Monday Briefing – 25 June 2018

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Heathrow Expansion CGI Image
Heathrow Expansion CGI Image (Image Credit: Heathrow)

Hello and welcome to our Monday Briefing for the week beginning 25 June 2018, summarising the main developments in air travel over the past week, and a look the week ahead.

Heathrow Third Runway Vote

The House Of Commons will vote on the Government’s Airports National Policy Statement this afternoon, which proposes a third runway at London Heathrow.

The Conservative party has issued a “three line whip” for its MPs to vote in favour. The Labour Party has allowed its MPs a free vote, though its front bench is not in favour of a third runway. The trade union Unite, which is a significant donor to the Labour Party, has come out in favour of the third runway.

The Conservative party position has prompted Gregs Hands, MP for Chelsea & Fulham, to resign from the Government as minister for trade policy.

Estimates on Sunday evening are that around 15 Conservative MPs will vote against the Government and that around 100 Labour MPs will defy their front bench to vote in favour of the runway.

There has been a deafening silence from Boris Johnson, MP for Uxbridge and South Ruislip, who said in 2015 “I will lie down in front of those bulldozers and stop the construction of that third runway.” Boris Johnson is reported to be out of the country at an undisclosed location.

Irrespective of the outcome of the vote, there will be a judicial review which is supported by the Mayor Of London, Sadiq Khan. A judicial review is a legal challenge, not to the actual merits of the third runway itself, but the manner in which the Government reached its decision. It is an expensive process that is not easily won.

There is also disquiet about the cost of the third runway, notably from BA’s parent company, International Airlines Group.

Assuming there are no further obstacles, construction of the third runway could begin in 2021.

Craig Kreeger to retire from Virgin Atlantic

In 12 months’ time, Virgin Atlantic will be different in many ways from today.

It should have taken delivery of its first Airbus A350-1000 aircraft. It should have launched, or at least be close to launching, a new expanded transatlantic joint-venture with Air France-KLM and Delta.

Perhaps more significantly, Delta should be the single largest shareholder as Sir Richard Branson is due to sell a 31% stake in the airline he founded to Air France-KLM.

Virgin will also have a new CEO, Shai Weiss, who will replace Craig Kreeger from 1 January 2018. Craig Kreeger was the architect of Virgin’s “Plan to Win” which was intended to achieve record levels of profitability this year. That has proved elusive, thanks to a number of factors, notably Boeing 787 engine issues. Virgin is due to launch a new business plan “Velocity” next year. Details are scant at the moment, but given that Virgin is some distance from consistent profitability, further changes to the business are expected.

Hoovering Up Avios

For a long time there has been a huge industry on both sides of the Atlantic dedicated to squeezing out every last possible frequent flyer mile at every opportunity.

In Europe this has been aided in part by the adoption of the “Avios” currency across a number of frequent flyer programmes, notably BA Executive Club and Iberia Plus. In addition, there is ability to move Avios between these programmes and take advantage of arbitrage opportunities.

Iberia sparked a frenzy this week by launching a seemingly too good to be true promotion whereby 9,000 bonus Avios would awarded for flights booked on the airline, subject to a cap of 90,000 Avios. 90,000 Avios is enough for a return flight to New York in BA Club World (travelling off peak and subject to a surcharge of nearly £500).

Bonus frequent flyer promotions are nothing new. However, this was unusual in that the Avios are awarded immediately and won’t be forfeited if the flights are not taken, meaning passengers can book the cheapest possible flights anywhere on Iberia’s network and effectively throw away their tickets. This is a radical break with convention. The Avios do expire if not used by December of this year, but this appears to be circumvented by transferring them to another account eg BA Executive Club. (At some point in the future, a single “Avios Bank” will be introduced across all Avios frequent flyer programmes.)

In spite of the relatively short promotional period (which has now ended), it has attracted a huge amount of attention worldwide. It must have prompted booking activity far beyond what could have been expected. It does have shades of Hoover’s notorious free flights promotion. Suspect this will be one to watch.

About the Airbus statement

The news agenda in the UK on Friday last week was dominated by a statement by Airbus that a “No Deal” Brexit would severely impede its ability to do business in the UK.

The announcement was met with either nonchalance and surprise concern from politicians. This is despite the fact that MPs had just waved The EU Withdrawal Bill through the House Of Commons which ruled out the UK staying in the European Economic Area, the Single Market and Customs Union.

Be under no illusion, Airbus is only stating publicly what it and businesses in many other sectors have said in private to Government for two years.

At this stage, it is impossible to predict how the current Brexit impasse will be resolved. However, that a strategically important European business like Airbus felt the need to go public and the dismal response is a damning indictment of Britain’s political class, on both sides of the House of Commons.

Also of note this week:

Airlines for Europe rails against Air Traffic Control strikes in Europe. (Airlines for Europe)

Cathay Pacific receives its first Airbus A350-1000 aircraft. (Cathay Pacific)

Etihad introduces a programme to second pilots to Emirates. (Reuters)

The Financial Times interviews Norwegian founder and CEO Bjorn Kos amid continued speculation about the airline’s future. (Financial Times)

How to miss a flight. (Financial Times)

Virgin Atlantic reflects on 34 years of its Flying Lady. (Virgin Atlantic)

Late Post Publication Updates:

[Reserved for updates during the day.]

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