Merill Lynch likes EADS

We came across an interesting piece of analysis today by Merrill Lynch's UK-based aviation analyst, who likes EADS. He thinks its under priced. We think the market's right; perhaps the stock might even be over priced? DISCLAIMER -- we don't tout stocks, bonds or any other financial assets. We just like to understand another analyst's thinking. Check out our thinking here.

Paper Planes

The reaction to our piece on the A370 has been, shall we say, significant. Typically a Sunday is supposed to be quiet, but not yesterday. Many people reacted to the story with anger – accused us of being Airbus bashers. Please read more of our work first, and then decide. Regarding the A370 – we did not “break” this story. It was doing the rounds at a Seattle cargo conference last week. Today Bank of America’s Equity Research Group also mentions it – almost the same information we wrote. But there’s more. We heard from a lead in the Middle East about another concept being traipsed about – the A390. We are trying to get more on this. Clearly Airbus are taking the threats to the current 350 very seriously and good for them for getting the plane right. This leads to another story worth looking into. Dominic Gates at the Seattle Times has a great piece on designs floating within Boeing. The designs look to use like some really out of the box thinking. For a start there are a few with UDF engines (very nice!). Their Fozzie looks to us like a revised 757 hull with new wings and really fabulous looking power plants on a near V tail. The next design, called Beaker, looks to us like a revised MD80/90 – a straight wing (with weird looking folding tips) which means it should climb like a mad thing. The wing is also very thin – sort of like the U2. The backward facing ducted fans and T tail remind us of the MD UDF. The Kermit Kruiser looks like a Sonic Cruiser that could use a diet. Pretty its not. Finally there’s the Honeydew. Looking like a stepped on NASA Shuttle, this design looks very odd. Of note in every case – Boeing is looking at twin engine designs. Fuel costs and noise seem to be primary drivers of these designs. None of the designs really addresses what many believe to be the most efficient commercial passenger design of all – the blended wing body or BWB. Airbus and Boeing are both working on paper planes.

What happened to Enplaned Blog?

For those of you (like us) who used to read the Enplaned blog and miss it - here is some news: Speculation on the Joel on Software discussion board is that it might have been pulled because of a lawsuit or threat of a lawsuit (which would be bad) or because the author has a book in the works (which would be less bad).

Dummy of the week #14 - Drunks should not fly

Two drunken Vietnamese passengers claimed that they placed bombs in a plane, which forced Vietnam Airlines to cancel its Ho Chi Minh City-Hanoi flight, local newspaper Youth reported Monday. When the plane, with 230 passengers on board, was going to take off on Sunday afternoon, two old men in drunken state stood up, saying there were some timer bombs in their hand-luggage and that of several other passengers. The incident caused the flight coded VN740 to be canceled. The pair have been detained and the baggage of all passengers and the whole plane have been checked for bombs. The search will last till Monday morning, the newspaper said.

An Airbus 370?

We came across something very interesting today. We follow an aviation thread, which has proven to be thorough and reliable. On this list we learned the following: Airbus is potentially developing an A370. The information is from secondary and tertiary sources so it may be inaccurate – essentially a paper plane at this stage. It appears the 370 is a follow on to the 350. The A370 appears to be targeted at Emirates and Singapore, to forestall 787 orders. Other airlines probably have been contacted. The information suggests Airbus will keep the current A350-800. The A370 would come in two sizes; approximately sized like the A350-900 and A340-600. The A370 would feature an all new Al-Li fuselage with a ~236 inch (5.99m) cross-section that would allow 9-abreast seating in coach. This compares to the 5.28m cabin width on the current 330 and what is expected on the 350. There is an all new wing planned which is not based on that of the 330/340/350. This is good news because there has always been talk of the current wing being “slow”. Of course, losing the BAE-based wing manufacturing knowledge base must hurt more than ever. The smaller A370 (A350-900 size) requires two engines of ~85klb thrust class, whereas the larger A370 (A340-600 size) requires two engines of ~100klb thrust class. If no suitable power plant is available for the larger A370, then an option exists for four engines. (Although theGE90 might fit this requirement) Entry into service is estimated late 2012. Production could be in Hamburg instead of Toulouse. Clearly there are concerns over how Airbus can finance another project. The 370 appears to be the A350 v3. There is by now no doubt that Airbus’ 340 program is in tatters. Its 350 program is getting hammered, too. So a reaction was expected. But based on this information, it appears to us, the anticipated reaction demonstrates, perhaps, growing desperation within Airbus. Airbus’ cash cow is the 320 line. Everyone knows about the composite 737 replacement being developed and planned in Seattle. The industry is similarly aware of the 320 replacement in planning. Coming up with the 370 now has got to negatively impact product planning within Airbus. They simply do not have a large enough team to work on all their programs. Boeing’s 787 trumped the 350. It looks like the next generation 737 will trump the next generation 320. These must be very trying days in Toulouse. And there are rumors swirling from Moscow about their 350 order being announced soon. How will Aeroflot feel about its ordering an aircraft that cannot seem to be defined? Note that the 350 model ordered by Finnair, potentially, now appears to be a 370. Airbus' vacillations are going to cost it dearly. The well thought out 350 product document we reviewed spoke frequently about the plane being a low risk option. Now we see that, potentially, Airbus is becoming a high risk because while an airline might order an aircraft, this may not be what gets delivered. Airline fleet planners must be shaking their heads in wonder. ------- Correction: The BAE sale is not likely to have as much impact on new wing development as we first thought. All the wing IP will stay with Airbus.

Remember our advice to US pilots - Go East?

Todays WSJ has a great story on where the gigs are for pilots. We said that US pilots should be looking at India and China. We were right - except we did not think of Emirates, which was silly (mea culpa). WSJ -- "Duane Woerth, president of the Air Line Pilots Association, a U.S. union, says foreign carriers are interested in senior pilots, not junior ones. He worries about the "brain drain" and whether foreign carriers are using U.S. pilots only temporarily until they can staff up with their own citizens. But "our guys are warming up to it," he says. "This one looks like a permanent structural shift." Is it just us, or are there other people out there who also see the commercial pilot profession as a global skill that DOES NOT require any union at all? Its called globalization and it has come to your airport. More WSJ -- "American Craig Harnden, formerly a pilot for now-defunct Eastern Airlines, has worked overseas since 1990 for Saudi Arabian Airlines, Thai Airways International and now Singapore Airlines. "If I had known what I know now, I would probably have left Eastern and gone overseas a lot earlier," says the 59-year-old Miami native, who lives in Singapore. "But we didn't leave the airlines because of the seniority system." Yes sir, if you did not have the union thinking for you, you'd have been wealthier and happier a lot longer ago. It really seems the US commercial aviation industry is one that cannot get out from its labor woes. Either its greedy managers or greedy unions. By the way have you noticed not one overseas country has complained about outsourcing their nation's pilot jobs to Americans?

French "invade" US from Cuba - Dummy of the week #13.5

How about this for people with a death wish? ---------- (Reuters) - Two French adventurers in an ultralight plane touched off a security scare on Wednesday when they flew across the Florida Straits from Cuba and made an unauthorized landing in Key West. Agents from the Border Patrol, Customs and the FBI rushed to the Florida Keys tourist town's airport with lights flashing when the tiny, zebra-striped two-seater touched down. "We were just flying from Chile to Africa. It's a long story," Peltier told Reuters before agents whisked him away for questioning. ---------- A long story? Right. They are probably in line for a French medal for bravery. Perhaps the short cut from Chile to Africa runs through Miami? Reuters also points out "The plane's fuel tank is so small that the pair have to land often to refill." -How do these jokers plan to cross the Atlantic? Its a long story...

Spiroid winglets

We have become accustomed to seeing blended winglets like this on 737s and now even 757s. These blended winglets reduce fuel burn by 5% which is a big saving. But there's more to this idea. A Seattle company, Aviation Partners, Inc., is developing advanced winglet designs for aircraft it says will cut fuel consumption 6-10 percent in cruise. The company has been testing a new concept - Spiroid Winglets, which look like a large loop of ribbon rigid material attached to each wingtip. Initial flight tests of the Spiroid concept on a GII last year reportedly reduced cruise fuel consumption by more than 10 percent. Winglets are wing-like tip devices which reduce the vorticity strength and concentration thereby reducing drag. The Spiroid concept featuring a closed contour, carries this trend to its logical conclusion, eliminating concentrated vorticity and further reducing drag.

Greek tragedy continues

If the play wasn't so long and drawn out it might be interesting. By now, with so many acts and tiresome to-ing and fro-ing, the audience (if this were really a play) by now would have climbed on stage to do the players in themselves. Pity the poor Greek consumer who has to bear this - but then they voted for the government. ------------ Reuters -- Olympic will be succeeded by a new company that will take over its flights if Greece's troubled carrier is forced to shut down by its debts, Finance Minister George Alogoskoufis said on Thursday. The European Union has ordered Greece to recover hundreds of millions of euros in illegal state aid handed to Olympic over the years, a move that may mean the airline's end. Alogoskoufis said in an interview Greece was determined to keep flights going, whether by Olympic or a successor. "There is a process of creating a new company, which could take over Olympic's flights in case Olympic is forced to shut down. There is clear investment interest in this specific solution," he said.

Ticket stub ID theft? Also Dummy of the week #13

Great story in today's Guardian about stealing a discarded ticket stub and accessing BA's passenger database. The scary part is this:"We logged on to the BA website, bought a ticket in Broer's name and then, using the frequent flyer number on his boarding pass stub, without typing in a password, were given full access to all his personal details - including his passport number, the date it expired, his nationality (he is Dutch, living in the UK) and his date of birth. The system even allowed us to change the information." That, in our opinion qualifies BA as dummy of the week. Where is their website security? This is awful news for BA. There are a bunch of you that get really excited about the US' increased passenger data - this link will feed your nightmares. Click

CO3161 - Amazing flying

Despite losing two tires, the crew brought the plane down the centerline and landed safely. As these pictures show, the plane sustained damage. However, it was great flying and also a testimony to the airline's training. Well done! The damage The Crew

They're serious!

Virgin America really plans to fly. No matter the glut of seats or over supply of LCCs in the US. Its going to be wild ride for them. United is already irritated with its exosure to Southwest. There is no way Virgin America will be flying into friendly skies out of SFO.

The rise and rise of Emirates

One can understand the feelings at Airbus and Boeing about this airline. Profitable and growing fast, the company is awesome to watch. How long can they sustain it? That is the question every bank, potentially financing the growth, is worrying about. Competitors are worried, too. No airline has defied gravity for long. Not one. The industry has good cause for its wariness. --------- Reuters -- "If we get what we want, then we could go for a big order, even up to 100, why not? We need more aircraft," The Gulf News daily quoted Emirates president Tim Clark as saying. An Emirates official confirmed Clark's remarks. Emirates had previously said it was considering a deal for 50 mid-sized planes and was in talks with Airbus and Boeing. -------- If this does not convince you to be a skeptic, try this: Reuters -- Gulf tourism and trade hub Dubai said on Tuesday it plans to invest USD$33 billion in building what it said would be the world's largest airport and city in Jebel Ali, home to the region's biggest free-trade zone. A statement by organizers of the state-run project, Dubai World Central, said the multi-phase 140 sq km (54 square mile) development around the planned international airport will include a cargo city, residential and commercial quarters and a Golf course. Dubai is pouring hundreds of billions of dollars into infrastructure and real estate developments, making it home to an estimated 17 percent of the world's cranes. "Dubai World Central International Airport (JXB)... when complete will be the world's largest with a capacity equal to that currently of Chicago's O'Hare and London's Heathrow (combined)," it said. "Dubai World Central will be a new city where eventually some 750,000 people will live and work," it said, adding the project was designed to support Dubai's aviation, tourism, commercial and logistics requirements until 2050. The airport will have a capacity of 120 million passengers and 12 million tonnes of cargo per year. It will have six 4.5 kilometre runways capable of receiving all aircraft, including the double-decker Airbus 380.

Fuel prices to soar ever higher?

If there's one man driving the price of oil higher by the day, its this gentleman. This is the President of Iran. His education includes a stint that might be termed as "advanced studies" in irritating Americans. Here he is with an American hostage many years ago. As if the world needed more proof that this fellow is deranged, here is news that reads like what Saddam used to say. Reuters reports that Iran threatened on Tuesday to attack Israel in response to any "evil" act by the United States and said it had enriched uranium to a level close to the maximum compatible with civilian use in power stations. Airline planners the world over are now adding this delightful face to their dartboards.

