11 July 2008

Russia postpones deliveries of Superjet 100 for 12 months

Well at least this is not a story about Boeing for a change.

The Russian Sukhoi Superjet 100 Regional Jetliner that is going to be competing in a very crowded space with entries from CHINA/ARJ Canadair/Bombardier, Embraer, Mitsubishi alongside announced a delay of 12 months to launch customer Aeroflot. The latest delay signifies a delay of 12 months in total so far.

Lets hope things improve for them.



OK One for the Doom Merchants... a New Indicator - Luggage sales are way off

This one is from Professor Steve Zilinek - He of Flylite.com the Virtual Closet people.

I think he has a point. Luggage sales means people are simply not planning on travelling.

Here is the story and for the chart and full details (courtesy of Merril Lynch) check out the URL at the end:

Luggage sales fall off the carousel

David Rosenberg:
We track luggage sales as a barometer of travel plans – and they have fallen in two of the past three months and are running at a near-record 35% annual rate over the past six months. Either people intend to stay close to home (which requires a 'cocooning' theme) or those who do intend to travel are scaling back their suitcase purchases in response to the advent of these airline per-bag fees.
Why buy a bag that is only going to be another cash-flow drain? Simply wear everything you would have packed (not comfortable but a lot cheaper).
Empty suitcase: No Luggage Sales = No Travel Plans
David Rosenberg
Merrill Lynch, July 7, 2008


Direct from the BOOT... The US Airlines shoot themselves in the foot

This is the verbatim post from Tim Hughes Blog the BOOT.

Most of the major US airlines sent round an open letter blaming the skyrocketing oil prices and resulting economic consequences on
"Speculators [who] buy up large amounts of oil and then sell it to each other again and again" (here is the letter in full below)
They have even supported a very serious looking website called "Stop Oil Speculation Now (or SOS NOW)". The ludicrous argument by the airlines is that when speculators enter the market they sell the oil to each other with no intention of delivery with the only consequence is driving up the price. This is an absolute lie.

The airlines are the first to tell the markets about their financial genius when they successfully hedge against fuel increases and save $$$$ in fuel costs. Hedging can only occur because there are speculators in the market that are prepared to bet the other way. If you remove speculators, then hedging disappears and the airlines will have no facility at all for planning ahead of time for fuel purchases. They will have to do what you and I do - turn up to the pump and pay the price on the day. There is no one in the airline industry that wants to do this and therefore remove speculators and hedging.

If speculators disappeared then it would dramatically increase the uncertainty for airlines in fuel prices resulting in increases in prices rather than decreases.

This is a blatant and almost pathetic smokescreen to cover up efforts to beg for government support/handouts and set up someone else to blame when the chapter 11 bankruptcy filings start.

So if you support the airlines then go to the website. If not then write your favorite congressman and senator and tell them what you think



Dear United Airlines passenger....,

Last week, crude oil hit an all-time high of $146, and the skyrocketing cost of fuel is impacting our customers, our employees, the communities we serve, and the economy as a whole. United, and the majority of other major U.S. airlines, are asking our most loyal customers to join us in pushing for legislation to add more transparency and disclosure in the oil markets. Please see the attached open letter from the leaders of the U.S. airline industry.

An Open letter to All Airline Customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.

Robert Fornaro
President and CEO
AirTran Airways

Bill Ayer
President and CEO
Alaska Airlines, Inc.

Gerard J. Arpey
President and CEO
American Airlines, Inc.

Lawrence W. Kellner
Chairman and CEO
Continental Airlines, Inc.

Richard Anderson
Delta Air Lines, Inc.

Mark B. Dunkerley
President and CEO
Hawaiian Airlines, Inc.

Dave Barger
JetBlue Airways

Timothy E. Hoeksema
President and CEO
Midwest Airlines

Douglas M. Steenland
President and CEO
Northwest Airlines, Inc.

Gary Kelly
Chairman and CEO
Southwest Airlines Co.

Glenn F. Tilton
President and CEO
United Airlines, Inc.

Douglas Parker
Chairman and CEO
US Airways Group, Inc.

