What’s Your USP??

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

KeyholeI keep telling people that you have to understand your business model, you got to understand your “Unique Selling Proposition” (USP). But then I fall in the same trap. Implying “initial” understanding…

We recently had a discussion on this with […] on CheckIn.com and found them to have a typical misunderstanding, considering us “competitive”… Say what?

So yes, it brings up the question: What’s our USP… And why are we not competitive to anyone? What makes our dashboard “different” (unique)? And why is it so difficult to make professionals understand…?

It seems simple enough.

It’s not the “MIDT”

Current “solutions” focus on flight data (MIDT, etc.). We focus on passenger potentials. And thinking further down the road; our “route level” will focus on commercial relations between the regions, ethnic traffic (VFR, visiting friends & relatives) as well as Tourism (taking into account the hotelrooms per population). We believe (from own airport and route development experience) that flight data is for established routes, but nevertheless require – other – experts to analyze. As they also relate to frequencies, flight times, air fares, reputation, and other “soft factors”.

But we look on the ground.

Own experience: A low cost carrier “cannibalized” a regional aviation route, the regional carrier was forced out. A year later, the route was dead. For the flight profile was on a double daily, small airplane, business travel. The low cost tried triple weekly, big aircraft, low fares, tourists. Sorry, no tourists that route…

So don’t put us in the box “passenger review”. This is new. Our tools are especially useful on routes without any previous flight operations, without comparable flights from neighboring airports. When “MIDT & Co.” leave you in the blind.

The Isochrones People

It’s not really about Isochrones either (though we call ourselves The Isochrones People). Where common Isochrones usually are results of more or less creative guesswork and simply look at how far you get in 30, 60, 90 minutes driving from the airport, their source data is usually on county level or worse, often the figures do not compute with our own findings – not even close. So what’s the source and do you trust it?

Just some examples from public sources, what we had to deal with:

samples

It took us four years (out of five) to compile our data sources, test, throw away, dig into them, correct them (usually very much) and compile the sources in a way we can reuse them without too much work. Because every year there are changes, communities merging, splitting, renaming, …
Find solutions to calculate mass drive times. Where the commercial services limit to 1 million requests a year (at a fortune), we have that number in a few weeks. So we use commercial “standalone” solutions like the logistics industry uses, but still – running a country takes some days of pure computing time.

The Stuntmen

Still having some bugs, using commercial software for the mapping caused the maps to be close to unusable in Eastern Europe. Not professional for sure. So we had to relaunch. Now we use Open Street Map with a mix of their data and mapping data we receive from the countries. Which differ from what the commercial map providers sold us, but “suddenly” and to our expressed delight fit the statistical sources we use. And the bugs we solve one by one.

Wonder why no-one did our stunt before? Wonder why we think no-one (in his/her right mind) will? Above is your answer. But was that really necessary?

Eyesight for the Blind…

From our experience and that of the experts out there supporting us (airlines, airports, and their consultants), we know there is need for understanding the local customer base. And highly expensive, often outdated analyses of questionable quality at exorbitant prices. So yes, we think our services are needed. And if you don’t use them, you remain blind on one eye.

So what’s our USP again?

We’re not just polishing your Crystal Ball as I keep saying. We expand your vision and understanding to what’s truly important. But wasn’t yet available for no-one dared to address the complexity behind it. So trust the airport they know their market? The best you could do. Now we do better. We qualify their impressions with hard data.

And we make it comparable.

And that’s why we don’t compete with the flight data providers. We do something new. We do the other side of business. The hard one ツ

Seen our demo yet? Three airports. Full analysis. Free to use. But we have almost 600 more: https://www.CheckIn.com/

We’ll debut at Routes and hope to speak to many of you. It’s still “brand new” with cuts and edges. We will smooth them out and improve, we promise. But what we have was simply beyond imagination.

Until now. We launched.
Come. Have a look!

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Purchasing Power & Airports

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

For many years, I use a graphic overlay in Germany in my presentations. I plan to make it available in CheckIn.com in the near future on a European level… I think it speaks for itself.

The influence on airports to purchasing power. Yes, it’s a hen-egg question, but a fact that politicians should think about. Here’s the latest. May it be useful for you too…

Germany Purchasing Power vs. Airports

Sources: gfk.com + Wikipedia
Updated 2017

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What is ‘Low Cost’?

