To celebrate the re-launch of the UK service, (GIG-GRU-LHR) Gol CEO Constantino de Oliveira "Junior" announced that they had secured 14 767-300s and 14 737-800s for the starred but ill-fated former Brazilian national carrier. The new fleet should be fully operational by the end of next year when all the aircraft are refurbished to VRG's specifications. In a very tight market for 767-300s where these planes came from is somewhat of a mystery. There is no one disposing of them at the moment especially with the delay of the replacement craft 787 Dreamliner.
At the same time - rumors are now swirling that with a reduced stock price - down nearly 50% on the year - Gol is looking to take the 30% in public hands back private. Gol has confirmed that it has received private equity interest in assisting in such a move. With Brazil's travel market starting to boom - despite the ongoing air traffic control mess - there is much to be enthusiastic. Whether the original players in Varig's bankruptcy - Mattelin Patterson and Cerberus are among those interested remains to be seen.
03 November 2007
01 November 2007
US (Mobile Carriers) halting advances in Mobility
Far be it for us to pick on another business sector unless there is a significant impact on ours. Well today I am mad and getting madder about the US Mobile carriers.
What's the problem?
Advances in mobile technology especially in the area of Mobile Data Services is enabled by technology. It is adopted by consumers if they see a benefit. That benefit is driven by usually two factors - Keeping competitive (my phone is cooler) or convenience/functionality. Classic examples are the iPhone for the former and Blackberries for the latter.
Unfortunately this means that we need contracts that are competitive and don't discriminate. Phones last for about a year. In my case I am probably pretty hard on my devices but still - each year I need to change to accommodate both drivers. Not so fast say my providers.... Sign here for a 2 year contract and oh by the way you may not have an equipment upgrade. I pay extra now for that facility so that all the people on my contracts can upgrade and get new phones every year.
Still... I see people with old phones using them because of the two drivers: They are afraid of their contract and they are afraid to change. This makes the US market a laggard in adoption of advanced mobile data systems.
Thanks - AT&T, Sprint Nextel, T-Mobile, Verizon et al for keeping us as Luddites.
What's the problem?
Advances in mobile technology especially in the area of Mobile Data Services is enabled by technology. It is adopted by consumers if they see a benefit. That benefit is driven by usually two factors - Keeping competitive (my phone is cooler) or convenience/functionality. Classic examples are the iPhone for the former and Blackberries for the latter.
Unfortunately this means that we need contracts that are competitive and don't discriminate. Phones last for about a year. In my case I am probably pretty hard on my devices but still - each year I need to change to accommodate both drivers. Not so fast say my providers.... Sign here for a 2 year contract and oh by the way you may not have an equipment upgrade. I pay extra now for that facility so that all the people on my contracts can upgrade and get new phones every year.
Still... I see people with old phones using them because of the two drivers: They are afraid of their contract and they are afraid to change. This makes the US market a laggard in adoption of advanced mobile data systems.
Thanks - AT&T, Sprint Nextel, T-Mobile, Verizon et al for keeping us as Luddites.
31 October 2007
787 Program still not out of the woods - Bair points a finger
The outgoing, recently ousted, Boeing 787 Dreamliner program manager Mike Bair has publically pointed the finger at the much vaunted Global Supply Chain system for delay problems with the new wonder plane. At this week's scheduled quarterly meeting of the Snohomish County EDC, Bair kept a pre-arranged date to give a breakfast address in Everett. He didn't hold any punches.
Much like then head of Boeing Commercial, Alan Mullay's famous comment on Washington State' competitiveness in 2003 (Quote "We suck"), Bair pointed the finger at key players in the supply chain. Afterward, Bair declined specifically to name the suppliers Boeing "won't use again." He said he was referring not just to the six first-tier airframe partners — Alenia of Italy; Mitsubishi, Fuji and Kawasaki of Japan; Spirit of Wichita (spun out from Boeing), Kansas.; Vought of Texas — but also to some of their suppliers in the second tier.
Bair made his comments pointedly at the key global supply chain partners and of course Boeing's own management of it: "That whole production system is built for 1,200 pieces. ... Everything about it was designed for 1,200 parts," he said. "We threw 30,000 at it, " indicating the Chicago based company's misunderstanding of the complexity of the processes.
It has been well understood by industry insiders that Boeing's management process was built around a system of delegation and responsibility of the individual supply chain partners. IE that the partners had to be totally responsible for design, fit and functionality of each of their chunks of the process. Boeing would then have hit teams who would act as fire fighters flying to supply chain hiccoughs and fixing the problems. The idea looks great in the boardroom and on a white board. Not so easy in practice as Airbus has learned throughout the years.
So who are the guilty parties? While we have no definitive information, we can speculate through process of elimination. Sources inside Boeing have indicated that there has been a lot of activity of Boeing engineers making European trips. With the Japanese partners being well show cased by Boeing we can only imagine that there has been less than satisfactory performance from other of the vendors.
So what is the impact on the 787 program and Boeing for the future?
Immediately we anticipate that Boeing managers will be taking a hands on role in resolving some of the issues at the problem partner/suppliers. At this stage they cannot bring the production facility back in house because there is no "in-house" facility to bring it to. With Spirit (Formerly Boeing Wichita) a separate company - there are no production capabilities that could be added without long lead time and factory facilities being created. As for a reason, " ...some of them proved incapable of doing it," Bair said. In the interview after his speech, he expressed frustration that some partners seemed "unwilling, for whatever reason." "They just didn't do what we thought they could do," Bair said. "Who knows why?"
For the long term future his will impact the 737 Replacement narrow body designed for launch and in-service by approximately 2015. Some news reporters regarded this as a boost for the Puget Sound (Seattle) region. Not so fast. For a 2015 date, selection of the manufacturing site would likely be made at least five years earlier. At one point, explaining the reason for the 787's global supply chain, Bair said it was difficult to ask the Japanese to invest money and then build their sections somewhere else than Japan.
So is the supersite concept that he outlined — supplier factories located alongside final assembly — really practical? "I don't think it's outside the realm of what may have to be done," Bair said in the interview afterward. "Toyota builds as many cars here in the U.S. as in Japan." A supersite approach would make the next aircraft assembly operation a bigger prize than the 787 plant, which has not attracted many supplier jobs to Washington. Boeing has spent millions in hiring in ex-Toyota managers as well as sending engineers and managers to Japan to understand a car like production platform for its aircraft.
So we can expect for the next 2 years a lot of PR war of words flying around as Boeing is courted to build the next gen production facility for the 737FG (Future Generation) aircraft. One thing is for certain - it won’t be Renton. I will lay bets on that one. There just isn’t enough space at the current production line for that. Since the sale of land nearby for a shopping mall and office development; only if Paccar (ironically builders of Mack and Peterbilt brand trucks) could be persuaded to move would there be anything like the room for such a supersite. Highly unlikely when there are so many other competing and suitable sites. Plus with many states itching to land the supersite - we can be assured that Texas, Alabama and California would be in the running.
"The right way to do this would be to have all those big parts across the street so you could just roll them in," Bair told his audience. "We'll see on the next airplane programs whether we can accomplish something like that." And who says it has to be in the USA?
