1Q09 score -$3bn

Global airlines lost more than $3bn in 1Q09 IATA said today, maintaining its estimate for full-year losses of $9bn. In its latest industry snapshot IATA says weak travel demand and lower freight volumes in the global recession bled revenues for major carriers, in "a significant deterioration from last year."

"This deterioration was before the recent rise in fuel prices," IATA said, warning the 30% increase in jet fuel prices since early May is squeezing airline cash flows further. Both oil and jet fuel prices have risen almost $20/barrel in the past two months, and are already 75% higher than the low point at the end of 2008, the IATA Financial Monitor reports. But it said it was not changing its previous 2009 loss forecast of $9bn, which follows revised 2008 losses of $10.4bn. Take a listen to Perry Flint's podcast this month on the fundamental change in air travel demand to get a better idea of how serious this is.

Leading airlines are seeking mergers and acquisitions to build scale and shield themselves against continued market weakness until the global economy recovers. Its not like this solution is a guarantee of success either.

In other news --

• OnAir demo's powerful stuff
• Travel with Nepal
• EU to accept Garuda?
• Another crash

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Wind Jet to London Luton

London Luton Airport announced that Wind Jet will begin flights to Forli, Italy on 2 July 2009. Who?

The Italian airline will expand Luton's route network into Italy with twice/weekly services to/from Forli. Offering low fares and flying an A320, Wind Jet plans its Luton flights to be a resounding success.

Flying to Forli provides access to destinations such as Ravenna, Rimini and San Marino. Luton flights to Forli are timed to provide onward flight connections to both Catania and Palermo in Sicily.

In other news --

• Southwest begins LGA service
• EU might delay Lufthansa/Austrian deal
• Another T5 baggage glitch
• EU airlines and travel insurance sales

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The Raj speaks

It is amazing that India cannot let go if its meddling ways. With an employee ratio of over 200 per plane, Air India burns through cash at a frightening rate. Being state owned, it has too much of everything - except brains. The state creates jobs for pals and voters.

So the Indian government has thrown flag carrier Air India a lifeline by offering a financial aid package on condition it undertakes a “massive cost reduction” program. The offer by the prime minister follows his meeting with the airline’s new chairman and managing director. With the election behind it, job cuts can be made at minimal political risk.

Praful Patel, India’s aviation minister, said: “The government is fully committed to Air India to tide it over the present crisis”. However he added that as a condition Air India “must shape up, become leaner and trimmer, and also must put its best foot forward”. Patel said Air India, and the unions that represent its 31,000 workforce, must undertake radical cost-cutting and other financial improvements to qualify for the assistance.

The airline has already said it was looking to cut $103m in staffing costs, about 17% of its total wage bill as it faces its worst liquidity crisis in its 75-year history. Good luck on this project -the reaction will be horrible. Remember when Jet cut its staff? There were protests that brought the state into the fray and the airline backed down.

Debts are running at $4bn and last week Jadhav asked 150 top executives to voluntarily forgo salaries in July, and announced that June pay for staffers would be delayed by two weeks. In India this is a radical move - probably unprecedented.

“This is an hour of crisis for all of us,” Jadhav said in an e-mail circulated to staff. “It is a fight for survival – the survival of our airline. I am looking for every single employee of our airline to rise to the challenge.” He has been listening carefully to WW don't you think?

The government is reviewing the carrier’s order for more than 100 new aircraft, about half of which have yet to be delivered. So delivery delays can be expected. It also intends to shake up Air India’s board by appointing eight independent directors.

After years of monopoly, Air India’s domestic market is coming under increasing pressure from leaner private airlines, reflected in its share in passenger traffic falling from 38% in 2004 to 15% this year. On an international level, markets are being eroded by intensifying competition from Gulf carriers, which are expanding aggressively into India. In other words, Emirates is eating their lunch. The Indian airlines are all under pressure.

In other news --

• BA and labor settle
• IATA calls bottom
• Tanker split - again?
• Boeing's Black Day (more to come?)

