Monday Briefing – 10 December 2018

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Monday Briefing Montage

Welcome to our Monday Briefing for the week beginning 10 December 2018.

At the risk of being proved wrong, news tends to thin out in the run up to Christmas so this is our last Monday Briefing for 2018. It will return on Monday 14 January 2019.

2018 has been a tough year for the industry.

The oil price remains volatile. Primera Air and Cobalt Air have failed. Flybe is searching for a buyer. WOW air is scrambling to secure new financing. Etihad is shedding itself of aircraft, lounges and routes.

There are still questions over Norwegian. Last week, it reported a fall in its load factor from 83.7% to 78.8% year on year as revenue growth did not keep up with capacity expansion of more than a third.

Alitalia somehow stumbles on regardless.

2019 will be no less an eventful year.

Indeed, before it has even begun we know to expect:

– BA’s Centenary Celebrations

– BA and Virgin Atlantic both introducing the Airbus A350-1000 aircraft and new Club World and Upper Class cabins respectively.

– easyJet launching a new frequent flyer currency.

– JetBlue possibly announcing new transatlantic routes from Boston and New York to London.

– Qantas confirming whether it will launch non-stop flights from London to Sydney.

– Virgin, subject to regulatory approval, launching a new combined transatlantic joint-venture with Air France-KLM; and relaunching its frequent flyer programme.

– WestJet introducing the Boeing 787 with its first international business class cabin at Gatwick.

The one thing you won’t be seeing is Crossrail as this is now expected to be delayed until 2020.

Buckle up, it’s going to be quite a ride!

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Monday Briefing – 3 December 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

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WestJet's Christmas Miracle
WestJet’s Christmas Miracle (Image Credit: WestJet)

Welcome to our Monday Briefing for the week beginning 3 December 2018.

‘Tis The Season….

The release of an annual Christmas film from the world’s major airlines, and indeed some airports, is now a firm fixture in the travel calendar.

The pioneer of this was WestJet with its annual WestJet Christmas Miracle. And not to be outdone it has now published what it promises will be the first of no less than 25 videos to be released every day up to Christmas Day.

You can keep up with all films with WestJet. In terms of other airlines, expect a flight to Lapland soon from SWISS and possibly a New York themed film from BA.

Joon Jettisoned?

Le Figaro reported this week that Air France-KLM’s CEO Benjamin Smith is poised to take the axe its nascent “millennial” brand Joon.

There is some credence to this. Benjamin Smith is on the record that he thinks Air France-KLM has too many brands, which include Hop! and Transavia, and should be more focused on Air France and KLM.

Most commentators in the industry do not understand what Air France is trying to achieve with Joon. And if they don’t, it’s unlikely passengers do.

Ostensibly, Joon is aimed at millennials with cabin crew in casual attire and white trainers serving their passengers smoothies. It is progressively taking over some short and long-haul routes from Air France.

Leaving aside the baselessness of the entire concept of millennials, it’s hard to understand what it is about Manchester or Madrid that merits them to be served by Joon, and for Lisbon and Milan to be served by Air France.

One of the more bizarre aspects is the claim to be “Also An Airline”. There’s little point in an airline pretending to be a lifestyle brand when there are others that can do that much better.

What is really happening is Air France employing cabin crew on different contracts, whilst the aircraft remain with Air France and are operated with Air France pilots. “Twin brand” strategies are of course nothing new. Qantas has used it very successfully with Jetstar. As does Air Canada with Air Canada Rouge. However, there’s always been a very clear delineation between brands and it’s no panacea for avoiding structural reform in the parent.

With Air France due to dispose of some Airbus A380s, Benjamin Smith is clearly not afraid to overturn decisions of his predecessors. This is of course subject to political influence from the French state which owns 23% of the voting rights in the group.
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Monday Briefing – 26 November 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

London Air Travel » Monday Briefing

British Airways Boeing 767-300 G-BNWP Pictured 1999
British Airways Boeing 767-300 G-BNWP Pictured 1999

Welcome to our Monday Briefing for the week beginning 26 November 2018.