Much like then head of Boeing Commercial, Alan Mullay's famous comment on Washington State' competitiveness in 2003 (Quote "We suck"), Bair pointed the finger at key players in the supply chain. Afterward, Bair declined specifically to name the suppliers Boeing "won't use again." He said he was referring not just to the six first-tier airframe partners — Alenia of Italy; Mitsubishi, Fuji and Kawasaki of Japan; Spirit of Wichita (spun out from Boeing), Kansas.; Vought of Texas — but also to some of their suppliers in the second tier.
Bair made his comments pointedly at the key global supply chain partners and of course Boeing's own management of it: "That whole production system is built for 1,200 pieces. ... Everything about it was designed for 1,200 parts," he said. "We threw 30,000 at it, " indicating the Chicago based company's misunderstanding of the complexity of the processes.
It has been well understood by industry insiders that Boeing's management process was built around a system of delegation and responsibility of the individual supply chain partners. IE that the partners had to be totally responsible for design, fit and functionality of each of their chunks of the process. Boeing would then have hit teams who would act as fire fighters flying to supply chain hiccoughs and fixing the problems. The idea looks great in the boardroom and on a white board. Not so easy in practice as Airbus has learned throughout the years.
So who are the guilty parties? While we have no definitive information, we can speculate through process of elimination. Sources inside Boeing have indicated that there has been a lot of activity of Boeing engineers making European trips. With the Japanese partners being well show cased by Boeing we can only imagine that there has been less than satisfactory performance from other of the vendors.
So what is the impact on the 787 program and Boeing for the future?
Immediately we anticipate that Boeing managers will be taking a hands on role in resolving some of the issues at the problem partner/suppliers. At this stage they cannot bring the production facility back in house because there is no "in-house" facility to bring it to. With Spirit (Formerly Boeing Wichita) a separate company - there are no production capabilities that could be added without long lead time and factory facilities being created. As for a reason, " ...some of them proved incapable of doing it," Bair said. In the interview after his speech, he expressed frustration that some partners seemed "unwilling, for whatever reason." "They just didn't do what we thought they could do," Bair said. "Who knows why?"
For the long term future his will impact the 737 Replacement narrow body designed for launch and in-service by approximately 2015. Some news reporters regarded this as a boost for the Puget Sound (Seattle) region. Not so fast. For a 2015 date, selection of the manufacturing site would likely be made at least five years earlier. At one point, explaining the reason for the 787's global supply chain, Bair said it was difficult to ask the Japanese to invest money and then build their sections somewhere else than Japan.
So is the supersite concept that he outlined — supplier factories located alongside final assembly — really practical? "I don't think it's outside the realm of what may have to be done," Bair said in the interview afterward. "Toyota builds as many cars here in the U.S. as in Japan." A supersite approach would make the next aircraft assembly operation a bigger prize than the 787 plant, which has not attracted many supplier jobs to Washington. Boeing has spent millions in hiring in ex-Toyota managers as well as sending engineers and managers to Japan to understand a car like production platform for its aircraft.
So we can expect for the next 2 years a lot of PR war of words flying around as Boeing is courted to build the next gen production facility for the 737FG (Future Generation) aircraft. One thing is for certain - it won’t be Renton. I will lay bets on that one. There just isn’t enough space at the current production line for that. Since the sale of land nearby for a shopping mall and office development; only if Paccar (ironically builders of Mack and Peterbilt brand trucks) could be persuaded to move would there be anything like the room for such a supersite. Highly unlikely when there are so many other competing and suitable sites. Plus with many states itching to land the supersite - we can be assured that Texas, Alabama and California would be in the running.
"The right way to do this would be to have all those big parts across the street so you could just roll them in," Bair told his audience. "We'll see on the next airplane programs whether we can accomplish something like that." And who says it has to be in the USA?
Hertz owes it all to Ryanair?
Well not quite but the numbers are pretty good. Outpacing both domestic and international regular growth by a factor of at least 2 - Hertz cozy relationship with Ryanair goes from strength to strength. So far in their best quarter of the year for Leisure activity - Hertz went as far as to comment on the value of the exclusive relationship between the two companies.
PS Sorry if the image is a bit fuzzy... use your glasses!
AZ - the final drumbeat calling the faithful?
The final round of choices for the perennial life supported Italian Airline seems to be approaching. However the final choices seem to be somewhat mundane. Approved for the final round was AF/KL, LH, SU and Air One. TPG having been unable to persuade their first partner (Mattelin Patterson) or find another one, officially threw in the towel over a week ago. Besides they have several other shiny new projects to worry about.
Now it appears there is only LH and AF/KL in the running with SU a long shot. Call it part of the fallout from the liquidity/mortgage crisis but the numbers don’t look so hot now to the potential suitors.
Realistically AF/KL has to be the lead. Remember there is so much emotion and politics wrapped up in this one - logic and commercial common sense does not really work. At least AF/KL won’t close down the Alitalia brand (even though perhaps they should!).
We just can’t imagine Prodi's somewhat shaky coalition approving a Russian or a German ownership.
We can hear Michael O'Leary's cackle from here......... Cheers Timothy
Now it appears there is only LH and AF/KL in the running with SU a long shot. Call it part of the fallout from the liquidity/mortgage crisis but the numbers don’t look so hot now to the potential suitors.
Realistically AF/KL has to be the lead. Remember there is so much emotion and politics wrapped up in this one - logic and commercial common sense does not really work. At least AF/KL won’t close down the Alitalia brand (even though perhaps they should!).
We just can’t imagine Prodi's somewhat shaky coalition approving a Russian or a German ownership.
We can hear Michael O'Leary's cackle from here......... Cheers Timothy
30 October 2007
American Prevails in first stage of battle with Google over Names
The first stage in the battle between Google and AMR's American Airlines over the use of brand names in Paid Search went to the plaintiff.
Google sued to dismiss the case andthe judge without any comment dismissed the attempt.
However things are going to be hard for AMR going forward. So far not one single suit has been resolved by a judgement in favour of the plaintiff. But then again - the suitors have all been pretty light weight.
Let see what happens. We are predicting nothing more than a messy fight and at least one unhappy result
Cheers
Timothy
Google sued to dismiss the case andthe judge without any comment dismissed the attempt.
However things are going to be hard for AMR going forward. So far not one single suit has been resolved by a judgement in favour of the plaintiff. But then again - the suitors have all been pretty light weight.
Let see what happens. We are predicting nothing more than a messy fight and at least one unhappy result
Cheers
Timothy
Roundup Since I was away last week
Dear Readers... sorry for the silence.
I spent the last weeek exploring the great American West. Driving a UHaul (aka a large 10,000lb capacity truck) between Seattle and Big Sky Montana was an experience. You get a definite appreciation for the size of the American continent. Some of those things you see from the air are hard to make out at ground level. If you want to rent a REALLY great truly ski in ski out in the Largest Ski area in the USA - then send me a ping.
But this has been an interesting week. the A380 finally started shuttling lovers (oops I mean passengers) in First Class Suites playing chess behind closed doors on SQ. But there were lots of other stories:
Kitty Hawk Airlines stopped service - flying priority freight head to head against the logistics mega carriers of UPS and Fedex is a tough battle. It just goes to show its a business of scale. Remember those little old converted prop planes we used to see around the US country side - well most of them are going bye bye - just like the Supplementals before them.
Northwest rounded out the huge profits of the spectacular second quarter.
Merril Lynch dumped their grumpy Goldman Sachs hating CEO (No relation) O'Neal. Imagine living in the same building as your sworn enemy!!!! No truth to the rumour that his payout is in United stock.