Ferrari of the Skies

Another strange name in aviation - Piaggio - is not to be confused with those scooters. Italian to the core, this company is now owned by the Ferrari family. The unconventional design provides the airplane with amazing performance. This is the world's fastest business turboprop. The plane can operate at 41,000 feet and flies at 0.7M. Just for comparison, that is about 400 knots. The world's fastest turboprop is the Tu-142 at 500 knots. The Tupolev has four 15,000 shp engines and the P180 has two 850 shp engines. The P180's engines are, sadly, not from Ferrari. But the performance has Ferrari all over it.

GROB - A name we're going to hear more about

In the US we have heard about the amazing Swiss Pilatus and even the sexy Piaggio pusher turboprop. Clearly there's a lot going in Euroland that has nothing to do with Airbus. One new player (for us anyway) is GROB. What kind of name is that? Imagine the fun comics are going to have with it! All of the jokes will make for good advertising. In Bavaria, southern Germany, GROB ha sbeen building really great planes for a while. Starting with composite and fiberglass gliders in the 1970's, GROB has been developing some neat planes. Take a look at their site. The planes we find compelling are the these two: Ranger - note the curve of the roof line; reminds us of the Connie (gorgeous) SPn The SPn is especially neat: it costs about $7m - making it a VLJ competitor. It has 8 seats and is all carbonfibre. The wing is created as one piece. This is the largest all carbonfibre plane in the world and 10% lighter than if built in aluminum. Now about that name....

Northwest buying 777s?

Photography By: Carlos Borda Word from Paris is Craig Saddler (finance director of the 787 program) says Northwest has "committed" to the 777. In 2001 Northwest found the 777 too much airplane compared with the 330 for trans-Atlantic trips. Regarding the Pacific market, the 777 (P&W powered) did not have the legs for its routes. ("The 777-200's range, evaluated with Northwest rules and interiors, is approximately 1,100 miles less than advertised.") Fuel costs are making not only the DC9s too much to operate but now also the DC10s. So it is no surprise the company is looking at replacements. Northwest, at current fuel prices, can overcome its P&W big fan bias. A GE-powered 777 is likely to make the airline's per seat costs drop because of better fuel burn. Given the remarkable GE-90's reputation, the fabulous maintenance record means less shop time, too. Northwest is understandably nervous about its mechanic situation. So driving down running costs from lower fuel burn and lower maintenance costs might be just the thing to tip the balance.

$73 Oil

Its not getting easier. Today's oil spike is not the highest - there are rumblings about $100 per barrel. Crain Communications Inc., reports: "As oil prices hit $75 a barrel recently, the cost of jet fuel cleared $2.20 a gallon and is expected to average at least $2 this year, says Air Transport Assn. chief economist John Heimlich. That's well above the $50 oil and $1.48 jet fuel prices United assumed in financial projections computed before it emerged in February from a three-year bankruptcy reorganization." United apparently is pursuing fuel-saving tactics like reducing the extra load of fuel that 1950s-era FAA required on overseas trips in case of bad weather or navigation errors. Technology enables the airline to carry less fuel. We had previously reported that Delta is the most conservative fuel-carrying airline. It will be interesting to see if Delta also cuts its fuel loads. A key question is whether airlines can hike fares fast enough to offset higher fuel costs. The betting is that this will not happen because market prices are essentially controlled by LCCs, particularly Southwest. Since Southwest has moved into United's turf in Dulles and Denver, it is unlikely they will cut United any slack. What's more if United is hurting, you don't even want to think about how Delta is doing. American and Continental at least seem to have a grip on their ops. Northwest and US Airways are still works in progress. Northwest's DC9s being a weak link whereas US Airways at least has a newer, more efficient fleet.

Dummy of the Week #12 - Excel Airways

Manchester Evening News -- POLICE were called as more than 200 holidaymakers were stuck for nearly 29 hours at Manchester Airport when THREE jets were hit by technical snags. Their big Bank Holiday getaway to Barbados descended into chaos when the first aircraft, and then two replacements, suffered faults. Police were called after tempers flared when the angry passengers finally got on board the third plane - and were then told they would have to get off. Advertisement your story continues below An airline spokesman said the trip had been hit by an "unfortunate catalogue" of engineering faults and bad luck. Half of the 226 Excel Airways passengers were due to board the flight at London Gatwick at about 9am on Friday. Problems But they were taken by coach to Manchester - a regular stop on the airline's Barbados route - after their Boeing 767 developed an engine problem. Excel then arranged for a Boeing 747 to fly them and the Manchester passengers to Bridgetown later that day. But this second plane is thought to have been hit by hydraulics problems. The passengers were put up in a Manchester Airport hotel overnight, while airline crews spent the early hours trying to find a third plane. Another operator, Monarch Airlines, stepped in and offered to lend Excel an Airbus A300. This aircraft was due to take-off at about 9am on Saturday, but it was stranded for more than four hours as the crew struggled to put the route into its navigation system. A police spokesman said officers were called to the plane after passengers were told they were to be off-loaded and taken back to the terminal by bus. Some passengers are thought to have refused to fly and asked for their bags to be taken off. The flight eventually took off at 1.30pm on Saturday. Passenger Isilma Brown said: "Everyone was very angry and upset. I should have been getting on at Gatwick, but ended up on a coach to Manchester. Then we were told we were being put up in a hotel. "There were a lot of angry people. Some had young children with them." Faults A spokeswoman for Excel Airways said: "There was a catalogue of engineering faults on various aircraft we were calling in to operate the route. "It was really unfortunate. The passengers would have understandably been very upset about it."

Skype hits 100 million users

VOIP is now a factor to be considered for inflight communications; VoIP pioneer Skype says it has passed the milestone of 100 million registered users. The company says it reached the figure just two and a half years after entering service, and that the subscriber tally has nearly doubled since last September, when it stood at 54 million. Skype software gives PC users unlimited voice communications with other Skype subscribers. The software is available in 27 languages and is used in almost every country around the world. The company generates revenue through its premium offerings, which include calls to and from fixed and mobile phones, as well as voicemail and call-forwarding. This means any traveler with a laptop and a headset, flying on a Connexion-powered flight, can make calls for free (at no additiona charge to a fee for going online). You don't have to wait for the Luddites to give you permission. You don't need airlines to further irritate you. Just go ahead and make good use of those hours you are strapped to a seat. Technology can set you free.

Flip seats may cut risk of DVT for airline passengers

This is great fresh thinking about the increasingly limited space on-board. Airlines dodged the bullet on DVT. But the issue has not gone away. Flights are getting longer. Indeed, in our interview with leading California cardiologist Dennis Goodman, we learned that DVT becomes an issue on any flight over four hours. (visit www.iagportal.com to hear the interview). ---------- Telegraph -- Cinema-style "flip seats" could be introduced on aircraft to speed boarding and help cut the risk of Deep Vein Thrombosis (DVT). New composites are leading to thinner seat backs, but the flip seats are seen as an even better way of increasing the space available. According to Aida, the German manufacturers, passengers will have three times as much room as on a conventional seat. Boarding will be quicker, because passengers will be able to move swiftly into their seats having stowed their luggage, which in turn means that other passengers will not be backed up the aisle. One of the biggest advantages will be the ability it gives passengers to stretch their legs. By just standing up they will be able to do a range of exercises which could reduce the risk of DVT, which affects more than 8,000 British passengers a year.

Its Friday - take a 5 minute break

and watch this animated video - its very well done. click

Airline Branding - Much Ado About Nothing

IAG and Action Marketing Group, Inc. have produced a white paper on airline branding which is available at this link.

Fliers would use iTunes if available

Regulars on this site are not surprised by this story. ------------- Over a third of airline passengers would download songs from Apple iTunes if they were available in seat-back in-flight entertainment systems, a recent poll suggests. The poll, run by leading aviation media portal www.flightglobal.com , showed that 38% of site visitors would download songs from iTunes if they were available in seat-back in-flight entertainment systems, while 62% said they would not. The poll was run in response to recent talks held between Apple and Aircraft in-flight entertainment (IFE) system providers on the possibility of licensing iTunes media download software for airlines' in-flight systems, enabling passengers to use their frequent-flyer miles to download music and videos onto their iPods in-flight. The poll attracted 750 participants, and ran between April 12 and 18 at www.flightglobal.com , the world's leading aviation media website, attracting a wide range of aviation professionals and enthusiasts.

Fresh thinking from Boyd Group

We are firm believers in critical thinking and this piece matches that. By the way, if you need a great laugh, read more of their views here. Some comments are rather biting and funny. ------------- Just When Airlines Thought It Was Safe To Get Back Into The Black... $75 Oil - A Whole New Dimension Hot Flash Summary: It's fairly certain that if oil stays above $70 - or goes even higher - the airline industry will need to again fundamentally change. Here's another strategic trend forecast from The Boyd Group, one that the aviation cognoscenti will sneer at today, and next year will be preaching like an evangelist who just discovered a gospel tent: The airlines best postured to weather this oil price storm are legacy carriers. The ones that will be hurt worst and first will be low-cost carriers. Some key points: - Legacies have reduced their operating costs, so they aren't wildly at variance with LCCs any longer. - Higher fuel costs will lead to higher fares. Higher fares will hit discretionary, price-driven passenger segments first. Passengers who in the past were created by low fares to Orlando will think twice with higher ticket prices and $3-per-gallon gas for the SUV. - Legacies will continue to have access to the strong growth traffic at places such as Shreveport, Taipei, Montgomery, Tupelo, and Kaoshiung. (Tupelo? Yup. Traffic's up almost double in two years. Maybe it's the consultant they hired.) LCCs don't have the fleets or the route systems to access these flows. - Most importantly, legacies are not as vulnerable to traffic down-turns as are LCCs. That's because several legacies have significant fleets they can quickly park, and have limited aircraft on order, unlike most LCCs. In fact, the new-airliner orderbook may well be the Achilles Heel of the LCC segment in the next 18 months.

Le Google

This is hysterical. Here we have a confluence of ideas that seems too good to be true. Google and Yahoo are getting massive free advertising from the French state courtesy of their xenophobic President. Imagine the gall (Gaul?) of the man. Named Quaero (Latin for "I search") M. Chirac’s brainchild does not even have a French name. Indeed, the name is in a language that most people consider dead. M. Chirac says he wants to raise the global profile of French industry and avoid a future in which France is known only as a "museum country". Heck that is what it is! With the exceptions of the TGV train (an awesome ride) and Airbus (great technology at work, no question) – what has France done lately? It seems a French growth industry is trying to irritate America. Makes us want to break the French jokes. ---------- Guardian -- The French president, Jacques Chirac, yesterday unveiled what he hopes will be his great legacy to France's struggle against the global dominance of the US: a series of technological projects including a European search engine to rival Google. Yesterday, he announced that he would provide €2bn (£1.4bn) in funding for a series of innovative grands projets, including a Franco-German search engine to compete with Google and Yahoo!.

Olympic & Dr Kevorkian

Many of you will remember Dr. Death. He was the doctor who helped terminally ill patients commit suicide. Dr. Kavorkian believes in euthanasia, a process of painlessly putting a terminally ill patient to sleep for ever. This way a person could (his opinion) die with dignity rather than spending the last few months of their life in constant pain and becoming a burden to their family and friends. Unfortunately the Doctor is in prison. We might have considered exporting him to Greece where he could perform his clearly needed services in Athens. The Greek government has defied the EC over and over again over aid to Olympic. Perhaps the EC can toss out Greece and take Turkey instead? The Greek government now wants to relaunch (again? I hear you cry) Olympic but branded as Pantheon Airways. Oh boy. Even the EC has to be running out of patience. What with other governments handing out aid (remember the Italians and Alitalia?) and not sticking to their deficit formulas, why would anyone take the EC seriously?

Podcast interviews

We mentioned this to readers some months ago and have been beavering away at developing podcasts. The technology is new to us and we are learning how to make this better. Meantime we have some neat interviews for you to listen to. Click - This button will take you to our podcast storage area. We have one free podcast you can hear as a sample. The remainder are for sale. If you have suggestions on improvements, subjects or people to interview, please email us at info@iag-inc.com.

Is the 757 making a comback?