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

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

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

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

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

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

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

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

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

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

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

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

Ryanair_Cuts__2013-14

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

Food for Thought
Comments welcome

In memoriam: Airline Sales Representatives Association Frankfurt e.V

asra

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

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The Right Perspective

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

inside-outNew Airport Insider recently published a blog by one of who they call the “Generation Y”, students, getting ready for the travel and aviation industry. What triggered my attention there was a very basic, though very common misperception, what I call “the inside-out-look”.

What’s wrong with that?

That is rather easy. If you provide flight services, you fly both directions. Worse, if you subsidize any airport, you likely do it to attract commerce to your region (tourism is commerce too). You likely don’t do it to make the people in your region to take their money elsewhere. As such, the focus of airports and politicians alike must be on the outside in, or as we say in the travel industry; the incoming.

In the example, which is very common, the French author considered “rail” a competitor to flight. Which is true on the inside-out-look, or outgoing, but it’s simply missing the point once you look outside-in.

crowdedtrainsAside of Germany, France and a handful other nations, train is usually no issue. Within these countries, train is very competitive on the local market, especially the high speed trains like French TGV or German ICE. But now I go abroad. Into another country. I go into any travel agency, even in France or Germany and ask for international travel. Give me a guess: How often will they offer you train, even i.e. Paris-Frankfurt? All they intuitively look for in phase 1 is “flight”. Is the city the client wants to connect to bookable on the GDS (Global Travel Booking System)? If not, the agent (hopefully without showing you) rolls the eyes, curses you and starts looking up how the f*** to get you to that godforsaken town you ask for…
noflights
Offline Airport

In short: If you have an airport “nearby” with scheduled services that link you into the global aviation networks on the GDSs (connections are important), you are visible. Else, you’re an annoyance. If there is an airport “nearby”, travelers may take train, bus, rental car or taxi for the remainder of the trip.

pickupLikely, not knowing the language, maybe not even the local alphabeth, it’s going to be a taxi or a car from a large (global) rental car company offering navigation system. Or a personal pickup…

Later, the train may become a competitor. But that’s another story. To trigger global commercial interest, an airport is a strategic answer.
But not just the airports, but also the connectivity by scheduled flights, which can be booked in the GDS, connecting the airport to the global aviation networks! Second lesson, most local-minded politicos miss to understand with their inside-out-look…

Food for Thought
Comments welcome!
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Global Economic Centre of Gravity

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

A Wake-Up Call

Frankfurt Airport at night
Frankfurt Airport at night

If you ask yourself, why Germany and Europe and their Aviation Industry stumbles behind on a global scale, ask our politicians! Ask them why new airports are being built in Turkey (+150 Mio. passengers) and Dubai (+160 Mio. passengers), triple the capacities of Frankfurt (56 Mio. passengers), more than double that of London-Heathrow (70 Mio. passengers). Each! More even than all London Airports together have – and they operate at their limits, new expansion stalled in bureaucracies. And ask them, why German Airlines go bankrupt (Augsburg Airways, Cirrus Airlines, Contact Air, OLT, …), struggle to survive (Lufthansa) or are already steered by Arabs (i.e. Air Berlin, Darwin Airline) … Our answers? “Air Passenger Duty“, night curfews, stop of 3rd runway in Munich (instead of Transrapid), Capital Airport disaster in Berlin, etc., etc.
There was a time, when German Lufthansa was the measure of all things. Without Lufthansa, i.e. the Boeing 737 would never have been build, nor become the most successful airplane type of all times.

Emirates A380 Hub Dubai
Emirates A380 Hub Dubai

Today the big shots are called by the Arab airlines, Emirates wiht 39 Airbus A380 just ordered another 140 of that mega-airplane, their fleet of 200 aircraft triples with more than 400 new aircraft on order. And Lufthansa’s Star Alliance partner Turkish Airlines doubles the fleet, adding almost 200 to the existing 200. And as mentioned, Istanbul gets another airport (they have two already) for another 150 million passengers, three times as many as Frankfurt manages today.
Lufthansas order list may look similar, but most of the aircraft needs to replace older generation “gas hogs”. And with 10 A380 and another four on order, with 29 747 with just 10 new on order, Lufthansa is in no position to play in the same league as an Emirates.

