France ordered another 60 Rafale fighters to be delivered over the next five years. France plans to buy 300 and 60 have been delivered to date.

Two years ago the French Air Force activated its first squadron of Rafale fighters. The navy received ten Rafales two years earlier. The prototype Rafale was shown in 1986 and the aircraft should have entered service in the late 1990s.

Rafale is generally considered to be superior to the F-15 and F-16, very similar to the F-18F, but inferior to the F-22 and F-35. The 28 ton aircraft sells for ~$100m, and so far, there have been no export orders. But Libya looks like it is getting closer and the French have not given up on India.

In other news --

• In-flight e-commerce
• Sanctions bite Iran
• Lufthansa's results
• Ethiopian shines

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Take a look here. This should be big news. Singapore has been after the Sydney-LA route for years. If the Australian government gives Singapore access to this route we are likely to see a big change. For a start, Qantas will have a fight on its hands as another A380 operator moves into its premium turf. As is pointed out, Qantas charges 38% more per kilometer for Sydney-Los Angeles flights than on the more competitive route to London. No wonder Singapore wants in.

The other shoe of course would be United's rapid decline to bottom fisher in the market. Who would want to fly United if the choices are Qantas, Singapore or Virgin Australia? These airlines will all fly planes built in this half decade. United's planes are old and its service nowhere near competitive. The friendly skies only goes so far. By the way, have you tried the friendly skies lately?

Bottom line is that we might expect to see Singapore on the route by late 2009 or 2010. Who knows if United will even be around by then? Delta will almost certainly enter the market from Atlanta using 777LRs - but might add service from LAX if an opportunity presents itself.

In other news --

• A400M news
• A "New" Alitalia? Nope.
• SRB blinks - Lufthansa checks Virgin with bmi; while Willie Walsh laughs
• The new Delta - the big dog

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In an 11th hour decision, Thai Airways canceled plans to scrap its direct service from Bangkok to Los Angeles as fuel prices continue to fall. The service was to have been terminated last Sunday, but the Bangkok Post reports that "sharply lower oil prices are improving the route's viability".

"At least for the time being, the national carrier intends to continue the loss-making service until January 31 next year when it will be replaced by flights that stop over in Osaka," the newspaper reports. Airline executives said that before that date, the airline will assess the business environment, taking into account prevalent traffic demand and oil price movements, to see if the non-stop Bangkok-LA route should remain on its timetable.

Thai operates A340-500s on the route five times a week. The replacement flights with a stopover in Osaka will use B777-200ERs, five times a week.

In other news --

• Is Michael Bishop selling?
• Lufthansa's Lehman hedges
• Two more Qantas events
• Another one bites the dust
• Angola protects TAAG, unfortunately

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Many years ago, the USAF tried to power a bomber with nuclear energy. It never flew on this power source, but it did carry a reactor that ran "hot". The story is rather fascinating and is worth reading. Why bring this up? Because the idea got a boost today from Ian Poll, Professor of Aerospace Engineering at Cranfield University. More on Professor Poll's thinking can be found here.

This thinking is way "out there", but is important all the same because the industry needs to push the boundaries to see what can be done to ensure survival of air travel. The current drop in the price of fuel will not continue. So alternatives are important.

In other news --

• Austrian sale delayed
• Ryanair and those hedges
• Hawaiian adds two A330s
• Boeing strike over?
• SuperJet video

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Here you see the first Saudi Eurofighter Typhoon fighter aircraft in the full two-tone grey livery of the Royal Saudi Air Force. In December 2005, the Saudi Arabian and UK Governments announced the signing of an Understanding Document that aimed to establish a greater partnership in modernizing the Saudi Armed Forces. This paved the way for the acquisition of 72 Eurofighter Typhoon aircraft, and the transfer of technology, investment and training, confirmed on 17 September 2007. Nice clean deal, right?

Heck no! This deal should have been investigated but never was for fear the Saudis would cancel the order. BAE and the UK government could not stand to see Rafale get the order. So they threw their legal issues under the carpet where they could be ignored. By the way, the US has signed off on the deal. As is usually the case with politics, "I have scruples, and if you don't like these, I have others."

In other news --

• USAF and its pilots
• Obama and the tanker
• Singapore's A380 - one later in service
• Fuel hedge damage continues

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We have not had a good story on this group in a while, so start here. Essentially DHS (TSA) wants your gender and date of birth in future or you don't get on the plane. Apparently we should all be comforted that the airlines are no longer doing the checking, rather the the government will be doing it.

