There is a lot of greenwashing and intentional abuse by using especially SAF for unsustainable fuels. So let me give you a short definition and help me and all others on the road to sustainable aviation to understand the greenwashing and using the proper wording for the proper thing!
At first, we started to blend biofuels into our car fuels. It is what you use in your car, blended as E5 (5%) or E10 (10%) into to fossil fuel. So it is lipstick on pigs, as in reality, it is still 90% or even 95% fossils! And may be very likely the reason, why fossils (and CO2) are still on the rise and growing.
Anything not Zero-fossil such by definition is not “sustainable” in reality. At max it can be a step on the road to sustainability. Mostly an attempt for Greenwashing!
So first we had biofuel. Which by definition is from a biological source, like rapeseed. With environmental activists for years complaining that valuable agricultural space (fields) are abused for biofuels instead of human food. And Amazon and other forests are being burned down to plant such seeds.
Biofuels to date comes always blended, engines are not able to operate on unblended biofuels without major modifications! There was another greenwashed development, where Lufthansa in cooperation with DB Schenker operated a 100% Carbon-Neutral cargo flight, offsetting the CO2 from unsustainable fossil fuels. As was openly discussed at and reported from COP26, offsetting is #greenwashing. It’s not in itself “green” but a sale of indulgences.
While we also planned with Biofuel when we developed the Kolibri business and financial plans, we back then already understood that as the only option then available and such the maximum step we could do to fly somewhat sustainable. But then I learned about
SynFuel (my choice)
Just about three years back, I stumbled across a report about Sunfire.de, developing something they called SynFuel. I still use that word, whereas SynFuel is also called e-Fuel or PowerFuel. I do not like those two “modern” terms. As e-Fuel implies (I believe intentionally) “electric” (e-Mobility), which has nothing to do with it. And PowerFuel implies a higher power efficiency which as as missleading. So I file those namings under attemps for white- and greenwashing.
SynFuel by definition is Synthetic Fuel, refined by CO2 and Hydrogen. The name is program. So I encourage use of SynFuel and not those other names that are rather distractive.
Speaking to Sunfire back then, I triggered their understanding that aviation is a key target market for their SynFuel, which they originally envisioned as a Diesel-replacement. So I speak about SynFuel for the generic addressing of fuels, SynKerosene and SynDiesel for specific replacements.
SynFuel has been proven to be able to operate unblended, at 100%, both for cars, trucks, ships or aircraft. It might be noteworthy that the Hamburg SynFuel pilot facility at Hamburg Airport is said to not have been just opposed, but in fact boycotted by Lufthansa there. For the fear to be pushed towards it’s use, which they are not ready for. Unwilling. A clear sign about their real “sustainability interest”, which is pure greenwashing!
In my opinion, SynFuel is the main, in fact the only candidate to replace fossil kerosene in aviation. At this time, the production of SynFuel requires quite some energy; 15.3kWh/liter. Energy that taken from the grid, especially in Germany with the worldwide highest grid cost, will make it very expensive. But.
But if you develop green energy sources and use those to refine SynFuel, you have several advantages. The energy cost drops drastically. You replace grid-power, which is not green, no matter what you “buy”. The demand for green grid power by far exceeds the supply today. So that’s just more greenwashing! Only green SynFuel is sustainable and Grid-Energy is not sustainable either!
It’s rather new, which might explain conservative politicians and industry leaders still holding on to the less sustainable e-mobility. Or wishful thinking like liquid hydrogen flying, which will not have any impact by 2030, realistically a lot later than 2050! And a meek excuse by most of our industry leaders to delay investment into real sustainability.
Sustainable Aviation Fuels (SAF) – the Greenwashing Lie
When IATA commits to 2% blending of SAF into fossil fuels by 2030, that “SAF” is used to pretend sustainability. In IATAs definition, that includes both BioFuels, as well as any-colored SynFuel. If they would be honest, their commitment would require to amount for 2% net sustainability. Which in itself remains an embarrassment! Even on cars we have already E5 in most countries as a standard, E10 an option. And aviation commits to E2?
The only real SAF is 100% green SynFuel
meaning the source energy is green!
Even waste-to-liquid is not really SAF, as the waste often is not from sustainable sources. But experts agree so far that it is “circular” and helps to reduce the carbon-footprint. There it is more the waste-producing industry to replace i.e. fossil-based plastics with bio-degradable alternatives. Though I just had some lobbyist trying to convince me (seriously!) that plastic is good for climate…
Where my WhitePapers are meant as articles I keep updating occasionally. Different from such posts, which reflect my knowledge, opinion and ideas at time of writing. They are also rather nice in review, seeing my head still being round, but my ideas mostly sound.
This all is
Food for Thought!
And as usual, comments, disagreement, discussion and ideas are welcome!
Electric? Hydrogen? All the aviation associations promote going “green” 2040. Or beyond. Whereas the technology for the first step is here.
Being asked on my baby KOLIBRI.aero on why we don’t wait for electric planes or hydrogen planes, my answer is simple. They are fog-screens, intentional distractions allowing the airline to hold on to them to avoid really addressing the issue! To avoid Change. This can be brought down to very easy to understand examples.
The Fairy Tale of Electric Passenger Flights
Boeing dropped out of funding Zunum, having the plans to develop an electric air plane. Because there is a simple, physical challenge that they cannot overcome. The battery size. Reducing the battery size, Boeing learned the lesson with the 787 Dreamliner. Where internal batteries caught fire. Would that have happened inflight, you can imagine the catastrophic impact. They had reduced the size vs. capacity to the point where batteries happen overheat. Especially rechargeable ones that we talk about it here. It is rumored and I heard it from Boeing, that their engineers disqualified electric passenger planes beyond 35, maximum 50 seats. The max size Zunum targeted, but with a range of one flight hour, maximum 90 minutes.
There may be developments that may one day increase battery capacity while reducing the size, but they are wishful thinking as of today.
The Fairy Tale of Hydrogen Powered Passenger Flights
The very same issue is it about hydrogen powered passenger flights, Airbus recently promoted as their “Zero-Emission Aircraft”. Again, the physical challenge.
To put into those aircraft cooled hydrogen tanks with the related cooling makes those tanks very bulky. In fact, sources inside Airbus have been cited assuming 50% or more of the fuselage (cabin and freight compartment) to be needed to build in the hydrogen needed to operate the aircraft 60 to maximum of 90 minutes. Unpressured (uncooled) Hydrogen does not have the needed energy.
That is, why those airplanes Airbus showed in the picture are also small aircraft, with about 50% less seating of a comparable aircraft those sizes today. Another wishful thinking and fog screen if you ask me.
Electric + Hydrogen Electric – a Summary
There is a very interesting summary on electric (and hydrogen-electric) flight in a 45-minute YouTube video:
Generally it confirms my opinion, that we won’t have any substantial development in time for any meaningful impact on the climate goals. With first liquid-hydrogen prototypes expected by the research experts by 2035 to 2040 and first commercial operations likely 10 years faster. See my summary from an expert panel in the comments. A bit late for a 2050 impact?
