Air Berlin, Monarch Airlines, Ryanair – Lessons Learned?

In the past weeks, we got shocking news. Where the insolvency of Air Berlin was more or less expected, the grounding of some 20 thousand flights impacting more than 700 thousand passengers by Ryanair – attributed to a “pilot shortage” – as well as the recent demise of Monarch Airlines came more of a surprise.

Air Berlin

Air Berlin sure was no surprise. In fact, when Lufthansa senior manager Thomas Winkelmann in February joined Air Berlin, everyone in the industry knew that he wasn’t taking such post leaving Lufthansa Group, but to prepare for a takeover by Lufthansa. At the same time (February) Etihad “extended” their cooperation, Etihad, being main investor at Air Berlin’s arch enemy Lufthansa? Then they wet-leased 28 aircraft (all A319 and many of their A320s) to Lufthansa’s low cost subsidiary Eurowings, five more to Lufthansa subsidiary Austrian Airlines…? All 321s to be given to Niki, former Air Berlin subsidiary, in December 2016 Air Berlin sold all stakes in Niki to Etihad. Niki now being rumored to be sold to Austrian Airlines…?

To be surprised like Ryanair’s Michael O’Leary, now calling “fire” such is hypocritical. What I do find questionable is the handling of long-haul flights, Lufthansa has (never had in my opinion) the intention to take over Air Berlin, they just positioned themselves for a prime spot, preparing the inevitable insolvency to secure the prime pieces for themselves. Yes Michael O’Leary is right, but a surprise? Calling now for “law and order”, him who bends the rules every time he can?

Air Berlin made many mistakes, trying to evolve from a specialist in tourism flights with a strong USP with their hubs in Nuremberg and Palma de Mallorca to become … something? A low cost airline? A scheduled airline? Operating a mixed fleet of A320- and B737-family aircraft, but also small Bombardier Dash-8 Q400 (50 seat turboprop). Trying to operate low cost, but also doing feeder flights for Etihad? And long-haul flights using five A330 aircraft? As a German saying goes: “Alles, aber nichts richtig”: Everything, but nothing right.

What I see mostly critical is the intentional “mismanagement” of the A330, also the Dash-8’s seem more like a neglected annoyance, not an asset. And a management considering a success to save 80% of more than eight thousand jobs. So 1.600 will loose their jobs. Well done Mr. Winkelmann, I’m sure you will get a bonus and a job promotion for that (blistering sarcasm).

What I find fascinating indeed is the interest of Lufthansa and easyJet in the A320 aircraft. But that I’ll come to below.

Ryanair

So now how about Ryanair? Ryanair used an “outsourcing” model, where Ryanair did not employ pilots directly, but through some questionable constructions (typically Ryanair that) they made the pilots operate as self-employed, only paying them for flight hours. No social security, sick-leave, guaranteed vacation. Several countries (including Germany) started legal investigations in that model.

I have questioned that approach ever since I first heard of it, as everyone in the aviation industry knew that we face a shortage of pilots. Given availability and demand, with the large number of aircraft orders, easyJet and Ryanair both are known to seek to sell aircraft from their enormous back-log of orders they placed with Airbus and Boeing. At Paris Air Show this year, I discussed with experts, confirming that this already backfires on both Airbus and Boeing, as they have to lower their own prices as those airlines handover the substantial discounts the gave the low cost airlines for their humongous orders.

Canadian CAE released a study at Paris Air Show claiming “50% of the pilots who will fly the world’s commercial aircraft in 10 years have not yet started to train”.

So aside a saturation of the European market with A320 and Boeing 737, we are short on pilots. Now Ryanair “pilot management” increasingly questioned, it is no wonder that pilots are open to “competitive offers”. It’s about how you treat your staff. Now Ryanair pilots not really employed by Ryanair, what keeps them from taking up better offers? Then Ryanair decided to change the fiscal (and vacation) year to the calendar year and did not take into account that this will result in a shift in vacation demand in the process? Obviously the managers did armchair decisions, not thinking them through.