Despite all the advice - people still havent booked their Winter Vacations. In the USA - that means you are going to PAY and PAY!!! Alternatively for about the price of a one way ticket in 1st class on SQ - you can rent my condo in Big Sky!
ILFC finally commited to the Airbus A350XWB. There is no truth to the rumour that the XWB stands for Xtra Weight onBoard as a reference to the new size wize for humans in the USA. However they did up the number to 20 from 16 original orders.
SAS Dumped their Q400 Fleets. Imagine reading the story of the 3rd crash landing by SK when you are flying in said aircraft doing 3 take offs and landings to get from BZN-SEA. SK has just had enough
BA lost it 3rd franchise partner in 6 months with GB airways selling out to EasyJet and Loganair (the Trislander carrier) dumped their contract. No truth to the rumour that Kulula will dump BA when they start flying to the UK next year.
And what about those slots at LHR - 4 of them (not part of the GB airways sale) are on offer to the highest bidder. BAA/LHR has allowed EI to transfer its slots for SNN-LHR to the new service to LHR from Belfast. That story will run for a while.
More insight and analysis starting tomorrow.
Cheers
Timothy
I spent the last weeek exploring the great American West. Driving a UHaul (aka a large 10,000lb capacity truck) between Seattle and Big Sky Montana was an experience. You get a definite appreciation for the size of the American continent. Some of those things you see from the air are hard to make out at ground level. If you want to rent a REALLY great truly ski in ski out in the Largest Ski area in the USA - then send me a ping.
But this has been an interesting week. the A380 finally started shuttling lovers (oops I mean passengers) in First Class Suites playing chess behind closed doors on SQ. But there were lots of other stories:
Kitty Hawk Airlines stopped service - flying priority freight head to head against the logistics mega carriers of UPS and Fedex is a tough battle. It just goes to show its a business of scale. Remember those little old converted prop planes we used to see around the US country side - well most of them are going bye bye - just like the Supplementals before them.
Northwest rounded out the huge profits of the spectacular second quarter.
Merril Lynch dumped their grumpy Goldman Sachs hating CEO (No relation) O'Neal. Imagine living in the same building as your sworn enemy!!!! No truth to the rumour that his payout is in United stock.
Despite all the advice - people still havent booked their Winter Vacations. In the USA - that means you are going to PAY and PAY!!! Alternatively for about the price of a one way ticket in 1st class on SQ - you can rent my condo in Big Sky!
ILFC finally commited to the Airbus A350XWB. There is no truth to the rumour that the XWB stands for Xtra Weight onBoard as a reference to the new size wize for humans in the USA. However they did up the number to 20 from 16 original orders.
SAS Dumped their Q400 Fleets. Imagine reading the story of the 3rd crash landing by SK when you are flying in said aircraft doing 3 take offs and landings to get from BZN-SEA. SK has just had enough
BA lost it 3rd franchise partner in 6 months with GB airways selling out to EasyJet and Loganair (the Trislander carrier) dumped their contract. No truth to the rumour that Kulula will dump BA when they start flying to the UK next year.
And what about those slots at LHR - 4 of them (not part of the GB airways sale) are on offer to the highest bidder. BAA/LHR has allowed EI to transfer its slots for SNN-LHR to the new service to LHR from Belfast. That story will run for a while.
More insight and analysis starting tomorrow.
Cheers
Timothy
17 October 2007
Detla and Air France announce new Atantic JV
Delta Airline and Air France have just announced the first major foray into the transatlantic Open Skies venture. By making it a JV they resolve any issues about how it will be operated.
Initially covering JFK-ORY, JFK-LYS, and of course JFK-LHR and ATL-LHR. 3 new slots at LHR will be accomodated by Air France surrendering some of its slots to Delta who will operate the service.
Reported by both CNN.com and USA Today - the deal has been in the works for some time and will start in March 2008 and run for 8 years. It will eventually the joint venture is expected to increase revenues, competition and customer travel choices on key routes across the Atlantic.
The first phase will begin April 2008 and will include all non-stop flights operated by Air France and Delta between Air France's Paris-CDG, Orly, and Lyon hubs, and Delta's Atlanta, New York - JFK, Cincinnati and Salt Lake City hubs. It will also include flights operated by both carriers between London-Heathrow and the U.S.A combined 19 daily flights and more than 4,500 seats per day -- a 45% increase -- are expected to be part of the first phase of implementation.
Specifics about the SLC-LON service has not yet been clarified.
Initially covering JFK-ORY, JFK-LYS, and of course JFK-LHR and ATL-LHR. 3 new slots at LHR will be accomodated by Air France surrendering some of its slots to Delta who will operate the service.
Reported by both CNN.com and USA Today - the deal has been in the works for some time and will start in March 2008 and run for 8 years. It will eventually the joint venture is expected to increase revenues, competition and customer travel choices on key routes across the Atlantic.
The first phase will begin April 2008 and will include all non-stop flights operated by Air France and Delta between Air France's Paris-CDG, Orly, and Lyon hubs, and Delta's Atlanta, New York - JFK, Cincinnati and Salt Lake City hubs. It will also include flights operated by both carriers between London-Heathrow and the U.S.A combined 19 daily flights and more than 4,500 seats per day -- a 45% increase -- are expected to be part of the first phase of implementation.
Specifics about the SLC-LON service has not yet been clarified.
Earnings season starts - Delta posts great results
Delta just reported its first full quarter of results - ok so its the best quarter of the year but still a pretty good result. But this is nothing to crow about and there is a lot to do.
Delta Air Line Inc.'s third-quarter net income more than quadrupled to $220 million as the company's planes were fuller than ever during the summer. In its first full quarter since emerging from bankruptcy, the carrier also saw revenue increase 10% to a quarterly record of $5.23 billion.
FOR MORE INFORMATION, please see: http://www.wsj.com/earnings
But what about the other guys? Our analysis shows it will be a mixed season. The results will in general be good across the board. However there will be a few players who are already under-performing. Dont be surprised. One carrier to watch will be Skybus but since they are private not likely to see any financials.
It will be interesting!!!
Delta Air Line Inc.'s third-quarter net income more than quadrupled to $220 million as the company's planes were fuller than ever during the summer. In its first full quarter since emerging from bankruptcy, the carrier also saw revenue increase 10% to a quarterly record of $5.23 billion.
FOR MORE INFORMATION, please see: http://www.wsj.com/earnings
But what about the other guys? Our analysis shows it will be a mixed season. The results will in general be good across the board. However there will be a few players who are already under-performing. Dont be surprised. One carrier to watch will be Skybus but since they are private not likely to see any financials.
It will be interesting!!!
787- Bair out, Shanahan in as Boeing struggles
Boeing has reshuffled its Commercial Airplanes group as a result of the retirement president-Boeing International Laurette Koellner.
However we all know that the real reason is that someone had to take the fall for the 787 delay. Mike Bair is that guy, moving over from running the 787 to the new VP-business strategy and marketing for Boeing Commercial Airplanes. BCA's president/CEO Scott Carson made the changes before he himself got the big heave ho. However if there is any other delay - you can rest assured Chicago will be looking to push out one of its own.
The "new guy" is however an experienced hand at Boeing. Pat Shanahan previously led the 757 and 767-400ER programs.