And electric will start with small air taxi-type services of 15-20 passengers. And while that is a good development, it will only replace (and enable) very small regional routes. Can you imagine 5-10 slots an hour at any of the larger airports to be burned by such small planes?
It will very likely take beyond 2050 until we will see any of the 100 or 200 seat aircraft flying commercially on either technology. Bullocks. Just more #greenwashing …?!
The Road to Carbon Neutral
Developing Kolibri, from the outset we thought about using contemporary aircraft allowing us to use bio-fuel. Though bio-kerosene must be “blended”. Must be mixed at least one to one with the classic, dirty kerosene. Often, it is mixed like “E10” gasoline, only 10% “bio”. It’s not uncommon to have a 10-20% blend only, using 80-90% classic Jet-A1. Whereas the “bio” comes mostly from rape seed monocultures (picture), having already it’s own negative impact on bioversity. That ain’t “clean”, nor “sustainable”.
Hydrogen – a volatile gas
From my work on a solar powered WIG 2008, replacing it’s diesel-engine with an hydrogen-engine, I understood hydrogen as the future. Clean electrolysis using solar power (and wind, bio mass and other sustainable energy sources) and salted water, whereas desalination facilities produce the surplus salt to augment seawater to the level needed for the electrolysis. So sunny regions with access to seawater have a “natural advantage” to develop the infrastructure to create hydrogen.
Now hydrogen is exceptionally volatile, even in special tanks, the losses are substantial, so it’s not easy to transport. Now…
Two years ago Sunfire’s Synfuel triggered my attention, from a National Geographic report – not reported in Germany, but in the U.S. … I instantly understood synfuel a perfect solution to replace our plans to invest in expensive electric and hydrogen powered ground fleet, still with the need to have Diesel-powered trucks and emergency generators in an airline, with syndiesel. And to develop into synkerosene to replace biokerosene.
Developed since, Sunfire with partners started a construction of a synkerosene facility in Oslo, Norway. No, not in their home-country Germany, but in Norway. Norway is not full member of the EU, “only” an associated country. Make your guess, why not inside the EU… Maybe Ursula von der Leyen’s implied quote below gives you a hint.
Aside, synfuel can be used quite easily as a buffer technology, using excess power to create synfuel during peak times and using it in common and tried power generators to recreate energy in low times. Until we have something better, Syngas is a clean energy source that can make us independent of crude-oil for power generation. a technology that can create a future for many “poor countries” in the “tropical belt”, the tropic (red) and subtropical zones (yellow), as their surplus of solar energy is way higher than what the northern hemisphere has in the temperate to polar zones.
The Fairy Tale of the End of the Combustion Engine
And while German transport minister Andreas Scheuer demands the end of the combustion engine by 2035, I can only interpret this as another short-sighted publicity stunt. A distraction and a fog screen! By a minister who’s not known for his realism. Combustion technology will still be around a while, cars having a lifetime of minimum 10 years. Other technologies like aviation, simply lack an alternative for now. And while privileged nations can likely afford the switch, less privileged regions will rely on combustion engines for a great number of reasons and even more years.
Making the Change
So while we make again big plans in Northwestern Europe, developing synfuel facilities in the “poor South” makes a lot of sense. Developing synfuel facilities at airports will be an incubator for the regional conversion from classic gasoline to synfuel. Developing a new “regional” airline with the large demand of synfuel, will make the development a profitable venture. A classic win-win.
So anyone believing in electric passenger planes is daydreaming, or whitewashing why they don’t invest to become clean. A distraction, a fog screen. The same is true for purely hydrogen-powered planes.
But anyone who wants to make a change, can do so today. Modern aircraft engines are ready to apply 100% synfuel. Or so Sunfire, Norsk-e-Fuel and an engine maker assure me. Synfuel created from hydrogen and carbon-dioxide. Not carbon-positive, but yes, carbon-neutral. Proven tech. Today.
And we have a business plan, and we have the interest to make this happen. Starting today and being carbon-neutral within this decade. If not faster.
This week and last I attended two aviation financing conferences by Airfinance Journal, one in Japan, one in Latin America. Then I read an article by National Geographic, demanding that travel should be considered an essential human activity. But that is something I find so very often. Thinking Outside the Box and understanding psychologically different mindsets is Not Everyone’s Cup of Tea.
Whereas a conference for me is a place we do networking, for which I am immensely grateful for Airfinance Journal (AFJ) to allow me attending the event. I sure couldn’t have afforded travel to Japan and Latin America. And thanks to their added focus on networking, it turned out some very promising new contacts to discuss KOLIBRI.aero with.
Let us have a look at the Latin America event which ended yesterday.
The Great Pretender
Whereas AFJ added a virtual networking lounge, there were the same, I’d say ten, people in there, only once the (too small) window showing the delegates forced me to scroll with more than four delegates in the networking lounge.
Saving the delegate list and not counting the dupes I came up with 720 delegates. An awesome conference. 42 of which “filled out” their profile. Only. The others failed to use a free way to promote who they are and what they, respectively their companies do.
I happen to believe from what I have seen that most of the delegates of the online conference were obviously pretenders, signing up, but not showing up. Not even taking the time to log in and fill out their profile. Do they know there are such?
Then there was a “dedicated networking”, where more than 50 registered for (I think the host said 64). We were seven (plus AFJ moderator, plus one totally unresponsive), so roughly 9 out of 10 having registered for it did not show up. For some reason, being in aviation so long, “no shows” is something I consider exceptionally rude. Not just careless, but outright rude. Because there are people, taking the effort to organize something good and then people simply don’t show? It is extremely frustrating for whoever works this out to provide you a service!
For the few being there, I believe it was better than if it would have been crowded. I just hope I didn’t talk too much!
Overall, it just confirms my assumption that less than 10% of the registered delegates showed up at all. Of which again, how many have been speakers? 21?
Not My Cup of Tea?
Again, these two events showed that there are different mindsets at play and it should be worthwhile to understand the motivation behind it.
I’ve seen that before, 20-odd years ago, when I organized the Airline Industry Stammtisch in Frankfurt. Many sign up for the event, to show their bosses, never intending to go there and spend their “valuable” time off elsewhere. Others, like me at AFJ do see the opportunity and value in networking.
A very good and valuable event, especially in Corona times. But it seems, at least from the outside, that most of the “delegates” were pretenders and never showed up on the website, never “participated”. Those people missed out on supporting a good event and torpedoed a valuable effort. From my side, I can only thank AFJ. The next step to improve the events in my opinion will be to automatically add the delegates to the networking lounge to enable messaging. Let them “opt-out”… There’s no e-Mail or other personal information shared, beyond the attendee list that delegates have access to anyway.
And they might want to promote to the delegates to fill out their profile… That’s free marketing and free networking!
The next event coming up in two weeks as Airfinance Journal China, then followed by Asia Pacific. Hopefully the “delegates” are motivated to not only register to show-off to their bosses, but to really attend? And use the networking opportunities AFJ provides?
Because else, such virtual conferences turn to be a barrel burst. And that would not value AFJ but do them a big disservice! Did I mention? Aside failing on your job (or why would you sign up?), it backfires; no-one really likes “Dateileichen” (file corpses).