Germany Purchasing Power vs. Airports
Germany Purchasing Power vs. Airports 2016 [updated 2016]
What many oversee is the commercial impact of aviation. As I show for many years now the correlation of economic centres in relation to airports and their size, there is simply also a historic development giving a warning example.

As Carthage and Rome have been the centre of the world in there time, as was Genoa (Columbus) or Bombay. Always the metropolises where strategically located at trade routes. And as shipping (the one on the water) got competition by rail, street and aviation, developments in aircraft construction shot airports like Shannon or Anchorage into the insignificance of history.

train-vs-planeMy former boss compared this with the old American railroad tycoons. Their self-conception was to build rail tracks and operate large iron horses, not the mass transport of people and goods. As the first aircraft were developed, they belittled these developments. As the World Wide Web developed, Microsoft belittled this development and to date limps reactively behind current developments (the Windows 8 Apps are simply uncompetitive compared to their Apple paragons).

Merkel-PutinAnd currently, the politicians of the “industry nations” miss to set the right tracks for the future. Would Moscow get the Russian corruption in check, no politicians would dare to challenge the authoritarian regime of this resource rich country. Just as they handle China with velvet gloves, knowing exactly that money rules the world and in the end, if they want to “profit” from the business, they dodge their high moral and ethics first… And aviation is simply a punching ball for them, screaming “noise” and “pollution”, no matter the major, largely unsubsidized developments in quieter and fuel efficient aircraft… Yeah, don’t think, just hit’em and milk’em!
For aviation, it is finally about moving people and goods from A to B (as efficiently as possible). And who believes the thousands of aircraft seats ordered in the Middle East would fly empty… Where does the traffic flow? Minimum growth in Europe. A graph by the CEO of Turkish Airlines given when he took seat of chairman of the European Airline Association AEA pinpoints it:

global economic centre of gravity 1971-2031

At the same time Lufthansa impairs it’s cooperation with Star Alliance Partner Turkish Airlines, with the reasoning that they would “unfairly” pull longhaul passengers to their hub in Istanbul. “Obstinacy” you call that I think. Because factually, in the current political sludge and struggle for survival, Lufthansa has nothing substantial to counter such developments

Cash cow - milked dry
Cash cow – milked dry

Aviation in Europe: Lufthansa and Air Berlin have rested too long on their successes, Western politicians simply understand aviation as a milk cow they can drain, ignoring the negative repercussions to commerce of their decisions against aviation development. Even Ryanir “stumbles” and frantically tries to reshape the own, aggressive business model, replacing it in fact with a core-different business model. If that will succeed? I doubt it.

Feeder for the Hub (FRA)
Feeder for the Hub (FRA)

My expectations: One global hub will remain in Europe. With Easyjet and current focus by Norwegian, London has a good chance, if they get their capacity problems managed. London isn’t dependent on the drip of British Airways as are Frankfurt (Lufthansa) or Paris (Air France), being tied to these airling operators for the better or worse.
Passengers from or to Europe then will fly with regional feeder services into the real global hubs in Moscow, Istanbul, Abu Dhabi or Dubai. As a hub to South America Portugal could position itself, but also Madrid and Morocco (outside the EU) are showing ambitions, a prophecy being rather risky there.

The traffic and commerce streams are changing. And I have concerns about the ability of the industry nations politicians to realize that the world suddenly bypasses them. And when they wake up, it will simply be too late.

Food for Thought
Comments welcome
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Aviation Network Planning – or: how the Crystal Ball works

There is an updated version of this article that we published on LinkedIn in March 2016

crystalballaviationplanning

Two bad news hit the media this week. Ryanair removes flights from Budapest and Memmingen looses the scheduled services to Hamburg and Berlin. As Michael O’Leary (the Ryanair boss) had already announced that Ryanair will ground aircraft in winter (last year they grounded 80), this seems to be rather strategic and O’Leary’s argument it would be because of high airport charges may be just a smoke-ball, decepting the media. Memmingen on the other hand…

It gives me reason to highlight and explain a bit of the Crystal Ball used in airline route planning. It starts with an idea. Who brings the idea up is irrelevant, except it may be a good idea to do a bit additional research, if your boss does.

