There is an old handyman's saying, equally applicable in our era of programmable televisions and coffeemakers: "When all else fails, read the directions." To its credit, Delta Air Lines has become the first US legacy carrier to read the directions. Its domestic fare reform unveiled last month (see News Briefs, p. 9) belatedly acknowledges what business travelers, Wall Street analysts and just about everybody not employed in a network airline revenue management department have been saying for years-the pricing model is fractured beyond repair.
Boeing's catchphrase in the early 1990s was "working together," but for Singapore Airlines Group Chief Executive Chew Choon Seng it has become "working together quickly." Speed is needed to insulate SIA from the relentless shocks that have ravaged the airline industry and tourism in Southeast Asia over the past four years: 9/11, avian flu, the Bali bombing, SARS and the tragic tsunami in December.
The rapid embrace of low-cost carriers by European travelers has sent shockwaves through the airline food chain, and although embattled former flag carriers may be shouting the loudest, the impact also is felt at those that formerly operated under the radar. Lacking a government owner/protector or a defendable niche, many of Europe's small privately owned airlines are in a competitive no man's land, caught up in the slugfest between money-losing legacy carriers and their LCC tormentors.
Don't look now, but US legacy airlines are in better shape to challenge their low-cost rivals than at any time since the start of the millennium. Sure, that sounds farfetched. After all, in many respects the US legacy carriers entered 2005 in much the same way that they entered 2004: Awash in a sea of red ink, facing continued yield erosion and with a cost structure that is not sustainable in today's market. Without the bank of GE, half of them probably would be in liquidation by now.
A sense of style and a commitment to service quality long have been the traits required to remain in the top ranks of the world's airlines. Today, however, courage must be added to those requirements; investing in a major passenger service product upgrade during times of escalating competition and challenged yields requires the boldness to act on the belief that only a superior product will do in the battle for the shrinking premium passenger group.
This year's winner of ATW's Market Leadership Award deserves credit for launching a travel revolution not simply in one country but across an entire region. In just three years, AirAsia has shown that the Asia/Pacific is ripe for low-fare exploitation, defying conventional wisdom that the LCC model would not work in an area characterized by tightly managed bilateral arrangements. It has made air travel affordable to hundreds of thousands of people and has spawned a number of imitators that will spread the revolution even farther.
This year's Regional Airline of the Year is a company that has completed a successful business restructuring during one of the most difficult periods in the history of commercial aviation. After losing $59 million in the 2001 and 2002 fiscal years, Mesa Air Group recovered to post profits totaling $51 million over the next two years, including $26 million in the year to last Sept. 30. Revenues, meanwhile, rose more than 70% from $523 million to $896.8 million and passenger enplanements more than doubled to 10.2 million.
A new epoch in the air traffic management technologies and capabilities often associated with the term Free Flight finally is arriving. ATC providers around the world will be moving with increasing speed to operational use of a satellite-based system that sets aircraft free from the limiting tyranny of locally positioned short-range, line-of-sight navigation aids and radars in favor of a ubiquitous "god-to-ground" technology for surveillance, navigation, precision approach and aircraft separation.
ABX Air selected Quint Turner as CFO. ACE Aviation Holdings appointed Montie R. Brewer president & CEO-Air Canada, Jon Turner VP-maintenance-Air Canada, Duncan Dee senior VP-corporate affairs & CAO-ACE, Bradley Moore president & CEO-Air Canada Ground Handling Services and Claude Morin president & CEO-Air Canada Cargo. Alaska Airlines welcomed Caroline Boren as MD-corporate & strategic communications.
Last year, ATW introduced a new award to recognize airlines achieving a commercial rebirth through a life-changing transformation. The first recipient, Aer Lingus, successfully implemented a low-cost business model, demonstrating that a traditional flag carrier can "change its spots." This year's winner, Air New Zealand, likewise survived a near-death experience in 2001 to remake itself into a profitable and innovative competitor across different markets.
Predictive maintenance solutions for aircraft and engines may be as common someday as yield management systems, but today's cost-conscious environment hampers investment in any product that can't offer an immediate payback. Carriers using the software freely admit the difficulty of quantifying the actual savings in reduced delays or cancellations and improved dispatch reliability. Yet customers with whom ATW spoke confirm its value.
