Airbus AD - Embarrassing

AD: Airbus Pilot Seats

Tue, 31 Oct '06 Pilots Could Lose Control If Seats Move

Years ago, Cessna was hit with an Airworthiness Directive (AD) to ensure that its pilot seats would not suddenly fly back on its rails when the aircraft took off. The effect of a pilot pulling back all the way back on the yoke during departure could certainly be catastrophic and several planes went down when the pilots lost control after their seats moved all the way aft. The fix was a simple metal lock, to ensure the seats stayed where the pilot placed them.

Now, the FAA has issued an AD (2006-22-04) for just about all Airbus aircraft currently flying, for essentially the same reason.

Of course, on a fancy airplane like the Airbus, it's not just a simple pin in a hole along the seat rail that keeps the seat in place. An actuator used to move the pilot's and co-pilot's seat forward and aft, must be inspected because of reports of heavy wear to the gears. The fix will, as the FAA says, "prevent uncommanded movement of the seat during takeoff or landing, which could result in interference with the operation of the airplane and consequent temporary loss of airplane control."

(As any pilot will tell you who has had his seat roll back during take-off, there is no more helpless feeling as you watch your instrument panel disappear in the distance, or hold onto the yoke like a grab bar and find the nose angling up like an F-15 on afterburner. If you are wearing one of those seatbelts that automatically cinch up to prevent any slack, the results can be quite frightening. If you don't have a copilot, timely recovery may be impossible -- Ed.)

The FAA airworthiness directive matches a French AD, and is estimated to affect about 743 airplanes of US registry. It becomes effective December 4, 2006.Costs of Compliance This AD affects about 743 airplanes of U.S. registry. The inspection takes about 1 work hour per airplane, at an average labor rate of $65 per work hour. Based on these figures, the estimated cost of the inspection for U.S. operators is $48,295, or $65 per airplane. The replacement takes about 8 work hours per seat per airplane, for a potential total of 16 work hours per airplane, depending on the number of actuators identified, at an average labor rate of $65 per work hour. The manufacturer states that it will supply required parts to the operators at no cost. Based on these figures, the estimated cost of the replacement for U.S. operators is between $386,360 and $772,720, or between $520 and $1,040 per airplane.

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Emirates desire for deliveries and its need for pilots

This airline is now the world’s most voracious.  It wants its planes ASAP.  As of October 1, 2006, Emirates had 98 aircraft in its fleet – a mix of 88 Airbus and Boeing passenger aircraft and nine freighters.  Emirates’ US$9.7 billion order was the largest ever for the Boeing 777 family.  The confirmed order brings Emirates’ total order book to approximately US$35 billion worth of aircraft. 

 

To attract flight deck crew the airline is offering the following:

 

	CAPTAIN	FIRST OFFICER
Salary/month/tax free	$7,666	$5,372
Productivity (>78hrs/month)	$125/hr	$88/hr
Annual Leave	42 days per year

Based on US averages, Emirates needs about 14 pilots per plane or a crew roster of 1,372.  As of March 31, 2006, Emirates had 1,350 captains and first officers representing over 70 nationalities. All seems great, right? Not so fast.

 

Apparently being a pilot at Emirates is a bit unsettling also here.   The data in the table above comes off the airline’s web site.  A simple browse through the links above will quickly show that in fact pay rates are higher than on the web site – captain’s make closer to $15,000 per month and F/Os make around $10,000 per month. Besides the PPrune.org site linked to above, here is another site for recommended reading.

 

To get an idea of Emirate’s pay scales, we recommend another site that lists the numbers.  Captains at major airlines in the U.S. have an average salary of $129,250 per year.  Here is another site worth looking at to get a pilot view of the world.

 

Back to the thread.  There are reports that Emirates has a “shortage” of pilots.  This may not be in absolute terms as we can see the airline has the appropriate number of crew per plane.  However, the pilot roster may not have enough mix to the levels required for certain routes – particularly 777-300ER pilots.  This means that a number of Emirates 777s are not be used to maximum efficiency.  This puts that big order number at the top of this story in a new light. It also means that analysts might want to reconsider Emirates ROI on that order.

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VOIP & UAE

We reported some time ago that Skype no longer works in the UAE. Somehow the government has managed to close that loop - making residents there pay the full price of phone calls.

Well as you know from reading this blog, we are steadfast in one thing - calls should be free. Why pay for phone calls? That's so last century.

OK, we found something that still works - Google chat. Somehow this still functions when calling the UAE. Perhaps Google has local servers that allow the VOIP to slip through? By the way, the call quality is awesome. We could hear traffic in the street outside, it was that clear.

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A380 Begins technical route proving process

The Airbus A380 starts its technical route proving exercise on 13th November 2006 to carry out function and reliability tests at key airports around the world. This exercise is the last of the trials required for Type Certification, which is expected in mid December. For the trial, the aircraft has to make over 150 flight hours on a continuous typical airline schedule, performing in its normal operational environment. The aircraft will be operated by Airbus flight crews with the participation of Airworthiness Authority pilots from both EASA and FAA.

The aircraft used for the trial is A380 MSN002 and is powered by four Rolls Royce Trent 900 engines. Starting from Toulouse, France, it will be visiting ten different airports in four trips. They include Singapore and Seoul during the first trip (14th and 15th November), then Hong Kong and Narita on 18th and 19th November. The third trip brings the aircraft to Guangzhou (22nd November), and Beijing and Shanghai (23rd November).

The fourth and final trip will take the A380 around the globe, via both poles. It will depart Toulouse to reach Johannesburg on 26th November, and then fly over the South Pole en-route to Sydney where it will arrive on 28th November. From Sydney, it will fly across the Pacific to Vancouver (29th November) prior to returning to Toulouse via the North Pole.

During this technical route proving exercise, the A380 will have to demonstrate that it can be turned around as per normal airline operations. Tests will cover, amongst other things, checks on standard aircraft maintenance and behaviour, as well as typical airport operations and compatibility. These will include monitoring functions such as bridge docking, cleaning and catering, refuelling and boarding procedures.

Five development A380s have now flown. Four aircraft, one of which is powered by the Engine Alliance GP7200 engine, are now actively involved in the intensive flight test programme, which has already reached over 730 flights and 2,300 flight hours. The fifth aircraft is undergoing cabin installation in Hamburg. Firm orders and commitments for the A380 currently stand at 176 aircraft for 16 customers.

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Student shows how to beat US airport security

[UPDATE: see these sites: Slashdot, before the Feds bust the guy, they might consider busting Senator Schumer as well]
Go figure. This story speaks for itself. ------------ Travelmole -- A graduate student showed how easy it is to get around the US's no-fly list by printing fake boarding passes.

"Before, any 12-year-old could have done it. Now any 30-or 40-year-old could do it just as well," Christopher Soghoian told the Associated Press.

He is a 24-year-old doctoral student at Indiana University who set up a Web site that prints fake boarding passes. He said he did it to show that the Transportation Security Administration (TSA) is not serious about security.

Terrorists on the no-fly list could use a fake boarding pass to avoid the list because ID's are checked only when the passenger passes through TSA screening.

There have been recent reports of travelers flying without any ID at all, which shows the "no-fly list does not work," the student said.

He admitted that the fake boarding pass could not get anyone onto a flight because the bar code wouldn't match other information on the pass.

The response of the TSA?

"Showing fraudulent documents to get through security is against the law," said a spokesman.

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Internet surpasses GDS in hotel bookings

A sign of the times? Next up, airline sales. ---------- Travelmole -- For the first time, internet reservations surpassed GDS reservations, according to TravelCLICK's second quarter eTRAK results. The results showed the internet contributed more than 37% of the total Central Reservation Office (CRO) reservations at major hotel brands, which was almost a 20% increase compared to the same period last year.

GDS accounted for just over 36% or more than 7.4 million bookings.

The eTRAk report showed that voice represented the remaining CRO reservations, but that number was down by more than one percent. It's believed that phone reservations will continue to decline but that they still offer an alternative for older bookers, as well as those with limited or even no internet access.

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Skybus better change the website...

Remember this picture? Upstart Ohio Airline Purchases a Fleet of Airbuses

Eric Torbenson
The Houston Chronicle

Skybus Airlines, a new Columbus, Ohio-based carrier that plans to start service next year, has agreed to buy 65 Airbus A319s for delivery beginning in 2008.

The order, with a list price of $4.3 billion, would be one of the largest Airbus aircraft sales to a U.S. startup airline, Skybus said Thursday.

The closely held airline said it will begin flights from Columbus in April with four leased A319s that are painted shades of orange.

Skybus will face competition from Southwest Airlines and JetBlue Airways, which began service from Columbus to New York on Oct. 3.

"It'll be an uphill battle" for Skybus, said George Hamlin, a consultant at Morten Beyer & Agnew in Arlington, Va. "Southwest is growing at Columbus, and Southwest doesn't play well with others."

Southwest controls 22 percent of the market at Port Columbus International Airport.

"We're not about to relinquish the low-fare leadership position," said Ed Stewart, spokesman for Dallas-based Southwest. "They're just another competitor."

JetBlue spokeswoman Jenny Dervin said the carrier's growing network and in-flight television are more compelling to Columbus travelers than a potential startup airline. New York-based JetBlue ordered 75 Airbus A320s in 1999 and began flying in February 2000.

Skybus didn't say how much it will pay for the Airbus planes. Airlines generally get substantial discounts for large orders. In standard configuration, the single-aisle A319s seat 124 passengers, although Skybus may use more seats because it won't offer first-class service.

Skybus aims to start flying to "major markets" from Columbus in April, spokesman Bob Tenenbaum said, declining to be more specific. Fares "will be lower than any other airline serving the city," he said.

The Department of Transportation on March 14 granted Skybus permission to operate commercial flights in the U.S. and Canada.

"Our business model is not to take business away from other airlines, but to compete with the family automobile and the price of gas," Chief Executive Officer Bill Diffenderffer, 56, said in an interview. "People make flying decisions on the basis of price and schedule, not in-flight TV."

Also this week, Airbus said it will set up a plant in China to win a greater share of sales there. The factory in eastern China, Airbus' first final assembly plant outside of Europe, will eventually produce as many as four of the A320 planes a month, Chief Executive Officer Louis Gallois said.

China also ordered 150 of the A320s.

---

 

Could be that Airbus will have a customer for some of those deferred jetBlue aircraft. It is curious as to why they shifted from Boeing to Airbus. Hoping for a delay?   The amazing part is that this carrier will get off the ground sooner than Virgin America. The question is whether they will still be in service when VAm gets into the air.

 

Notice they are using Orange for their aircraft. I doubt whether this is harkening back to Braniff or even Southwest. How about Easyjet? Interesting.

 

At one point in American aviation history, no one, except Wein, had a solid blue tail. Then everyone did. For while only NWA had a red tail. Later there were multiples. At one point everyone, except American, Braniff, and Southwest, and Wein, had a base white a/c scheme. Now the country is a lot more diverse. Is orange about to be come the universal color for savings?

 

But speaking of Southwest, it is interesting they are targeting 'the family automobile and the price of gas' as their competition. Can't run an airline like this exclusively on leisure travelers, first of all. Second, the true advantage with the A319 is going to come with segments longer than 400 miles, and most people in cars are traveling much shorter distances than that. I don't think your primary target is a businessman doing CMH-DEN. Being in CMH, you want the biz pax who are willing to pay for the nonstop, as opposed to the soccer moms who don't mind dragging two screaming, kicking 6-year olds through an airport terminal to save $30 a head! Finally, the CMH leisure market isn't really large enough to support a hubbing carrier. It ranks below IND and ORF, but above CLT and SLC, as I recall, in population. IND and ORF aren't hubs, while CLT and SLC are based primarily around flow traffic.

 

At least they are going for the flexible A319 for their choice. 130-ish seats. Still a little too rich for this particular market, I believe. It could be, given the range they have available, that some other point-to-point services, from markets similar to, but not limited to, Columbus, could catch their attention. After all, the way to keep costs low is to have more seats in the mix. Gotta think they are aiming at high utilization, which could mean transcons during the overnight period. I don't think CMH lends itself to many red-eyes. Some part of me still thinks this carrier could have done well with the ERJ-190s. Perhaps jetBlue could swing a deal. This makes me think back to Braniff and how it was always assumed that if the air travel market totally tanked, Braniff was in a good position as they could put their relatively new fleet of 727s up for sale. Didn't work out that way.

 

The real danger to jetBlue and Southwest is that they don't take this carrier seriously. I know I am having a bit of a problem with doing that. But the point is that now they appear to be poised for operation. They claim to have the lowest costs and will have the lowest fares. I'm taking a hint that their product will be less than stellar given the lack of inflight entertainment. But if they want to go all Ryanair on everyone and put the ultimate cheap product out there and lure passengers away, I think JetBlue better take notice. Southwest is big enough to just lower fares to armageddon levels and slap Skybus around. I'm not sure jetBlue is in a similar position, having positioned themselves as a value carrier, but not necessarily having the lowest costs. We shall see, but the operative word here is response. What will jetBlue do? They are much less exposed in CMH than Southwest, but they are in the process of growing their market and it would be a shame for Skybus to mess that up. At least from jetBlue's perspective.

 

I am glad the planes won't be yellow, like on the original website mockup.

 

Paris Tyler

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GOL grows again

GOL (Gol Intelligent Airlines) disclosed its order for 20 more Boeing 737-800s. Boeing showed the order last week as UFO on its website.

GOL announced today that it has increased the number of firm orders from 67 to 87 aircraft, as part of the its expansion. The contract is the largest signed between Boeing and a Latin American company. GOL also increased its number of options by 20 aircraft, bringing the total potential order size 121 737-800s. GOL also announced that it has increased its fleet plan between 2006 and 2012 to meet increasing demand for passenger air travel in Brazil and South America. Keeping a young fleet ensures fuel burn efficiency and lower maintenance costs.

The airline is also moving to larger planes; its 737-300s seat 141 and the 737-800s seat 187. We would not be surprised to the see the 737-900 in future orders. The demise of Varig has provided good opportunities for both TAM and GOL. While Latin America offers growth prospects, GOL is going to start flying further north. Mexico for sure and the US after that.

Emirates to be 747i launch customer?

A report out today suggests that Boeing is about to secure an order for the passenger version of its new 747i.

Last week Emirates president Tim Clark said his company wanted the slightly shorter version of the 747i originally proposed by Boeing as opposed to the slightly longer hull as used for the freighter version. Emirates concern is that they want the longer range to be sure of year round service to Los Angeles.

Boeing, understandably, wants to standardize the plane around one size. However, Emirates is suggesting an order of between 20 to 30 planes - which might encourage Boeing to revisit their decision. Given the paucity of 747i orders, we think Boeing will take this order. Boeing might produce both versions of the 747i because existing customers like British Airways and Cathay Pacific prefer the longer version with 460 seats.

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Airbus - the head spinning continues

Late Friday Emirates CEO decided to stir the pot a bit. Telling the world the A380 is five and a half tons overweight. On top of this, he also said the airline is cancelling its A340-600 order. News like this should be enough to make everyone in Toulouse ill. We were going to write about this before COB but did not. Lucky for us.

Airbus is going to party hard this coming week. Qantas gave them great news. The airline ordered 12 new planes - 8 of them A380s! Of course everyone will be thinking the price on these planes is low. So what? Qantas wins - and the customer is always right. Airbus needs the work for sure. This piles pressure on Boeing to sell its 747i more aggressively because Qantas would be among the target customers. (Hint: British Airways and Lufthansa owe the Aussies big time for the serious discount coming their way)

It can be safely guessed that the A380 is selling for a lot less than the 747i. Boeing will simply have to cut its price. It needs orders for the plane - particularly the passenger version. Airbus is compensating for performance shortfalls (due to weight) with lower prices. Without this, Airbus could not be making sales. So Airbus fights with the tool at its disposal - which is perfectly rational. Rational from a Euro-perspective.

Remember, Airbus cannot be seen in the same light as Boeing. Airbus' shareholders are looking at preserving jobs whereas Boeing's shareholders are focused on profits. The Qantas sale shows us that the European powers have given Airbus the green light to go for sales and not worry about short term financial impacts.

Airbus is going for 420 sales it needs for breakeven and will be aggressive. Airlines around the world are smilingthis week. As long as Airbus and Boeing fight, they win. Declining fuel costs and high load factors help to make things brighter.

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USAirways trying to get compensation from Airbus?

CNN reports a story from the Financial Times that USAirways conceded that a delay in the launch of the planned Airbus A350 could affect its long-term expansion plans.

And what plans might these be? USAirways President Scott Kirby says "We still have a lot of options with the Philadelphia hub to fly into Europe with 757s, 767s and A330s." The FT reports that USAirways lacks planes to launch routes from its Phoenix base as well as longer flights from Philadelphia. Lots of options? Something does not fit here. Either they have lots of options or they don't.

Earlier this year the airline was cagey about the subject of new service from Phoenix to Europe - alluding to the fact no new flights were planned. It moved its 757s east to start new service across the Atlantic. So what's with this story? Could it be the airline is trying to catch the Airbus gravy train? Beats working for money if you can get it.

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Brazil crash update - high-tech ATC

This article is very interesting. "Aviation experts say Brazil's flight control system may be too dependent on high technology, and that better use of old-fashioned radar observation and radio communication might have spared the lives of 154 people." Ouch.

"Many of Brazil's air traffic controllers say they are not fully confident of their ability to make themselves understood in English, the standard language for communications between airplane cockpits and air traffic control centers worldwide." You can imagine what would happen if the ATC staffer sees an emergency developing and any excitement creeps into his or her voice. Events could require an evasive reaction within seconds - maybe too little time to restate instructions to ensure pilots understand what is being said.

The story makes interesting and disturbing reading.

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Dummy of the week #38 - Riding on the baggage carousel is not a good idea

Ever wonder what would happen if you rode on the luggage carousel at your local airport? A New Hampshire 23-year-old decided to find out, and the answer wasn't good.  

 

Chris Jackson decided to take a seat on the carousel, which eventually took him out of the baggage-claim area and into a secure area of the Manchester (N.H.) airport. "It turns out [that's] not so funny after all, especially in a post Sept. 11 world," the Manchester Union-Leader writes.  

 

Local police Capt. Bill Hart tells the paper that it seems Jackson was just trying to have fun. "It appears it was simply a prank," Hart says. Still, Jackson was arrested on a charge of criminal trespass, and was led off in handcuffs and placed in the back of a police car. He’s now free on $5,000 bail and has been ordered to stay clear of Manchester’s airport. He has a trial date scheduled for Dec. 18.  

 

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Aer Lingus and Ryanair - round three

This story continues to amuse.