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Happy news for Boeing

Its not all about Airbus. The USN increased its order for its P-8A maritime reconnaissance aircraft from 114 to 123. The Navy found more uses for the aircraft, which will replace 161 aging P-3Cs. The first two P-8 development aircraft recently flew for the first time. A third development P-8 will fly before the end of the year.

The Navy has great expectations for this plane. It is highly versatile and has a huge base of spares and service technicians the world over. In fact, it may be the most successful Boeing military plane after the B-52 and KC-135 if it gets export orders. We expect to see Boeing quietly push the plane into many new areas. Never mind the Wedgetail mess, the military 737 has a great life ahead of it.

In other news --

• Republic's upset role
• The new competition across the Pacific
• The Great Shrink of 2009
• BA shows LCCs are not always cheaper

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Airbus delivers first Chinese-built aircraft

Not all the news from Airbus is good. Airbus delivered the A320 made at its Chinese factory, saying the event symbolized its long-term focus on the Chinese aviation market.

Airbus hopes the plant in Tianjin will deliver a big advantage over arch rival Boeing. The latter makes components in China, but Airbus is the first to have a full production facility in the country, as it vies to meet fast-growing Chinese demand for commercial aircraft. The plane was delivered to leasing firm Dragon Aviation, and will be used by Chinese carrier Sichuan Airlines.

Airbus plans to deliver nine more planes from its Chinese plant by the end of the, with production expected to increase to four aircraft per month before the end of 2011. The plant is 51% owned by Airbus, with the remaining 49% owned by a Chinese aviation consortium.

China is now the world's second-largest market for commercial aircraft and is expected to buy up to 2,800 passenger planes over the next 20 years. And if you believe that, you're a nutter! Airbus has already had espionage problems at the factory. There is no way the Chinese are not trying to steal every piece of IP they can lay their hands on. Airbus has not only ruined the market for Boeing - they shot themselves in the head. In the next 20 years China will be a net exporter of planes, and Airbus and Boeing - who knows?

In other news --

• China's EA-6B
• Hong Kong Air selects OnAir
• Hot Virgin rumor - good bye 787?
• Republic east Midwest - with nary a burp

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Hubris - 25 years of it

Today Virgin Atlantic turns 25. There is no way your won't hear about it because SRB has been planning this party for a while. He's rolling out all the big guns. Like standing on a wing with a barely dressed Kate Moss. The press love him as he keeps them busy.

But how's this for a start? "Virgin Atlantic founder Sir Richard Branson has ruled out bailing out troubled British Airways. He distanced himself from media speculation that his airline would attempt to save its loss-making rival if it feel into further difficulty." What?!

SRB was quoted by the BBC as he prepared to mark the 25th anniversary of Virgin Atlantic by retracing the carrier’s first flight from London to New York (Newark). He said BA’s pension burden would prevent Virgin Atlantic from mounting a takeover.

However, SRB says that if BA were to fail, his airline and others would take up the slots at Heathrow that would become available and attempt to lower fares. Call us flabbergasted.

SRB also predicts that first class air travel would disappear due to the recession. What does this man consume that gives him such hubris? Whatever it is, avoid taking it.

In other news --

• More Virgin Atlantic news
• Lufthansa and bmi - what's German for ouch?
• A review of the Global Fighter Market
• LH Brussels Airlines

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Tanker - here we go again

The stakes are higher now. Take a look here. EADS and Airbus don't have cash to spare on white tails - especially not tankers. Its true they could probably sell these planes to other tanker buyers, but a buyer might not want to combination - i.e. engines, etc.

As you can imagine there are complications. Meanwhile the time has allowed Boeing to update their offering with talk about the GEnx engine. Of course the NG/EADS team has not been asleep - they can also offer the GEnx engine. P&W looks like being cut out of the competition.

If last time was rough, the next round is going to be a lot rougher.