To my believe, this situation is a mix of Ryanair bending the rules, offering tickets at prices below any reasonable levels. Confirming my concerns about “hidden income” Ryanair applies. It would be interesting to have a look into Ryanair calculations as how they can offer flights with average fares below the common cost of Kerosene. Not even talking about the aircraft, staff, administration and maintenance. Though yes, I know markets where they also charge more reasonable “average fares”, seems they not everywhere find ways to milk the regions for subsidies of questionable legality.

Monarch Airlines

Some smart-asses say that was already clear from last year that Monarch would have to close down. But Monarch did quite some development in the past year and it hit about anyone I know rather unexpected – as well as passengers, airports, media! Not having any true details on that, it only confirms by view about Boeing 737/Airbus A320 families.

Update: Financial Times reported 750 thousand future bookings having been cancelled, other media says more than 800 thousand future passengers, of which more than 100 thousand are stranded and only a minority covered by tour operators’ insurance for packaged travel…

Boeing 737 / Airbus A320 – the Work Horse…?

All A320 / B737 – What was your USP again?

I have worked on projects with investors buying into Boeing 737. Instantly I questioned the business case for that aircraft. On the one side I hear from airline network planners how increasingly difficult it is to find viable routes for their aircraft. 189 seats usually. On the other side, being bound to those aircraft families to keep the complexity = cost in check, they now add even bigger aircraft with 220-240 seats to their fleet. How that should “improve” the situation is simply beyond me. All that can do is to cannibalize other routes, fly less often.

Now there is a pilot shortage, airlines operating those aircraft are fighting to utilize the aircraft with a sustainable revenue. Insolvencies like Monarch Airlines with 35 aircraft and their flight and cabin crews will likely result in a short relieve for the likes of Ryanair. But given the new aircraft deliveries, that is a drop on a hot stone.

I believe, the market is oversaturated. When “Low Cost” started, the A320 and B737 offered the best cost per seat and loads to compete with existing airlines on the “common” routes. For regional aviation, that aircraft was and is too big. Nowadays we see a consolidation of airlines operating that aircraft, be it Alitalia, Air Berlin, Monarch but even Ryanair, though for different reasons.

Another issue is a feedback I got from a financial expert. There are financial funds for aircraft. All those funds currently suffer as soon as the initial leasing is over from eroding revenue, often resulting in substantial financial losses even before the end of the first 10 years. Thanks to the eroding prices of A320 and B737 aircraft, thanks to the low cost airlines passing on the substantial discounts they received from the aircraft makers on their mass-deals, result in a faster drop of value than anyone anticipated. As FlightGlobal reported already back in 2014 in their special report Finance & Leasing, Norwegian established their own leasing subsidiary to try to sell or lease their surplus orders. And they’ve not been the only one, easyJet and Ryanair do the same, trying to get rid of the liability those aircraft became.
While that gives airlines access to competitive (low) priced aircraft, it ruins both the aircraft makers own price policy, as well as it cannibalizes the business model of the institutional aircraft lessors.

With order books exceeding delivery times beyond 10 years, only large airlines or institutional investors have the funds to invest over a time frame of 10 years. With new aircraft makers building aircraft competing with the Airbus, offering similar or better economics and substantially lower delivery times, airlines using “The Work Horse” take a more or (likely) less calculated risk to bet their money on a work horse. I wonder if there’ll be some (Arab) race horses suddenly and unexpectedly coming up with new business models and more efficient aircraft using the unbeaten path as a shortcut?

And yes, we just work on a business plan for such a “new model” making use of new ideas, unique selling propositions for investors, travelers and airports. No magic involved, just some creativity and willingness to think different.

Food for Thought
Comments welcome

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Delay and Disruption Management

[edited]

Sharing the Bloomberg headline What Do You Want, Cheap Airfare or an On-Time Flight? Daniel (S.) today quoted from the article on LinkedIn:  “An ultra-low-cost carrier will never, ever try to be as punctual as a big legacy #airline. Being on time all or most of the time costs money.”

After an initial misunderstanding we agree: That is stupid!