Who Wants To Buy An Airline Like Flybe?

Speculation over the future of Flybe accelerated last week.

Mark Kleinman of Sky News, one of the most consistently reliable sources of business scoops, revealed that Virgin Atlantic is actively looking at a bid for the airline. This was confirmed by both sides.

For an airline that has always attempted to exude glamour and has had only brief forays into the world of short-haul in its near 35 year history, short-haul regional flying is a world away from Virgin’s Clubhouses and Upper Class bars. We take a look at why Virgin may be interested in Flybe here.

The Sunday Telegraph also reported that according to “aviation sources” IAG is a front-runner to buy Flybe. Do bear in mind that, based on the track record of the Sunday papers, “aviation sources” could be anybody.

It is also hard to reconcile this with IAG’s historical approach of buying airlines that either buttress its existing hubs or have strong leadership positions at their own hubs.

Its airlines have also shown little relatively interest in regional airports. Both Aer Lingus and Iberia rely on franchise partners for regional flights. Indeed, Aer Lingus has actually scaled back from UK regional airports. It will also be recalled that BA sold its troubled “BA Connect” regional business to Flybe ten years ago and since disposed of a stake in the airline. IAG of course also has its sights set on Norwegian, which is exactly the sort of “transformational” deal it pursues.

BA Retires The Boeing 767

BA finally retires its last two remaining Boeing 767 aircraft today.

The last two remaining aircraft will fly from Heathrow to The Ministry Of Defence in St Athan. It completed its last passenger flight last night, BA663 from Larnaca, arriving at London Heathrow Terminal 5 at 22:34.

BA’s press photographer flew out to catch the final flight from Heathrow landing in Larnaca, so pictures of the final flights should be available shortly.

In other fleet news, BA took delivery of its first Airbus A321 Neo aircraft last week. This is the first of 10 to be delivered to the airline over the next two years.

BA CityFlyer is also wet-leasing a former Virgin Australia Embraer E190 from Stobart Air, with a dedicated business class cabin.

Frequent Flyer Programmes: Up In The Air

2019 is a potentially interesting year for frequent flyer programmes.

In the UK, the field is dominated by the BA Executive Club and its Avios currency. However, a number of BA’s rivals are starting to make moves.

easyJet has confirmed it is to launch its own frequent flyer currency next year which members will able to redeem for as yet unspecified rewards.

Virgin Atlantic is to also spin-off its Flying Club frequent flyer programme in to a separate legal entity and launch a new loyalty programme which will partner with Air France-KLM.

Back to BA, at some point it is expected to revamp the Executive Club with the possibility of Avios awarded according to the price of the flight and dynamic pricing of reward flights.

BA Returns To Doha

In what must be the longest streak of cancellations without suspending a route, BA returns to Doha this Saturday 1 December after a break of 8 months.

Flights had been cancelled to release aircraft due to maintenance checks on the Boeing 787 fleet. It seems Doha has been spared further cancellations as BA is to continue to wet lease an Airbus A340 from Air Belgium to cover one return flight to Dubai until late March 2019.

Also of note this week:

Air France is to cut its Airbus A380 fleet in half as five aircraft will be returned to lessors. Expect this to be the first of many fleet changes under new leadership from Ben Smith. (Les Echos)

Finnair continues its retrospective to mark its 95th birthday, looking back at pilot uniforms. (Finnair)

The FT interviews Flybondi CEO Julian Cook on breaking into the Argentina’s domestic market. (Financial Times)

Late Post Publication Updates:

[Reserved for updates during the day.]

Our Monday Briefing is published every Monday at 06:00 GMT. If you have any comments, suggestions or tips then please drop us a line at mail [@] londonairtravel.com

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Monday Briefing – 19 November 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

London Air Travel » Monday Briefing

Flybe Bombardier Dash 8 Aircraft
Flybe Bombardier Dash 8 Aircraft (Image Credit: Heathrow Airport)

Welcome to our Monday Briefing for the week beginning 19 November 2018.