In other news --

• BA and its pilots strike a deal
• AF447 investigators getting "closer"
• FAA certifies AirCell
• More Airbus news from Paris - Wizz joins the party

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GEnx and the tanker

For those of you who listened to our tanker podcast with George Talbot, Michel Merluzeau and Richard Aboulafia - we hoped you smiled when you saw Stephen Trimble's story yesterday.

We thought the GEnx was a player that would make the Boeing tanker offering a more compelling solution. Boeing clearly loves the engine, using it on the 747i and the 787. Stephen's story even mentions the GEnx and the 777 in one sentence. Now that's an eye opener. Could this be a serious thought? Can the GEnx work on the 777?

If this reflects a new flexibility from Boeing, that would be most interesting. We have heard that a 767 option would be based on the -400. Japan and Italy must be furious that they are sitting with orphans that are only a few years old.

Boeing has handled the tanker business in an odd fashion to date and continue to look like the loser that needs to get the rules changed to win. The perception is there - regardless of political views. The EADS solution has won every race it has been in. So Boeing clearly has to become more creative. Hence the 777 option being added.

At least as the 2009 summer wanes we already know what there will be to discuss.

In other news --

• Ryanair scuttlebutt - the tangle with BALPA
• Boeing makes a sale in Paris!
• More pictures from AF447 debris
• P&W ups the ante
• There's even more...

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Rafale gets ready for big news

Starting with this story we hear matters are coming to a head fast. A second, impeccable, source advises that the M-88 engine is a "go" and that as soon as next week we might hear of the first export order of the Rafale to the UAE.

The stakes are huge - India and Brazil are watching and also want the more powerful engine. By getting the more power engine the plane's performance is enhanced considerably and payload rises a lot. By having a "player", the market becomes much more interesting. Gripen for example will now have to focus on its own upgrade just to stay in the game.

In other news --

• JAL cuts back
• Its Airbus all over Paris

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Aer Lingus starts to shrink

Aer Lingus is cutting about a quarter of its seat capacity on winter long-haul routes, including the suspension of Dublin-Washington and Dublin-San Francisco from 25 October. Flights between Shannon and Chicago will also stop from 1 September and the four-times-a-week Shannon-New York service remains under review.

This does not augur well, because this is where the airline is supposed to make most of its profits.

In other news --

• Superjet gets a win at Paris
• MOL in Seattle
• Airbus & composites Part 2
• Dog causes chaos on runway

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Beaver crash

De Havilland Beaver plane crash at Lake Hood in Anchorage AK, on June 7, 2009. From the start this takeoff looks underpowered.

In other news --

• Iran's election
• Paris day one
• Airbus and composites
• US wins in India (C-17s)

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Bad luck story of the week

An Italian pensioner who arrived late for the AF447 last week has been killed in a car accident. Johanna Ganthaler from Bolzano-Bozen province had been holidaying with her husband in Brazil but missed the fated flight after turning up last for the flight from Rio de Janeiro.

The ANSA news agency reports that the couple managed to catch a flight from Rio the following day. It then reports that Ms Ganthaler was killed when their car veered across a road in Kufstein, Austria, and swerved into an oncoming truck. Her husband was seriously injured.

As they say, when its your time....

In other news --

• Boeing cuts its forecast
• Deeper cuts coming - what comes after bone?
• As we head into the Paris show...
• Jetstar A330 fallout grows

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Spanish airline hurts

No its not Iberia. Air Nostrum plans to lay off up to 507 employees (23%) of its workforce because of the downturn in the industry. But there is an Iberia connection - Air Nostrum has 67 planes and operates most of Iberia's domestic flights. Ooops.

So perhaps the cutthroat market in Spain has not yet seen its nadir yet. This will make the bosses at Iberia squirm as they put on their brave face for the British. Of course cosying up to Air France and Lufthansa will now look less pleasant too. As the saying goes, don't take pleasure at the downfall of anyone else.