The earlier rumor we heard about Delta wanting to buy the ex-TWA 757s from American may be part of something going on in JFK. There is a little war of words going on between Delta and Continental about who flies the most to Europe. Continental says it flies more from the Metro-NY area than Delta (true) but Delta flies more to Europe from the entire US (true). Behind this silly spat, something bigger might be going on. A recent hire at Delta is an ex-Continental biggie. Said person is a proponent of 757s across the Atlantic. Note that Continental is putting winglets on its 757s to cut fuel burn (or increase range). Therefore, it seems if Delta gets these additional 757s (which American should be pleased to get rid of, as they are not common with their own 757s) we are likely to see a spurt of trans-Atlantic flights on 757s from Delta. These flights could more easily work from Boston, but JFK would be fine for many smaller city pairs. Of course, it would be better for Delta to add winglets - but based on what we hear of Delta’s internal workings nowadays, that might not happen. The next paragraph explains why. For example, Delta has a reputation of "tankering" more fuel than any other US carrier. This goes back decades; a flight between Boston and Bermuda ran out of fuel and had to land at a military base. Frequently Delta’s flight to Athens lands with 22,000 pounds of fuel – imagine the cost of flying that much gas around rather than payload. Now figure this thinking on all their flights - it boggles the mind. Landings with this extra weight surely adds to maintenance costs as well. It also shows fresh thinking and reviewing or challenging anything within the current Delta management is not rewarded, compared to what has happened at American and Continental. A number of good people have been laid off at Delta recently for not singing the company song and not drinking enough of the company Kool-Aid. Back to the 757 resurgence. It is clear that the 757 offers interesting opportunities to fly smaller city pairs effectively. Delta could start a number of new city pairs to Europe that unzips European hubs. This is great for Delta and its alliance partners. This last point being very important. Delta will not use the 757s to upset existing alliance hubs. That limits the city pairs a bit, but also indicates where they might want to add service. The ex-TWA 757s are good for west of a line drawn from north to south stretching from Helsinki to Milan from JFK. Once you go over 4,200 miles, you're taking passenger and cargo hits. Cities under consideration might include HEL, GVA, NCE, MXP, BGO, SVG, OPO, VCE, NAP, BCN, AGP, LUX. One could even envisage ATL-LIS. These are boutique markets. Alliance partnerships reduces risk of new service as the capacity is used by all. Why is this so interesting? Because it means we are seeing yet another evolution away from hub to hub. This type of activity plays squarely into the sweet spot defined by the 787, and now the 350. Secondary cities are where the big growth is going to be. Yes, one side of the city pairs mentioned above starts at a hub. That is to ensure lowest risk. Once traffic flows start to change, to better exploit new service, traditional hubs will lose connecting traffic forever. It is a poignant moment for the 757. The MD11 also saw its future brighten after it went out of production. It is strange how things work out sometimes.

The mysterious Taiwan 747-8 order

Weird things happening across the Pacific. Check this out. April 27 (Bloomberg) -- China Airlines plans to buy 10 of Boeing Co.'s 747-8 passenger aircraft costing almost $2.5 billion, the Economic Daily News reported, without citing anyone. The two sides are expected to sign the deal by the end of June, the Taipei-based, Chinese-language newspaper said. April 26 (Bloomberg) -- China Airlines, Taiwan's largest air carrier, said it will pick the supplier of its new large airplanes by the end of this year, denying an Economic Daily News report that it had chosen Boeing Co. for the order. So this was either a slip up by somebody within the airline yesterday mouthing off prematurely or a negotiating tactic. Taiwan has the money to buy whatever it wants, and what it wants most of all is friends. Reliable friends. It is fair to say that this aircraft order will be more politically motivated than most others. The Taiwanese have been very good about spreading the joy between Airbus and Boeing. That said, we are inclined to go with the 747-8 over the 380 on this order because the US has been Taiwan's best friend. (BTW two months ago, both China Airlines and EVA Air publicly told the media that the traffic volumes and transit traffic at Taipei does not require A380-sized aircraft in its fleet) However, the airline does need to think about replacing its 330s eventually and is goign to remove the A300s. It has a smallish fleet of 67 planes. With little domestic traffic, the airline is widebody biased (like Singapore). The airline is pleased with its 330s and would therefore be a candidate for the 350.

The Southwest Blog

http://www.blogsouthwest.com - a new destination for you to visit. Once again, Southwest has shown leadership in the industry. Traditional media is dying. Smart people are discovering that blogs are a conversation, which is what makes them compelling. Good for Southwest. Now lets see how long its takes the othes to figure out that conversations are useful, entertaining and powerful means to communicate.

What is Delta up to?

Delta are at it again; they are apparently trying to get American to sell them the ex-TWA 757s and also acquire all Iberia's MD-88s. There is too much capacity in Delta's system - especially widebodies to Florida. Delta has started to drop the 767-200s and -300 domestics and they are also removing 737-200s and -300s. Delta is left with a gauge gap between 70 seats and the next biggest plane is the MD-88 with 142. While there is too much capacity in many markets and dumping old planes helps; but going out and getting more capacity before seeing how the reduced capacity works out is, frankly, dumb. It seems certain people at Delta believe market share is directly proportional to revenue and profitability. All three are separate. Delta should be pushing for maximum profitability - smaller could be better since there is a seat glut. But there's more trouble brewing. Instead of doing line checks every night, Delta now gets has these done every 5 days. The idea of outsourcing MRO work has not gone well and the word is Delta wants to sell its MRO. Narrowbodies now cost more to have work done and it takes longer to get completed. Air Canada's YVR MRO center does HMV work on 767 and 757s for Delta. Guess what? The word is Delta can't get the work done fast enough. The YVR center cost Delta over 280 flights days last year because of delays. Imagine the cost of a 767 out of service for 280 days. Imagine having that revenue generation instead of hammering staff for more give backs. (Now think about US Airways using Air Canada for the maintenance work.) What flavor KoolAid are they drinking in Atlanta? How likely is it that Delta will survive? Things are not looking good. Myopic management is not what the company needs now.

Those Standing Room "Seats"

NYT -- Airbus has been quietly pitching the standing-room-only option to Asian carriers, though none has agreed to it yet. Passengers in the standing section would be propped against a padded backboard, held in place with a harness, according to seating experts who have seen a proposal. CNN -- Airbus disputes report it is in discussion with Asian airlines to offer padded backboards to have flyers stand in effort to increase capacity. ---------- Current information from the NYT reporter (Chris Elliott) is as follows: "An Airbus spokeswoman admitted to me last night that the standing room seat exists. Its only argument with the story is that it said it no longer is pitching the concept. But the seats are real." Update -- Word is Airbus wants the NYT to do a retraction. Odd don't you think, since they admit the seat idea did exist. Was this a bad joke that got traction?

The BAE & EADS Divorce

Read our take here

787 sales help the 350

Boeing has sold out the first three years of its 787 production. It is highly unlikely Boeing can double its 787 output fast enough. Therefore, the 787's success is actually to the 350's advantage. We have been saying this for some time now. Too much of a good thing for the 787 is the best thing for the 350. We're talking current 350, not a newer one. Any airline that has to wait for 2015 (some say its 2010 but Boeing keeps selling the 787 very well so it could be 2015 before long at an annual output of 125) to get their hands on a 787 might as well go for a 350 delivered before then. Nobody has said the 350 (in current guise)is outclassed by the 787. Indeed, Qantas and Singapore have both said the planes are quite close. So lets define "quite close" as the 350 is 80% equivalent of the 787 (which is generous to the 787). Which airline is going to wait for a 787 when they can get 80% of what they need years earlier? The question therefore is - how much is the 787 really worth? Is it worth waiting for? The big driver at present (and perhaps more so after 2010) is fuel cost. The planes will have basically the same engines and will carry about the same number of people. The difference in cost per seat mile between the two at present is estimated between 10-15% (advantage 787). It seems to us that Airbus can stay with the current 350 design and do better than the 25% market share Mr. Udvar-Hazy said. If this class of airplane is going to be so popular (3,000 they say), then Airbus has done an excellent job with the 350 as it is. A low risk option for Airbus and its airline customers. Whatever changes are considered, let us hope Airbus focuses on greater use of composites to make the plane lighter still and not a hugely delaying hull widening. Airbus has enough delays in other programs. A wider hull is not the panacea Boeing would have you believe. They have managed to keep the "tube machine" building the same hull on the 737 which dates back to the 707. Wider is better, yes, but Boeing has managed to very successfully compete with a wider 320 using a narrower 737. ----------- Reuters -- Airbus plans to decide on possible changes to its future A350 mid-sized aircraft by mid-2006 following complaints from customers, Airbus head Gustav Humbert said. "We are talking intensively with our customers and looking very closely at the matter," Humbert told reporters in Dresden, Germany. "We have an A350 that is good. If we can improve it, we will do that with profitability and the market in mind." His remarks suggest a decision could come in time for the Farnborough Air Show, due to take place in England from July 17 to July 23.

jetBlue's loss & Battered Airline Syndrome

Our take on the news from jetBlue is here

What does one make of this?

Are these people suicidal? Stupid? Or among the best pilots you have ever seen? We think these South Africans are plain (plane?) nuts. Lots more here

Connexion Interview

We interviewed David Friedman, VP Marketing & Direct Sales at Connexion by Boeing today. Summary and audio are here

Airbus 340 gets a lift

India's Kingfisher Airlines has ordered five Airbus 340-500 aircraft and taken options on five more, the European aircraft maker said on Monday. With these planes the airline plans to fly to the US in 2008. Kingfisher has also ordered 380s and 350s. Their growth is on a tear. Kingfisher's funding is from its brewery busines...lets hope consumers devour the stuff because the airline is going to chew through capital. The airline started operations one year ago.

BAE & British angst

An interesting piece in The Observer describes a feeling of angst in the UK about BAE's selling its Airbus stake. There have been numerous stories about Britain losing its commercial aerospace capabilities. This is odd, since the country "lost" the capability years ago. It has only been building parts for planes. When was the last "British" commercial plane created? This comment says a lot: "BAE's willingness to repudiate civil aircraft manufacture is strategically stupid, technologically vapid and deeply depressing." We think the British are stuck with the last part the most - they are depressed. BAE is a shareholder owned company and the fiduciary duty of the managers is to maximize profit for shareholders. If BAE can make better returns in the US defence sector, that is the obvious place to invest. It’s called outsourcing and we in America are, painfully, adjusting to this as well. This depresses Americans a lot, too. State supported industry is a Euroland sport. What is so painful for the British is that having been given the asset, BAE has decided that they can do better elsewhere. It’s tough when you get something from the government, sell it and then invest someplace else. "The government's record in making strategic judgments about aerospace has been infinitely better than the market's." - This too says a lot. In America we would actually prefer less government in everything. We don't see government doing anything particularly strategically smart. Governments cannot because they are not market driven. Government's "vision" changes with each election in a series of fits and starts. In America we are comfortable doing business despite government ineptness; we expect the government to be wrong most of the time. What makes the British government so much better? So rather than wring their hands in angst, our British friends should rather become more embroiled in the capitalist model. BAE is taking a bet. They may win or they may lose. There are lots of British firms with their fingers in the US defence business. If the Pentagon decides, as it now appears it could, to buy Airbus 330 tankers are we Americans going to feel betrayed because Boeing didn't get the deal? We Americans see ourselves as shareholders too. If the US government actually gets anything cheap we are thrilled because our government spends money like a drunken sailor. Ours is the nation of the $600 toilet seat after all. So as citizen shareholders we appreciate Airbus competing for the tanker order because it will keep Boeing honest. Therefore if BAE enters the US market in an even bigger way, and manages to bid more cheaply on government contracts we Americans are thrilled. Moreover, we will not begrudge BAE shareholders a bit if their dividends go up and paid to British shareholders. Indeed, British citizens can extract value from their nation's support to BAE by becoming shareholders in the firm. If BAE's shares go down, the market will have decided the Airbus stake sale is wrong. Thislink seems to show that the share price has reacted favorably to the Airbus sale. BAE's share price has not performed particularly well in 2006. Perhaps the market, with all the information available, has already decided that the bet being made by BAE is the right one.