One thing about Boeing though is that they have a very deep pool of managerial talent with wide experience. Airbus on the other hand has had more specialist experience but in the past promotion or experience was gained as a result of your nationality not necessarily your skill set.
However we all know that the real reason is that someone had to take the fall for the 787 delay. Mike Bair is that guy, moving over from running the 787 to the new VP-business strategy and marketing for Boeing Commercial Airplanes. BCA's president/CEO Scott Carson made the changes before he himself got the big heave ho. However if there is any other delay - you can rest assured Chicago will be looking to push out one of its own.
The "new guy" is however an experienced hand at Boeing. Pat Shanahan previously led the 757 and 767-400ER programs.
One thing about Boeing though is that they have a very deep pool of managerial talent with wide experience. Airbus on the other hand has had more specialist experience but in the past promotion or experience was gained as a result of your nationality not necessarily your skill set.
16 October 2007
Air Travel - the New Sin Tax
Following the success of the various fees and fees being charged in various jurisdictions – the governments are beginning to use Air Travel as a tax revenue source, sadly with little relevance to the use of the funds.
So let’s look at the issues – it is not very simple. In fact its REALLY complicated.
The facts:
1. Governments need more money
2. Environment is a bigger issue now than it has ever been (thank you Al Gore)
3. Air infrastructure is creaking
4. Post 9/11 security demands are enormous
5. Growing demand (with increased spending) is moving faster than GDS growth
6. Prices of air travel has fallen and continues to fall
7. And one to come….
So with these background facts it is only natural that taxes/fees or other charges are going to be due to be paid by someone.
The US originated much of this via the various post 9/11 fees and as well the allowing of mandated PFCs (Passenger Facility Charges) which allowed individual US airports to levy fees for airport usage. But perhaps one of the most interesting issues is that the US traveling population has been paying into a fund which has been funding the feds nicely every year. It was intended for the things like new airports new runways etc etc. None of which it ever funded.
So the Brits jumped in and started charging the now infamous APD. No pretence – it’s a tax. The French however wanted to charge several taxes for things like saving Africa and the environment. But they got smart about it and actually show how much the fee is for “eco”.
Next up the Dutch… the Secretary General of IATA is now pretty pissed.
So is everyone going to do this? Probably we are going to see all manner of fees and charges emerging over the next few months and years.
You remember my 7th point above…
It’s the Chicago convention. It is supposed to be used to exempt airlines from paying taxes on international travel. Specifically it bans the taxes on fuel. In the past it has been used as logic for avoiding all taxes on international travel as agreed by the Chicago convention which also set up ICAO as a UN Agency. The latter is important because it transcends national laws.
So bottom line… all bets are off and air travel is now a full open source for new taxes. Despite what Mr O’Leary might say – they are here to stay. We should only hope that some international rationalization of the tax regime is put into place. The only way to do that is to file a notice under GATT or some other convention. Otherwise its going to get REALLY messy. Watch for this its going to run and run.
Cheers
Here is the text of the IATA Press Release
Dutch ticket tax proposal is ineffective and inappropriate- breaches international obligations -
GENEVA -The International Air Transport Association (IATA) condemned the Dutch Government's plans to impose further taxes on air passengers. The government is planning to tax passengers departing the Netherlands by air as much as€45 citing environmental reasons."This passenger tax is ineffective, inappropriate and it breaches international obligations.It is a thinly disguised tax grab that does nothing for the environment. If anything, it is counter productive as it limits airlines' ability to buy newer, more fuel-efficient aircraft," said Giovanni Bisignani, IATA Director General and CEO."Airlines are making great strides to improve their environmental performance. Last year we saved 6 million tonnes of CO2by shortening 350 routes globally. We have improved fuel efficiency 70% over the past 40 years and forecast a further 25% improvement by 2020. The Dutch Government should be looking at what it can do to help airlines limit emissions. It can start by working with other EU governments to implement a Single European Sky that would save 12 million tonnes of CO2each year. It should also look at tax credits as an incentive to improve environmental performance rather than counterproductive taxes," added Bisignani.The passenger tax also breaches resolutions of the International Civil Organisation (ICAO) and Article 15 of the Chicago Convention on International Civil Aviation. "I am surprised that the Netherlands, as an ICAO Contracting State, chooses to ignore its obligations and trample over international agreements," Bisignani commented."We are seeing a worrying trend across Europe with governments cynically taxing air passengers for environmental reasons then failing to use the revenues for environmental purposes. These taxes are blunt instruments that just damage tourism and impact the competitiveness of European businesses. We urge the Dutch Government to rethink this ineffective, inappropriate and misguided proposal," concluded Bisignani.
So let’s look at the issues – it is not very simple. In fact its REALLY complicated.
The facts:
1. Governments need more money
2. Environment is a bigger issue now than it has ever been (thank you Al Gore)
3. Air infrastructure is creaking
4. Post 9/11 security demands are enormous
5. Growing demand (with increased spending) is moving faster than GDS growth
6. Prices of air travel has fallen and continues to fall
7. And one to come….
So with these background facts it is only natural that taxes/fees or other charges are going to be due to be paid by someone.
The US originated much of this via the various post 9/11 fees and as well the allowing of mandated PFCs (Passenger Facility Charges) which allowed individual US airports to levy fees for airport usage. But perhaps one of the most interesting issues is that the US traveling population has been paying into a fund which has been funding the feds nicely every year. It was intended for the things like new airports new runways etc etc. None of which it ever funded.
So the Brits jumped in and started charging the now infamous APD. No pretence – it’s a tax. The French however wanted to charge several taxes for things like saving Africa and the environment. But they got smart about it and actually show how much the fee is for “eco”.
Next up the Dutch… the Secretary General of IATA is now pretty pissed.
So is everyone going to do this? Probably we are going to see all manner of fees and charges emerging over the next few months and years.
You remember my 7th point above…
It’s the Chicago convention. It is supposed to be used to exempt airlines from paying taxes on international travel. Specifically it bans the taxes on fuel. In the past it has been used as logic for avoiding all taxes on international travel as agreed by the Chicago convention which also set up ICAO as a UN Agency. The latter is important because it transcends national laws.
So bottom line… all bets are off and air travel is now a full open source for new taxes. Despite what Mr O’Leary might say – they are here to stay. We should only hope that some international rationalization of the tax regime is put into place. The only way to do that is to file a notice under GATT or some other convention. Otherwise its going to get REALLY messy. Watch for this its going to run and run.
Cheers
Here is the text of the IATA Press Release
Dutch ticket tax proposal is ineffective and inappropriate- breaches international obligations -
GENEVA -The International Air Transport Association (IATA) condemned the Dutch Government's plans to impose further taxes on air passengers. The government is planning to tax passengers departing the Netherlands by air as much as€45 citing environmental reasons."This passenger tax is ineffective, inappropriate and it breaches international obligations.It is a thinly disguised tax grab that does nothing for the environment. If anything, it is counter productive as it limits airlines' ability to buy newer, more fuel-efficient aircraft," said Giovanni Bisignani, IATA Director General and CEO."Airlines are making great strides to improve their environmental performance. Last year we saved 6 million tonnes of CO2by shortening 350 routes globally. We have improved fuel efficiency 70% over the past 40 years and forecast a further 25% improvement by 2020. The Dutch Government should be looking at what it can do to help airlines limit emissions. It can start by working with other EU governments to implement a Single European Sky that would save 12 million tonnes of CO2each year. It should also look at tax credits as an incentive to improve environmental performance rather than counterproductive taxes," added Bisignani.The passenger tax also breaches resolutions of the International Civil Organisation (ICAO) and Article 15 of the Chicago Convention on International Civil Aviation. "I am surprised that the Netherlands, as an ICAO Contracting State, chooses to ignore its obligations and trample over international agreements," Bisignani commented."We are seeing a worrying trend across Europe with governments cynically taxing air passengers for environmental reasons then failing to use the revenues for environmental purposes. These taxes are blunt instruments that just damage tourism and impact the competitiveness of European businesses. We urge the Dutch Government to rethink this ineffective, inappropriate and misguided proposal," concluded Bisignani.
