The Road to Environmentally Friendly Flying

Kolibri - disrupt aviation

Electric? Hydrogen? All the aviation associations promote going “green” 2040. Or beyond. Whereas the technology for the first step is here.

Being asked on my baby KOLIBRI.aero on why we don’t wait for electric planes or hydrogen planes, my answer is simple. They are fog-screens, intentional distractions allowing the airline to hold on to them to avoid really addressing the issue! To avoid Change. This can be brought down to very easy to understand examples.

The Fairy Tale of Electric Passenger Flights

Zunum 50 seat electric plane
Zunum Electric Plane

Boeing dropped out of funding Zunum, having the plans to develop an electric air plane. Because there is a simple, physical challenge that they cannot overcome. The battery size. Reducing the battery size, Boeing learned the lesson with the 787 Dreamliner. Where internal batteries caught fire. Would that have happened inflight, you can imagine the catastrophic impact. They had reduced the size vs. capacity to the point where batteries happen overheat. Especially rechargeable ones that we talk about it here. It is rumored and I heard it from Boeing, that their engineers disqualified electric passenger planes beyond 35, maximum 50 seats. The max size Zunum targeted, but with a range of one flight hour, maximum 90 minutes.

There may be developments that may one day increase battery capacity while reducing the size, but they are wishful thinking as of today.

The Fairy Tale of Hydrogen Powered Passenger Flights

Airbus Zero EmissionThe very same issue is it about hydrogen powered passenger flights, Airbus recently promoted as their “Zero-Emission Aircraft”. Again, the physical challenge.

To put into those aircraft cooled hydrogen tanks with the related cooling makes those tanks very bulky. In fact, sources inside Airbus have been cited assuming 50% or more of the fuselage (cabin and freight compartment) to be needed to build in the hydrogen needed to operate the aircraft 60 to maximum of 90 minutes. Unpressured (uncooled) Hydrogen does not have the needed energy.

That is, why those airplanes Airbus showed in the picture are also small aircraft, with about 50% less seating of a comparable aircraft those sizes today. Another wishful thinking and fog screen if you ask me.

The Road to Carbon Neutral

Biofuels greenwashing

Rape seed monocultureDeveloping Kolibri, from the outset we thought about using contemporary aircraft allowing us to use bio-fuel. Though bio-kerosene must be “blended”. Must be mixed at least one to one with the classic, dirty kerosene. Often, it is mixed like “E10” gasoline, only 10% “bio”. It’s not uncommon to have a 10-20% blend only, using 80-90% classic Jet-A1. Whereas the “bio” comes mostly from rape seed monocultures (picture), having already it’s own negative impact on bioversity. That ain’t “clean”, nor “sustainable”.

Hydrogen – a volatile gas

Hydrogen powered Wing in GroundFrom my work on a solar powered WIG 2008, replacing it’s diesel-engine with an hydrogen-engine, I understood hydrogen as the future. Clean electrolysis using solar power (and wind, bio mass and other sustainable energy sources) and salted water, whereas desalination facilities produce the surplus salt to augment seawater to the level needed for the electrolysis. So sunny regions with access to seawater have a “natural advantage” to develop the infrastructure to create hydrogen.

Now hydrogen is exceptionally volatile, even in special tanks, the losses are substantial, so it’s not easy to transport. Now…

Synfuel

Synkerosene, Powerkerosen, eKerosene, synfuel, powerfuel efuelTwo years ago Sunfire’s Synfuel triggered my attention, from a National Geographic report – not reported in Germany, but in the U.S. … I instantly understood synfuel a perfect solution to replace our plans to invest in expensive electric and hydrogen powered ground fleet, still with the need to have Diesel-powered trucks and emergency generators in an airline, with syndiesel. And to develop into synkerosene to replace biokerosene.

Developed since, Sunfire with partners started a construction of a synkerosene facility in Oslo, Norway. No, not in their home-country Germany, but in Norway. Norway is not full member of the EU, “only” an associated country. Make your guess, why not inside the EU… Maybe Ursula von der Leyen’s implied quote below gives you a hint.

World Climate ZonesAside, synfuel can be used quite easily as a buffer technology, using excess power to create synfuel during peak times and using it in common and tried power generators to recreate energy in low times. Until we have something better, Syngas is a clean energy source that can make us independent of crude-oil for power generation. a technology that can create a future for many “poor countries” in the “tropical belt”, the tropic (red) and subtropical zones (yellow), as their surplus of solar energy is way higher than what the northern hemisphere has in the temperate to polar zones.

The Fairy Tale of the End of the Combustion Engine

Others are faster, but we have a PLAN

Guess what, there is a Workshop “Mission Hydrogen” this week in the EU with some focus on Germany. At the same time, Saudi Arabia announced to invest 700 billion to become the global leader in hydrogen … While European players still make plans, others stake their claims. And to transport that hydrogen, syngas offers the advantage to be using the same logistics infrastructure.

And while German transport minister Andreas Scheuer demands the end of the combustion engine by 2035, I can only interpret this as another short-sighted publicity stunt. A distraction and a fog screen! By a minister who’s not known for his realism. Combustion technology will still be around a while, cars having a lifetime of minimum 10 years. Other technologies like aviation, simply lack an alternative for now. And while privileged nations can likely afford the switch, less privileged regions will rely on combustion engines for a great number of reasons and even more years.

Making the Change

Kolibri - disrupt aviationSo while we make again big plans in Northwestern Europe, developing synfuel facilities in the “poor South” makes a lot of sense. Developing synfuel facilities at airports will be an incubator for the regional conversion from classic gasoline to synfuel. Developing a new “regional” airline with the large demand of synfuel, will make the development a profitable venture. A classic win-win.

So anyone believing in electric passenger planes is daydreaming, or whitewashing why they don’t invest to become clean. A distraction, a fog screen. The same is true for purely hydrogen-powered planes.

But anyone who wants to make a change, can do so today. Modern aircraft engines are ready to apply 100% synfuel. Or so Sunfire, Norsk-e-Fuel and an engine maker assure me. Synfuel created from hydrogen and carbon-dioxide. Not carbon-positive, but yes, carbon-neutral. Proven tech. Today.

And we have a business plan, and we have the interest to make this happen. Starting today and being carbon-neutral within this decade. If not faster.

Food for Thought
Investors welcome!

Go Carbon-Neutral This Decade

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Thinking Outside the Box is Not Everyone’s Cup of Tea

Not My Cup of Tea

This week and last I attended two aviation financing conferences by Airfinance Journal, one in Japan, one in Latin America. Then I read an article by National Geographic, demanding that travel should be considered an essential human activity. But that is something I find so very often. Thinking Outside the Box and understanding psychologically different mindsets is Not Everyone’s Cup of Tea.

Airfinance Journal Virtual Events

Airfinance Journal Virtual EventsI am sure you remember my recent blog about why I consider Virtual Conferences a Barrel Burst.