Which is another example of people focusing on their own life style, ignorant to others’ needs, motivation, life style. As I commented right away on LinkedIn:
A dozen years ago, I spoke with a friend/student, trying to convince her to join the aviation industry. There’s three types of people.
Nestlings, staying all their life in one place, except for the one or other vacation. A flight of more than two hours takes them to the unknown they fear.
Precocials, leaving home to move elsewhere and get settled. They travel for vacation and VFR.
Birds of Passage. They go, where live takes them, are open to the new and for them travel is a reward and each destination an adventure they embrace.
If you talk to nestlings, they will oppose your notion that travel would be “essential”. At the same time, they tend to be nationalistic and protective about their local environment. And the first to shut-down borders and travel. It’s those, “thinking different” being “in power” we have to catch and convince. To do that, we must understand their different “gut feeling”.
That said, if you talk crisis these days, it showed (most of) us, what privilege it is to be able to travel. And how quickly such privileges can be taken from us by forces beyond our control. And the lousy standing of travel lobbyists and lobbies with the decision makers.
A Lesson for the Crisis
Convincing the People to Fly Again
In all the discussions, it seems to be common opinion that we must regain the travelers’ faith to fly again. Given the (painfully) slowly sinking-in fact that we never might have “the” super vaccine, we better adjust our communications. We must understand that there are us “birds of passage”, looking forward to new experiences and adventures, but also the ones that are afraid of the new, the conservatives, the nestlings. And some of them being politicos, in my humble experience a lot of them narrow-minded, cover-your-ass-types that do not make a move unless they have to. As seen at the beginning of the crisis. Then they overreact out of fear, understanding they made a mistake, trying to cover up hysterically to distract from the mistake. Or like Trump now was caught in the act, lying to the U.S. people to “not spread panic”. Whereas a healthy panic is good! It keeps us alert. And then we must adapt. It’s called evolution. But that’s something many people are mortally afraid of.
Think Outside the Box
There are a lot of posts and speakers emphasizing that we must adapt to the crisis, think outside the box, then in the next minute turning back on why them keeping the status quo and doing as they always did would be the right thing. As they obviously fail to understand the thinking of their customers, shutting down the crisis, falling back to “safe thinking”. Just as most investors do.
As painful as it was, in fact it was truly funny. A speaker at Airfinance Journal Japan, an aircraft lessor, emphasized the time being right for new airlines. When I approached him, he retreated to the fact that they neverlease to start-ups and would never invest in a start-up airline. Oh yes: Cognitive Dissonance at it’s best, right? This is a quite common stance when we talk to “aviation investors”, failing to understand that “aircraft investor” is not “aviation”, but just one piece of the puzzle. We represent an opportunity to place 200 aircraft in 10 years. Which is big business. Once we get the launch funding secured.
Me too … Or doing things different?
While many still focusing “blindly” on “Airbus/Boeing” aircraft investments, they lost and loose money. It’s been a shark pond before the crisis, now that bubble imploded. At Airfinance Journal Latin America event, the best speaker was Walter Valarezo of DAE (Dubai Aerospace Capital), outlining the “abnormal normal” in the market pre-crisis. Now most investors curl up into a ball falling back to “old habits”.
USP is about “unique”. You don’t have a USP if you only copy what the others did. And stick to your modus operandi.
Fortunately there are some – very few but some – who do understand the opportunity, the need to think outside the box. Those are the ones we talk with. Will they help us launch the Kolibris? I guess they will. Let’s see how quickly we can convince them and their PTBs that change is good and our business plans are safe and sound. And benefits a great deal from this crisis.
Last week it started with a analysis by the German Association for Environment and Nature (BUND), hitting the headline news claiming that seven of the 14 regional airports in Germany would be expendable. Which was a welcome story for the media. While I still hope that they come to senses, I am afraid that history shows their sole focus on populism (next election) and hypocrisy. Including their attempts to distract from their failures managing the ongoing Corona crisis.
More articles and posts surfaced this week that airports should be privatized.
Focus on votes reminds me too much on “shareholder value”, being accused to have a sole short-term profit-maximization interest and none for long-term success, sustainability or social responsibility. Same stupid.
Today the headline news is about the Thuringian president of their Court of Auditors recommending the closure of Erfurt-Weimar Airport, building on the above analysis.
Closing Erfurt-Weimar Airport? And others Regionals?
As you may recall, 2009/10, I’ve been managing Marketing, Press/P.R. and Corporate Communications at the Erfurt Airport, one of the seven now questioned. Which is my example of why German airports fail thanks to populistic airport bashing by the local politicos and most of the media. And an idiotic, short-sighted focus on “outgoing” holiday charter flights. I am adamant about my justified opinion that given a positive support and strategy, the airport would be worth a million passengers and an economic operation. If they’d cash in on incoming.
Back 10 years ago that was the reason I made the name change from Erfurt to Erfurt-Weimar possible from Marketing budget. Just before the shortsighted politicos – lead by then Minister for Traffic (“C.C.”) who saw it more important to invest into streets and highways – decided to “strategically” end all support for scheduled flights, which I had recommended to replace Munich-service with a sole Lufthansa- but without Star Alliance codesharing, with a KLM-service to Amsterdam to be connected to the world. With having compiled justification and statistical data supporting the case.
As I wrote three years ago, airports must embrace their changing role – which many airport managers and owners fail upon. And that is simply another example where the Corona crisis highlights the shortcomings. These shortcomings have been there before. We have too many “good weather managers” that keep running a company (beyond just airline, airport) and have no vision for it, no strategy. They handle day-to-day work and live inside their microverse without understanding or concern about the bigger picture.
Should they now close Erfurt-Weimar (or either of the other questioned airports), it is a direct result of the local stakeholders failing to envision, demand and support a long-term sustainable strategy for the airport. And giving the public airport bashing by the stakeholders, I wouldn’t justify scheduled flights to Erfurt-Weimar either. It’s an example how short-sighted stakeholders run an economic driver into the ground. And just an example how politicos don’t think and guide, but brainlessly worship an implied public (voters) opinion and not act but only react to developments (incl. Corona).
CYA in action: Cover Your Ass. Don’t think, don’t move, don’t risk.
Strategic Indecision and Short Sight
As I’ve written in the two Food for Thoughts in December, there is the Financial Impact of Air Travel for the regions and their economy. If you understand and focus on the need for “incoming”, passengers coming into the region, bringing money to the region. Instead of the sole “outgoing” focus we see with most airports in the “developed countries”. And without this, there is no valid argument to invest into the airport, is there? But with a strategy, it makes sense to invest. Not to subsidize!
The other post in December was about Why Airlines Keep Failing, which is mostly the same reason why airports keep failing to live up to their expectations. No strategy, no stakeholder management (politicos, industry, media, public opinion, etc.). Erfurt-based Thuringian state development agency funding travel for delegations from Berlin, instead supporting the subsidized flights from and to Erfurt. Politicos publicly promoting to travel to Erfurt and Thuringia flying from Frankfurt, Berlin or Leipzig, then taking the train. And even with a Biathlon World Cup taking place in Thuringian Oberhof, places like Weimar, Eisenach and the Thuringian Forrest recreation are, travel to Thuringia not coming through Erfurt in their empty heads.
