Airline Start-Ups – an Unreasonable Risk?

Mass Market - No Profit

Two (good) articles today about the riskiness of starting up an airline and the comments they got shared with, triggered some controversial thoughts with me.

The Articles + Comments

Airline Cash BurnOAG summarized on the Evolution of airlines since 2019 (just before the Pandemic) to today. While their findings are very interesting, there is a tone in the summary and a resulting summarization by Tim (someone I generally value) that I happen to disagree with. OAG’s John Grant wrote:

“Airline start-ups are incredibly difficult, cash rapidly disappears and securing the necessary operating licences frequently takes longer than expected and that’s even before sourcing aircraft, securing slots, avoiding the competition, and building all the necessary reservations systems and back-office support functions.”

And Tim shared the full post with a comment: “OAG is a great data resource for large scale review and schedule activity. This data really doe strike a chord. Airlines are a very risky business. This is very illustrative.”

The other one was an analysis by McKinsey, checking on the aviation value chain’s recovery shared by Patrick, which he introduced with these words: “McKinsey & Company has done an interesting analysis of the aviation value chain. For each subsector, they’ve calculated the “economic profit”, meaning (return on invested capital – weighted average cost of capital) x invested capital. In other words, are firms in that sector creating or destroying value? Their conclusion: only fuel suppliers and freight forwarders created value last year, and airports and airlines lost a lot!”

The Economist’s (My) Response

Mass Market - No ProfitAs an economist by original education and having experience with Startups and Business Angels, I do happen to believe in a sound “business case”. As an airliner, I learned with American to focus on the business case. Like to reconsider twice before approving any waiver on fare rules or trying to upsell to the more expensive (i.e. more flexible) air fare. But I also learned the value of a renowned brand (AA) and service. Or to treat your colleagues as your most valuable customers – they help you sell each and every day. And can ruin a customer relation as quickly.

In “global fares training”, I learned the cost of a flight transfer, something that I never forgot; thanks Ruth King (our fares trainer), I will never forget you.

At Northwest Airlines, I learned that airlines and their managers just sold “cheap”. With full flights in summer season, the airline generated losses on the transatlantic flights. A lesson I’ve seen later over and again. Most sales staff had neither information, nor idea about the “yield” they had to generate to fly profitable. Northwest focused on a minimum yield (revenue per seat-mile) half of that of American. Then sold at that yield as the standard “special fare” and making group offers or “reseller-rebates” below that rate aplenty. As I summarized 2019 on my article about why airlines keep failing, “know your cost”.

Yes, talking about Why Do Airlines Keep Failing. It’s the same response I have on the above two mentioned articles. And many like them. At ASRA 2008, I emphasized brand faces. But I also told those brand faces – the airline sales managers – that they are not there to sell the cheapest price. Anyone can do that, the Internet lives of that. A real sales manager understands that they have to sell the high-end tickets.

Live story, also happened today. Qatar Airways passengers (mother and three kindergarden-aged kids) arrived with >18 hour delay in Düsseldorf. German Rail (clerk) sold tickets to the customer to pick up the passengers that are neither change- nor refundable. So they had to buy completely new (expensive) tickets. A good clerk of this company renowned for it’s unpunctual trains (<60%) would have mentioned the possibility of a flight delay and sold the slightly more expensive tickets that allow for a change. Or at least the optional insurance.

So thinking back to my experiences with Northwest and other such airlines, it’s my questioning about KPIs as well. If my KPI is load and not revenue, I must expect to loose money. It remains beyond me, why airlines offer connecting flight at what a rough calculation on Ryanair or easyJet CASK/CASM (cost per available seat km/mile) proves as below cost, even without the “stop en-route” (landing fees, complexity, etc.). Those are managers who had a nap, when their tutors talked about sound economical calculation? And I keep questioning, why airlines publish loads without revenue per seat. To date, we have hundreds, if not thousands of flights every day, that fly full but loose money. All this is confirmed by the above mentioned and many other such articles.