Whereas a conference for me is a place we do networking, for which I am immensely grateful for Airfinance Journal (AFJ) to allow me attending the event. I sure couldn’t have afforded travel to Japan and Latin America. And thanks to their added focus on networking, it turned out some very promising new contacts to discuss KOLIBRI.aero with.

Let us have a look at the Latin America event which ended yesterday.

The Great Pretender

The Great PretenderWhereas AFJ added a virtual networking lounge, there were the same, I’d say ten, people in there, only once the (too small) window showing the delegates forced me to scroll with more than four delegates in the networking lounge.

Saving the delegate list and not counting the dupes I came up with 720 delegates. An awesome conference. 42 of which “filled out” their profile. Only. The others failed to use a free way to promote who they are and what they, respectively their companies do.

I happen to believe from what I have seen that most of the delegates of the online conference were obviously pretenders, signing up, but not showing up. Not even taking the time to log in and fill out their profile. Do they know there are such?

Virtual Networking

Airfinance Journal 2020 Latin America Dedicated NetworkingThen there was a “dedicated networking”, where more than 50 registered for (I think the host said 64). We were seven (plus AFJ moderator, plus one totally unresponsive), so roughly 9 out of 10 having registered for it did not show up. For some reason, being in aviation so long, “no shows” is something I consider exceptionally rude. Not just careless, but outright rude. Because there are people, taking the effort to organize something good and then people simply don’t show? It is extremely frustrating for whoever works this out to provide you a service!

For the few being there, I believe it was better than if it would have been crowded. I just hope I didn’t talk too much!

Overall, it just confirms my assumption that less than 10% of the registered delegates showed up at all. Of which again, how many have been speakers? 21?

Not My Cup of Tea?

Not My Cup of TeaAgain, these two events showed that there are different mindsets at play and it should be worthwhile to understand the motivation behind it.

I’ve seen that before, 20-odd years ago, when I organized the Airline Industry Stammtisch in Frankfurt. Many sign up for the event, to show their bosses, never intending to go there and spend their “valuable” time off elsewhere. Others, like me at AFJ do see the opportunity and value in networking.

Empty CabinA very good and valuable event, especially in Corona times. But it seems, at least from the outside, that most of the “delegates” were pretenders and never showed up on the website, never “participated”. Those people missed out on supporting a good event and torpedoed a valuable effort. From my side, I can only thank AFJ. The next step to improve the events in my opinion will be to automatically add the delegates to the networking lounge to enable messaging. Let them “opt-out”… There’s no e-Mail or other personal information shared, beyond the attendee list that delegates have access to anyway.

And they might want to promote to the delegates to fill out their profile… That’s free marketing and free networking!

Learning Curve?

Airfinance Journal 2020 China virtual eventThe next event coming up in two weeks as Airfinance Journal China, then followed by Asia Pacific. Hopefully the “delegates” are motivated to not only register to show-off to their bosses, but to really attend? And use the networking opportunities AFJ provides?

Because else, such virtual conferences turn to be a barrel burst. And that would not value AFJ but do them a big disservice! Did I mention? Aside failing on your job (or why would you sign up?), it backfires; no-one really likes “Dateileichen” (file corpses).


Of Nestlings and Birds of Passage

National Geographic: Why travel should be considered an essential human activity
Source and Copyright: National Geographic

Then there was that article on National Geographic: Why Travel Should Be Considered an Essential Human Activity

Which is another example of people focusing on their own life style, ignorant to others’ needs, motivation, life style. As I commented right away on LinkedIn:

A dozen years ago, I spoke with a friend/student, trying to convince her to join the aviation industry. There’s three types of people.

  • Nestlings, staying all their life in one place, except for the one or other vacation. A flight of more than two hours takes them to the unknown they fear.
  • Precocials, leaving home to move elsewhere and get settled. They travel for vacation and VFR.
  • Birds of Passage. They go, where live takes them, are open to the new and for them travel is a reward and each destination an adventure they embrace.

If you talk to nestlings, they will oppose your notion that travel would be “essential”. At the same time, they tend to be nationalistic and protective about their local environment. And the first to shut-down borders and travel. It’s those, “thinking different” being “in power” we have to catch and convince. To do that, we must understand their different “gut feeling”.

That said, if you talk crisis these days, it showed (most of) us, what privilege it is to be able to travel. And how quickly such privileges can be taken from us by forces beyond our control. And the lousy standing of travel lobbyists and lobbies with the decision makers.

A Lesson for the Crisis

Crowded Aircraft Aisle during BoardingConvincing the People to Fly Again

In all the discussions, it seems to be common opinion that we must regain the travelers’ faith to fly again. Given the (painfully) slowly sinking-in fact that we never might have “the” super vaccine, we better adjust our communications. We must understand that there are us “birds of passage”, looking forward to new experiences and adventures, but also the ones that are afraid of the new, the conservatives, the nestlings. And some of them being politicos, in my humble experience a lot of them narrow-minded, cover-your-ass-types that do not make a move unless they have to. As seen at the beginning of the crisis. Then they overreact out of fear, understanding they made a mistake, trying to cover up hysterically to distract from the mistake. Or like Trump now was caught in the act, lying to the U.S. people to “not spread panic”. Whereas a healthy panic is good! It keeps us alert. And then we must adapt. It’s called evolution. But that’s something many people are mortally afraid of.

Think Outside the Box

Blame GameThere are a lot of posts and speakers emphasizing that we must adapt to the crisis, think outside the box, then in the next minute turning back on why them keeping the status quo and doing as they always did would be the right thing. As they obviously fail to understand the thinking of their customers, shutting down the crisis, falling back to “safe thinking”. Just as most investors do.

As painful as it was, in fact it was truly funny. A speaker at Airfinance Journal Japan, an aircraft lessor, emphasized the time being right for new airlines. When I approached him, he retreated to the fact that they never lease to start-ups and would never invest in a start-up airline. Oh yes: Cognitive Dissonance at it’s best, right? This is a quite common stance when we talk to “aviation investors”, failing to understand that “aircraft investor” is not “aviation”, but just one piece of the puzzle. We represent an opportunity to place 200 aircraft in 10 years. Which is big business. Once we get the launch funding secured.

Me too … Or doing things different?

A320 B737 Whats Your USPWhile many still focusing “blindly” on “Airbus/Boeing” aircraft investments, they lost and loose money. It’s been a shark pond before the crisis, now that bubble imploded. At Airfinance Journal Latin America event, the best speaker was Walter Valarezo of DAE (Dubai Aerospace Capital), outlining the “abnormal normal” in the market pre-crisis. Now most investors curl up into a ball falling back to “old habits”.

USP is about “unique”. You don’t have a USP if you only copy what the others did. And stick to your modus operandi.

Fortunately there are some – very few but some – who do understand the opportunity, the need to think outside the box. Those are the ones we talk with. Will they help us launch the Kolibris? I guess they will. Let’s see how quickly we can convince them and their PTBs that change is good and our business plans are safe and sound. And benefits a great deal from this crisis.

