Around the Globe in Aviation

Lot’s of encouraging news as most of the major international carriers are reporting record and near record profits last quarter. Despite oil prices continuing to rise, carriers are managing capacity better and expanding towards more profitable international markets at an accelerated pace. Some rumors of possible mergers are in the wind as the industry looks to consolidate. Some highlights across the regions:

The A-380!!

After an 18 month delay, Airbus presented to Singapore Airlines the first operational aircraft last week. It will begin scheduled service on this weekend. The A-380 is the largest passenger aircraft seating 500 passengers and crew. (The Antonov AN-225, 6 engine transport is the largest aircraft) Currently, no U.S. customer has ordered the aircraft. Most airports aren’t designed to handle it.

The B-787 Dreamliner

Boeing announced fight test delays upwards of 6 months. Quantas, the largest customer for the B-787 had a measured response with the announcement. They also have A380’s on order (delayed also). Northwest, Continental, and Air Canada all are awaiting Dreamliners within the next few years. Their initial responses in the media appear to be tepid – for now.

EU Emissions Tax

The airline industry contributes roughly 5% of the world’s CO2 emissions as reported by IATA. The EU is considering replacing the controversial passenger tax with an assessment based on flights instead. British Airways estimates its share will be $815.6 million annually. Funds to be used to combat the “green-house” effect.

Airline Fares

Not surprising, fares are headed upward further still in 2008 in response to continued strong demand, generally tight capacity and higher fuel prices according to the “Global Business Travel Forecast” released by American Express Travel Advisory Services. U.S Domestic 1%-5%; International long-haul business fares5%-10%; Canada domestic short-haul 2%-5

Philippine Airlines

PAL may be emerging from receivership this month, as it moves towards health after 9 years in its “rehabilitating program”. It has demonstrated improved profitability since being acquired in 2000 by the Lucio Tan Group.

China’s air safety record

China’s airlines were perhaps the worlds most dangerous through the 1990s due to pilot errors, poor regulation and spotty maintenance. The country’s aviation industry has made vast strides and is today one of the world’s safest, as it approaches the showcase summer Olympics next year. China continues to improve airspace management also.

Aeromexico is finally sold

The final price of $249 million was accepted by the Mexican government for its 62% controlling interest in Aeromexico. Banamex, a subsidiary of Citigroup, and a consortium of wealthy Mexican families, won out over the Saba family and a last minute bid by Mexicana Airlines. The company is forecasted to continue a strong earnings performance.

News around the Globe

It’s been a busy month as the summer ends and the industry moves towards a brief lull before the robust holiday season begins. A brief look at some recent events:

China Routes – Big story with the recent liberalization of bi-laterals between the U.S and China. Delta: Atlanta to Shanghai and U.S. Airway: Philadelphia to Beijing both enter this burgeoning market for the first time. Continental, United, Northwest, and American are adding new route authority to their existing China service. China as host of the upcoming summer Olympics is hoping the number of visiting American intensifies next year.

Brazil Aviation – We spoke extensively about the July 18^th crash of Brazil’s Tam Airways at Sao Paulo’s Congonhas airport several months ago.. Subsequently, the CAB director was fired; the airline admitted one of the aircraft’s thrust reversers was placarded inop.; and  the airport itself underwent extensive scrutiny with the Brazilian government issuing a 25% reduction in flights per hour. One casualty of the accident, though, was Gol Airline’s 3^rd quarter earnings and their stock experienced a significant price drop after the crash as the entire Brazilian aviation community was impacted. We are still very enthusiastic about Gol’s long-term prospects.

Air Canada – Initiates a tech-savvy means of checking in at the airport by introducing paperless boarding passes. You don’t say!! A traveler’s PDA or cellphone, which captures the boarding pass in the format of a SMS message, is presented to the ticket counter agent and then the airport screener to access the checkpoint. Very cool!!

