Aviation and the Learning of Lessons

One of two incidents in aviation questioning the proper application of the "safety first" principle

Since the beginning of flying, aviation learns (often too late) from mistakes. There are some questions rising from the recent debacles at Haneda Airport of an Airbus A350-900 crashing into a Coast Guard aircraft and the Boeing 737-Max9 loosing a dummy door in-flight, that I find noteworthy to share. I will not mention the airlines, considering them victims.

Neither will pour blame over Boeing only again, at Haneda it was an Airbus raising questions. In my humble opinion, think the entire industry has an issue relating to “safety first” recently. And I am afraid, the “commercial focus” on the cost of safety hasn’t ended with the Boeing 737Max debacle with an amok running flight system driving two fully loaded aircraft into the ground just before the Pandemic.

Haneda (Airbus)

Fire trucks infront of the fully burning A350-900 at HanedaAn Airbus A350-900 aircraft crashed into a small Japan Coast Guard Dash-8 aircraft at Tokyo Haneda airport, killing all people aboard the Dash-8. No fatalities aboard the Airbus A350-900. Which in hindsight is a miracle to many experts I heard talking the last days.

  1. Airbus Fire Sensors
    “After the aircraft came to a stop the cockpit crew was not aware of any fire, however, flight attendants reported fire from the aircraft. The purser went to the cockpit and reported the fire and received instruction to evacuate. Evacuation thus began with the two front exits (left and right) closest to the cockpit. Of the other 6 emergency exits 5 were already in fire, only the left aft exit was still usable. The Intercom malfunctioned, communication from the aft aircraft with the cockpit was thus impossible. As result the aft flight attendants gave up receiving instructions from the cockpit and opened the emergency exit on their own initiative” (Source). Later information says there was a several minutes of delay because of missing or misinformation between cockpit and cabin. So why was the communication malfunctioning in that situation? Why were the pilots unaware? Even Haneda Tower should have informed them instantly of that danger! Why haven’t they? And … and why does the crew have to get approval from the flight deck to evacuate when the aircraft is burst into flames and mortal danger imminent?
  2. Airbus Evac Procedures
    Good thing first: The captain [reported only later] was the last one to leave the aircraft. 18 minutes after the aircraft came to a stop. (Source). Wait a minute … 18 Minutes??
    Given he aircraft burned out and was on fire rather instantly after the collision, what the heck have those passengers been thinking or doing? I’ve seen my first flight attendant training back in 1989, the emergency training a major part of the training courses. The shouts, day and night in the training center echoing in my ears: “Move it, move it. Get out of my way!”. But 18 minutes? Especially with the issue of 5 out of 8 emergency exits blocked by fire when the purser went to the cockpit to get evac approval?! I believe both Boeing and the airline must have to review the procedures urgently.

Side note. I find it rather telling that there is a lot, a big lot of footage (images, video) of the A350-900, but virtually none of the smaller Dash-8 suffering all the fatalities. At least, I didn’t see or find any? A nice example of “biased news reporting”?

Portland (Boeing)

Door Plug found in PortlandAbove Portland, Oregon (USA), a Boeing 737-Max9 lost a “door plug” in-flight, by sheer luck, not causing any fatality. That this can end far more tragic is burned into my mind, remembering the Aloha Airlines 737 loosing its entire roof shortly after I’ve been there and flying Aloha. A flight attendant being ejected by the decompression. And given the picture, it makes one wonder on the miracle the entire aircraft didn’t break up. One of the many “near-misses” in my life to date. (Wikipedia)

Aloha Airlines Flight 243

Following the two fatal disasters of 2018+2019 forcing the lengthy grounding and near-bankruptcy of Boeing, the new accident now “naturally” raises the question about the quality of Boeing engineering. In my humble opinion, it does raise the question especially about their constant claim of “Safety First”! With subject matter experts claiming loose screws having caused the door to come apart. What was that about four-eye principle on aircraft construction and all major maintenance?

The door was later found in a teacher’s back yard in Portland Oregon. Just like a phone from the aircraft, the pieces “sailed down”, aerodynamically similar to a Frisbee and landed almost unharmed.

Added 08Feb24: According to preliminary media reporting, there were bolts not just not fastened but missing. Say what??

Is the 737 MAX safe?

Fact: I will neither voluntarily fly, nor allow my immediate family to fly a 737 Max anytime soon. In my humble opinion (IMHO), that aircraft has been misconstructed from the outset and should be shelved for good. It only flies and is approved IMHO for commercial reasons; if it’d be grounded for good, the losses for Boeing can very well proof fatal. To me, it seems the door plug again was a “quick and dirty” solution. On the other end, I won’t “actively” avoid the aircraft, flying was and remains the most secure transport in the world. Just that any incident instantly receives scrutinous media coverage. But yes, booking flights, I usually happen to look at details – and given the choice, avoiding the MAX will be a clear decision making factor for me.

The new incident brings up feedback that I got during the 2019 grounding media uproar. Questions why the “better” Boeing 757 was shelved. It didn’t have the low profile causing engineering complications as there wasn’t enough space under the 737’s wing. Which led to the fatal idea of MCAS, later being the cause for the two fatal crashes killing 346 people. And commercial reasons leading not only to base that on a single sensor (instead of the originally planned three), false readings causing the misinformation of MCAS causing the crashes. But also to the secret implementation not shared with the pilots to avoid potential demand for an “expensive” full type-rating as a new aircraft.

Conclusions

Flight Safety is back to “reactive”. But aircraft engineering must be proactively focused on flight safety! As must be processes, just like the evacuation of aircraft under grim circumstances! Ever since the beginning of flight safety with the Comet-disasters back in the 1950s, aviation “reacted” to disasters. A lesson we also learned  with aircraft deicing.

I truly believe that flight safety ain’t a luxury. Just like “service” or “sustainability” being only identified as “cost factors” by finance-focused aviation managers. The recent “cases” are just more examples where things went awry and off track. There are enough cases, not just old, but rather recent, when airlines in distress started to save on the aircraft safety and maintenance. Usually reducing it to the rule-book, “encouraging” their maintenance staff to “look the other way” and to delay parts replacement in questionable situations. Or to have supervisors “sign off” as the additional pair of eyes but in fact reducing it to a single pair of eyes on the job! To safe cost.

Boeing engineers are well advised to return to spend a few more screws  and bolts on securing a door plug and to demand four-eye-principle on their construction.
Airbus better finds out, what too so long to evacuate the aircraft.

All else is to be looked at when the incident reports come out. And media is well advised to not just jump the incident, but also report on the final findings. Not 1:1 copying the press release, but questioning them. I think that would be good for (shareholder-value-focused) “managers” to not stray from “Safety First”. As in the end, it’s a trust thing.

Food for Thought
Comments welcome…

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Too Many Chiefs …

… and the Question about System Relevant Jobs

Managers vs. Executives

Today I had a very emotional discussion about the need for new IT, new processes and all that other stuff the consulting industry keeps telling us, we got to have. Consultants, that have a standing relation inside the aviation company, with constant projects to “improve” and streamline the work.