"The war of words between Ryanair and takeover target Aer Lingus escalated on Friday as the latter said Ryanair had made "numerous misrepresentations" and its shares had underperformed."

"Aer Lingus CEO Dermot Mannion has told staff the Irish carrier might have to make sweeping job cuts to help it compete with local rival Ryanair, whose takeover bid the Aer Lingus board opposes."

It is starting to look like employee shareholders might be better off taking the offer Ryanair has on the table (Employee members could expect to receive an average of $49,200 each) to offset the coming layoffs. You may recall Aer Lingus management said at the time of the airline's listing last month it planned to raise ticket prices rather than cut jobs - fat chance of raising fares with Ryanair as a competitor.

"In the context of the current bid, the proposals from Aer Lingus may soften employee/ESOT (Employer Shareholder Ownership Trust) resistance to consideration of a -- raised we expect -- Ryanair offer," NCB analyst John Sheehan said in a research note. No kidding. If you are an Aer Lingus employee reading this, take Michael O'Leary's money - quick.

Remember, Ryanair says in its offer document, published Monday, that it carried 11,500 passengers per employee compared with just 2,500 at Aer Lingus.

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WestJet teaches Southwest some new tricks

Canadian LCC WestJet has published its latest results - its best ever. You can read details at ATW's site here.

The part we want to focus on this: "The 10-year-old airline, once strictly no-frills, is growing revenue from items such as buy-on-board food, liquor, headsets for LiveTV satellite television, service fees and pay-per-view. Ancillary revenues rose 65% in the third quarter to C$22.1 million."

LCCs typically have limited revenue growth outside of passenger numbers because they don't sell seat upgrades or other things like meals. Ryanair has been building its revenue stream by selling services - checking bags has a fee. Southwest can learn from WestJet about the power of marginal revenue creation.

Southwest would do well to think about LiveTV and in-flight Internet, for example, as ways to extract more dollars from the same customer. As Southwest's stage lengths grow longer, these services will be in demand and passengers will pay for them. We have some other ideas - but we're selling those.

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Philippine Air Lines and moonlighting pilots

It appears that its not only China and India that need pilots. A strange story from the Philippines suggest they too have a problem. Air Forece pilots have been moonlighting at the national airline. Every time we come across these stories we end up saying the same thing - if you're a commercial pilot, head east for a great gig.

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Hans Weber interview

We spoke with Hans Weber today and it was a fascinating discussion. Mr. Weber is well known in US aviation circles. One of his most well known works is his co-authorship of this report. Mr. Weber is President of Tecop International Limited, a consultancy based in San Diego. In case you search for a web site - its not up yet, but next week you might try tecopinc.com.

One of the most intriguing things Mr. Weber said is that in doing the A380 shadow report they discovered that launch customers paid about $145m per plane. When asked about compensation Airbus has offered its launch customers Mr. Weber guessed it could be in the region of $40m per plane - supporting Scott Hamilton's guesstimate of $100m per plane in real costs. The plane retails at over $300m. As Hans says "The fact that Airbus gave deep discounts of the order of 40-50% to launch customers of the A380 is not unusual - at first glance. What is unusual and financially troublesome is that Airbus extended discounts as deep -- or nearly as deep -- to nearly all of their existing customers. Apparently, that's what it took to get airlines to sign up for the plane; nobody wanted to pay anywhere near full price. As you know, in today's market nobody who is anybody pays list price for transport airplanes. Discounts of 10 -20% are expected. But 40 - 50% is painful."

Reading the report linked to above, you are left wondering how come people outside Airbus, with limited access to costs and other data, accurately predicted the limited market for the plane. The report was first written four years ago and later updated. Unfortunately the fact that the report was funded by Boeing tarnished it. But time seems to have proven their work, regardless of who paid for it.

In fact, EADS would have benefitted from funding the report rather than Boeing. It would have provided objective insight missing from within. Then again, the perennial problem every consultant faces is competing with internal sources. Internal sources are threatened by the outsiders. Which is a pity because the organization never benefits when everyone is drinking (too much) company KoolAid. This problem is not an EADS or Airbus specific issue, it applies everywhere.

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Conflicting US tourism data

Travelmole reports -- International travelers to the US from 2004 to 2005 increased by 20.3%, the largest two-year increase since 1996. But that figure was still below 2000 and 2001 levels, according to research from PricewaterhouseCoopers LLP.

 

International travel, however, has been seeing some "robust" gains since 2003, the report said. The figures were seen as encouraging because US tourism representatives have been complaining about lower numbers of international visitors.

"A number of factors, including lingering travel concerns, a global economic slowdown and more strict visa immigration procedures contributed to the declines in international travel," said PricewaterhouseCoopers.

Some factors contributing to the apparent recovery in international travelers:

• Global economic performance has accelerated.
• The dollar remains weak relative to most currencies and is forecast to continue modest declines through next year, which will encourage increases in international travelers.
• The Department of Commerce has initiated marketing activities to increase awareness and develop a positive image of the US as a tourist destination. Campaigns in the last few years were started in both the United Kingdom and Japan.
  

International travelers to the US -- excluding Mexico and Canada -- in 2005 reached levels of 22 million, which represented 83.5% of the peak of 26 million in the year 2000. International guest rooms accounted for almost 13% of the total US lodging demand in 2000. That share declined to a low of 9.5% in 2003. But it rose to 10.3% in 2005, the report said. Said Bjorn Hanson, a principal with the Hospitality & Leisure practice at PricewaterhouseCoopers: "The return of international travelers is especially important -- international travelers have longer lengths of stay, pay higher room rates and spend more in other hotel departments including restaurants, business centers, retail outlets, communication, laundry and valet."

Really? How do you explain this then....

Foreign tourism in Boston six years ago represented a $3 billion industry. That fell by nearly half in recent times, however, partially because of lower foreign tourism marketing funds.

The Boston area is now again looking at rebuilding its foreign tourist industry after 9-11. Tourism Massachusetts, a non-profit group with state funding, sponsored a conference attempting to link local hotels and attractions with foreign tour operators, reported Boston.com. The goal: to persuade tour operators to use those attractions as part of their travel packages.

"When you get a brochure in a foreign country, you'll see Boston as a destination and specific hotels and restaurants to visit," said William MacDougall, president and CEO of Tourism Massachusetts. No specific funding levels were released but statewide officials pledged to spend more money to attract foreign tourism.

A brochure? Seriously?  Perhaps Tourism Massachusetts has heard of the Internet? Could it be these people are not aware of the $65 billion online travel marketplace? And  the Department of Commerce is taking credit for more travel to the USA? It would be hard pressed to prove its case we think - the drop in the dollar is, by far, the biggest influence.  Is there any wonder the travel industry remains confusing?

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Dummy of the week #37 - Chevy & JATO don't mix

[OK OK we fell for it.... lots of comments on the fact this is a legend. We did not post them all. But we loved the story... pity its a legend. Mea culpa already]

Actually, since this story got more responses than anything before, lets keep the funny side going. How about this?
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The Arizona Highway Patrol came upon a pile of smoldering metal embedded in the side of a cliff rising above the road at the apex of a curve. The wreckage resembled the site of an airplane crash, but it was a car. The type of car was unidentifiable at the scene.

 

 Police investigators finally pieced together the mystery. An amateur rocket scientist... had somehow gotten hold of a JATO unit (Jet Assisted Take Off, actually a solid fuel rocket) that is used to give heavy military transport planes an extra "push"  for taking off from short airfields. He had driven his Chevy Impala out into the desert and found a long, straight stretch of road. He attached the JATO unit to the car, jumped in, got up some speed and fired off the JATO!

The facts as best as could be determined are that the operator of the 1967 Impala hit the JATO ignition at a distance of approximately 3.0 miles from the crash site. This was established by the scorched and melted asphalt at that location. 

 

The JATO, if operating properly, would have reached maximum thrust within 5 seconds, causing the Chevy to reach speeds well in excess of 350 mph and continuing at full power for an additional 20-25 seconds. The driver, and soon to be pilot, would have experienced G-forces usually reserved for dog fighting F-14 jocks under full afterburners, causing him to become irrelevant for the remainder of the event. However, the automobile remained on the straight highway for about 2.5 miles (15-20 seconds) before the driver applied and completely melted the brakes, blowing the tires and leaving thick rubber marks on the road surface, then becoming airborne for an additional 1.4 miles and impacting the cliff face at a height of 125 feet leaving a blackened crater 3 feet deep in the rock.

 

Most of the driver's remains were not recoverable. However, small fragments of bone, teeth and hair were extracted from the crater, and fingernail and bone shards were removed from a piece of debris believed to be a portion of the steering wheel.  

 

Epilogue: It has been calculated that this moron attained a ground speed of approximately 420-mph, though much of his voyage was not on the ground.

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India's online travel growth

The buzz around online travel business in India continues to get stronger and stronger. A fact well exemplified by the spate of well-funded online ventures launched this year.

It is being estimated that the online travel market in India was estimated at $300 million in 2005 and is expected to cross $750 million in 2006. By 2008, it is expected to exceed $2 billion.

By comparison, the US online travel market was worth $65 billion in 2005.

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Dummy of the week #36A - jetBlue's Loss

JetBlue. First the good news... 

 

And based on those slots they are probably going to have to fly something other than JFK on one of the legs. So this means 3 ORD-JFK legs and one FLL-ORD? Or maybe PBI-ORD? I doubt they will do BOS. I also don't see an ORD-LGB or ORD-OAK/SJC simply because to compete in any way in those markets, you have to have two trips at least. Now, will they do only 2 ORD-JFK trips (let's see, bad frequency at the less desired airport)? That opens up other possibilities. But since All jetBlue knows how do do well is Florida then I have to say they will have to have one trip to FLL or MCO or PBI in the mix.

 

But still expect a frigid welcome to Chicago for jetBlue.

 

FAA Clears JetBlue for O'Hare Takeoffs

Anna Marie Kukec
The Chicago Daily Herald

http://www.airportbusiness.com/article/article.jsp?id=8592&siteSection=3

JetBlue Airways Corp. is expected to start service at Chicago's O'Hare International Airport by January - possibly the most frigid and most snowy month of the year.

Luckily, the low-cost carrier has service to the Caribbean.

JetBlue said Monday it has received approval from the Federal Aviation Administration for four daily arrivals at O'Hare that should start by Jan. 27. It had amended its initial request last week that had sought eight arrivals.

The FAA limited arrival times to one at 8:30 a.m., two at 11 a.m. and at 4 p.m. The agency has limited air traffic since November 2004 to alleviate congestion, FAA Chief Counsel James W. Whitlow wrote in a letter Friday to JetBlue.

"We've been looking for opportunities where there isn't a lot of low-cost service and Chicago has a large population and that's a great opportunity to stimulate travel with low fares," said JetBlue spokesman Bryan Baldwin. He said the carrier is still deciding on the date to launch service and the routes from O'Hare.

Forest Hills, N.Y.-based JetBlue, which started in 2000, reaches the Caribbean and about 45 U.S. cities. It covers much of the East and West coasts, so it has more recently started eyeing the Midwest. It recently launched service in Columbus, Ohio. Passengers also enjoy room, leather seats and DirecTV.

While the new airline will be a bonus for consumers, it's a potential blow to legacy carriers, like Elk Grove Township-based UAL Corp.' s United Airlines.

"The legacy carriers are not going to have an easy time with JetBlue knocking at their door every step of the way," said Marisa Thompson, an analyst with Chicago-based Morningstar Inc. "This is going to put a lid on any more fare increases."

Thompson also said it was unusual for a low-cost carrier to start at O'Hare, which has higher landing fees than Midway International Airport. Air Tran, ATA and Southwest all fly out of Midway because of the lower fees.

"But JetBlue said they're trying to expand their network and once they're up and running in a city, they feel costs don't matter," said Thompson. "I'm don't really agree with that."

United filed an objection to JetBlue's initial application seeking arrivals at O'Hare, saying it wasn't following the process established by the federal government. United doesn't plan to object to the approval.

"This is nothing new to us. We've been competing against low- cost carriers in 80 percent of the markets we serve. We look forward to more competition at O'Hare," said United spokeswoman Megan McCarthy.

The extra competition also doesn't worry American Airlines, the world's largest airline that also initially objected to JetBlue at O'Hare.

"There are so many airlines at O'Hare and Midway now, This is just another airline," said American spokeswoman Mary Frances Fagan.

Baldwin said JetBlue intends to continue its expansion but declined to specify where it will fly into next.

It also doesn't have service yet in business hubs, such as Houston or Dallas or Atlanta, said Thompson.

"They've got a lot of holes in their network to fill," Thompson said.

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So we basically see that JetBlue, unlike their experience on the West Coast, is trying to market itself  back east as the discount carrier serving the major airports. Like the reverse of Southwest, old Southwest.

 

 

 

JetBlue posts narrow loss, reduces expansion

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20061024:MTFH64637_2006-10-24_16-30-12_N24324774&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage1

NEW YORK, Oct 24 (Reuters) - JetBlue Airways Corp. on Tuesday posted a narrow third-quarter loss, the latest sign that short-haul carriers face softening demand, but shares rose after the discount airline said it will pare expansion plans.

JetBlue, which is in the midst of a restructuring plan to trim $120 million from annual expenses by 2007, said it will slow its growth rate over the next three years by reducing its 190-strong fleet of Airbus A320 and Embraer planes. Shares rose nearly 7 percent in early trading.

"We feel very strongly that the slower growth will be a benefit to our investors," said Chief Executive David Neeleman on a conference call.

Neeleman said JetBlue has no plans to raise capital in stock offerings for the next three years, soothing investor concerns that the fast-growing airline could dilute earnings by issuing new shares to finance expansion.

The company said it may take delivery of the 30 planes it has on order for next year and sell or lease older ones. But it didn't specify how many planes or what types would be cut.

With the revised growth plans, JetBlue said it expects capacity to increase 14 percent to 17 percent in 2007. It previously planned to expand capacity 18 percent to 20 percent.

Six-year-old JetBlue, which is in the midst of a restructuring program, posted a net loss of $500,000, or nil per share, compared with a net profit of $2.7 million, or 2 cents per share, in the year-earlier quarter. Analysts expected the company to break even, according to Reuters Estimates.  

Earnings were boosted by a $7 million pretax gain from the sale of five A320 aircraft earlier this year, as part of an earlier plan dampen growth that also included the deferral of 12 A320s that were to be delivered in 2007.

DISCOUNTERS FACE HEADWINDS

While the overall airline industry experiences a rebound from a six-year slump, discount carriers such as JetBlue are facing headwinds.

Traditional airlines like United Airlines have made deep cost cuts to compete more effectively with low-cost carriers. Meanwhile, demand for short-haul routes operated by budget airlines took a hit from tighter security measures implemented Aug. 10 after British police said they uncovered a plot to blow up airliners.

"It appears low-cost carriers are in a vice with high fuel and the increased hassle factor (associated with tighter security measures)," said Ray Neidl, an analyst with Calyon Securities.

JetBlue said operating revenue rose 39 percent to $628 million as the company added flights and raised ticket prices at the expense of filling seats.

JetBlue's load factor, the percentage of airline seats filled with paying customers, fell 6.2 points to 80.4 percent. The company is trying to improve earnings by charging higher average fares even if it means empty seats.

CEO Neeleman also said that the New York-based carrier is in talks with international airlines about codeshare partnerships and could announce a deal in the course of the next quarter.

For the fourth quarter, JetBlue said it expects to report an operating margin between 6 percent and 8 percent, assuming fuel cost of $1.94 per gallon.

Jet fuel is currently trading at about $1.69 per gallon. The company has hedges in place above this level, which may lead to it paying above-market prices for fuel.

JetBlue shares were up 44 cents at $11.58 in midday trading on Nasdaq. JetBlue has underperformed the sector so far this year, falling 28 percent, while the Amex airline index rose 22 percent. (Additional reporting by Paritosh Bansal)

---

I'm just not buying the whole 'security measures' as a reason that travel was down. If jetBlue were primarily a short-haul carrier, then maybe. What percentage of their traffic is in those newly started NY-DC and NY-BOS corridors? The vast majority is Florida and California. And while there is a sizeable chunk of that passenger base who could change their travel plans at the last minute, how many did? Did the leisure traffic to Florida suddenly decide not to go? Maybe that traffic will show up later then?

 

Checking another press release, their margin has increased. Great. People are paying more. But, wait, could that mean that there are fewer people in general in the seats and that the ones that remain are all that are paying more?

 

Not quite. They made more money during the quarter. But costs have gone up more. The 190 integration perhaps?

 

And remember, they made this loss in the 3rd quarter. 3Q is traditionally strong for carriers in the transcon market. Florida is soft, but transcon is strong. So what happened? Not a lot of places to safely, efficiently, redeploy those A320s in the summer? They are somewhat tapped out in frequency in their current transcon markets. How many Burbank trips does one need?

 

The real dummies are people who believe B6's current financials are a blip and not a trend.  I am not buying the 'security problems' issue. The security impacts more short-haul, and while Southwest did report less than stellar numbers, it still made money. And its system is more short-haul dependent than that of jetBlue.

 

Paris Tyler

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Airbus gets some bounce

Good news coming from Airbus today. (at last!) Read on....

• Skybus, a new LCC based in Columbus, Ohio, has signed a firm contract for the purchase of 65 Airbus A319 aircraft. Elsewhere on this blog we have written about Skybus. Its not just us who are a bit down on their prospects. "They might want to call the bankruptcy attorneys right now," says Mike Boyd of the Boyd Group, an aviation consultancy in Colorado. "If the rumors we're hearing about them flying to secondary cities and flying connecting flights through Columbus are true, I just don't see it. Overall, the market for regularly scheduled, low-cost service is picked clean. It's not like Southwest is some bloated competitor. It's the wrong time to get into that business." That said with a name like Skybus, they simply had to buy Airbus. Good luck to both.
• China Aviation Supplies Import and Export Group Corporation signed a General Terms Agreement for the purchase of 150 A320 Family aircraft and a Letter of Intent for 20 A350XWB aircraft with Airbus in Beijing. This order represents the largest single transaction ever by Airbus in China. A new order for the XWB? Very interesting. Which airline might get this plane (and when)? No delivery dates are in the press release at all.
• Airbus has signed today the Framework Agreement with a Chinese Consortium comprising Tianjin Free Trade Zone, China Aviation Industry Corporation I and China Aviation Industry Corporation II in Beijing on the establishment of an A320 Family Final Assembly Line in China. Aircraft assembly in China is planned to begin in early 2009, with the aim of ramping up production to reach four aircraft per month by 2011. This means most of the A320s mentioned above will be built in Toulouse.