Scheduled Incoming vs. Charter Outgoing
Again ,there is no reasoning to invest into an airport that only looks at outgoing summer charter flights. The money leaves the region and benefits the destination. Why would I subsidize that?
Without a strategic vision to use an airport incoming as an asset to connect the world to the region and cash in on the incoming air travel, it is a logical consequence to shut down an airport and write it off. In turn, you write off an asset for your region. If I call anything short sighted, this is a very good use case.
I keep explaining “seasoned airport managers” that airports need three foci.
Connection with the global hubs and connectivity there
At Erfurt, it was a barrel burst to have a flight into Munich by Cirrus Airlines as “partner of Lufthansa”, but with only some Lufthansa code-share, but not even Star Alliance. It was why I very quickly promoted to replace that one with a KLM-Amsterdam-service. With very promising talks ongoing until the political stakeholders decided to shelve all support for scheduled flights. A good reason to end my work there. Aside me being told later that the discussions ceased as they called my number, reaching someone not able to communicate in English.
So connectivity to global hubs with code-sharing and/or interlining must be prime on any regional airport’s agenda.
Strategic Point-to-Point travel
Depending on commercial and strategic regional relations, direct flights between economic partner regions can and should be established.
With “airport bashing” being too common, it is vital to promote the airport as a partner for the region. As a vital infrastructure to improve commerce and industry, incl. but not limited to tourism!
And yes. Summer charter flights are nice to have, and may contribute to the revenue, but they are commercially and strategically not a priority.
The Kolibri Offer
KOLIBRI.aero is looking for funding of the development of first and further bases. With seven aircraft, maintenance, infrastructure and several hundred jobs a € 15 million funding is needed. No subsidies but a bold investment with minimized residual risk, to be paid back with interest. Investment into local infrastructure will reflect long-term commitment. Further development of profit centers being part of the plans. Should you know airports being interested in such a joint development having regional funds to provide the capital but also demand for the new routes, we are happy to discuss details.
Recent 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!
Yes, 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.
The 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
I 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!
I 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).
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.
Discussing with a friend and intellectual sparring partner, why we focus to establish a new airline and not simply buy a failing airline, the reasoning was easy.
If you acquire an airline, you acquire it’s heritage.
To which he replied: “I couldn’t agree more. I have seen the same firsthand when it came to [product] engineering. Initially we were going to work with an established manufacturer and have them make modifications for us. That was quite the trip down the rabbit hole, and more trouble than it’s worth. Now we’ll get [products] that were custom engineered for us, from the ground up.”
Most of the times I was asked for support in project management, the project itself was fine. What caused the trouble was the missing change management.
Air Berlin Example
In direct conversation, one of the later board members of Air Berlin told me, the airline would not kick the bucket because the new CEOs wouldn’t have good ideas, but because they failed on the heritage. The existing “networks”, afraid of the change, afraid to loose their job, torpedizing the management.
When Stephan Pichler took the helm, he i.e. identified the “different fleets” as a concern. With little to no interaction on scheduled flights or tour operator charters. Still, when he left, there were still the different departments interacting little to none. There was a lot more to Air Berlin’s unnecessary demise, as there was to FlyBEs. Usually it is attributed to the management, but “internal resistance” can be a first-class back-stabber.
Save the Dinosaur or Fresh Start?
As addressed in To Save or not Save in the Corona Papers, The question in my opinion is mainly, how much funds you are willing to pump into the existing airlines and for how long. And if you now start to shove money down their greedy throat, will that ever end? The U.S. carriers complained instantly when they learned that they get only 30% of the bailout “for free”, but would get the other money as a credit.
To turn this around. We developed a business concept to invest € 1.6 billion into a new airline covering Europe. With a business concept based on USPs, profits, low residual risk, attractive profits, but also socially responsible and sustainable. i.e. A positive overall impact on greenhouse gases.
Triple that amount to invest into three new players instead of just one and you cover what we have today. Now airlines asking +$50 billion in the U.S., € 20 million for Germany, IATA calls for +$ 200 billion. Emirates will take up long haul, maybe challenged by a U.S. carrier and a Chinese one – connecting the long-haul world.
The existing airlines will need to survive. Realistically downscale. At first and until a vaccine becomes available in sufficient quantity, we talk about “leave the middle seat free”. That cuts one third off the seat capacity of 189 seat A320 or B737. 126 seats. Given an inital slow start of traveler confidence to use flights agin, we realistically talk about max. 50% average load. Down from above 90%. That means that the ticket prices will likely be double. But the “administrative overhead” must be split to less aircraft, so we will have a totally different cost level.
Ryanair’s O’Leary clings to keep his “known model” and predicts even more aggressive discounting post-Corona. But in the end, someone must pay the bill. Does anyone really believe O’Leary to not plan for the stupid to pay his bills? Including airports, regions and naive passengers… I wonder how long even a Ryanair could keep that illusion up?
… meet Evolution
Doing a staged setup and focusing to stake our own claims, select strategic bases aggressively outselves, we can establish the company for a mere €30 million. € 15 million per additional base with seven aircraft and hundreds of (secure) jobs. A fraction of the food the dinosaurs demand to survive. Condor now half a billion? What evolutionary wonders we could achieve with that money.
We’re the mammals. We’re effective, profit focused, sustainability and social responsibility driven. Evolution. Don’t pump millions and millions into the dinosaurs until the crisis is over. Invest into the future.
Airbus announced to reduce the monthly output of the A320 fro 60 to 40 aircraft, citing problems handing over ready aircraft to their customers. Aircraft being parked at Rostock Airport (RLG).
Lufthansaannounced their fleet changes, retiring (decommissioning) mostly large aircraft like A380s, A340s and 747s, but also 11 (out of 62) A320s.
— and so on, and so forth.
Aside such news articles it is rather difficult to come by good, hard data about how Corona impacts the industry on a global scale. On LinkedIn, I received a graph by The Air Current.
The Air Current Graph
Having discussed those numbers in a conference call, it seems that there are some interesting factors that impact that graph.
Freight Use + Repatriation Flights
Many if not most of those seat miles are repatriation flights as well as passenger aircraft transporting freight! Those are and can be only temporary remedies. In Germany, Condor recently published their foreign farm help shuttles, now the Polish state-owned PGL owning LOT and most Polish airports cancels their rescue-takeover of Condor. Likely the end of that tradition-airline.
Large Aircraft (Twin-Aisle)
Very visible is the mass grounding of large aircraft. The Airbus A380 is already no longer built, now airlines retire, decommission that aircraft in large numbers. Flightradar showed quite some of those aircraft being flown to the scrap-yards, also called aircraft graveyards. The same applies to many 747s, not being “parked”, but decommissioned. The same fate even seems to hit the Boeing 777. Coronavirus also seems to seal the fate of many Boeing 767. For all those aircraft, more than 80% are grounded – many of which are being decommissioned for good.