At what cost?

Having addressed Consulting, Outsourcing, Cloud? COTS or tailormade back in August 2020, we meanwhile discussed over and again the issue of “System Relevant Jobs”. Back in my economics studies, 40 years ago, the general manager of my intern company questioned the increasing “management jobs” by academics, reminding, emphasizing that in the end, it is all about products. Even in whole sale (it was a central logistics warehouse) it’d be a question about benefit for seller and buyer, where the warehouse we worked in distributed the goods to the own satellite stores. He warned, that every intermediary becomes a leech and products becoming more expensive, not cheaper, by adding more and more intermediaries into the pool. His assumption was that 50% management surplus would be viable. And I should mention that he warned about dependencies from “rogue countries”, like China. Cheap but at what cost?

Being very pro globalization in general, he did call it hypocrisy to buy cheap in China, knowing that this is simply based on abuse of work force and stealing of patents and other ideas from other countries – back in the days, China did not much invent themselves, they were known copycats. In Germany meanwhile called “precarious jobs”, that don’t provide decent living, the living standards of workers in China at the time were at best questionable.

System Relevant Jobs

System RelevanceIs your job “system relevant”? If you work in home office, I can tell you the answer is No. If you work in consulting, I can very likely tell you the answer being No. Working in aviation and transport, the answer very likely is No. And if your salary is above average, the answer also very likely is No.

It’s all about leeches. Draining the money out of the really system relevant people, who normally are overworked, but underpaid. Not on the picture are farmers, friends of the family farming, living since I grew up on the brink of bankruptcies over and again. With more and more demands and pay for their products (milk, meat, grain, etc.) being often below the cost of production. Then they get generously state aid, to keep them working on subsistence levels.

The NHS personnel is on strike, the medical situation there in the U.K., also in Germany, being devastating. 24 hour shifts, 3 days “on call” duty?

Logistics drivers, the one delivering all those fancy goods we all buy, paid at minimum wage or just very little above for good feeling? Uber being a gigacorn? Delivery “Heroes”? But the managers in their offices having a “decent salary”? Who’s doing the work and what do we pay them?

U.N. Sustainable Development Goals

The United Nations Sustainable Development Goals

There are 17 SDGs. But all statistics show that all of them are actually still deteriorating. And if companies call themselves “sustainable”, they usually focus on the easy SDGs, most times at the cost of the others. Yes, we invest into climate, we buy CO2-certificates. And buy our growing hunger for power from the grid. Sure we buy “green power”… We upgrade our HR Director to “Chief HR Officer” and call it a board position, but only on paper to look good. We invest in R&D to find solutions how we can become sustainable in the future, while we fight the unions and deny salary increases for our workers. We add the (female) position of Chief Sustainability Officer to express our commitment to the SDGs. Oops, we forgot to give her a budget or empower her responsibilities? Examples aplenty…

We need companies to do the right thing. To embrace sustainability and evolve. It’d give them a competitive edge, a USP. When I was a child, it was common that people worked for “Daimler” (Mercedes-Benz) or “Bosch” all their live. You looked after your stuff from post-school training to retirement – often even beyond. Then they became “Human Resources” to managers who turned “shareholder value” from “what’s good for the company” and “long-term thinking” into “what’s good for my bonus” and “who cares about the time after I’m gone”.

A Question of Respect

My “intern” boss (again) taught me respect for everyone. The guy on the fork-lift, the cleaners, truck drivers and “secretaries” (yeah, we still had those). He taught us to set up the coffee when it was empty and not bother the secretaries. To clean up ourselves to make the cleaners’ jobs easier. To think beyond our petty box as “office workers” and value the hard work of the real workers. Also to question, but then also embrace the value of our work. IF we added value.

And in the pandemic, we should have (but obviously didn’t) learn the other lesson. That it’s not enough to sit at the windows “applauding” the system relevant workers that went above and beyond any perceivable “line of duty”, but to pay them decently. To look after them and keep in mind that they also have families to sustain, vacation wishes that go beyond the balcony on an old residential block they only can afford with added state aid.

Beyond White- and Greenwashing

I recently attended a multi-week project by United Nations Climate Action on Circular Economy. And the need for lifecycle-assessment. But it was also mostly #talkthetalk and academic ideas. And I had several objectives that then led to my image about the panacea distraction.

Aside me wondering, of that lady in the image might be an unpaid intern? Another reflection of the value HR managers and their bosses have about the value of training and labor. Any employer not paying their interns should be put in the pillory. For labor abuse!

Oh yes, and that goes in line with midwifes that quit their jobs as governments don’t reduce but add to the legal strains in the job. Or riders asked to bring their own bikes – and repair, all at minimum wage and abusive “time management”. Or airlines outsourcing their pilots forcing them into bogus self-employment without vacation or sick-leave cover, paid wages below their own pilots. Back in my intern-days, there were “personnel agencies” too. But to hire someone for short-term was always about 50% higher cost than employing someone directly. What went wrong there?

Yes I could go on.

Food for Thought
Comments welcome!

Yes. Comments welcome: Do you agree, disagree, partially, am I right, wrong, do I oversee anything? Have your own examples? What would, could and should we do?

 

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A (Fast Forward) Look Into 2022/23

In the recent weeks, there were some discussions about hopes and expectations for 2022. Related to aviation, tourism, Corona and politics… So let me share some expectations here in a (fast forward) look into 2022/23.

And sure, let’s start with

La Linea Corona 2022

The Pandemic …

MeaslesIn the first year of the pandemic, in the first wave in May, I voiced my expectation already of Corona CoVID-19 as the new Measles. It’s even less, it will be more like the Flu. Get vaccinated one year for the latest SARS-variants. And keep in mind that SARS is in the wild for almost 20 years, it ain’t new! So to take it with the former German Minister for Health Jens Spahn, we will (globally) have 3G; in German Geimpft (vaccinated), Genesen (recovered) or Gestorben (died).

Omicron being good, as it spreads aggressively with a focus on unvaccinated people, who will then be recovered (or dead). Yes, Yulia and I are boostered, the kids are “officially vaccinated”, got their second shot early January, about as quickly as it was possible for 5 to 11 year old’s. Both wanted it, both had friends suffering the infection with side effects.

But now a new variant hits from Portugal, that seems immune to the vaccines or body’s own defense from previous infection. And Germany is hit by another peak. Whereas the infection rates a mere year ago would have called for lock-downs…? But our airlines promote travel without masks… And what happens, if the next variant is a more hostile version again?

… Turning Endemic (in Europe and U.S.)

Endemic vs. Pandemic

There was a very good article on Al Jazeera about why the WHO refuses to turn Covid from a pandemic to an endemic state. Including the graph linked here on the impact of existing endemic diseases.