Flybe’s Dash For Cash

Flybe released its half-year results last week.

Its profit before tax fell 54% to £7.4m. Revenue fell 2.4% to £409.2m following cuts in capacity and net debt increased 40% to £82.1m.

The all important number however is cash. As at 30 September 2018, the airline has £70.6m of cash compared to £101.3m in the previous year. £16.4m of this is deemed “restricted cash”. Flybe has had to provide partial collateral to two companies that handle its credit and debit card transactions. This may rise and fall in line with seasonal sales patterns.

Flybe has given warning that its ability to trade as a going concern is dependent on card handling companies not demanding additional collateral and it carrying out certain asset sales to raise cash. One of these is the sale and leaseback of its aircraft hangar at Exeter airport for £5m. This was subsequently announced last week. The airline is also being advised on cash flow by the professional services firm KPMG.

The airline has also officially confirmed that it has put itself up for sale. It is unlikely that any buyer would be another airline group. BA sold its former “BA Connect” regional business to Flybe more than 10 years ago. It has since divested of a 15% stake in Flybe. Air France-KLM sold CityJet five years ago. And Lufthansa would not want to repeat its experience with bmi. It can be said with confidence that these groups will have already been approached privately.

That said, there are a lot of parties with a vested interest in the future of Flybe. Of 19 scheduled departures from Exeter airport today, just 1 is not operated by Flybe. Flybe also has dominant positions at Cardiff, Norwich and Southampton airports.

All airlines ultimately depend on cash flow from forward bookings and credit from suppliers. Speculation in itself is not helpful. It would be remiss not to also acknowledge the human impact of any airline failure. The sensible measures that apply to any airline ticket purchase, namely using a credit card and having adequate travel insurance, should not deter anyone from booking with any airline.

On a related note, easyJet announces its annual results tomorrow and should provide an update on recent initiatives in the areas of easyJet Holidays and its loyalty programme.

Black Friday

Of all the American imports into the UK, Black Friday makes the least sense.

The story behind Black Friday is well known. This Thursday is the Thanksgiving Holiday in the US. Black Friday is the equivalent of the UK’s Boxing Day sales and, legend has it, the day that US retailers go into the black. This Friday is of course not Boxing Day in the UK. It’s an ordinary working day. Most people haven’t neither the time nor inclination to plow through scores of e-mails from online retailers and airlines which are more of an irritation than anything else. The vast majority of efforts are also pretty half-hearted.
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Monday Briefing – 12 November 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

London Air Travel » Monday Briefing

Edward Bair, Home For Christmas
Edward Bair, Home For Christmas (Image Credit: The Mill for Heathrow)

Welcome to our Monday Briefing for the week beginning 12 November 2018.

Christmas Films

And so it begins. Heathrow has released its third annual Christmas film, once again featuring Doris and Edward Bair.

You may well be thinking these ads are being released earlier this year. And that’s because they are. Two weeks in fact. With so many concurrent campaigns from consumer brands and retailers it is harder to cut through and easier for viewers to gloss over them all. There are of course only so many variations of the theme of Coming Home For Christmas that can even the brightest minds at the best ad agencies can come up with.

That said, Heathrow has to be given credit for how much it has improved its image that it can even run such a campaign. Consider this news clip from December 2010, which is akin to something from The Day Today. Demonstrating a complete lack of preparedness for winter weather and dysfunctional relationships with airlines, Heathrow was claiming the airport was operating normally after BA cancelled its entire flying programme, just as the airport was on the cusp of closure for days due to snow.

Finnair Celebrates 95 Years

Finnair celebrates its 95th anniversary this month.

The airline was founded as Aero O/Y on 1 November 1923. It has been known as Finnair since 1968. In recent years it has gained a niche as gateway to Asia with nearly 100 flights a week to the region. Taking advantage of its geographical location to offer fast connections between Europe and Asia, it has extensive coverage of China and Japan. It is also known for its close partnerships with Finnish design house Marimekko. Finnair also considers itself the official airline of Santa Claus.