This is NO comfort to us. There is no way the system will get better with more government intervention - simply no way. Sure the airlines will need to gather this data - but that's easy really. They simply modify their frequent flier profiles to add these data points once and its done. Expensive and a pain in the a** its understood, but done.

Here's the amazing thing - airlines need to report this to DHS 72 hours prior to departure. What about people who need to change plans inside 72 hours? There are 2m people flying every day n the US - that number may be falling - but it will stay big, very big. We cannot see the feds making anything but a huge mess of this.

Given that federal employees are not the finest minds for hire, there has to be some sense of what is coming. We are not sanguine about this at all. We have a government process that seems determined to kill air travel one irritation after another.

In other news --

• GE dusts off the UDF
• The next fuel hedging victim
• Ryanair is #1 in Italy
• EU traffic downturn is official

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Take a look at this. It seems the Indian government is now trying to save its airlines. Getting six months to pay off your fuel bill would be a benefit every airline would like. But then considering the lack of infrastructure and a real fuel price 65% higher than outside the country, India's airlines could use a breather. It also strikes us this may be the reason Mr Goyal had such an overnight change of heart about laying off people.

Either he was clever and called the state's bluff or the state panicked and gave him a hand. Either way, he looks good and as we know the Minister also wanted to take the credit. The airline industry remains in an odd state within India, the state used to revise oil prices monthly and now will do so twice monthly. This is obviously incredibly inefficient and out of touch with the way the rest of the world works. But it speaks volumes about how business gets done in India.

The billion rupee question - what has the state done for its own airline? The silence has been deafening. That airline laid off 15,000 people. And not a word has been forthcoming.

In other news --

• United's results
• China's Global Hawk
• EU merger games - stakes grow
• BA & Cathay - not a great idea
• Qantas and ASPIRE
• IATA advises MENA

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Modern Russia is an interesting place. If you make a decent living, but are not inside the government, watch out. First they watch you from behind the Kremlin walls make the business a success. Despite cronyism and corruption. Just when you get the business going and start to do alright, they hit you with an "investigation". This has happened time and again in the oil sector. Well, guess what? Here we go again!

This time its the fueling business at airports. "President Dmitry Medvedev has ordered the Russian government to investigate a possible cartel among aviation fuel suppliers, whose pricing policy has grounded dozens of planes and left thousands of passengers stranded." Prime Minister Vladimir Putin sacked the head of Federal Aviation Transport Agency Yevgeny Bachurin. At a meeting with proceeded with Deputy Prime Minister Sergei Ivanov in Medvedev's residence outside Moscow, "The situation with aviation fuel is outrageous," the normally reserved Medvedev told Ivanov, who oversees aviation among other things in the government.

Right. The rise in the price of fuel was no doubt fraught with all sorts of machinations by outside forces and capitalist roaders. Exploiting the people. It would be better that this business be run by one of the boys from the Kremlin for the benefit of the gang inside the Kremlin. The price of fuel was a problem for Russian airlines because of two things; one the oil price shot up because of market conditions and two, some Russian airlines are very poorly managed. So don't expect to see fuel costs decline any more in Russia than they do elsewhere. But expect the profits to now be funneled into the Kremlin, probably the most crooked institution outside North Korea.

In other news --

• Qantas A380 heads to LAX
• Crew pooling at Jet and Kingfisher
• Another drunk pilot
• Two more bite the dust

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It is a common fallacy that wealthy people tend to have better manners. This is a fallacy. And here is some evidence: An heir to French luxury goods empire Hermes had to be tied down on an Air France plane after fighting crew members and seizing the captain's crotch.

Mathias Guerrand-Hermes was arrested when the flight from Paris landed at JFK airport in New York. He was charged with "interference with a flight crew" and freed by a court after posting a $50,000 bond. Silly man, he should have chosen to misbehave on a flight to anywhere else. Now he's in the hands of the US justice system. And he's French. Oops. You think he's seen Midnight Express?

Prosecutors allege Guerrand-Hermes, a member of the family behind the handbags and scarves brand, appeared drunk and was bothering passengers in the first-class section of the Air France flight. When the captain intervened, Guerrand-Hermes "grabbed the captain's genital area", according to the complaint sheet. When he also allegedly tried to punch the captain, he was tackled by the flight crew and restrained with handcuffs and shackles, finally being tied to his seat.