Food for Thought
Comments welcome!

Kolibri @ Prestel&Partner Zurich December 2020

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Corona Cognitive Dissonance

Cognitive Dissonance ResolutionRecent developments and posts really bug me. Don’t the writers of those posts recognize the cognitive dissonance? Yes, we must think positive. But there is a clear distinction between thinking positive and whitewashing or daydreaming. We have a crisis at hand and the “positive signals” aren’t as “positive” as those posts try to make them look like. They look at the marketing messages on the surface but fail to look the slightest bit deeper.

We need positive thinking, but we must also stay realistic!

Whitewashing Statistics

IATA loadfactor 2020Yes, the latest statistics are not there (yet), but we have enough experience to understand that the classic statistics, that I questioned as incomplete and intentionally misleading before the crisis, now in the crisis not only proof insufficient, but even dangerous for all of us, trying to grasp the repercussions to our industry!

Many of our media friends take up the old focus on unrealistic data packages. Yeah, hurray, the airlines add flights, bring the aircraft back in the air. Are. You. Kidding me???

The reason behind is mostly that the aircraft can only be parked for up to three months without the recovery into operational readiness getting substantially more expensive: >100 manhours, replacement and thorough components checks, etc., etc.
So the “losses” from flying empty might well be a cost-saving long-term. Depending on how long the aircraft must be stowed, when the passengers “come back”. But this adds to the “Corona Debt”, that must be funded and some day payed back.

ForwardKeys Average Return FaresThe current IATA Regional Briefing, Europe, June 2020 reports on the beginning of the crisis. Available seats for April plummeted by 95%, the load factors of the remaining flights to 32%! At the same time Gridpoint Consulting analysed the London-Heathrow figures with similar devastating results, an average load factor (2Q20) of 35.5%! And ForwardKeys published some nice figures on air fares, plummeting 20-30% in average.
Now the airlines are reported to bring flights back to the air aggressively. Whereas the German Airport Association (ADV) published in their latest (June) traffic statistics: “Privater Reiseverkehr findet nicht statt”: Private travel does not take place. So those added flights mostly cannibalize the existing, low passenger numbers. Which we will likely see reflected in the next statistics. But keeping the aircraft grounded comes with it’s own bill. Adding to the “Corona Debt”.

So aviation media, please do not simply publish those statistics on how many seats are added to the market, but also check the demand = load factors and the revenue = average ticket prices. It would be worthwhile to look behind those numbers and check the reasoning for those flights. Looking only at the first statistics (increase of available seats) is negative, if the revenue and loads drops further. We need the full statistical picture I was demanding for many years: ASK (available seat kilometers), load factor (how many seats sold) and the average revenue (ticket price). In combination with the CASK, the cost per available seat kilometer) it would allow to understand the real development. And commercial viability, success … or failure! And I do look forward to real “success stories”, a.k.a. “profitable routes”. Routes not piling up more “Corona Debt”.

The Fairy Tale of the Corona Super Vaccine

Yes, as you can see in the archive of my Corona Papers, I also believed what those lying politicos and virologists told us. Though having brought up in a medical household, I looked early behind that cloud-screen. My (published) assumptions were based on a recovery following the common availability of the vaccine – and the treatment. We’ve learned a lot on the treatment meanwhile. And now, like with the face masks they initially called “unnecessary” for pure hidden motives to cover their unavailability, they slowly let the fact surface that:

We must not expect a “super vaccine”!

Corona will turn out more to be like the flu. Okay, not so much like the Measles I referred to earlier. The first infected people in Germany have ceased to have antibodies in their blood a mere three months after their infection. Now they, along with the WHO start slowly telling us the “new truth” (like with the masks), that we will have a long journey ahead, getting used to Corona. And as I kept emphasizing for months already, the time to stop the virus is long over, all we can do – and must do – is to #flattenthecurve. Keep the infections at rates our medical systems can manage. Until the first vaccines are there – to further limit the spread of the disease. Just like we get (or according to statistics mostly don’t) get our yearly flu-vaccination. By which time we will also hopefully by able to “manage” the severe cases with standardized treatment.

But hold it, ain’t that telling, all that lock-down was for nothing???

No! The lock-downs were a vital necessity and still can be! Because the reasons to flatten the curve are still undeniably valid! As I just wrote in the previous paragraph. But we must return to a life that embraces the Corona-virus (and it’s future variants) as what they are. A new “flu”. Maybe more hostile, sure different. But here to stay. And once we will have learned to manage the recurring “waves”, just like the annual flu, we will live on. Without masks if you ask me. Without “social distancing”. And without lock-down. And with air travel and real-world conferences.

Bailing-Out the Dinosaurs

Burning EurosI know, being a German and having taken residence with the family in Germany for the pandemic, I am somewhat biased on what happens here and especially Lufthansa. And that makes me puke. No, I can’t say that nicely.

Lufthansa, with a pre-crisis value of four billion (Source: Fortune) and burning five billion in the first three months of the crisis receives a bailout from the German government of € 9 billion. For a 25% silent stake, not allowing them to influence Lufthansa, i.e. relating to job securities (prime CSR), sustainable developments or a less hostile behavior towards smaller airlines they kept and keep walking over, their latest “victim” Air Berlin. No, lesson not learned. The next they announce is to make 22,000 (twenty-two thousand!) jobs redundant. Quite recently, they had to admit that 25% of the refunds for unflown tickets due to Corona have still not been paid back, the media claiming a 1-billion backlog!

airline money burnI was kind of shocked this week, when German Tagesthemen, one of the main news channel mentioned already that this may not be the end, but just the beginning of an expensive further bail-out series for the airline and it’s many subsidiaries. But if they burned 5 billion in three months, how long can they sustain the drought before they burned up the added nine billion?

Don’t get me wrong! I belief that aviation will recover, but that will go slow and take time. What I see now is activism and lots of wishful thinking, piling up more debt and risking the airlines’ long-term survival.

But I keep my emphasis, that bailing out the dinosaurs is not good for anyone, except the dinosaurs. At KOLIBRI.aero, we have a concept in the drawer to invest € 1.6 billion into an airline with 200 aircraft. Okay, establishing the airline in Germany would be a bit more expensive. But no more than € 2.5 billion. Give another € 3-4 billion as a reasonable amount to add a global network, we could develop a “Lufthansa 2.0” based on sustainable aviation (not the Lufthansa greenwashing), true corporate social responsibility (way beyond Lufthansa whitewashing), looking after our own, but also after the regions we serve and the overall responsibility of a major player. There are others like us out there. I’m sure, given € 9 billion, given only € 5 billion, they could make a change. No Corona debt, but a clear profitable business, paying back the debt within 10 years with (above-market) interest. € 9 billion without any strings attached? € 11 billion for Air France/KLM? And meanwhile Austrian – a 100% Lufthansa-owned subsidiary also received a bailout by Austrian government, though “only” € 600 million and with environmental demands attached. But with another € 150 million to go into equity in Austrian parent Lufthansa (Source: CAPA). Swiss received a 1.25 billion loan guarantee for its poor mother Lufthansa (Source: Reuters).