Delay and disruption management are the single most important influenceable cost factors in aviation today!

Yes, we can make good aircraft deals, we use revenue management to sell out tickets as expensive as we can in the low-cost world. But operations is the single most important cost driver we can influence today. We can neglect it, like many seasoned airline and airport managers do, we can deny and ignore it. And loose money.

While doing the research at late delair for the Zurich Airport case study, focusing on the impact of a contemporary deicing management, just that improvement in (IT-supported) process saved about 20 million in one winter alone there. For Swiss (about 50% of the flights). Now working on a financial summary that thanks to the acquisition of delair by SITA never made it “to market”, I spoke with the OCC (Operations Control Center) manager of Swiss in Zurich. Who confirmed what they all knew (and know), but their management remains blissfully ignorant about: It is all about rotations in an airline. The aircraft starts somewhere in the morning and flies to different places throughout the day. And a disruption or delay anywhere en-route is prone to impact the entire rotation. Worse, a late aircraft usually accumulates more delays as ground handling is also tightly scheduled without spare manpower to cover up for such situations. Then crews fall out of schedule as they have to have their rest times. And while the airline may reduce the financial damage by calling for higher force on a snow event in the morning, on the flights down the line, I am told they tend to pay. And passenger compensation often exceeds the value of a single ticket!

In 2014 I wrote this article about Airport Operations Center (APOC), Airline Operations Control Center (OCC) and ATC’s Network Operations Center (NMOC) and how they do not communicate with each other. I asked just recently about a common airline system with decent, contemporary, f***ing basic interfaces and learned that none of my precious industry expert friends knows such. Worse, I got more feedback than I wanted about the issues all my friends in this industry can tell about; where thanks to missing such data flow, the right hand does not know what the left one is doing. In the process, trying to improve a bad situation, but working with different information, making things often enough worse.

I also heard just this week, how airline managers love the big planes (A380), a Lufthansa manager was quoted that they love the big bird, but that they don’t know if they can ever be operated long-term commercially revenue-making.  Or read a comment, how much these airline “managers” love new inflight entertainment and seats and fancy stuff. But don’t understand, why Windows-XP-machines in their OCC need replacement. It’s “fancy”, touchable, visible to see the airplane or fancy seats, but no-one sees the impact of deicing. Okay, we have a winter-delay. Who cares, we’ve calculated it into our prices forever and it’s been always like this. It can be improved? Who cares.

Source firewalkeraussies.comAnd while the airlines benefit, I hear from the airports that they do not show any interest in A-CDM and A-CDM improvements. While they cut into the flesh on most airport’s fees, while they let them starve; while most airports need to invest heavily to compensate the losses from “aircraft handling” by doing their best to increase “non-aviation revenue”, while this is daily life today, airlines demand airports to invest into those technologies and development and process improvements, but are not willing to pay. Did Swiss pay a Penny (Rappen) for the improved deicing at their home airport? Make a guess.

So while I know that seasoned managers in aviation act that stupid and short-sighted. Delay and Disruption Management is the single most important factor we can influence to save big money.

As I should have known Daniel’s opinion, i.e. from his LinkedIn article about why airlines burn money every day I keep myself referring to.

And if you need someone to discuss such projects or to manage them? Keep me in mind. And Daniel 😉

Food for Thought
Comments welcome!

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Carolyn McCall + easyJet Vienna

Three news this week I find noteworthy about easyJet.

Where I have learned early to have the greatest respect for Dame Carolyn McCall, she now resigned at easyJet to join the TV industry. And the same time, easyJet is in the process to acquire an Austrian AOC (air operators certificate) to prepare for a post-Brexit world. Third, they celebrated their delivery of the first A320neo (new engine option) and converted A320-orders to A321.