11 October 2007
Boeing - Delay on 787 - More indepth analysis
So the smoke has cleared and as we predicted as far back as May (well spotted Addison) Boeing did not make its overly ambitious schedule for the 787. Lets dive a little into the Boeing situation.
The 777 program - much less complex and very little integration issues arrived exactly on time promised delivery with a suitable gestation period occurred to United on the day promised.
The 787 is several orders of magnitude more complex. For example 4x the lines of code in the software. Vendors from all over the world with not just components but major subassemblies (like Wings and Fuselage barrels etc etc).
An overly aggressive delivery schedule
Supply chain issues that range from raw materials to specific parts such as fasteners.
However perhaps the biggest challenge remains just learning how to run a business such as Boeing has set themselves up for. It is clear by the amount of "travel work" that there have been and will continue to be significant issues in the integration of this just in time production capability. Boeing is probably guilty of believing it’s on Bullshit. The 787 is not the Smart Car type production they thought it was. No manner of Toyota engineers is going to make an inherently complex process any easier.
So from our vantage point, the following issues remain with the aircraft:
1. The learning curve is steeper than the Company ever imagined.
2. The amount of time for learning while now extended is still not going to be enough.
3. The amount of "travel work" indicates it requires an overhaul of the assumptions that were created in the design of the production schedule - particularly where the Italians are concerned. Building the schedule on the basis of the relationship to Spirit was somewhat optimistic.
4. Single sourcing has long term ramifications that need to be revisited. Boeing needs to consider how to ensure long term supply of its critical finished and raw supply chain. In this case they cannot blame the procurement process of the Government (a la C17) as a root cause.
5. Raw materials access beyond the direct provision of the supply chain interface is a cause for concern. The significant rise in the price of raw materials (whether plastics for the composite sections or Titanium) is going to cost Boeing dearly in future years.
We believe that the early customers such as ANA, JAL and Qantas are going to see significant in service issues particularly at some airports where Ramp Rash is well known. Those and other 787 customers would be well advised to learn from Boeing's issues in doing a gentler ramp up of the new aircraft. It should be remembered that it has been a long time since we saw a generational change in aircraft introduction.
And finally - let’s not forget Airbus. They better learn also. AND given the long term contract lock down of certain components that Boeing has already made - they better get their supply chain right for the A350XWB.
The 777 program - much less complex and very little integration issues arrived exactly on time promised delivery with a suitable gestation period occurred to United on the day promised.
The 787 is several orders of magnitude more complex. For example 4x the lines of code in the software. Vendors from all over the world with not just components but major subassemblies (like Wings and Fuselage barrels etc etc).
An overly aggressive delivery schedule
Supply chain issues that range from raw materials to specific parts such as fasteners.
However perhaps the biggest challenge remains just learning how to run a business such as Boeing has set themselves up for. It is clear by the amount of "travel work" that there have been and will continue to be significant issues in the integration of this just in time production capability. Boeing is probably guilty of believing it’s on Bullshit. The 787 is not the Smart Car type production they thought it was. No manner of Toyota engineers is going to make an inherently complex process any easier.
So from our vantage point, the following issues remain with the aircraft:
1. The learning curve is steeper than the Company ever imagined.
2. The amount of time for learning while now extended is still not going to be enough.
3. The amount of "travel work" indicates it requires an overhaul of the assumptions that were created in the design of the production schedule - particularly where the Italians are concerned. Building the schedule on the basis of the relationship to Spirit was somewhat optimistic.
4. Single sourcing has long term ramifications that need to be revisited. Boeing needs to consider how to ensure long term supply of its critical finished and raw supply chain. In this case they cannot blame the procurement process of the Government (a la C17) as a root cause.
5. Raw materials access beyond the direct provision of the supply chain interface is a cause for concern. The significant rise in the price of raw materials (whether plastics for the composite sections or Titanium) is going to cost Boeing dearly in future years.
We believe that the early customers such as ANA, JAL and Qantas are going to see significant in service issues particularly at some airports where Ramp Rash is well known. Those and other 787 customers would be well advised to learn from Boeing's issues in doing a gentler ramp up of the new aircraft. It should be remembered that it has been a long time since we saw a generational change in aircraft introduction.
And finally - let’s not forget Airbus. They better learn also. AND given the long term contract lock down of certain components that Boeing has already made - they better get their supply chain right for the A350XWB.
09 October 2007
US Air Force Tanker Deal - A different view
So at the moment all of the Beltway bandits are probably engaged in the biggest political battle of the season. Who is going to win the USAF's Air Refueling contract. it could be worth $100 Bn when all is said and done.
In the red corner is Reigning Champ and long favoured bidder Boeing with its decidedly ancient Boeing 767 design. In the Blue corner is the Northrup Grumman and EADS-Airbus Industrie the nasty Franco-German smelling foreigners, with their bigger A330 based design. OK so on patriotic grounds Boeing should win. But not so fast. NG/EADS-Airbus (what a mouthful) is proposing a production line in Alabama Only 400 Miles from where Mercedes (And EADS Shareholder, builds its M and R series).
At the moment the battle is squarely around an old US based design smaller and the bigger newer European design.
But i would like to post a contra view. Because over to the side is Lockheed-Martin (US's Largest Defense Contractor) advocating an update to the very decrepit C5 with the C5M re-engined, updated avionics. Boeing is also advocating more purchases of the C-17.
Lets start with the C5M. BAD IDEA. The plain is clapped out and the wings leak like crazy. It is in such poor shape that half the fleet (the ones that can fly not the ones on the books) are now used as cannibalization for parts. It has lost most of the crews (After being forced to do back to back tours the Reservists who fly this old clunker bailed en masse).
So how about this. Re-think it. Although I am sure that the Lobbyists would welcome this and Congress and the others will moan - but even though this contract has been scandal plagued and delayed for nearly 10 years, they time has come to rethink the whole idea of Military airlift in the USA Arsenal.
I propose that the US uses the A330M as a COTS based aircraft. I further propose that all the money that was to be used for C5M be used to purchase many more additional C-17s.
Who wins?
Boeing ends up with a good contract extension on the C-17 and we can reduce the price do the very stupid US procurement practices. Further they can stop wasting time on the 767. Time to put the old girl out to pasture which in turn will free resources for the now troubled 787 program.
Lockheed gets a smack in the eye - they need it.
NorthrupGrumman/EADS-Airbus (whew!) get a US production line and possibly a shot at the Hercules replacement market with the A400M.
The US Air Force (remember them) get much greater airlift capacity and better tanking with multiple convertible aircraft better suited to today's needs.
The US public gets a better deal for its money
Will they do it?