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Revised A350XWB - is this version 6?

Geoff Thomas, writing for ATW, says the A350XWB is back at the drawing board. The story is intriguing because it appears Airbus is refining the focus of the A350 to the larger 787s and the 777-200ER.

Also worthy of note is talk of a composite fuselage. This is a radical departure from the original briefing Airbus provided with version one of the A350.

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Russia grounds Oasis

[great post script: from FI here] In what might be a world first, Russia denied overflight rights to Hong Kong-based Oasis Airlines. Despite completed paperwork and fees being paid. This was supposed to be the airline's first flight.

What a clumsy and arrogant move by the Russians. Why would they do this?

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Reuters -- The maiden flight of Hong Kong's much-talked-about first budget air carrier was cancelled on Wednesday after Russia refused to let it fly over its territory, the company said.

Originally scheduled to depart for London Gatwick at 1 p.m. local time, Oasis Hong Kong Airlines cancelled flight O8-700 about five-and-a-half hours later.

"Now our flight has to be terminated. We have tried very hard to talk to Russia's aviation authorities but we can't go forward, so we're asking passengers to leave the plane," the pilot said in an announcement carried on Hong Kong's Cable TV.

Oasis, which local media and analysts had touted as a potential threat to the likes of Cathay Pacific Airways and other airlines on the popular route, was packed with passengers who had paid just HKD$1,000 (USD$129) for one-way economy-class seats and HKD$6,600 (USD$849) for business class.

It was not clear if the flight would be rescheduled.

Earlier, the airline said in a statement that "despite all paperwork being in order and having received all necessary approvals, the Russian authorities, for unexplained reasons, have chosen to hold up the over-flight rights."

It had been communicating with Russian authorities, but apparently reached no agreement that would allow the Boeing 747-400 to take off.

"I don't have any confidence that the flight will be on tomorrow," one passenger told Cable TV, which had reporters aboard the flight and were broadcasting from the cabin.

Brazilian theories on the Gol crash

A great online reference place (courtesy of Flight International) for those of you, who like us, are intrigued by what happened.

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Bombardier might still launch CSeries

Bombardier could decide by year-end to revive its dormant plan to build a new 110- to 130-passenger jet, says Jacques Kavafian. He says Bombardier may launch the USD$2 billion CSeries program after all, in conjunction with its proposed USD$300 million plan for the CRJ900X, a 98-seat stretch version of its 86-seat CRJ900.

Kavafian says he agrees with Bombardier's view that there is a global market over 20 years for some 5,000 aircraft seating 100 to 135 passengers. Bombardier still needs orders for between 50 and 100 units for the CSeries jet to get the green light.

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Southwest Airlines Boarding Pass - does the airline know about this?

This new site we just discovered is interesting. Wonder if the airline knows about it?

Germany Undecided on Role in EADS

With jobs cuts looming a lot of action is taking place behind the scenes.
--------------
Deutsche Welle German Radio -- In the minefield of national egos at the heart of EADS, the German government seems undecided about how best to shore up its interests without being left to foot the bill if the aerospace giant's finances deteriorate.

The European Aeronautic Defence and Space Company insisted Friday that it currently had enough cash to cope with the huge problems facing its crisis-ridden airplane maker Airbus. But EADS warned it might go to the debt markets next year in order to raise additional financing.

Group finance director Hans-Peter Ring said that EADS "will manage pro-actively its financial requirements and might go to the capital markets in 2007," possibly by issuing hybrid bonds.

But the company, which has announced delays of up to 24 months in deliveries of the ambitious super-jumbo jet A380, "has neither the need nor the short-term intention" of making a capital increase, Ring insisted.

Despite EADS' insistence that it finances are very solid, such comments raised the specter of potential financing bottlenecks further down the line. And that could explain the government's chronic prevarication as to how best safeguard German interests in the company. After all, if the German state does acquire a stake in the company, it will be compelled to put up a large chunk of the financing should a capital increase ever become necessary.

What will Daimler do?
The crunch of the matter lies with German-US auto maker DaimlerChrysler, which holds a stake of 22.5 percent in EADS but has signaled its intention to reduce that stake to 15 percent.

Berlin is adamant that the 7.5 percent stake being put for sale should remain in German hands and must not be allowed to fall into French or even Russian hands. It must "remain in the German sphere", the government spokesman Ulrich Wilhem said recently.

German Finance Minister Peer Steinbrück defended the idea of a possible state stake in the European aerospace giant EADS, in an interview to be published Monday. "This is about stabilizing an enterprise, about keeping the jobs of qualified workers and especially about being up to the level of our French partners," Steinbrück said, referring to the delicate French-German balance within EADS.

His remarks came in response to a question by Germany's Suddeutsche Zeitung newspaper about whether EADS' problems would continue to grow without state intervention.

The minister said no decision had been made about a German public stake in the company, a matter that has sparked speculation in recent days. "There are possible solutions which are completely defensible from an interventionist point of view," Steinbrueck said.

"Nobody in the government wants to suddenly transform the federal state into a business," Steinbrück was quoted as saying in the Suddeutsche Zeitung. "But we cannot let Airbus go into bankruptcy simply because society is undergoing an adaptation crisis or because a manufacturer wants to cede its share."

The current balance of power with EADS is extremely delicate. Germany's interests are represented by DaimlerChrysler's 22.5 percent stake, while France is represented via a 30-percent interest shared by the state holding company Sogeade and media group Lagardere.

In September, Russian state-owned bank Vneshtorgbank bought 5.02 percent and Moscow has signaled its intention of increasing its say in the company, a development that would be welcomed by EADS German co-chief executive, Thomas Enders.

Spanish interests are represented by the holding group Sepi, which owns 5.48 percent.

Lagardere has committed itself to halving its stake to put French interests back on a par with Germany's, but the balance of power would be upset if DaimlerChrysler were to reduce its stake.

Calls for and against state involvement
DaimlerChrysler chief Dieter Zetsche is opposed to the idea of the German state acquiring the shares. "Fundamentally, an increase in state influence is not desirable for the group," he told the daily Frankfurter Allgemeine Zeitung.

There is also opposition within EADS to the idea of state involvement. Enders said in an interview published in the Wall Street Journal that such a solution would mark a "return to the stone age."

But there are plenty of people in Germany, not least a number of top-ranking politicians, who argue that is the government's patriotic duty to get its hands on the shares.

The group's plane maker Airbus employs 22,000 people at seven different sites around the country. The northern port of Hamburg is home to Airbus' biggest German site.

The government "has a crucial political responsibility" in the matter, the chief whip of the Social Democrat SPD party, Peter Struck, insisted.

A number of politicians have said the government should acquire the stake via the state-owned redevelopment bank KfW.

Hamburg mayor Ole von Beust caused a stir last week when he said that a corresponding deal had been reached. But Chancellor Angela Merkel swiftly qualified that statement, insisting that no decision had been made yet. But she added: "I'm not ruling anything out".

Economy Minister Michael Glos insists that a future investor in EADS should come from the private sector.

Newspapers have suggested that a group of suppliers to Airbus or even a consortium of banks could take DaimlerChrysler's stake.

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Airbus UK jobs safe - for now

[Update] We were given good insight from a European-based observer on the A350 work leaving the UK: "I find it just impossible to imagine the UK being left out. The Brits are the experts in building the wings and the wing is definitely the most complicated part of the plane. There would be a huge learning curve for the Germans, or the French, or whoever took it over and that would be very dangerous for the A350, I think. It seems to me suicide to drop that British expertise when they're already so far behind on a widebody to compete with the 787." This view echoes and supports the official Airbus line.

There has been much discussion in news media and online in various forums about the fact that the UK has not been consulted on the new A350XWB.  No doubt the subject is a rational cause for concern to the thirteen thousand UK-based Airbus employees.  Indeed, the jockeying that must be going behind the scenes now that job cuts have been announced is alarming for many people.

 

To date job cuts have been aimed at Germany and France.  Information we have from within Airbus is that any deeper meaning to the UK being left out of the A350XWB planning is speculation.  It is also speculation that the A380 will be moved to Toulouse and the A350XWB built in Hamburg.  You see its all just speculation. There is no official information.

 

Read into this what you will.  We would like to believe our Airbus source; but Airbus has a reputation for obfuscation.

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The crappy cruise ship

Tour operator Thomson's Destiny cruise ship has been without toilets for three days. As you know people eat a LOT on cruises....

Dummy of the week #36 - jetBlue makes a big mistake

In a story that will dent jetBlue's reputation, the airline conducted an experiment on pilot fatigue without passengers OR the FAA knowing about it.

"But the FAA isn't impressed, arguing that JetBlue and Alertness Solutions did not have proper approval to conduct the test or to operate outside of FAA regulations governing in-flight hours." No kidding!

Who authorized this experiment? We hope heads roll. This is a serious breach of the FAA's rules and fundamental passenger expectations.

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What if Michael O'Leary loses?

Ryanair has issued its offer document for Aer Lingus, giving a number of reasons why its target will face ‘an uncertain future’ if it does not accept the approach.

The sustainability of Aer Lingus' profitabiliy is uncertain because:

• short-haul fares are uncompetitive;
• costs per passenger is too high (twice Ryanair’s);
• its customer service needs improving;
• its revenue maximisation strategy is flawed;
• high fuel surcharges inhibit long-haul growth;
• it is exposed to high and rising costs at Dublin Airport; and
• it is a small, regional, periferal carrier whose isolation will inhibit growth.

Ryanair also takes issue with some of the responses from not only the Aer Lingus board but also the Irish government. ‘The dead hand of anti-competitive, monopolistic and anti-consumer policies will continue to drag down Aer Lingus,’ it warns.

Everything Ryanair says is true. Pity that Mr. O'Leary has irritated so many people. In the end, if he loses this battle it will be in large part because his interpersonal skills have ensured that few people want to deal with him. Aer Lingus still has the problems listed, so it will need a white knight. Said knight will have to buy out Ryanair - at a handsome profit for Ryanair. So Mr. O'Leary either loses nothing or makes money. It seems that even if he loses Aer Lingus he wins.

But it would be so much better if Ryanair wins and gets its hands on Heathrow. This would lead to Dublin reversing the traffic flow for long hauls. Approximately 2,500 daily seats potentially could be taking long haul traffic from London through Dublin. There is nothing to stop that number being driven up if the flights use the A330s rather than A320/321. So you might see a flight (A330) that looks like this: LHR-DUB-MCO (London to Orlando through Dublin). Fares would be much lower than that of BA and Virgin, to be sure.

A fare war at Heathrow is just what the travel industry needs. Its healthy and good for everyone - yes, even the airlines. So if you pay retail for your flights, hope that Michael O'Leary pulls this off.

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Aer Lingus & Ryanair - more

There are a few pieces of recommended reading for you on this issue. The story is becoming the most exciting European aviation news since the Airbus mess.

Its a mistake to think this takeover is a storm in a teacup. If Ryanair gets its hands on Aer Lingus, a seachange is coming to Heathrow and the rest if Europe's travel market. There are lots of people up against Micheal O'Leary but the man has a lot of money and he can still pull this off.

Interest in this deal ranges from Seattle (Boeing would love Ryanair to win) to Dubai (Emirates apparently has an interest in those Heathrow slots). One report we saw indicates Ryanair's valuation of Aer Lingus is rather low - we can easily see the share price over E3.00 in the next week or so.

Link 1 - Sunday Post
Link 2 - T2impact.com
Link 3 - Times online
Link 4 - The Post

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Legacy transponder was not working....

There have been stories swirling and more information is slowly coming out. Some of the facts in this story remain disturbing. Why was the Legacy's transponder off? The plane was brand new - it surely was in working order. This is probably the most important question. Next, why did the pilots not go to FL360 after Brasilia? Why are the Brazilians not coming clean on their radar returns?

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Associated Press -- Early analysis of the flight data recorders from two planes that collided in Brazil's deadliest air disaster indicated the smaller jet's transponder was not signaling its location at the time of the accident, Brazil's defense minister said.

All 154 people aboard Gol Airlines flight 1907 were killed on Sept. 29 when the Boeing 737 crashed into Brazil's dense jungle after clipping an executive jet.

Defense Minister Waldir Pires told reporters Thursday that initial analysis by the International Organization of Civil Aviation in Canada showed the transponder aboard the Embraer Legacy 600 executive jet was not broadcasting the aircraft's location.

"There is still no confirmation if the transponder was turned off or if there was an interruption because of equipment failure," Pires said. "That we don't know."

The Legacy, on its maiden flight to U.S. purchaser ExcelAire Service Inc., landed safely at a Brazilian military base with none of the seven people aboard harmed.

Pires also said the Legacy's data recorder showed the pilots told air traffic controllers in the nation's capital Brasilia they were flying at 37,000 feet (11,300 meters) as they approached the city.

"The position of 37,000 feet (11,300 meters) until Brasilia was the normal position," Pires said. "After Brasilia (the plane) should have dropped to 36,000 feet (11,000 meters)."

The crash occurred after the plane passed Brasilia and air traffic controllers lost contact with the Legacy.

The Legacy apparently collided with the Boeing at 37,000 feet (11,300 meters), an altitude reserved for planes traveling in the opposite direction. Investigators were trying to determine how the smaller jet came to return to the higher altitude, and were considering possible error by the pilots or controllers.

Earlier this week, Pires said the Legacy appeared to be following its flight plan after it passed Brasilia, the first time since the accident that a Brazilian official acknowledged that radar had tracked the Legacy's altitude.

Controllers previously said they were unable to track the plane's altitude because its transponder stopped transmitting shortly before the crash.

Air force officials said they had completed the recovery of the victims' remains, but said troops would remain at the jungle crash sight to continue investigations.

"The investigating commission has been (at the crash site) since the first day," air force commander Gen. Luiz Carlos Bueno told reporters in Brasilia. Bueno said it was unclear how long the investigation would take.

The two Legacy pilots, Joseph Lepore, of Bay Shore, New York, and Jan Paladino, of Westhampton Beach, New York, have had their passports seized to prevent them from leaving the country. While they have not been arrested, they remain holed up in a Rio de Janeiro hotel as the investigation proceeds.

Muslim staff in Paris airport row

[update] - as we suspected. BBC news has the story and in our opinion this story is going to acquire momentum. Europe has many Muslims working in in public transport, not just airports. Recall that one of the airport staffers rounded up at Heathrow during the recent trouble there was a Muslim with total airport access.

There must be a way to better identify threats to public transport. Note the story says it was not religion that caused the airport workers to lose their access - it was other things like traveling to Pakistan. That's a fine line. Is there a better way?

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Dummy of the week #35 - Namibia's scary skies

AllAfrica.com has a great story today on the "brain drain" taking place in Namibia. "Currently, there are 31 air traffic controllers in the country. Already seven are threatening to leave. In a normal situation, a country like Namibia is supposed to have a minimum of 60 controllers."

This part is a beaut! "The country trains its staff to use the procedural system, which entails communicating with the pilot and using a three-dimensional sketch to be able to tell where the aircraft is. Most countries use the advanced system called radar. This is a computerized way of controlling aircraft - used by developed countries. The fact that most Namibians can use both the procedural and the radar systems make them sought after internationally."

Next thing, they will add windows so the controllers can see the planes. Africa comes through again during a slow news week.

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Calyon notes big catalysts for airlines; ALK, GOL, and COPA top picks

Calyon says short term, the big catalyst for the airline price jump has been the continuing weakness in oil prices and the closing in of the jet fuel crack price spread as the hurricane season passes. Firm says based on seasonal trends, they believe that there may be a slight pullback in prices as they move closer to the slower winter travel season and they hear of more of ticket price discounting from airlines to try to generate traffic.

Firm says there are no real indications yet on fall holiday traffic demand but they believe that it will be high. At this point firm would be adding or acquiring positions in their favorite airlines, which include among others AMR, CAL, LCC, LAN and TAM.

Firm's top choices continue to be ALK, GOL and COPA. On any potential fall seasonal stock price weakness, firm would become more aggressive buyers.

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Southwest Airlines Targets Impulse Shoppers.

Value conscious shoppers wishing they were somewhere else while waiting at the check-out now have a new option. Discount carrier Southwest Airlines on Wednesday said it will sell USD$50 and USD$100 gift cards at stores operated by Wal-Mart, Kroger, Safeway, and Albertson's.

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Philippine Airlines wants eight wide-bodied planes

Philippine Airlines said it wanted to add eight wide-bodied planes to its fleet and would decide by the end of the year whether to buy them from Boeing or Airbus, for delivery from 2008. The Philippine flag carrier will use the new aircraft to expand its routes to the United States and Canada and to return to Europe after an absence of about a decade. He said PAL, Asia's first commercial airline, was considering buying or leasing either Airbus A340-600 or Boeing 777-300ER planes.

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Lufthansa To Wait For A350 Detail Before Order.

Lufthansa To Wait For A350 Detail Before Order. Lufthansa chief executive Wolfgang Mayrhuber said he would wait for more information on Airbus's planned A350 XWB mid-sized aircraft before making a decision on renewing its long-haul fleet. Lufthansa last month announced it was buying 30 Airbus A320-family aircraft with options for 30 more, as well as 5 A330s to offset delays to the A380 superjumbo, of which it has ordered 15. The carrier said then it would make a decision on further long-haul aircraft before the end of the year

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Travelocity's VIP program

Travelocity has unveiled a travel loyalty programme, with an objective of giving its most loyal customers automatic access to a range of perks minus the fine print and red tape of traditional loyalty programmes. Prior to launching the new VIP programme, Travelocity tested it by offering VIP status to a sample of customers in a beta programme.

A survey of members using the beta programme showed that the test group scored significantly higher than the control group in the highly satisfied category, stated the company. According to the company, VIP status gives top customers: A dedicated customer service 800-line staffed by seasoned agents specifically educated in VIP benefits; VIPs will earn even more Travelocity Points on Travelocity Purchases including 3 Travelocity Points for every $1 spent on Flight+Hotel packages, flights, hotels, Last Minute Packages when they apply and are approved for the Travelocity MasterCard; Advance notice of sales and special VIP-only promotions; Travel perks such as airport shuttle and car rental discounts; Everyday exclusive discounts on GoodBuy hotels, vacation packages and last minute deals (including up to $100 off Last Minute vacation packages).

Customers need only five qualified bookings in a 12-month period to become a VIP. Customers who make the qualified bookings automatically become VIP's, with no sign-up or initiation fees required. So barriers to entry are low. It will interesting to see how Orbitz and Expedia respond. That said, this move by Travelocity is innovative.