So given we have covered European and North American countries with enough vaccine for anyone who wants to be vaccinated, three, even four times, the times for lock-down will slowly be past. That will have impact to recovery of intra-European and North American air travel.

The only reasoning allowing for lifting air travel restrictions will then be the the hospitalization rates, though I expect those to go down to more manageable levels. Though we have ongoing reports of countries less privileged with vaccine access that report problems:

#vaccinationalism

#vaccinationalism (Source: Deutsche Welle)The next big challenge is the look across borders and out of the “industry nations”. Over and again, news about vaccines that expired in the richer nations were met by the ones of i.e. African countries being delivered expiring vaccines or even ones that were not certified in the donor countries. At the same time, vaccines like the Russian Sputnik were still not “certified”. In turn, my own mother-in-law was denied entry into Europe as she got Sputnik, to visit to take care of my kids in my absence, while Yulia (my wife) works full time too.

Air Travel Industry #testingregime

“Principle Hope” and the Saint-Florian’s Principle dominate our industry: “Oh holy dear Saint Florian, don’t burn my house, take the neighbors one.”

During the recent handball European Championships, the German’s team played. With a mere four players from the core team, all others infected. Airlines and their lobbyists demand to end mask requirements and testing regimes in gross negligence and full knowledge that all those new variants can only spread that quickly globally by means of air travel.

It is my personal understanding that aviation needs to improve health rules and not hide behind the individual, political rules in place somewhere. How expensive would it be to have temperature scanners added into the check-in- and or security-process? And if someone has high temperature, to demand wearing of an FFP2-mask in flight. A mask that should then be provided if needed. They are no longer excessively expensive. A requirement shared by security with the airline, to ensure safety of the other passengers (and the flight crews). We must think beyond the current pandemic, as this is nothing new, just the worst case so far in “aviation history”.

Thermal ScreeningAirports would be well advised to have processes in place to ensure #testingregime for the current and future infections., demanding and assuring the ability for pre-flight testing.

Given the issue of #vaccinationalism, I expect a first “recovery” in the rich industry nations, but also future variants swapping across those countries like Tsunamis from the neglected countries. Again, what happened to #weareallinthistogether? Or #thenewnormal?

This week I got reminded that the next variant-rise in infections that the experts predict for coming fall (again) is so much like airline winter ops. It hits every year again. To the surprise of the airport and airline managers…? Why is it that the mask requirement is liftet in Germany and I still enter shops with a mask? With about 50% of the shop visitors doing likewise – while the others play Russian Roulette?

Airline Loads and Revenue

IATA Air Passenger Analysis 2022-04
IATA Air Passenger Analysis 2022-04

Also “again”, we had discussed load and revenue just recently. Whereas aviation experts report own experience with flights cancelled on short notice. Which is met by reports from many airports, that airlines register more flights than sensible, with a large number cancelled in advance due to lack of passengers/revenue.

I keep voicing my concerns that airline management must rethink. The KPI “load factor” is useless by itself, even dangerous. The KPI we must focus on is “revenue”. But in the recent IATA Regional Economic Briefs stopped reporting KPIs that reflect on revenue. Likely as they try to avoid “bad news”? Good-weather-mentality. Works well, when there is sunshine, but we are now in a thunderstorm. Even with some brief respite, we’re anywhere but “back to normal”.

Cabin Crew FFP2+GlovesReports I read fed hopes again about a summer recovery in Europe. A recovery now threatened by the new BA.5 variant spreading throughout Europe. And again, what is the airlines’ role in spreading those new variants so quickly across countries? And Lufthansa recently cancelled 600 flights (5%) for lack of staff. A main reason being the infection of their own. Mainly infected “at work”. What was that again about employee health protection? Naaaw, let’s not play it safe, let’s go back to old normal?

Personally, I’m a bit afraid, we are just in the eye of the storm…

Back to (the new) Normal?

Change Resistance (shutterstock_210479080 licensed)Speaking to airline and airport managers, they prioritize no “new normal” which they promoted in the beginning of the pandemic. But they focus to “renormalize” back to the old normal. Which bites them in the butt over and again. Demands are to lift mask and testing requirements. In an obvious ignorance of the pandemic development. In line with political developments, but not in line with the infection rates.

As I asked before: Why do the new variants spread globally in a matter of weeks, if not days. I am quite sure, they are not contracted that quickly by air. Nor by rail, bus of freight. This should have been a wake-up-call for aviation to understand their role in globalization, not only in commerce, but also in health, in the spread of diseases. How many pandemics does it need for us to start “new thinking” and take responsibility?

What about #weareallinthistogether and #thenewnormal? Ain’t this the “safest industry in the world”? Safety first? What happens if we stray from that priority towards maximized returns, we have learned all watching and commenting on Boeing and the Max (and the 787) disaster(s).

Flying Empty

Hibernating Aircraft at BRUThere can be reasons to fly an aircraft even empty.

One being to avoid aircraft hibernation. If an aircraft is not used for too long (and that time frame is rather short), the requirements to “reactivate” the aircraft explode the complexity and cost to do it. So it makes sense to consider which aircraft to take into hibernation, which ones may come soon back into service. And rotate the reserves to make sure they are ready to fly when needed.

Empty CabinAnother would be to rotate the pilots to make sure they all keep their “type rating”, their license to fly the aircraft. Which also expires just too quickly. And while airlines now recognize the shortfall on pilots that they had either “laid off” (fired) and (or) didn’t support in keeping their type rating, the current feedback from pilots is that airlines still fail to have programs in place to rotate the pilots as good as they could to keep the type-ratings.

The Role of IATA?

IATA mask mandatesI am very much missing the leadership I’d expect from IATA. Not a leadership towards the next disaster, but same rule for all. Like requirements to implement measures helping to identify sick passengers. Standards how to handle such. What if it’s not a single traveler, but a small child traveling with its family? But in the end, I believe if in doubt, a medical flight readiness certificate may be required. But also made available at airports offering commercial flights. Maybe demanding FFP2 mask. Maybe even plastic gloves or a hazmat-suit. What about the ticket? Will it be allowed to rebook. Airlines and/or travel insurances may need special rules for handling medically denied boarding? Maybe that we must add certain insurance as default to tickets?
But looking at the current line of communication by IATA, it does show a frightening ignorance, promoting future infection spread.

All things, the IATA could set up and require. Or ICAO if IATA doesn’t have the balls. #talkthetalk #discouragechange …

Side note: There was a nice article back in December ’20 from Simple Flying, Why You Shouldn’t Expect Masks To Disappear From Planes Soon… But who cares about the crap we thought reasonable yesterday?

War in the Ukraine

Donetsk Airport
Donetsk Airport – 2014 before and after

Being married to a Russian with close friends in the Ukraine, I would have never, never-ever believed an invasion of Ukraine. And while NATO-expansion threatened Russia – reminding of the political uproar when Khrushchev attempted to base nuclear missiles on the U.S. “doorstep”. Whereas NATO territory in fact is as close or closer to the Russian capital cities of Saint Petersburg and Moscow. That taken into account, there is no reasoning for an invasion of the Ukraine or the claims of a denazification. C’mon, I’m from Germany and Russia is the aggressor, too close to comfort following the propaganda and strategies of the Third Reich.