"We are Listening. And We're Not Blind. This is Your Life. This is Your Time!" [Snow Patrol - Calling in the Dark]

And at the same time, one airline after the other is being grounded, Level’ed. No bailouts for Air Berlin pre-, flyBE early into the crisis. None for Level (IAG), Germanwings (LH Group), Laudamotion (Ryanair). And expecting no real “recovery” of the passenger numbers this year, I foresee a large number of the small airlines with one, two, maybe even five or ten airplanes to fail this year. And I get a lot of feedback that this is the time for KOLIBRI.aero. But we struggle not for billions, to launch we struggle to get funding of a mere € 30 million.

But given feedback from “experts” out there, to start it small as a virtual airline, or “aviation investors” not seeing beyond aircraft leasing? I now have hopes that our invitation to attend Prestel & Partner later this year at their real-world conference in Zurich will open the doors of more visionary family office owners, understanding the opportunity such a crisis provides to a business concept like KOLIBRI.aero. As those bailouts must be paid back one day. If the airlines don’t go bankrupt, once KOLIBRI.aero is kicking their butts.

Kolibri @ Prestel&Partner Zurich December 2020

Food for Thought
Comments welcome!

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Evolution … or why should we save the Dinosaurs?

Burning Euros

Discussing with a friend and intellectual sparring partner, why we focus to establish a new airline and not simply buy a failing airline, the reasoning was easy.

If you acquire an airline, you acquire it’s heritage.

Change resistanceTo which he replied: “I couldn’t agree more. I have seen the same firsthand when it came to [product] engineering. Initially we were going to work with an established manufacturer and have them make modifications for us. That was quite the trip down the rabbit hole, and more trouble than it’s worth. Now we’ll get [products] that were custom engineered for us, from the ground up.”

Most of the times I was asked for support in project management, the project itself was fine. What caused the trouble was the missing change management.

Air Berlin Example

Backstabber Assassin shutterstock22635031In direct conversation, one of the later board members of Air Berlin told me, the airline would not kick the bucket because the new CEOs wouldn’t have good ideas, but because they failed on the heritage. The existing “networks”, afraid of the change, afraid to loose their job, torpedizing the management.

When Stephan Pichler took the helm, he i.e. identified the “different fleets” as a concern. With little to no interaction on scheduled flights or tour operator charters. Still, when he left, there were still the different departments interacting little to none. There was a lot more to Air Berlin’s unnecessary demise, as there was to FlyBEs. Usually it is attributed to the management, but “internal resistance” can be a first-class back-stabber.

Save the Dinosaur or Fresh Start?

Disruptive Events - Meteor kills DinosaursAs addressed in To Save or not Save in the Corona Papers, The question in my opinion is mainly, how much funds you are willing to pump into the existing airlines and for how long. And if you now start to shove money down their greedy throat, will that ever end? The U.S. carriers complained instantly when they learned that they get only 30% of the bailout “for free”, but would get the other money as a credit.

To turn this around. We developed a business concept to invest € 1.6 billion into a new airline covering Europe. With a business concept based on USPs, profits, low residual risk, attractive profits, but also socially responsible and sustainable. i.e. A positive overall impact on greenhouse gases.

Triple that amount to invest into three new players instead of just one and you cover what we have today. Now airlines asking +$50 billion in the U.S., € 20 million for Germany, IATA calls for +$ 200 billion. Emirates will take up long haul, maybe challenged by a U.S. carrier and a Chinese one – connecting the long-haul world.

Dinosaurs …

The existing airlines will need to survive. Realistically downscale. At first and until a vaccine becomes available in sufficient quantity, we talk about “leave the middle seat free”. That cuts one third off the seat capacity of 189 seat A320 or B737. 126 seats. Given an inital slow start of traveler confidence to use flights agin, we realistically talk about max. 50% average load. Down from above 90%. That means that the ticket prices will likely be double. But the “administrative overhead” must be split to less aircraft, so we will have a totally different cost level.

Ryanair’s O’Leary clings to keep his “known model” and predicts even more aggressive discounting post-Corona. But in the end, someone must pay the bill. Does anyone really believe O’Leary to not plan for the stupid to pay his bills? Including airports, regions and naive passengers… I wonder how long even a Ryanair could keep  that illusion up?

… meet Evolution

evolution dino vs manDoing a staged setup and focusing to stake our own claims, select strategic bases aggressively outselves, we can establish the company for a mere €30 million. € 15 million per additional base with seven aircraft and hundreds of (secure) jobs. A fraction of the food the dinosaurs demand to survive. Condor now half a billion? What evolutionary wonders we could achieve with that money.

We’re the mammals. We’re effective, profit focused, sustainability and social responsibility driven. Evolution. Don’t pump millions and millions into the dinosaurs until the crisis is over. Invest into the future.

Food for Thought
Investors welcome!

Kolibri @ Prestel&Partner Zurich December 2020

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It’ll Hit Us in the Back

Domino Effect Circle

Domino Effect Circle (licensed)

Another post in the Cognitive Dissonance series.

Aviation banks say new deals on pause until ‘market bottoms out’ (ISHKA)
The market will be flooded with surplus of 150-seat up aircraft. (ISHKA webinar)

Aside those headlines, two ideas shortly (too short?) addressed in the ISHKA-webinar triggered my thinking:

Is P2F  (passenger-to-freight-conversion) a strategy for aircraft owners? And is part-out, cannibalizing aircraft for spare parts, an option?

P2F – Passenger to Freighter Aircraft Conversion

Freighter Aircraft DemandBill Cumberlidge addressed P2F shortly in the ISHKA webinar. As the need for quick transport increases, the belly-freight in passenger aircraft has gone missing. That increases the demand for classic freighter aircraft. But keep in mind that this is a temporary peak only.

But given passenger airlines taking up that surplus transporting goods in their passenger aircraft, the question now is not if we need more freighter aircraft, but the aircraft owners sitting on “dead capital”, seeking their own bailout – by considering to convert them to freighters seems a good idea. Or does it not?

B767 Conversion (Source: IAI)The main issue there seems not to be the demand for conversions exceeding the available resources, companies with the experience in such conversions.
Then you cannot simply convert all the grounded aircraft to freighters, without flooding the market. Offer and demand will simply result in surplus freight capacity, ruining the prices both for freighter aircraft as well as for airfreight cost. So the idea will quickly backfire. What I heard first from truck drivers, seems now to become an issue in the airfreight industry. Passenger airlines, offering cheap passenger aircraft for ad hoc transport ruining the prices.

ContainershipsWhile there is a current peak, promising a use of lots of large freight aircraft (A380, B747, B777, B767, A330, A300, etc., etc.) that demand bubble will last maximum one year.