In other news --

• A330 information starts to seep out - those pesky sensors
• Jetstar event triggers angry words
• The contagion grows
• airBaltic surprises

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AF447 continued

We added two more parts to the story today - a pilot who analyzes the ACARS data and a chat with John Craven, the pioneer of deep sea recoveries.

Take a look & listen here.

In other news --

• Crew fatigue
• The new America
• BAA traffic slides

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The A380 and 747 - Nine Years Into the Program

With speculation that ILFC and Thai may cancel or defer A380 orders, the question of how the A380 is performing vis-a-vis the Boeing 747 when it was introduced provides an interesting analysis. The following chart shows cumulative aircraft orders and deliveries for both the Boeing 747 (beginning in 1966 with the initial Pan Am order as year 1) and the A380 (beginning in 2001 with its initial order from Singapore Airlines as year 1). The results are quite interesting. Orders, on a cumulative basis, are quite close, with a slight lead for the 747. Deliveries, however, are quite different, with a large gap. Boeing was able to deliver its first units within 4 years, as opposed to 6 for the A380, and was able to quickly ramp up production to reduce the backlog. Airbus has been unable to ramp up production, leaving a large gap. The major difference in the programs has been the ability to deliver. Clearly the A380 is a more complex aircraft, with 4 times as much wiring as early Boeing 747s and a larger footprint. But it's first delivery is 37 years later, providing the benefits of more modern manufacturing technology and techniques. This leads to several unanswered questions:

Will Airbus be able to close the production to order gap?

Will potential cancellations cripple the A380 program?

Will customers maintain their positions in light of delayed deliveries?

In a recession, can Airbus take advantage of customer deferrals to more gradually increase output?

Will the program reach the projected 500 aircraft now needed to break even over its life cycle?

Will the A380 need additional versions, like the 747 had, to provide additional impetus over the life of the program?

Are engine manufacturers likely to invest in such a narrow potential market?

Can the A380, with similar seat-mile costs, compete with the 787 and other smaller yet equally efficient aircraft? The answers to these are other questions will be explored by analysts in the next few weeks, as the sale of ILFC and its anticipated cancellation of the A380 order bring new focus to the difficulties Airbus has had in ramping up production and meeting customer demand. Stay tuned to this channel!

In other news --

• China tries again
• Some goods news from IATA's KL meeting
• BA's first 2009 strike starts to loom
• Midwest gets another $6m - and shrivels away

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United's order news

We were able to participate in an audio interview/discussion today as part of a Gerson Lehrman Group analyst team to discuss the potential order. You listen to it here.

In other news --

• Virgin America & Google - watch out world
• Iberia in the red - talks tough about Lufthansa and Air France
• Even more on AF447
• Lufthansa and Panasonic start to dance - behind a curtain

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We need broadband on planes - like now

The wake of this week's AH447 tragedy highlights something crucial. While we don't know why the plane crashed, we should have known where it crashed immediately. This is not some outlandish idea.

This is the 21st Century. We have the ability to track cell phones for 911 purposes (let's forget other sneaky reasons for now). The A330 had GPS, but it was a one way system like found on cars. The crew knew where they were, but there was no live feed back to Air France.

Its clear from the absence of a "mayday" message that the crew had no time to even think of sending one. Whatever happened, it came too fast. The Airbus A330 is a marvelous airplane - fitted with the latest technologies. But how come that the space shuttle has had real time telemetry all these years and airline's have not installed this on their planes? The short answer is cost. But that is a sufficient answer. It costs a fortune to build in redundant systems too, but its done for safety.

Ask anyone in commercial aviation what is their #1 priority? They will all say safety. Well, its time to add another layer of safety and that is make broadband mandatory on every commercial plane.

Broadband would not have saved AF447. But it would have enabled real-time telemetry and Air France would have known the plane was in trouble sooner and where it was in the world. This is not to say lives could have been saved on AF447. But we learn from accidents. What can we learn from a crash where the evidence is miles underwater? Not enough obviously.