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Northwest's 787s to be America's first to fly

Northwest Airlines announced completion of restructured agreements with Boeing and Rolls-Royce that allow the carrier to begin taking delivery of its 787s in August 2008. Northwest placed its order for 18 Trent 1000-powered 787s, with purchase rights for an additional 50, in May 2005.

Continental placed its order for 20 787-8s in June 2005. But these planes will enter service in 2009. Although Northwest ordered later, it got a better delivery slot. This gives Northwest bragging rights which it is sure to exploit.

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Southwest Airlines' results - Is Mike Boyd right?

Southwest Airlines says its third-quarter profit fell sharply because of rising fuel costs and a downturn in air travel after a terror threat in August. Based on their numbers, without the fuel hedge gains of $200m, Southwest might have posted a net loss. Yikes. This is not supposed to happen at Soutwest.

Maybe Mike Boyd is right. Maybe Southwest (and other LCCs) faces an issue of how passengers react to increased airport dwell times (security) when they are traveling relatively short stage lengths. Maybe jetBlue focusing on longer hauls is smarter. If gas prices hadn't been high over the summer, would even more people have been willing to drive short stages (<500 miles) instead of fly?

It is interesting to note that Southwest seems to be getting good fares with the capacity they have been adding, but they haven't been filling as many seats. Maybe this is another carrier (jetBlue being the other) that needs to consider scaling back capacity growth?

Southwest seems to have a revenue problem. What good is having low costs if you cannot drive traffic and revenue? The revenue shortfall is magnified by the fact that Southwest offers no amenities for sale (upgrades, food, etc.) - what marginal revenue can they create? Perhaps this why Southwest is seriously looking at in-flight communications.
Paris Tyler

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A380 is a financial failure EADS data suggests

EADS has put out new numbers showing that Airbus needs 420 planes sold to breakeven. At the start of the project breakeven was 200 planes.

By now not one plane has sold at list price - indeed, one credible estimate is that the plane may be effectively selling at 66% off list for launch customers after compensation is factored in. Given Airbus and EADS opaque accounting and reporting, the 420 number may be low.

Data shows Airbus expects a twenty year market of 1,500 planes in the A380 category. Boeing initially expected a market size of 400 and subsequently increased this to 990. Assuming a market size of 1,000 and giving Airbus a half share indicates that the A380 program may not breakeven. The 420 units needed may be accurate but other calculations we have seen show Airbus may need to sell 560 units.

Airbus has to hope they get more than 50% share and demand exceeds 1,000 units in less than twenty years. The higher the hope the higher the risk.

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Euroland gets no respect from member states

This saga has gone on for years. We think the Greek aviation model is also happening in Italy. If member nations openly and consistently defy Euroland what hope is there? Italy's budget consistently exceeds agreed deficits and nobody does a thing.
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ATW -- The European Commission is upping its efforts to force Greece to reclaim some €161 million ($201.8 million) in illegal subsidies from Olympic Airways, adopting a decision requesting the European Court of Justice to fine the country.

The EC ruled in 2002 that aid granted to Olympic between 1998 and 2002 was illegal. The ECJ confirmed last year that Greece failed to retrieve the money.

"Having regard to the seriousness and duration of the infringement, today's decision requests the Court to impose on Greece the imposition of a lump sum payment of €10,512 for each day since the 2005 Court ruling until the effective implementation by Greece of the 2002 decision," the EC stated. Furthermore, it threatened that the ECJ may impose an additional periodic penalty payment of €53,611 per day if the Greek government has not recovered the sum by the time of the court's next ruling.

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US carriers about to report profits - first time in six years

American Airlines started the cycle with a report that it earned $15 million in the last quarter, compared to a loss of $153 million a year earlier. Other US carriers are poised to follow suit for the first time in six years. Continental's Q3 profit was $146 million topped Wall Street expectations and is up sharply from $61 million profit from the same period last year. Southwest reported a profit of $48 million for the July-to-September period, which is down sharply from a $210 million a year ago. Ray Neidl, predicts record airline profits next year of more than $6 billion.

As is traditional, when US airlines make money, they buy new planes. Happy days are ahead for Boeing. Flight International reports that in addition to American, Boeing now has proposals from Delta and United to offer the exclusive 787 GoldCare program. This means these two carriers have now also "opened their kimono" on the 787. Its interesting that Air Canada, Continental and Northwest, already customers for the 787, did not offer any proposals to Boeing.

Delta has started to make fleet changes with its 777LR order. United and Delta need to replace many older 767s. American, ever the coy player, is quiet because it has the strongest finances. But it too has older 767s that can be retired. The second hand market for 767s is hot for freighter conversions. The first mover will get the better prices on its 767s. Note that Delta managed to offoad some 767s easily to Hawaiian a few months back.

Has a quiet game of chicken started?

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SkyEurope beats Ryanair to free seats

Ryanair's Michael O'Leary has stated he wants to see the price of an airline ticket at zero and generate revenues from selling passengers other things to offset the costs. He seems to have been beaten to the free ticket part of the deal.

The Scotsman reports that SkyEurope Airline, a Central European company, said today it will cut ticket prices to -£1. If you wonder about what kind of airline offers free seats, follow this link and you will be pleasantly surprised that it earns three stars at Skytrax.

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Boeing secures titanium supply

Boeing has apparently secured its future titanium needs for a long time ahead. Airbus, if it decides to go ahead with its A350XWB, will need to use lots of titanium to keep the plane's weight as low as possible. As the titanium market tightens Boeing may be forcing higher input costs into Airbus' production process.

Titanium accounts for 15% of Boeing's 787 Dreamliner, more than twice as much as older models, according to estimates from U.K. airplane part manufacturer GKN PLC. Global titanium demand will climb to 126 million pounds this year, up from 95 million in 2004, according to FTN Midwest Securities Corp.

On Monday Boeing agreed to buy about $2.5 billion in titanium products from Allegheny Technologies, ensuring supply of the key metal for its jets. Boeing signed an agreement last August with Russian titanium maker VSMPO-Avisma to make titanium parts for commercial planes. VSMPO supplies ~40% of the titanium used by Boeing and ~60% of that used by Airbus.

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Airbus to restructure?

"We are going to study everything without blinkers, including the solutions used by Boeing, which sold some of its sites. I don't have any preconceived ideas, and we will be pragmatic," Gallois told the French daily Depeche du Midi. The #1 issue facing Airbus now is its costs are in Euros and sales are in dollars - and the dollar is down 30% this year. Even if the A380 was rolling out the door, this problem would be painful. Read more from Reuters.

Airbus is coming to terms with something nobody likes to talk about. Whereas Boeing is a "for profit" company, Airbus is a "for employment" company. This statement will get us into trouble, no doubt. But we will stand by this statement. Boeing has gone through more than one painful restructuring. Remember the roadsign, "Will last one to leave Seattle please turn off the lights"? Organizations grow and experience upsets. Its how these are dealt with that matters. Airbus cannot avoid economic reality forever. Boeing can go bust. Can Airbus?

Somebody has to work and pay for all the Airbus support. Euroland tax payers are subsidising Airbus to an extraordinary extent - can anyone argue this fact? How can EADS and Airbus managers get the politicians out of the way when they are so dependent on their largesse? The restructuring required to enable Airbus to compete with Boeing may require such radical surgery; the patient may die first. Don't take our word for it - its the opinion of Mr. Gallois himself.

Singapore Airlines may cancel 9 Airbus A380s

Singapore Airlines may cancel an option to buy nine Airbus A380 planes if delivery delays are too lengthy, the dailies La Tribune and Le Figaro said, citing airline operations chief Bey Soo Khiang. The option was signed in July to supplement a firm order for ten A380s. This news must have Toulouse in a tizzy. If they cancel some of the A380s, can an XWB cancellation be far behind?

Frontier Airlines solicits business

The Rocky Mountain News reports that Frontier is asking people for route ideas. This is a most unusual move. Normally, airlines, especially the LCCs, are inundated with requests for service. Along with these requests come gifts.

Why would the airline need these inputs? Its route planning group surely knows about every available market out of Denver. Up to now, smaller routes have been flown by Horizon for Frontier. You can be sure Frontier knows about the performance of each route flown by Horizon. The recent order for Q400s by Frontier demonstrates it has plans. But what plans? Are there none that these cities are being asked to make proposals?

We think Frontier needs the money and other "soft" support from new cities. Southwest Airlines service in Denver must be keeping the mainline Frontier very busy. There are few markets Frontier can go into without being trumped by Southwest. Frontier is known for its "what will you give us" attitude when it comes to new service. But with Southwest in Denver, Frontier is now going to be second on the list - everyone prefers Southwest. They are bigger and richer. They are worth any gifts because when Southwest moves in they can afford to stay the course. Its better to put your money on a perennial winner and that is surely what Southwest is.

Frontier is therefore left to find niche markets Southwest won't chase - like smaller turboprop markets within 1,200 miles of Denver. This is an attempt to protect its feed traffic. Frontier could also focus on more Mexico and Canada service because Southwest won't go there - yet. And what happens if Southwest decides it likes the Embraer planes, which it is rumoured to be looking at? Frontier will be hoping that each gift includes a big bottle of pain killers.

DFW on sale

The Wright Amendment is not completely dead yet. Well almost. This press release from Southwest Airlines tells a great story. The Dallas area is going on sale.

Southwest has to sell the fares as 1-stop in the meanwhile. They have announced 25 new cities out of Dallas Love - Baltimore, Chicago Midway, Cleveland, Columbus, Denver, Detroit, Fort Lauderdale, Indianapolis, Jacksonville, Las Vegas, Los Angeles, Louisville, Nashville, Oakland, Omaha, Orlando, Philadelphia, Phoenix, Portland, Sacramento, Salt Lake City, San Diego, Seattle/Tacoma, Tampa Bay and Tucson.

What does this mean? Lower fares of course! We recommend you watch fares using Farecast and use any of the above cities as the departure and DFW as the arrival. Using this tool, we ran San Diego to DFW for our example. We like the way the fares have mostly been high or steady over the recent history. We especially like the fact the curve has started to fall.

We think its going to fall a lot more. Southwest is offering introductory fares of $99 each way (taxes and fees extra) on all 25 of the new routes. American's non-stop monopoly on the route is going to get hammered. American sometimes charges over $400 roundtrip. 50% off is a great way to start.

Singapore Airlines raises the bar - really high

We will let the pictures tell the story.... yes, dear reader, the "Singapore Girl" is standard.

>

First class - an airborne apartment

Business class - look at that seat!

Economy class - note the space

jetBlue gets ORD

To be announced shortly, but already leaked by two news stations in Chicago.  jetBlue will announce a 4 trip schedule between ORD and JFK.  If I were Frontier, I would be really angry! 

Paris Tyler  

 

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http://abclocal.go.com/wls/story?section=local&id=4667082

 

Jet Blue to fly out of O'Hare

 

October 16, 2006 - O'Hare Airport is getting a new airline. Crains' Chicago Business is reporting the Federal Aviation Administration has given discount carrier, Jet Blue permission for four daily flights out of O'Hare.

The airline hasn't decided yet which cities it will fly to from O'Hare.

 

JetBlue gets OK for O'Hare flights

http://chicagobusiness.com/cgi-bin/news.pl?id=22457&bt=jetblue&arc=n&searchType=all

FAA approves 4 daily departures from airport

(Crain’s) — After years of trying to establish a foothold at O’Hare International Airport, discount carrier JetBlue Airways Corp. has received federal authorization to begin flying at the airport.

The Federal Aviation Administration (FAA) approved the New York-based airline’s request, allowing JetBlue four daily departures from O’Hare.

A JetBlue spokesman said the airline has not yet decided to what cities it will fly from O’Hare. The airline must start flights by next Jan. 27, according to an order from the FAA.

The airline needed FAA approval because the agency has capped flights at O’Hare during peak hours in an attempt to reduce congestion.

The victory for JetBlue could be viewed a loss for AMR Corp.’s American Airlines and UAL Corp.’s United Airlines, the two dominant carriers at O’Hare. Both airlines had objected to JetBlue’s request.

JetBlue had earlier requested eight daily flights at O’Hare, but halved that number last week.

The FAA’s decision comes at an opportune time for JetBlue.

JetBlue’s request was approved just before a new FAA anti-congestion rule takes effect near the end of this month. The rule would have required new carriers to buy or lease available landing slots at O’Hare from other carriers.

Because the request was approved before the rule goes into effect, JetBlue will not have to pay for landing rights at O’Hare, the nation’s second-largest airport in terms of total passengers.

JetBlue had expressed interest in expanding to O’Hare since at least 2002, when JetBlue executives met with Chicago Mayor Richard M. Daley to discuss the carrier’s plans for O’Hare.

“We see Chicago as a huge opportunity for us as a low-cost carrier,” the JetBlue spokesman said, calling the city “a huge population base missing from our route network.”

The six-year-old airline flies to 47 destinations, most in the continental United States.

United and American did not immediately return calls for comment.

US travelers often unaware - USTOA

In a survey that defies logic, USTOA says many US travelers don't realize how much money they can save if they were to buy a package. Really? It gets better - "tour operators needed to do a better job of educating travelers" and "opportunity for travel agents to educate their clients". Respondents to this survey must the two dozen offline people living underground someplace.

A very short visit to Expedia or Travelocity educates travelers reagrding the benefits of packages in a New York second. Regarding tour operators and travel agents educating their customers - well, what can one say? These groups are already a decade behind in speaking to their customers. ---------- US travelers often unaware of tour savings Only 17% of US consumers know buying packaged travel can save them up to 30% over making their own travel arrangements, according to a recent poll by the U.S. Tour Operators (USTOA).

Among the almost two thirds who believed buying packaged travel could save them money, few knew how much they could actually save. Oddly enough, more than 60% said they would be more likely to take a tour or package if they knew they could save money.

Said Bob Whitley, USTOA president: "The average savings purchasing a tour or package are 30% and can range from10 to 40%, depending on time of year and destination. This is something that purchasers of travel need to know.

He said the results showed tour operators needed to do a better job of educating travelers. "It's also an excellent opportunity for travel agents to educate their clients," he added.

The USTOA Web site is filled with consumer-friendly information and news that can be adapted by travel agents, he said. USTOA requires all members to pay agent commissions. USTOA members are responsible for the vacations of almost 11 million people.

British Airways starts a feeding frenzy

The long awaited fleet renewal at BA is now started. Some useful links are here and here.

Interesting items are that the A350 and A380 are under consideration. BA is "flexible" about which vendor to go with. BA have even invited the Engine Aliiance to bid - found exclusively on the A380. We think it a fair bet BA will not buy the A350XWB - its committed to the 777, and is not interested in waiting as long as Airbus needs for the plane to fly. By the time Airbus gets the XWB into the air, Boeing will have its new plastic 777 on offer, which will leap ahead of anything Airbus has to offer. For the middle weights we see the 787/777 combo as winners.

In the large segment, the A380 and the 747i is a much more interesting fight. The A380's huge seat capacity has to excite BA. Especially for service to Australia where it wants to cripple Emirates and stay current with Qantas. On the other hand, BA is an old 747 customer and it nearly launched the 747-600. The 747 has a special place at BA. We think BA will drive Airbus and Boeing crazy over this order - it is a highly influential customer that is going to play hard and rough.

A key influence on the BA order will be Lufthansa's order for large planes later this year. If the Germans buy the 747i in addition to keeping their A380 order, then Boeing's position strengthens considerably at Airbus' expense. While Airbus can accept orders for large planes, its ability to delivery on time is in doubt. On the other hand, Boeing can deliver but has a slightly smaller plane. The risk averse decision, in our opinion, is to buy the 747i. But that means diminished bragging rights in an industry awash with more testosterone than Jet-A.

O'Leary finally trumped?

IALPA (the Irish Pikots Union) bought over 2% of Aer Lingus in the market last week. This means that the Irish government (28.3%), the Employee Share Ownership Trust (ESOT) (12%) and the pilots union (2%) = 42% or more. It will be very difficult for Ryanair to secure over 50% unless they much more. Holders ofthe stock should sit tight now and see what happens next.

Even if Ryanair could acquire Aer Lingus, we doubt the employees would make the deal work. Mr. O'Leary may have met his match. In which case he might sell his stake. Who would buy his close to 20%? Lots of airlines might think its very attractive to have over 20 daily slots at Heathrow.

Panasonic taking over Connexion?

This report highlights a few things. Airlines that comitted to Connexion are irritated that its going away. Airlines that bought into the solution invested heavily and want it to work - to the extent that they are considering the Panasonic offering. Korean was getting less than 5% take up - much lower than Lufthansa - so price may have been a problem for them. Which is why we think Boeing should never have been given pricing power over this solution. Finally, Boeing is in the compensation game over their decision to cancel the program. ------- ATW reports: Panasonic is considering taking over the Connexion by Boeing inflight Internet service when Boeing ends it at year end (ATWOnline, Aug. 18), Korean Air President and COO Jong Hee Lee revealed. Briefing reporters in Seoul, Lee said Panasonic has told Korean, which equipped 29 aircraft with the service at a cost of $400,000 per plane, that it will take over the program if it can be assured of firm orders to equip 500 aircraft with the service. Fewer than 150 aircraft are believed to be outfitted with Connexion currently.

"We are waiting to remove the equipment or continue through Panasonic," Lee said. He noted that fewer than 5% of passengers on aircraft with Connexion use the service, commenting that the $20 price for usage may be "too expensive." He said Korean was "very, very disappointed" that Boeing decided to pull the plug. The airline has been reported to be seeking $12 million in compensation (ATWOnline, Aug. 23). Lee declined to confirm the figure and suggested that it may be higher.

Boeing Startup site

The Boeing Company wants to teach future airline owners (Tacoma News-Tribune 10/15/2006; John Gillie) Imagine for just a moment that your checkbook balance is bigger than Bill Gates', your ego is bigger than Donald Trump's and your grasp of business history is weaker than Jessica Simpson's. Imagine, too, that you want to become an airline industry legend in the same league with Southwest Airlines' Herb Kelleher, Virgin Atlantic's Sir Richard Branson and TWA's Howard Hughes. But your unaided chance of creating a profitable, long-lived airline is about as good as your chances of developing a vaccine against bird flu. What to do? You could recruit an experienced airline executive as CEO; research the air travel market for a profitable niche; draw up a complex business plan; search the world for additional financing; hire and train a large corps of pilots, mechanics and flight attendants; set up a major maintenance base; evaluate and acquire a fleet of aircraft; implement a marketing plan; and open the doors and pray for paying customers. Or you could just call The Boeing Co. At least that's what the Seattle-based Boeing Commercial Airplanes Group hopes that fledgling airline owners worldwide will do. In its quest to capture business from start-up carriers, the company has created what it calls "Start-Up Boeing," a program to guide aspiring airline owners through the conception, gestation, start-up and operation of a new airline.