Midsized Aircraft (Single Aisle)
Coronavirus also seems to seal the fate of many 767 and 757, though American Trans Air seems to have a sound business model for the 757s; an excellent aircraft that might have been the saver bet for Boeing to upgrade instead of the old 737-frames. With Lufthansa not just grounding, but decommissioning not just 11 A320, but also the entire Germanwings with 23 A319 and 10 A320. Reflecting their managements disbelief in the post-Corona market for that aircraft. Boeing had already shelved the production of the new 737MAX and seems to have also trouble to handover the currently produced ones to the intended customers.
What stroke me odd was the Embraer E195, showing 75% grounded, as well as 65% of the E190s. Both very good aircraft. But very few, large operators grounding their Embraer fleet in favor or their Boeing/Airbus operations seem to have resulted in their large groundings.
Generally, the regional sized aircraft with below 150 seats (below A319 or 737-300/700) by the time that graph was compiled operated still 50% of their pre-Corona regional services.
Outlook into the Crisis
Optimists outlook is a two-year return to “normal” (AF/KL). Flightglobal headlines Global airliner fleet returns to 1990s levels, John Strickland writes on Aviation Week For Airlines, The Shock Has Just Begun. At the same time I see and here seasoned airline and other aviation manager expressing an ongoing cognitive dissonance on a surprising level. It’s beyond my understanding how anyone can vouch for unsecured credit by demanding vouchers when we don’t know, if those airlines, cruise companies, etc. will survive. I expect a large number of claims against governments, where such vouchers are legally made normality. Anyone expecting a quick recovery, think again. And yes, that includes people like IATA chief economist Brian Pearce. I consider it a dangerous, if not criminal belittling of this crisis.
And while optimists still hope for a quick recovery and flights to recover even within this year, realistically we must expect worse. In many webinars and discussions there is agreement by seasoned professionals that this year and likely next, maybe even beyond we will be living in crisis mode.
Now Flightglobal headlines that Cash reserves give Boeing 10 months of breathing room. The MAX-grounding came at the worst possible time for them. Thinking about their intended acquisition of Embraer, there are already news in the media questioning the value of Embraer in the time of this crisis. Does the deal make sense at all? Not in my opinion. Airbus published reduced A320 output and many of the ones rolling out of production being parked at airports like Rostock (RLG). Until they can be delivered to clients who want them. Clients who can afford to pay for them within the crisis.
Overall, which aircraft will be shelved, either by the airframe makers or by airline and especially aircraft investment companies’ demand.
The Beginning Recovery
What they also agree upon is that whenever the recovery starts, the recovery will be slow and need small airplanes!
Operators + Leisure Travel
In a recent conference call, two attending tour operators flight purchasing managers emphasized a recovery on the basis of previously high density high volume routes. They emphasized that while VFR (visiting friends and relatives) will recover a bit faster, the “normal” traveler will be busy recovering their jobs and lives and income – they expect only very little demand for the typical vacation for 2020. And they, as tour operator flight experts raised a question: “Who will want to spend some hours in an airplane having the reputation of being a sardine can?” This will even impact the vacation travel in 2021 and beyond. There will be a revival of ground-based and localized travel at the expense of air travel. It will take time to recover from that blow.
The same conference call had corporate travel managers and representatives of two different business travel management companies (BTM, corporate travel agents). They expected an even more restrictive point of view. Corporate travel managers have for years been made sensitive about their responsibility for the well-being of their travelers. So now they fall-back to what they have been taught, now they will restrict travel to the most needed, qualified as important cases, until the traveler can be vaccinated against Corona.
An exception the BTMs mentioned: Travelers who went through the infection and are such immune and noncontagious may be the first to start traveling again. But it was also consensus that a comparison to flu vaccination would be not comparable, after all the hysterics we went through.
Maybe some people won’t vaccinate. But that will not make much of a difference about their reluctance to travel by air for a while.
Slow Passenger Growth
All this lead to the expectation that even on former high density routes, the use of B757, A321LR and such smaller airplanes may be the first routes to recover on long haul. Some very high density routes may recover using larger aircraft such as the remaining B747s or B777s. Where I see Emirates likely to stake their claims quickly, possibly even basing some of their aircraft out of country to serve remote routes.
Also on regional routes, operations using anything larger than a 150-240 seater (A320-family, Boeing 737s) will be very unlikely. It’s also the signal aircraft retirements within the IAG group (BA, Iberia, etc.),
Long-Haul, Hub- and Connecting Traffic
As for the anticipated return in passenger numbers, except for the very high density routes like New York-London, airlines will start with shorter hub-to-hub-routes, like back in the 80s the availability of two-leg-connections between any two cities will be limited, three-leg connections again becoming quite normal. Expectation was also voiced that most operators will shelve most, if not all twin-aisle aircraft.
Given Emirates fleet of A380 and B777, it is expected that Emirates will expand by “round-the-world” services, connecting most of the long-haul/high-density-routes! That in turn will make it difficult for the other network carriers to cash-in on those routes.
Low Cost + Regional Aviation
Given the expectation of questionable safety regarding load factors and demand for 150-240-seat aircraft, this will be a turning point for the low-cost industry. For a long time, I considered “low-cost” carriers (LCC) as a cost-sensitive regional aviation player. Connecting point-to-point without a focus on connecting traffic. As the fleets grew, the routes got longer, the LCCs started experimenting with classic concepts like GDS-sales, hub-services and connecting flights, etc., etc. As the classic airlines learned to adapt to the new competition. It was long questioned on conferences and other discussions, if you can still group LCCs, that dates back even to fierce discussions about the status of Air Berlin as a LCC.
But at least in Europe, the promising routes allowing sustainable services became scarce. And now the passenger growth evaporated, many routes will no longer be viable for the LCC on a “low cost”. Will they increase the ticket prices? I expect so. In fact, I hope so. The number of tickets sold below the average cost per seat will shrink. Then the LCC will be “just another airline”.
In most of the webinars, calls and discussions of the past weeks, the expectation was expressed that as regional flights were the last to be cancelled, they will be the first ones to recover. 150-240 seats are the domain of the former LCCs. There problem will be the very slow growth of passenger numbers post-crisis. Suddenly their “more seats” turn from benefit at full load into a severe challenge. Similar to tour operators, they will focus their recovery on the former high density routes. In a perfect scenario, they would slowly pick up speed. Realistically, they will rush it, risking a lot, flying below cost. How long they can sustain that must be seen. If aviation truly cuts back to traffic of the 1990s, the demand for flights served by 150-240 seat aircraft will be rather limited. A lot of Airbus-320- and Boeing-737-families’ aircraft will be grounded for time to come. With a devastating impact to aircraft leasing companies focusing on those aircraft.
At the same time, while that would have been a perfect business case for FlyBE, the airline was (among) the first to shut down in the crisis, neither owners nor other stakeholders understanding the impact of the crisis to future passengers’ development, nor FlyBEs value in a post-crisis. I expect other airlines operating the smaller aircraft with 50 to 150 seats to be the first to recover and be the winners in the immediate post-crisis.