Whilst Finnair has done better than most small European airlines to carve out a niche and remain financially strong, it has indicated a desire to play a part in European consolidation. However, there are no indications that the Finnish Government is willing to sell down its stake which would certainly be a condition of any bid from the likes of IAG.

Finnair’s in-flight magazine “Blue Wings” takes a look back at the airline’s history in the first of a five part series. (Finnair Blue Wings)

On a Christmas theme, Finnair is also offering special direct flights from Gatwick to Ivalo on Thursday and Sunday from Thursday 13 December 2018 until Thursday 28 March 2019 and Kittilä on Tuesday and Sunday from Sunday 16 December 2018 until Tuesday 26 March 2019.
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Monday Briefing – 5 November 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

London Air Travel » Monday Briefing

Emirates "Fly Better" Advertisement
Emirates “Fly Better” Advertisement (Image Credit: Emirates)

Welcome to our Monday Briefing for the week beginning 5 November 2018, summarising the main developments in air travel over the past week.

IAG’s Capital Markets Day

IAG held its annual Capital Markets Day last Friday. We covered the major BA announcements and group wide initiatives on the day.

Whilst there were no surprises at the individual airline announcements, looking back a couple of days on there were a couple of interesting changes.

These presentations are usually dense on hard financial information and IAG’s uncompromising mantra of rational, disciplined, investment by a “brand agnostic” parent.

This year, it was noteworthy that IAG spent a lot of time discussing the relative brand positioning of its airlines.

IAG was quite candid that there were some areas its brands, such as BA, fall behind others in terms of perception. In the eyes of passengers, perception is of course reality.

Two of these airlines were easyJet and Emirates. To illustrate the the point, the day afterwards Emirates debuted the first of two new TV ad spots on UK television under the brand promise “Fly Better”. The first ad shows a passenger boarding an Emirates aircraft and being taken on a fantastical journey as cabin crew morph into different style dancers to demonstrate the breadth of its in-flight entertainment.

What Emirates does extremely well is hammering home its points of differentiation, such as its advanced in-flight entertainment systems. And selling a positive vision of the future “Hello Tomorrow”. The huge amount of attention given to Qantas’ launch of direct flights from London to Perth shows the power of the perception of progress. The suggestion is also that being that by flying Emirates you are part of something. As does easyJet with “Generation easyJet”.

It has been more than five years since BA ran a major brand-led marketing campaign. The last being “To Fly. To Serve. Today. Tomorrow”.

With BA’s centenary next year, there is clearly going to be a huge marketing push. Irrespective of budget and technical prowess, for any marketing campaign to be successful there has to be an underlying truth that customers can buy in to.

It has be said that BA’s preparation for its centenary feels a bit like the 2012 London Olympics. Until it happens you’ve no idea whether it will be an absolute triumph or beset by unforeseen problems.

IAG can claim to have delivered on the promises of its initial formation, namely cost and revenue synergies. Many legacy structural issues such as BA’s pension deficit have also been addressed. Whilst IAG does monitor customer Net Promoter Scores across all its airlines, there is no central group marketing / brand development function. Arguably, this should be the next stage of IAG’s evolution.
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Monday Briefing – 29 October 2018

Welcome to our weekly briefing on air travel in London and around the world, published every Monday at 06:00 GMT.

London Air Travel » Monday Briefing

International Airlines Group Airlines & Businesses
International Airlines Group Airlines & Businesses

Welcome to our Monday Briefing for the week beginning 29 October 2018, summarising the main developments in air travel over the past week.

IAG Capital Markets Day

International Airlines Group will be holding its annual Capital Markets Day this coming Friday 2 November 2018.

The event is primarily aimed at institutional investors with industrial quantities of Powerpoint and talk of Earnings Per Share and Return On Invested Capital. However, there should be presentations by individual IAG member airlines. There are also often some fairly “candid” views, particularly post-lunch, from IAG CEO Willie Walsh.