Naw not a hope in hell. Still nice idea.
Cheers
Timothy
Timothy J O'Neil-DunneManaging Partner - T2Impact LtdGlobal Travel eBusiness Tel (US) +1 425 836 4770Mobile (US) +1 425 785 4457
Mobile (International) +44 7770 33 81 75Fax +1 815 377 1583
UNIVERSAL VOICEMAIL BOX +1 425 749 4221
http://www.t2impact.com/
Please treat this email and all forms of communication as confidential use only for the direct recipient(s).
Read our Blog: http://t2impact.blogspot.com/
In the red corner is Reigning Champ and long favoured bidder Boeing with its decidedly ancient Boeing 767 design. In the Blue corner is the Northrup Grumman and EADS-Airbus Industrie the nasty Franco-German smelling foreigners, with their bigger A330 based design. OK so on patriotic grounds Boeing should win. But not so fast. NG/EADS-Airbus (what a mouthful) is proposing a production line in Alabama Only 400 Miles from where Mercedes (And EADS Shareholder, builds its M and R series).
At the moment the battle is squarely around an old US based design smaller and the bigger newer European design.
But i would like to post a contra view. Because over to the side is Lockheed-Martin (US's Largest Defense Contractor) advocating an update to the very decrepit C5 with the C5M re-engined, updated avionics. Boeing is also advocating more purchases of the C-17.
Lets start with the C5M. BAD IDEA. The plain is clapped out and the wings leak like crazy. It is in such poor shape that half the fleet (the ones that can fly not the ones on the books) are now used as cannibalization for parts. It has lost most of the crews (After being forced to do back to back tours the Reservists who fly this old clunker bailed en masse).
So how about this. Re-think it. Although I am sure that the Lobbyists would welcome this and Congress and the others will moan - but even though this contract has been scandal plagued and delayed for nearly 10 years, they time has come to rethink the whole idea of Military airlift in the USA Arsenal.
I propose that the US uses the A330M as a COTS based aircraft. I further propose that all the money that was to be used for C5M be used to purchase many more additional C-17s.
Who wins?
Boeing ends up with a good contract extension on the C-17 and we can reduce the price do the very stupid US procurement practices. Further they can stop wasting time on the 767. Time to put the old girl out to pasture which in turn will free resources for the now troubled 787 program.
Lockheed gets a smack in the eye - they need it.
NorthrupGrumman/EADS-Airbus (whew!) get a US production line and possibly a shot at the Hercules replacement market with the A400M.
The US Air Force (remember them) get much greater airlift capacity and better tanking with multiple convertible aircraft better suited to today's needs.
The US public gets a better deal for its money
Will they do it?
Naw not a hope in hell. Still nice idea.
Cheers
Timothy
Timothy J O'Neil-DunneManaging Partner - T2Impact LtdGlobal Travel eBusiness Tel (US) +1 425 836 4770Mobile (US) +1 425 785 4457
Mobile (International) +44 7770 33 81 75Fax +1 815 377 1583
UNIVERSAL VOICEMAIL BOX +1 425 749 4221
http://www.t2impact.com/
Please treat this email and all forms of communication as confidential use only for the direct recipient(s).
Read our Blog: http://t2impact.blogspot.com/
03 October 2007
Tony Ryan 1936-2007
A canny Irishman who pioneered the core of Aircraft leasing with GPA in the 1970s and at the same time founded the airline that pioneered low cost - Ryanair has died aged 71.
He founded GPA - Guiness Peat Aviation in 1975 only to see it come crashing down in 1992.
Of course and perhaps in hindsight one his greatest achievements may end up being his choice of the man who he hired to run his airline. While not the man to fully benefit from his core ideas - he nevertheless was a true pioneer in Airline commerce. As Michael O'Leary described his mentor and family friend yesterdayas "one of the greatest Irishmen of the 20th century."
He should be remembered as such.
He founded GPA - Guiness Peat Aviation in 1975 only to see it come crashing down in 1992.
Of course and perhaps in hindsight one his greatest achievements may end up being his choice of the man who he hired to run his airline. While not the man to fully benefit from his core ideas - he nevertheless was a true pioneer in Airline commerce. As Michael O'Leary described his mentor and family friend yesterdayas "one of the greatest Irishmen of the 20th century."
He should be remembered as such.
Sabre and EDS extend Outsource Agreement to 2014
Citing the relationship as contributing to Sabre's continued business transformation, the two Dallas area based companies have extended their agreement for another 6 years.
Probably business as usual, there is no need for Sabre to re-enter the mainframe business or go back to managing the "bunker" in Tulsa.
However there is a bit of under the covers work that is interesting - mostly in what was not said rather than the rah rah announcement.
For some time Sabre (which BTW stands for S-emi A-utomated B-usiness R-esearch E-nvironment) has been looking at what to do with its aging core platform. With Travelocity businesses (including LastMinute.com) on a much better footing and driving boat loads of transactions - now is the time to look at the other major parts of the business, namely the airline reservations and the GDS services.
Sabre's airline reservations business reached a peak with the US Airways outsource (long before bankruptcy #1). Since then they have lost market and mind share to the upstart Amadeus and its ALTEA (I don’t have the acronym) business. Carefully grabbing outsource deals from first Qantas and then BA, Amadeus has demolished the legacy infrastructure providers. The last casualty being Lufthansa Systems which closed down its FACE project during the summer. With astounding success, Amadeus now provides services to most of the world's top airlines. They are to be complemented on an incredible sales success. But the delivery is long from over. With a significant gestation period and a fall back to the use of BABS as the master inventory system, the Amadeus team has a very steep hill to climb to master all of these new customers. Whither Sabre in all this?
Sabre now needs a new system. There has been much talk and rumour of a deal with Unisys (the bride/mother left at the altar after Lufthansa Systems FACE project was cancelled). The rumours have yet to be verified but the sources are sound. Build it or Buy it? No trivial task whichever one is chosen. No army of Indian outsourced programmers is going to make this one easy. Whatever happens, there needs to be a new core and its needed soon or Sabre could lose its anchor customer American Airlines, in much the same way as Cendant/Travelport lost United Airlines to the STAR Alliance/Amadeus CITP - Common Information Technology Platform.
So chaps what's it to be? There are still some nice plumbs sitting on the table waiting to be eaten. If not, heaven forbid will the business go to AiRes or ITA, even Navitaire? Time's awastin'
Cheers
Timothy
Probably business as usual, there is no need for Sabre to re-enter the mainframe business or go back to managing the "bunker" in Tulsa.
However there is a bit of under the covers work that is interesting - mostly in what was not said rather than the rah rah announcement.
For some time Sabre (which BTW stands for S-emi A-utomated B-usiness R-esearch E-nvironment) has been looking at what to do with its aging core platform. With Travelocity businesses (including LastMinute.com) on a much better footing and driving boat loads of transactions - now is the time to look at the other major parts of the business, namely the airline reservations and the GDS services.
Sabre's airline reservations business reached a peak with the US Airways outsource (long before bankruptcy #1). Since then they have lost market and mind share to the upstart Amadeus and its ALTEA (I don’t have the acronym) business. Carefully grabbing outsource deals from first Qantas and then BA, Amadeus has demolished the legacy infrastructure providers. The last casualty being Lufthansa Systems which closed down its FACE project during the summer. With astounding success, Amadeus now provides services to most of the world's top airlines. They are to be complemented on an incredible sales success. But the delivery is long from over. With a significant gestation period and a fall back to the use of BABS as the master inventory system, the Amadeus team has a very steep hill to climb to master all of these new customers. Whither Sabre in all this?