Travelocity is taking fare transparency a step further with a new tool called Flight Navigator. The tool will tell shoppers when three or fewer seats are available at a particular fare with an eye toward eliminating one of the "crap shoot" aspects of buying air travel.
Has Gol's success caused TAM to reevaluate its own business model? When you have a new entrant in a market that is in the process of deregulation, it finds a low entrance barrier. This is the first competitive advantage it had. The second advantage is that it was born on a new technological platform-high-tech aircraft. And the third is that it was also born in a new e-commerce environment. Therefore we had to adjust to this reality, defending our market without losing our characteristics.
Five years ago, the airline industry was buzzing with claims of 20% savings on aircraft purchasing by shrinking the multitude of options offered to and demanded by airlines when ordering aircraft. Today, with acquisition costs and airline yields moving in opposite directions, the need for standardization and simplification is more pressing than ever. Yet progress remains slow, and what has been achieved is being driven more by manufacturers eager to pare costs and complexity out of the production process than by airlines intent on cutting sticker prices.
Dynamic packaging, a hot topic in the US for a couple of years, has been slow to take off in Europe but is widely anticipated to become a force. For the package tour and charter airline segment, already struggling to come to grips with changes wrought by the advent of low-cost carriers, that looms more as a threat than a promise (ATW, 11/02, p. 30).
By virtue of the symbiotic relationship between Regional carriers and their mainline partners, the Regionals consistently are watching the bottom line as their partners consistently try to cut costs. There was a sharp reminder of this fact of life when United Airlines in early November issued an RFP to replace flying currently being done by its ally of nearly 20 years, Air Wisconsin.
At the first annual Association of Asia Pacific Airlines Assembly of Presidents since the retirement of DG Richard Stirland, attendees heard his successor, Andrew Herdman, deliver a message that might have been written by Stirland. Perhaps that's not so surprising given that Herdman, like his predecessor, is a product of the Swire/Cathay Pacific Hong Kong community, having served in a number of positions at both companies, most recently as Swire Pacific's director-corporate affairs and a director of John Swire & Sons.
The factors that contributed to a buoyant market for air cargo last year should continue in 2005, with solid traffic (FTK) growth propelled by trade from Asia, particularly the booming China market, which had exports valued at $851 billion in 2003. Through the first 10 months of 2004, IATA airlines reported that international FTKs rose 14%, with double-digit increases recorded across all regions.
On any given day, the specials at Bryan Owens' Unclaimed Baggage retail store in Scottsboro, Ala., include deals like a $75 Sharper Image pillow for four bucks, a brand-new Trivial Pursuit 20th anniversary edition board game for $15 and a Schwinn double jogging stroller in excellent condition for just $40.
As at every other airport in the US, business bottomed out at San Francisco International immediately following 9/11. While many airports struggled back to their feet as passengers returned, it's been an uphill climb for SFO. Rather than wait for nature to take its course, managers launched an aggressive, innovative marketing campaign to increase business and draw new carriers to the beleaguered facility.
Saying that the airline industry's fortunes will improve somewhat in 2005 is overly optimistic for some carriers while being a bit too dark for others. Yet, on average that's what the year will bring...unless.
For Christian Heinzmann, these are uneasy times. “The most difficult year Luxair has ever experienced� was 2003, the CEO of Luxembourg’s national carrier told ATW recently, and although he expected the parent company to show a positive operating result for 2004, with the airline breaking even, he recognizes that much remains to be accomplished.
Next year, Cargolux Airlines International will celebrate its 35th anniversary. Established in 1970 by Luxembourg national carrier Luxair, Salen Shipping Group, private interests and Loftleidir Icelandic-which recently acquired a 10.1% stake in easyJet-the airline has outperformed its founders' wildest expectations, growing to become the ninth-largest cargo airline in the world, according to IATA, and Europe's largest all-cargo carrier, with revenue expected to exceed $1.1 billion in the current year.
The stronger-than-expected traffic recovery this year in conjunction with the emergence of a thriving low-fare sector in many parts of the globe has contributed to a healthy restoration of demand for new and used transport aircraft, leading to a reduction in the overall number of stored jets and driving up lease rates for the more popular types, experts say.
