Airport Coordination Ltd, the body responsible for governing the allocation of slots at London airports, has granted an extension of the waiver of “use it or lose it” rules until the end of the winter season.
However, reform of the slot waiver process is proposed by the European Commission to address concerns that it restricts competition.
Ordinarily airlines are required to use their airport slots for 80% of a season to avoid forfeiting them. Following a ruling by the European Commission airlines are currently benefiting from a waiver of this rule. This means they can cancel as many flights as they like without risk of losing their slots.
There had been doubts as to whether the waiver would be extended into the winter season. Indeed, only three weeks ago, ACL advised airlines that they should plan for the waiver not to be extended into the winter.
European Commissioner for Transport Adina Valeăn has today, Monday 14 September, issued a statement announcing the Commission’s intention to extend the slot waiver.
The Commission has published a report for the European Parliament and Council identifying shortcomings with the current process, namely that incumbent airlines are not handing slots back to slot coordinators in sufficient time for others to use on a temporary basis.
Adina Valeăn has made it clear in her statement that as full slot waiver has been granted for the whole winter season, incumbent airlines are expected to follow the spirit of the waiver and hand back slots sufficiently early for other airlines to use them.
Currently, airlines operating from London airports benefit from a relaxation of “use it or lose it” rules which govern their ownership of slots.
Ordinarily airlines must use their slots at London airports for 80% of the time in the winter or summer season to retain their slots. This is to prevent airlines from hoarding slots to keep out competitors.
Earlier this year, Airport Coordination Ltd agreed to relax this rule for the summer 2020 season following a ruling from the European Commission.
By all accounts, air travel is not expect to meaningfully recover until well into 2021. Airlines face a tough winter. With the winter season now less than two months away, there are no indications that ACL is preparing to relax its “use it or lose it” rule for London airports over the winter season.
ACL has today, Wednesday 26 August 2020, issued guidance to airlines in the expectation that “use it or lose it” rules will return for London airports from Sunday 25 October 2020.
For airlines, this presents a challenge. If they do not use their slots, particularly at London Heathrow, these will be forfeited and ultimately acquired by competitors for free.
At the same time, the overwhelming priority for airlines is the preservation of cash. Many airlines are actively ensuring that every single flight they operate is on a cash flow positive basis. Airlines could operate “ghost flights” to preserve their slots. This will cost money and leave them exposed to criticism for its impact on the environment.
This rule could still change, but it will still give airlines very little notice.
Virgin Australia has formally entered into voluntary administration.
The professional services firm Deloitte has been appointed as administrator, The announcement was made shortly before 00:00 BST / 09:00 AEST on Tuesday 21 April 2020.
Virgin Australia’s “Velocity” frequent flyer programme is owned by a separate legal entity in the Virgin Australia Group and is not part of the administration process.
There had been speculation about Virgin’s financial health for some time. Profitability has been elusive and the airline has debts of AU$5 billion. Virgin Australia had sought support from the Australian Federal Government of AU$1.4 billion.
The airline has a history and ownership structure that could best be described as “complex”.
It was owned by Etihad Airways, Singapore Airlines, Nanshan Group, HNA Group which each own approximately a 20% share of the airline. Virgin Group owns approximately 10%.
Virgin Australia is currently operating a skeleton domestic network, which is being subsidised by the Australian Federal Government. Unlike when an airline enters into administration in the UK, Virgin Australia will continue to operate flights whilst it is in administration.
It is probable that a buyer that will be found for the airline’s assets. However, it is likely that it will emerge as a significantly smaller airline.
Whilst the Australian Federal Government has decided not to provide financial support to Virgin Australia, Australian Minister for Finance Mathias Cormann told ABC News Breakfast today that it does support the ultimate emergence of a second privately owned domestic airline to ensure Qantas does not have a monopoly.
The administrators have advised at a press conference that there have been a large number of expressions of interest in the airline. It is expected that the ultimate buyer will be known in around 2-3 months.