While the first may be a career move for Dame Carolyn McCall (and that is all that counts from any employee view), it is a tragic loss to our industry. And I might be wrong, but I believe this will be similar to the loss of Steve Jobs at Apple.
Carolyn McCall has understood that “service” and “behavior” are not that expensive but important difference-makers. easyJet customers’ loyalty is substantially stronger than Ryanair’s or British Airways’. How you treat your customer not only if legally required (Ryanair continually failing even on that) makes a difference. I learned back in my early days with American, that friendliness and a smile are the spoonful of sugar the traveler needs. And they understand things can go wrong, even more than our industry pretends.
Her successor is rumored to be likely easyJet Christine Browne, the management remains to keep it’s female touch. But does she understand, live and provide the role model for “her” airline about “customer focus”? Or will she fall into the trap American did in the days when Bob Crandall left, to focus on money, money, money?

easyJet on the Move?

About the process to obtain an Austrian AOC, there are several pitfalls and hurdles I see in that decision.
Austria is not truly a “low cost country”. Which is similar true for the U.K. or Switzerland, but where the U.K. enjoys two strong source and destination market with London, Switzerland enjoys a very strong economy. And they are rather flexible on taxes (Wizzair is in Geneva for good reason).

If and how the Brexit impacts the U.K. market remains to be seen. But Austria and Vienna do not have that strong a market. And while Basel has been underserved by classic airlines, at Vienna easyJet will face potentially fierce competition from Lufthansa group, whereas they might hope to benefit from the retreat of Niki from the Vienna scheduled flights market.

The flying part though is not the issue of my concerns, I’m sure easyJet will do okay on that end. But establishing a “sub-HQ” in town comes with a price tag. And there are other European cities that might have been cheaper and bureaucratically more efficient than Austria.

A320/321neo. A Change-Maker?

The third news that “hit the media” was about the delivery of the latest Airbus A320neo, as well that they convert A320-orders to A321s. Such they upscale the fleet to the 250-seat A321s, I have concerns.

While the A320neo comes with 12% better performance, by 2022, when all orders are delivered, the aircraft will reflect about 1/3rd of the easyJet fleet. And as Airbus changed the structure, the “old” ones can not simply be “upgraded”. So on a fleet level, that will account for a 4% benefit. Or to give a common example: For a 100 Euro ticket, you then might pay 96 Euro. Though I happen to believe that this will be simply accumulated to improve the ROI of the airline.

Further, on the “work horse” A320, it’s only 25%, the others are A321neo’s. Whereas I believe the A321 will simply cannibalize routes that are currently operated by A320s. Whereas, will larger aircraft and the “better economics” per seat equal the lower possible frequency? And frequency is something business travelers like. Is the cost advantage that high that it will exceed the advantages of a higher frequency? I have my doubts.

Quo Vadis easyJet?

How will those two decisions impact on easyJet?

Get me right. I love easyJet for many years. Their inflight product is as good as their overall friendliness and efficiencies. They focus on business case but keep customer-centric in mind. But as Ryanair, they try to sell aircraft they ordered, finding it hard to place the large aircraft in Europe. Now they face a Brexit and size-up the aircraft, cannibalizing their existing routes at that.

For Carolyn McCall it is a good time to leave the company at the peak of “her” success. The successor will phase some repercussions out of his/her control, as well as some tough decisions to make.

Food for Thought!
Comments welcome

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The End of the Airport Passenger Fees?

Inflight Shopping

As I outlined in my summary on the Hamburg Aviation Conference, my friend Daniel expressed his believe that within 20 years, there will be no more passengers fees.
At the same time, Michael O’Leary was recently quoted that he expects in very short time they will offer the flights for free.
But flying costs money, no matter how good the aircraft engines become, terminal construction and maintenance, ground handling, air traffic control, gasoline, pilots, cabin crews, aircraft, insurance, it all needs to be paid. And no matter how effective you calculate …

… someone has to pay the bill.

Airlines lower their ticket prices, covering the “loss” with “ancillary revenues”. While those “ancillaries” have been understood as services previously bundled (inflight meal, baggage, flight insurance), they meanwhile extend quite into “inflight shopping”.

At the same time, traditionally airport landing fees, split into the landing and passengers, covered for the airports’ cost of operations and development. This basic, sensible model is now threatened. It will change. But how. When the airline and airports fight for the revenue of the passenger – I believe both will loose.