It became more obvious, when the “special operation” failed to achieve the Russian targets, when they invaded from Belarus towards Kiev and when they leave scorched earth (and hundred of massacred civilians) behind. The entire Donbass region now looks like Donetsk Airport, as does Mariupol.

The streamlining of the Russian media is totally in line with German propaganda. Control the media, promote your side, anyone voicing other opinion is taken to jail. Gestapo like. The next level being Stasi-methods jailing people already if there are unqualified claims of opposition. I am indeed afraid we will see that coming.

So with a focus on the impact of aviation? We are back into cold-war times. No overflying of the Russian territories is #thenewnormal for years to come. There will be exceptions – there are still flights between Russia and Turkey or Russia and China. How that will backfire on long-haul airlines though? There are discussions in the U.S. to ban those airlines from connecting to U.S. airlines. Which in turn would sure be followed by Europe. And then? This war has a big impact on our industry.

The Energy Crisis 2.0

Primary Energy Demand vs. CO2While the aviation industry and it’s Powers-That-Be (PTBs) argue that we must delay sustainable flight in face of the crisis, I am on a complete opposite belief. We must, but we failed, to take the crisis as a chance for overdue change. Instead of investing into sustainable fuels and developments, into optimizing the airspace, our PTB try to go back to old normal. Then finding reasons to delay the change further.

Power from the Plug Greenwashing
The Sustainability-Energy Dilemma

It’s the very same with the necessary transition on ground, in Germany, fuel is subsidized now, not forcing consumption to be reduced, but we keep using more and more energy. Which in turn does result in increasing demand for crude oil, not in a reduction.

All “sustainable investors” come up with is “green tech”. Demanding more power, not less. And we produce more plastic every year, even in this crisis and even knowing we hit the 1.5°C target by 2026 most likely, not even by 2030. As we consume more and more crude oil, wind, solar and even nuclear power being a drop on a hot stone. And while there are ideas aplenty out there, I know of too many projects that happen to fail triggering investor interest.

"Our Obsession with technology will slow down the green transition.” [Lubomila Jordanova]In my humble opinion, most “impact investors” are greenwashers. It’s beyond cognitive dissonance when they focus their investments on “green tech” but in turn increase the energy demand instead of focusing on solutions that safe and conserve energy. Yes, I can sing not just a song but an entire opera about “green investors” that either look for max-profit under a green umbrella or they look for the next “tech unicorn”. It’s what I said before. If you want to invest into sustainability, pick your industry. Pick your “brown” company and invest into solutions that change that industry. Or. Look at energy consumers and how you can improve their energy consumption. Or replace them. And yes, any of your investments should target a reduction of energy consumption. Which can be, to provide the same service in demand, but having a clear strategy on your energy source.

Kolibri SDGs7+13 - saving 2 Gigatons CO2 by 2030And we talk about leveling the energy to a sustainable level. Use as much energy as you return. Like Kolibri. Not just launching the airline, but having plans to develop your own sustainable fuel-source. Which can be Synfuel. Which still uses energy and creates CO2, but no more than it takes from the air to create it. A circular solution. Which we assume would trigger the use of SynFuel locally, which works better on a global scale than e-mobility, which has the worse life-cycle impact then. But so far, all “impact investors” we talked to expressed our idea to be very good and worthwhile, but they did not intend to invest themselves. Then they invest into money-graves like Uber or

The Fairy-Tale of Travel Recovery

LaLinea Corona 2023Just like last year (2021), we will have a careless “Corona summer”. We will very likely hit another infectious peak by fall – all the pandemic experts are warning of that, we better start listening. With BA.5 now spreading and aircraft full of mask-free travelers likely much faster. So here I go early this year with the update of LaLinea Corona extending into 2023.

While most our political and industry leaders lead us from the darkness into deception and back into the cold.

aircraft interceptThe war in the Ukraine will impact not just long-haul travel, like the reestablishing of the polar route avoiding Russian air space. And that we can not trust in “neutral air space” we learned when Belarus took down a civil aircraft from transit with the sole reason to jail a political opponent living in exile abroad.

We have rules. But I see too many of them “bent” to commercial or political benefit. Rules the international and aviation communities leave unpunished if broken or bent.

Greenwashing Demon (shutterstock_1170455851)

So my outlook 2022/23 is kind of bleak. Given our own and our leaders ignorance, the pandemic ain’t over, Putin will continue wreaking havoc (not just to the Ukraine) and the planet will continue warming. And the people who could make a change keep focusing on maximum financial ROI, wearing a cheap “green” mask.

#talkthetalk #greenwashing #cognitivedissonance #cheapexcuses #nochangeleadership etc.

Food for Thought
Comments Welcome

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Impact Investing vs. Whitewashing

Impact Investing

Impact Investing

I am very, very happy that I started speaking to Family Offices and regret that the Pandemic forced a reschedule of one event and kept me from attending another this week. But I am grateful to be allowed attending the first Family Office virtual conferences. It’s a rather steep learning curve. I am grateful for any event reference or invitation that I got and hopefully will still get.

European Climate Goals

Given today’s jabbering by the EU Commission (Mme. von der Leyen) that they – wow – will reduce the CO2 to 55% of the 1990-level … Oh wow? Shall I be impressed? Or cry? EU parliament would have been okay with 60% the news say. But even as is, this “deal” is full of small-print and not really worth the paper it’s written on.

We must be better to make an impact. And we better stop lip-services, white- and greenwashing but address the issues we can address today. Or this expert saying we’re way too late is right.

Though this is totally in line with my initial experience about “impact investing”. Lots of talk and lip services, with little substance too. Hard to find the ones that believe that this is something real.

And what industry is more in desperate need for a sustainability makeover. And having the chance for it?

Aviation Impact Investment
… a Barrel Burst?

Zunum 50 seat electric planeWhile we have clear plans to become Carbon-Neutral in realistically in three to five years, you got to start. And an “impact investor” told me this week that we are too little innovative. Really?

The EU plans give airlines 15 more years to fly dirty. Yes, that is a barrel burst! You got to be kidding me. But sure, it’s completely in line with German and European aviation lobbying, managed well by Lufthansa, Ryanair and the likes. Lufthansa, the airline with the single-largest bailout package in Europe but with virtually no ties attached, especially none about job saving or evolution into turning “green” and flying clean(er). And in Hamburg I heard the synkerosene pilot suffered from disinterest by Lufthansa, aside of a single carbon-neutral flight by Lufthansa Cargo. A nice example of greenwashing!