Sir Richard Branson has penned an open letter to Virgin Australia employees. Whilst Sir Richard hopes this is the start of a new beginning for the airline, it will of course be for the new owners to decide whether to continue to licence the Virgin brand.
Airlines operating at London City, Gatwick and Heathrow airports have been granted a waiver to cancel flights up to 30 June 2020 without risk of forfeiting their slots.
Under “use it or lose it” rules airlines must use their slots for 80% of the time during a travel season. Otherwise, the slots will be forfeited and placed into a pool for other airlines to bid for.
For airlines facing significantly reduced demand due to Coronavirus, this means they are limited in how many flights they cancel.
Airlines would rather run empty flights than hand slots free of charge to their competitors, which in the case of Heathrow, could otherwise cost tens of millions to buy.
Airport Coordination Ltd which oversees the management of slots at City, Gatwick and Heathrow, had granted a limited waiver for slots used for mainline China and Hong Kong flights. The company had said that its ability to grant a broader waiver was constrained by EU Slot Regulations.
The European Airport Coordinators Association had published a paper urging the European Commission to relax these regulations. It has since done so, and whilst the legislation has not yet been formally adopted by the European Council and European Parliament, ACL will now relax slot regulations.
There remains considerable uncertainty as to the human cost of the outbreak of Coronavirus (COVID-19).
However, it has already had a significant impact on the aviation industry. Airlines have cut capacity to affected areas and implemented flexible rebooking policies.
A number of trade and sporting events have been either cancelled or postponed. Many organisations are restricting their employees from international travel.
A number of companies in other industries are themselves experiencing disruption to supply chains and adverse financial impacts due to the effective closure of certain geographical markets. This, in turn, leads them to cut discretionary spending. The travel budget is the easiest to cut first.
The industry does not yet appear to facing a crisis of the scale of 11 September 2001 or the 2008 financial crash. However, airlines are now facing a period of significantly reduced demand for air travel and are unable to ascertain what the financial impact will be.
For some airlines there will be a short-term impact. For others, there will be significant long term changes. Based on history, here’s what we can expect.
Weak Airlines Are Vulnerable
We’re not in the business of speculating on the health of individual airlines.
However, it is well known that some airlines in Europe and beyond are struggling. A number of airlines such as eos, Flyglobespan, MaxJet, Silverjet, XL Airways UK and Zoom failed around the time of the 2008 financial crisis and a rising oil price.
It is inevitable that some airlines will not be able to survive a prolonged period of depressed demand. This is particularly so if this coincides with other pressures such as a rise in the oil price, or if this prompts nervousness from creditors and suppliers.
Cash Is King
With airlines having very high fixed costs, they ultimately survive on the cash flow from forward bookings and suppliers offering credit terms.
If depressed forward bookings continue, preservation of cash will be a priority. This does mean that capital intensive expenditure such as new aircraft deliveries and aircraft refurbishment projects will be postponed.
In terms of passenger revenues, it also means more focus on generating maximum revenues from flights. Anecdotally, after the 2008 financial crisis, BA adopted an extremely aggressive approach to overselling long-haul economy and premium economy cabins.
Everything Is Up For Review
During a crisis, no stone will be left unturned and nothing can be ruled out.
Marginal routes will be cut, aircraft will be grounded, projects put on hold and everything will be looked at to save costs. Again, after the 2008 financial crisis BA removed foot rests from long-haul economy seats to save £1m from its annual fuel bill.
Airlines Will Look To Ancillary Revenues
On that note, airlines will look again at generating more ancillaryrevenues from passengers.
The “sweet spot” for airlines is charging for ancillary services that cost little to provide, but have a value to customers. And in was after the 2008 financial crisis that BA started charging for seat reservations at the time of booking, which were previously restricted to Silver & Gold members of the Executive Club.
Airbus has unveiled the latest member of its A321 family of aircraft, the Airbus A321XLR.