Airport Duty Free

So currently it is a fight between airport and airline for the money of the traveler. I hear airlines expressing their anger about the airports increasingly draining the pockets of the passengers pre- and post-flight. And the airports upset about architectural changes enforced by the evaporating aviation income, forcing them to add shopping in arrivals halls and rebuilding terminals for improved shopping, i.e. forcing the passenger through the duty free store. Or how to speed up the check-in process to increase the dwell time of the traveler to spend more money shopping. And the shop owners about the increasing pressure to cash in on the passenger in order to pay the expensive rental deals with the airports. And, and, and…

And no, it does not help to imply that the politicos should provide airports similar to train stations. Yes, it is true, airlines bring business to the regions. Airports are important infrastructure. But in the end … someone has to pay the bill.

Source firewalkeraussies.comWhat we will need is a serious, joint discussion about the future business model in aviation. At the moment there is no discussion. There’s the airlines, the airports and business models that cannot work. And we need to have the politicos and the usually government-controlled ATC (and border control, security, etc.), we have to have the ground handlers, the shops and all other players on the table. You can’t reconstruct all the small airports. We don’t need a fight. We got to work together for a sustainable business model. ERA, AAAE, IATA, ICAO, this is your call.

Food for Thought
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What is ‘Low Cost’?

An interview in ATN with Girma Wake, Chairman, RwandAir triggered a question that spooks around for quite a while now.

Wake-GirmaATN: Are you afraid that this new environment will bring more low-cost carriers or do you believe that this model does not fit into the African environment?
GW: I personally believe that low-cost carriers in the African sense will be very difficult to achieve. First, because the cost of fuel in Africa is high, second there are limited  secondary airports in Africa, we all fly from the same airports, and third there are few countries where the traffic density is large enough. If you are paying more for everything, handling, fueling, overflying etc, how can you be a low cost carrier?
So the question will have to be modified, may be not so much on the low-cost aspect of it but considers the issue of flying smaller airplanes to smaller airports covering smaller destinations bringing passengers to the major hubs. Such a model will probably work but the low-cost model as it works in Europe and America will take some time to develop in most parts of Africa.

Can a regional carrier with small airlines operate low cost? Can a long haul carrier operate low cost? Why can’t the big ones operate low cost?

InterskyJust my idea on that: I truly believe that a small carrier can operate a low cost model. In the beginning the carriers operated large narrow-body like 737-800 or A320 with some 185 seats. More and more, they also operate smaller aircraft like the 737-700 or the A319. And the time the prices were really low are gone as well. In the end you have to cover cost of operations as well as secondary cost like marketing, call center, claims and refunds, taxes and the likes. Not to forget the kerosene as a main cost block, forcing the models to slowly converge. Did I mention Intersky’s regional low-cost operations?

German DLR recently made a study on the fare levels. Comparable flights turned out i.e. an average fare incl. taxes/fees (selected days) like

Ryanair (FR) 78,78
Easyjet (U2) 97,44
Germanwings (4U) 144,33
Air Berlin (AB) 158,64
Wizz (W6) 69,99

With “low cost” and “traditional” airlines offering about the same price levels, it is about cost of operations and you got to cover your cost – low cost or “old model”.

IHS actually reports on the importance of low cost carriers for the smaller regional airports. With cost savings programs reducing services (and service), the “old carriers” loose quickly ground to the ever-expanding, young and hungry competitors. Where Lufthansa services about any German airport in the past, today Turkish Airlines offers more services to German Airports from Istanbul than Lufthansa from Frankfurt! easyJet (with a large base in Berlin) today operates more aircraft (199) than Air Berlin Group (153). And easyJet has 166 aircraft on order plus 100 options (Air Berlin Group 55 orders).