The Fairy-Tale of Loss Making Airlines

Heresy. Aviation ain't profitable - and the world is FLATTo claim “aviation” is a loss making business is true and can’t be further from the truth.

Yes, many airlines are loss making. And it fits the common reasons I elaborated before. And yes, you can make airlines very profitable, if you have a management that thinks just a bit outside the box and applies economic rules to their modus operandi (mode of operation). But this also goes in line with route development and other areas. If you don’t have your numbers under control and focus on the ones that are “good to sell to shareholders”, you’ll fail.

Like with any company, with any startup, in and outside the aviation sphere, we must constantly have an understanding of our cost. And of the competition. What is it our customer wants? There is a psychological price. If you missed that in your economics studies, make your Internet-search for it now. If you have sales teams, train them to upsell the seats. Sell the higher yield fares. Not at a discount, but at a value!

Natural Leader LemmingsThis is one reason, I do not believe we can make Kolibri ever happen by taking over an already failing or failed airline. Wrong structures, wrong thinking in place. I learned this lesson with Air Berlin. The force of inertia was simply too strong. There are some airline that make revenue, but even their managers I find often blindly “follow the worms” (a Pink Floyd referral, yes, the picture is lemmings).

(That’s) The Way Airlines Operate

But unfortunately, all investors we talk to, always think inside their boxes. Can’t tell how many talks I had to radically change our approach and take A320 and do like everyone else does. Ain’t that contrary to the concept of Unique Selling Propositions?

And has ever a “disruptive investment” (another investor buzz word) been developed out of the box using the same thinking? The same values (I’m the cheapest)?

The others are usually starting to tell you that you have to start with smaller amount of money. Sure way to burn your money is a cheap business plan. As OAG writes “getting to size is so important”. You can’t produce a low cost in small numbers. For us, the ideal mix is seven aircraft, where the “administrative overhead cost” becomes manageable. i.e. You have the same cost if you maintain one – or seven aircraft. The same reservations office (just less staff and calls), only little less marketing. You must outsource your operations (at cost) to share the necessary organization with other small airlines. Etc., etc.

Source firewalkeraussies.comTo date, I am still working with consulting companies reviewing airline business plans. Aside the usual failure issues, size is a recurring issue. Another being the lack of fallback in case of flight disruptions, may they be caused by technical issues, weather or other events. Their focus on cheap “human resources” and missing team building results in friction and internal competition that further weakens their product offering.

But even taking that into account, we believe the business and financial plans we developed are sound. And profitable from the outset. With a focus on services and a military-style responsibility “for ours” (no “HR” in that company), a “service-focused concept”. Everyone to pull on the same side of the rope. Yes, not starting with a dead corpse, trying to revive, adds some bureaucratic hurdles. But it allows you to think outside the box and instead of following the worms (or other airlines), to do things “right”.

So ever since I entered into the business, I learned at American Airlines under Bob Crandall how to do things right. And learned over and again that the same mistakes are made by short-sighted, narrow-minded managers. And I know all the reasoning used to distract and divert off the incompetence to operate an economically sound business. Usually, I account this as “no faith in your brand”. That then goes along with topics I mentioned before, like brand dissolution (airlines are often academic example), missing USPs, etc. – Cobalt CEO told me about their USP shortly before their demise “We are Cypriotic”. Seriously? When I started, Lufthansa was the brand. Lufthanseat was the employee. All employees of American Airlines knew “Proud to be AAmerican”. Then came the button counters. And mighty AAmerican was taken over by their once-small rival U.S. Airways. Another box of memories.

So yes, airlines are often a loss making business. With bureaucrats leading them into disaster. Sometimes fast, often times a veeeery long death. Air Berlin and Alitalia are very good examples. “Too big to fail”? Simply “prestigious”? And there are “the others”. Airlines that have an idea about what they are doing. That know their niche(s). That know their cost and marketing. That value their brand. That build a reputation. Until button counters (aka. bureaucrats) take over.

