 61.7% are dining out less, 57.3% are driving less, 47.4% are attending fewer movies, 46.1% are forgoing department stores for discount retailers and 45.3% are cutting back on their vacation budget to cope with the current economic environment.

What is impacting consumer budgets the most (percent of those saying “very much”)?
• 67.9% say gas prices
• 47.2% say groceries
• 46.8% say home heating and cooling costs
• 36.1% say taxes
One way consumers appear to be coping with pressures on the family budget is by learning a new shopping skill – haggling for price. According to the survey, half of Americans (50.3%) report having negotiated for better prices on products other than a home or vehicle in light of the current economic situation. Americans say they haggle the most for better costs on tires/batteries/auto repair (38.6%), followed by appliances (37.3%) and electronics (37.2%).

Gol - Problems mount on Varig and Fuel issues

Call it a little hubris, but the chaps at Gol have stumbled of late on Varig and the market realities.

On Varig - they have changed the model at least 5 times since acquiring the former Brazilian Star. Into London, Into Paris, a Hub in Madrid,etc etc. International route development takes time. Clearly not a lot of patience from the former bus drivers at Gol.

They need to settle down and to let the business run itself for a while.

So We Change Partners..

A new 3 way is being proposed. BA/AA/CO. This far more appropriate than the proposed mergers in our view and is the appropriate response by all 3 players.

Digging beneath the surface - it is interesting to see who wins here. Actually all 3 do.

BA and AA get further into bed. The likelihood is that the US DoT will finally allow the transatlantic version of the Code Shares to take place as a result.

AA gets a long sought after link to CO and protects its base. Fortress Texas! AA has benefited for many years from the withdrawal of DL from the Dallas hub. This has left fares high.

CO probably gets the most immediate value with incremental revenue which should outweigh the loss of the Skyteam business.

BA's shares rose this morning 5% on the news.

30 April 2008

Aloha converts to Chapter 11. Cargo shuts down. State in chaos

Sadly despite best efforts from a number of entities, Aloha's lead creditor GMAC refuse to fund any more time for the carrier and it ran out of cash. The airline has been put out of business and the management and owners as debtors converted the filing to Chapter 7 on Monday night.

Aloha will now cease to exist.

29 April 2008

Regionals and ACMI operators starting to look a little thin.

The surprise bid by Skywest for ExpressJet over the weekend - and the subsequent speed with which it was rejected is likely to be a harbinger of more upheaval in the market.

ExpressJet has been struggling since former parent CO cut back on its hours. Running a lite operation on its own was perhaps not the smartest move but they are still trying. Best of luck to them. I think they are going to need it. That said their value jumped on Friday and has stayed up on Monday and Tuesday. It means someone is in the hunt.

Republic is looking less than its normal robust self. With warning bells being sounded. Previously it looked like the Commuter ACMI operator could do no wrong. Now some of the aircraft asset owners are getting jittery.

Frankly as we have written before the current ACMI Pay for Play models are going to change which makes the whole sector look less appetizing.

And then there is Mesa. Will someone please put this puppy out of its misery!

Nationwide shuts down. Fuel claims first African Airline in the crisis

This is a post from our sister blog. Sorry - I posted it wrong!

Confirmed - Nationwide has shut down
Efforts will be mounted to restart Nationwide which has a large labor force but prospects look bleak at this point.

The South African HVC was unable to compete with the LCCs in its market - 1Time, Mango and Kulula. Despite making a good run. The delay in resolving the BEE (Black Economic Empowerment) element at a time when cashflow was critical finally crushed the carrier.

Of the 3 LCCs - we believe that Fly Mango (supported by Government funds) with the Orange Planes and Kulula with the lime green ones are well positioned with BEE concluded. 1Time with the red planes is also BEE as required by the aviation charter. However without the support of the ZA government, it has found itself hard pressed with a gas guzzler of a fleet. Still strict adherence to the LCC model is sustaining them.

Labels: 1Time, Comair, Kulula, Mango

Fuel Claims Another Victim - Nationwide South Africa Stops Flying
According to reports coming from South Africa - Nationwide Airlines the low cost airline serving Domestic South Africa main markets, Lusaka in Zambia and a 4x a week JNB-LGW service has stopped flying from mid day today.