Pending question was if there will be enough consolidation to leave enough niches for the survivors. Or if the stabbing and fighting for routes will continue – with the pre-crisis effect on revenues and commercial sustainability of the air carriers. While we all expressed hope for the first, we all fear that airline managers will fall back into their old modus-operandi to focus on marked share and loads instead of revenue and profit.
Especially of concern are the LCCs, suddenly sitting on a fleet of too-large aircraft. Likely to push them in the market with low ticket prices trying to fill them up. Will they understand and be able to adjust their business model to a drained market? Ask for “sustainable” prices, covering the cost of operation of half-empty aircraft? If not, we will see them burning up quickly like a flash in the pan.
The recovery will be slowed down as “low-cost” models at the beginning will such pose high risk – low return, airlines will need to focus initially on low load factors but the need to create profit after the drought.
The recovery will also demand shrunken cost, fleets, etc. – also including a elimination of non-essentials, redundant developments with the teams associated to them. There will be very hard decisions. A lot of developments will be faced with the need to provide hard evidence on USPs, impact on profits.
With KPMG, ISHKA and other professionals saying that the average return on aircraft fund investments to be around 4% pre-crisis, there have already been the large players as the winners, with many losers. There also was a focus on “me too”, many smaller players, like banks or funds, focusing on the “safe bet” on more and more 150-240 seat Airbus or Boeing aircraft. It was always an issue that those aircraft were leased out to small start-ups, which failed, releasing it at lower return to other airlines, just to minimize the losses.
At the end of 2019 aircraft investors said they’ve been only surviving because of the grounding of the 737MAX. Now suddenly that entire market (finally) imploded. And despite a lot of “experts” expecting the market to recover quickly, all signs are on a slow recovery for that aircraft type. And while a factory new Airbus A320ceo was sold pre-crisis at a cost of 1/3rd of the list price or even less, there is now a fight at play that will turn that aircraft a burden for a long time to come!
What about larger aircraft? The A380 was the warning shot. First the production ended last year, now a large number has not only been grounded, but flown to known scrapping sites. The same true in the few weeks since start of the crisis for 747-400, 777-300 and other large aircraft that was expected to be entering the secondary markets – markets that suddenly evaporated and are unlikely to make it back any time soon. And now there are many reports like Blue Swan Daily‘s addressing the conflicting interests in the current crisis between airlines, aircraft lessors and investors. Everyone following the Saint-Florian’s Principle about who shall take the financial repercussions of grounded aircraft.
Speaking to investors about investment in different aircraft with USPs (yes, I talk about KOLIBRI.aero), I was told repeatedly that they prefer those common aircraft models as they know what they are and everyone does it. So now may be a time where investors will recognize that doing what all others do is (and always has been) a paved road to disaster.
Holistic Investment Models
Speaking about KOLIBRI.aero we also talk about holistic investment. Writing this, there is a report on TV about the wake-up-call against “outsourcing” of pharmaceuticals to China. Developing the business plans for KOLIBRI.aero, we intentionally looked at insourcing as a means to reduce the cost. 30+ years ago, my senior manager in the company accompanying my education in whole-sale and foreign trade economics told me what I found true ever since: You always pay for outsourcing. Either by paying more or by loss of quality. A classic outsourcing is consulting. And my rule offering consulting has always been: If you need know how temporarily, you pay a consultant. If you need know how long-term, you may pay a consultant to train someone on your payroll. Temporarily. If you pay a consultant permanently, you do something wrong.
This is the same in aviation. If an airline flies somewhere once a day, it makes sense to order external ground handling. If you have your base or focus city, you better do it yourself. If you have one airplane, you better outsource the maintenance. You acquire flight crews someone else trained. You outsource your IT, your marketing & sales, etc., etc. And pay for it. Better do not expect to be able to be competitive to your local low cost competitor. If you have a fleet of aircraft, you better do it yourself. Lower the cost, secure the quality. Yes I know, I addressed it in my post asking last December, why airlines do keep failing.
Now, surprise surprise, the current crisis proves that this is the very same with aircraft investors. If you just look at aircraft but have no idea how to use it, you’re doomed. It will work a while, it did work a while. But even before Corona, this model was doomed and I addressed it. If an investor invests into the aircraft but outsources (the risk of) the operation. Then those small failing airlines return the aircraft after not paying the bills for several months.
While the large lessors could shift the aircraft rather quickly between different clients, the smaller lessors often swallowed losses, accepted leasing the aircraft out at lower rates, all biting into their revenue. There was a lot of “academic believes”, “cognitive dissonance” and “wishful thinking”. And a lot of banks and investors avoided to look into new ideas. New ideas reflecting usually unique selling propositions. Not necessarily all winners. But following the flock ain’t the answer either, right?
Since starting to turn the idea that turned out to become KOLIBRI.aero we looked at what I learned back in the very early days of my aviation career. To think beyond. To not “think it can’t work because everyone says so” but to do the maths myself, to calculate ideas. And guess what: Those ideas mostly worked.
Different aircraft, different business model, focus on profit, identify USPs. And Corona did not disqualify our business model. Quite to the contrary. So now all we have to do is find an investor, understanding the value of creativity and interested to make a change. Thinking outside the box. If you try to repeat what others did, look at their failures.
Food for Thought Comments Investors welcome!
P.S. Not all of the links are publicly available but require a subscription. Apologies.
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?
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.
So 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
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.
Which 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 demandthat 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.
The use of ships to travel from Scandinavia or Britain to Europe or crossing the Mediterranean I think I don’t need to remind of the extreme emissions of cruise and other ships?
But there was another article even more to the point: “Where there is a will there is not always a train“. But there are some issues that are unrealistic. The numbers of German Rail are biased and greenwashed. They claim to use only “Green Power”. But in fact, published by the German Federal Environmental Agency, their power comes from the public grid and no matter what “deals” they do, it is grid power. And on the grid, in 2018 only 16.6% has been “Green” (Source). The energy industry accounts for 85% of all Greenhouse Gases of which 98% CO2, the remainder being mostly Methane (CH4) and nitrous oxide (N2O) (Source).
So in fact, the amount of greenhouse emissions by German Rail are considerably higher than advertised. As a report from 2018 shows, we talk about up to 83% “dirty energy” on the “green” energy companies… So if we increase the “public” German Rail assumption of 36g per km (greenwashed) and adjust it to reality, we talk about +200 g/km. Suddenly the published 201 g for flights is not so bad at all!
But what also needs to be taken into account is the emission per passenger. Be it rail, in average used 22% only, whereas those passengers are mostly commuters, filling up the trains above their limits in the rush hours. That is not only true for the commuter but also the long-haul routes. This year, the long-haul trains’ punctuality was only 69.8%. For 2018, German Rail reported 16 routes operating above capacity – passengers finding no seat being just another annoyance, half of the delays are a result of those overused routes. That 20% of the trains are in (often unscheduled) repairs, toilets and air condition known to be out of service just being others. Just a reminder, the average load factor of flights according to IATA is about 85%.
e-Mobility: Battery Greenwashing
Given the devastating destruction of the natural environment in Lithium mining, I do not understand that politicians push forward battery-based e-Mobility. Using fuel-cell technology we can use the existing gas stations infrastructure. Refueling takes only about five minutes! And given a broad use will lower the prices and make the technology available on smaller cars too. They can even power scooters, so don’t tell me it doesn’t work for a compact car!