US Attorney's Office spokesman Robert Nardoza says that interfering with an aircraft crew carries a maximum sentence of 20 years' prison. But, "it's likely he'll face from zero to six months if he has no prior criminal record". Couldn't happen to a nicer guy, could it?

In other news --

• Qantas has another "event"
• The twists with Jet's employees continues
• Rolls Royce and the open rotor
• Ryanair and AirBP, and Boeing

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The Russian Aircraft holding company and the Indian Hindavia company will set up a joint venture to market and sell IL-114-100 airliner in India, the head of the Russian company said on Wednesday. The Il-114-100 is a short-range passenger airliner powered by two PW-127 Pratt and Whitney engines. It can carry up to 64 passengers.

Any success in India and southeast Asia will almost certainly put pressure on ATR and Bombardier. This aircraft will no doubt be a lot cheaper than its western competitors plus it has western engines. Note the Chinese are going down the same path in terms of this size turboprop. As Asian economies try to grow, access to global markets will mean lots of need to get air service into smaller places that up to now, might not have had service. Rugged turboprops are just the thing to get this process started.

In other news --

• American takes the plunge
• Jet and Kingfisher form alliance; watch those orders shrink
• BA and Virgin drop fuel surcharge - suspiciously
• Meet EUClaim

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The price of gasoline has its largest ever one day drop in price. And its going to get cheaper - according to DoE, the US' stocks of gasoline are far higher than expected. So this is really good news, right?

Not necessarily for airlines. As fuel prices fall, we have not seen an concomitant drop in air fares. Moreover, flying remains a major pain in the rear. Even though fuel prices are down 40%, we have seen no move on fares. Rather we have seen sharp rise in fees, which in effect have increased travel costs.

Rational travelers therefore are looking at the SUV that has been collecting dust for two months with renewed affection. As the first of the holidays approaches, and knowing air fares are high along with over 75% load factors on flights, many consumers are going to drive short hauls rather than fly. The oil shock created an opportunity for people to change consumption patterns. The follow on Wall Street fiasco has cemented the shrinkage in consumption to ever lower levels. The impact of shrinking consumption can be seen in department stores, where non seasonal sales are in full swing, months early.

Consumers are going to buy what they must and nothing more. The credit crunch is helping to ensure this. Nobody can get credit to buy anything anyway, for example cars. This new discipline is to be welcomed in order to help Americans wean themselves off cheap debt. Even Toyota is now offering deals like the Detroit firms; zero percent finance.

So while airlines are pocketing revenues at great rates now while fuel costs are off, it may be a short lived thing. Travel demand is likely to be lower this year end as consumer sentiment turns against credit card funded travel. With horrible layoffs acting as a further brake to consumption, high load factors will fall. Given the airline industry behavior this past year, nobody outside ATA will care much.

In other news --

• Salt Lake City looks east
• More shrink in India - Jet and Kingfisher
• MA600 flies
• MiG on the skids
• Flag of convenience

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Airline Maintenance

This is a subject that is likely to see much more attention going forward. There are a number of factors that make this a complex arena. Forrester has just published a report on the matter. As they point out, "Airlines are hesitant to invest in products they still regard as lackluster, while vendors are slow to develop their products when the market potential is so uncertain".

Oversight -- The FAA has been hammered again and again for being lax or too close to the airlines they are meant to be watching. The cases of Southwest (which appeared overblown and political) led to an over reaction at American. Being a government body, the FAA would always point fingers someplace else rather than take the heat. Congress' lack of love for the agency speaks for itself. But ten again, is the FAA funded enough? Why can't the agency manage within its budget and get the system operating effectively? This area of public policy has many more questions than answers. Answers invariably are seen through a political lens. So the top question really is how can we de-politicize the FAA?

Airline managements -- The industry is in real turmoil, especially in the USA. Awful revenue outlooks and even more awful costs are making the industry a mess, and as far as investing goes, a dog. Squeezed as they are between falling revenues and rising costs, airlines are seeking any cost relief they can. Often this leads to outsourcing MRO work. Its not a panacea as Delta discovered when using a site in Vancouver. Northwest has fought with its internal MRO people for years. Trouble is the internal people "know" each plane in the fleet better than anyone else but they cost the most. Which is probably American keeps most work in-house. Management tries to keep costs low while not crossing the safety barriers. Unfortunately in the US, this invariably means slimmed down internal costs and greater outsourcing. Unfortunately we have not seen airline management outsourced. So US airlines have bloated executive costs where some top airline CEOs earn millions while their companies lose billions. Call it new math - it does not compute.

