Low cost carriers - or are they ?

One market sector within air transport has fared better in the last 12 months than any other - the low cost carrier .

But are those who announce their low cost credentials genuinely offering such a product? That basic 'get you a seat from a to b' product where anything on top attracts a charge . Analysis identifies that relatively few 'low cost carriers' now pass the test- few are now exhibiting the basic service that defines the true low cost model.

Want a ramp agent to place your bag in the hold - you pay for it ! Want a beer on board,want to pay for your ticket by credit card? - you pay for it ! Want a widow seat? - well that depends how fast you can run to the aircraft steps! Paying for each additional product facet has become the norm for 10s of millions of passengers worldwide. Those who will turn on the Ipod and listen to or watch their choice of entertainment and fore go the onboard in flight entertainment selected by someone else, bring their own drink on board and cram a weeks worth of clothes into the sports bag that with effort just passes the cabin bag size check at the gate.


Some who originally planned their business model with low cost foundations are adopting certain additional product features whilst the legacy carriers adjust their back end products taking them in the reverse direction to reduce costs. In times of difficulty there is the temptation to deviate from the known comfortable business model .

Enter the Hybrid carrier. Product creep towards the full service carrier whilst the legacy carriers creep backwards in terms of product in order to reduce cost has created this mongrel.

So does pre-boarding seat selection qualify under the low cost business model ? How about a hold baggage allowance? Free drink on board? Queuing for the traditional airport check in ?

Well many of the self stated 'low cost' carriers are exhibiting product creep by offering some of these additions in order to become attractive to the wider audience. In doing so they must now classify themselves as hybrid - parked between the genuine low cost business model and the traditional full service legacy model.

And with this comes additional cost - does the provision of these new products facets to attract the new 'need to have ' market set against offering them for the already converted and thus 'nice to have' market result in a net revenue improvement ?

So who is left on the loco ramp - by definition maybe 1 in Europe and 5 globally.

Of course the measure of success is the ability to take a product and deliver a return on investment when the market tours sour . This industry is good at re-inventing itself.

Who have been true to their no frills roots? Does it even matter that many of the low cost carriers are becoming Hybrid? Or is it something only marketing academics ponder over ?

What do you think ?

Sense prevails on European airport slots

Some support for the embattled industry has at last come from the European parliament this week with the announced holiday on the 'use it or lose it' policy for European airport slots.

The industry - already trying to make sense of the serious decline in passenger and cargo revenues caused by the global economic turbulence found itself with an additional dilemma. That of balancing new reduced demand with supply and frequency reductions, leading to the potential for losing rights to airport slots if they remained unused.

No carrier is escaping the fallout from this economic contraction. The asset value of these slots is considerable for many airlines. Faced with the prospect of loosing both the slot and its asset value or wasting hard earned cash by flying for no commercial reason other than to protect its ownership had the potential creating a farcical situation . It would further stress the balance sheets of the already pressurised carriers and make the policy makers look stupid.

Sense has prevailed and operators are with immediate effect no longer required to fly loss making schedules solely for the purpose of slot protection.

Sense prevailing at last in Europe? Why has it taken 9 months to put in place a fix for which the arguments weighed so heavily in favour of the change? Good news for the airlines but with a downside for the airports, seeing a decline in their airside revenues now these slots become at least temporarily dormant.

The fragility of this industry

For an industry already badly impacted upon by economic issues, what was not needed was another global situation to negatively impact customer confidence and further erode business performance.

History shows that this is an industry more badly affected than other industries by external factors- territorial conflicts, economic cycles, pandemics etc- especially in an era where news broadcasting is instantaneous .

Like the SARS speculation some years ago, current media speculation and over reporting causes concern in the minds of the travelling public. In the case of the SARS issue, media output was much overblown compared with reality and history shows the final issue was far less dramatic than the media forecasts predicted.

Stock market parallels can be seen- an industry driven entirely by speculation rather than objective fact sees stocks take a dive as a result of comment , only to be followed by an equivalent bounce the following day when the realisation of a more balanced view restores confidence!

Airline stocks in Europe witnessed just that over a 48 hour period this week. All associated with the Swine flu announcement and driven by sentiment alone rather than clear objective understanding. This, then followed within 24 hours by a bounce back to the original levels. This must call into question the relative intelligence levels of those leaders 'trusted' in managing these large finance portfolios whose reaction seems more 'follow the leader' rather than 'lead the followers' !! For anyone denied access to any news of any kind, a look outside the front door first thing in the morning would see little or no change for many compared with 6 months ago.