This will be the longest range single aisle aircraft in the world. Airbus plans for the aircraft to be available from 2023. It has a 15% longer range than the Airbus A321LR aircraft with a range of 4,700 nautical miles. Airbus has cited London – Miami and New Delhi as feasible routes – though established airlines in the UK will be looking at new destinations not already served by wide body aircraft. The aircraft is designed to accommodate 180-220 passengers.
There are attractions for airlines in that has a lot of commonality with Airbus A320 family aircraft, which is of course the workhorse of short-haul travel in Europe. Though, it remains to be seen how willing passengers will be spend nearly ten hours on a single aisle aircraft.
In terms of orders, the third party lessor Air Lease Corporation has signed a Letter of Intent for 27 of the aircraft at the Paris Air Show. Middle East Airlines has also signed a firm order for four of aircraft.
Further orders may be forthcoming at the Paris Air Show this week. However, we would hazard a guess that many other airlines will want to see how the Airbus A321LR performs before committing to the Airbus A321XLR.
Airbus has officially confirmed that it is to end production of the Airbus A380 in 2021.
The announcement was made today, Thursday 14 February, as Airbus announced its financial results for 2018.
The Airbus A380 has been a presence at Heathrow for over ten years. It was on 18 March 2008, that Singapore Airlines flight SQ308 arrived at London Heathrow from Singapore Changi marking the beginning of scheduled A380 flights from London Heathrow.
Emirates and Qantas soon followed at London Heathrow. As did Etihad, Korean Air, Malaysian Airlines, Qatar Airways, and Thai Airways, albeit with varying frequencies.
Emirates now operates up to 7 A380 flights from London Heathrow a day. It is is the largest operator of the A380 by some considerable margin.
Last year, it ordered 20 additional aircraft with options for 16 more. According to the Airbus order book for January 2019, Emirates had 109 A380s in service, with 53 aircraft to be delivered.
However, Emirates has now decided to reduce its order substantially by 39 aircraft in favour of 40 A330neo and 30 A350 aircraft.
Beyond Emirates, there has been little appetite to order more aircraft. Qantas officially confirmed last week that it will not exercise options to add to the existing 12 in its fleet. There has also been a notable lack of interest in second-hand aircraft.
Some airlines have also reduced A380 flights at Heathrow. Malaysian ended daily A380 flights last year, in favour of the Airbus A350. Qantas has switched one of its two A380 routes to a non-stop Boeing 787 Dreamliner service to Perth. Qantas is also studying next-generation twin-engine aircraft to fly non-stop from London to Sydney and Melbourne.
Whilst the A380 has been popular with passengers, efficiency rules and it seems clear that airlines see the future of long-haul travel is twin-engined.
This announcement by Airbus seems to have settled the perennial question of whether BA will order any more aircraft. It has 12 in its fleet, with options for 7 more. It’s clearly serving the airline well, with a year-round presence on routes such as Hong Kong, Johannesburg and Los Angeles. However, IAG CEO Willie Walsh has always insisted that the purchase price for new aircraft is too high. With production now due to end, there seems no prospect of an order.
Now that the main day itself is over, there’s at least some time to think about travel for the year ahead.
It’s a busy time for airline sales, so here’s our rundown of selected New Year sales by airline for travel into 2019.
Air New Zealand
Air New Zealand, which flies from London Heathrow to Auckland via Los Angeles, has special fares to Los Angeles across all cabins for booking until Thursday 31 January 2019.
Special fares are available from £329 in economy for travel between Wednesday 16 January and Saturday 23 March 2019, from £759 in premium economy for travel between Sunday 20 January and 23 March 2019, from £2,099 in Business Premier for travel between Monday 1 July and Saturday 24 August 2019.
BA’s sale for flights and package car hire/hotel deals is underway in all cabins across its network.
On short-haul, there are a good number of destinations available from £24 in EuroTraveller and from £99 one way in Club Europe.