Extremists May Target Private US Planes - TSA

Oh boy, here we go. Now TSA is going to be on the lookout for GA threats, too. Of course you see this coming can't you? They'll need more money. The $18bn DHS gets is not enough. How hard is it for anyone with an IQ approaching 100 to threaten planes in the US? Any planes? The mind boggles. ------------- Reuters -- The US Transportation Security Administration has warned aircraft owners and airport managers that Muslim extremists may be targeting private American jets and urged them to boost security. "On April 13, 2006, a message posted in Arabic on an Internet forum explained how to identify private American jets and urged Muslims to destroy all such aircraft," the TSA said in an advisory issued on Thursday. The TSA quoted the Arabic message as saying: "We call upon all Muslims to follow and identify private civilian American aircrafts in all airports of the world." "It is the duty of Muslims to destroy all types of private American aircraft that are of the types Gulfstream and Lear Jet and all small aircraft usually used by distinguished (people) and businessmen," it quoted the message as saying. It said the message explained how to identify private US jets and also provided the tail number of a private plane believed to be used by the CIA. The TSA and other law enforcement organizations regularly issue advisories when they have information of a potential threat though there have been no major incidents since the September 2001 hijacked plane attacks on New York and Washington in which about 3,000 people were killed. The TSA urged plane owners and operators to boost security measures and secure unattended aircraft and verify identification of crew and passengers. "Be alert/aware of and report persons masquerading as pilots, security personnel, emergency medical technicians or other personnel using uniforms and/or vehicles as methods to gain access to aviation facilities or aircraft," the TSA advised. It said the theft of any private plane should immediately be reported to law enforcement and TSA.

New Mobile Travel Tool

Readers might like to made aware of and participate in, the beta launch of Skip – a new (free) way for people on-the-go to manage their travel details using their mobile device/phone. Everything you need to know about Skip can be found on our site: www.GoSkip.com. Skip is available for OTA download to almost every type of mobile phone – the site explains this and guides you through the process. The proposition is that you can make and track all your travel arrangements using your cell phone. The world keeps moving towards your cell phone, that lives in your pocket and goes everywhere with you.

A finger in the dike

This is an open letter from the BTC, a coalition that "represents business travel". By being an ally of the travel agent side of the equation, BTC has staked out its position. BTC's position is amusing - they get to it near the bottom of the piece below. "Content source fragmentation is unacceptable as it generates inefficiency and additional costs. Any revisions to the economic model should balance the interests of all industry principals and not be dictated by airlines to corporations and others." That's a bit of a joke. What hope do these people think they have? Airlines have a lost billions and their current model is broken. In order to survive they will first and foremost search for a solution that suits them. Business travelers no longer pay top dollor. Nobody pays top dollar. Airline pricing is in the tank, even with recent fare hikes. -------------- U.S. Post-Deregulation Travel Distribution The Moment of Truth and Call-To-Action Prepared by Business Travel Coalition April 19, 2006 I. INTRODUCTION After decades of U.S. federal government economic regulation, the global distribution system (GDS) industry is currently undergoing a marketplace upheaval that could bring with it acceptable changes or devastating losses to travel industry principals. Some airlines are endeavoring to structure a fundamentally new economic relationship among these principals -- airlines, GDSs, travel management companies (TMCs)[1] and corporate buyers -- that could have irreversible, worldwide implications for corporate managed travel. No issue in a generation has been this important to the travel industry or corporate travel managers. At issue is whether the lion’s share of benefits from a new distribution system model will flow primarily to network airlines at the expense of others, or alternatively, whether all principals’ interests will be taken into account. So far, TMC and corporate travel executives have been largely silent and unengaged; however, their bottom lines are at great risk. The economics of the new model will likely be determined by this summer, when (for better or worse) most of the new airline-GDS agreements will be concluded. Many TMC and corporate travel executives are in danger of being surprised and unprepared for potentially radical change. However, corporate travel managers are in the best industry position to influence the outcome, if they choose to speak out. II. BACKGROUND For twenty years ending in 2004 the U.S. GDS industry was heavily regulated by the U.S. Department of Transportation (DOT) mainly because the airlines that owned the distribution companies used their ownership positions to distort travel agents’ neutrality, frustrate airline new entry and drive the costs of their airline competitors up. In cities where airlines dominated hub airports and controlled most travel agents’ desktops through their GDS firms, the effects of airlines’ abuses were especially pernicious and often led to exceedingly high business airfares. This regulatory period was characterized by a single, DOT-imposed business model, replete with one-size-fits-all approaches to travel distribution services, including significant pricing restrictions. Most corporate travel managers had no reason to pay much attention to GDS issues, since access to content was assured by law and incentive payments were money in the bank. By 2003, U.S. airlines had sold their ownership stakes in these GDSs, which changed the relationship between GDSs and airlines dramatically, and paved the way for deregulation. These travel distribution firms were now standalone businesses freed of their airline parents, but encumbered by the now unnecessary DOT regulations. Indeed, airlines’ divestiture of ownership positions in GDSs eliminated the rationale for regulation. GDSs and other industry participants successfully petitioned the government to deregulate the marketplace for travel distribution services. DOT announced GDS industry deregulation during the last week of 2003. An airline drumbeat for reducing GDS costs suddenly got louder. Airlines and GDSs, both about to be thrust into a deregulated environment, entered into a series of three-year agreements in late 2003 which gave the airlines significant reductions in booking fees in exchange for full content guarantees. This brought some stability to the marketplace for a 3-year period for suppliers, distributors and customers, and bought time for industry participants to conceptualize new business models, relationships, products and services. Indeed, much experimentation began to take place. Some airlines predictably used this time to try to bolster new alternatives that would dramatically alter the economics of travel distribution in their favor. In 2005, in advance of the expiration of these agreements the following year, some airlines deployed a full blown industry relations campaign in support of new entrant technology firms such as G2 Switchworks. Although the technology was unproven and remains largely undeployed, the issue, fueled by airline support, dominated the industry trade press and industry gatherings. Many observers saw airlines’ very public support of these new entrants, however, as mere posturing ahead of 2006 GDS negotiations. Unsettling threats were made by some airlines that they would consider withdrawing content from a GDS altogether. Those threats made TMCs and corporate travel managers nervous. Sabre and Amadeus responded with a content backup agreement in March 2006 guaranteeing content from the other GDS should such a worst-case scenario develop. More recently, American Airlines and Continental Airlines announced new agreements with Worldspan amidst unparalleled secrecy over their details. Confusion has quickly gripped the marketplace with speculation that incentives would disappear entirely and TMCs and corporations would have to begin paying for access to content. Negotiations between GDS companies and airlines are occurring right now – some deals have already been signed. Others are likely to be reached in the next few months, and it’s probable the details of these transactions will have a profound and perhaps permanent effect on the economics of travel distribution. The die is about to be cast. Corporate travel managers could be in the not-so-advantageous position of informing senior management that GDS pass-through financial incentives will not be available in 2007, and moreover, there could be a significant content access fee added to each airline ticket. There would potentially be hundreds of thousands to millions of dollars in bottom line impacts for corporate buyers. ARC-certified CTDs would be particularly vulnerable. III. THE EVOLUTION OF THE MARKETPLACE As the commercial air transportation marketplace has evolved, at the upstream position there are several hundred airlines connected to a small handful of GDSs immediately downstream. These GDSs provide significant value to their airline customers by signing up thousands of TMCs that match the airlines’ geographic and market segment needs. These TMCs provide airlines further benefits in connecting airlines to millions of downstream customers. This marketplace has operated very well for airlines. Up to 50% of the GDS segment fees paid by airlines are actually competed away downstream as GDSs vie with one another to sign up TMCs that are in market positions to benefit airlines that are GDS customers. Incentive payments paid by GDSs to TMCs are likewise often competed away by TMCs competing to sign up corporations, also for the benefit of airlines at the upstream position. The GDS segment fee has evolved to become the financing mechanism for a marketplace consisting of millions of complex airline-related products and services and hundreds of millions of end customers spanning the entire globe. Many other industries’ markets such as the cell phone industry are organized and financed in this same manner. Economists such as Dorothy Robyn of The Brattle Group describe the GDS and similar industries as ones with a “two-sided intermediary market.” IV. CURRENT SITUATION So the issue is not that change is coming, or that there might even be a reconfiguration of economic responsibilities among airlines, GDSs, TMCs and corporate buyers. The issue for BTC is whether the outcome of the current uncomfortably secretive process, which will end in just a few months, will enrich just the airlines at the expense of their best corporate customers, or alternatively, will conclude with customer and TMC interests protected. According to industry sources, there are signed airline-GDS agreements that are truly toxic to corporate managed travel programs, but these agreements are being kept secret under confidentiality clauses until the marketplace has moved closer to the model envisioned by some airlines. These airlines are counting on corporate travel managers being asleep at the switch until such time as it is too late to influence the design of the emerging model. It’s time for travel managers to engage the issue and take action to protect their companies’ interests. V. POTENTIAL OUTCOMES BTC sees three potential outcomes: 1. Fine Tune. The existing incentive-based model will remain with across-the board reductions in booking fees charged by GDSs to airlines and reductions in incentives paid to TMCs by GDSs. 2. Variable Change. Several variations on the existing model will emerge with no dominant, market-leading framework prevailing. 3. Blow Up and Dominate. A sweeping, radical transformation of the existing business model will be forced on the market wherein incentives to TMCs virtually disappear and corporations pay for content. VI. INDUSTRY CONCERNS There is little doubt that some major airlines are working diligently to ensure that outcome #3 above comes to be the prevailing model, but without input from and recognition of the concerns of corporate customers. These airlines want TMC incentives virtually eliminated. It’s very unclear that any thought has been given to how such a model would impact other stakeholders. The airlines have an unimpressive track record when it comes to strategic distribution decisions, and in particular decisions that impact their best customers. Corporations need assurances that the existing marketplace model described above is not replaced with a fragmented and inefficient one with total processing costs rising from complexity and pricing levels increasing through lack of access to full content. In the most macro economic sense, it is the corporate customer who is largely financing the current travel distribution system. Its costs are baked into the price of a ticket. It is the corporate customer who is also at most risk should the current model be precipitously blown up. However, and importantly, it is the corporate customer, more than any other industry participant, who can influence the outcome over the next few months for the benefit of all industry principals. Blowing up the current model is not pre-ordained. A couple of airlines will not be able to dictate to the rest of the industry if corporate travel managers speak out and secure a seat at the negotiating table now. The choice is simple. Travel managers can accept a new, potentially fragmented distribution system model that saddles corporations with distribution costs they are already paying for in the price of their tickets while at the same time causing overall costs to escalate. Or, they can protest, seek to intervene and ensure that a rational and equitable model finds footing in the marketplace. VII. THE BTC POSITION BTC believes that corporate travel buyers, as the best consumers of airline services, bring enormous value to airlines and deserve to have a role in all decisions about revising the industry’s current economic model. Specifically, corporate travel buyers should insist that full content be available through GDSs without additional airline-imposed service fee charges. Corporations already pay for these distribution costs in the price of their tickets. Content source fragmentation is unacceptable as it generates inefficiency and additional costs. Any revisions to the economic model should balance the interests of all industry principals and not be dictated by airlines to corporations and others. VIII. CALL-TO-ACTION The American Society of Travel Agents (ASTA) and BTC have teamed up to give both TMC and corporate travel executives a platform from which their concerns can be voiced and interests represented on this issue. The Travel Distribution Working Group has been formed by ASTA and BTC to bring shape to TMC and customer proposals for sensible reform of the distribution system. Membership is also open to other industry Associations. With BTC participation, ASTA will be conducting an industry conference call on May 4 at 2:00 pm (EST) to discuss this critical issue and the details of the Travel Distribution Working Group. Conference call information will be communicated to the industry in the near future. … CONTACT BTC || Kevin Mitchell | 610.341.1850 | Kevin_mitchell@verizon.net. Founded in 1994, the mission of the Business Travel Coalition is to lower the long-term cost structure of business travel. BTC seeks to bring transparency to industry and government policies and practices so that customers can influence issues of strategic importance to them.