But easyJet can be booked in the GDS. There website even supports to book multiple flights connecting, which I did myself to the U.K. lately (via LGW). As I keep saying: The difference between Lufthansa or Air Berlin and easyJet is NOT that they are only bookable on the Internet (which is simply not true), but that easyJet doesn’t have legacy systems and processes – for easyJet, they focus on the business case! Where “airline sales” often gives special rates to portals and travel agency chains, easyJet does not see a benefit to sell low. They focus to sell high. So if you negotiate with them, you don’t negotiate competing the cheap fares. Also repeating myself: Anyone can sell “cheap”, you need no sales manager to do that.

And two remarks closing: Carolyn McCall, CEO of easyJet is known to understand and promote “service” as a unique selling proposition (USP). And WestJet with its Christmas Miracle had clearly a promotion for the WestJet trade mark in mind. While the “established” airlines keep diluting their own trade marks: What again has “Lufthansa” to do with “Germanwings” (Swiss, Austrian, …)? Ain’t they competitors?

Post Scriptum: ANNA.aero just announced axing of Ryanair, mostly of regional routes.

Ryanair_Cuts__2013-14

You should not rely on Ryanair for anything more than a door opener to make your airport known… And as an airport and region, you should have a strategy to sustainably place your airport on the “road map” of the global aviation network. That requires a strategy, incoming, route feasibility studies and all that common homework.

Food for Thought
Comments welcome

In memoriam: Airline Sales Representatives Association Frankfurt e.V

asra

Having addressed “Airline Sales & e-Commerce” in presentations between 1994 and 2007, I became honorary member in 1999. I have tried to raise awareness for the changes our industry faces but now regretfully have to accept the official disbanding of the association effective August 1st, 2014.

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Check-in 2020

Aside other sources, I copy the content of that news with kind approval of Momberger Airport Information:

Picture: Dailymail.co.uk
Picture: Dailymail.co.uk

Passengers travelling with British Airways through London Heathrow Airport Terminal 5 have begun to test the personalized digital bag tag being developed by the airline. Microsoft Employees have been chosen to take part in a month-long trial, using a specially adapted version of the British Airways app, to provide essential feedback that will help shape the final product. The digital bag tag, which contains all of a passenger’s baggage details, could eventually replace the need for a new paper tag for every flight. Comprehensive testing of the tag has already taken place to make sure that it works in a live airport environment and can stand up to the rigours of airport baggage systems and everyday travel. Customers on the trial will use a Nokia Lumia Windows smartphone to check in, chose their seat and obtain their mobile boarding pass. Each will be equipped with a specially adapted version of the British Airways app, which automatically updates the digital bag tag with a unique barcode, containing new flight details and an easy-to-see view of their bag’s destination – just by holding the mobile phone over it. They can then save time by quickly dropping their bag off at a dedicated bag drop desk, before going straight through security. The personalized digital bag tags have been specially developed by British Airways, in partnership with Densitron Displays, and Designworks Windsor. #963.AIT4

Image R.Kollau
Image R.Kollau

These news upset me as much as the one I read about Amadeus trying a bag tagging based on 3G-technology. Or Air France and other airlines introducing “home-print” bag tags.

As I mentioned two years ago in my little article about a possible check-in-scenario for 2015, I would see a far more reasonable approach (and easy/fast to bring to market) by the aviation industry to use established standards. Why do they use a QR-code with a modified layout? Anything to hide? Or simply to do it different? Which by the way equals “more expensive”, faulty and slow. And – worse of all: Incompatible like VHS and Betamax…

RFID: Q-Bag-Tag
RFID: Q-Bag-Tag

Why do they try to implement and sell expensive, non-industry-standard-compliant stuff here? Why not using existing and proven technologies like RFID or the newer (but to be standard) NFC? Why force me to use an “App” (and where can I get online when being abroad?) or even worse, an expensive 3G-Network technology?Which Network???

In addition to my (somewhat delayed) prediction about Check-in 2015, I’d also like to see a common free airport WiFi system; wherever an airport offers free WiFi, it’s a common log-in worldwide. Maybe even the same for inflight, just a quick cost note if not free. Or at least a common log-in-process. Enabling to register “globally” is an added value for the Jet Set. And would encourage safer WPA2-connections. “CDM” in action – across aviation industry stakeholders 😉

I’m allowed to dream, right?