Mesa runs into more island flak

Mesa's go! airline, operating in Hawaii, is running into more trouble. A local group is aiming at go! Their website is full of links and images.

The myopia is amazing. Mesa came to the inter-Island market to cut fares and make getting around cheaper. Imagine if this happened where you live.... would you react by starting a campaign against the airline? Its no surprise then that the site is runs by people who think they are heroes - really they do. Here is what the word hero means to them: Hawaii's Airline Employees Repelling Ornstein.

Perhaps its time for travelers in and to Hawaii to start a website for the consumer.

Dummy of the week #34 - British Airways

Its been a while since we posted one of these. Seems strange, but there has been a shortage of flat out dumb things going on - can you imagine that? But we are saved from starvation by BA!

BA decided to ban an employee from wearing a religious symbol. Can you imagine this? Airline bosses told check-in worker Nadia Eweida, 55 to remove the necklace because it contravened the company's uniform policy.

BA policy states that jewelery may be worn underneath clothing. A BA spokesman said: "This rule applies for all jewelry and religious symbols on chains and is not specific to the Christian cross."

Really? What about employees who wear a head covering like Shikhs, Jews or Muslims? It does not stop there. Many faiths have people wearing obviously religious items. Or maybe they simply don't get hired? The world has grown to accept religious symbols of all types. Particularly in western democracies. What a preposterous policy.

Christian Streiff - another view

The world was shocked with Mr. Streiff's resignation from Airbus. Nobody really saw this coming. He appeared to be a saviour when he was appointed in time for Farnborough. But check this out.

His time at previous employer Saint-Gobain also ended after a short stay. Christian Streiff resigned at a board meeting after just over a year in the job. Jean-Louis Beffa was Saint-Gobain's chief executive and had selected Mr. Streiff as his successor, but turned against him once it became clear he was "not up to it".

The prestigious Financial Times wrote (May 3 2005) "If there is one French blue-chip company claiming to set standards of managerial excellence, it is Saint-Gobain." It goes on to say Mr. Streiff "does not seem to have lived up to Saint-Gobain's high expectations as managing director."

Mr. Streiff was appointed to his post at Saint-Gobain is said to have disagreed with the chairman, Jean-Louis Beffa, over the group's organisation. Sound familiar? Maybe Mr. Streiff was not the "boy wonder" after all. Could it be that Airbus is actually better off without him? The firm certainly does not need more management upsets.

Delta's international expansion

Delta, which has reduced domestic flying in favor of an expanded international schedule, plans to launch direct flights in spring 2007 from Atlanta to Prague, Vienna, Dubai and Seoul Incheon and from New York JFK to Pisa/Florence, Shannon and Bucharest. Additionally, it will double JFK-London Gatwick service from once to twice daily from April 1 and ATL-Sao Paulo from once to twice daily from June 15 to August 15.

Lets review these routes.

• Seoul Korean (a Skyteam partner) operates the route. Is this an indication that the safety concerns with them have not eased? ATL-SEL is a good route, but aircraft intensive (requiring 3 planes in a rotation?) and Delta's product does not compare well with Korean's. Additionally, Delta is weak in the Pacific. This might be the beginning of a major thrust for them. It makes you think Hong Kong is something they are considering. But again, given Atlanta's location, the number of markets with decent circuity is quite small. Draw a line at St. Louis and only traffic east of that might consider connecting over Atlanta to Seoul. Once Korean gets its 787s, Delta slips further back in this market because Korean can start serving secondary cities, thereby unzipping ATL.
• Prague By the same logic, if it's OK to put the beat down on Korean by flying their segment, why not fly the more lucrative JFK-PRG as opposed to ATL-PRG? Is this a nod to Continental to take on EWR-PRG service? While I agree that there is a need for additional service to Prague, is Atlanta the best base from which to do it? Why does Delta ignore the better JFK market? Or is this better served over Paris with Air France?
• Atlanta-Dubai? No logic here. I am willing to bet that 60% of the US traffic to Dubai comes from the upper East Coast. The local traffic on ATL-DXB has got to be, what, 10 people per day each way (PPDEW)? That is a long haul route, probably 2.5 aircraft worth if the schedule is daily. Fear of Emirates Airlines? Emirates will start IAH-DXB soon. Delta cannot compete from a product standpoint with Emirates. (Notice a trend here?) I wonder what happens if Continental goes EWR-DXB, because the best connection markets over ATL (West Coast, Texas, Florida) suddenly have another (better?) option. Again, Delta will be left with limited connection opportunities. Also, might Delta be looking to do something clever with 777LRs beyond DXB? Even if Continental and Delta were to slog it out over DXB, Continental would have the advantage of serving a larger local market vital to DXB. One has to wonder why Continental has not announced IAH-DXB already?

  Which brings up the major question. Are we slowly seeing the marginalization of JFK for Delta? They are putting their major international thrust out of ATL, not out of JFK. It makes sense from a feed standpoint, except for the fact that you need strong local component to support the routes. Delta's route structure is already overly connection-dependent. JFK at least provides a substantial O&D market. Atlanta, the world hub of the future? I wonder if this will actually work.

• Bucharest before Warsaw? Competition issues again? Willing to compete with whomever operates from OTP but not with LOT? An odd choice.

Notice the mention of the long-range 757s Delta is acquiring? Interesting. Guess that explains the Shannon and Dublin services. With the resurgence in the popularity of the 757 one can understand airlines' desire for the 787. And the big questions about the need for lots of A380s.

Paris Tyler

Euroland and EADS - what's next?

Like many pundits, we wonder about the wisdom of increased government influence over EADS. However, lets go through a possible scenario. EADS has to pay out BAE for its stake. EADS is not cash flush; capital needs at Airbus for A380 compensation is a top priority.

Euroland governments are nervous about EADS because trade unions are strong in Europe. Here's a scenario we think is plausible. Perhaps, Spain and Germany together provide EADS with the funding to buy out BAE. This means EADS does not need big loans from banks and that takes a serious financial burden off the table for EADS. Germany and Spain appear to be "protecting" jobs at home. The politicians look good and this ensures Putin Aerospace is kept at arm's length as well.

It appears that Airbus is loath to give Boeing the 40% of the market which the 787 appears to be monopolizing. You have to wonder, why did Airbus think the A380 a more important project than the A350? Even if the A380 market is 10%, there is no way it compares with 40%. It seems the XWB is going to go forward because Euroland needs those jobs. We expect the unions will give up a lot of their members' benefits to keep everyone employed. This is the only way everyone wins a little as opposed to everyone losing a lot. The Euroland-based launch customers for the A350 will understand and approve.

This is a scenario and not based on any "off the record" insight. Its not a leak. But it seems to hang together.

Avro Jetliner - a forgotten pioneer

This was a remarkable airplane. Built in 1949, the plane performed very well. Everyone liked the plane, except some Canadian politicians.

The project was shelved. Canada lost what could have been a great lead in commercial aerospace. Imagine where Bombardier could be today had the Avro plane been turned into a commercial success?

Interfering politicians again - does this remind you of something more current?

Travel services on mobile phones expected to become a “must have”

Travel services by mobile phone will become a 'must have' for today's busy, stressed travellers, according to Mobile Travel Technologies. The company adds that a growing number of people are accessing the Internet through their mobile phones and that travel content was ideal for the medium.

Mobile Travel Technologies described the technology as another 'direct booking channel' which enables travel companies to offer useful services 24 hours a day such as information on flight delays and the ability to search for and book hotels on the move. The company also indicates that the technology reduced the need for customers to use call-centres and encouraged them to manage their own travel.

Mobile Travel Technologies said a number of forces would drive the use of mobile services such as the improved technology with bigger screens and faster Internet access as well as the availability of content.

Companies like Google, Orbitz and Kayak are going into mobile services in a big way so it is going to be easier and easier for people to find mobile travel service.

787 keeps soaring

Boeing updated its website today and the orders keep on coming. Boeing has 432 firm orders for the 787 with another 20 UFOs this week.

At this rate, Boeing will have over 500 order firmed by year end. This is remarkable because its no longer front page news. Imagine if Airbus announced 20 orders this week - that would be front page news.

757 gets another boost

This airplane becomes more popular each month.

Northwest is going to fix up 10 of its 757s for long haul service to Europe. The 757s, which must be ETOPS certified, will be fitted with winglets and will seat 160 passengers in two classes. The business class cabin will be reconfigured with two aisles and 16 new seats, providing passengers with portable on-demand IFE, 1.5 m. of personal space, a computer port and other amenities. Coach will be configured with 144 seats with 4 in. of additional pitch.

As the picture shows, Northwest's 757 with winglets looks gorgeous!

Virgin Atlantic does not control Virgin America - we have pictures!

The DOT has held back Virgin's America's operating certificate because some US carriers (cough, Continental) say the company is really being run by Virgin Atlantic. Well we have proof that its not true.

Yesterday Ms. Grace Slick (picture), a one time famous person in rock and roll (about 30 years or more ago), named Virgin America's first plane Jefferson Airplane after a band she played in. This band first saw the light of day in the era of black and white pictures.

By comparison Virgin Atlantic also used a famous woman in their marketing efforts; a certain Ms. Claudia Schiffer (a must click). As you can see in the picture below (which does not show off Ms. Schiffer at her best), Sir Richard Branson reacted to her presence in a completely rational way.

Consequently we think this discovery should allow DOT to immediately remove any delayed approval on Virgin America's application.

Aboulafia digs France

Dear Fellow Private Sector Standard Bearers,
Just back from France with Part 27 of my comprehensive fact-finding project: “Who has the dumbest politicians, the US or France?” I’m pleased to report a winner: Thierry Breton, France’s Finance/Industry/Economy Minister, tips the balance in France’s favor.

Breton told the Financial Times (October 4) that “In Airbus and EADS we have European companies that are really a European success…There is no question. We will defend this model.” Now, there’s something in the back of my head that vaguely bothers me about that state-ment…what could it be? Oh yeah: Why the hell would a successful model need defending?

Let’s back up. Airbus was created when European governments orchestrated their economies, creating new national and continental champions as per politicians’ whims. But as far as industrial policy goes, Airbus was a no-brainer: The jetliner industry offers guaranteed growth rates and extremely high barriers to entry. Take some legacy industrial assets, insert government cash, find some talented sales people like John Leahy, and watch it go. Every other European industrial scheme—shipbuilding, cars, Concorde, Minitel terminals—obliterated value. Airbus was the only state-supported success. Unfortunately, Europe’s politicians forgot a crucial fact: Airbus succeeded despite government industrial policy, not because of it. In fact, this government interference has created some serious trouble.

Look at the Airbus record: a series of moderate successes (A300/310, 330), one huge home run (A319/320/321), and some lamentable but forgivable near misses (A340, A340-500/600). But with the full support and connivance of parent governments, they launched a spine-breaking horror (guess). Without the A380, Airbus would still be a tremendous success. Instead, they’ve got a serious industrial crisis, right in the middle of the best bull jetliner market in years. So, Breton’s “model” of state-guided industries is alchemy in reverse: spinning gold into straw.

Airbus is a good plane maker. But as an industrial model, it’s in dire need of change. The bad old days of getting 70% of its equity from governments and their large industrial proxies is ending. EADS/Airbus needs cash (equity or debt) from new private sector investors. What does a broad float of new investors get them?

1. Freedom. With private cash, Airbus will be free to shift production between sites, to outsource, to sign global industrial partnerships, all without political interference. The A350 won’t happen without that freedom. Airbus also needs to be able to fire workers in one place, and hire them in other places, without anyone caring that the jobs balance was shifting between countries. Most of all, it needs the freedom to launch and kill programs depending on market needs. IF Airbus cannot launch the A350 while continuing with the A380, they need the political freedom to shelve the A380. Streiff’s exit is a good indicator that this freedom is a long way off. Germany’s renewed talk of an equity stake means it might be moving even further away.
2. Feedback. A company held by large stakeholders can do something dumb as long as those stakeholders are coerced or incentivized to go along for the ride. Hence the A380. But a broad float gives you instant feedback and discipline. Do something dumb, and your stock will drop until you cease doing that dumb something.
3. Survivability. We’ve been here before. Think back to 2002 and the collapse of Fairchild Dornier. When the two sole major stakeholders withdrew, there was no broad float to hold up the table. FD went from major player to RJ dust in two months. That can happen when there isn’t a broad market for a company’s shares. Anyone who thinks the A380 is bulletproof need merely look at the prototype 728JET. That’s right, you can’t. It was scrapped.

My friend George Hamlin, VP Business Consulting at Morten Beyer & Agnew, brings up another point concerning imminent money requirements: A380 delays could cause a cash shortage. Airliners are paid for largely at delivery, which removes several billion dollars in the next two years at Airbus. The expenses, of course, go on unabated (and could even increase due to overtime, out of sequence work, etc.). On top of that, what will Airbus/EADS’s cash position be after buying back BAE’s shares? And when Airbus SAS was created, did the partners capitalize it with a pile of money which is now being seriously eroded? Private sector cash isn’t just useful; it might be very necessary.

Back to M. Breton. If you were a member of the French government elite, letting Airbus join the Anglo-US club of independent companies owned by private sector cash would be admitting defeat. To many in France, the role of the state is to manage economies, not let globalization and the private sector run the show. They view Airbus as proof that they are right. The dysfunction: because of the current crisis, Airbus has also become the final proof that they are very wrong. Hence, it’s a “successful model”…that, ummm, needs “defending.”

What’s the real danger of Breton’s thinking? Time for my favorite metaphor, The Windmill. If a storm comes, you can fix your windmill blades in place, or you can let them spin freely. But if you try to slow them down, to manage them as they spin, the gears inside will be ripped apart. Metaphor translation: EADS/Airbus can be re-nationalized (blades fixed in place). Or, they can float all the shares, with totally independent management (blades spinning freely). But if Breton and his government cronies (in all parent countries, possibly including Russia) persist in interfering, EADS/Airbus will resemble that managed windmill. Subject to market forces, but unable to respond as needed. It will be ripped apart.

So once again, the US has fallen behind in a key strategic race — political stupidity. The US may have some serious buffoons, but with leaders like Breton, the Chirac administration is in first place. Giving Breton and his cohorts a decision-making role in the Airbus affair is like putting Mark Foley in charge of the Missing & Exploited Children program. Heaven help the people they are supposed to protect.

Yours, ‘Til The Right Guys Prevail, Richard Aboulafia

Emirates to offer iPod downloads?

Word is that Emirates may be offering an opportunity to passengers to make use of their own devices for entertainment. "He (Emirates CEO Tim Clark) did mention that iPod or video iPod type devices owned by customers would have access to seat back downloads, but did not expand on whether these would be free, retailed or a mixture."

We have been muttering about this for the past year. This, if true, is a great move. Nice revenue opportunity for the airline and - potentially - a great advertising opportunity too.

Price transparency - A Farecast review

Markets clear best when buyers and sellers know what is going on. This is the classical economics view of markets. In the online travel world, transparency is not an easy thing to find. Travel has traditionally been a supplier driven business. For example,airlines produce seats in a market and then use pricing tricks called yield management to extract the most from the consumer. How do they do this? They accumulate data on a flight over a long time and price according to patterns - they know how many days before do they need to offer cheap seats, etc. In the scenario, the airline (seller) has ALL the information. The buyer has nada unless the trip is flown regularly and the traveler has a sense for what prices should be.

The problem of course is that a travelers has no hope to keep up with a computer tracking demand and supply to ensure the market clears at its highest level. The best a consumer could hope for is speaking with a travel agent who might know more - and certainly can advise the traveler which fare buckets are open and selling. Without telling the traveler this level of information of course - the agent might say something like "seats are mostly sold, so take this deal". This works well when the traveler knows the agent well and there is trust. Mostly of course there is little trust because, after all, the agent was paid a commission by the airline. The traveler's interests came second.

Which is why the Internet has been a boon to travelers. But taking away the agent also meant travelers are less in the know. Travelers are at the mercy of suppliers. Airlines and hotels have migrated people to their own websites as quickly as they can by offering lower fares - essentially not charging a fee for selling the ticket like third party sites do. This has meant that suppliers are clawing back the world they like, where they control things. The Internet drove suppliers nuts because it meant a consumer driven model was imposed. Suppliers could not bear it, but had to embrace it and now they are cleverly turning matters around again.

Along comes Farecast (www.farecast.com) where consumers can view fares in historical terms. This is very useful because travelers can see prices in two dimensions, fares in the market and how these have moved over time. Information like this is powerful. As travelers discover this site we can see it becoming a big seller of travel; particularly air fares. Since online travel bookings first started, travelers have discovered that information is way more powerful than anything else. The consumer driven model educated people that paying retail for travel was what suckers do. Suppliers are trying to put the genie back in the bottle - and Farecast is using clever technology to ensure the genie does not fit in the bottle anymore. Give the site a test, you'll be amazed to see what fares have done over the past few months.

Its a great start, but we think there is a better model and we're selling that idea.

Smells like teen-Spirit

Spiritual Enlightenment A Spiritual Experience De-Spirited Spirits Rising

As you can see, there were lots of different directions we could have gone in to title this piece. Unfortunately there aren't so many different directions left for the subject carrier. Where is next for Spirit? Who knows?

History It all started out so well. A niche carrier, serving some Florida, that apparently always under-served Atlantic City market, and some limited skimming under the NWA radar at Detroit. Nothing too obtrusive. Should have been a relatively prosperous existence, as airlines go. Detroit should be big enough to support a second, smaller carrier. Sun Country, AirTran and Frontier have done well in other carrier's strongholds. And the market can always absorb a few more seats to Florida.

Bonuses Spirit seemed to be a very nimble carrier. Able to sneak into new markets quickly when the option presented itself (ORD-LAS service was operated after National ceased operations). Small and fast moving, a good combination to exploit growth opportunities.

Route System Spirit has tried to focus on major markets. The Detroit route system was initially linked to major Florida markets plus Atlantic City and Myrtle Beach, while the Florida system concentrated on major East Coast destinations and, later, Chicago. In those major markets there has always been room for an additional carrier to Florida. Additionally, red-eye service to Los Angeles, San Francisco, and Las Vegas has been operated from Detroit.

Recent Moves But as airline fortunes always go, growth was in the cards. And this too seemed like a good idea. Instead of relying solely on point-to-point Florida dependent service, turn your primary market into a flow market and serve the Caribbean. And the Caribbean seemed to be open to the competition. Most of the service to many of the resorts was operated by American, which meant high fares. Certainly there was room for a second competitor. And what better hub for launching Caribbean service than Ft. Lauderdale? It's close enough to Miami to siphon off the spill traffic from American. And given how much American charges, Spirit could technically still make a nice yield charging less than American.