Having the idea, question is: Is it feasible? So as a route manager, you’ll talk to the airport, you check MIDT-statistics about flown passengers on the route or routes from neighboring (=competitive) airports, you check “facts”, such as official statistics on commercial relations between the two regions, attractiveness to potential tourists or “VFR”-traffic: Visiting Friends and Relatives. Statistical data…

The MIDT-data is by nature incomplete. Often it does not include direct sales with the airline, Internet sales, etc.. Even if it does, it is based on historic data that relies on facts that are meanwhile outdated. Have the commercial relations strengthened? Did they suffer from bad connection and have faded away? How much were, are and will the travelers be willing to pay for the ticket? If the flight failed, why … hard facts preferred, not guesswork or interpretations by the airports involved.

There is something called “catchment area”, based usually on isochrones, frequently a wild guesswork by the airport itself, more wishful thinking than reality. While working with Yulia on the basics of the CheckIn.com-isochrones, I found in all cases we checked discrepancy larger than 10% different from the airport’s own figures. And in all but one case, the “catchment area” did not cover at all that there are other airports competing with the traveler! An example: If you live in Minden, Germany you are about equally distanced to four airports: Hanover, Paderborn, Münster/Osnabrück and Bremen. For the CheckIn.com-isochrones, we took into account the size of the airport – number of passengers, as the more passengers, the more likely that people choose the larger airport. The distance – the closer it gets by driving time, the better. And other factors we considered relevant or only partially available – like flights to the destination and the weekly frequency and seats (the higher the more “competitive). But quite some more! From that, the system now calculates “fully automatic” the isochrones. And the results are devastating! Even on a “global” airport scale.

The smallest discrepancy of the catchment given by the airport of how many potential travelers would use the airport to the catchment we calculated was 50%. The high ones +90%. That is just basic statistics.

On top of it, you have the questions we did not take into consideration when we worked on the isochrones. Like VFR, like commercial relations, like tourism interest, like … And you better know, where you got it from, how likely it is to be overly optimistic or (sometimes, rarely) pessimistic…

Having that information, you start fine-tuning. You likely have several possibilities, depending on the passenger potential. Take a bigger airplane with more (cheaper) seats and lower frequency. Or take a smaller one with higher frequency, what the business traveler’s will like, but the seat being more expensive. OECD gave some figures for a rough calculation I found quite reasonable for a first idea: An Airbus A320 or Boeing 737 with 150-180 seats costs about 8c (Eurocent) per seat-kilometer (not mile). Use this form to multiply that with the distance for yourself. That is the “net cost”, so add the (increasing) taxes and surcharges onto that cost to come up with an idea about the ticket price you need as an average for flying break-even…

A route planner takes into account much more accuracy, such as real cost of operations, variables depending on aircraft and total hours of weekly/monthly operation. But for a start…

Now comes the next tricky step: How many seats can you likely sell from A to B at this average price, and how many might connect to C but use your flight from A to B? Do you have interline or codeshare agreements at the destination? What air fare do you get? Do you operate the long-haul-sector as well? The cost there likely is cheaper as the aircraft is bigger. But you got to have an idea on connecting services – a science of its own…

So now, at the end of that exercise, you can calculate your risk – how many passengers are you sure about using the offered flights? If you are unsure, your risk is 100%. If you have 50% guaranteed load, you risk less. You also get support from the airports usually, either financial, or “marketing support”. Compared to your operational risk, these are “peanuts”. And in the beginning, you run high risk, so it is wise to not calculate that on your predictive models – if you can’t succeed without, you likely loose.

But then comes the key-point, most airports today fail to have an answer for. Having finally calculated the risk, who takes it? In most cases the airline, virtually alone! Under such circumstances, why should an airline risk a new route with questionable return of investment? In charter flights, the tour operators (sometimes) take the risk, also mostly on their own. Lately, unused seats on some business charter flights, operated by large corporations are being made available to the public, either via Internet or GDS (travel industry flight booking systems).