There are a number of North America destinations available at less than £300 return in World Traveller including Boston, Chicago O’Hare, Fort Lauderdale, Las Vegas, Miami, New York, Orlando, San Francisco and Philadelphia. Many of these destinations are also available at around £700 return in World Traveller Plus.
In Club World, some of the best fares are Baltimore at £1,374 return and Nashville at £1,377 return.
And in First Class, Chicago O’Hare and Washington Dulles are available from £1,874 return.
The best way to see what is available is to use the low fare finder on ba.com and select your preferred region and class of travel.
The Boeing 787 Dreamliner is now a firm fixture in the fleets of many long-haul airlines from London.
The Boeing 787-8 has, with great success, opened up many new transatlantic routes such as Nashville and New Orleans and, from next year, Charleston and Pittsburgh. The Boeing 787-9 has established the first direct scheduled route between London and Australia, to Perth.
This year, airlines have begun to take delivery of the latest variant of the 787, the Boeing 787-10.
However, it’s not clear whether the 787-10 will be as revolutionary as its older siblings.
It’s a larger aircraft, with a length of 68m, compared to 57m for the 787-8 and 63m for the 787-9, but with the same height and wingspan. The most significant difference is that it has, based on official figures from Boeing, a shorter range of 6,430 nautical miles, compared to 7,355 nautical miles for the 787-8 and 7,635 for the 787-9. The total number of aircraft ordered is relatively small, 169 out of over 1,400 for the 787 in total.
Always one to pride itself on world firsts, Singapore Airlines took delivery of the first Boeing 787-10 in March of this year.
Singapore Airlines now has 7 aircraft, out of an order of 47. These operate in a two class configuration with 337 seats in total. It’s used on what the airline terms “regional” routes of less than eight hours from Singapore to Manila, Nagoya, Osaka, Perth and Tokyo Narita.
United Airlines has taken delivery of its first Boeing 787-10.
It has ordered 14 aircraft in total. It will operate on transcontinental flights from Newark to Los Angeles from Monday 7 January 2018. Next summer, it will progressively operate on transatlantic routes from Newark to Barcelona, Dublin, Frankfurt, Paris Charles de Gaulle and Tel Aviv. United has yet to reveal interior images of the aircraft, but it will feature its “Polaris” business class seat as well as premium economy and economy cabins.
Etihad has very recently taken delivery of 2 out of 30 Boeing 787-10 aircraft. However, given its current financial situation, its fleet plans are likely to be reviewed.
British Airways plans to take delivery of 12 aircraft from 2020 to 2023, with the first six due to arrive in 2020. This will take its total number of 787s to 42, making it very close to the largest series of aircraft in its long-haul fleet.
BA is the only UK airline to have ordered the Boeing 787-10. Like the Airbus A350-1000, it is intended to replace the Boeing 747. The first Airbus A350-1000 aircraft to be delivered next year will not have First Class and will replace many 52 Club World seat Boeing 747s. As such, it is likely the Boeing 787-10 will have First Class and a higher Club World configuration to replace the 70 Club World seat Boeing 747s on routes such as New York JFK. It will of course feature BA’s new Club World seat.
Other airlines to take delivery of the Boeing 787-10 include Air France-KLM (though its new CEO has indicated that the fleet plans of Air France and KLM will be reviewed), ANA and Eva Air.
Airlines will be keen to showcase their latest cabins and advanced in-flight entertainment systems on the 787-10. However, with its larger size and relatively limited range, the Boeing 787-10 is likely to be a replacement for aircraft on many existing routes, rather than a gateway to new routes. The principal benefit seems to be its fuel efficiency and commonality with the 787-8 and 787-9.
For aircraft that will open up the next phase of new long-haul routes from London, we’ll have to turn to the Airbus A350 Ultra Long Range and the Boeing 777X which are currently under consideration by Qantas for non-stop flights to Sydney.