Euroland/Italian chaos

easyJet was handed an amazing advertising opportunity. This story goes to show what happens when you allow gnomes too much power. The law is an ass, but its the law anyway, and if you find a loophole, we close it right now. With this kind of chaos, its no wonder Euroland's economies are stagnant. Its no wonder Italians are famous for not paying taxes. The Euro-consumer could use fewer laws and a lot fewer bureaucrats. How about some logic? We are certain the passengers (and consumers generally) see that monopolies are inefficient. Its the 21st Century! ----------- easyJet has been forced to cancel its inaugural flight between Milan and Olbia due to ENAC’s (Ente Nazionale Aviazione Civile – the Italian National Civil Aviation Authority) unlawful refusal to allow easyJet to fly. The Italian authorities objected to easyJet’s new route connecting its base at Milan Malpensa with Olbia, in Sardinia, thereby reinforcing the monopoly of the incumbent airline Meridiana, under guise of the Public Service Obligation (PSO). As a result of this unlawful activity easyJet has filed a legal challenge in the Italian courts and lodged a complaint with the European Commission. While the court case is pending, the airline planned to continue to operate the route, taking the dramatic step of flying all of the passengers for free. This was a perfectly legal alternative as the European regulation 2408/92 on PSOs clearly states this only applies to 'the transport of passengers for remuneration.' However, this morning, ENAC intervened and prevented easyJet from operating the service, forcing both the airline to cancel the flight and its 149 passengers to travel with the monopoly carrier – who had an aircraft prepared especially for the occasion. Speaking at Milan Malpensa Airport today Arnaldo Munoz, General Manager Commercial for Southern Europe, said: “Not only is the Italian Government’s attempt to impose a Public Service Obligation on this attractive route ludicrous - it goes against every PSO principle and is a clear breach of European law. But today’s decision by ENAC to prevent easyJet from operating this service at no charge is also unlawful and a clear example of blind bureaucracy. In order to sustain their untenable position ENAC is willing to stamp on everything and everyone, and passengers first of all. In spite of all the efforts made by easyJet to find an amicable solution to the benefit of all the parties involved, unfortunately the final decision is now with the Italian courts.” Passengers due to travel with easyJet today supported the low-cost airline’s cause and protested to the Italian officials who prevented them from flying. easyJet has reimbursed the passengers’ cost of the flight and offered a €100 voucher to be used on other easyJet flights in the future.

Southwest & ATA - we told you so

We've been talking about this for a while. It makes sense and the aircraft that allow this exist in form of long range 737s and 757s. Aloha has shown that Hawaii to the west coast is doable with 737s. ATA already flies long routes, so the North Atlantic is next. The good news for legacy carriers is that ATA/Southwest will have limited capacity and have to use out of the way airports. The bad news is people are used to exploting out of the way airports for LCCs. Since airline brands now count for less than ever, witness BA's new pricing, this next step will be very scary for legacy carriers. Readers might be interested to know that we are developing a paper on airline brands; titled "Airline Brands - Much Ado About Nothing". Meanwhile, read this link for insight on the issue. Click ------------- FT -- Southwest Airlines on Thursday gave its clearest indication to date that the world's largest low-cost carrier would launch international flights for the first time. The Dallas-based airline said it has furthered preparations to launch cross-border flights with partner ATA Airlines, though Gary Kelly, chief executive, said the domestic market would remain its primary focus over the next two years.

BA's new pricing

Lets see how long they can handle this. There is no way BA's cost structure will handle a one-on-one with the likes of Ryanair or easyJet. BA's strength lies in long hauls where people might pay a premium for service. In the short haul market we cannot see this working. ------------ "We have slashed our one-way fares by up to 50 per cent and will have over seven million plane seats a year, to more than 65 destinations, available at these new prices. "This is not a short-term gimmick, but a long term commitment to our millions of customers to offer irresistible low fares every day of the year. There are no hidden extras and air travellers will receive the same excellent standards of service that are the hallmark of British Airways." British Airways' Commercial Director, Martin George

Dummy of the Week #11 - TSA again!

The Transportation Security Administration bagged a terrorist in Los Angeles International Airport Tuesday, or so they thought. Daniel Brown’s name came up on their no-fly watchlist, so they dragged him into interrogation and grilled him, despite the protestations of Brown and his fellow travelers, who swore they could vouch for him. The others in Brown’s party went on their Northwest Airlines flight to Minneapolis-St. Paul, where they waited on a bus at the airport. You see, the detained man was Staff Sergeant Daniel Brown, USMC Reserve, and he was traveling with the other members of his Marine Reserve Military Police unit, which was heading home to Minnesota from eight months of combat in Iraq. The Marines were in full uniform and all, including Brown, had travel orders and military identification cards. After attempts to stonewall under claims of “security,” TSA spokesmen finally admitted that Staff Sergeant Daniel Brown was placed on the no-fly list, and ultimately detained, because they had detected gunpowder on his footgear — not on this flight, but on a prior flight, which earned Brown a permanent place on the TSA’s mysterious terrorist lists. The footgear that had been exposed to gunpowder? Brown’s combat boots, and the occasion of that flight was after his return from his first combat tour in Iraq. Source: http://rightrainbow.com/archives/2006/04/its_amazing_the.html

MAXjet flying higher

Its great to tell a good story in the midst of higher fuel prices and general industry malaise. This performance speaks very highly of the team behind MAXjet. Which other US airline has a 98% recommendation level? ---------- The all-business-class airline, MAXjet is reporting high load factors and strong passenger confidence, supported by the airline's first passenger survey. The airline recently announced its highest load factors to date since MAXjet began service in November 2005. MAXjet now provides service from both New York and Washington D.C. to London. At the end of March, for the first time ever, all 102 MAXjet seats were full on the New York flight. On average, loads for March were more than 50% with the latter part of the month coming in at nearly 70%. Bookings for April indicate that the New York route will average at 70% load factors for the month, with bookings for May and June also looking strong. MAXjet recently launched its inaugural four times weekly flight from Washington D.C. to London on April 3, in addition to the six times weekly service from New York to London. The Washington route is still gaining ground, and MAXjet is confident in its success with strong future bookings for May and June. "There has been a great deal of speculation about the success of our business model, but the figures speak for themselves," said MAXjet's CEO Gary Rogliano. "We have managed to build up our loads as quick, if not quicker, than any airline developing a new international route. We are currently negotiating for our third and fourth planes to expand the MAXjet fleet. We are very confident. Not only do our future bookings illustrate our growing success, the quality of our product is also endorsed by the positive results from our first passenger survey. Some 87% of our customers found the experience to be very good or excellent, and 95% of passengers said they would likely fly with us again." The passenger survey also highlights that 96% of travelers thought the service was either what they expected or better than they expected, and 91% of those questioned felt that MAXjet was delivering on the promise to provide value-driven, all-business-class travel. Some 98% of passengers said they would recommend MAXjet to others.

Today's non-story - Boeing & Whistleblowers

This is an odd story. The plane is no longer made, having been replaced by a newer version. Operators of the affected planes have had no issues. The industry has ALWAYS had to make parts fit. It is quite common, from what we have been able to gather, that aircraft parts though made to fine tolerances, often don't fit as planned. The black magic knowledge has been the secret of the old hands; they were always able to make the parts marry and fit. These parts came from a pre-CAD/CAM era. There is no smoking gun of an accident or broken airplane. Slow news day we suppose. ---------- Reuters -- Three former Boeing employees have alleged that the planemaker installed improperly fitting parts in hundreds of Boeing 737 jets, a newspaper reported on Monday. Boeing has denied the whistle-blowers' claims, contained in a lawsuit filed in US District Court in Wichita, Kansas, insisting that no faulty parts could have slipped past Boeing controls and that there is no safety issue related to the parts, the Washington Post said.

Boeing to Lay Off About 900 Kansas Workers

Its only speculation on our part but here's what we read into this story. Kansas has a small Congressional delegation. Washington and California have much bigger ones. The C17 plant at Long Beach needs work, big time and California will not be pleased to see an end to aerospace skills at Long Beach. Everett might be a great place to start building a 777F-based Air Force tanker and Long Beach a great place to do the finishing touches. This makes both delegations happy. Washington's delegation wants something back for its unswerving loyalty. But without a push from California, a 777 tanker might need help. Boeing irritated a lot of people in DC over the past few years. They don't want another fracas over the tanker thing again. If something had to give, Wichita is has to be. But, no worries, Airbus/EADS is looking for 200 aerospace engineers. Wichita already has some Airbus interests. These are interesting times with so many big pieces floating around. ---------- AP -- Citing defense budget cuts and delays, Boeing Co. announced Monday it would restructure its Wichita operations and lay off about 900 workers, or about 25 percent of its current work force at the plant. The Chicago-based aviation and aerospace company said its Wichita plant will focus on military 747 and wide-body aircraft modifications and upgrades and continue its engineering center. The plant currently employs about 3,600 people and Boeing said the work force would be 2,700 by early 2007.

IFE hardware prices start to fall

Competition is a wonderful way to focus attention. Airlines have to be delighted that the cost of at one technology is going down. We predict further pricing mayhem as travelers start to bring their own devices and content with them. Consumer electronics are going to defeat IFE tyranny, where you have to watch/endure canned crap on a screwy system. After the 1,000th veiwing no sitcom is funny. Reruns may make the syndicate owner rich, but the viewer is done. If the Internet has managed to mortally wound television, what makes airlines and IFE manufacturers think they can withstand this phemonenon? Content is king, but unlimited channnels is impossible in-flight. Digital content has and enabled a move into a universe where a customer market size of one is perfectly acceptable. Airlines would do well to get out of the hardware game altogether. People are breaking off into ever smaller groups and they will buy the content they are interested in. As groups grow smaller, their demand inelasticity rises. There are people who would happily pay for access to a hunting or fishing channel and watch it all across the Pacific. Since the airline has no hope of providing this but couldmake good money selling it, why not enable this? Anyone in advertising can tell you how much more you can charge for such a small section of a market. Yes, you can focus down to a market of one. But first you have to open your mind to this reality. Its called creative destruction. And it has worked in numerous other markets. ------------ The potentially game-changing nature of IMS Inflight’s decision to base its next generation of handheld IFE systems on the Archos AV 700 consumer digital video recorder (DVR) (Inflight Online, April 4) has been driven home by the French manufacturer’s announcement of new, lower, prices for its mainstream products. The company is now offering the top-of-the-range 7in-screen, 100Gb AV 700 for $599.95, a $200 cut, and the 40Gb version for $499.95, down $100. The 4in-screen, 100Gb AV 500 is going for $549.95 (previously $699.95) and the 30GB version for $449.95 ($499.95). The cuts presage further developments in the Archos range – the company says its 2006 products will have new features not seen before in the portable video player market. They also look like good news for Californian-based IMS Inflight, which has just switched from custom hardware development to adapting the AV 700 on the grounds that is now feasible to make consumer devices fit for the IFE market and offer them at prices significantly lower than those of purpose-built systems. “We recognise that consumer products like the AV 700 are rapidly approaching the capabilities of proprietary-built IFE portables at a much lower price point,” IMS chief executive Alan Pellegrini said earlier this month.

Re-engining the MD80

We came across a neat piece of insight today - Click

Webaroo

This is potentially awesome for IFE.  Hate to admit it, but the late starters in the US (read legacy carriers) are benefiting from their wait.  The solution further builds on what we believe is the future of IFE - bring your own deliver device and, maybe, turn to the airline for a pipe to the content.

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IFExpress -- How would you like to do a little surfing on a plane that has no connectivity? Or, if you are a portable IFE vendor and you would like to give passengers the Internet on your portable? What if you were responsible for providing Internet contend via Wi-Fi for your airline passengers but you had none of that expensive connectivity hardware? The answer to all the above is Webaroo, and it's free.

Here's the story; Webaroo is an Internet startup that had a great idea - how can we help all those folks who have no Internet connection or have laptop or Smart phone and are mobile - say, on an airplane or train. No problem, simply log on to Webaroo and download the client to your PC or laptop then select from the various "packs" available. Right now they are building a library that is free online and updated daily. You send the pack to your portable devise and thousands of compressed HTML pages are transferred to the device. Let the surfing begin! Webaroo has a cadre of technologists in California and India who have developed an algorithm that picks a targeted subject (like San Francisco, or Wikipedia), and the client downloads the pack off the Webaroo server. Webaroo told us that they can drill down one link on their whole collection of websites but plan to develop more link depth later... all for less than a megabyte per pack. Think of it as a cached Internet that is updated by the client the next time you log on. Hey, this service was made for travelers. Webaroo told IFExpress that airlines and vendors have free access to the service and we could see a time when an airline would place the client on their intranet server and update whenever they landed. Phones, laptops and portables that are surf capable can use Webaroo. Expect to see web packs in the future that provide news, destinations, weather, or whatever. You pick your pack and you are good to go. The Webaroo model will, no doubt, be driven by a paid search model (Oops, Google territory), and we expect other search providers to up the ante if this idea takes off. We hear that Acer portable laptops will soon ship with this feature. Check out Webaroo.com and surf with or without an Internet connection.