Instead they promote an ecologically catastrophic technology with a completely missing loading infrastructure…?
There is an important advantage of air travel to both rail and road that is frequently not addressed. The issue of ground sealing!
For an airport, about 2,500 x 45m are typically “sealed for the runway, in total about 3,000 by 400 m are required for a regional airport, of which only 25-30% of the ground are “sealed” by infrastructure, 70-75% being grass areas. So we talk about 400,000 m² of an average regional airport being “sealed.
A highway with four lanes is about 31 m wide with about 24 m being sealed. A 50 km highway such seals about 1.2 million m², so three times as much as a single airport. Highways are known to be an insurmountable obstacle for wildlife.
For Rail we talk about a minimum of 12 meters sealed width for 2 tracks, up to 20 meters on high speed train routes and and average of about 15 meters. So on 50 km of rail we talk about 600,000 m² of sealed ground. Before we start talking about the railway stations…
Ground Sealing Summary
I don’t have the number, not even for Germany, but it might be an interesting comparison for the aviation industry to compare the total ground sealed for highways (not talking about cities) and rail, compared to airports. I think that will be a devastating result for the ground transportation modes.
My hope on rail is that hyperloop we will not seal more ground, but will be established underground.
Yes, I am a big fan of the CO2-tax. If it is used to compensate for bio- or better SynKerosene! So far, all eco-taxes are abused to cover up for growing demands of the policos for their “other agendas”. But did you know that the German air traffic accounts for less than 0.3% of the CO2-emissions in Germany? (Source)
National Geographic last year reported about a development by Canadian Carbon Engineering, using CO2 with hydrogen (H2) to create artificial kerosene (and gasoline). Whereas there are industry sources to provide excessive CO2, hydrogen can be created using solar parks. The resulting bio-kerosene is an independent power storage. As the CO2 from burning that bio-kerosene equals the amount that was used from the environment, it is a completely climate neutral solution. And using solar energy for the electrolysis and the power needed for the processing, there is a power loss, but that is ecologically irrelevant.
But… Why do the media and politicos actively neglect those developments? Why do they go for dirty Lithium?
So what is the reality check for #flygskam (flight shame) vs. the “green rail”? Green rail is a myth, the power consumption not close as “green” as they say. Considering the ground sealing also favors aviation. And should we in aviation invest large scale into bio-kerosene, lowering the prices to competitive cost levels, replacing crude-oil-based fuel… A CO2-tax such might be an enabler for the conversion. If our lobbyists would show balls, which I’m afraid from experience, they don’t have.
But sustainable transport, including air transport is acknowledged as an important factor in the United Nations Sustainable Development Goals to develop regions, counterbalancing inequalities and disparities!
I think it should not be aviation bashing, nor should we greenwash rail, but we should develop a sustainable transport network for everyone. Connect individual transport to rail, hyperloop or flight. It is the mix we need, not enemy stereotypes! And we need funds to support strategic projects selected, not the ones having the biggest lobbies. And “batteries” are no solution but a pest! Lithium mining destroys the planet!
#flyshame is out! Flying is a vital service for a global world. To disqualify it with false facts does not help to make our world a better place.
Dear Readers. I’ve spend a quite large amount of my “free” time on qualifying myself on online-PR, -marketing, SEO, SEM, SEA. All those buzzwords that I summarized a bit in the new SEO-optimized page Unhyping Online Marketing (SEO SEM SEA). So I didn’t have spare time to focus on the topics but made note, what to address in the upcoming blog posts.
As I told a friend, it mostly scratches on the surface only, where I could pour some salt into open wounds. Most fun for me was to make that article SEO-perfect, though it does make it a bit hard to read… And it became so much, that I decided to put it in a page, not a blog article (post). If you didn’t read it yet, if you’re in marketing or online, you might want to after reading this post.
What did trigger is the statistics on active users vs. leechers. I know a lot of you read, though most of you I don’t know who you are. I sure do appreciate anyone “outing” themselves to me that they read my blog. Send me a mail to juergen at barthel eu if you don’t want to comment in the blog.
Quo Vadis Virtual Airlines?
Many new airlines come without business concept. What is the business model? What is the USP? Have you made a sincere SWOT analysis? Know your internal and external strenghts, opportunities, weaknesses and threats? Or do you believe with a small, leased fleet, paid maintenance, some commercial off-the-shelf software and some flights in summer to the secondary holiday destinations you can stand up to the existing big airlines? What’s your niche and is it safe and sufficient enough? Else, you simply build up a market for the big ones and find yourself pushed aside – another “victim” to the ongoing consolidation. Nothing new. Nothing unexpected.
There is the saying about how to make a million in aviation. Start with a billion. While I believe with a billion you can achieve something, the usual “airline startup” is 2-20 million. One or two leased A320 or B737. I call them mayflies. They fly one (high) season, maybe two. Then they have no more funds to sustain another low season and “fail”. A failure with prior announcement.
Regional Airlines vs. Low-Cost
Discussing “Regional Airlines” and “Low-Cost Airlines”, all the “experts” keep separating the two models. What they fail to see is the role of low-cost airlines in the regional aviation market.
The common “definition” of regional airline is to fly small aircraft, up to 100 seats. Often in a mixed fleet. Always at a high cost per seat. So the tickets by nature are and must be more expensive.
“Low Cost Airlines”
Different from Regional Airlines, the Low Cost airlines fly Airbus A320- or Boeing B737- family aircraft with 150 to 200, recently implementing even larger A321 and B737-9/900 with up to 240 seats.
Regional + Low Cost
Both airline types have something in common. Both fly point-to-point. Both classically focus on short and medium haul.
Both also establish some connecting services as their hubs. And airlines like FlyBE try to reduce the cost by using a single-type-aircraft fleet like FlyBE’s 54 Dash 8 Q400, though they have some other aircraft too. Air Baltic converts to a single-type A220-300, their CEO expressed even adding the A220-100 would complicate and increase the cost base. But the choice of aircraft defines the choice of airports and routes. Which leads to the next topic of this article:
The Passenger Airline Food Chain
30+ years ago, when I started in aviation, there was a very clear “food chain”. First came general aviation and holiday charter flights, feeding the demand for certain commercial routes or holiday destinations. When those flights became successful enough, they lost to regional airlines providing scheduled services at fixed times between A and B. The larger holiday charters lost to scheduled airlines and network carriers, taking over those lucrative routes. At the end of the food chain were the large network carriers, connecting smaller cities to their hubs and through the hubs connecting to the world.
Then came the Low-Cost carriers. And everything changed.
… Everything? Really?