I’ve summarized the possibilities to turn aviation carbon-neutral for a start (and what comes then) into another article Clean Aviation Whitewashing and the Real Deal, which I publish simultaneously with this article. But the Future of Clean Aviation is Now. It just needs someone with a real interest to start the process. No talking, no lip-services, no whitewashing, but the real deal! With a real ROI.

Impact Investment in IT & AI … What Impact?

AI Impact InvestingThere is a lot of buzz ongoing about Impact Investment in IT and AI. Whereas I just wrote about Big Data & AI, feedback from family offices principals recently confirm my assumption. Of one emphasizing that ESG “tools” are usually a means to white- and greenwash family offices’ IT investments. And as I posted that on LinkedIn, got a lot of feedback from other family office principals that IT hardly makes a real impact by itself. It’s simply a profit-focused investment, mostly just improving existing processes or digitalizing them.

There also was a discussion this week about “decision making AI” or “decision support IT”. From my aviation background, I see IT as an important support tool. One that improves productivity, but more important safety. I do not see an IA-tool taking more than a supportive role at the time being. But I see a lot of claims that direction, which I can only consider white- and greenwashing.

It’s a Trust Thing

Use a magnet to find the needle in the haystack
Oops. Didn’t we tell you? We seek the toothpick…

In my opinion, there is no “impact investing” if you don’t find the right managers with a mindset to leave the beaten path and find profitable developments in the industry. For KOLIBRI.aero we don’t just think about carbon-neutral aviation. Or some solar parks. We think beyond! We understand it’s our duty to make an impact. Investing into our people and the regions we serve. To foster gender equality, diversity and to develop a future beyond our own. In turn, KOLIBRI.aero addresses not two or three, but all 17 of the U.N. Sustainability Development Goals.

In the overall plans, there is one issue being in the U.N. SDGs and EU’s TEN-T, regional connectivity at affordable price. Going carbon-neutral is more important on that in our opinion, but there are obstacles that must be overcome, that is a journey. Decently paid, qualified jobs and ongoing, structured training to fight against poverty. Ideas aplenty on how to establish a disruptive airline, that shows how sustainable aviation can be. If you look outside the box. If you embrace “sustainability”, even the notoriously loss-making scapegoat aviation can change.

The Quick and Dirty

If you want to go Fast, go Alone. If you want to go Far, go TogetherOn the other side – and back to the topic of my previous article, Big Data and AI provide quick success stories. So much easier to use those for white- and greenwashing. But real impact investment may not be so sexy, it may take a longer breath. To turn around our world is a journey, no sprint. It’s why even UBS recently confirmed in a webinar that family offices are more likely the ones truly investing into impact. Because they think long-term. About family impact across generations. Not as politicos or banks or “institutional investors” and venture capitalists in quick, maximized returns, happily overlooking the negative impacts for an improved profitability.

… or The Neverending Story

The concept of the Hyperlook has long ago been visualized by Roger Leloup.A German investor this week told me: “There is too little change in what you’re doing.” That investor referred to either air taxi or hyperloop. Whereas I’ve often enough expressed my concerns about air traffic control taking individual mobility into the third dimension and into potential conflict with commercial (and military) aviation. Just thinking about the increasing drone-warnings disrupting airport operations the past year. That is a very long way to go.

The same for hyperloop, which may connect high-density routes, similar to (German) Transrapid in China. Will this be more successful? The concept is around for more than half a century. And I don’t like the pipes over ground, even Roger Leloup planned them underground. I’ve written more than a year ago in the #flygskam Reality Check about it and about the so much smaller footprint an airport has.

… Academic Thinking – Research Forever

Academic ResearchGlobal CO2 emissions dropped by 7%, with 11% in Europe due to Corona. Especially aviation reduced due to the lockdown by 22% global, some regions by 30%. But those are expected to come back quickly (Source).

Now the EU says it turns the European Investment Bank into a Climate Bank. And they will focus on research. Or to give the dinosaurs a facelift. Maybe it makes more sense to look for ideas to apply the research results to the real world? Why is it that German Transrapid only runs in China, European Skype is now U.S. Microsoft, the first industrial Synkerosene-facility is being build in Norway (EU associated)? Examples aplenty. We research but we’re utterly incompetent turning research into practical products.

Others are faster, but we have a PLANPeople should take rail the politicos wrote. Yeah, I can see Merkel spending a day to travel from Berlin to Brussels. An interesting LinkedIn post, and German Tagesschau reports “Strategy falls short of what is possible and necessary”. A carbon-neutral aviation we plan on existing technological solutions for 2025, latest 2027 for Kolibri and by 2030 operating +200 aircraft carbon-neutral.

It’s embarrassing! Why does everyone find reasons not to invest in large-scale change? No, it is not quick, requires industrial site funding, but it’s about real change! Which in turn would apply pressure on the “establishment” to get their butts up and move. Get out of your comfort zone and make a change.

Divesting the Bad, Investing in Sustainability

Scottish Widows For 200 YearsThere are exceptionally good examples recently, like Scottish Widows devesting “bad stocks” in the value of almost half a million Euro. Whoops?

And whoops again. But they work with Black Rock, a company with a very bad reputation, funding most of the dirty stocks in the world. But on the other side, Black Rock may have started their journey to change? Maybe the money divested may be well invested into those change makers?

Corona is a testing time for about everybody. But also an opportunity for new methods and thinking to rise.

Impact Investment for better ROI!

Kolibri - disrupt aviationThough also notable, there is a bad misinterpretation that impact investment would mean low ROI. I think our business concept for Kolibri is looking at very competitive ROI at a residual risk below other investments. But it is so much easier to accuse impact investment to justify one owns look the other direction, right?

Impact Investment ain’t Philanthropy.
Invest into the future and benefit from it!

And as real impact investment gains support and more and more investors look at their investment portfolio and clear out the dirt, suddenly your “max-ROI”-investment in crude oil, guns or other “bad investments” will turn foul on you. Investment into the main investor in “bad business”, namely Black Rock will backfire on your own reputation. So Black Rock will likely recognize the headwinds and start divesting too? Not to be caught in the fray.

Funds, Indices, Shares or what?

Change ResistanceWell, it’s always easy to invest into existing business. Buying in on indices or major shares, you don’t need to understand anything beyond their “performance” and “marketing message”. If they wash well enough, they might appear shining green or white, right?

As if we did not learn the very recent lessons from German Property Group, Wirecard? On a report that week, a Shortseller mentioned that the higher the interests and dividends, the likelier they are on a rush against the wall. So they look at those stocks first. As do greedy investors…

My very personal experience includes working for a company that became one of the “New Market winners” when they entered the stock market. Happened, after a short flash in the pan, they ended up a penny stock.

Grounded Aircraft FleetsThe “typical” aviation investment is aircraft funds. Whereas KPMG valued them at an average 4% return in 2019, look at all those assets now. Liabilities in most cases, because they had and have no USP. And even back in 2019, the big aircraft lessors being well established with the airlines made good returns, but many funds also underperformed or failed completely.