Yet the sentiment in the press sees a far different response. This is not taking lightly the potential for a global illness . However Europe sees many thousands on average die each year from Influenza or complications caused as a direct result. Populations and commerce gets on with life and business worldwide plan for growth in the knowledge of this background issue.


Some in the industry are reporting light ahead. Is the smart money on some recovery signs at year end. To what extent will the reported pandemic interfere with this small yet positive sign and further pressurise traffic levels ? Or will another 48 hours see the media become bored with this story, it becomes old news and all can get back to managing the recovery ?

It had to happen sooner or later

In this age of expanding waistbands it was only a matter of time before airline operators would react and enforce additional charges for those of us of a 'larger disposition' .

The average customer weight has risen visibly over the last 20 years but for a certain proportion of individuals, it has turned into a sport. How many times have our regular customers found that they are having to share half the seat they have bought with the burger and fries loving guy sitting next to them - not only have the armrests become unavailable for use but half the seat is occupied too!

Still to make an appearance in Europe and the Far East, there are now a good half dozen U.S carriers resolving this problem of transporting sumo size customers with a second seat purchase condition. True, they will try to accommodate these customers on a no charge basis on the flight in question if possible. But on full flights if all else fails , its a bump onto the next available flight for the big guy (or gal!) and a second visit for the customers' credit cards to the PDQ machine.


Meanwhile the number in the global air transport fleet currently ''resting'' in dry desert conditions due economic impacts has risen beyond 2000 airframes. It's good business for the specialists who maintain these cocooned planes in anticipation of better times and proves that someone's crisis always seems to be another's opportunity. Whilst operators use the downturn to retire the less economic high time airframes, there are also unfortunately a growing number of relatively new beasts on the desert line . With fading painwork and removed engines, some will never make it into the air again.

At the same time the cutback in executive jet manufacture as a result of the economic climate is causing shortage in this market in certain territories. This sees potential buyers trawling the used market to the extent that demand exceeds supply and second hand values for low hour models of some of the marques now exceeds new unit prices . Is the 'high nett worth individual ' market less impacted upon ?

As ever the industry can always surprise !!

Back in the mass market transportation sector, who will be the first in Europe to adopt the 'buy two get one ' product ? Will we ever get a situation in corporate travel where only the non-obese can expect to travel by air on company business as part of their employment contracts? Seem far fetched? So was mass market air travel 40 years ago !

Mixed fortunes for the global air transport community

The state of the industry globally has recently been described as woeful with decline in global passenger forecast carryings next 12 months likely to be in the 5% territory and cargo volume decline at 13%.

Premium cabin passenger revenue and cargo revenues are the big losers over the last 6 months and forecast to continue at least in the short term. A cumulative industry $4 billion forecast loss for 2009 on top of a $8 billion loss for 2008.

New aircraft deliveries from the major manufacturers will fall from a recent high of 1100 units annually to below 800 over the next 2 years.

Regionally the airline picture varies with Far Eastern markets taking the biggest hit , but with Europe less so. The U.S is matching volume decline with capacity reduction and thus profit performance treading water and the Middle East market showing small revenue improvements.

It is rare to see an annual 10% return on investment for this industry and the cumulative profits banked over several years are easily lost in a 12 month period. The old joke that the only way to make a small fortune in this industry is to start with a large one becomes embarrassingly accurate!

How much less pain could have been felt if the fuel buyers had not hedged at the ridiculously high 2008 prices . Sometimes the airline industry is too clever for its own good!

As in life though , problems for some will be an opportunity for others .

There is no doubt that no one involved in the industry is escaping pain. The strategists would far rather focus on continued measured expansion than being moved away from their comfort zones to delivering survival strategy. Some will fail in that delivery.

However, some have business models more adaptable and less exposed in the changing market. Some are showing an extra eagerness to appeal to the customer, manoeuvring to capture new volumes, eying the availability of aircraft delivery positions deferred by others, identifying new opportunities.

Who will see opportunity and pick up the new aircraft delivery slots deferred by others? Who will take those opportunities and emerge from the downturn relatively stronger and sharper? Who will suffer the business cardiac arrest that although not killing them now, will leave them so weakened they limp along and finally keel over just when the green shoots of recovery are seen ?
Who are the names in your minds eye?

Locos in the back yard

Expansion of low cost carriers across Europe has had a significant impact on Euro legacy operations and also legacy air transport orientated airports.

5 years ago it was said that the acceptability of no frills strategy would be limited to short haul operations. Customers would fore go the pre-seating and in flight service as long as the journey was 1.5 hours or less.

It would appear that Europe has so readily adopted the principles of the low cost operator, both legacy carriers and airports that uniquely support them are suffering far greater loss than would have been forecast even 2 years ago. Many loco routes now offer the frequency to appeal to the business traveller,often from departure points more convenient than the traditional legacy operators .