Sabre now needs a new system. There has been much talk and rumour of a deal with Unisys (the bride/mother left at the altar after Lufthansa Systems FACE project was cancelled). The rumours have yet to be verified but the sources are sound. Build it or Buy it? No trivial task whichever one is chosen. No army of Indian outsourced programmers is going to make this one easy. Whatever happens, there needs to be a new core and its needed soon or Sabre could lose its anchor customer American Airlines, in much the same way as Cendant/Travelport lost United Airlines to the STAR Alliance/Amadeus CITP - Common Information Technology Platform.
So chaps what's it to be? There are still some nice plumbs sitting on the table waiting to be eaten. If not, heaven forbid will the business go to AiRes or ITA, even Navitaire? Time's awastin'
Cheers
Timothy
02 October 2007
And today's newest Travel plyer is.... Auntie Beeb!
The venerable BBC - bastion of Britishness is now a major player in worldwide travel. How come? They just bought a large chunk (majority share) in Lonely planet.
As a major provider of content worldwide and one of the best and most trusted sources of travel content - this is a natural tie up. The Beeb wins on 3 fronts:
1. Great content for TV - an adjunct to their various travel programs and of course Mr Palin.
2. Great print and core content written in their iconic style that transcends natural tribalism
3. A wealth of existing relationships
For Lonely Planet - it takes it to the next level. Lets just hope they dont screw it up
As a major provider of content worldwide and one of the best and most trusted sources of travel content - this is a natural tie up. The Beeb wins on 3 fronts:
1. Great content for TV - an adjunct to their various travel programs and of course Mr Palin.
2. Great print and core content written in their iconic style that transcends natural tribalism
3. A wealth of existing relationships
For Lonely Planet - it takes it to the next level. Lets just hope they dont screw it up
01 October 2007
Amadeus targeting Worldspan and Galileo with Sleeze
Well it looks like the gloves are off...
Amadeus this past week unleashed its own version of a Sleeze campaign by sending out large boxes of emptiness to Galileo and Worldspan subscribers.
A message has gone out from the combined WSP/Gal sales HQ to the troops as follows: I quote verbatim
Date: Fri, 28 Sep 2007 00:53:18 +0000 North American Sales Teams: Please be aware that Amadeus has launched a very aggressive marketing campaign targeting our customers. In some instances, they are sending customers an oversized cardboard box that is empty except for a large banner (pictures below). The wording on the box points the reader to the following website with a presentation that makes numerous assumptions about Travelport's acquisition of Worldspan. http://www.yougettochoose.com/Choice/ This is a very aggressive campaign aimed at capitalizing on the fear, uncer! tainty and doubt that some of our customers may be experiencing. Rather than respond to this attack directly which could serve to validate their claims, we will take the high road and continue focusing on the business of servicing our clients. Instead, we encourage you to engage with your clients and let them see through our actions how ridiculous Amadeus' claims are. You may also choose to point out that Amadeus must be quite threatened by the new Travelport GDS if they went to the expense and trouble of shipping empty, overly-large boxes to our travel agencies all over the United States. You can point out that Travelport would not use our marketing monies in such a frivolous manner. Additionally, we are planning a creative advertising and email campaign in the coming weeks that will set the stage for our communication to customers and the industry at-large. Thanks for your support. Cheryl and Erin
Sleeze? You be the judge
Cheers
Timothy
So you think the 787 will be delivered on time?
Then you my friend are in the minority - at least according to the site Bet2give.com. https://bet2give.com/b2g/market/linear/market.html?symbol=Boeing787onTime
Here you can see what REAL people are saying about the odds of Boeing delivering on time. Having spoken to many industry insiders (including some at the manufacturer itself) my best summation of the information is that there is NO WAY Boeing will be able to either:
A) Deliver its first aircraft on time - fully certified in all jurisdictions
B) Maintain the delivery schedule as proposed in the first 12 months.
So if you want to track this then go to the website and check it out. It will be interesting to see what happens
Here you can see what REAL people are saying about the odds of Boeing delivering on time. Having spoken to many industry insiders (including some at the manufacturer itself) my best summation of the information is that there is NO WAY Boeing will be able to either:
A) Deliver its first aircraft on time - fully certified in all jurisdictions
B) Maintain the delivery schedule as proposed in the first 12 months.
So if you want to track this then go to the website and check it out. It will be interesting to see what happens
29 September 2007
Emissions Trading in Aviation - a treatise
For some time now there has been a brewing friction between the airline community – as represented by IATA and ICAO and the European Community over the EC’s ETS – Emissions Trading Scheme. When initially proposed the Airline community was not included in the scheme, however as a major consumer of hydrocarbons this was soon rectified and added to the mix. However the Airline Community did not like it or support it.
In September 2005 the issue spilled out into the open. “Air transport is a global industry and the environment is a global concern. Effective solutions must be global solutions. Member states of the International Civil Aviation Organization (ICAO), including all EU members, are committed to deciding a course of action on aviation emissions in 2007. A European solution is no solution at all. Unilateral regional efforts will only distract from this process," said Giovanni Bisignani, IATA Director General and CEO.
In September 2006, The EC came to plead its case in front of the US Regional meeting of the WEF – World Economic Forum. They were told in no uncertain terms that the proposal was flawed for the design not necessarily the concept. In February 2007 when officially announced, the ETS was given a very cool reception by the Airline Community. While being very careful not to attack the concept, IATA and ICAO have been very strong in their opposition to the scheme’s implementation. This Autumn 2007 as the scheme reaches its roll out, the official aviation organizations (ICAO and IATA) have ramped up their opposition to it.
Let’s consider the issues and try and make sense of it…
Without a doubt the airline industry contributes to global climate change through the extensive use of Hydrocarbons. However jet fuel is one of the cleanest burning of any oil distillate. Further the global use is quite small at only approximately 2% for all uses of Oil based hydrocarbons.
IATA and ICAO have 3 basic objections.
1. They want a global scheme not a country or regional specific one. The UN (of which ICAO is a member organization and so chartered), endorses this point of view. Aviation is a global industry. There is a concern that some countries not just the EC and its member states plus the ECAC covered additional states will unilaterally impose both green taxes or other schemes. The complications of a single unit of countries such as the European Community (EC) starting this scheme creates all manner of issues.
2. They want a fair treatment of aviation particularly airlines in proportion to the amount of climate change contribution from the industry vs other more heavy hydrocarbon and polluting market sectors
3. Full consideration of the issue rather than picking on a small number of user types. (More on this below).
As a note there is several other lurking issue. For example the Chicago Convention of 1946 which explicitly forbids the use of any form of taxation on airline fuel. It could be argued that ETS is such a form of taxation. Clearly IATA and ICAO are somewhat miffed into having to react to this rather than addressing the issue in their own way and on their own time. Caught napping, they are not happy at being told what to do.