Shareholder value got a very bad reputation, didn’t it? As if all shareholders would believe in Max-ROI? How about some long-term benefits, how about impact, sustainability and a return that is above the inflation rate and what your bank pays? But that is to my experience and observations the normal “manager type” our world suffers from. Maximizing the own short-term remuneration and bonuses, leaving a wreck behind. Back to IT-investments?

… or what?

Another version has a third question: Who wants to lead the change. Whoops, all gone…

Especially thinking about impact investment, we need long-term thinking. Something bank managers, institutional investors and venture capitalists fail to provide. We need people thinking in decades, in generations. We need Family Offices, private investors. And we need company managers, entrepreneurs, founders thinking not in three years at max ROI, but in 10 years and a real ROI, including but beyond monetary. Maybe at a much better ROI than those straw-fire-startups burn up?

What Impact Do You Target?

What’s the “Impact” you want to make? Is Tesla truly the future? Or is it more hydrogen? How about impact on poverty? Why not investing in “developing countries”, poor countries? Giving them the infrastructure and tools to develop themselves. Another German history lesson. While the leading industry nations cannibalized German technology, machines, entire factories, it left a void in it’s wake. A void that was filled with the help of the Marshall Plan leading Germany into the Wirtschaftswunder.

The investments back in those days did not target the surviving companies, but enabled startups. The remains of those funds are known as KfW, Germany’s Bank for Reconstruction.

Impact vs. Whitewashing

My final topic today is to take a look at the United Nations Sustainable Development Goals or U.N. SDGs.

United Nations Sustainable Development Goals

Good Health & Wellbeing = biotech, right? Every biotech something claims to be SDG3, even the pharma-giants o chem-giant BASF.
Or Decent work and economic growth also used a lot for good argument to be “sustainable”. The Real Estate industry talks a lot about their focus on 9 and 11. Those are just the ones I see a lot “abused”. But also tech companies claiming sustainable under 3 ,4, 5 and 10… Be careful if someone tells you they’d be “sustainable” under consideration of the SDGs.

I like the approach of some family offices very much, that they qualify the real impact. Over time, what is the change. Targets, Milestones. And understanding that real change takes real efforts.

Food for Thought
Comments welcome!

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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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The True Meaning of Corporate Social Responsibility

For quite a while, I am stumbling over the issue of the common investor understanding of Corporate Social Responsibility (CSR) and their implication that it is the same as Sustainability. Which it is not.

Wikipedia a.k.a. an Academic Idea

Wikipedia on CSRReading the Wikipedia page about it, they see it as a high-level code of conduct for large, international organisations. And focused on the representation of the company towards its customers. I think we must step back and make a change. A change to how we must understand corporate social responsibility. And not just, but especially in times of Corona, this is not a nice to have, it is a desperately needed definition update!

Shareholder Value vs. CSR

The Rise and Fall of Dennis MuilenburgIf you focus on shareholder value, human resources and only your own, personal profit, you end up in a deep, dark pit. Sometimes, like Boeing’s Muilenburg and others who have been on the Olymp, just for that much deeper a fall. Examples aplenty.

In most cases, it’s like the recent decline in employee morale at Lufthansa, Carsten Spohr shelving Germanwings in a “strategic” and likely necessary move, but without the touch to understand the emotional repercussions on overall staff. Them having very well in mind the fate of Contact Air, Cirrus Airlines, but also Air Berlin with their last CEO a Spohr-lackey sent to liquidate the airline. And sure, there is quite some green- and whitewashing involved by such CEOs, having their own “sustainability” and “CSR” departments.

Basic Principle

So what is “CSR” truly about? Or should be? Like with all such “definitions”, there has been a basic idea. Then it was abused to abstraction to #whitewash investments and make them attractive to investors.

To understand the original idea behind corporate social responsibility you simply need to read it. It is everything about the social responsibilities in corporate (organisational) environments. Is it social to support sustainability? Definitely. But not only. Those definitions applied to CSR crippled the original definition. Then the #whitewashing continued. As Wikipedia refers to, there’s a cost-benefit analysis. Don’t get me wrong, it makes sense. But then let’s name it – it’s a business model, has nothing to do with philanthropy.

Micro Level Social Responsibility

Branson on EmployeesCorporate Social Responsibility starts with your immediate environment: Your own organisation!

When I started my aviation career with American Airlines under Bob Crandall, we were a family. My friends at Delta and Pan Am envied us for that family spirit, called us “brain washed”. To date, we were not brain washed, but professionally motivated. Something I miss since the button counters took over. Something Carolyn McCall at easyJet understood and (as I predicted) what left easyJet with her. The top management understanding that humans are no resource and that motivated staff and service are invaluable assets!

Air Asia CEO Tony Fernandes on staff importance CSRAside the example i used on the different approaches between Alex Cruz at British Airways and Branson’s Virgin Atlantic, there was a noteworthy post by Tony Fernandes of Air Asia. Please read it, this is only a key message out of it:

“What always drove us was our people, our AllStars . It’s what’s drives us every time we are in a Crisis. We must do whatever to protect their jobs.”

CSR the KOLIBRI.aero Style

United Nations Sustainable Development GoalsCo-Founder Ndrec coming from a military background, me grown up with American military and starting my career with American, it was clear from the very start, that developing such a better airline, aside profitability ☑ (check), USPs ☑ (check) and sustainability ☑ (check), we must take care of “ours”. What we considered and consider true “CSR”. From the outset, we such looked at staff management and banned to wording of “Human Resources” and its shortened version “HR”. And we looked at the locations we plan bases for, beyond the company, but the impact such development has to the communities “we serve”.

Aviation holistic viewIt might be surprising to the bean counters (accountant-mindset “managers”) that all of our related “cost centers” turned out to be no just driving loyalty, but to be true profit centers and vital in our attempt to melt the cost factors to competitive levels. As a start-up, investing into all the company’s assets, you must be competitive against all those large, established companies like easyJet owning around 70% of their fleet, cost down to maintenance, with roughly 25% being paid off and around 5% being leased to cover ad hoc opportunities (like taking over Air Berlin routes). And while now being a “burden” in Corona times, airlines cannot drop out of leasing either, so the cost still is there. But those airlines can secure credits based on their (aircraft) assets. To develop profit centers that allow to cut down the cost to competitive levels such ain’t a mere strategy, but a vital need.

Summary

 

The Man in the Mirror (Michael Jackson)

As in all my posts addressing moral and ethics, I turn back to my father, who told me that you got to be first and foremost someone you see in the mirror and you like the guy. Secondly, despite all mistakes you do, you must keep your sheet clean. Your sins will backfire on you.

So you got to start with the good old (wo)man in the mirror. Then think about “yours truly”, family, employees. Then look after the extended community, local and work. If you look at all that, sustainability will be a “natural development” for you.

Food for Thought
Comments welcome!

 

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The Financial Impact of Air Travel

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

GFK Purchasing Power vs. Airport 2020You all know my graphic merging the GFK purchasing power map with the Wikipedia map of airports that I use to visualize the relation between the both.