And if that works well, from such a “business charter” a “scheduled service” with a higher frequency can evolve. But in most cases, the airline is left alone. Any question, why they limit their risk, by pulling the plug when the losses pile up beyond their worse case scenarios?

With eroding net profits, eaten by kerosene, excessive flight crew salaries, taxes and fees, the ability to build a new route in two to three years is very limited. If the route does not take off immediately with a reasonable load factor, the losses pile up so fast, the airline risks extinction if it does not keep a tight control on it.

That’s a short summary into the “science” of airline route planning. If you are an airport who seeks a new route, better do your part of the homework. Can you convince your local “catchment area” population to support the flight, even if the schedule and fares in the beginning may feel higher than from one of the competitive big airports in reach? Will your travel agents sell your flights with fervor – I’ve seen travel agencies at airports offering flights from Frankfurt, Munich, Düsseldorf, but not from the regional airport they were living at! Do you have a grip on the local VFR market? And most important: Can you get commitments from your corporates, business associations (chambers of commerce) or politicians about guarantees on how many seats they could fill? If you are a touristic region: Can your tourism managers qualify, how many people they will have flying on the route? It is fantastic to see, how ingenuous most of the tourist boards are about such basic facts: “Fly and we’ll see”. Flown for a decade, not seen…

Okay. As I’ve put it in the past (as a German saying goes): I take a big long stick and grope in the dark. It requires expertise, experience and good guesswork to do something with all that information you get. Good luck is part of the business.

To summarize planning of new routes:

  • The quality of figures available, as well as my trust in them.
  • The cost of operations
  • From those: A more or less realistic load factor expectation.
  • Who takes the risk?

The first two factors are subject to an educated guess…

And what about Memmingen and Budapest? Memmingen likely has to do above homework now, there obviously was a discrepancy between expectation and reality. And Budapest? I honestly believe Ryanair simply cuts aircraft there for winter – they may want to talk to others if the routes justify a year-round traffic! That may convince Ryanair to consider the next winter. Or do the above homework as well to match expectations and wishful dreaming with the harshness of reality.

Food for Thought
comments welcome

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Cheap Pizza…

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

“You can make a pizza so cheap, that nobody wants to eat it”
[Gordon Bethune, former CEO of Continental Airlines]

Being asked about my sanity to invest into Join!, the start-up of an airline network, this article is about “cheap pizza” or why I still think it is a good idea to start a regional airline today.

ERFstatsIn order to complete my statistics about the passenger development before / during / after I’ve been working at Erfurt Airport, I had a look at the monthly development, as well as the annual one of Erfurt and Germany (published by ADV.aero) and Europe and the world (published by IATA) as a comparison.

IATA reports EU, with 9,5% growth 2011, the second strongest market in the world. That is behind Latin America, but before Asia! The market being challenged by political mistakes, increasing the tax burden on aviation. Milking aviation until it collapses instead of strengthening it in its role to attract and support commerce is sure short sighted expression of ignorance. Unfortunately, this political development makes Europe at the same time the global area with the lowest profits world-wide and – to my understanding – has forced the collapse of a number of routes, airports and airlines in the past year. Where the failure of one, opens the opportunity for the other.

ADV confirms Germany, having added aviation tax in 2011, to have only grown by 5,0%, visibly below EU-average. This may also be a result of the struggling by Air Berlin and Lufthansa to cover up for the resulting strain on profits, closing down a number of routes, focusing on their hubs. Which opens opportunity on several of these abandoned routes.

cirrusdefunct spanairdefunctRecently, Cirrus Airlines and Spanair, the one being a code share partner of Lufthansa, the other being a Star Alliance member, ceased their services and filed for bankruptcy, leaving more routes unserved. The failure of one opens the opportunity for others.

Airplus (leading credit card provider for companies and business travel) reports that the business travel in Germany will increase exponentially compared to other markets. At the same time, the average air fares are increasing.

There are some airline operational models, that can be used exclusively or in a combined operation.

  • Hub & Spoke (Network) Airlines
  • Low Cost Carriers
  • Regional Aviation
  • Business Charter
  • Tour Operators

Hub carriers usually operate one or several hubs, routing passengers from and to smaller places through their hubs into their networks. This is mostly the classic way, airlines operate since the 1980s. In those days, the airline took the financial risk to establish new routes. Challenged and responding to low cost carriers, their ability to do so has eroded.