 

 

Dummy of the week #10

This week we offer you a choice - who's the dummy here? The passenger or the crew who gave the passenger this much booze? We say both! Too bad for this fellow he landed in the USA - he's in very deep doo-doo now. Unfortunately the dumb flight crew get to go home. ------------- A man who authorities say drank five to six bottles of champagne aboard a flight from Japan to Kona has been arrested and charged with assaulting four crew members and interfering with the flight crew. Iwao Amano, who was aboard the flight that left Narita Sunday, and reportedly drank the champagne in economy class, is accused of then punching one of the flight attendants "lightly in the forehead" when trying to move to the business class. He later grabbed a flight attendant by her hips, lunged at another flight attendant and tried to grab her breasts and kicked a flight purser, an FBI affidavit said.

OFCOM on in-flight phones

OFCOM, the UK office of telecommunications, has issued a 45-page discussion paper on the introduction of mobile service on aircraft with the closing date for responses 23 June. Oftcom does allude to the fact that the ultimate responsibility is held by the CAA as a question of aircraft safety. The paper goes into in some detail the legal and technical aspects concerning the introduction of mobile phones on public scheduled flights. It also mentions, thankfully, the human factor. At the end of the day are we to have ‘quiet zones’ on aircraft? Are there to be large signs (under the no smoking ones) forbidding the use of mobiles in the washrooms? For the downloaded documwent - Click

Tanker RFP out soon

This is going to be very interesting. Boeing does not have this deal in the bag. Airbus' experience in tankers is a work in progress. But their 330 is more airplane the than the 767. Will Boeing come back with a 777-based tanker? Boeing is not hurting the way they did when this whole tanker mess first started. Rather than get the original deal, greed and other stuff got in the way. This has given Airbus time to create its own offering. A number of customers have signed for the 330-based tanker. The Pentagon now has a real competition for its business. ------------ Reuters -- The Air Force got the green light to relaunch the process from Kenneth Krieg, undersecretary of defense for acquisition, after a two-year study by the non-profit RAND Corporation on ways to upgrade the US fleet of 531 KC-135 tankers. Krieg signed an order late on Thursday clearing the way for the Air Force to start a competition, said Cheryl Irwin, a Pentagon spokeswoman. Rand concluded that potentially suitable tankers could be derived from Airbus's A330 and A340 as well as from Boeing's 767, 787, 777 and 747 jets. "A mixed fleet consisting of more than one of these alternative candidates also has comparable cost-effectiveness, so there is no reason to exclude a priori an Airbus-Boeing mixed buy on cost-effectiveness grounds," the study said.

A350 redesign?

Great story in USAToday (Click) Readers here will already know most of the background to it. But what is interesting for us is the fact that it describes the cash crunch at EADS. We have been expressing concern about this issue. Buying back the BAE holding is a must. Getting the A380 flying commercially is a must. Getting the A400 project done is a must. Getting the A350 to better compete with the 787 is a major must. This is a long list and EADS does not have the resources. They will have to go into debt to finance the A350 redesign. Where will the money come from? Banks, especially Euro-banks. To avoid another WTO row the loans will have to be commercial. We hear the redesign will cost around $11bn. More importantly, the redesign will also cost two years in deliveries. So lets say EADS gets the loans (without any obvious government involvement and without any WTO issues). Whats does Airbus tell its customers for the A350 who have signed? There are about 100 orders for the plane as it is now. The redesign is going to make the hull wider. This may impact the wing and main gear. Of course these changes will impact the price airlines have already agreed to pay. Besides the technical changes, airlines now have to deal with a higher price and a delayed EIS (entry into service). It is likely that A350 customers will demand compensation and Airbus will give it to keep the orders. This compensation must be added to that being given to A340-600 operators now. Whatever form the compensation takes, it costs Airbus and EADS real money. Actually there may never have been a better time to order the A350. Airlines could basically get away with a deal they could never get on a Boeing - any Boeing.

ElAl sneaking up to Airbus?

This story is rather entertaining. You may recall that ElAl is really steamed at the government since they gave access to their crown jewel route between Tel Aviv and New York to a competitor. At the time we suggested that to irritate the government the most they could do was start a dialogue with Airbus. Hey presto! ElAl is now privately owned. They can buy what they want. They will buy the 787 because its best for them. But, they first need to irritate their government - a lot. Boeing no doubt is unsure how real the courting of Airbus is. Airbus is probably also unsure how serious ElAl is. So Boeing will keep quiet in public but the phone lines are hot trying to ascertain the real situation. Boeing has lots of friends in Tel Aviv. ElAl is playing a dangerous game. If they buy 330s, it would be a temporary measure. Their old 767s will be snapped up and turned into freighters. The 350 would naturally replace the 330s. But why would ElAl buy Airbus? They just ordered two more 777s. Perhaps they want a better delivery slot on the 787? If ElAl gets Airbus worked up and then drops them in favor of the 787, Airbus will never take them seriously again. Boeing will never give ElAl a big discount again. Who loses in this game? ElAl every time. In a two horse race, being a small airline gives you very little wiggle room. ------------ El Al is seriously considering buying airplanes from Airbus Industries for the first time ever. Until now, El Al has had an all-Boeing fleet, but is on the verge of purchasing a number of Airbus A-350s and A-330s, TheMarker has learned. A high level delegation of Airbus executives met yesterday with El Al's owners and senior officials, along with representatives of the Israel Aircraft Industries, at the offices of the Borovich-Moses Group (BMG). A month ago, a less senior team from Airbus visited El Al in secret and presented management with a proposal to purchase the Airbus A-330s. Yesterday's meeting was, for all practical purposes, the beginning of negotiations over the deal, and issues such as price, delivery schedules and credit were discusse. The new planes are meant to replace El Al's old Boeing 767s.

ALPA goes mad

We just came across a scab list put out by ALPA. We live in weird times. Would any other industry do a thing like this? We sell a lawsuit coming. Hit the link before they take it down. Link

US market share of international tourism at all-time low?

This should come as no surprise to most people who have the slightest inkling of the US travel industry. In the US, Congress has repeatedly cut the budget for the US' national tourism efforts. What used to be an agency with the Dept. of Commerce (USTTA) was cut and the remnants (now known as OTTI) was pushed under the International Trade Administration. The issue, it seems, is that Congress is confused about the need for a national tourism office. The group assigned the task of marketing the US, has a budget of ~$5m. The following table puts this budget into perspective. This chart shows how much the top ten US states spend on their tourism marketing. Clearly at the federal level the US "under spends" on its marketing the country as a destination. Moreover, the Travel Industry Association (TIA and quoted below) maintains the US international tourism is at an all time low. Beware what you read. The official source of international travelers to the US is not TIA. The official source is the OTTI. Their website offers some very different perspectives on inbound tourism. Use this link . Bottom line? The US has increased its share of overseas tourism in the past two years. The US is third in the world after France and Spain as a destination. The US has a commanding lead in tourism spending. So the sky is not falling. The US is a hot destination and US taxpayers are getting this job done on a pittance. An interesting statistic would show how much spending each country is putting into its tourism marketing efforts and divide that by the number of tourists. We bet the US is in a league of its own. -------------- FT -- US market share of international tourism is at an all-time low, dropping 35 per cent between 1992 and 2004, which translates into $286bn in lost revenue, according to the Travel Industry Association of America (TIA). While about 20 US states have overseas marketing campaigns, there has not been a unified US-themed one in 15 years. The issue has become urgent as countries such as Australia and Ireland market themselves aggressively and capture greater share of global tourism. Mr Rasulo blamed the slow response from the US on lack of cohesiveness from the diverse travel industry, which broadly includes hotels, airlines, restaurants, car rental agencies, cruise lines and related businesses. "The travel industry has not spoken with a single voice," said Mr Rasulo. "We hope we're changing the channel."

Airbus rumor

This is a new one doing the rounds in certain circles - aerospace engineering circles specifically - Airbus is looking for 200 engineers in the US. Part of the pitch is that if an engineer accepts the gig, they might need to go to China as "liasion" on a temporary basis. Of course interested parties might be able to negotiate Euro-standard vacations but the money might not be good enough. And living in China, even temporarily? The best place for Airbus to find these people is in Wichita, Long Beach, Everett and Seattle. Particularly Long Beach. But Boeing does not like this poaching of hard-to-find and hard-to-keep talent. Headhunters are doing their best though.

US carriers start to turn around

The old saw is supply and demand. It appears the legacy carriers are matching these better. Supply is growing slowly while demand remains strong. With LCCs using the rising fares to cushion themselves, this rising tide is lifting all airlines' revenues. Load factors are rising, and appears to have started to remain at or above 70% regularly. It used to be, with lower fuel prices, that 65% was the nut to crack and ensure a profitable flight. Legacy airlines are still struggling with their costs, particularly labor. But as the demand holds while prices rise, the revenue gaps are closing. These gaps are no doubt much smaller than a year ago. If fuel prices soften, then we should see dramatic changes of fortune among the airlines. The latest run up in fuel prices is based on Iranian sabre rattling. The price of oil is skittish and tends to over react to anything untoward. The unfortunate truth is that the world's oil supply is located in places not known for peace and quiet. That said, oil supliers need the markets as badly as markets need oil. Prices will settle again, bringing relief to US carriers. Update -- 11:30PDT SAN FRANCISCO (MarketWatch) -- The parent of Fidelity Investments, seeing an opportunity in the downtrodden airline sector, has become the largest shareholder of United Airlines and has built up its stake in American Airlines, according to regulatory filings this week. -------------- USAToday -- To break even, this year's industrywide average domestic fare — including business and leisure fares — needs to be around $179 one way, or 21% higher than it was in the third quarter of last year, when that average domestic fare was about $148. "We're only about halfway there, measuring from the third quarter of last year," says Vijay Bathija, a senior principal with the consulting arm of the Sabre Group, operator of the Sabre computer reservations system and online travel seller Travelocity.com. Based on bookings data (not actual sales), "we think that the average domestic fare right now is only up somewhere between 10% and 13% from the fall." In January and February, the big carriers reported filling the highest percentage of seats ever for the historically slack travel months: 73.7% and 76.8.%, respectively. For all of 2005, the USA's biggest airlines filled 77% of their seats, a record according to the Air Transport Association (ATA). Last week, most of the big carriers reported record March load factors near or above the 80% mark. • The average domestic fare paid per mile flown was up 12.5% in February from a year earlier, when fares were the lowest ever in inflation-adjusted terms. A 2,000-mile trip that cost, on average, $229 in February 2005, was up to $258 this past February. •The price of the typical one-way business fare between Chicago and Washington was $339 in early April, up 71% from a year earlier, according to price-tracker Harrell Associates. The demise in January of discounter Independence Air, based at Washington Dulles, influenced that jump. But the defunct carrier was not a factor on many routes, such as Detroit-Los Angeles, where the business fare was $599 in early April, up 29% from a year earlier. • A broader sampling of business travel fares done by American Express Business Travel shows that the average one-way business fare rose steadily through most of 2005. For 329 popular domestic routes, it reached $223 in the October-December quarter, up more than 10% from $202 from the first quarter of the year. • Southwest Airlines, the giant discounter popular with leisure travelers, pushed its average one-way fare above the psychologically important $100 mark on March 10 when it added $2 to $4 each way to most fares. It also raised the absolute cap on its fares by $10, to $309 one way.

MRO - On the Brink of Structural Change

This white paper, by Ernest Arvai President of The Arvai Group, considers the future of the MRO sector from a strategic perspective. An analysis of the forces driving the industry results in an analysis of likely future developments and the relative impacts they will have on industry participants. This insight becomes very important in light of Boeing offering its own product support on the 787 for example. o There is a coming revolution in MRO for commercial aircraft. o What innovative products and services will be introduced? o How will those products shift, and who will offer them? o How will the structure of industry participants be changed? o Will new alliances be created? o Will PMA Parts grow to have major impact, or be thwarted? o What will airlines outsource, and what will they maintain in house? o How will airline-affiliated MRO providers be impacted? o What will be the economic and commercial impacts of new technology components on MRO? This 15 page strategic summary is available for $99.95 here

Credit Card Fees - the next cost cutting item among airlines

No cost is too small and OK to ignore.  Airlines are embracing e-commerce with a vengeance.  The surprise here is that Qantas is the first mover.  We would have expected a US carrier (Southwest at least?) or perhaps even BA.  But before the month is out, this issue will be all over. Get your debit card ready.  Airlines are getting into the habit of charging you for everything they can.  Every $1 they can hit you for is good clean, new revenue.  If every passenger in the US paid but $1 more, airline revenues would skyrocket by nearly $800m in 2006.

