Managerial grit that sometimes borders on cockiness seems to keep El Al Israel Airlines aloft against all commercial odds as perhaps the ultimate ethnic niche carrier. Maybe it's a mindset composed of equal portions of self-reliance and chutzpah (a Yiddish expression loosely translated as utter nerve or supreme self-confidence) that somehow translates into viability for the small airline with the outsized reputation.
The universe of profitable US airlines shrank further during the third quarter ended Sept. 30 as fuel prices climbed throughout the summer while back-to-back-to-back-to-back hurricanes pummeled those carriers with extensive route networks in Florida and the Caribbean. Yields in the hypercompetitive domestic market continued to erode, although a rise in load factor offset about half the decline.
Of the lessons learned from the shocks that have jolted the airline industry over the past few years, perhaps the most valuable is the resilience of air cargo. Despite SARS, terrorism and avian flu, Asian airlines have managed to derive ever-increasing revenue--in one case, up to 48% of the total--from freight.
Eastern Airways CEO Richard Lake came to the annual European Regions Airline Assn. fall meeting here with a sense of optimism that this year the organization might bestow its Regional Airline of the Year award upon the Aberdeen-based carrier. Instead, for the second time, Eastern came up just a bit short with a second-place finish. But Lake was philosophical about the outcome, saying, "We must try that little bit, little bit harder."
Driven by stringent noise targets, the designs of the two engines for the A380 are remarkable not only for the size of their fans in relationship to thrust produced but also for the very shape of the fan blades. No longer straight shafts of metal, these blades swoop and turn with a sinuous grace that looks, well, sort of sexy--or maybe that judgment is just the consequence of staring at too many engines in a full-frontal sort of way.
Russian investigators are homing in on RDX, the main ingredient in C-4 and Semtex, as the explosive that triggered the near-simultaneous destruction of a Tu-154 and a Tu-134 over Russia on the night of Aug. 24. The materials are believed to have been carried into the cabin inside the clothing or carryon bags of two suicide bombers who detonated the RDX at altitude, killing all 89 passengers and crew on the two aircraft.
Reducing airline labor costs is usually fraught with turmoil, but curtailing fuel consumption is a task on which management and labor usually can agree. For those carriers with cash in the bank, a risk management strategy involving financial instruments may be the most complete-and rewarding-way to smooth out the peaks and valleys. When prices just keep rising, however, as has been the case over the past 12-18 months, even hedging has its limitations. And many cash-strapped airlines simply lack the funds to participate.
With losses of close to $58 million over the past two years-including an estimated $32 million in the fiscal year ended last July 31-Air Malta cannot continue to operate with a business-as-usual attitude. That is the message coming out of the executive office, where CEO Ernst Funk, a Swiss transplant who took over in fall 2002, and Air Malta Group Chairman Lawrence Zammit are shaking things up at this formerly sleepy Mediterranean carrier.
Thai Airways International's advertisements always have promised passengers a "smooth as silk" ride and the airline often has delivered. But for the carrier itself, the flightpath has been more like dodging the severe thunderstorms for which Bangkok is famous. A major cause of the turbulence has been government meddling combined with a lack of understanding by the bureaucrats of the critical role Thai plays in the development of the tourism industry.
Three years of airline industry turmoil and restructuring have left their mark on the maintenance, repair and overhaul aftermarket, where suppliers are scrambling to stay abreast of the changing needs of their airline customers while coping with tough competition and excess hangar capacity, itself a result of some of those changes.
In early October, the price of oil topped $52 a barrel, representing a 60% increase over the year-ago period. According to the Air Transport Assn., every $1 increase in the price of a barrel adds $425 million in annual operating expenses for US airlines. That means they are spending an extra $9.93 billion on Jet A this year compared to 2003.
For a person whose largest customer is on the financial ropes, Riccardo Raimondi seems remarkably composed. The Executive VP-Aeronautical Activities of Aeroporti di Roma, which operates Romes two commercial airports, Fiumicino Leonardo da Vinci and much smaller Ciampino Giovan Battista Pastine, is confident that the continued health of the properties does not rest on the survival of Alitalia. Fiumicino is more than just an Alitalia hub, he declares.
You've got to spend money to make money. Easier said than done when it comes to the airline industry, where cash is a scarce commodity at any time and particularly when oil prices are through the roof and fares are under attack by a bevy of lower-cost operators with a simple message: "We're cheaper."