This would not come at the expense of Detroit service. That would remain a vital part. How many markets the size of Detroit have major markets still served by only a single carrier? Not many. And Spirit has been slowly adding service to the major markets from Detroit. LaGuardia, Washington National, Los Angeles and San Francisco have been added to the route system over the years. None with enough frequency to anger Northwest, which, of course, did limit the utility of the carrier to schedule-sensitive customers. But offering significant savings over Northwest fares had to appeal to a significant number of passengers.

You Knew There Would Be Bad News. So, Spirit is poised for growth in Detroit, in Florida, and in the Caribbean. Sounds good. What could go wrong? Plenty.

• American doesn't cede ground easily. They've built that hub in Miami, and it is probably one of the best positioned hubs in the United States as far as future international growth is concerned. Between passenger and cargo growth to Latin America, American has a wonderful asset. Don't think they would allow Spirit to come in and share in the profits. For American , Ft. Lauderdale is too close for comfort. Spirit is limited in its expansion possibilities to the extent that adding too much could get AA's attention and unleash their wrath. American has been experimenting with Ft. Lauderdale-Caribbean service, and I have a feeling Spirit is the primary reason.
• Delta decided that the Caribbean and Latin America were ripe for expansion at the same time Spirit was moving in. They serve, via Atlanta, most of the markets Spirit serves via Ft. Lauderdale. And American serves these markets via Miami. Spirit has no unique position, nor is it obvious that the markets are large enough to support all three carriers.
• Though they are trying to build a hubette/focus city at Detroit there are very few major Detroit O&Ds that do not have at least two or three other carriers competing. Worse, many of the remaining markets have an LCC in them, or just aren't big enough for 3 or 4 carriers. Witness Detroit-Denver as an example - it doesn't work when all the flow is only to other major cities with plenty of nonstop and connecting service (for example, Spirit would offer Denver-La Guardia via Detroit, but that market has plenty of other options). AirTran is aggressively expanding into the Detroit-Florida market. American operates Detroit-La Guardia. There are not many Detroit markets left with room for 3 carriers. See below for the rest of the Detroit problem.
• Expand Detriot? Not with the double barreled shotgun of Northwest aimed squarely at your backside. Northwest is one if the three carriers (American and Southwest being the others) that I would never want to start a fare, or more appropriately, a revenue-management, war with. They are skilled, attentive, some would say predatory, but very quick and adept at meeting low-fare competition. See Sun Country circa late 2000, early 2001, as an example of what happens when you grow beyond your niche in Northwest's backyard. Dare I also mention AccessAir and RenoAir for examples that show how Northwest reacts to invasions of what it believes is its turf?
• Florida is always jumping. It is a sure way to achieve a 90% load factor. For some reason, a lot of investors like high load factors, yield be darned! Knowing that, a lot of carriers still hide planes in Florida to boost loads. Those 10 Indiana-Ft. Lauderdale passengers make the Indiana-Charlotte flight look good, and maybe are the difference in breakeven and not. And notice how much concentration of service JetBlue, AirTran, and, of course, Southwest, have in Florida. And this is where they are growing.
• Are they hemmed in? With Ft. Lauderdale as a primary hub (again, Detroit growth is limited because once they get too big there, we could be seeing another Sun Country experience) there is only one direction to go; South. Is there room for another operator to Latin America and the Caribbean? Even a discount one? American, Continental, and Delta are strong and entrenched.
  United couldn't make a piecemeal service to Latin America work. Keep that in mind. And each of the key operators in the region has large hubs feeding into their international service. Spirit, as noted above, serves mostly the major cities, which, aside from the ones with nonstop service to many Caribbean and Latin destinations, have multitudinous connections to the region. Does one more carrier make a difference? And do they have the wherewithal to fight, and how long can they? It takes time and money even to carve out a small niche under these conditions. And let's not forget that Jetblue is sniffing around the Caribbean. Are those trips between Orlando and Puerto Rico just the start? JetBlue serves almost as many domestic destinations from Ft. Lauderdale as Spirit does. (You know, overlaying those two route maps make for an interesting proposition. The same goes for Spirit and AirTran, but don't get me started.)
  The point is, the route system only offers limited flow opportunities, and the local markets aren't large enough to support as many carriers as are currently participating the in market, at least not without some changes. Notice that Spirit recently significantly decreased Chicago service, this despite ATA leaving the Chicago-Florida market over the past year, and Southwest not replacing most of that nonstop service. Note also that AirTran has started some limited additional Chicago-Florida service. What's wrong with this picture? Who was where first?
• As for expanding Ft. Lauderdale, there is some limit to that too. How many of the non-core markets can support service to Ft. Lauderdale? Notice how many markets don't support year-round nonstop Miami service. And how many of those markets will provide decent flow to the Caribbean? Market stimulation only goes so far. As I have noted before, a large stimulation of a small number still yields a pretty small number. Bigger, but not big.
• This then leaves Spirit with the local Miami/Ft. Lauderdale/West Palm Beach markets. Those can be lucrative. Perhaps that is the role for Spirit? Skimming the Miami traffic. Nothing offensive enough to rustle American's feathers. There is a risk to that strategy, but only a mild one. What if some other carrier comes into Ft. Lauderdale or Miami? That is probably a battle Spirit could win, assuming of course that they build a brand and a presence. Perhaps taking a lesson from jetBlue is important here. jetBlue belongs to NYC. New Yorkers identify with it. If Spirit can derive a similar ownership feeling among the South Florida population, that could go a long way towards increasing their staying power. That said, their branding, image, 'feel,' and other aspects will have to be tailored to that area. It's possible. Could be interesting. Do they risk being regionalized? Maybe, but regionality can be profitable. Visions of world-domination in and of themselves don't guarantee positive P/L performance.
• Wither Myrtle Beach? I've thought before that some carrier would eventually make the links (no pun intended, maybe) between Myrtle Beach and the major domestic destinations that don't have nonstop service. When Hooters Air opted out of existence, I thought that Spirit would be the logical replacement for some of the service. Highly seasonal? Maybe. But it is counter-seasonal to Florida and the Caribbean, which means that Spirit would have places to hide planes in the summer. For example, it seemed logical when Spirit initiated Ft. Lauderdale-DFW service, that there would be some Myrtle Beach-DFW as well. That would have given them more utility to that market, even if they were still but a small player. But it didn't happen. Why not? Perhaps they have better places to use that capacity? I'm still waiting to see what they are.
• Who is Spirit? Are they another JetBlue, but at Ft. Lauderdale? Are they AirTran, but focusing on different markets? What they can do depends on what kind of carrier they think they are. The other LCCs are slowly setting their images, and people will begin to associate certain qualities with each. Spirit has to brand itself as something that people will seek out and want. Determining what kinds of markets they will focus on will have a great impact on what kind of brand they need to be.
  But wait, you say. Their just released traffic data shows year-over-year traffic increases. You are right. But how much of that has been driven by extreme fare sales? They have been doing a lot of that recently. Not all traffic growth is indicative of profit growth. No matter how low the costs are.
  I'm not saying the situation is hopeless. I am saying it is going to take some creativity and some Esprit de corps to make this work. They have a new fleet, a new image, and the ability to move quickly. They need to move quickly to carve out a niche. The question is whether the moves they make will be successful.

Paris Tyler

Here are Delta's new routes

ATL-PRG JFK-PSA 4xweek ATL-DXB ATL or JFK-ICN JFK-OTP ATL-VIE

So, how many 777s do you need to handle this?

ATL-NRT - 2 ATL-DXB - 2 JFK-BOM - 2 ATL-TLV - 2 ATL/JFK-ICN - 2

That equals 10 aircraft. Unless Delta goes less then daily into the new markets, they do not have enough aircraft (is there is a secret deal to lease some more 777s next year?). So, if they go less than daily why go into these markets against (DXB, ICN) Emirates and Korean?

WSJ tears into EADS

Earlier we shared with you The Economist's view of the EADS mess, today its the Wall Street Journal's turn.

"More Airbus Follies October 10, 2006 Never let it be said that the folks at Airbus and the Elysée learn from their mistakes. Yesterday's move to hand the reins of the troubled plane maker to a career French civil servant is yet more proof of self-destructive Gallic arrogance. Government meddling is the chief reason Airbus is in freefall from its spot as the world's No. 1 maker of large civil aircraft. Years of making decisions based on political rather than business rationale have put the company in its current bind. Louis Gallois, co-CEO of Airbus's parent company, European Aeronautic Defence & Space Co., will replace Christian Streiff, also French, as head of Airbus. Only three months ago, the two men took their respective posts in the wake of an earlier management shake-up. Yet unlike Mr. Streiff, Mr. Gallois has spent most of his career at state-owned enterprises, including atop the French railroad. He'll no doubt be more attuned to the political sensibilities of running Airbus than was Mr. Streiff, who reportedly resigned after his attempts to gain more authority to restructure the company, perhaps through sensitive layoffs, were rebuffed. But the real upshot of his resignation -- aside from being more bad news for a company that last week announced further embarrassing and costly delays in delivering its A380 superjumbo -- is that Paris has regained control over Airbus. A few months ago, Mr. Gallois's co-CEO at EADS, the German Thomas Enders, took overall responsibility for the civilian plane subsidiary. That personnel move rankled in Paris. Now it's effectively been reversed, since Mr. Gallois will keep his EADS hat on too. Tant pis."

Ouch. The Germans and French are at it again. They are going to fight over the A380 - Hamburg can't lose face. There are reports that "MUNICH LAW OFFICE ACCUSES EADS OF WITHOLDING NEWS OF DELAY" from Bloomberg. Even Time magazine has a story on this sad saga.

If you think the in-fighting is over, you're wrong. They will close the curtains Streiff tried to open, and hide the messy stuff. EADS shareholders will remain much less informed than Boeing's. What a pity. Customer anger will mount until market reality strikes - and it will and must. If you're sick, you have to take medicine. Airbus and EADS are sick.

If shareholders cannot bring any pressure to bear, then its up to customers. Airlines need a strong Airbus and a strong Boeing. Never mind the bravado from Toulouse; Airbus is on its knees. Let's hope that a few strong customers step forward and force the issues to be dealt with. Where are you Steven Udvar-Hazy, Sheikh Ahmed bin Saeed Al-Maktoum, Geoff Dixon and Chew Choon Seng?

Alitalia "out of control"

Reuters has a strange story out on Alitalia this morning. They quote the Italian Prime Minister Romano Prodi describing Alitalia's financial condition as "completely out of control" and pledged to come up with a new strategy by January to save the carrier from bankruptcy, a union source said on Tuesday. The rest of the story is equally odd.

The EC has fined Greece over its repeated "illegal" support of Olympic. The Italians are surely skirting, if not breaking, EC law with perpetual support of this dinosaur. The company has not made a profit since... maybe so far back nobody remembers. Things are awful at Alitalia. You can follow this airline's miserable history at wikipedia.

Does the EC allow euthanasia for airlines? If not, some employees are attempting corporate suicide.

CATIA

From IFExpress:

This story is about In-Flight Entertainment, at least eventually. It is about entertainment wiring on the A380, the systems that design the wiring, and the way computer aided tools help, or don't help that job. I would also ask that readers please read the hyperlinked articles at the end of this story, all the while remembering that both Boeing and Airbus use many of the same sophisticated CAD/CAM design and collaboration tools. The big one in common usage is from a company in France of all places, called CATIA (sounds like it is spelled). Because it plays a big part in the development of planes from Boeing and Airbus, it is the focus of the billions of dollars in overruns and missed opportunities by the folks in Toulouse. It is not the problem per se, but rather the vehicle for the problem and if the stories in the links below are to be believed, it is the antithesis of working together! Lets start in the beginning...

In the late 80s and early 90s, Boeing spent vast sums and employed thousands of people in an attempt to integrate the management systems (CAD/CAM, Purchasing, Bill Of Materials [BOM], etc) that are necessary to support an airplane production program. Boeing had hundreds, if not thousands, of existing management systems that were developed over many years and were the key to producing a consistent product such that internal experts would know the status of any airplane on the assembly line or on the flight line. This is a daunting task today considering a modern commercial airliner may have over 1 million parts and the design, manufacturing, assembly and installation of each one was tied to some piece of paper (or many pieces of paper) and usually some type of system was in place to detail, track, make, coat, test, install, and store each one. As new computer aided design capability came along, each system had to be modified to interact with the digital output of computersnot pieces of paper. The computer aided design tools came along long after many were born and the task was to integrate them into the process of designing and building airplanes. Boeing sunk a ton of money in their primary design tool, CATIA, a French software product developed by Dassault Systems, and hosted on IBM workstations. Further, they spent big dollars to get their suppliers and all company stakeholders in lock step with the design tools. The fact that many suppliers did not speak English (in many cases) or were not located in Seattle caused many problems, but great efforts were made in a attempt to mitigate any miss-coordination or misunderstanding. Their goal was to produce a digital mockup of the B777 and then derive all the design, purchasing, manufacturing and assembly plans that fell out because of the design, digitally. It was useful that the design tools came first but here is the key, it made them without all that paperwork and then it had to talk to all those other systems. As it was, Boeing was able to roll out the B777 without at least one level of physical mockup and this meant less design costs and faster product development.

A lot has happened since then and this writer has little knowledge of the final airplane manufacturing process developed or the evolution of the systems in place today but the process is somewhat universaltechnology will invade your best laid plans and you have to deal with it if you want to maintain profitability. At the time, Boeing was quite jealous of Airbus and they talked continually about advantage of a green field approach the new Airbus Company had no relearning or rewiring old manufacturing systems to fit the new technology. It is also ironic that Airbus should fall into this trap because when the CATIA software first came into Boeing, the technocrats then bemoaned the potential knowledge that Airbus would glean from Boeings rigorous wringing out of the Dassault product. I guess it looks like another bug bit Airbus, at least from reading from the below links. New technology can be made to work with old systems but new technology can also generate new problems. It is beginning to look like Airbus lost configuration control (one of the top musts in airplane design) and the problems of designing and building airplanes in multiple places, with differing languages and different software compounded when the product neared rollout and taught a cruel lesson. Certainly one lesson that was painfully obvious to this writer after reading the Internet chatter is hardware is easy, software is hard.

http://worldcadaccess.typepad.com/blog/2006/09/a380_delayed_by.html http://worldcadaccess.typepad.com/blog/2006/07/disaster_storie_2.htm http://www.aviationnow.com/avnow/news/channel_awst_story.jsp?id=news/aw072406p2.xml http://www.bennettmg.co.uk/News/news_airbus_catia.html http://aecnews.com/articles/2035.aspx

Bloomberg on EADS

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBULy44ETRvE&refer=home

 

Andrea Rothman  wrote an excellent piece on the ongoing fracas in Toulouse.  There are particular parts we think readers should pay special attention to.

• "It's a stark reflection of the challenges, both political and structural, that Airbus is facing, and it's disappointing to lose a champion for the cost-reduction course,'' said Will Mackie, an analyst at Mainfirst Bank AG in London, who has a "sell" rating EADS shares.  
• "Streiff's departure tends to indicate that it's not achievable,'' said Nick Cunningham, an analyst at Panmure Gordon who rates EADS shares a "sell."  " I just don't think that the A380, and Airbus's loss of market share to Boeing hand-over-fist, has been enough of a shock to make everyone wake up and realize how much Airbus needs to change to regain its position.''  
• "There's an atmosphere of worry among the workers and we have to inform them about how we plan to manage the situation,'' said Ruediger Luetjen, the labor representative for Airbus's German workers, in an interview following a briefing with journalists in Hamburg on Oct. 6. 

Brokers have turned bearish on EADS. The appearance at EADS and Airbus is that they are out of touch with reality. And reality is not something that is welcome. No wonder employees are worried.  We wonder how much EADS is paying Streiff to be quiet?

More support on why India's aviation sector will outgrow China's

China's government has to learn that central planning will not work in the airline business.  It is a messy business - even in a capitalist system.  Better to allow market forces allocate who flies where at what price than interfere.  But market forces may be an anathema in China.  We doubt they will take our advice.
-----------------------

The EIU review of China’s OK Airways

Less than a year and a half after its acclaimed maiden flight from Tianjin on the east coast to Changsha in Hunan province, China’s first private airline, Okay Airways, has grounded its budget-carrier business model. Blaming the skyrocketing fuel prices and a pilot shortage, Liu Jieyin, the company’s president, said as early as in November, “given the current conditions, it’s impossible for Okay to really succeed as a low-cost, budget airline”, according to a report in Flight International. Indeed, the Tianjin-based carrier’s travails show that despite booming air travel, anyone navigating China’s still-immature domestic air-transportation market will encounter plenty of bumps.

It is a common strategy all over the world for a new airline to begin with a low-cost, low-price approach since this minimises the initial investment. But managing a budget carrier requires simultaneously mastering several operational issues—such as flying a single type of airplane in order to save on maintenance costs and pilot training; minimising ground time and maximising flight time; offering none or only token free services on board; and relying on second-tier airports.

Alas, Okay found that too many of its costs—in addition to those related to personnel and fuel—were out of its control and often at the mercy of Chinese aviation authorities. According to Mr Liu, “after Okay was established 40-50 airports called us to open flights, but we could not fly to these places because airline companies cannot decide on the flight routes.” Likewise, ticket prices remain under tight government control, making it impossible to replicate the flexible budget model enjoyed by low-cost airlines in the West. “We need a looser policy and market environment,” Mr Liu was quoted as saying in the Flight International report. “It will take at leastthree to five years for the low-budget aviation market to mature in China.”

Central-planning habits

Actually, China’s civil aviation authorities are quite keen to nurture private airlines in order to help meet the country’s soaring air-travel demand and prepare for the eventual onslaught of foreign competition in the domestic market. That iswhy in 2004 they decided to license new airlines, including Okay Air and three others. Yet Chinese authorities have found it harder to give up their decades-old habits of central planning. While they want a more competitive domestic airline industry, they also want the transformation to be orderly and follow their vision.

Thus, the government retains tight reins on fares, landing charges, fuel supply and routes. In order to stay airborne under these conditions, Okay recently has adopted a more conventional model. Almost certainly in response to the criticism that Okay’s main investor—Beijing Okay Traffic & Energy Investment—lacks any real aviation experience, the airline has teamed up with Junyao Group. In June Okay sold a 30% stake to Junyao, which has been operating charter flights between Changsha and Wenzhou in Zhejiang province since 1991. The Shanghai-based group, widely known in China for its milk, also owns Yichang Airport, which is a mere 30 km away from the Three Gorges Dam, and two years ago purchased an 18% stake in the former Wuhan Airlines, now controlled by China Eastern Airlines. And most recently, Junyao invested in  a  new Shanghai-based airline called, Eastern Express, which will start operating later this year from Shanghai Hongqiao Airport.