Now my friend Ged had put together some numbers, simplifying but following mostly what I used myself in discussions with tourism offices, chamber of commerce, politicos and the other stakeholders that in Germany frequently fight against their airports. Those stakeholders keep failing to understand the commercial impact of “their airports”. In Germany, it’s “airport bashing”. Aircraft noise being an enemy. Transportation statistics on environmental issues beautified to condemn the airlines, I just wrote about the #flygskam reality check.

I have some improvements, but maybe you want to see the info about Ged’s presentation first?

New Airline Routes Are Worth Huge Amounts To Destinations

There are some shortcomings that from experience I do address when talking to the local stakeholders beyond airports. But most politicians I found to prefer airport bashing to understanding. And most airports (not all, there is a slow change) work alone on the route development process. Stakeholders like chambers of commerce, tourism boards, politicians or local media focusing on “other things”. And my original use case was Erfurt with Cirrus Airlines, when I tried to attract KLM to Amsterdam with 70-seat aircraft.

Doing the mathsSo let me quickly adjust Ged’s numbers.

First of all, I prefer frequency over size, so I think we should talk about i.e. a route with 100 seats. Instead of a trice weekly that fails to attract business travelers and suffers such from a higher seasonality, I’d look in turn at a daily service. So let’s keep to the example of an Amsterdam-service with KLM. As operated by KLM will also get you the more attractive ticket prices they can offer.

So over the year, a “daily service” accounts to six weekly flights or about 330 round trips. That accounts (at 100 seats) to 330 days x 1 flight/day x 100 seats x2 (return trip) = 66000 seats. Or slightly more than Ged’s assumption of 29,640 outbound seats we use for typical statistics, we have 33,000. Slightly more, but triggering commercial passengers helps to fill the plane and get some improved ticket revenue.
Talking about 90% load factor – and I agree with Ged, that is minimum what you better plan for nowadays, we need to sell 29,700 seats. For easier calculation, let’s say we must sell 30,000 seats.

Now comes Ged’s mistake, a rather common one, the “inside-out” look.

Passengers never travel only one direction on a plane, ideally they originate on both sides. Different on summer charter flights, I know. But we talk scheduled and low cost services here. So depending on the destination, let’s take the simple equal distribution of in- and outbound travelers. So we talk about 15,000 travelers we target “inbound”.

Next I agree, € 250 total average spend per day for a four day trip is reasonable. But again, I’d adjust slightly here.

Not all travelers go to hotels, there usually is a valuable VFR traffic, visiting friends and relatives. So I’d use only a lower, more conservative €500 for trip spending.
But then Ged fails to use an important multiplier. EU (European Union) usually uses the factor 2.5 (sometimes 3) on the commercial value on any € “spent”. So for any passenger, we talk about 500€ multiplied by 2.5 = 1,250 €. At 15,000 travelers we talk about roughly 19 million € spending by all travelers.

What must be emphasized is the fact that the airline route will also trigger commercial relations with a positive impact to the commerce taxes for the regions as well as the attractivity. Especially on regional airports with such a connection, it will create new jobs, countering the rural exodus so many secondary regions suffer. That is, why the local chamber of commerce (and tourism) have such an impact. If tourism can fill more seats incoming than outgoing, the result becomes even more favorable. A 60/40 in-/outbound results in 3,000 more passengers adding on the incoming value of the flight or 3,750,000 €, totaling the effect to € 22,8 million. Full flights will result in increased frequency or larger airplanes.

If you focus on “holiday flights”, i.e. from an airport like Erfurt-Weimar to the Mediterranean

Image courtesy The Economist

But given all that, the regions – as mentioned – fail to understand the impact to their commerce. Nor do they understand the financial risk an airline takes, calculating with “competitive” ticket prices they must fill the plane year-in/year-out. If the wonderful biased statistics by the airport marketing fail to materialize the passengers, if the airline looses 10% of the planned revenue, we can quickly talk that many or more million Euros being burned. You may be able to understand why an 80% discount on the “landing fees” are nothing more but an expected risk the airport takes. The brunt of the risk is with the airline.

That said, I remind my readers I am no fan of long-term “airline subsidies”. There are “PSO”-routes, called public service obligation. I would expect the (political) stakeholders of any regional airport to be well advised to fund a PSO-route to one of the big global hubs, but not by “any airline”, but by the hub-carrier. Reminder: German airport association ADV published that most passengers connect online (same airline) or within the airline alliances, there is only negligible numbers of passengers connecting “interline” (between unrelated airlines). Which in my opinion is a result of biased marketing, but it’s like it is now.
But generally, a route shall be set to the right sized aircraft, an attractive frequency and a strong point-to-point demand. Then there can be subsidies, better a real “risk sharing” to establish the route. If the airport/region believes in their own numbers and expectations, they should be willing to guarantee the break even load factor and revenue to the airline. Right? And like any business venture, there must be clear milestones – and an exit scenario if the expectations don’t match the real demand.

burning moneyWhich triggers the other issue. At the ISHKA Investing in Aviation Finance conference we discussed reasons for airline failures. One very common reason is the fact that airline managers don’t calculate according to their own cost base, but try to compete with ticket prices of their competitors. Not just the real ones, also the implied ones. Trying to fly low cost ignoring their different and higher own cost base. Negotiating new flight services, airports but especially the political stakeholders make it worse by “expecting” unrealistic low cost of operation. They demand that tickets must be cheap. If they, like in Germany, add taxes and make flying more expensive, they shoot their own foot.

The financial impact on air travel is a two-sided coin. There is a major impact to commerce and regional income, especially on the incoming travel. But if you focus only on holiday charter flights without incoming, you deprive your region of an important commercial multiplier. In fact, I question your business case. And yes that goes to you Erfurt-Weimar, my prime, sad example.
On the other side, airlines are commercial companies. No airline can keep flying if load and revenue don’t justify.

Food for Thought
Comments welcome!

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Shattering the American Dream

As for your Future, your task is not to forsee the future, but to enable it!

These weeks I am most disturbed, how U.S. President Trump keeps pushing commerce above life. I can only hope that the world stands united up to him.