The Rise of the Low Cost
So the model of the Low Cost Airlines was to use a single type aircraft fleet, such minimizing the complexity to operate the fleet. Be it exchange of broken aircraft, be it flight crew training (cabin and cockpit), maintenance, etc. Using the highly effective new Boeing 737 models, later also the A320, they focused on one thing. To provide the lowest cost per seat and such undercut the prices that the network carriers with their far higher complexities asked for.
They did not bother about the complexity of hub-services or – god beware – “interlining”, requiring baggage transfer, the need to secure the connection for the passengers, they connected secondary airports point-to-point. Just like the regional airlines, but at lower cost. All they did in fact, they cannibalized the upper end of the regional airlines and also competed with many regional flights of the network airlines. Given their USP of a very, very low cost per available seat kilometer (CASK) or mile (CASM), they covered their niche well and ate away from the profits of both small regional airlines, as well as the large network carriers.
Regional Airports vs. large Hubs
In the past, there was a clear distinction. Regional airports were small airports that were connected to the global air traffic networks by being connected to the hubs. So a regional airport only served a few scheduled flights, plus vacation charter. I had this concept also at the Erfurt-Weimar airport (ERF) 2009/10. Where they did not even understand their Munich flight they subsidized would connect them via Munich to the world. Cirrus Airlines as the operator was “Lufthansa Partner” without code-share into Star Alliance, not even with other airlines in the Lufthansa Group, so all the airport looked at was the few “Lufthansa connections” they could offer from their airport via Munich. Of which some even didn’t connect. In consequence, the locals did not look at those few connections, but focused to fly from Berlin or Frankfurt, both three hours travel time by train. Or they even took the train to Munich. If you know the added time you need in Berlin and Munich to get from the train station to the airport, you understand why I got upset. Simply to date my example of a gross misperception and belittlement of the airport’s value. Even worse, on my first day at the airport, I had to read an article in the main local newspaper that one political stakeholder promoted Arab stakeholders to come to Thuringia. By flying to Frankfurt and taking a bus (four hours minimum). Instead of flying via Munich…
Working with regional airports, my experience is a verystrong tendency to short-sell themselves, belittle the own region. It is not made any easier that there are virtually no regional statistics about travel demand and the IT “solutions” are being biased to make big airports bigger and neglect the small airports. As I explained in the December 2017 article about the bias of route viability analyses.
Evolution of regional hubs
Especially in Europe, the political strategy about aviation is “thinking small”, new airports like Berlin are planned too small from the beginning. Airports that were planned for growth, like Munich when moved from “Riem” to “Erding” face political opposition to execute the expansion, adding the originally planned runways. Even London, instead of a bold move to establish a new airport, decided to just add a new Runway to London-Heathrow. A move that will quickly face the same problems Heathrow has today, of inheritance in terminal structures, slot constraints, a limit to the expansion. Should Boris Johnson in the recent turmoil follow Theresa May, there are some hopes that he revitalizes the “new airport” idea for London.
With the large hubs increasingly slot constrained, i.e. Amsterdam simply “out of slots”, the only way is to bypass those airports and increasingly fly to smaller cities. An example can be American Airlines, adding Dubrovnik on the Balkan Adria to their destinations. Sure, the low-cost airlines have a history understanding the value of point-to-point services between smaller, “regional” airports. Basel, as a first base of easyJet evolved into a major hub for the low-cost airline. Business case given, the operation of a regional hub can make sense… And didn’t we joke about easyX when Air Asia X flew to London-Gatwick with majority of travelers connecting onto easyJet…
So far, many of the “low cost airlines” (i.e. Eurowings, Norwegian) focus on larger airports as their hubs; Düsseldorf, Cologne, Barcelona and the likes. Their decision makers obviously are not bold enough to leave the beaten path and go new ways. Ryanair moved into Frankfurt, but it’s said they are not doing well there. Wizz and others establish small bases in regional airports and then grow them, benefiting both the airport, the region and commerce in the regions. Given the slot constraints on the “mega hubs”, we will see a lot more development of regional airports, point-to-point services and hubs. For those airports and their regional development stakeholders, one of the main tasks is to change the perception from “feeder airport” to a bold understanding of their own values and needs – which directly served regional routes make sense? I know, this is a recurring topic on this blog…
The Future of Airports
My friends at Passenger Terminal World, also doing the Passenger Terminal Expo, recently collected views on the future of airports. Personally, I found those views rather conservative. Very focused on the adjusting the status quo, no bold jumps at all. But for several years, some bold ideas keep resurfacing of which I’d like to address two.
The Circular Runway
The Circular Runway on first sight is an intruiging concept. You could land anywhere, never a “runway overrun”, never the wrong wind direction and while one plane takes off on the one side, another lands on the other. But.
There are some questions that I believe this idea will nevermake it to reality. Usually, there is a given wind direction and airplanes take off and land against the wind. So instead of a straight runway you have a circular one that allows to take off and land exactly against the wind. While the remainder of the runway remains unused. A nice to have? Or a lot of sealed ground for no gain?
The other setback is if you exceed the capacity. Adding another circular runway? If need be crossing runways use less space and allow parallel operations. # And they can be started with one runway, adding as demand requires.
Given both those issues, I think will be good reason to stick to the existing straight runways.
Drive Through Airport Terminal
The Drive Through Terminal is also an interesting concept that the designers invented for large airports. But in fact, there are a lot of setbacks from such a terminal that make it less ideal for such airports, but more ideal for regional airports. What I like is the possibility of weather independent operation thanks to the roof, as well as the guide rail system to transport the aircraft from arrival to departure.
The first problem is on large airports that there are airline using differently sized aircraft. So you have classic terminals and drive-through ones only for certain aircraft? On regional airports and low-cost airports, the terminal could be optimized for standard aircraft from 70 seats up to A320/B737 families with up to 240 passengers. Should there be a larger aircraft, it can be handled on the apron.
The other problem with the proposed design is the ignorance of what any airport operations manager can sing of: Disruptions during the turnaround. Once the airplane enters the process, there are now ways to replace the aircraft (see image left). On a small, regional airport, that can be overcome rather easily using one or two lanes only, allowing the aircraft on any stop to be “extracted” or “added” into the “line”.
The third issue is the issue of parallel handling, supporting connecting flights. While the first aircraft boards, the other just comes in. But what I think can be a practical approach is to have drive through in a two step process. Disembarking, embarking – go. If there is a problem, on both “stations”, the airplane can be pulled out backwards or front. Several airplanes could be managed in parallel.
The last issue is the passenger facilities, including and not limited to contemporary airport cities
There are a lot of ideas out there, but the main hurdle is the conservatism. Airplanes to date are serviced on the left, boarded on the right. A relic. But to change such requires not only different airports but also different airplanes. I doubt I will live to see such a change. Other issues can and should come. So I see the rise of the regionals, also the drive through terminal.
Food for Thought
Back to the introduction. I’d love to hear from you. You can out yourself on mail, WhatsApp, Viber, here in the comments, that you’re one of the frequent readers of my blogs. It is motivational, believe me. And if you haven’t read it yet, you might want to smile about my SEO-optimized summary of three months studies: Unhyping Online Marketing (SEO SEM SEA)
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