Seabased shipping will still do the majority of transport. And while shipping cost will likely peak, ship-operators (I avoid the word shipping company) will possibly recover their eroding revenues in the crisis. If they don’t make their own mistakes.

Cargo AircraftBut how many containers does a single container giant today transport? And how many of those can you put onboard an A380 or B747? There were a lot of hurray and self-praise of airlines that one aircraft transported 500,000 masks to somewhere. Whereas the population there is a multiple of that number. Airfreight is expensive and a drop on a hot stone.

And the rush now to the common idea everyone follows will backfire and hit us in the back soon.

Parts-Out – Cannibalizing Aircraft

B747 Engine-StrippedAnother, very standard “fallback idea” is the “End-of-Life”-strategy to cannibalize the surplus aircraft for spare parts. Given the immense surplus of 150-240-seat aircraft, this bubble is instantly doomed. In several expert discussions I heard 50%, even up to 70% of the fleets to be grounded. Recovery of likely 80% within two years. Let’s say we decommission 20%. Which ones? Where? Who starts?

Bill voiced a valid concern too. What if airlines neglect the engine maintenance, but use the engines of the grounded aircraft? Sure, once traffic picks up you can lease new engines. Which might be even cheaper than servicing the neglected engines. But. If all airlines follow that strategy, I predict a shortage in new engines to hit us in the back. And we will have hundreds of aircraft engines to be written off.

Saint FlorianCognitive Dissonance: Who Pays the Bill

All those ideas try to secure the profits, moving the losses to others. Whereas we so much promote that we are all in this together, in reality it is very much egoism at play. Back to the good old Saint-Florian’s Principle: Oh holy dear Saint Florian, don’t burn my house, take the neighbor’s one!

A good example is basically the question about aircraft. Airbus and Boeing reduce their production. Because airlines do not take the aircraft as planned. Realistically, there won’t be much demand of their aircraft in the next two years (or more). But could they sustain two years without revenue? Beyond some spare parts.
Then the airlines return aircraft to the leasing companies or cancel orders, even at the expense of financial penalties. Such piling up the dead capital with them. i.e. Brussels Airlines, representing the mighty Lufthansa Group, cancelling their wet lease deals with CityJet. Leaving them out in the cold. Lufthansa style.
And then there are the investors. Who will loose big money as a result of a surplus of aircraft they had focused on. Without realistic concepts how to make money or turn their dead capital to assets again.

That self-centered thinking will hit us in the back soon.

Supply Chain Management: We are ALL in this Together

business relations

My first boss taught me an important lesson in supply chain management ethics. It is not always about the cheapest offer. There is always someone cheaper. But part of good supply chain management (and beyond) is the reliability of partnerships. Especially when times are challenging.

#weareallinthistogether. Exactly that catchphrase so many now use for #whitewashing. Again. It’ll hit us in the back.

Food for Thought
Comments welcome!

P.S.: Things can be handled differently. If you Think Outside the Box. And beyond. We’re looking for airline investor(s) who understand “doing different” being the core to the Unique selling proposition. We have some sound, profit- and USP-, sustainability and social responsibility focused business out for funding. Contact me to learn more.

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#flygskam (FlyShame) Reality Check

All the industry discusses #flygskam (flyshame), but even given sound studies disqualifying the topic, our own lobbyists fail to organize a concerted response to the case. Let’s have a reality check…

There were some reports recently on German television and in the media. German “Welt” (TV + newspaper) reported “Green (party) Demands: Climate Sin Domestic Flight? Abolition Hardly Saves CO2“.

The use of ships to travel from Scandinavia or Britain to Europe or crossing the Mediterranean I think I don’t need to remind of the extreme emissions of cruise and other ships?

Rail Greenwashing

But there was another article even more to the point: “Where there is a will there is not always a train“. But there are some issues that are unrealistic. The numbers of German Rail are biased and greenwashed. They claim to use only “Green Power”. But in fact, published by the German Federal Environmental Agency, their power comes from the public grid and no matter what “deals” they do, it is grid power. And on the grid, in 2018 only 16.6% has been “Green” (Source). The energy industry accounts for 85% of all Greenhouse Gases of which 98% CO2, the remainder being mostly Methane (CH4) and nitrous oxide (N2O) (Source). So in fact, the amount of greenhouse emissions by German Rail are considerably higher than advertised. As a report from 2018 shows, we talk about up to 83% “dirty energy” on the “green” energy companies… So if we increase the “public” German Rail assumption of 36g per km (greenwashed) and adjust it to reality, we talk about +200 g/km. Suddenly the published 201 g for flights is not so bad at all!

But what also needs to be taken into account is the emission per passenger. Be it rail, in average used 22% only, whereas those passengers are mostly commuters, filling up the trains above their limits in the rush hours. That is not only true for the commuter but also the long-haul routes. This year, the long-haul trains’ punctuality was only 69.8%. For 2018, German Rail reported 16 routes operating above capacity – passengers finding no seat being just another annoyance, half of the delays are a result of those overused routes. That 20% of the trains are in (often unscheduled) repairs, toilets and air condition known to be out of service just being others. Just a reminder, the average load factor of flights according to IATA is about 85%.

e-Mobility: Battery Greenwashing

Given the devastating destruction of the natural environment in Lithium mining, I do not understand that politicians push forward battery-based e-Mobility. Using fuel-cell technology we can use the existing gas stations infrastructure. Refueling takes only about five minutes! And given a broad use will lower the prices and make the technology available on smaller cars too. They can even power scooters, so don’t tell me it doesn’t work for a compact car!

Instead they promote an ecologically catastrophic technology with a completely missing loading infrastructure…?

Ground Sealing

Memmingen Airport (FMM)There is an important advantage of air travel to both rail and road that is frequently not addressed. The issue of ground sealing!

For an airport, about 2,500 x 45m are typically “sealed for the runway, in total about 3,000 by 400 m are required for a regional airport, of which only 25-30% of the ground are “sealed” by infrastructure, 70-75% being grass areas. So we talk about 400,000 m² of an average regional airport being “sealed.

A highway with four lanes is about 31 m wide with about 24 m being sealed. A 50 km highway such seals about 1.2 million m², so three times as much as a single airport. Highways are known to be an insurmountable obstacle for wildlife.

rail bridgeFor Rail we talk about a minimum of 12 meters sealed width for 2 tracks, up to 20 meters on high speed train routes and and average of about 15 meters. So on 50 km of rail we talk about 600,000 m² of sealed ground. Before we start talking about the railway stations…

I don’t have the number, not even for Germany, but it might be an interesting comparison for the aviation industry to compare the total ground sealed for highways (not talking about cities) and rail, compared to airports. I think that will be a devastating result for the ground transportation modes.

My hope on rail is that hyperloop we will not seal more ground, but will be established underground.