Food for Thought
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Crumbling Facades

What is money all about?

Crumbling FacadesFirst the financial market in the United States failed. Constructs where a single person is responsible for the loss of 50 Billion US$ are just the top of an iceberg. That ice berg turned and we all feel it’s repercussions.

But it was not the U.S. that caused the problem, but the greed of financial managers and the corruptibility of the politicians that made it possible. German’s federal state banks had to be sold, only to learn the buying banks from the other states are simply in similar troubles.

Deutsche Bank manager Ackermann and Deutsch Bahn boss Medorn keep up the facade of the reasoning for the indecent salaries they and their buddies in other corporations pay themselves, blaming others in their companies for the problems their companies face. Isn’t it the CEO who is ultimately responsible? If he has his company not in check, he may not be worth his salary. If his company looses money, they make a bonus? When they fire people, they make another bonus? “No risk, just fun” the yellow press recently titled…

Companies asking for help, often “suddenly” coming up with hidden “treasures” and financing leaks often as high as the losses so far admitted. Oops. If I have a management that has no up to date information about their financial situation, I can imagine this in a start up or small company – but we talk “global players” here! My advise: Fire them! Sue them! You got to, they got to learn the basics of business before they are allowed any management job again!

Politicians having been informed as early as August about the financial troubles of German Hypo Real Estate but now claim their innocense?

In Russia, Oligarch Boris Abramovich lost first the control on AirUnion, which meanwhile “somewhat” restarted as Rossavia as a state airline, now looses Malev as well. His buddy Lebedev is out of a deal to take over German Öger Tours, he’s short on money – weren’t these the people anyone worldwide envied for their incredible wealth?

And wasn’t “U.S. President” a synonym for integrity? Thank you Mr. Bush… What a legacy for Barrack Obama.

So with all these crumbling facades, it is not the time for blame. But it’s time to roll up your sleeves and work to get us out of the mud hole these irresponsible and greedy idiots drove us all into. I am daily facing cases, where good people loose their jobs to managers, still thinking to cut heads is the solution. Or airline managers believing that it’s important to increase revenue at all cost. Flights take off fully booked but causing the airline to loose money?! That has nothing to do with bad sales, but with a bad, price-only-focussed strategy of short-sighted managers. Good service needs good people. But our industries miss to show their own strategy. What makes an airline commercially successful? More aircraft with less people? A drop in service? A university graduade being sent to the key account having no idea what a cross ticket is or what makes a travel reseller select one airline vs. another? Pay for coffee inflight? The next business for airports and catering companies is logically to have vending machines offering snacks and drinks at the gate (or on the aisle infront of the waiting room) at cost below that offered inflight…

BethuneQuote

But what keeps my mind busy is the question, why the facades visibly crumble, why we work in an industry where everyone tells me no one in his right mind would invest in? I did question the human “resource”-thinking. I hear from Lufthansa that the “Lufthanseat” (the employee news) is off reality. American Airlines staff tells me they have never heard of the company update video I remember from the 80s.

BransonEmployeesOur industry is like the opposite to the car industry, but not any better: Where they focus to build the big cars for big money and ignored the growing demand for low-consuming cars, our managers seek quick revenue at any cost…? Load factors and market share at the cost of yield and income.

We can learn from the current U.S. president. Airlines got to learn again that the manager is head of the family. That means (s)he also has to look after the family income and budget. But they got to get out of their glass domes, listen to staff and customers alike and finally start face reality!!! And come to grips and learn to make money!

Food For Thought – your thoughts about this sure are welcome…

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IATA says Aviation declines. Really?

Update 2012
Update 2012

According to IATA General Secretary Giovanni Bisignani, aviation warns of a decline in global aviation. But is that reasonable? Yes, global economy suffers. But look at the global maps and you will find a clear relation between airport and decent aviation and the size of cities. Aviation is a key motivator for business, but the travel industry suffers from a major inferiority complex:

Travel Agents: Any financial consultant who at the end of the year gets you €1,000 interest a year will be decently paid, but the consultant where you spend €5,000 for a vacation shall work for free?