In previous years, it’s at these events we have first learned of BA’s plans to “densify” its Gatwick based Boeing 777s and to revamp Club World.

Developments we will be looking out for this year from IAG and BA may include:

– BA’s plans for its centenary year in 2019

– At least some outline plans for introducing a new Club World seat with the Airbus A350-1000 in 2019

– Possible improvements to in-flight catering amenities in First Class and World Traveller Plus

– Lounge investment plans for 2019, most likely Geneva, Johannesburg, Manchester and San Francisco and at least a timescale for revamping the London Heathrow lounge complex

– BA’s plans for expansion at Gatwick in 2019

– Possible plans to redevelop some facilities at London Heathrow Terminal 3 in conjunction with American Airlines

– Timescales for a revamp of the Avios frequent flyer currency

If there is anything of note, we will share on Friday morning from 08:00 GMT.

Why Virgin Atlantic will not be flying to Perth

Interest was piqued this week when Sir Richard Branson told Brooke Corte of the Australian digital channel “Your Money” that Virgin Atlantic wants to launch non-stop flights to Perth “as soon as possible”.

This was widely repeated online. However, nobody seemed to check with the Virgin Atlantic press office to confirm whether it was true or not.

Sir Richard Branson is President of Virgin Atlantic. However, by his own words, he has little involvement in the day-to-day running of the airline. Virgin Group is a majority shareholder for now, but is expected to sell part of its stake to Air France-KLM in the next 12 months. This will leave Delta as the single largest shareholder in the airline.

With Virgin Atlantic seeking to return to profitability and the imminent merger of Delta’s transatlantic joint-venture with Virgin into its longer standing joint-venture with Air France-KLM, it seems implausible that Virgin would return to Australia.

Virgin Atlantic stopped flying to Australia in May 2014 when it suspended its London Heathrow – Hong Kong – Sydney route. Also bear in mind what Virgin said when it launched the Boeing 787-9 Dreamliner:

“It will also be instrumental in introducing new routes like Bangkok, Melbourne, Rio de Janeiro, Seattle, Toronto and Vancouver. Due to the long range of the aircraft, both Perth and Hawaii are currently under consideration.”

Virgin currently only flies to one of these: Seattle.

Whilst this sort of behaviour has diminished, Virgin has form in announcing things that don’t ultimately happen.

When Virgin Atlantic placed its now cancelled order for six Airbus A380s it expressed a desire to fit the aircraft with gyms, beauty salons, and casinos.

Some ten years or so ago, it also announced its intention to launch all business class flights from London and European airports to the US.

Market conditions may have played a part in these plans not being realised, but a public company would never have the luxury of such ambiguity.

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Monday Briefing – 22 October 2018

Welcome to our weekly Monday Briefing on the main developments in air travel in London and around the world, as published every Monday morning at 06:00 BST.

London Air Travel » Monday Briefing

Cobalt Air (Image Credit Cobalt Air)
Cobalt Air (Image Credit Cobalt Air)

Welcome to our Monday Briefing for the week beginning 22 October 2018, summarising the main developments in air travel over the past week.

Winter Is Coming (Part 1)

October is a cruel month for the airline industry.

The peak summer season is over. It is some months before most passengers think about booking their next holiday.

Three weeks in, it has already claimed Primera Air and Cobalt Air.

Flybe also issued a profit warning last week. The airline expects to make a loss of £12m this year, compared to market expectations of £3.5m.

City investors do not take kindly to surprises. Flybe was duly rewarded with a more than 50% fall in its share price to 14.30p. This compares to a price of 341p when it first floated on the stock exchange in 2010.

Small regional airlines have struggled this year. CityJet has abandoned all scheduled flights. Fly VLM entered liquidation.

Consistent financial profitability has proved elusive for Flybe. It has banked its financial turnaround on downsizing its fleet. It is shedding larger Embraer E195 aircraft, a hangover from an over-ambitious aircraft order. This will make the Bombardier Q400 the backbone of its fleet.