The Junyao tie-up will also fill the void left by Korean Air, which in July dropped its bid to take over Okay. The South Korean flag carrier and the largest cargo operator in the world had lent Okay’s first airplanes—two Boeing 737-900s—and had announced in August 2005 its intention to acquire up to 25% of the fledgling Chinese airline. Korean Air, which reportedly had doubts about working with the major shareholder who was not familiar with the airline industry, reversed its decision when told that Okay would not sell it a controlling stake. Korean Air instead signed a deal on September 19th with Sinotrans Air Transportation Development to jointly launch a new cargo airline with an initial investment of US$65m.

The move will help Korean Air gain a foothold in China’s fast-growing air-cargo market. Its new venture will get off the ground next year with three freighters. Okay Airways, for its part, is seriously considering  big stake in Junyao’s Eastern Express, which was recently renamed Jixiang Airlines, according to a report by Sina.com. Industry sources say the two partners are also mulling a foray into the private business-jet industry. It would be ironic, to say the least, if China’s first budget airline finds success as a private carrier for rich businessmen. But given the dizzyingly rapid transformation of many Chinese industries, it would hardly be surprising.

EADS Press Release - its official, Streiff is out

EADS Board of Directors changes significantly the management structure of EADS

Amsterdam, 9 October, 2006 - EADS has announced the resignation of Christian Streiff as Airbus' Chief Executive Officer and member of the EADS Executive Committee with immediate effect on Monday.

The EADS Board of Directors has appointed EADS Co-CEO Louis Gallois as Airbus CEO with immediate effect. Louis Gallois will remain Co-CEO of EADS. The non-Airbus divisions will report to EADS Co-CEO Tom Enders in the future. The Board of Directors once more underlined its unanimous support for the Power8 programme as decided on 3 October, 2006 as well as for the immediate implementation of the A380 recovery plan. It will take its decision on the A350 XWB in the next weeks. The new management structure will allow, on the one hand, a leaner, more efficient corporate governance and, on the other hand, additional cost savings within the EADS group.

GOL keeps climbing

Looking at one airline that is doing very well despite recent setbacks, GOL appears to be on to its second wind. Reuters has a neat chart demonstrating this (picture) over the past year.

GOL released preliminary passenger statistics for the month of September 2006 today. System-wide passenger traffic and capacity increased 47% year-over-year. GOL's system load factor for the month of September 2006 was 76%. Domestic passenger traffic and capacity for September increased 41%. GOL's domestic load factor for the month of September 2006 was 76%. International passenger traffic and capacity for September increased 150%. International load factor for the month of September 2006 was 72%. Yield per passenger kilometer increased 4% versus September 2005, and average stage length (passenger trip) increased 9%.

The demise of Varig has been of great benefit to GOL.

Streiff is out after 100 days

Reuters reports that Christian Streiff is leaving Airbus today. he is apparently to be replaced by Louis Gallois.

As is to be expected, investors are going to pound EADS' stock. Except there seem to be buyers even with this awful news. Ask yourself, what rational investor would be a buyer now? That's right, the buyers are not rational - because we suspect the buyers are national governments, we highly suspect France, Spain and Russia. Governments make different decisions than mortals.

Looking at the EADS share price chart, you will notice the deep low occured when the previous A380 delay news came out. There are very few people who would argue that Airbus is stronger now. Consequently, we see the previous low as guidance on where the market will take the EADS share price if market forces are rational. As noted, we don't think the buyers are rational right now even if the sellers are.

United scared of jetBlue?

United is asking the FAA to deny JetBlue's request for landing slots at Chicago O'Hare. Wednesday United filed a doument with the FAA. Reuters reports United "argues that JetBlue's request ... doesn't follow proper procedures and should be denied." In the filing United says "JetBlue must operate in accordance with the regulatory rules of the road, just as all other carriers must do. Because its current request ignores those rules, it must be denied."

JetBlue's growth plans for Chicago caught atention among O'Hare's current airlines where capacity restrictions exist to control delays at the congested airport. As part of operational caps, United and American cut more flights than any other carrier in the effort to help O'Hare better match its flights to capacity.

"Nonetheless, Chicago is eager to attract JetBlue to O'Hare," Reuters cites Chicago Aviation Department spokeswoman Wendy Abrams. Abrams says space for jetBlue could open up as US Airways vacates a gate in Terminal 2 now used by America West. Abrams says that gate could accommodate as many as 10 daily flights. jetBlue, if given the gate, could drive American an United up the wall, cherry picking flights to New York, Boston and DC.

More Trouble & Streiff

What turmoil at Airbus! CNBC reports the EADS board has accepted Streiff's resignation. Last Friday we hear the board was unhappy with his speech and he offered to resign. Too bad, the man is most forthright manager the company has seen.

If you smell a whiff of panic, you would be right. The drip-drip of bad news is turning more into a stream. This is awful; customers and employees are depressed. The stock market is going to punish EADS. The old saw is to buy on rumor and sell on news. Airbus seems to have forgotten what good news is.

The sources we have spoken today are all bewildered. Reuters reports the resignation has been denied by Airbus. Who would want to trade with this company now? Airbus is on its way to become Boeing's best salesman.

Speaking of which, here is a class act statement on Randy's Blog. This blog has given Boeing a "face"; more than the typical PR could ever accomplish. Its too bad Airbus cannot see that this type of output, even if it is biased, is powerful and compelling.

San Diego and the "Mystery Airport Site"

America's "Finest City" continues its bumbling towards an airport solution. The city's leadership (if you can call it that) has been doing this for nearly 50 years. Yes, 50 years and nearly $17m in studies and consultant fees. You would think that by now a solution would have been found. But no.

Southern California real estate is expensive. VERY expensive. The population moving southwest in US finds the sixth largest city in the nation with an appalling airport. San Diego is limited in overseas international service because of its short runway.

Along comes a group that wants the San Diego Airport to look at a site - just look at it. But they won't, because they are focused on Miramar. Miramar is famous being the former home of Top Gun. This is now a Marine Base - and within earshot of tony La Jolla, a beautiful location with among the most expensive real estate in the world. Its residents are expected to vote down the selection of Miramar in forthcoming election.

The unfortunate truth is that California needs more international gateway access. The state needs another gateway airport and San Diego should exploit this need. But it is hamstrung with its current airport location. With new land for airports being squeezed out by developement of homes, time is not on the side of the timid.

A350XWB - to be "x-ed" out?

Thomas Enders, the co-chief executive of EADS Airbus' corporate parent, told The Financial Times Deutschland that the company might scrap its planned A350 XWB. Under extreme pressure, Airbus' A350 may be at least sidelined or even cancelled.

A step-child from inception, the A350 never caught on to the extent of Boeing's 787 with which it competes. Airbus "invented" the widebody twin market. So it is ironic to see the company caught so flat footed in this space. Its current offering is the highly regarded A330. This aircraft was the base line on which the first version of the A350. Customer complaints forced Airbus to go back and "redo" the plane to its current XWB format.

Really good advice for Airbus on next steps is to be found close to home. "It could be wise for Airbus to just quietly put the A350 on the back burner [and] see if they can squeeze a little better performance out of the 295-passenger A330, in the same way they're trying to gain a 5% fuel efficiency improvement on the narrow bodies over the next couple of years, and ride it out," said Doug McVitie, a former Airbus employee and managing director of the France-based Arran Aerospace consultancy. "Whichever way they turn, they have no magic solution, so dropping the program or at least deferring its launch seems to me to make sense." We hear some Canadian firms are getting their A350 work moved to the A380.

It would seem that Airbus should not give up on its A330. Rather it might consider using all the research spent on the A350 and how this knowledge can be applied to the A330. In fact, going back to the original A350 offering and simply calling it the A330-500 might be most effective. It is a low-risk option of staying in the space - meaning that it will not concede the market to Boeing's 787 in total.

This removes Euro 10bn in capital costs from Airbus' needs and suddenly things look a lot brighter.

Northwest's off the wall order

In a really strange fleet renewal, Northwest just announced it has ordered 72 jets from Bombardier and Embraer. The order is for 36 E175s and 36 CRJ900s.
Northwest will configure the CRJ-900's and E175s exactly alike. Not only is this odd, these two different aircraft have essentially the same range (1,400mi for the 900's; 1,700mi for the 175) and they have the same seat capacity. The press release indicates Bombardier is taking back 15 CRJ200s. This may explain why Bombardier got part of the order.
The CRJ900
The E175

The Economist on "Trouble and Streiff"

Great story here - some new news, too. If this magazine is doing a piece called "The airliner that fell to earth", it confirms Airbus is in deep doo-doo.

Then there is a hazy story from Bloomberg (can't find it anywhere now) that Boeing is about to announce an order for 13 747s. If this pans out, it will be another body blow to the A380. News that Ryanair (a Boeing customer) is on a path to acquire Aer Lingus (an Airbus customer) adds salt to an open wound.

The TSA "List"

We poke fun at the TSA every chance we get. Although we are all for a list of threats, one has to have a proper list. It seems that TSA, true to form, has a messy one. Really messy. Even Evo Morales is on it. But Hugo Chavez is not. Odd don't you think?

Streaming video, cell phones and truth

For those of you who (like us) think the future lies in your mobile phone, you want to read this story at Wirelessworld.com.

How's this gem? Sprint and Verizon said just five subscribers watching streaming video on their handsets in the same cell site sector could cause serious degradation of service. Analyst Andy Seybold says the issue is not confined to CDMA carriers, but also includes the GSM/HSDPA and WiMAX technologies because all have limited spectrum. Huh?

Are we to understand that streamers can kill the golden goose of unlimited access? How does this information fit into our blog? First consider what this ays about the in-flight Internet. How will somebody like OnAir handle huge bandwidth demand? As we download the news on our mobiles, we will be chewing huge amounts while cramped half to death in coach. Remember the satellite solution (Connexion) is going away in December. On the other hand, solutions like OnAir and AirCell are going to use cellular technology.

Where does this lead in terms of bandwidth? Will these solutions be limited to SMS and other thin client data services? Let's hope not! We eagerly wait to hear from both firms.

Virgin Atlantic gets closer to Virgin America

Call it branding if you want. Virgin Atlantic is about to launch a new look. The pictures show the new look on the UK company's next A346 set for delivery soon. It features a new font and the purple stripe on the tail is gone, instead they are using a deeper red.
The new livery matches the livery proposed for Virgin America, which also features a white fuselage. (sorry about the image quality)
Is this a branding that will be used at Virgin Blue in Australia soon? The anti-Virgin America folks will jump on this as evidence that London makes the decisions.

Israel tries to develop oil alternatives

[update] An Israeli company has discovered a small amount of oil at a drilling site near the Dead Sea, raising hopes that the Jewish state could one day join its regional neighbors as a petroleum producer. Initial tests have found that the site would yield between 100 to 150 barrels daily, said Eli Tannenbaum, geologist for the Ginko oil exploration company. While this is minuscule by global standards - No. 1 producer Saudi Arabia produces 9 million barrels a day - Tannenbaum said there are signs that larger amounts of crude are nearby. (AP)

The US Air Force is not the only group looking seriously at reduction in oil use.

------------------------- 

Israel Leads in Developing Alternatives to Oil 

By Arutz Sheva Staff     Israel is taking the lead in the effort to attain energy alternatives to oil. A new research initiative was launched at Israel’s Weizmann Institute and new cooperation with the US is in the works.

At Rehovot’s Weizmann Institute of Science, a new multidisciplinary research initiative into alternative, sustainable energy resources was recently launched. The goal is to significantly advance the search for solutions to the world's most pressing energy problems.

"Developing alternative means of producing energy is a necessary step for dealing with the continuing energy crisis," Institute President Prof. Ilan Chet told Israel21c. "Creating fresh, sustainable methods of producing energy in the required amounts will only be possible if we can gain the knowledge to invent completely new technologies.”

Finding true sustainable and affordable alternatives to oil would strip powerful Arab oil states of their ability to use oil as a tool of diplomatic pressure. “We believe we can help shape the planet's future," Chen said.

Institute scientists have already come up with several original approaches to producing alternative energy, such as the production of methanol, which is now extracted from fossil fuels, from the sun’s energy instead. If that method proves successful, it could provide a relatively clean, renewable, and environmentally friendly fuel, researchers say.

Physics and chemistry research groups are focusing on energy conversion, storage, and conservation. One research team, in the Institute’s life sciences department, plans to investigate ways of utilizing plants and biomass as energy sources.

A new bill, called the United States-Israel Energy Cooperation Act, was submitted to the U.S. Congress in July. The bill was sponsored by 100 congressmen, both Democrats and Republicans.

The bill passed in the House of Representatives and has moved to the Senate for ratification.

"There is nothing we can do that is more important than weaning the United States and the world off its dependence of petroleum,” Rep. Brad Sherman (D-CA) told Israel21c. “And the first step is research, and an important part of that research is cooperative research with other countries similarly dedicated to finding alternative energy. There is perhaps no better partner than Israel."

Ryanair drops a bombshell

In a move bound to drive British Airways and its Irish CEO nuts, Ryanair has launched a surprise takeover bid for Aer Lingus. The deal values Aer Lingus at 1.48bn euros (1.9bn dollars).

Predictably, the spin started immediately. "This offer represents a unique opportunity to form one strong airline group for Ireland and for European consumers. We will expand, enhance and upgrade the Aer Lingus operations," said Ryanair Chief Executive Michael O'Leary in a statement. "This offer, if successful,means both companies will continue to operate separately and compete vigorously in the small number of routes on which we both operate, currently around 17 of the approximately 500 routes operated by the two airlines," he added.

A takeover would mark the first time a European budget airline has secured trans-Atlantic routes. The impact of this move cannot mean anything but trouble for British Airways. Aer Lingus has 23 daily slots at Heathrow. Whereas British Airways was able to acquire feed from Ireland through One World Alliance partner Aer Lingus, that is certainly over. A revitalized Aer Lingus, independent of One World, focused on long hauls with Ryanair feed is a very unpleasant prospect for British Airways.

Ryanair bought a 16% stake in Aer Lingus when it was recently floated on the stock market. The bid is conditional on Ryanair acquiring the remaining stock through an all-cash offer at 2.80 euros per share.

"The combined strength of Ryanair and Aer Lingus would establish an Irish airline group with over 50 million passengers annually, capable of competing on the European and world stage against other large European airline groups," Ryanair said in an official statement to the London Stock Exchange. No kidding. One of the first moves a Ryanair led group would do is acquire long haul planes to increase service to the US. Using pre-clearance at Dublin (thanks Ted Kennedy) such a service could under cut current players with a meaningful advantage at no cost. Aer Lingus on its own could never really exploit this. But Ryanair could vacuum up traffic al over Europe and turn Dublin into a real hub.

The Irish government has a reported 34.8% stake in Aer Lingus that it will not sell. With ~35% spoken for, it will not take Ryanair long to secure its takeover. After that, as we have been predicting for some time, Ryanair will focus on North Atlantic traffic. Incumbents watch out. While British Airways is the first to lose in this skirmish, Virgin Atlantic and the American carriers are next. Then the other carriers in Euroland will follow. They will see meaningful sales declines in the low fare buckets. This might please them at first, but not for long.

No airline has enjoyed competing with Ryanair. But the opportunities in the US are great. Under served cities, the smart ones that is, are calling their air service consultants in Washington DC today. Opportunity knocks.

Dummy of the week #33 - dumb ass

A woman was charged Wednesday with sexual assault after an altercation with a flight attendant on an airplane flying from Charlotte, N.C., to London, an official said. Conan Bruce, a spokesman for the Federal Air Marshal Service in Washington, said the woman got into an argument with a male flight attendant aboard US Airways Flight 1494. "During the altercation, she grabbed his buttocks," Bruce said. When the airplane landed at Gatwick Airport, Sussex police charged the woman with disrupting a flight and sexual assault, Bruce said.

Streiff's Analyst Briefing 10/3/06

This was not "leaked" - its the official transcript. The document is in PDF format. Click

A380 - a jinxed jet?

One does not want to pile on. But some major questions are crossing people's minds in the aviation world now. Airbus' woes are monumental. Is the A380 jinxed and has it now jinxed the whole company?

The jet building business goes in cycles. Jet fighters are described in generational terms; the latest being the fifth generation. It is much the same with commercial planes. The creation of commercial aircraft is a massively complex project, with inputs stretching across the world. It is clear that today no one company can build a plane on its own - the risks and inputs are too great.

If the generational thesis holds true in the commercial jet arena, then this is a good time to look at what happens when a company “misses” a generation. The industry is full of examples of companies that simply blew their chances. The first commercial jet was British, the Comet. But the plane was flawed and Boeing took the lead. A derivative of the Comet still flies today (picture). Where is de Havilland today? The jet making part was swallowed up by what is now BAE. The French SUD Aviation built a very good small jet in the Caravelle. Where is SUD Aviation today? Submerged into Airbus. In the US we have seen the demise of Lockheed’s commercial jets, Convair and McDonnell Douglas.

These companies could not execute and deliver on the massive demands these projects demand. The resources they eat up are alarming. The risks are very high. By Airbus’ own limited disclosures, the A380 is now costing billions more than expected. Goldman Sachs’ estimate is that Airbus needs €4.3bn to overcome the A380 program problems, which translates into $10m per plane. As if this is not enough, Airbus is facing another cash eating situation with the much revised A350. In total this program will require approximately €10bn. Topping that off, EADS has to find €2.75bn to pay off BAE. To help fund all these capital demands, EADS and Airbus have to find an awful lot of money. It has to find this money quickly, too.

Scott Hamilton has estimated that A380 net prices are now close to under $100m per plane for launch customers – which may be why nobody is cancelling orders – yet. The A380 is, if Scott’s numbers are close to reality, the steal of the decade. For a plane that retails at $300m, getting it for 1/3 of retail is nothing to sneeze at. When these planes start flying, airlines (all things being equal) will surely make money with them.

But will capital demands placed on Airbus trip the company up now? Most people would agree (non-Airbus people, at least) that the A380 was the wrong bet. It would have been much better to have launched the A350 first. This would have slowed Boeing’s runaway 787. The A380 could have gestated more slowly and taken on the 747 from a better point in time. Without the A380, Boeing would not have revised its 747 as it has. Boeing has been trying to rekindle interest in revised 747s for a long time – without success. The 747-8 is mainly attracting freighter interest. After the A380 started floundering has the passenger 747-8 been getting attention.