To save lives going forward it seems reasonable to recommend that all commercial planes be required to carry broadband. This will allow not only passengers to communicate - more importantly, airplanes can generate continuous streams of data to airlines. This data stream could allow the operator to monitor systems - taking pressure off pilots when things start to go wrong. And eventually they do go wrong.

The technology exists. It may add a cost, but which passenger would refuse to pay (say) $5 more for such a system to be added? Indeed, don't be surprised to see insurance companies require this technology to be installed. The AF447 crash will cost them a fortune, as every crash does.

For the sake of maintaining the airline industry's magnificent safety record, IATA should take the lead on this matter. Accidents happen - thankfully they are becoming ever more infrequent (which is why this one is getting so much attention). The cost of learning from accidents need not be repaid time after time.

In other news --

• Military tidbits - Iran and Malaysia
• The Irish Chicken - hello Noel Dempsey
• May traffic data trickles in
• Think you had a bad day? China Southern's not finest hour or 3 days

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More on AF447

An excellent resource to be found here. This is emotion free and has good sources.

Reuters reports the LH planes that passed through the same space as the first was a 747-400 and the second was an MD11.

The area where the crash occurred is deep water and finding the "black boxes" will be difficult. Since the A330's two black boxes, which can emit signals for up to 30 days, it is likely the French will have a submarine on station in the area quickly to listen for the signals. The theories of the crash are pretty standard.

What seems clear is that there are a several key questions to ask -

Available data indicates a possible massive decompression.

Was this in the front or the back of the plane?

Would a multiple lightning strike cause a window to fail?

Could the plane's pitots have frozen and generated misinformation to the systems?

These are initial thoughts that came from a a discussion with one expert today. Suffice to say this crash has caused alarm in aviation circles. Nothing about AF or the A330 raises any questions. And everyone has to be very careful about speculation.

The last communication was the data link message at 2.15am reporting a failure of electrical power, pressurization and other systems, suggesting that the aircraft was already out of control. Some airline pilots speculate that the plane could have flown into a powerful storms cell strong enough to turn a big aircraft on its back and that are usually avoided.

In other news --

• VH-71 canceled
• Another missile story
• Delta's Kenya plans on hold
• Ryanair makes a loss

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T5 sinking - no really

Is this some sort of wicked joke? Apparently not. Heathrow’s T5 building is suffering from "subsidence" BAA admitted. Just over a year since its opening, BAA says the foundations are rising with floor tiles reported to have been repaired on the south side of the terminal.

T5 was built on top of a former sewage plant on London clay, notorious for subsidence and movement, especially in the newly built properties. The news is clearly awful and one has to wonder why the building was placed in its location, knowing this.

BAA is insisting the problem is minor. A spokesman said: “In a building of this size, there is going to be some level of ground movement, but the fact remains that it is perfectly normal and what would be expected in a structure of this size. The degree of subsidence is in line with what you would expect and is nothing to worry about.”

Subsidence expert Norman Train, vice president of the Institute of Structural Engineers, told The Telegraph: “T5 is like an iceberg - far more of it is below the ground than above. Because clay swells when it is built on there was always going to be movement. There will be movement as part of the bedding in process during the first few years of the construction.” How comforting. How come this was not mentioned before now if its such old hat?

Greenpeace called for more information to be released about the subsidence before works begin on a new terminal which is being planned just 500m from T5. Ben Stewart, from Greenpeace, said: “We need to know the extent of the subsidence and any data BAA and the Government have on the effect this because it will have an impact on the planned sixth terminal.”

The news is the latest in a line of disasters for the £4.3bn terminal, most notably its botched launch in March last year, which was hailed as a “national humiliation”. The litany of disasters included 20,000 bags being separated from their owners, numerous canceled flights, transferring passengers missing their connecting flights due to baggage delays, and many airport staff not knowing their way around the terminal. You know SRB and his team are coming up with something clever for the weekend papers - if not before.

In other news --

• Hello JetAmerica
• Awful news today
• Cheap satellite calls are coming
• Emirates doubles commissions - very smart

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