For the EC there are significant advantages to making the play to include aviation – especially airlines. Why? Firstly it must be remembered that the EC is trying to become the supra-national organization that legislates and represents the member states. As such it is important for the EC to take a single position. The EC is ramping up more and more to have a single voice with regard to airline. For example it is clearly emboldened by the agreement in May of this year to get all member states a deal with the USA on the Transatlantic Open Skies agreement. In the event that the EC is able to proceed with the ETS and force the inclusion by the non-EC carriers they will have created the first major step. Without a doubt it will put Europe ahead of all other nations in addressing the issue of Climate Change in the sector.
As a unit, Aviation becomes very easy to regulate. With less than 100 players in Europe and points of contact and control easily administered, Aviation is one of the simplest sectors to tax and regulate.
But, and this is a big one, People do not just use airlines to get from A to B. they are but a part of the mix of transport. Popular sarcasm in many countries points to so-called Green Warriors who campaign for Climate Change limiting measures but drive SUVs and buy exotic foods that travel very far. Not to mention their use of distant locales for holidays. So too we must review the issue of the aviation eco-system. Consider the issue of the airport. These are large collectors of people and consumer massive amounts of energy in their own right. Further there are some more efficient than others. Consider the issue of ground congestion waiting for runways. London’s Heathrow airport is one of the most notorious in the world for congestion both on the ground and in the air. Yet the ground portion is not considered in the scheme.
How to resolve this?
There are many issues in front of the aviation community. As with any major issue – this is going to be a tough nut to solve. However if we stick to the broad principals, Airlines should be included as Climate Change contributors in any scheme at the supra national level. Exempting them from the scheme would be inappropriate. The EC will definitely not be backing down from the scheme which means a showdown in some court is likely. The key battle will likely emerge with the US airlines who may choose not to opt into the scheme. As such the US Administration (not that of Bush as it will only occur beginning next year), will be forced to support their citizen airlines. This will likely end up in some form of compromise. Most likely with a voluntary contribution from the US and other non-EC airlines.
It should remembered that we are not speaking of a full taxation system here but rather only an emissions trading scheme. Implementing such a system will be no trivial task. And the passenger or freight owner? Yes they will be impacted. Lets all hope that this is handled in a reasonable way and we can get on with the business of moving people with their own free choice. Do I believe in ETS? Yes. Fundementally it is important for aviation to accept its position and responsibilities. The true cost of the product must not be the past elements that created them but also the allocation of future impact. This has to be the manner of handling product responsibility. The alternative would be a tobacco style witch-hunt post fact. Let’s not make that mistake.
In September 2005 the issue spilled out into the open. “Air transport is a global industry and the environment is a global concern. Effective solutions must be global solutions. Member states of the International Civil Aviation Organization (ICAO), including all EU members, are committed to deciding a course of action on aviation emissions in 2007. A European solution is no solution at all. Unilateral regional efforts will only distract from this process," said Giovanni Bisignani, IATA Director General and CEO.
In September 2006, The EC came to plead its case in front of the US Regional meeting of the WEF – World Economic Forum. They were told in no uncertain terms that the proposal was flawed for the design not necessarily the concept. In February 2007 when officially announced, the ETS was given a very cool reception by the Airline Community. While being very careful not to attack the concept, IATA and ICAO have been very strong in their opposition to the scheme’s implementation. This Autumn 2007 as the scheme reaches its roll out, the official aviation organizations (ICAO and IATA) have ramped up their opposition to it.
Let’s consider the issues and try and make sense of it…
Without a doubt the airline industry contributes to global climate change through the extensive use of Hydrocarbons. However jet fuel is one of the cleanest burning of any oil distillate. Further the global use is quite small at only approximately 2% for all uses of Oil based hydrocarbons.
IATA and ICAO have 3 basic objections.
1. They want a global scheme not a country or regional specific one. The UN (of which ICAO is a member organization and so chartered), endorses this point of view. Aviation is a global industry. There is a concern that some countries not just the EC and its member states plus the ECAC covered additional states will unilaterally impose both green taxes or other schemes. The complications of a single unit of countries such as the European Community (EC) starting this scheme creates all manner of issues.
2. They want a fair treatment of aviation particularly airlines in proportion to the amount of climate change contribution from the industry vs other more heavy hydrocarbon and polluting market sectors
3. Full consideration of the issue rather than picking on a small number of user types. (More on this below).
As a note there is several other lurking issue. For example the Chicago Convention of 1946 which explicitly forbids the use of any form of taxation on airline fuel. It could be argued that ETS is such a form of taxation. Clearly IATA and ICAO are somewhat miffed into having to react to this rather than addressing the issue in their own way and on their own time. Caught napping, they are not happy at being told what to do.
For the EC there are significant advantages to making the play to include aviation – especially airlines. Why? Firstly it must be remembered that the EC is trying to become the supra-national organization that legislates and represents the member states. As such it is important for the EC to take a single position. The EC is ramping up more and more to have a single voice with regard to airline. For example it is clearly emboldened by the agreement in May of this year to get all member states a deal with the USA on the Transatlantic Open Skies agreement. In the event that the EC is able to proceed with the ETS and force the inclusion by the non-EC carriers they will have created the first major step. Without a doubt it will put Europe ahead of all other nations in addressing the issue of Climate Change in the sector.
As a unit, Aviation becomes very easy to regulate. With less than 100 players in Europe and points of contact and control easily administered, Aviation is one of the simplest sectors to tax and regulate.
But, and this is a big one, People do not just use airlines to get from A to B. they are but a part of the mix of transport. Popular sarcasm in many countries points to so-called Green Warriors who campaign for Climate Change limiting measures but drive SUVs and buy exotic foods that travel very far. Not to mention their use of distant locales for holidays. So too we must review the issue of the aviation eco-system. Consider the issue of the airport. These are large collectors of people and consumer massive amounts of energy in their own right. Further there are some more efficient than others. Consider the issue of ground congestion waiting for runways. London’s Heathrow airport is one of the most notorious in the world for congestion both on the ground and in the air. Yet the ground portion is not considered in the scheme.
How to resolve this?
There are many issues in front of the aviation community. As with any major issue – this is going to be a tough nut to solve. However if we stick to the broad principals, Airlines should be included as Climate Change contributors in any scheme at the supra national level. Exempting them from the scheme would be inappropriate. The EC will definitely not be backing down from the scheme which means a showdown in some court is likely. The key battle will likely emerge with the US airlines who may choose not to opt into the scheme. As such the US Administration (not that of Bush as it will only occur beginning next year), will be forced to support their citizen airlines. This will likely end up in some form of compromise. Most likely with a voluntary contribution from the US and other non-EC airlines.
It should remembered that we are not speaking of a full taxation system here but rather only an emissions trading scheme. Implementing such a system will be no trivial task. And the passenger or freight owner? Yes they will be impacted. Lets all hope that this is handled in a reasonable way and we can get on with the business of moving people with their own free choice. Do I believe in ETS? Yes. Fundementally it is important for aviation to accept its position and responsibilities. The true cost of the product must not be the past elements that created them but also the allocation of future impact. This has to be the manner of handling product responsibility. The alternative would be a tobacco style witch-hunt post fact. Let’s not make that mistake.
27 September 2007
Red Shirt for Myanmar - Friday September 28 2007
While I am not normally a political animal in public - I do think we should support the peaceful protests against a repressive regime.
Please show your support for the monks and others protesting the military repressive regime on Friday September 28th 2007 by wearing a red shirt.
Thank you
Please show your support for the monks and others protesting the military repressive regime on Friday September 28th 2007 by wearing a red shirt.
Thank you
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