Airline labor -- The bugbear of the industry, labor costs as a percent of overall costs only this year was eclipsed (briefly) by oil and fuel. But it's not just in terms of costs. Labor is generally unionized and amazingly inflexible. This is partly the fault of the Railway Act in the US and due to the way management have treated the blue collar workforce. An exception is Southwest Airlines, where one can see how effectively an airline can be run and management and labor can remain goal congruent. But is far and away the exception. Typically labor and management cannot agree on anything - their dialogue is win-lose rather than win-win. Nobody has figured out how to cut this Gordian knot outside of Southwest. Consequently the industry will remain in a rut and we are likely to see a combination of airlines cutting MRO costs to the legal minimums and outsourcing in an atte4mpt to save money. This will bring internal labor to new heights of irritation. It will not save airline though and more will go into Chapter 11. Sad as this is, it is a necessary thing. Its not that we have too many airlines in the US. Its that we have too many broken airlines in the US. What the US needs is to see the back of this broken industry once and for all. Cheer startups that come forward with new paradigms of co-operation between labor and management. We should also cheer any airline that decides to employ inherently happy people as customer facing employees. That alone will make a sea change.

Trolling the web in the early hours to get a sense of the industry is fast becoming an awful task. Take a look here for example. Just where is there good news?

Well Dubai seems to plan to sit out the recession. Apparently there will be no recession there and all the dials are in the green zone. One has to feel pity for them to think the tsunami won't work itself into the Gulf. Few people will be crying when it does - and it will hit that region.

United is laying off 414 mechanics in SFO. The not too glib questions is if the airline plans to have any employees one of these days? Sun Country filed for Chapter 11 and asked its employees to take a 50% pay cut. Mesa looks like its headed for a crash - more layoffs and parked planes coming. The Wall Street malaise is now infecting planet earth - so we expect to see sharp drop offs in travel quickly. Once people stop spending money the trouble only grows.

Imagine the biggest joke - the world begs China to spend its reserve trillions in dollars to help the markets recover. What a comeback for communism.

Is there any wonder why IAM and Boeing are talking again?

In other news --

• Hawaii news
• Boeing and IAM talk again
• Two London airports to grow

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Andrea Rothman has a great story today about how the lack of credit is hurting the industry. Few airlines can afford to pay cash of have sources of funds readily available to buy and pay for the orders placed.

Consequently, MOL's dream of finding cheap planes next year looks promising. The mess in the markets will almost certainly drive more airlines to the wall. US airlines are moving forward with cash positions in order not to run into the problem Frontier faced with its credit card processor.

The scramble for cash means that all sorts of projects are on hold. Yesterday we had an email from an executive at American who could not work with us on a project because of an unplanned headcount cut. It may be months, if not years, before the mess works itself out.

In other news --

• Doing business with Russia
• Hello MagShoe
• Hawaiian gets another 717
• Qantas' rough ride
• Brazil fighter news

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A brief history of the US airline industry

Click on this image, you'll want to see how bad things are - BEFORE oil spikes and Wall Street meltdowns. A red cell is where CASM exceeds RASM. Note for the airlines quite a few over the period from 1998 through 2007 have not managed to make money. The last two columns show the industry for each year. Again note the red cells. In the event that this data is something you are interested in, IAG has a powerful online service that enables clients to mine DoT data. For those people who don't need to full blown service, we offer custom data runs. Interested? Visit www.iag-inc.com and reach out to us.

Boeing is about to start negotiations with another union as the strike continues. Clearly Boeing will not flinch - if it did, the next negotiations are are as good as done. So its easy to understand Boeing's modus operandi.

But let's look at the union position. They too are not flinching. Despite many IAM workers seeking menial jobs to feed their families. How long can they go on? Time is actually less on their side than they realize. IAM has rejected four out of the last five contracts offered by Boeing. The global scenario has changed dramatically over the last ten days but the IAM seems to have missed this.

The business has gone global already, so union demands to keep jobs in the USA are moot. As has been pointed out elsewhere, Mitsubishi is interested in doing final assembly on the 737 replacement. Boeing's unions are now competing with Japanese workers - its as simple as that. Then throw in the ambitious Chinese who also want to work. How about clever and aspirational Indians? Even if Boeing wanted to keep jobs in the USA, the genie is out of the bottle and the IAM is apparently stuck in the past.