Low Cost Carriers compete with, making them virtually a mix between hub carriers, regional airlines and charter operators. They operate point-to-point-services with larger aircraft, offering ability to start with lower air fares. They temporarily profited from the fact that airlines had to build war chests to finance the establishment of new routes. Meanwhile they come to recognize that operating an airplane is a cost factor and as the established airlines responded to their threat, the advantages they built upon increasingly eroded.

Regional Aviation is usually referred to as the operators of smaller aircraft of up to 100/120 seats maximum. Their focus is to establish air services for regional airports with limited passenger numbers. Using smaller aircraft, they can operate higher frequencies required by business travelers, still being of less interest to the low cost airlines, usually operating mid-size jet aircraft (100-180 seats) with a lower frequency and focusing less on the business traveler’s needs.

Business Charter usually fills the gap, where the operation for a scheduled service between two airports is not supported by the passenger numbers needed, but business travelers need to go either on a customized schedule and/or traveling between airports not connected by existing scheduled services.

Just to complete the picture: Tour Operators have aircraft flying leisure travelers seasonal between their point of living and their place of vacation. The aircraft can be owned by the tour operator, it can be charted exclusively by a single one or a group of tour operator(s), or it can be offered to the tour operators. As such, there is a business opportunity for airlines focusing on operations for business travel, to offer their aircraft on weekends, midday or night to tour operators.

On the positive side: Hans-Rudolf Wöhrl, who already founded NFD (today Eurowings), later bought and turned arouned DBA, now joined into the board and invests in Intersky, a smaller regional airline in Friedrichshafen, Germany.

Updated 2015
Updated 2015

So why attempting to launch a regional airline just now?

The major carriers straighten out their networks, focusing their routes to serve into and out of their hubs. Low Cost operates usually larger aircraft, accommodating the leisure traveler with lower frequency. Many routes are served once to trice a week only, making them less likely to be of interest for business travelers. On the other end, business aviation reports a surge in demand.

Likely the increasing demand for business aviation reflects the reduction of flight services by scheduled airlines (be it major airlines or low cost). Business travelers are not as focused on the air fare. It must be competitive, but their focus is frequency. If needed, they charter the aircraft to enable the necessary business trip.

So it needs careful route analysis. How many people will travel between A and B? Flying between A and B with a 50-seat aircraft twice-daily service (daybreak) plus twice on the weekend at 80% load factor generates 25.000 seats a year. That means 25.000 return tickets to be sold – of 50.000 one-way tickets. Double this for a 100-seater… And when you fly that, what do you do with the aircraft between the morning and the evening rotation?  Can you utilize it at night? An aircraft standing around looses money. So you better consider the options for a secondary service that utilizes the aircraft in midday. And if you have local tour operators interested to charter the smaller aircraft for their services, utilizing it on the weekends or at night adds to improve the return-of-investment for the aircraft and its operations.

But yes, no matter how well you qualify your route potential, it remains a risk. So you got to find investors to believe in your route analyses and believe (or need) it. You can also talk to other involved parties or bodies, such as airports, chambers of commerce, politicians, companies and reduce the risk by having commitments for tickets. Remember, we talk about 50.000 one-ways every year… But in the end – this does not have to be subsidies, it could be commitment to sell a certain amount of tickets.

That said: There are many routes, which require business-frequency with smaller aircraft and would not work with lesser frequency but bigger aircraft (and fares), as the business traveler would not fly only one-way. Increasingly, the retreat of the major carriers from the regional airports opens up opportunities for smaller airlines. Our idea of a “network” offers those small, “individual” operators access to know-how, distribution, services and quality usually available only to larger scale of operations.

Every  failure or retreat from a route or airport opens opportunity for someone else. Though the times, the airlines’ take the risk alone are over – if you start up, you better find out, who comes with you on the journey.

Food for Thought. And yes, I appreciate your thoughts.