Just a few headlines that hit a nerve with me:

“Donald Trump slashes size of national parks in Utah to allow drilling” [Telegraph UK]
“Native Americans to Sue Trump Over National Monument Downsizing” [Voice of America]
“How Trump’s Declaration Inflames a Middle East Already Ablaze” [Mintpress]
“A Brief History Of Donald Trump Stoking Islamophobia” [Huffington Post]
“US: Devastating Impact of Trump’s Immigration Policy” [Human Rights Watch]
“President Trump Calls for Ending Diversity Visa Lottery Program” [Time Magazine]
“Trump’s eldest son questioned in Congress about Russia” [Reuters]
“I’m a Multi-Millionaire So Trump’s Tax Plan Is Great for Me.” [Time Magazine]
“Trump Tax Plan Will Skyrocket National Debt” [Financial Tribune]
“What Will the End of Net Neutrality Do to America?” [Huffington Post]
“What Trump’s Latest Attack on Planned Parenthood” [Vogue]
“Commentary: The Hidden Victim of Trump’s Tax Plan: Your Health …” [Fortune]

All those developments show the excessive greed of Trump, not looking after “the small people”, but about his mighty, his rich friends and his own interests. The U.S. changing to support capitalism at all cost. Who cares? He doesn’t. And this is the head of the most powerful country in the world? While Obama enabled a social security for the poorest, Trump slaughters it. North Korea, Venezuela, Jerusalem, … in my opinion it’s only a question until Trump “wags the dog“. And that man holds that famous suitcase.

I also keep wondering about the U.S. Dollar as a “standard value”. We work on a European business plan, no link to the U.S., but I get quotes in US$, instead of local or Euro-currency, that we use in our calculations. One of the reasons, if not the reason for the U.S. to sustain such high national debt is the “Petro-Dollar” dominance. But that is more and more threatened. And U.S. aggressively enforcing their dominance. How much longer? With Trump isolating the U.S., adding more debt beyond (my) imagination, I predict more and more commerce to move from “US$” to bilateral currency exchange. Quo Vadis U.S. of America?

When I recently won the U.S. Visa in their annual lottery (another Trump target), I said I was not sorry, it couldn’t work out. Having grown up virtually on the premises of the famous U.S. 1st ID Fwd, “America” was a childhood dream. It never worked out. With Sonia having the pacemaker and me at that time recovering from a major surgery ,I likely couldn’t have afforded living in the U.S. under threat to life. And my American Dream is shattered into more pieces day by day. So today I keep it with Pink Floyd’s High Hopes:

Beyond the horizon of the place we lived when we were young
In a world of magnets and miracles
Our thoughts strayed constantly and without boundary
The ringing of the division bell had begun
Along the Long Road and on down the Causeway
Do they still meet there by the Cut
There was a ragged band that followed in our footsteps
Running before times took our dreams away
Leaving the myriad small creatures trying to tie us to the ground
To a life consumed by slow decay
The grass was greener
The light was brighter
When friends surrounded
The nights of wonder
Looking beyond the embers of bridges glowing behind us
To a glimpse of how green it was on the other side
Steps taken forwards but sleepwalking back again
Dragged by the force of some in a tide
At a higher altitude with flag unfurled
We reached the dizzy heights of that dreamed of world
Encumbered forever by desire and ambition
There’s a hunger still unsatisfied
Our weary eyes still stray to the horizon
Though down this road we’ve been so many times
The grass was greener
The light was brighter
The taste was sweeter
The nights of wonder
With friends surrounded
The dawn mist glowing
The water flowing
The endless river
Forever and ever

Food for Thought
Comments welcome…
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The End of the Airport Passenger Fees?

“Our Heads Are Round so our Thoughts Can Change Direction” [Francis Picabia]
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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Management Salaries

“Our Heads Are Round so our Thoughts Can Change Direction” [Francis Picabia]

The highest paid workers in Silicon Valley are not software engineers … but “project managers”.

Reading this, it reminded me of my own experience, as well as something my dad told me decades ago: “Keep in mind that the people doing the productive work pay for all those supportive jobs.”. Including the bakers, the medical, schools, trainers, … Not talking about all those “managers” that nowadays make a living by explaining how to do things differently.

Source: https://fabiusmaximus.com/2012/09/10/american-military-force-changed-43153/
Source

Growing up with American military, there was a saying that you can’t have more chiefs than Indians. In fact, it’s a clear pyramid with given salary schemes where the general earns more than the private, but in a reasonable amount. At the same time, there were only about four generals and flag officers for each 10,000 uniformed personnel*. Today it’s seven. And they soon have more “admirals” than ships…

CaptainsvsRowerLooking at current structures in the industry, we have too many Chiefs and too little Indians. In fact, I know companies (i.e. consulting) having 10 Chiefs on a single Indian or less. Mostly secretaries, IT support and cleaning staff, often enough outsourced. And we pay the Indians badly and feed the Chiefs. Some figures in Germany make me afraid. In the last years, the numbers of people living of social security despite having a job increased year over year. Yes, they have work. But not enough to live from, they need state support to survive!

The number of retirees needing a side job to survive grew the past years from 15 to 35 percent. That means that one out of three can’t survive of the retirement plan they paid into most of their life?

German Wirtschaftswoche (“Commercial Week”) magazine reported 2015 that top managers make 54 times the salary of an average employee. This is the average. At Volkswagen they made 170 times the salary of their workers, Adidas 100 times. In the U.S., they make in average 273 times the salary of their workers the German Zeit (“time) magazine reported. 30 years ago, top managers made approx. five times that of the average employee. This is about paid managers. It’s a different issue on the owners of the company, but even those usually made about the same income as their top managers and invested the revenue into the company, their employees and reserves. When there was a “crisis”, they had reserves to dig into. Where today the managers fire their workers (same time often increasing their own “salaries”).

“Human Resources”?

automationAt the same time these highly paid managers reduced their personal risk in case of failure by insurances and contractual clauses. But imply that their mega-salaries are because of all the responsibility they have for the company and its employee and their well-being. Whereas the net income of their workers have in reality dropped many years as a result of inflation, tax and social security increases, etc. And not to forget by making “Leiharbeit”, subcontracting labor. That way, the history of working for a company throughout your lifetime became a myth, companies, no, not faceless companies, but company managers are no longer loyal to their workers. And not paying subcontracted labor a surplus for the job risk but paying them mostly even less than their own.

branson_quote_train_people
“Train people well enough so they can leave, treat them well enough so they don’t want to.” [Richard Branson]
My friend Erica was hired for a temporary job with one of the large global players. While they denied her any surplus for the risk of a temporary contract she was asked to not do any side jobs. Similar for me when SITA acquired delair. The same time that they both denied us any job security. Are they crazy? Companies recently start paying minimum wages, adding contract clauses that the workers are not allowed (!) to have a second job. Forcing them to live of state aid, despite a full-time job, often in combination with unpaid overtime. That is reality. Now Erica is happy to leave the bureaucrats, I was quite happy to part ways with SITA (with +400 peers). I prefer smaller companies with less hierarchy but also support and fair pay for the Indians. Recently there’s studies and case studies proving better payment proved to be far better on the motivation of the work force with substantially higher return on the “investment”.

Source: http://jampackedbear.blogspot.de/Another issue on salaries is “variables”. I truly believe a fair base salary and a fair results scheme are motivating. Unfortunately – and I hear that from a lot of friends – the “targets” set are unrealistic. Such you can rarely rely on them. The manager’s goal not being motivation, but cost savings, is also counter productive. Aside, it’s simple greed and also just aside, that’s a mortal sin.

Food for Thought
Comments welcome!

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