I hope that someone of my hundreds if not thousands of readers (hard to believe, that’s what my server stats claim I’d have) knows some investor with the guts to understand that profitable aviation and sustainable aviation can be the same thing. That the stories those consultancies and their statistics and reports tell have two sides to the coin. And that we get a chance to proof, that climate neutral flying is no heresy, but the future of flight.

Food for Thought – Jürgen

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Why Do Airlines Keep Failing

Cognitive Dissonance Resolution

Recently, I attended the ISHKA conference Investing in Aviation Finance: Germany in Munich where one session addressed Why are airline bankruptcies still happening in a booming environment?

There are some, very few, very common reasons. And auditing airline business plans, start-ups and established, I keep raising the same questions.

What’s Your Business?

Back in the 90’s, I became the honorary member of the Airline Sales Representatives Association in Frankfurt. Aside the narrow-minded thinking of sales managers denying to understand that the emerging Internet was about sales channels, it kept and keeps bugging me, that they focused on their “sales channels”, denying responsibility for the new channels, as they had to be handled “by others”. In the beginning and to date, many if not most airlines have no personal e-Mail-contacts for their customers, be it travelers, travel agencies or online portals. The same applies to their smartphone numbers.

My former boss Louis Arnitz used a historic lesson to explain the change we faced converting FAO Travel, a “classic” business travel agency into i:FAO, the first European business travel portal. In the 19th century, rail companies built the railroads of America. Replacing the Pony Express. Then came those crazy flyers, “aviators”, in their small machines transporting mail. To date rail and air travel are not “connected” (very few exceptions). Because the managers understood the building of steel railroads as their business. Not the transport of people. And they still focus on the wrong priorities. Airline and Rail managers alike.

11 years ago, I wrote about the revival of the sales manager.

Know Your Cost

Speaking about Sales Managers ignorance to the cost of their airline’s operation, I found the fish stinks from the head first being a true proverb. I’ve met too many investors, airline managers, airport managers, not understanding the cost involved. Then they try to compete on the price with the large, established airlines. I have no idea, what those managers learned, I heavily doubt the quality of university education…

The recent failure of Ernest is a “classic”. They take little money, rent Boeing 737 or Airbus A320 family airplanes, in case of Ernest 1 A319 and 3 A320. Then they buy software licenses (COTS, Commercial Off The Shelf). They buy ground handling and maintenance. Something I learned studying Whole Sale & Foreign Economics  35 years ago: If you outsource, it is either more expensive or you they safe from the service levels they provide.

Something I keep telling about consulting. If you need someone with special knowledge for a short time, you “outsource”, you hire a consultant to do the job. If you need something long-term, you hire a consultant to develop the know-how within your company. Again, the job for the consultant is short term.

A ship engine failed, no one could fix it. Then they brought in a man with 40 years on the job. He inspected the engine carefully, top to bottom. After looking things over, the guy reached into his back and pulled out a small hammer. He gently tapped something. Instantly, the engine lurched to life. The engine was fixed! 7 days later the owners got his bill for 10K. ‘What?!’ the owners said. ‘You hardly did anything. Send us an itemized bill.’ The reply simply said: 1. Tapping with a hammer. $2 — 2. Knowing where to tap: $9,998. -Don’t Ever Underestimate Experience.-

In both cases you pay for the experience.

Airline managers that do not understand their real CASK, their Cost per Available Seat Kilometer (or mile as CASM), are not doing their job! Airline managers that fire good people because they are “too expensive”, airline managers that save on “service”, don’t understand reputation and brand as important are being doomed from the outset.

So these airline startups come and believe that with some 10 million Euro, leasing the same (but usually older) aircraft, pay for outsourced maintenance, IT, ground handling, etc., etc. They truly believe they can “succeed” in the shark pond where an easyJet owns 70-80% of their fleet. Only some 20-25% being still paid off (until they own them), less than 3% being leased to cover for ad hoc demand. Where they run their own maintenance operation, their own ground handlers where they can. Then they have established processes and understanding of the cost of disruptions and delays – and cover them with an own fleet of spare aircraft. Do those small airline operators have any spare aircraft on hand when their aircraft fails them?