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Qantas is to introduce a cash payment option on qantas.com and move to a flat fee for credit card payments from 24 May 2006. Customers can purchase tickets, using BPay, up to seven days before departure.

 

Qantas Group General Manager Sales and Distribution Rob Gurney said that the airline’s credit card surcharge from 24 May would be A$4.40 for domestic and trans-Tasman bookings and A$12 for international bookings, charged per passenger per booking and covering all sectors in the booking.  “The change from our current percentage based credit card surcharge is simpler for customers, who will know from the outset the cost of using a credit card to buy an airfare.

 

“The flat rate will mean that some customers will pay less in fees,” he said. “For others the cost may be slightly more, however BPay will provide an alternative payment method where no fees apply.”
 

 

 

'Babyboomers' have highest look-to-book ratio

The piece below confirms what Richard Eastman said to us late last month.  Baby Boomers have the money and are a very significant part of the online travel buying public.  Note the piece mentions only 10% actually book online although they are voracious readers of content.  This is the generation that is used to working to find information as opposed to younger generations would have less patience and endurance for "work".  The younger you are, the less brand loyalty you have and conversely the older you are the more you value a brand you know and trust. --------------------- A VC-backed research group has issued a US-focused study which looks at how different age groups book travel online.

Boston MA-based Compete found that babyboomers – people aged 45-64 - are most likely to book online. It says that ‘10% of the 17m babyboomers who research travel online will also book online...’ Babyboomers are also the most voracious researchers, looking at an average of 36 pages of content when researching. Other headline findings from the study show that ‘young travellers’ – the 18-24 age group – are most likely to book at price-focused online travel agencies, visiting an average of 1.7 OTAs when researching. Only one in five will book travel without visiting an agency site. At the other end of the demographic scale, seniors – 65+ -  are the most likely to go supplier direct. Airline sites account for 80% of all seats bought by seniors, compared with 72% for the 25-34 age group. And 68% of seniors’ hotel bookings are made at the hotel site. Gregory Saks, a senior associate at Compete, said: ‘Travel marketers that develop content, services and promotions targeted as different age groups will be ideally positioned to more effectively manage their online distribution strategies.’ The VCs behind Compete are Charles River Ventures, William Blair Capital Partners, Split Rock Partners, North Hill Ventures and Idealab!.

 

 

 

A Pilot's life - yo ho, yo ho, a pilot's life for me

The current fracas at Delta gives one pause. Are the pilots nuts or smart? The same question applies to Delta's managers. Federal Air Regulations (FAR) limit commercial pilots to 1,000 flying hours in any 12 month period. Dividing 1000 hours by 52 weeks in a year and you get ~19 hours on average that a pilot is allowed to work on a weekly basis. Monthly the average allowed by FARs is a little over 83 flying hours per month to remain with the 1000 hour 12 month limit. CBS reported in December 2005 that Delta, the nation's No. 3 airline, has said in bankruptcy filings that its 6,000 pilots make an average annual salary of $169,393. So on average Delta's pilots are making over $150,000 per year and they work (under FAR) for about a half-month. Imagine, if you will, that your job paid that and you had a work rule imposed by the government that you only worked 2 weeks per month. There is no information on what the average manager (non-pilot) at Delta earns. But we know its likely to be under $150,000 and it certainly is for at least 160 hours per month. We fully expect to get comments from pilots complaining about the numbers and our not understanding what really goes on. Before that happens, let us give a tad more perspective. Carl Kuwitzky, a vice president for the union, said in an interview Wednesday with The Dallas Morning News that the union has been improving its partnership with Southwest. "Our pilots have no problem working hard," he said. The airline's 4,700 pilots had about 67 hours of actual flying time a month before the latest agreement, reached Nov. 6, goes into effect. Southwest pilots used to average about 70 hours a month a decade ago, the carrier's union officials say. But as the pilots have gained seniority, they've also earned more vacation. Moreover, a 777 Captain at American flies 320 people for ~$170/hr while a Southwest Captain flies 150 people for ~$190/hr. However, Southwest's model is vastly more efficient. Whereas an American 777 pilot will fly the 777 for say 10 hours, he/she then takes 24 hours off and comes back with 320 people. That means 640 passengers in 3 days. During the same period, a Southwest pilot will have carried people for three days, likely flying six legs per day with over 100 people per leg. That means while an American 777 captain transported 640 people in three days, the Southwest captain transported about 1,800. While we used the example here of American (based on data we found online), it could just as easily been Delta or United or Northwest or Continental. We came across a fascinating theory put forward by Sam Fairchild, a well-known aviation industry consultant. He proposes, basically, that airlines split themselves into two separate groups. One handles all customer facing issues - call this company A. The other handles all flying issues - call this Company B. Company A then contracts with Company B for transportation. You could see what happens next, if Company B becomes too expensive, Company A can shop around. This model will quickly ensure that Company B never has the power it has within a combined airline structure as it does now. What happens now, in an airline, is massive transfer pricing from everything in the company to those protected by FAR - with the exception of the great and greedy who run the company, of course.

Its not all Boeing

Getting lost in all the fuss and bother over the A350, Airbus is building its single-aisle planes as fast as it can. The story people should be following here is the 737 vs. 320 production. Most orders are coming in for these airplanes. There is a great battle going on between factories to get these planes to their customers. Knowing this one might ponder production build quality - are these planes coming out with no pre-delivery issues? We are watching for build quality changes. -------- ATW -- Boeing holds a healthy lead over Airbus in terms of new orders for March and the first quarter of 2006, while Airbus delivered more aircraft in the quarter. Turning to deliveries, Airbus had a slim lead through March 31, having delivered 101 aircraft in the first quarter versus 98 for Boeing. Interestingly, Boeing actually out-produced Airbus in March, handing over 41 jets versus 33 for its rival.

Apple talks to IFE developers to bring iTunes to seatbacks

You have been reading here about our thinking on this matter for some weeks. At last its in the open. Apple is the best thinking firm in the mobile entertainment space. We have recommended that travelers use their miles to download content not only on Apple devices. This could be used for movies and other content, too. The upstream value for airlines is clear - they can get rid of the in-seat equipment that breaks. Airlines can become conduits for content and get paid for this. For instance, iTunes charges 99c for a song or $10 for a whole CD. Instead they could charge 2,500 miles for this and use up miles at a higher value than giving aways tickets. Airlines have embraced e-commerce and are hunting for ways to get higher share of wallet. Travelers clearly don't want to pay more for seats. Michael O'Leary should love this model. The increased use of mobile devices that entertain and provide communications (hello iPhone?) need a lot of storage. Flash memory requirements are going to get bigger. In the US, if 1% of travelers buy downloaded content at $1 per time, airlines could see a huge rise in revenues. In 2003 (last year of data we found on DOT's website) there were 646 million enplanements. Traffic has jumped since then, we estimate 715 million for 2005. No wonder Apple is taking a hard look. ---------- FI -- IFE providers aim to lure Apple on board aircraft as Panasonic launches broadband and Thales system is approved Aircraft in-flight entertainment (IFE) system providers have held talks with Apple Computer on the possibility of licensing its iTunes media download software for airlines' own systems, enabling passengers to use frequent-flyer miles to download music and videos on to iPod MP3 players in-flight. Downloads are one of a range of concepts being explored by suppliers such as Thales and Panasonic in response to airline requests to expand the range of on-board applications. “We’ve had lots of discussions with Apple,” said Thales vice-president and in-flight systems general manager Brad Foreman last week at Aircraft Interiors Expo in Hamburg. “The key is to get them to see the value of hosting iTunes on an aircraft. Is it a big enough market for them to be interested in? I’d try to do it tomorrow if they said yes.” Panasonic Avionics strategic product marketing director David Bruner agreed that “there’s a lot of airline interest” in the idea of hosting iTunes. “Apple is aware of the market,” he said. “It’s a small market for them, but it’s a very visible market.” But Bruner added: “Our interests are wider – not just Apple, but enabling any e-commerce on the aircraft. Music is one thing in that category we are working on.” Apple refuses to confirm or deny the talks, saying "Apple never talks about the future." Several airlines have requested building iPod docks, or Universal Serial Bus (USB) portsin seatbacks, allowing passengers to browse iTunes through the airline's IFE system before transferring music directly to the MP3 player. Flights could be an ideal time during which to download songs, but currently it is restricted to those passengers with laptops flying on a flight with a wireless network. In order to license an onboard system offering, Apple would have to re-engineer the software to allow songs downloaded mid-flight to be transferred back on the customer's computer hard disk, currently prohibited. Apple would also encounter licensing issues similar to those faced by in-flight telephony providers over where copyright and sales data are recorded for media downloaded in international airspace, according to industry insiders familiar with the negotiations. During the Interiors Expo show, Panasonic announced plans to boost its IFE offerings by launching a broadband data communications service over Ku-band satellites. The company expects to reveal subcontractors for the project and its first two airline customers soon. “Communication is the hot thing for the next two to three years,” said Bruner. “Connexion by Boeing has proved there is a market for broadband.” Panasonic will also support AeroMobile’s service, enabling passengers to use their mobile phones. Meanwhile, Thales’ TopSeries i-4500 has been approved for use on Air Canada’s Embraer 175 and 190 regional jets, making the French company the first supplier of an in-seat, all-digital IFE system for the Brazilian manufacturer’s aircraft. The video and audio on-demand system dispenses with the need for a box of electronics under each passenger seat.

SAA joins Star Alliance

Star Alliance is welcoming South African Airways (SAA) as its 18th member into the alliance. Star Alliance is the first aviation alliance to include an African airline and SAA is the first airline from Africa to have joined such an alliance.

BTC weights in on Wright Amendment

Group urges Mayors to focus strictly on public interest Calls on Southwest to move to DFW, but cautions American to be careful what it asks for RADNOR PA., April 10, 2006–The Business Travel Coalition (BTC) today published analysis and conclusions regarding the Wright Amendment controversy after a 5-month due diligence initiative. In a letter to Dallas Mayor Laura Miller and Fort Worth Mayor Mike Moncrief, BTC urged the officials to consider BTC’s findings as well as Senators James Inhofe’s (R-OK) and Tom Harkin’s (D-IA) proposed legislation, S. 1425. According to the Coalition, if the Mayors and City Councils pursue what’s in the highest and best public interest versus what’s in American Airlines’ or Southwest Airlines’ interest, then business travelers in Texas and around the country will benefit enormously. It is BTC’s conclusion that the public interest is best served by Southwest Airlines moving to DFW, a move advocated by DFW and American. BTC Chairman Kevin Mitchell cautioned though, “Some may think such a move would be a dancing-in-the-street solution for American, but the airline should be careful what it asks for. Did US Airways invite Southwest into its hubs at Baltimore , Philadelphia and Pittsburgh ; United, Denver and Dulles? Of course not. Southwest’s entry to DFW would be a serious threat to American wherein the only winners who matter would be the consumer and the taxpayer.” The BTC Report can be downloaded at http://btcweb.biz/wright.htm.