Bio-Kerosene

Image: Carbon Engineering

Yes, I am a big fan of the CO2-tax. If it is used to compensate for bio-kerosene! So far, all eco-taxes are abused to cover up for growing demands of the policos for their “other agendas”. But did you know that the German air traffic accounts for less than 0.3% of the CO2-emissions in Germany? (Source)

National Geographic last year reported about a development by Canadian Carbon Engineering, using CO2 with hydrogen (H2) to create artificial kerosene (and gasoline). Whereas there are industry sources to provide excessive CO2, hydrogen can be created using solar parks. The resulting bio-kerosene is an independent power storage. As the CO2 from burning that bio-kerosene equals the amount that was used from the environment, it is a completely climate neutral solution. And using solar energy for the electrolysis and the power needed for the processing, there is a power loss, but that is ecologically irrelevant.

But… Why do the media and politicos actively neglect those developments? Why do they go for dirty Lithium?

Summary

So what is the reality check for #flygskam (flight shame) vs. the “green rail”? Green rail is a myth, the power consumption not close as “green” as they say. Considering the ground sealing also favors aviation. And should we in aviation invest large scale into bio-kerosene, lowering the prices to competitive cost levels, replacing crude-oil-based fuel… A CO2-tax such might be an enabler for the conversion. If our lobbyists would show balls, which I’m afraid from experience, they don’t have.

But sustainable transport, including air transport is acknowledged as an important factor in the United Nations Sustainable Development Goals to develop regions, counterbalancing inequalities and disparities!

The United Nations Sustainable Development Goals

I think it should not be aviation bashing, nor should we greenwash rail, but we should develop a sustainable transport network for everyone. Connect individual transport to rail, hyperloop or flight. It is the mix we need, not enemy stereotypes! And we need funds to support strategic projects selected, not the ones having the biggest lobbies. And “batteries” are no solution but a pest! Lithium mining destroys the planet!

#flyshame is out! Flying is a vital service for a global world. To disqualify it with false facts does not help to make our world a better place.

#railshame is my new buzzword!

Food for Thought!
Comments welcome…

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Primera Air, Azur Air, Small Planet Airlines – and the dying continues

After the demise of Air Berlin, forced by Lufthansa and incompetent if not corrupt politicians, we lost Monarch last fall, but the dying continues. This months we’ve been all “shocked” by the demise of Azur Air (Germany), Small Planet Airlines (Germany) and now Primera Air.

Interesting: None of those airlines had any relevant material assets. Working with leased aircraft as most airlines do today, it minimizes the cash-flow. And aircraft are almost not available for purchase, large aircraft leasing companies and the largest airlines dominating the market. No, neither Primera, nor Air Berlin “owned” aircraft. They were all leased.

Whereas Air Berlin struggled, there was an inherited business model that even ambitious CEOs could not overcome. What was Air Berlin? A holiday charter airline? A low cost airline? A network carrier? While Air Berlin tried to be all of that, they failed to be either “properly”. In a competitive, over-saturated market a death sentense.

Now all those airlines have operated Airbus A320 and/or Boeing 737. An aircraft in surplus, a saturated market, flooded not only by the aircraft makers but also by lease offers from the low-cost airlines seeking utilization for their own surplus. And while everyone wants aircraft in summer, the eroding revenues do not pay enough for those airlines to survive the winter. I learned so long ago, an ice cream shop needs to create enough revenue to survive the winter.

And while aircraft lessors add more and more Airbus 320 and Boeing 737 to their fleets, airlines are established without a long-term concept based on clear USPs, those airlines lease the aircraft out in summer and … oops. And then they go broke and the aircraft lessors sit suddenly on their assets without income. Even scheduled airlines like Volotea ground their aircraft in winter.

Even if the airline operates successful, after usually seven years, their leasing contracts expire. And then they understand the need to invest into more modern aircraft, so they do not extend the leasing contract but return the aircraft to the lessors. Who now need to find “other markets” to take their aircraft… Often below cost to minimize the losses!

In consequence, the aircraft financial funds are known to suffer from year 7, often generating losses over their typical 10-year duration. KPMG earlier this year said the average return on aircraft fund are 4%. While some do better, many smaller ones fault. Another consequence is deteriorating market value for Airbus and 737 aircraft, also usually starting seven years after the aircraft is sold into the markets.

source Wikipedia
A320neo family orders & deliveries (source Wikipedia)

So one of the reason for failure is the attempt to compete in a shark pond, using the same aircraft than the competitors, copying their business model and trying to find a small niche – that upon success is quickly threatened by the big fish.

Primera Air as the most recent failure tried to convert “in a rush” from a safe holiday charter airline operating secure routes for Primera Travel Group, into an – as aero.de said – copy of Norwegian, flying with the smaller A321neoLR across the Atlantic. But also trying to fly a mixed fleet of A321neo and Boeing 737-800, while having orders out for two A321neoLR and 18 Boeing 737 Max 9. As small newcomers do have problem getting access to the new aircraft like the A321neoLR, of which most go to the largest aircraft leasing companies to be placed into the existing fleets of their large (safe) airline customers. Why would they prioritize newcomers that threaten their existing clients they have long, very long relations with?

But which “newcomer” airline can wait for 10 years (at current production rates) for an Airbus or Boeing they order??? Can you plan what is in 10 years?

Then we come to the flight crews. While pilots usually are either type-rated on the Airbus A320-family or Boeing 737-family, a mixed Boeing/Airbus-fleet either requires respective crews for each aircraft or the cross type-rating. While pilots usually pay for their flight training, in return, they require high salaries in order to pay off for their – substantial – investment. Even Ryanair now faces the consequences of their “outsourcing” and slave-kind payments of their pilots. While I keep seeing their pilots recruiters immediately jumping on Primera Air but also trying to convince pilots from South America or Asia, if they don’t change their attitude to their pilots, they will keep having problems. Their recent announcement to close the base in Bremen and Eindhoven and reduce the base in Weeze are simply puffing. As Ralph Anker showed in his Anker Report. Behind each and every dropped route or base are airports, suddenly deprived from services. And pilots and crews, suddenly forced to find work elsewhere, likely move. Ryanair is the airline that does not care. Europe’s favorite airline? I doubt.

Summarizing, I come back to the point I keep emphasizing. Ever since easyJet (1995) and Wizzair (2003) I have not seen a new airline that had a USP and a clear concept. What is your USP? For the investor, the traveler and yourself? Or are you just another copy, trying to cash in?

I believe A320 and B737 families will hit a brick wall. Investing in those aircraft or airline models trying to operate a few of them is high risk. At best.

Food for Thought
Comments welcome!

Side note: Taking all those “natural thoughts” into account, in a team of experts we’ve developed a business model, that now seeks funding. With a unique concept, multiple USPs and under- if not unserved markets. But that does not work with small money. If you want to do it right and lasting, you need to do it right. And invest. Not just building “an airline”, but focusing on development of assets, as a side-effect securing the returns on the investment. If you know potentially interested investors, let me know and I’ll establish the contact to Kolibri. Or refer them to my call for investors.