From Cobalt, Germany, Primera (alphabetical order), feedback said “disruption cost”, attributed i.e. to EU261 “passenger rights” to having been a major reason for their financial troubles. Still, most business plans, I was asked to have a look at last year failed to address that issue at all. Or they used “easyJet figures”, neglecting the fact that easyJet has a spare fleet to cover and minimize the effects of flight disruptions.

Even large airlines’ network managers keep ignoring those cost factors and then get surprised when a route fails. Others go to considerable lengths to understand the typical delays they incur on specific routes. Caused by the ground handler, the departure and/or arrival airport, taxi times, the air traffic control – or simply common weather issues like fog in Stuttgart.

So taking all those common and neglected factors into account: What’s your cost? CASK is one value for the entire company – do you understand the performance on the specific route or airport? Why is it often the same airports “failing”? Maybe they shouldn’t be overly optimistic but be more realistic? And yes, that is the same airports believing if they reduce the landing fee, it would have some decision making impact on the airlines’ cost. It’s that level of non-understanding that causes constant and ongoing failures – not just for newcomers or small airlines.

What’s Your USP

Shortly prior their demise, a board member of Cobalt answered my question about their USP: “We’re Cypriot.”
Say what? Competing against easyJet and other low cost and classic network carriers, that is all there is for a USP?

His second answer about USP was “We’re cheaper.”
Okay. You operate 2 A319 and 4 A320. easyJet operates what, more than 330 A320 family aircraft. You think you’re “cheaper”? Really?

Another airline answered my same standard question with: We fly different routes.
Well… Hard to not be nasty. They just wonder that on their most successful routes, the other, bigger carriers kick their butts and take over those routes.

Carolin McCall understood “service” to be a difference maker. Since her leave, very quickly they dropped from my “role model” and preferred airline to “me too”. Taking over aircraft from Air Berlin with additional and “bulkier” seats, I suddenly experienced less leg space. Their airport manager at one of their hubs found himself quickly “obsolete”, the new paradigm being “cost savings”. In turn they seized my (half-sized) cabin bag due to “full overheads”. Aside the seat next to me being empty, there was more than enough space below the seat. Heard meanwhile from many frequent flyers they no longer wait if they have an aisle seat but make sure they have their seat and the cabin baggage with them. Would be indeed interesting to have some statistics how that impacts boarding time.

So what’s your USP? Price? Okay Mr. O’Leary… But what’s an LCC? Ryanair flies into the big airports recently. That’s another story I plan to address in the new year. So again, what’s your USP? How can you secure that people buy your product, that it’s not simply exchangeable with some cheaper airline? Back 35+ years, my boss in whole sale told me: “There’s always someone cheaper.” And several years later, the boss of “low cost airline” Continental Gordon Bethune said:

A good airline is defined by CUSTOMER SATISFACTION not just cost per available seat mile - Gorden Bethune 1996

Interesting enough, in my recent qualification in Online Marketing, P.R., I learned the same values being valid in the online world. Nothing new. What’s your USP? Know your Strengths, Weaknesses, Oportunities and Threats – internally and externally and build your business case. Then you come to your own USPs. And you will likely not invest into some airlines with a few aircraft. Or into aircraft owners with a few A320 or B737 aircraft they try to place in a sated market. If you’re an investor (or know such), send them over to Kolibri.aero

The Virtual Airline

airline money burnAs mentioned above and before and again. I usually don’t believe in the survival of virtual airlines. A few leased aircraft of the same kind than their competitors, outsourced IT, ground handling, maintenance and other “services”, often even the call and service center (to “GSAs”). Then they believe to be competitive to the large players. If you operate in an un- or under-served market, you may be able to ask for the higher ticket prices required by your increased cost levels. Most airlines I see trying to take off or change their business to survive try to compete to the large network and low cost carriers, but without a secure market (using the same aircraft).