It has also focused on providing connections to long-haul airlines at Heathrow and Manchester. It has taken up remedy slots for Aberdeen and Edinburgh at Heathrow and codeshares with many long-haul airlines. It has be said this is something that did not serve bmi well. The proportion of ticket revenue is small. There are significant operational issues in handling connecting passengers, such as dealing with mishandled baggage. Flybe also has ambitions to add many more regional routes at Heathrow if there is a third runway.

There is not a chance of IAG being Flybe’s saviour. When BA sold most of its former regional operation to Flybe in 2007, it acquired a 15% stake in the airline. It has since disposed of this. What had remained at BA became BA CityFlyer which has flourished at London City. Nor would IAG be interested in franchising the BA brand. BA cancelled its remaining UK franchise agreements with Loganair after bmi and easyJet acquired former franchisees BMed and GB Airways respectively in 2007.

International Airlines Group will also publish its 3rd quarter results this coming Friday. Whilst major announcements are likely to be reserved for the Capital Markets Day in November, IAG will inevitably be asked by analysts about the recent BA data breach.
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Monday Briefing – 15 October 2018

Welcome to our weekly Monday Briefing on the main developments in air travel in London and around the world, as published every Monday morning at 06:00 BST.

London Air Travel » Monday Briefing

Dreamflight, London Heathrow, Sunday 14 October 2018
Dreamflight, London Heathrow, Sunday 14 October 2018 (Image Credit: British Airways)

Welcome to our Monday Briefing for the week beginning 15 October 2018, summarising the main developments in air travel over the past week.

New Gatwick Airport Masterplan

Gatwick is to unveil a new airport masterplan this coming Thursday.

Part of it has been selectively leaked to the press in advance – possibly to take the sting out of one of the more controversial aspects.

Gatwick proposes to bring its standby runway into permanent use for short-haul flights when a legal agreement preventing Gatwick from operating a second runway expires next year.

Gatwick Airport Runways
Gatwick Airport Runways (Image Credit: Gatwick Airport)

Gatwick has long campaigned for a second runway in the hope of attracting more long-haul airlines, particularly to Asia. It has had mixed success in this regard. Cathay Pacific has launched Hong Kong. Air China has launched Chengdu. China Eastern will launch Shanghai in December of this year. Gardua Indonesia however moved its service to Jakarta from Gatwick to Heathrow. Heathrow has also managed to secure new routes to Changsha operated by Hainan Airlines and X’ian operated by Tianjin Airlines.

The airport currently has a rolling five year investment plan, details of which are available from here.

New Aer Lingus CEO

Last week International Airlines Group announced that Stephen Kavanagh will step down as CEO of Aer Lingus on 1 January 2019.

Stephen will be succeeded by Sean Doyle, currently Director of Network, Fleet and Alliances at BA.

Aer Lingus has expanded its long-haul network significantly over the past three years under IAG. However, progress in other areas has been slow. It has still not yet joined the transatlantic joint-venture with American Airlines and BA. Nor is there any immediate prospect of it rejoining the Oneworld alliance. There has also been no growth in short-haul, which will not happen until Aer Lingus can satisfy IAG it can make a sufficient rate of return.

This is not the first time IAG has moved executives between airlines. Alex Cruz was of course CEO of Vueling before his appointment at BA. Carolina Martinoli, BA’s Director of Brand and Customer Experience, was formerly Marketing Director at Iberia.

Alex has certainly not had an easy time in his first two years at BA, However, Carolina Martinoli has certainly had much more success than her two predecessors Frank van Der Post and Troy Warfield, who both joined from outside the airline industry, at instituting change. Sean should bring a lot of experience from BA and an understanding of the inner workings of IAG.

Dreamflight

For more than 30 years, the charity Dreamflight has raised funds to charter a BA aircraft to fly hundreds of disabled and seriously ill children to Orlando for a ten day holiday of a lifetime.