As Richard says: “For those who agree or disagree, it is the exchange of ideas that broadens all of our knowledge”

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German Word 2012: Stress Test

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

2011. Euro-crisis is my personally most disturbing issue of the year. “Stress test” has been selected “Word of the year” in Germany. And it covers more issues…

fukushimaStress test 1: Fukushima
We have just one planet. I personally was “pro atomic energy”, as we did not have many alternatives. Now we have them, solar energy solutions are getting better and solar parks in the worlds deserts could provide enough energy anywhere – given, we invest in the infrastructure. But Germans sue against overland power lines, as they go by in there neighborhood… How shall we install such across Europe or beyond?! German saying about the saint of the fire fighters: O holy dear Saint Florian, spare my house, take the neighbor’s one”…
But Fukushima also stands for a disastrous communication by “the government”. Not only in the beginning, but to date! Worse than Chernobyl? Not only the GAU, but also the communication!

stuttgart21Stress test 2: Stuttgart 21
Internationally likely irrelevant, German Rail tries to invest billions into a new – state of the art – railway station. They went through the bureaucratic processes, but simply kept it quiet. Once they started to build, suddenly “the people” learned about it. I do believe, the following outcry could have been neglected, if the communication would have taken them into the process from the beginning. But the mindset of the decision makers (world wide) is simply to ignore the public and do things. That backfired here and it shows that communication becomes public now – and people get organized quickly, using the new technologies (not just the “social networks”).

New monetary support. You can deposit it right here with us.
New monetary support. You can deposit it right here with us.

Stress test 3: Euro Crisis
How this crisis is handled, is an example on the same issue. Politicians simply ignoring the people. German public television ARD (“Das Erste”) in their program “Monitor” reported, how German government kept Greece from going bankrupt, not to the benefit of the people, but to the pure benefit of the banks! Meanwhile, the EU bailout funds, mainly “paid” by Germany exceeds any household – if Euro goes broke, we will go broke on the big scale! I therefore call our government (and Chancellor Angela Merkel) simply corrupt!
Need another proof? The recent elections in Russia. Everyone says, they were staged by “United Russia”, the party dominated (owned) by Putin and Medvedev. The people – a first in Russia – demonstrated against it. Published proof via mobile phones and Internet. Now Putin and Medvedev offer Europe to invest 20 Billion into the Euro… When? No information. But suddenly all political dissent ceases – you can’t argue against the corrupt government, if they offer you such bribe! Bribing I call it, bribing it is!

Other Stress Testing
In a recent report in the printed version of FVW about global aviation and Emirates vs. Lufthansa quoted Gerd Pontius of Prologis Hamburg: “While aviation in the Gulf Region is part of the [government’s] commerical strategy, Europe[an politicians] only see it as a milk cow.” (translated from German).

And while that is true, our experience now includes daycare in Germany does not allow for decent child care. Original from our experience in Erfurt, capital of the state of Thuringia: “If you want a kindergarten place for your child, to get it for a one-year-old, we have a waiting list until 2013.” So in fact, before you get pregnant, you have to secure the place for your child! And better don’t move here, because you won’t get daycare for your child either. From 2012, we shall have a right for daycare. But instead of making the daycare available, the politicians hope to delay it by another three years or pay the fees to the parents who end up without daycare, without ability to look for a job, because they have to do that on your own.
That is our government: Sit it out. Don’t move, don’t change, only if you have to. They call this conservative and are proud of it.

germanpartiesThere is a recent crisis in the governing party “FDP”, our foreign minister is member of that one. They would not even be elected if elections would be today. Yesterday, a question was asked, but not followed up upon: What are the differentiators between the parties?
In the good old days, CDU as “Christian-Democratic Union” was conservative, focusing on business, commerce and Christian values.
SPD was the party for the workers, a group that becomes increasingly large, but has no voice in politics today. They don’t have the lobby = political bribery! That history made them the best friends with the workers unions!
FDP was the party for the small and midsized companies and their owners. That made them a natural partner for the CDU, but they focused on the smaller businesses and they were not the friends of the workers, but of the managers.
The Greens came in the 80s to power and made environmental issues and responsibilities a topic for the political society. They lost their bite in my view, as they did not seek an environment-friendly political strategy, seeking solutions to the pressing problems within the social and commercial environment, but they ignored anything but environment – to their believe, streets, air traffic and commerce is hostile. If they would have answers that are more practical, with a strategy toward their goal, they could even become my friends. With their stubborn opposition on aviation, I’m sorry. Give me an alternative (such as my old WIG-idea) and finance that.