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Long-Haul Low-Cost? Supersonic? Quo Vadis?

While we work here on a business plan for a new airline, we did discuss and disqualified many of the existing airline models. Is that negative? Or realistic?

These days some news hit me in short succession, that make me rethink the assessment my friend Ndrec and I made when discussing possible, viable business models for a new airline.

I did the picture above a mere year ago. Meanwhile Niki is gone too, as is Virgin America. Mighty Norwegian being said to be likely acquired by IAG shortly. We have “new” players like Blue Air. But the question for any new business case must be:

What is Your (E-)USP?

Now Ray Webster, former CEO of easyJet opened the Routes Europe Conference with a keynote:

“I don’t see long-haul low-cost as a viable model. Operating a small aircraft across the Atlantic is not efficient, and low-cost carriers aren’t going to fill a 787 or an A380”

Ray Webster, former CEO easyJet

Even students traveling on longer flights do want more services the longer the flight gets.

In contradiction to that assessment, Eurowings now opens up New York-services, taken over from the late Air Berlin operating from Düsseldorf. We all looked at Norwegian, though their “success story” also seemingly was bought on the cost of revenue, the airline now is said to be acquired rather shortly by British Airways/Iberia holding IAG (also owning Aer Lingus).

Whereas I simply do not understand the “brand strategy” of either Lufthansa or IAG…

  • IAG: Aer Lingus, British Airways, Iberia, Level, Vueling … Now Norwegian adding to the mix of “it’s not me”?
  • Lufthansa Group: Air Dolomiti, Austrian, Brussels, Eurowings, LGW, CityLine, Swiss, Sun Express. Also “it’s not me”?

The work on a business plan for a new airline was triggered last year initially by some investors, going down the same “me-too”-dead end using old, inefficient Boeing 737-aircraft. Cheap to get, but their fuel consumptions renders them virtually useless.

BlueSwanDaily believes in the future of Supersonic… Are you kidding me? Yes, I believe supersonic will come, but expensive niche for the rich and wealthy. No real change to the Concorde business model.

I myself worked out a “green” concept a few years ago, but we’re neither getting there… The project got grounded in the wake of Lehmann Brother’s and a world financial crisis and the original interested investors gone never took up speed again. [Update: The Korean Wingship seems a ready-to-go WIG, though using conventional fuel, no green hydrogen or battery powered e-engines]

So we looked at models that differ from the existing ones. Where are unservered or underserved markets and why are they not served well? One issue sure is the airline analysis tools misleading their users to “established routes” and airports.

So we started with the original intent of a small scale operation. And recognized why so many such projects are doomed. There is a pilot shortage hovering on the horizon, Ryanair running pilot acquisition as far as South America and Asia. Most airlines do not value their workers but drain them.

And having discussed the very same issue again yesterday with friends who must relocate in the automotive industry as a direct consequence of overpaid managers, back again, using old images:

Maybe. Just maybe. I believe Ndrec and I came up with a sound business idea, which requires far higher investment than we originally envisioned. Coming with a round and sound business plan paying off that major investment in 10 years safe. Because we do have a unique selling proposition (USP). Because we do have an emotional USP. Because we thought it through and instead of failing at the first obstacle, we save cost from day one and make this a company to work for?

And working on that, we learned a big deal about the faults of the airlines we see in the market. And it boils down to the normal questions: What’s your (emotional) USP? What makes you different, why should the intended consumer decide to use your product. We see too much “me too” in the market. Buy your market share in the B737/A320 shark pond?

30+ years ago, my training officer told me that joke:

A man starts a business selling screws.
His friends questions him: “You buy
the screws for 1 €, you sell them for 95c?
How do you want to make money?”
“Oh, the quantity does it!”

My training officer told me to look after yours. Not only in the company, also your supply chain. Make sure you have long-term suppliers selling you the quality you need for a good reputation.

Later I learned the same lesson from space shuttle Challenger, management ignoring their own experts warning them of the temperature being below safety specifications. Shuttle Columbia dying of a piece of foam worth a few cent perforating the heat shield. Of Concorde crashing from a “minor” piece of scrap metal.

I’ve paid very high (in hard Euro) for another lesson. Starting with a sound idea (regional airlines’ franchise concept to share cost and operate a larger scale of operations), it turned out later that the stakeholders did not look for a franchise, but a means to start their own small operation and “share” the cost with the other small players. Clearly understanding the small operations to face obstacles they cannot overcome on their own. Could not. Cannot. Will not. A costly mistake I made. But lesson learned!

Then at delair I learned about airline disruptions and how our industry uses historic processes to “manage” somehow. How airlines use manpower instead of intelligence to cope i.e. with a winter storm.

With Ndrec, I found a seasoned manager understanding the need to either do it right – or don’t do it. And we got surprised how much money we save if we do it right! Not short term, there we need more to invest. But then very shortly, within less than 10 years. Now we reached the point of the reality check: Will we find solvent institutional investors helping us to pull this off? Cross your fingers.

For all those other airlines out there… Do your homework. First and foremost: What’s your USP? What’s the business case?

Food for Thought
Comments welcome

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Changing Roles

Juergen is one of the very few people, I really mean, VERY FEW, people that understand both airlines and airports.

As many of the readers of this blog know, I am somewhat personally attached to that little airport in Central Germany, Erfurt-Weimar.

Last week I was taken into a discussion by Thuringia’s Minister President Bodo Ramelow, about how to stop the down-spiral of emigrating Thuringians. Which reminded me about the likewise discussion we had in 2009 shortly before I joined Erfurt Airport with the task to stop their downward-spiral on their passengers.

Real Life Example

What I was faced with was an extremely negative image of the airport within the region. And a lot of demands on how to do business from amateurs in the industry, politicians, tourist offices, etc.

First day at work, the GM of Tourism Thuringia, Bärbel Grönegres was quoted in the local newspaper (TA, 02Mar09), having visited the United Arab Emirates to promote medical tourism to Thuringia. Having a Munich-Erfurt flight by Lufthansa-Partner Cirrus Airlines at the time, she recommended the Arabs to take a flight to Frankfurt, to be picked up with a bus for a +3 hour tour to Thuringia. Tourism material did not contain reference to the airport. Questioned about the reason, her reply was “Who knows, how much longer we will have that flight”. Ever since, that became a prime example I use for “negative thinking” or “calling for disaster”.

The next winter, the Thuringian Olympic athletes brought home a record number of medals. But at the following ITB, it was more important to promote Franz Liszt, who lived a dozen years in Weimar. The fact that the Russian-Orthodox chapel, Grand Dutchess Maria Pavlovna who’s invitation brought him to Weimar has built and got buried in is under direct protectorate of the Russion Orthodox “pope”, the Patriarch, such making it a pilgrimage site for the Russian Orthodox church has completely failed to trigger any support by Weimar or Thuringia Tourism. Air Berlin reported it to be a “known reason” for a substantial part of their Russian Berlin-passengers to add Weimar to their travel plans.