Boeing – Forecasts a need for nearly 1,800 aircraft totaling $120 billion USD over the next 20 years. That is an estimated 10% of the world-wide demand during the same period. The B-747’s or A380’s jumbo jets, however, are expected to make up as little as 1% of the aircraft orders.

Singapore Airlines – Hey, and let’s talk about the world biggest airliner-- the A380. Launch customer Singapore is auctioning off the first flight in October of next year on EBay, with the proceeds going to charity. The highest bidder paid $100,380 (of course) for 2 first class seats to Sydney, which is where he lives. That’s a tad much for a one-way ticket.

Aeromexico Airlines – The bid for Mexico’s largest carrier is heating up again. It was thought that the consortium headed by Banamex, the Mexican banking arm of Citigroup would acquire the airline for $151 million USD. However, Saba family, who had submitted a bid of $100 million last month, countered with $158.8 million. The airline is currently controlled by the government holding company Consorcio Aeromexico. We wonder what The Donald would say about a bidding war for – an airline (as oil lifts above $80.00 per barrel)!

British Airways – Taking advantage of the new Open Skies initiative between the U.S. and Europe, BA is expanding its service across the pond next summer. In addition to increasing service to New York with 55 ops. a week, they will fly to 18 destinations in the U.S. The schedules undoubtedly will coincide with Oneworld Alliance partner American Airlines in their hubs.

Bolivia – This one fall under the category of: “Don’t do it!”: This relatively-obscure South American country bordering Brazil to the west, without an ocean port but with a navy, has decided to require U.S. citizens to have a visa due to the U.S. requiring Bolivian citizens apply for a visa. The 30-day tourist visa will cost $134 USD (Brazil’s tourist visa costs U.S. citizens $100.00). The Bolivian government explains that is a “matter of reciprocity,” but they add: “we are working hard not to hurt the flow of foreign tourists.” Anybody booking a trip to La Paz, your dream vacation just went up by a Benjamin!    Ciao    James Alexander

Major Update to the website

We've completed the next phase of our electronic marketing program with the revamping of the Posting-Profits.com website. The major shift was to incorporate three essential elements:

• We are establishing a d.b.a. called "Aviation International" which will have separate business units engaging core aviation disciplines: Management Services, Airport Services, Aviation Safety, and Aviation Fuel.


• Each unit will partner with industry experts as associates thereby expanding the networking capability and revenue opportunities of the company. There will still remain geographical focus, of course. Our newest associate is José Hernandez, Cuban-born, cargo expert who cut his teeth at USAir for over 20 years.


• Updated our logo giving it a more brilliant look thanks to artist Yasela Maldonado at Mind Creations!!

My friends, please take a look at the site and give us your honest feedback. Our next step is to actively connect with other industry sites including IATA and also submit industry articles for publication.

www.posting-profits.com

Thanks for your support as always!!      James Alexander

Customer Service – the Elixir

            The most recent Airline Quality Rating, done by Wichita State University and the University of Nebraska, ranked United No. 8 of 18 big and small airlines for 2006. American, Delta and US Airways scored worse "The service stinks," one first-class American Airlines passenger wrote recently on airlinequality.com, a popular travel site where customers report on airline service.  Customer complaints in the U.S. continue to escalate and the Congress is seriously considering again legislating a Passenger Rights bill it kicked around in 1999 and in 2001. This past weekend, Northwest Air continued it spate of flight cancellations, this time relating to a “spike” in pilot absenteeism.

            One of the maxims of air travel is that a passenger can be checked-in at the counter by a warm, professional agent; greeted by name during a flawless boarding process; enjoy the jovial humor of the in-flight crew, arrive at their destination safety and on-time; but without their bags the whole customer experience is a failure. So how do airlines struggling to maintain new-found profitability create a customer service-focused corporate culture for its customers?