As the variety of profitable budget airlines demonstrates, success comes in many shapes and sizes. WestJet, Ryanair, JetBlue and AirTran all have taken different paths to arrive at the same destination. This is also true when it comes to how low-cost carriers approach pilot training. JetBlue is building its own facility while Jetstar has outsourced virtually its entire training requirement to a third party. Yet experts agree that most LCCs share a common trait: A determination to think outside the box.
Low-profile but profitable, Turkish Airlines is on a roll with an order for 51 new aircraft and plans to build a new $350 million technical base (see box, p. 42), soaring on the winds of a robust economy and rising demand for leisure and business travel. Earnings are at record highs and passenger traffic was up 26% in the first half of the current year.
Aircraft position information is essential for safe operations, including the parts that happen on the ground. While this ground piece has not been ignored, it is true that until recently it was not afforded attention equal to the flying piece. Consequently, increasingly congested facilities experienced a rapid rise in aircraft and vehicles getting lost on airports or going where they shouldn't go. The rate of runway incursions began to rise, and the rate of increase in the US was well beyond alarming (ATW, 9/03, p. 38).
George Cooper, head of airline operations and Aircom services for SITA, has a six-word business strategy: Voice and data, long-haul and short-haul, Airbus and Boeing. "It's an approach that takes into account what people say they want," he says. "What do you as an airline manager want to provide?"
The birth of Astar Air Cargo, which celebrated its first anniversary in July, was not particularly painful, but sticky questions of legitimacy were raised from the outset by UPS and FedEx, rivals of DHL Worldwide Express, from whence the new carrier traces its parentage. A four-year campaign by the two package/express giants to have the airline declared illegitimate finally was put to rest in May when the US Dept. of Transportation determined that Astar complies with federal law forbidding foreign nationals from holding more than a 25% voting stake in a US carrier.
Lufthansa Technik, which pioneered installation and operation of Connexion by Boeing high-speed broadband Internet access aboard A330s and A340s, overcame an array of technical challenges en route from the prototype installed in a Lufthansa 747-400 for a four-month trial to the ongoing installation on the airline's long-haul fleet. "We've learned a lot since the proof-of-concept aircraft," says Ulf Hallmann, director-LHT engineering services, VIP and government jet maintenance. Involved are complex structural enhancements both inside and outside the aircraft.
If the saying "think globally, act locally" is a valid proposition in the airline business, then Gol Linhas Aereas Inteligentes S.A.--translated as Gol: The Intelligent Airline--is doing its part to make it happen.
As turnaround stories go, Air New Zealand's is about as good as it gets. In just over 2-1/2 years under MD and CEO Ralph Norris, the company has come from the nightmare of writing off NZ$1.45 billion-the largest writeoff in New Zealand corporate history-to posting combined annual profits of NZ$331 million over its last two fiscal years.
Editor's Note: This is the first in an occasional series of articles on relationships between IT suppliers and airlines Finnair's seven-year relationship with information technology provider Lufthansa Systems Aeronautics, a member of Lufthansa Group, has yielded millions of dollars in savings and revenue for the Nordic carrier through scheduling, planning, pricing, profit, route planning and management software.
Charles Darwin wrote, "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." British Airways CEO Rod Eddington warns that achieving that responsiveness is extremely difficult-"Changing airline culture is like trying to perform an engine change inflight," he maintains. While not all legacy airline CEOs have to face as daunting a task as that, the magnitude of reform required to meet the actual or threatened competition from low-cost carriers is enormous, and for many airlines seemingly impossible to achieve.
Five years ago, only a relative handful of Italian and international business travelers were aware of the existence of Milan's Orio al Serio airport, or as it is more commonly known, Milan Bergamo. Today, you'll see more denim and backpacks than Armani inside the terminal. Lots more.
What a difference two years make. When ATW last reviewed the market potential for passenger-to-freighter conversion programs (9/02, p. 48), airfreight was just beginning to claw back from its most severe contraction since the early 1970s. The winding down of high-priority Y2K-related technology shipments, followed by the bursting of the dot.com and telecom bubbles and then 9/11, resulted in world airfreight traffic (FTKs) falling 6.6% in 2001, according to Arlington, Va.-based MergeGlobal.