In order to promote the government-funded route, after fierce discussions, Cirrus Airlines agreed to offer a low-cost ticket at 99€ return, having only about 6€ after the high taxes on the ticket. That offer was made available especially to the Thuringian government offices and the state development agency (LEG). Nevertheless, LEG planned and executed delegations traveling with the train to Berlin to take flights from Berlin, instead of promoting the route. The same also for the ministries and ministers. Even the responsible minister taking flights from Frankfurt and Munich instead of using the PSO-route he signed responsible for. During the months we’ve actively promoted that 99€-fare also to the industry and the travel agencies and also had it largely available, not one of the flights used up the 99€ tickets allocated to them. Being at the verge of a bankruptcy, Cirrus Airlines finally ceased to operate that route in December 2010.

By the time, working with the local industry associations, political parties I have been able to increase the passenger numbers by about 20 percent. In fact, to date, the airport is far from the 320 thousand passengers I left them with. With Weimar being the neighboring but historically better known city internationally, I pushed forward the renaming to Erfurt-Weimar with the attempt to improve the incoming for the airport. Paid almost completely from the limited marketing budget. A strategic decision executed after our parting-of-ways in December 2010 after my two-year contract was not extended in the wake of the retreat of Cirrus Airlines. A strategic decision though made obsolete by the “political” decision by traffic minister Christian Carius to not replace the route as I recommended with an Amsterdam-service. Sad decision indeed, as with our parting ways, the discussions with KLM were simply discontinued (KLM calling my number reached someone speaking German only, I was gone) and despite their interest in a PSO (public service obligation) financial route support, we had discussed flights based on mere startup incentives and marketing support.

Opposing myself ongoing subsidies, to demand a route but to leave the (substantial) risk completely with the airline is neither the answer. Whereas comparing the CheckIn.com-data about airport catchment areas with the data provided by airports we found that data to be completely off-set in a majority of cases. It caused us to make basic data available for free. But if the data provided by the airport is not hard, but guesstimates or outright lies, when the airline starts a flight based on that data, the airline takes the risk. To not only does the airport sneak out of the responsibility, they increase the airlines’ risk – is that a game? Or serious business?

Fraport Bulgaria’s more than doubled “population within two hours” can not result from the “drive time off-sets implied by Fraport Bulgaria investigating the discrepancy.

Changing Roles

Now since I started in aviation 30 years ago, the market has drastically changed. In the good old days, there were (often highly subsidized) “national airlines”, used to promote the country. Back in my early days, the airlines were the executive for the tourist offices and also worked closely with commercial development agencies. But ever since, those national airlines have either adapted or went out of business. The emerging “low cost” airlines virtually evaporated the income of the airlines, competition becoming fierce.

As I keep emphasizing with my updated image of Purchasing Power and Airports, there is a relation between a strong airport and the regional purchasing power. It is indeed a hen/egg issue, but if you are a small airport in a weak region, maybe it makes sense to consider how to attract travel (tourism, commerce) to your region. Not how to drain your region of the money by sending the population to the Mediterranean for vacation, but by having incoming, scheduled services, by adding point-to-point routes and to attract low cost airlines.

If we do not talk about PSO (Public Service Obligation) where the government pays for basic flight services, if you build an airport and wait for airlines to find you, keep on sleeping (and burning money). So if you are a small airport and you have little to no money, what can you do?

Having an airport is not enough any more.

The airport is part of the region’s infrastructure. As such, it needs to be integrated into a political and commercial strategy. Whereas in the example of Erfurt-Weimar, the airport is being kept as a scapegoat, being challenged in one sentence for the aviation noise (a good joke with so few flights) and for not having flights. A political punch-ball.

Other, successful airports like Memmingen in Southern Germany are integrated into and understood as a strategic value for the regional development. In fact, Memmingen is not politico-owned but owned by more than 60 co-owners from the region’s industry. Such, instead of being a scapegoat for political power games, everyone in the region understands the need to actively support the airport. Anyone harassing the airport confronts everyone in the region. A political suicide!

At Erfurt, I was asked to establish flights to Moscow. One company. 10 employees. Even with a small (expensive) 50-seat aircraft and weekly flights only (which are usually not sufficient for commercial demand), we talk about 40 seats by 52 weeks in two directions or 4.160 tickets to sell every year. But for a decent offer that is useful to the industry, you need at least twice weekly flights.

Leaving that task to attract airlines to the airport alone, at the same time running blame games and scapegoating, the airport cannot justify such flight. But what if the state development agency and the chambers of commerce, on demand by the political PTBs (powers-that-be) qualify the demand from all those small and midsized companies? Not on a low-cost, but with reasonable ticket prices. Not at prime time at the maximum risk for the airline. Maybe instead of a weekly, can the region sustain a double or even triple-weekly flight making it interesting for the companies in the region? Are those companies willing to support the launch period by committing to use the flight, even if slightly more expensive than a flight from Frankfurt or Berlin? Keep in mind, the people have to get there, you also pay for gasoline/parking or rail. Transport to those hubs is not free either. And the longer check-in times make them even less attractive, right?

Interesting approach. I’ve talked to several smaller airports where they agreed that their chamber of commerce and regional development agencies “pre-purchased” tickets at the cost of the average ticket price needed to cover the operational cost. Then they to sell it to their members. Not covering the full cost of operations, but simply taking their share of the risk! Why should they not, if they believe in the numbers and data they provide to the airline to promote their business case?

Then talk about Tourism. Given such flight, are the local tourism PTBs ready to promote such flight in the outlying region? What about other promotion? Don’t leave it to the airport! Is there a joint concept by the political PTBs, the state development and commerce PTBs, the tourism PTBs on what flight they want, how they will promote the flights?

“We have an airport”. That’s nice. But not enough.

And for a Minister President even only on a state level? You better think about a strategy. Or close down the airport. Having flight to summer vacation is not enough. It drains money from your region into those destinations. What’s in it for you? Why do you fund an airport? No scheduled services? No incoming? Do your homework.

Changing Roles

It’s no longer the job of the airline to promote your region! They simply don’t have the funds to do that. It’s not their business case.

It is the job of the political, commercial and tourism PTBs to qualify what they finance an airport for and come up with ideas and business cases for airlines to take the risk to fly there. And no, a “business case” is not necessarily paying subsidies. If you have a good business case that the airline will make money on the route by flying paying passengers, I can rest assure you that the airline will prefer that over subsidies that are usually associated to political nightmares.

Compiling sound numbers is a good start… And yeah, I might be willing to help you with that.

Food for Thought!
Feedback welcome…

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The End of the Airport Passenger Fees?

Juergen is one of the very few people, I really mean, VERY FEW, people that understand both airlines and airports.
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
Comments welcome

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