New business class airline to launch

As if the New York-London market does not have enough capacity. eos and MaxJet are already there and then there are the legacy carriers. How does this airline think its going to get any traction? What is so compelling about their offering? To think that their market research is suffcient reason to create this new airline seems like a long shot. The good news is, of course, that it makes the market more interesting. we're all for that. -------------- CNN - British and American business travelers will soon have a new low-cost airline to choose from for flights between London and New York. Silverjet is expected to start its Luton to Newark business-class service six to nine months after it lists on London's Alternative Investment Market (AIM) in May. Silverjet announced on Monday that it hopes to raise £25 million ($43.5 million) from institutional investors. The company eventually wants to run a 10-aircraft fleet to other destinations. All 100 seats onboard the aircraft will have flatbeds and a full business class service will be offered, the company said. There will also be significantly reduced check-in times -- as little as 30 minutes. The airline will be based on a similar model to short-haul budget counterparts easyJet and Ryanair. The first all-business airlines offering low-cost fares, MAXjet and eos, began operating between London and the U.S. in November. Silverjet chief executive Lawrence Hunt has been working on developing the business for two years. Hunt has been involved in six start-up businesses since 1984. He told the UK's Press Association that big airlines gain most of their profits from premium customers and lose money in economy class. In effect, business class passengers were subsidizing economy class passengers, and by losing economy seats, prices can come down without any compromise in service, he said. "Market research has shown that passengers are currently not satisfied with the value of business class services on offer," Lawrence said. "We therefore believe that there is a real demand for a long-haul airline, operating on a low-cost basis yet offering a high-quality, business-class product." Peter Owen, a former British Airways operations director, is Silverjet's chairman, while John Bavister, a former Thomas Cook and Airtours executive, is finance director. Following the float, Mr Hunt will own a 10 percent stake in the business while a further 10 percent will be owned by the other five members of the management team.

Dummy of the week #9

A man has been living at a Paris airport since 1988. He could be any passenger waiting for a flight, sitting patiently on a red plastic bench in Charles de Gaulle Airport's Terminal One, luggage piled neatly by his side. He sips a cup of hot chocolate and scans the crowd, occasionally cocking his head to listen to the airport announcements. He peruses a book, Hillary Rodham Clinton's "It Takes a Village." But Merhan Karimi Nasseri is going nowhere. He has been waiting for a flight out of France, he says, for 10 years. Nasseri was expelled from Iran a decade ago for his political views. Through a series of fateful missteps, he landed here without any documents. Since then, Europe's increasingly stiff stance toward refugees and his fragile mental state have kept him at the airport here in legal limbo. His is a story of broken hopes and bureaucracy, of a trip across Europe in search of a homeland that became a journey into mental chaos and despair. And it is a story of a man who has searched for his family, only to find an adopted one here, at Charles de Gaulle. "He's like a part of the airport. Everyone knows him," says Muhamed Mourrid, the manager of the Bye Bye Bar, pointing to the spot where Nasseri, 47, has lived for a decade. "That's his table, his chair, his place." Adds Marise Petry, a Lufthansa clerk, "He's one of us. We even get letters for him." Among the annals of horrific refugee tales, Nasseri's story is remarkable for its pathos and complexity. It begins in Iran in 1977, when Nasseri, fresh from studying in England, was expelled for protesting against the shah. His expulsion left him without a passport. Nasseri came to Europe. He bounced from capital to capital, applying for refugee status and being refused, again and again, for nearly four years. In 1981, his request for political asylum from Iran was finally granted by the United Nations High Commission for Refugees in Belgium. That decision gave him refugee credentials, which in turn allowed him to seek citizenship in a European country. The son of an Iranian and a Briton, Nasseri decided in 1986 on England with the hope of finding relatives there. He got as far as Paris, where in 1988 his briefcase containing his refugee documents was stolen in a train station. Nasseri boarded a plane for London anyway. But when officials at Heathrow Airport found he had no passport, they sent him back to Charles de Gaulle. At first, the French police arrested him for illegal entry. But as Nasseri had no documents, there was no country of origin to which he could be deported. So he took up residence in Terminal One. From its circular confines, he and his attorney, the Paris-based human rights lawyer Christian Bourget, battled to define his status and send him to London. In 1992, a French court finally ruled that Nasseri had entered the airport legally as a refugee and could not be expelled from it. But the court could not force the French government to allow him out of the airport onto French soil. In fact, Bourget said, French authorities refused to give Nasseri either a refugee or transit visa. "It was pure bureaucracy," said the lawyer. French immigration authorities have no comment on the case. Bourget and Nasseri then focused on Belgium, where they hoped to reclaim Nasseri's original refugee documents. But Belgian refugee officials refused to mail them to him in France. They argued that Nasseri had to present himself in person so that they could be sure he was the same man to whom they had granted political asylum years before. But, inexplicably, the Belgian government refused at that point to allow Nasseri to return there. And under Belgian law, a refugee who voluntarily leaves a country that has accepted him cannot return. In 1995, the Belgian government finally told Nasseri that he could retrieve his refugee documents if he agreed to live in Belgium under the supervision of a social worker. Nasseri refused. He said he would move only to Great Britain. And so here he has remained, year after year. At first glance, the dignified man does not appear to be a refugee who sleeps on an airport bench because he has nowhere else to go. His clothes are clean, his moustache well-trimmed. He keeps his one blazer covered with plastic wrap, hanging from an airport cart. His belongings are carefully packed in a frayed suitcase and a stack of Lufthansa boxes. Nasseri nods hello to a clerk, who calls him "Alfred," his nickname here. He follows the news closely, thanks to the most recent Time magazine, which the postman has just dropped off. And he loves to discuss the new selections from the Book-of-the-Month Club. "I just keep on reading, every day," said the soft-spoken Nasseri, a courtly gentleman who rises and offers his seat to a visitor. "I just keep waiting here." His pallid complexion is testament to his inability to cross the airport threshold to the outside world. He walks to the doors of Terminal One and absorbs fresh air as they swing open. But he never steps outside. His hollow cheeks and thin frame show the limits of the generosity of airport staff and strangers to help with his meals. Nasseri's confused account of his plight speaks to the psychological price he has paid in his fight to become a man who belongs somewhere. "Nobody could suffer all he did and stay normal," noted Bourget. The sad truth is this: After fighting for years to leave the airport and apply for citizenship elsewhere, Nasseri was afraid to do so when the opportunity arose. Belgium offered Nasseri the chance to settle there, but he refused. "Now, I think he will stay in the airport until he dies," Bourget concluded softly. His bizarre tale has brought him a degree of fame. He has been the subject of news reports from Finland to Britain. His life story became a 1994 French film, starring Jean Rochefort. Nasseri gets fewer visitors now to punctuate the long days down on Terminal One's boutique level, ringed with stores and small cafes. But he still has a following who help clothe and feed him and lift his spirits. "He does no harm to anyone," said Papa Starr, manager of the Les Palmes restaurant. "Everyone cares for him here." Several times a week, the airport priest stops by to visit him, as does Dr. Phillipe Bargain, the airport doctor. Many staff regularly visit him at his table for a cup of coffee and a chat. "I get lots of cards at Christmas," he said. "I call it my American Christmas." His life follows the quotidian airport cycle. He wakes at 5:30 in order to shave in the men's room before passengers arrive. He reads all day long. At night, he waits until the airport stores are locked before he brushes his teeth with the toothbrush and toothpaste from a complimentary airline travel kit. Weekly, he rinses out his clothes overnight in the bathroom. Nasseri is renowned throughout the airport for his refusal to ask for help. "We have a colleague who gave him clothes, but he returned them, saying 'I'm not a beggar,'" said Crystelle L'Hospitalier, a Lufthansa clerk. But he has to eat, and accepts occasional meal vouchers and francs from stewardesses and airport staff. As the years have slipped by, it has become increasingly clear that Nasseri will never leave Charles de Gaulle. His airport years have made him "crazier by the day," on the topic of his future, said airport doctor Bargain. When he talks about flying to London, the staff here greet him with understanding smiles. "An airport is kind of a place between heaven and earth," said Danielle Yzerman, spokeswoman for Charles de Gaulle. "He has found a home here."1 Nasseri, who has since adopted the name "Sir, Alfred Merhan" (that's not a typo — Nasseri took both the title and its misplaced comma from a mistake in a letter from British immigration), has changed the story he tells about his background several times over the years: Over the years, he has claimed many things about his origins. At one time his mother was Swedish, another time English. Nasseri's effectively reinvented himself in the Charles de Gaulle airport and denies these days that he's Iranian, deflecting any conversation about his childhood in Tehran. ("He pretends he doesn't speak Persian," his longtime lawyer, Christian Bourguet, says. "He was interviewed by Iranian journalists and made believe he didn't understand.") When we first met two years ago, he insisted that the United Nations High Commissioner for Refugees was attempting to locate his parents in order to establish his identity. But a spokeswoman for the agency dismissed the assertion as "pure folly." Early on in his saga, Nasseri maintained that he was expelled from his homeland for antigovernment activity in 1977. According to a number of reports, Nasseri protested against the regime of Shah Mohammed Reza Pahlevi while a student in England, and when he returned to Iran, found himself imprisoned, and shortly thereafter exiled. He bounced around Europe for a few years with temporary refugee papers, alighting finally in Belgium, where he was awarded official refugee status in 1981. He traveled to Britain and France without difficulty until 1988, when he landed at Charles de Gaulle airport after being denied entry into Britain, because, he contends, his passport and refugee certificate were stolen in a mugging on a Paris subway. Nasseri could not prove who he was, nor offer proof of his refugee status. So he moved into the Zone d'attente, a holding area for travelers without papers. He stayed for days, then weeks — then months, then years. As his bizarre odyssey stretched on, Bourguet, the noted French human rights lawyer, took on the case, and the news media piled on. Articles appeared around the world, and Nasseri became the subject of three documentary films. (Oddly, apparently none of his friends or relatives have attempted to contact him.)2 Nasseri is known for his honesty (when he isn't talking about himself) and his refusal of charity. On two occasions he turned in billfolds full of money that had been mislaid by passengers. Airline and airport personnel push meal vouchers on him so he can eat. "French fries are my favorite," he confides. "It's not a very healthy diet, but I get enough." On 17 September 1999, an international travel card and a French residency permit were put into Nasseri's hands. With them, he's now free to leave the airport, either to take up residency in France or to fly to another country that will allow him entry. He refuses to sign them, however, because they list his nationality as Iranian, and he wants it listed as British. He remains at Charles de Gaulle airport, using the excuse that he's determined to stick to this point rather than face life outside the terminal: [In 1999] he finally got permission to leave the airport — in fact, he can now go wherever he likes in Europe. The problem is, he no longer wants to. "He is scared to leave this bubble world he has been living in," said Dr. Philippe Bargain, the airport's medical director. "Finally getting the papers has been a huge shock to him, as if he was just thrown from his horse. When you wait 11 years for something and suddenly in a few minutes you sign some papers and it's done — imagine what a shock that is." "He will have to be weaned from the airport, like an addict really." Dr. Bargain said. "Still, it does make you wonder what kind of a society we live in that this can happen to a man."3 As of 2005, Nasseri is still living in the airport. He does not lack for money, as Dreamworks paid him a rumored $250,000 for the film rights to his story.

DFW & Love Field

Last week we interviewed Bernhard Weinstein, Professor of Applied Economics at North Texas University. An attempt to interview a DFW official was rebuffed because, he advised, DFW is in a "quiet phase". Prof. Weistein proved to be a good substitute. The podcast of the interview is still being prepared and will be available on the IAGportal (see link above). A key point made in the interview is that the Wright Amendment was poor legislation. But that does not mean its removal would help the DFW Metroplex now. The region has so much invested at DFW, anything that negatively impacts this regional asset will hurt a lot. Love Field is constrained and Southwest has limited options there anyway. No wonder there are rumblings about moving the entire Southwest HQ operation to somewhere else, like Phoenix. So, if Southwest were to quit Love Field and move into DFW, that airport will be protected inasmuch that it needs (desperately) Southwest's traffic flow. DFW carries a lot of debt, the ratings on which can only improve with Southwest's arrival. However, with DFW apparently run as an American Airlines resource, Southwest may have to be forced to move there. The idea of a regional airport authority is a smokescreen, it appears, for the eventual closure of Love Field and forcing this move. So it seems the real story here is not so much the protection of American Airlines, as it is the protection of DFW. Metroplex residents might lose much more if DFW cannot pay down its debt. And this is why so many people want to close Love Field. That has to leave people at Southwest wondering about going to DFW and being in an environment controlled by American's allies. Maybe Phoenix looks better every day. We certainly don't see Southwest needing to bend to the concerns and fears of the Metroplex. Indeed, were Southwest to move its base to Arizona, the Metroplex will lose anyway. Southwest can write its own ticket. Seattle had to face that reality recently. The Wright Amendment looks more complex every day, providing little wiggle room for anyone. It may in fact be in Southwest's interests to get out of town. That would minimize its exposure to the forces at play, trying to protect DFW and the complexities of dealing with American Airlines. Of course any drawdown by Southwest in North Texas means even higher fares in the Metroplex. This whole business looks more and more like a Mexican standoff. We're betting on Southwest doing a pre-emptive strike.