Yesterday, fresh from a four week refurbishment, a BA Boeing 747 departed a very wet Heathrow for Orlando under flight BAW1DF.

The children enjoy entertainment with special guests – this year Una Healy – in a BA hangar at Heathrow before boarding their flight. They are accompanied on their trip by representatives from Dreamflight, BA staff and a fully trained medical team.

There’s more on the charity’s work at Dreamflight.

In case you missed it:

No1 Lounges takes over Etihad’s London Heathrow lounge. (London Air Travel)

WestJet to fly its Boeing 787-9 from London Gatwick to Calgary in 2019. (London Air Travel)

The first of BA’s refurbished 52 Club World Boeing 747s enters service. (London Air Travel)

Our survey of the progress of roll-out of WiFi on BA’s fleet. (London Air Travel)

Late Post Publication Updates:

[Reserved for updates during the day.]

Our Monday Briefing is published every Monday at 06:00 BST. If you have any comments, suggestions or tips then please drop us a line at mail [@] londonairtravel.com

If you want to receive this, and all other posts, directly to your inbox simply subscribe using the box at the foot of this page.

Monday Briefing – 8 October 2018

Welcome to our weekly Monday Briefing on the main developments in air travel in London and around the world, as published every Monday morning at 06:00 BST.

London Air Travel » Monday Briefing

Qantas Boeing 747 SP VH-EAA
Qantas Boeing 747 SP VH-EAA (Image Credit: Qantas Airways)

Welcome to our Monday Briefing for the week beginning 8 October 2018, summarising the main developments in air travel over the past week.

Primera Air and Etihad

Two events occurred last week. One was reported very widely. Another much less so outside of the travel press.

Low cost airline Primera Air suddenly suspended operations on Monday 1 October. Thousands of passengers were stranded as were many of its now redundant employees.

The other was a relatively trivial detail that Etihad has transferred it lounge at London Heathrow Terminal 4 to No1 Lounges. The airline expects to transfer all of its lounges outside of Abu Dhabi to third party operators. The significance of this nothing is off the table as Etihad seeks to shore up its finances. That’s if it remains an independent airline.

What could the two stories possibly have in common?

It was clear that to anyone with a casual knowledge of the airline industry that both were pursuing unsustainable strategies.

Anyone who had read the briefest of histories about Swissair (see below) could see that Etihad buying minority investments in troubled European airlines, all with different alliance allegiances and management teams, was doomed to fail.

Alitalia had been recapitalised numerous times before Etihad bought a stake in the airline. It is notorious for its recalcitrant workforce. It can be said with confidence that other European airline groups would have looked at buying Air Berlin. None had chosen to open the cheque book.

Yet Etihad was widely hailed as transformational airline that was “reimagining travel”. Events such as the launch of the Residence on its Airbus A380s generated huge amounts of PR, with few wondering who would actually be prepared to pay for it.

Primera Air’s launch of transatlantic operations had got off to a very troubled start. Delays in the delivery of new aircraft meant that all long-haul flights from Birmingham were cancelled. It also had to lease aircraft to cover some flights from Stansted.

However, that did not deter Primera Air in pursuing a plainly implausible expansion with new transatlantic bases in 2019 planned in Berlin, Brussels, Frankfurt and Madrid. Consider that when Sir Richard Branson launched Virgin Atlantic with a single route from Gatwick to Newark, it took six years to get to the four scheduled routes that Primera Air launched in one year.

Some airlines, not accustomed to the transparency that comes with public ownership, do not appreciate scrutiny of their affairs. The survival of all airlines ultimately hinges on the confidence of their customers and suppliers. They depend on the cashflow benefit of revenue from forward bookings and the credit terms of their suppliers. If either one is lost, it is game over.

There would obviously consequences for publications that make unsubstantiated claims. However, when stunts like low lead in fares from Norwegian’s now withdrawn transatlantic routes from Edinburgh are given extensive free coverage, the press at large is not serving the travelling public by challenging the sustainability of airline strategies.
Continue reading “Monday Briefing – 8 October 2018”