The concern here is can Airbus avoid the pitfall of other manufacturers in this sector? Can it stay in the generational game? If it skips the mid-size generation (787, A350) timeline, it stands to lose momentum enormously. It will not be able to fund the revised A320. That could lead to another miss. The trickle down effect is frightening. The A380 debacle could lead to a miss on the A350 and then a miss on the A320. With Airbus out of sync on a generational basis, how does it recover? The stakes are extraordinarily high. It is no wonder BAE wanted out of Airbus because we cannot see any way forward that does not require substantial capital injections.

EADS has rebuffed Russia. It has toyed with China by offering to put a factory in the country. It may have to close a number of European factories. The management headaches are monumental. It seems that Germany, France and Spain are going to have to pony up more loans, or guarantee commercial loans. This will lead to WTO action by the US and Boeing. More headaches….

The trouble is all because the Germans and Spanish were using CATIA v4 software while the French were using CATIA V5. At least that is what they want us to believe. We find the excuse laughable. The project management AT THE TOP must have known because the shop floor people would have known. Or should have known.

Missing a generation is a very dangerous place to be in an industry that follows cycles. Boeing managed to come through its huge mess from a few years back. The industry needs Airbus to come though this mess, too and quickly.

Reality strikes at Malaysian Airlines

The A380 delay is giving many airlines an opportunity to rethink their plans. Emirates is deep into this now. So this news from Malaysia is refreshing. The loss-making Malaysia Airlines should cancel an order for six Airbus A380 superjumbos to save costs, the national carrier's major trade union said on Wednesday.

The 7,000-strong MAS Employees' Union called for the order to be scrapped after Airbus announced another delay to production of the world's largest passenger jet. "It defeats the purpose," said union executive secretary Mustafar Maarof, explaining the airline did not need more planes and should instead optimize use of the current fleet. "Furthermore, the airline is running low on inflight crew and maintenance personnel due to recent lay-offs," he said.

Malaysia ordered these planes around the time of the tsunami. The order was a quid pro quo to enable the nation to export its sea food to Europe without import duties. The tsunami news drowned out this deal, which was awful in light of the devastation. We concur with the union, this would be an excellent time to step back and solve the problems within the airline.

The airline, being state owned, is not run well. Here is a glaring example of how a bureaucrat does accounting. We understand the airline's internal accounting once apportioned overhead according the stage length of a flight. So the flight to Los Angeles never showed a profit, despite the best yields and long stage lengths. In fact we accounted for properly, this is the airline's most profitable route.

Walking away from the A380 would be good for the airline and no doubt its deposits can be applied to other Airbus planes. Malaysian could probably do very well with more A330s (picture) for its numerous regional routes as traffic continues to grow in SE Asia.

777 Tanker picture

We found a picture at last. One week ago we were able to confirm images exist, but could not get anything at the time.

Although this puts Boeing in a good situation regarding the tanker deal, there are clouds on the horizon. Komo News reports a Pentagon study that said the military doesn't need any more of the C-17 cargo planes now being built in Long Beach was badly flawed, federal auditors said. What is it with Boeing and the Pentagon? They seem to be at loggerheads every few months.

The GOL Amazon crash

The story has been a concern from the start. How could two new planescrash into each other? The 737 was two weeks old and the Legacy was on its delivery flight.

Now we come across the first plausible piece of data that starts to illuminate the circumstances. Aero-News.net reports that the planes were under guidance by different ATC controllers. This is very important information and if true starts to explain what might have happened.

The question of Traffic Collision Avoidance Systems needs to be addressed. Why did these systems not pick the planes up? Both systems should have been active. This is an awful loss of life on planes the using the latest technology. Something very big failed here.

Christian Streiff Speech

Airbus President and CEO

 

 3^rd October 2006

 

 

 

Ladies and Gentlemen, good afternoon….and Tom, thank you.

 

Yes, indeed, Airbus and EADS have jointly completed the full review of the A380 programme. And, of course, we studied the Airbus’ overall situation in depth. We have come to joint conclusions and we fully share the situation analysis as well as the challenge for the way forward.

 

I will update you today on three topics:

1)       The status of the A380 schedule and our path forward for that great airplane programme

2)       An overview of a comprehensive business improvement programme for Airbus, which will make our company more nimble and profitable – and will position us better to meet our commitments to customers and shareholders more consistently

3)       Finally, I will share with you my assessment of the state of Airbus after my intensive, 100-day review

 

A380

 

First things first: An A380 production and delivery schedule our customers can count on.  I will cut straight to the chase.  As we have informed our A380 customers over the past few days:

 

• The first A380 will be delivered to Singapore in October 2007.
• In 2008 we will deliver 13 A380s (to Singapore, Qantas and Emirates)
• In 2009, 25 A380s will leave the Final Assembly Line
• The industrial ramp-up will really be achieved 2010, when we shall deliver 45 A380s, including the first freighters.

 

This means another delay of over one year on average. It is very disappointing that we find ourselves in this situation, but we need to be realistic with ourselves and our customers. It is the most reliable schedule we can deliver today following our in-depth review of the A380 programme.

 

Let me summarize the key findings:

 

Great plane

First, the A380 is a truly great airplane. We have completed over 2,100 hours of test flights with four aircraft. It will fulfil customers’ expectations and beyond. It is meeting the guaranteed performance. Airline pilots who’ve flown it, love it. The flight test programme is going very well, in fact exceeding expectations in many key areas, and certification is on target for the end of the year. This is a great achievement and Airbus teams have worked extremely hard to bring to the world this magnificent machine. I want to pay tribute here to all those who have achieved this “tour de force”.

 

Complexity

However, this is a very long and complex value chain. While everyone on board was on top of their job, the production process… not the airplane… but the production process has one, big flaw – one weak link in the chain: that of the design of the electrical harnesses installation in the forward and aft fuselage.

 

To be clear: This is the weak link in the manufacturing chain, this is the reason why ramping up the production is hampered.

 

But the electrical harnesses are not the root causes why we at Airbus are in a crisis – Tom has already mentioned the fundamental reasons. And I will come back to that.

 

Let me return to the issue why we are not yet able to ramp-up the production.

 

The issue of the electrical harnesses is extremely complex, with 530km of cables, 100,000 wires, and 40,300 connectors . It is twice as complex as for our next largest aircraft, the A340-600! And the depth of the problem was not fully understood in June. The full analysis over these past weeks has revealed it is much worse than expected.

 

Root causes

The root cause of the issue is that there were incompatibilities in the development of the concurrent engineering tools to be used for the design of the electrical harnesses installation.  Quite simply, while the A380 is the most-advanced and modern plane ever made, the wiring harness installation design package in the forward and rear fuselage could not keep pace with the rest of the aircraft programme. Also, the learning curve for wiring harness changes was too steep during the complex development phase.  We have to update and harmonize the 3D- design tools and data base – and it will take time to do this.

 

The problem became first apparent when the electrical harnesses were installed into the fuselage: there were mismatches between the designed routing of the electrical harnesses and the real aircraft.

 

What I can firmly say is that it is not the electrical design team of  “Hamburg” who failed. Airbus is one company. It is Airbus as a whole which failed, the management on several levels with several passports who failed, and certainly not the teams on the shop-floors.

 

I want to be very clear: the problem we are tackling does in no way put into question the integrity, quality or safety of the A380 that have been produced to date, which are flying today and which are part of the first production wave.

 

 

Measures

What we are doing to resolve the problem?  We now are putting in place the right people, the right tools, the right training and the right oversight to ensure it gets resolved.

 

1)      Right People:  A number of changes have been implemented in the A380 programme management. In Hamburg, everything to do with the A380 is now consolidated under the full responsibility of one manager: Rüdiger Fuchs. A reinforced management team, all co-located, with the right expertise from across Airbus supports him and reviews progress twice a day. Rüdiger, who has valuable experience in the field of cabin customisation for long-range aircraft, reports directly to Mario Heinen, who is now in charge of the A380 Programme overall.

In addition, specific teams of experts from across Airbus are being formed to finalise the electrical installation in the forward and aft fuselage sections for the aircraft currently in production. For example, specialists from Broughton or St Nazaire will be called upon to help their colleagues in Hamburg and Toulouse.

 

2)      Right Tools:  Since the concurrent engineering tools are at the heart of the problem, I took the decision in July to launch the immediate implementation of the best and most uniform tools and practices on all sites. Tools such as CatiaV4, CIRCE and GILDA, which have already demonstrated their robustness on other sites, are being put in place throughout the A380 centres of excellence – and the Airbus professionals in those sites will be trained to use them effectively. So, we are going to do two things in parallel:

 

• Finish the production of the first wave of A380 aircraft with the present tools, but with a better organisation (as I already mentioned), and...

 

• In the meantime install new tools, redo the installation design, and complete the Digital Mock-Up. To achieve this, we are also creating an integrated multi-national Airbus team to make best use of the available resources and best competences. That will allow for the full ramp-up beginning 2010.

 

3)      Right Training:  Through training of people has been launched to overcome the learning curve effect.

 

4)      Right Oversight and Management:  The overall programme management has been changed:

 

• A fully transversal, cross-functional and cross-sites project management has been established – with daily reporting and tracking of all issues and tracking of progress. Nothing is hidden and all issues are addressed. After all, it is only by facing the reality in all honesty that we can overcome the problem.

 

• Furthermore, I personally will be overseeing this, with a weekly meeting to review the status and evolution of the situation.

 

• I have committed to keep our customers closely in the loop and regularly informed of all issues in a very open and transparent fashion on a monthly basis. We are of course also trying to find ways and means to help them out of the problem the delay in deliveries represents for them. They are our prime concern. I must say here that I have been humbled by the first-class dialogue we have with our customers and by their constructive reaction to this news.

 

• We will also need to address the challenges our suppliers are facing. For them this is as painful as for us. We are aware of the fact that after the customers, our suppliers are our most important partners. We will, therefore, do what we can to find a way forward for all of us. We will start with a supplier conference call in the coming days.

 

• Last but not least, we shall also use the time of delay to ensure full maturity of the A380 at entry into service.

 

There are no miracle solutions, and our production problem is not going to be solved overnight. But these measures will ensure a sound recovery, which will allow the A380’s global success for the years to come.

 

Our A380 programme recovery alone, of course, will not guarantee a bright future for Airbus. We must also speed up our development process for new products, generate sufficient cash to finance their development, and drastically cut costs to remain competitive in the face of a persistently weak dollar.

 

That brings me to my second topic:  our 4-5 year improvement programme, Power8.

 

Power8

Why do we need an overall business-improvement programme? 

The A380 delay means delayed revenue streams and a high working capital requirement. This drain on our cash is compounded by the threat from the persistently weak dollar that penalises the competitiveness of our Euro-zone manufacturing. We also have to face the difficult pricing and we must generate cash to afford the A350XWB and continue investing in our future.

 

We also want to build the basis for the launch of the A350 quickly to satisfy the strong demand in this segment and compete effectively against Boeing.

 

This means: We need a much faster and extremely robust development process. We need to maximise cash. And we need to reduce costs.  This is what Power8 will do.

 

Our change programme is called Power 8 because Power is what Airbus will generate through the 8 modules of this programme.

 

The programme is designed to speed up the development processes, deliver €2.1 billion in cost reductions, and drive €5 billion in cumulative cash savings by 2010.

 

We have already been working for two months to set-up this programme. We are currently further detailing Power8 at this point. We will need another two months at least before we can have the full programme up and running.

 

Let me summarize:

 

Power 8 is about

1/ First getting back to basics – in other words making great single aisle and long-range aircraft.

2/ Its about doing things the RIGHT way, FASTER, with as little capital as possible and the lowest possible costs.

3/ It’s about real change. It will be difficult; there will be no room for complacency. But it will also be worthwhile and rewarding. We will make Airbus a true architect and integrator. We will move away from the heavy 1:1 sales-to-capital ratio that limits our potential and achieve a much less capital intensive structure. We will free ourselves from the legacy will become truly one integrated Airbus.

 

To conclude

 

To conclude, after my first 3 months with Airbus, and looking at it still with a fresh pair of eyes, I can tell you: Airbus is a great company made up of many talented, very skilled, and highly motivated and dedicated people. They encompass the best know-how in the industry and a unique innovative spirit. They are what makes Airbus a very strong and sound company which has all the ingredients to regain its leading position.

 

But Airbus is not yet an integrated company. Airbus doesn’t yet have a simple and clear organisation. There are shadow hierarchies – leftovers from the never finished integration. And the change we bring about must also include the management culture. Until recently, it has been more a “green culture” where truth was not brought to light.

 

The Airbus management has the full backing of EADS. Thus, we will be able to create an open spirit, a simpler organisation. We are establishing as a guiding principle for everybody “tell the truth, ask for the truth, the right to error”.

 

The measures to get the A380 back on track, the Power8 programme and changes in the organisation and in our behaviour will deliver a sound basis for Airbus to regain its competitive edge.

 

And let us not forget:

We are producing record number of aircraft each and every month.  By the end of the year we will have delivered around 430 Airbus aircraft. This was never achieved in Europe. And next year we will deliver even more. This should not be forgotten. Nor should it be forgotten that we have a backlog of around 2,100 aircraft on order. They will fill our production lines for the next 4.5 years. Coming from another industry, I know what it means to have such a backlog.

 

So, we DO have a sound, even enviable, basis to address and master our challenges and ensure a bright future for Airbus.

 

I have come to Airbus to shape, together with all our teams our future.

 

Such a future requires no huge leap of imagination. It is simply the realisation of Airbus’ incredible potential.

I am convinced that the Airbus employees and management teams are ready to face the challenge – we will meet the targets – together.

 

Thank you.

 

Airbus restructuring - the official word

 

GDCM 67/2006R

 

3^rd October 2006

 

 

AIRBUS CONFIRMS FURTHER A380 DELAY

LAUNCHES COMPANY RESTRUCTURING PLAN

 

Airbus has informed its A380 customers about a further delay in the delivery schedule of the A380. According to this revised plan, the first A380 will be delivered in October 2007. Thirteen more will be delivered in 2008 and 25 in 2009. The industrial ramp-up will be completed in 2010, when 45 A380s are going to be delivered.

 

Fully aware of the impact this has on their development plans, Airbus is in close contact with its customers and is doing its utmost to find ways and means to alleviate the burden this represents for them.

 

In June, the amount of work to be done to finalise the installation of the electrical harnesses into the forward and rear section of the fuselage had been underestimated. Beyond the complexity of the cable installation, the root cause of the problem is the fact that the 3D Digital Mock up, which facilitates the design of the electrical harnesses installation, was implemented late and that the people working on it were in their learning curve.

 

Under the leadership of the new Airbus President and CEO Christian Streiff, strong measures have been taken, which, in addition to management changes, include the implementation of the same proven tools on all sites, as well as the creation of multi-national teams to better use the best skills available. Simultaneously, training is being organised to swiftly bring the employees using those tools to the optimum level. With the right tools, the right people, the right training and the right oversight and management being put in place, the issue is now addressed at its root, although it will take time until these measures bear fruit.

 

Furthermore, in order to regain its competitive edge and to counter the financial impact of the delay as well as the weakening Dollar, Airbus is launching the Power8 programme. The objective of the programme is to reduce costs, save cash and develop new products faster. The development cycle times are to be reduced by two years while the overall productivity is to be increased by 20 per cent. The programme aims at annual cost savings of at least € 2 billion from 2010 onwards and delivering some € 5.0 billion in cumulative cash savings by 2010.

 

Airbus will this year deliver around 430 aircraft, the highest ever, with a plan to deliver even more next year. It currently has an order-book of some 2,100 aircraft, filling the production lines for the next 4.5 years. The measures here-above should allow Airbus to even better satisfy its customers and be even more competitive.

 

Airbus is an EADS joint company with BAE Systems.

 

* * *

A380 news - its worse than you think

Hot rumors are that Emirates may cancel half its A380s and buy the 747i instead. It may be worse than any of us believed:

Tim Clark, President Emirates Airline said: "Emirates has been advised by Airbus of a further 10 months delay to its A380 programme, which means that our first aircraft will now arrive in August 2008. This is a very serious issue for Emirates and the company is now reviewing all its options." -ends ======= Regards Emirates

And this one from an undisclosed source: A reliable source with an interest in the A380 program just rang to tell me that EADS/Airbus will announce the first deliveries will be in 2009 (although the "official" press story may say 2008), and that the airplane's problem is more than wiring. I know nothing more; I'm told the news will be out by the close of business today in Toulouse.

Bloomberg reports: "This is a very serious issue for Emirates," spokesman Mike Simon in a phone interview today, reading from a statement written by President Tim Clark. "We've started a review to see how we can minimize impact on our expansion plans."

"These are very strong words for Emirates and catastrophic news for Airbus," Doug McVitie, managing director of the Dinan, France-based aviation consulting firm Arran Aerospace.

In-flight cellphone use marred by Connexion?

Shepard Group has a story out that offers yet another piece of insight into Connexion's collapse. We concur with their take on this by the way. Boeing's failure at Connexion is their own bungling. Airlines and passengers liked it more each month.

We think that the case study of early satellite phones is applicable for in-flight Internet. The facts are that the service has proven, growing, demand. The facts also show that Boeing blew it, because of its technical approach and its lack of patience.

Had Boeing decided to cut back its technical overkill but kept the system working, it could have turned Connexion around. New technology is coming out that would reduce the installation costs and weight. With a lower cost model, we think Connexion could be turned around. Panasoic is going to try this as is startup viaAir.

viaAir the near stealth, place based content and information services company issued near term goals for traveler technology last week.
viaAir established its Traveler Technologies Group, (TTG) to provide a bridge to the future in the Inflight Entertainment services arena, with a goal of globally standardizing airline identity, branding, and market localization needs, in general accord with the goals of The Localization Industry Standards Association www.lisa.org/.
viaAir is known to be working with airlines represented in the failed Connexion by Boeing venture, as well as members of the Star Alliance www.staralliance.com .

Congress approves Wright repeal

The Star Telegram reports the Wright Amendment is over. It opens up Dallas Love Field to nonstop domestic flights after eight years, allows immediate connecting and one-stop passenger flights to distant cities, and slashes Love Field to 20 gates from 32.

As you read this story you will see not everyone regards this as a win-win. But Southwest is going to start lots of new service quickly. The fun and games are about to start.

US and EU at data impasse?

Associated Press reports that the two parties have not reached an agreement. Apparently talks are to continue.

Washington has warned that airlines failing to share passenger information face fines of up to $6,000 per passenger and the loss of landing rights. This should focus attention. However fining the airlines is not the right step. The problem here is Euroland politicians.