But the politicians now want to serve anyone and most of all, they want to be friends with the lobbies and they are afraid to oppose for the sake of “their” voters – that makes them gray, they loose their color. They all become alike: Corrupt!
Change. We need people like Obama in the U.S.! Who is struggling against his narrow-minded opposition, also called the “political establishment”. No, that “political establishment” does not want “change”. They do not want the “good for the people and the country”, they want their pockets filled.

Will that be be better when we go to England? I doubt! Though the political opposition by Cameron lately is to me a good sign. And I suggested to my friends on Facebook, that I welcome Croatia in the EU, but recommend them, not to change to Euro any time soon. Yes, despite their problems, England is better off without the Euro right now…

Lots of Food for Thought and lots of concerns and missed opportunities.

ATR42 livery optionSo to finish this one off, about the question, if it is a good idea to launch a Regional Airline Network in Europe in these days… There’s an opportunity! We will need to make flying easier, better available. And the concentration to the hubs leaves many regions without decent airline connections they need commercially. So they need flights. Not the politicians, not the airlines, but commerce and industry. And that is an opportunity. Yes, it is more difficult than we expected to secure the funding, but it looks good and we are very sure it will pay off. So yes, it is a good idea and if you know regions needing air services, we have some good ideas how to make that happen 😉 Refer them to me 😀

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Fresh Breeze at Erfurt Airport

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

ERFMany of you have heard or seen that I became responsible Head of Marketing at Erfurt Airport. It was a very busy first week, we all face ITB next week and sure it is a lot of new faces and there is also a lot to do. This airport is an excellently located international airport in the heart of Germany. As you can see on the image, it is rather modern and supports CAT IIIb Instrument Landing. Air freight facilities as well as the four large car rental firms and a General Aviation Terminal complete the excellent impression.

Addressing the necessity to give the airport a positive reputation and position it in its due place on the map of international aviaiton, the airport has received a new management in the past months: Matthias Köhn has been managing the Kiel Airport before, after a six months transition period he is now the General Manager at Erfurt Airport. The second key position, the Manager Operations (Verkehrsleitung) is taken over by Susann Hörl, before having been General Manager at Jena’s Air Field. With Marketing now in my hands, we have an excellent and competent team to properly address the necessary changes to position Erfurt locally, nationally and internationally as a reliable and valuable partner to airlines, travel managers, travel agencies and all other partners. As this is a long-term, full-time commitment, please see my address changes reflected on the website already and coming up. Pending jobs at Barthel.eu Consulting are taken over by excellent partners I have worked with for many years and who are competent in the required jobs. And I am sure that more news will be addressed before the end of the month.

I appologize to the readers, I have no real “Food For Thought” this week. If you have topics you think I shall address, please let me know!

So yes. Food For Thought: What do you wish me to address?

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The Power of Regional Airports

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

ERFThere was quite some buzz the last weeks as I decided to take over my new job at a regional airport (more details I assume to be allowed to release next Sunday). Aren’t they doomed, especially in today’s crisis?

In addition, the Russian regional airports project develops well, Russia is very well aware of the need of regional airports.

So no. I do not agree. I do see regional airports to prosper. Not with point to point traffic, but feeding into the international hubs. Time remains a necessity. Four hours ground travel time are about the maximum business allows before air travel becomes a business case. Some will find their niche, even maybe a major one as I suggested to the Saratov PTBs as part of my side study on their situation. Which is a good example for other communities and their airports.

I also got the new figures of airport developments this month and I find quite interesting examples where and how airports position themselves. Globalization is here and air travel is vital to many businesses for sheer survival – may it be scheduled, charter or freight!

My example in the past years: Compare sizes of cities in the world with the existing of an airport and air travel. It’s a mutual development. But only cities with an airport having good flight connections nearby prosper. And I started in the business booking VIP passengers from the U.S. on the precedessors of Eurowings and other small airlines – flying little Cessna’s in scheduled service between Frankfurt and Paderborn, Dortmund and other such cities.

Food For Thought…

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