As yes these reports are not officially confirmed but you cannot reach their call center.

With a largely old fleet the airline has been severely impacted by the fuel price surge. Last year one of their older planes had an interesting mishap when an engine seperated from the aircraft just after takeoff. The airline was grounded for some time until checks were made.

There have been numerous airlines that have shut down in the last 12 months. Fuel cost has been the largest culprit.

28 April 2008

UK's Airlines will lose under new Taxation Scheme

The old adage in the UK travel industry used to be - "Punters will walk across the street for a quid". For lay or not Brit-speak folks - a Consumer would rather save a pound and walk to another high street travel agency.

Well it seems that the UK's Chancellor of the Exchequer despite having been previously the Minister of Transport had not heard that saying.

Alistair Darling (like his leader a rather dour Scotsman), has significantly elevated the UK Air Duty. Much to the outcry of the industry, the new duty penalizes long haul. Ostensibly for reasons of applying a green tax. However he may come to regret his format.

The tax can only be imposed on the first sector. Therefore the departure tax for a flight connection into Europe could easily save a UK family of 4 up to GBP200 per trip. Thus for example a BA based holiday for 4 to Australia will be 200 pounds more expensive than for the same flight booked via Air France or Lufthansa.

Talk about pound foolish!

At a time when BA's whole business model is under threat because of the appalling infrastructure issues at its main base LHR (on which we have commented frequently). This will just add to BA's woes. It will however badly impact also BMI and Virgin.

Clearly the UK government has no clue about how the airline business works.

Have a nice day.

US Airways + United = Insanity

Just say no.

There is no justification of such a merger other than pure desperation. It would be a waste of paint.

Full Stop.


Continental follows Delta in exit from Certified Tours for inhouse Vacation Packages

Earlier this year, Delta Airlines announced its intention to terminate its long term agreement with Certified Tours for in-house Vacation and Tour services. Now Continental is following suit.

Certified actually was founded by Delta staffers and for many years enjoyed a very close relationship with the airline. In recent years that relationship drifted somewhat. Now too it would seem that Continental feels the same way.

The importance of Vacation packaging - especially Dynamic - has been a hot topic for the US and other markets. We believe that, critically speaking, the technology supporting the Tour Operating has not kept pace with the consumer demand for self service. All Tour Operators need to review their technology needs and provide solutions that are easier for the consumer as ultimate user.

While the profitability of Vacation Packages sustains many intermediary businesses, we believe that this will come under pressure in the coming year as Airlines and other suppliers seek to lower costs again.

27 April 2008

Hurray! Someone is listening. CO rejects UA and US.

Larry Kellner and the Houston Oilers are to be congratulated - no urge to merge this time around.

Staying independent is now a prudent course. Merging with a bigger United or a sick US Airways might lead to Houston losing another home team.

Let's hope AMR seems this the same way and doesn't pursue either of the ugly sisters.

The WSJ is speculating that AMR will attempt to persuade CO to jump from Skyteam to OneWorld. CO was careful to leave that door very publicly open. Of course Star would benefit enormously if they dumped at least one of the two sick US airlines and replaced them with CO. With two transatlantic hubs (EWR and IAH) CO is a better bet than either UAL or US for Star.

Interesting... curiouser and curiouser.

The United Dance - CO vs US

So the rumours continue to swirl with regard to UAL, in our mind the weakest of the US carriers and the most in need of resolving its urge to merge.

Any proposed marriage with United will be a shotgun wedding at best. There is more than one person wielding that firearm too.

I believe that Continental is the best option, a UAL+US would be an unmitigated disaster.

I still firmly believe that these marriages - arranged, shotgun or out of love (sic) are all unsavory and unsuitable unions.


Eos - final dawn

Eos named after the the Greek Goddess of the Dawn failed yesterday and ran its last flights today.

Jack Williams (ex AA, ex RCCL) while having a fine team and doing a good job of making their numbers were unable to come to conclusion with their funding source and shut down.

There are a lot of lessons here. But the one that should resonate with everyone is that the basic airline model is flawed and is not sustainable in today's economic environment.

This was a great business. It can be once again. The economic reality of the depth and breadth of the recession leaves no margin for errors.