            A recent interview by the WSJ with the CEO of Virgin Atlantic Airways provides a first-rate model. Steve Ridgeway speaks inspiringly of Virgin’s service culture and it’s highly touted staff. At the cornerstone is – “we put the customer at the heart of the business”. Instead of operations people moving metal from point A to point B who, as Mr. Ridgeway knowingly states “don’t like passengers because they turn up late and drop peanuts everywhere”, Virgin is legendary for being driven by their customer proposition.

Few companies can be price leaders like Wal-Mart, Ryanair, and Southwest. But Virgin Atlantic with only 37 aircraft chooses to be a quality leader. It has become their culture; it drives many of the decisions surrounding the quality of products and the services the airline provides consistently. As Mr. Ridgeway says: “It’s in our DNA”.

            The launch next week of Virgin America promises the same service fiber of Virgin Atlantic and Virgin Blue in the pacific. To compete successfully with top-of-class carriers like Virgins, the Singapore Airlines, and Cathay Pacific, airlines will have to provide ticket value and much improved service for their customer. Hiring practices, customer service training, in combination with a top-down service focus are essential elements to overcoming the deficiencies that plague many bankruptcy-emerging carriers today. In the long run, customer service is the elixir of growth and profitability. Cheers!

James Alexander

Brazil’s Air Safety

Our thoughts and prayers go out to the families of the passengers and crew of Tuesday’s TAM Airlines (Brazil’s largest airline) crash at Sao Paulo’s Congonhas airport. Flight JJ3054 was arriving from Porto Alegre in southern Brazil during driving rains. The A320 slammed into a gas station and a TAM Airlines building after narrowly clearing the airport’s perimeter fence and rush–hour traffic on a surrounding highway in South America’s biggest city. Tam Airlines said that of the 186 people on board, 18 were TAM employees, six were crew members and 162 were passengers. Three people on the ground also died and another 11 were hospitalized.

Sao Paulo’s Congonhas airport is notorious for having short, slippery runways. They were recently resurfaced, but the cutting of grooves to channel rainwater off the pavement had not been completed. International air safety experts have long warned of the danger of just such an accident at Congonhas, especially in heavy rain. On Monday, just the day before, two other planes skidded off the runway’s end. And on March 22^nd, another aircraft skidded stopping just short of a steep drop-off to the adjacent highway.

Landing on the 6,362 foot-long runway at Congonhas is so challenging that pilots liken it to an aircraft carrier – if they don’t touch down precisely within the first 1,000 feet, they’re warned to pull up and circle around again. New York’s mid-city LaGuardia Airport, by contrast, has a 7,003-foot runway which is “crowned and grooved” to facilitate braking action.

The ungrooved runway becomes even more-treacherous in the rain when it turns into a slick landing surface. The pilot of this ill-fated flight reportedly did attempt to abort the landing and take-off again but failed to achieve sufficient speed and altitude.

This crash took place less than a year after a midair collision between a U.S.-owned corporate jet and a Boeing 737-800 operated by Brazil’s low-cost Gol Airlines losing all 154 souls onboard when it plummeted into the Amazon – and was at that time called: “the nation’s worst air disaster”. Previously in 1996, a TAM jet plowed through a densely populated neighborhood just after takeoff from the same Congonhas airport in Sao Paulo killing all 96 people aboard.

Conversely, it must be noted that globally, airline safety statistics show that the first six months of 2007 are the safest ever reported. There were only 11 fatal accidents though June of this year, taking into account all categories of commercial airline operations, including cargo. Additionally, there have been no fatal jet accidents involving a major Western European, North American, or Australian carrier since November 2001.

But in the span of less than a year, Brazil has had two major airline crashes. Last September 29^th’s disaster set off a widespread debate about the country’s air-traffic control system, including whether the military should remain in charge.

Once again, Brazil’s President Luiz Inacio “Lula” da Silva has declared three days of national mourning for: The Nation’s Worst Air Disaster. Let’s hope he and his government quickly act to address the safety of Brazilian aviation – with resolve.

                                                                   James Alexander