10 July 2008

Lufthansa facing troubles

Lufthansa has been doing a lot right lately. They are weathering the storm as a big player, their markets outside of Germany are growing. They purchased a nice cheap chunk of JetBlue... so what's to go wrong?

Actually it looks like labour troubles. Last Week Lufthansa Regional and one of its subsidiaries went on strike. Now the cabin crew and some of the front line staff have voted for a strike.

Things could get ugly.

Lets hope they can work it all out.



Poor Sun Country Airlines.

from Professor John).
The Minnesota based-carrier lost $43 million on operating revenue of $243 million in its most recent four quarters and the company is now asking for $50 million in state aid!
In the meantime, an employee admits to swindling the company out of $200,000. Some of that money was used for casino trips.
Sun Country might want to do a bit more in the way of background checks: according to the authorities, the swindler was convicted of stealing from another employer a few years back.


Oops Did Someone Drill the Wrong Hole on Fuselage #4

Boeing has announced that there is a slight problem with Prototype #4 of the 787 program. Apparently there is a small issue with them having to "repair" the fuselage at the Alenia factory in South Carolina.

Good practice for someone... but kinda scary that this sort of thing can happen. Shows that Boeing still has some work ahead of it to get the Supply Chain System running right



Tanker Wars Episode V: The Empire Strikes Back

So the USAF has been forced to re-open the bidding on the Tanker contract.

Bravo for the GAO for finding the errors. For those of you who believe in dark conspiracies - consider the following:

The US had to look like they were offering an opening to the international market for US military contracts. Now that they did award one contract (the Tanker to NG and EADS) they can go back to business as usual and give the real contract to Boeing.

No harm done? Not really - NG will be bent out of shape and the European will cry fowl. Too bad about Alabama.

The decision of course wont happen now until 2009 by which time there will be a new guy in the White House and occupying the DoD Secretary's chair.

So who cares?

We shall see.

BRAVO US DOT! No to holding onto unused authority

The US Dept of Transportation has for once been reading the tea leaves correctly and decided it would be un-catholic to let the holders of unused International Route Authority hold onto that while they tried to recover.

There are several urgent items out there.

US Airways new route authority to China.
United’s Moscow route and the withdrawl of Denver London
Northwest’s suspension of several European routes.

Of course with Open Skies the EU authority is not required but for Latam, Asia based routes this could be an interesting game.

Let’s see what happens next

Vegas Room Rates Tumble

The lowest in 5 years is how it is being reported. With traffic way off (see my entry from a few weeks ago), the Vegas Market is in trouble. I even say an ad for the Venetian which showed a room available for less than $159. The first time in years that an advertised rate has been that low.

Both major leisure destinations are in trouble, Orlando, and Vegas

This recession is biting hard chaps

07 July 2008

It's that old "Truth in Advertising" thing again.

I think everyone would prefer that there is a real price that you can use to compare flights. This doesn't exist. So airlines do all that they can to obfuscate the final price you will pay.

I hate it - you hate it.

I recently looked at Rick Seeney's ancillary charges (see earlier post). I also looked at the way the airlines use fuel surcharges in many cases which while I applaud the use as a way of knowing what is not within the airlines' power - they still manipulate it.

Apparently the EC and various national bodies also think the same way. According to CAPA: Denmark's National Consumer Agency has published the names of six European airlines it stated are still using illegal marketing practices, despite warnings from the European Commission following a review last year (Reuters, 07-Jul-08). Ryanair, Air Berlin, Air Baltic, SkyEurope, Aer Lingus, Brussels Airlines and Internet travel agent, Seat24, were named by the agency. Their crime - hiding the real price.

So SkyEurope is trying to change the model:

“Our customers have told us it’s important to be completely transparent about the final price of their journey with SkyEurope… We have eliminated the complex structure of surcharges and fees and we have implemented one easy to understand price point,” Steven Greenway, CCO.

Let's hope they are successful



Tripso article

Over the past few weeks I have been reflecting on the contraction of air travel in the USA.

This morning stats from the Hawaiian Visitors Authority were published, they confirm my fears. The market to Vegas is similarly bad. And we believe that the Mouse Kingdom in Orlando will also be way off in the coming months.

There will be a very large contraction.

Please read my article at Tripso