Airlines: Global economy needs aviation. But thanks to price dumping (and not only since “low cost”), airlines operate for years at the edge of commercial harakiri.

In December, I was asked by an airline manager, what I would change in the airline industry if I’d have a chance. What I mentioned, many of you heard from me before again and again:
Remove the price tag from the tickets! No other industry in the world provides the information about the price the seller pays for the product. Or you would not buy a car or even a yoghurt without arguing with the cashier about a discount! This is a relic from the decades when airline tickets were decently priced and the travel agent truly was an agent, receiving 9% commission. At the time, many agencies cross-financed other business with their airline sales. An Economy Class ticket for €2,000 at 9% was a nice deal… The hotels, at the time frequently not paying the commission were “negligible”. That’s “the good old days”! Gone.
But if the travel “agent”, or better the travel consultant sells today, they get no commission. Then why do the airlines show the price? It is totally outdated thinking that must be addressed.

The second thought I had in mind I mentioned last week: Airline sales is “suddenly” en vogue again. The managers promoting sales-free and sales-independent “self service” and “internet” without a strategy find themselves the most hit by the financial crisis and the recessive commerce. Because cheap flights sell themselves, but they are also the most vulnerable. Selling a product is a question about long-term relation. So better have or build a sales team with a personal reputation in their market. As they represent you.

Food For Thought. Please share yours 😉

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From Russia With Love …

DontPanicThis blog-post has been prepared, as are the next ones the next two weeks. I decided to go for an adventure trip to Russia. And no, not to Moscow or Saint Petersburg, but into the country.

The region I visit is addressing international markets but lacks a decent airline connection. In fact, there is one. But being expert for aviation distribution, I was simply unable to book the flight and have to travel from Moscow more than 12 hours by train. The flights I intended to fly out of Germany on were just cancelled on short notice. So I had to adjust my plans and that involved to stick within the schedule. Ad hoc changing the visa due to a flight cancellation? No way! Booking an affordable flight to Moscow? Nonrefundable. So I had to wait for the visa to be issued before I could book. Hotel? More expensive than in Berlin. So the entire trip turned out to be a preplanning nightmare and a bureaucratic Ironman challenge.
If I would like to do business there? There is a lot to be done and I work on a study to give them the look from the outside.

Thanks to exceptionally motivated people in the German Foreign Chamber of Commerce in Moscow, Olga Bleykhman, being a member of the Russian Marketing Guild in St. Petersburg, who became quickly a very close and valuable friend, Alla my personal translator in Magdeburg and long year friends such as Heinz, Richard or Mike, to mention some, I have been able to compile quite a detailed study, I am now trying to complete “on site”.
I will report upon return!

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Low Cost 2009

NoFrillsIs low cost at its end? Lately Ryanair sued a German tour operator for combining Ryanair product with hotel, etc. for a travel package. Concern was posted, if that was an intelligent move, though I did reply that it was in line with O’Leary’s public known strategy.

But now Ryanair grounds aircraft, stating it would be more expensive to fly them. Just two years ago, talking about the need to turn around aircraft faster, O’Leary assaulted all other airlines, stating an aircraft needs to fly, time on the ground loosing the company”s money. 180° turn…

Ryan Air now tests “hand luggage only”. That’s a niche of the niche. With a body diameter of about 3,6m and no cargo hold, how about a “Mini-A380”-design with two levels, adding passenger capacity in what was the cargo hold? “Sub-Economy”? Who needs seats? I used the above image in this year”s ASRA-presentation, I didn”t know, how advanced my thinking was.

Now Ryanair reports an 85% drop in net results for the first quarter, a net loss of 60 Mio. Euro being a serious possibility. Just two weeks ago, I just mentioned the joke here about the guy purchasing the screws for 1 $/€, selling it for 99c. No Mr. O”Leary, selling your seats for 99c does not improve your revenue…

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