Aviation – and the dying continues … Look at the fleet, at complexity at size and type. Do they have spare(s) in case of disruptions? How much do they fly (make money)? Look at the pricing model and if that reflects the higher CASK. I’ve not seen a single failure in the past years that was not clearly a result of those common causes.

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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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
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Quo Vadis Airline & Travel Distribution

Michael Strauss of Pass Consulting, developer of an “aggregator” system for travel distribution systems addressed his thoughts on why the NDC (IATA for “New” Distribution Capability) is already “old” (it’s XML, not contemporary JSON for one) and why we still need the GDS.

I find all those developments Michael addresses to be “baby steps”. And is it 18 months already again since I questioned the very same thing? Quo Vadis OBE?

Carefully tiptoeing around, while I still wait for the first airlines to make the bold step, leave the tangle box, cut the spider webs, dust off the past and make bold moves embracing the possibilities “digital” offers us. The likes of a C.R. and R.B. Smith back when they gave birth to what eventually became CRS,, GDS, PSS. Or Louis Arnitz (and myself) making Internet-Amadeus-booking reality, when all the GDSs told us, this is impossible and tried to protect the holistic, old way. Good, GetThere launched about the same time, but when we started, all it’s infancy could was to take a Sabre-entry and return the GDS-output. But yes, that gave us the idea.

1.44 MB = 0.00144 Gigabyte or 0.00000144 Terrabyte. Those thoughts tell me how old I became…

Now we are “surprised” that Cytric bypasses the GDS-side of Amadeus, linking directly to Altea (Lufthansa direct link). I just happen to wonder if Louis Arnitz also fondly remembers that “white paper” he wrote about “Mozart” (what later became Cytric). Few people remember the evolution from “Woodside Travel Trust” (today Radius) “Hotel Disk” (3.5″ ‘floppy’) to eHotel or that eHotel has been a spin-off of what became Cytric… It just tells me, how the GDSs keep the thumb on the thinking of our self-proclaimed experts. A battle they can’t win if they don’t embrace (carefully) those changes you so nicely summarize. Working on an airline’s business plan, I just emphasized that I see the future of travel distribution with Facebook, LinkedIn, Google, Amazon. Individual like a book. Common as a book.

20 years ago (!) my friend Richard Eastman emphasized disintermediation at ITB Travel Technology congress. And that it is about packaging what the traveler wants.

Voice recognition like “Alexa, book our vacation”. GDSs? Aggregators? Airline seat? Car Rental? Hotel transfer? Restaurant? Or …

  • “Jürgen, this is Alexa, I believe you wanted to go to that “new movie”, they show it tonight at the cinema here in your vacation area, shall I book you two or four tickets?”
  • “Jürgen, this is Siri, there is a Pink Floyd revival concert in xyz, I could book you and Yulia two flight and concert tickets in four hours as well as the babysitter for the girls?”

Things I would have overseen…

Richard emphasized, the consumer does not want to bother about all those detail. They want an offer. And consume. GDS? Aggreggators? NDC? …?
Hey Richard, that was 20 years ago we discussed and envisioned those things. Ain’t it faszinating, how our industry keeps stalling…?

Food for Thought!
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Air Berlin, Monarch Airlines, Ryanair – Lessons Learned?

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

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

Air Berlin

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

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

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

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

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

Ryanair

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

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

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

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

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

Monarch Airlines

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

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

Boeing 737 / Airbus A320 – the Work Horse…?

All A320 / B737 – What was your USP again?

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

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

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

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

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

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

Food for Thought
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Delay and Disruption Management

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

[edited]

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

After an initial misunderstanding we agree: That is stupid!

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

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

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

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

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

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

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

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

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

Food for Thought
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Carolyn McCall + easyJet Vienna

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

Three news this week I find noteworthy about easyJet.

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

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

easyJet on the Move?

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

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

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

A320/321neo. A Change-Maker?

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

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

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

Quo Vadis easyJet?

How will those two decisions impact on easyJet?

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

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

Food for Thought!
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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
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