Now let's go a bit further. Boeing's access to capital is surely a lot less easy this week. Indeed, access to capital for anyone in the EU or USA is rather constrained now. However, the needs for capital are great in any capital intensive business. So, for example, if Boeing were to fund the development of a 737 replacement, it may have to go to places like China to get capital. China has massive reserves, and probably as many dollars as the USA at this point. The quid pro quo? Chinese labor gets much of the work.

The longer IAM keeps up its strike, the better the Chinese card looks doesn't it? As Scott Hamilton states "There is a faction in Boeing that’s had it with the IAM". On top of that, "Labor disputes are affecting our customer relationships" is language to be found in Jim McNerney's internal memo.

The writing is on the wall for those who choose to read it. IAM should teach its members to read, quickly.

In other news --

• Bratwurst and pasta
• If you have money and your name is al Maktoum
• A glimmer of good news?
• More bad news rolls in

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We have been wondering a bit lately about an airplane we feel has gotten no respect. Despite its awesome stats. This plane outperforms the C-130J and the forthcoming (one day anyway) A400M. It is, in short, the best tactical freighter in the world. How come it gets no respect and orders? Take a look at these videos and perhaps you too will become a fan as we have. These videos date from 2001 and 2003!

Imagine if this plane had been exploited by more users. The An-70 is lighter than the A400M. They are the same size, even have similar performance and the same speed. But the An-70 has been flying since 1994 while the Airbus is still trying to fly.

In other news --

• Buying an airline
• MiG confident in India
• Nimrod is dead
• Testy UK airline voices - WW vs. SRB
• Financial meltdown gets worse

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Take a look here. This is clearly sending a signal and its not a pleasant one. Note especially the words "counter potential threats near the Russian border". So to whom is the message being sent? Clearly the Ukraine has to be one place the tests will be seen as highly threatening.

Once again Russia demonstrates its idea of influencing the "near abroad". These tests will of course only serve to make ex-Soviet states clamber ever closer to NATO and the EU. Unfortunately the EU is back pedaling and in any event cannot really respond. So these tests will be seen in the most pejorative light; Russia sends the message that its the boss and that the EU is toothless.

While Russia can get away with it now, it runs a serious risk. Any accidents will highlight its forces' weaknesses. This is quite possible because they have not done anything like this since 1984. If the missiles hit unplanned targets the fallout will be significant. Gone are the days when Russian citizens accept any state actions quietly. The forces better make sure these tests are flawless. After their less than stellar actions in Georgia, everyone will be watching.

In other news --

• Afghanistan's C-27s
• Twin Otter flies
• September traffic - mixed messages
• Transaero - a primer
• Ryanair goes at EU over Alitalia - Don Quixote rides again

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Crimea may be the next hot spot. Understandably, the Ukraine wants Russia out - way out. Russia leased the Crimea, a peninsula in the Black Sea, and the lease expires in nine years. Ukraine does not want to renew. But Russia is anxious not to loose this post because it host the Black Sea Fleet and some 80 planes.

Of course, Russia is trying hard. They seem to be ready to offer the Ukraine a chance to build aircraft carriers for the Russian Navy. Russia does not have shipyards that can do this, Ukraine does, but these yards are closed.

The EU did not like the way Russia thumbed its nose at them during the Georgia fracas. So now the EU and Russia are dicing over the Crimea. All the Ukraine has to do is be quiet - if they can. Russia would be mortified if Ukraine joins NATO; which is what it wants. This would put off any Georgia-type nonsense by Russia. But the EU is chicken - they don't want to protect new ex-Soviet nations because it means tangling with Russia. Russia keeps most of the EU warm in winter after all.

So what to do? Georgia is watching, as are other ex-Soviet states. Ukraine's Crimea is now looking like a hot spot. There are a LOT of Russians living in Crimea - sort of like in South Ossetia. But on the other hand, this might be an opportunity for Ukrainian business.

The most bright of these includes Antonov, so we are watching too. Imagine if the EU were to become really, really clever and do a deal with Antonov? That might offset shipyard deals for Russian carriers. Anyone in the EU spotting this opportunity? How about at NATO?

In other news --

• Southwest dares to enter MSP
• Boeing tastes its own medicine in the tanker war
• Steve Fosset news
• Alitalia - tasting the Teutonic water
• British high speed rail fight

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