The legacy carriers are being hit in their leisure and business segments . Many carriers are reporting declines in premium traffic of 25 % in Q1 2009 . High frequency low cost alternatives are attacking the leisure revenues from the back end . The high yield cabins are under pressure from the corporate accountants reducing unnecessary costs to placate their shareholders. The appeal to carriers of operating to major hubs still provides connecting passengers . BUT-The customer approach to air travel has changed and it looks increasingly likely that no frills models now appearing on long haul markets will have the same effect with an increasingly dominant range of services stripping out the core low yield volumes on many routes from the legacy carriers

Will the major legacy carriers have markets to return to after the latest business downturn ? Will they become just niche ''business only'' operators within the next generation, or will the markets return to their traditional levels of occupancy when the downturn is behind us? And what value their precious slots at hub airports if the aircraft are carrying only half the passengers but occupying the same runway and terminal space?

Changing times ! Possibly permanently!

Crisis management- not a time to be media reactive

The visibility of recent air transport incidents and accidents highlights the immediacy of news reporting and the availability of cctv or on the spot public with phone cameras or camcorders recording the incident.

The fact that an incident is unexpected does not require those organisations involved not to be prepared.

The increase in camera incident capture no doubt helps investigators providing an important extra dimension in the post incident analysis. However these images are also made available to feed the media craving for sensationalist news. The public love a drama and the media requirement for apportioning immediate blame and identifying the cause needs to be satisfied. The absence of an 'official line'' has heralded an array of pundits and experts who are put up for interview. Whilst not wishing to speculate on the cause in front of the microphone, they follow that comment by doing just that!

It is inevitable that accident/incident investigation and analysis to determine cause requires the time and the attention of very skilled individuals and thus the media wish for communicating immediate cause does not sit well with the need for providing measured accurate skilled accident investigation and suggests mutual exclusivity. The days, weeks ,months of careful investigation and analysis post accident do not exist to satisfy the needs of news thirsty media. The need is to identify an event or events, mechanical failure or human shortcoming with the objective to minimise or avoid a future repetition of the event.

An observation of recent air transport negative issues indicates that the industry crisis management divisions to a wide extent remain unprepared for the unscheduled issues that occur. This allows the media feeding frenzy to not let absence of immediate facts get in the way of a good story. By the time the organisational management have got their act together, the media have broadcast the drama, lost interest and moved on, leaving the accurate detail ignored, and the public misinformed.


The British Midland Kegworth accident 20 years ago became a case study of how to ensure a major accident didn't become a drama, with the airline staying ahead of the speculators. And yet 20 years on the availability of a text book response is ignored and the same old mistakes continue with speculation and inaccuracy of detail occupying the high media ground.


Specialist crisis management companies do exist to assist business in this very specialist area. How many organisations believe that they can ''get away with it'' based upon the held view that these situations will not happen to them and so remain completely unprepared- is this an issue based upon cultural approach or are these just the same organisations that deliver a questionable approach to normal everyday customer service?

There exists a critical first 5 hour media period where the absence of a proactive, undramatic and informed response will result in all the 'experts' providing a purely speculative,uninformed and often incorrect analysis of the incident, often with resulting negative impact on the organisation involved- an image that often stays in the public eye years after. Some senior management in certain organisations still believe a head office team designated to lead the business response will be the only effective method of media management. Even when the incident may be 15 hours flying time from head office and with them in the air en route to the incident scene and thus unavailable for comment over the critical first 5 hour period.


With so much budget put aside for 'positive' advertising and brand promotion, so little time and effort for crisis management is the order of the day in many organisations. Many involved in air transport seem naively prepared for the most important and most negative media issue that they all hope will never happen to them. This is a time to be proactive with the media, not reactive

Hubs or point to point? - the jury is still out

The existing world economic climate has diverted the air transport industry attention from the long term future strategic plan to one of short term survival.

The 2 major air transport manufacturers historically have offered similar size, similar mission profile aircraft, competing head to head for aircraft sales. It is interesting that the 2 major players have drawn different conclusions regarding the fundamental issue of future long haul airline operations.

In Toulouse Airbus have developed a range of competitive units serving hub and regional needs. But the A380 is truly a long haul hub machine uniquely able to satisfy needs for large volume lower frequency carriage between major points. The Airbus 380 is very much being supported by a limited number of very high volume hub to hub long haul routes .

Boeing meanwhile has created in the 787 a concept straddling both camps- being equally at home in the hub environment delivering a higher frequency solution compared with Airbus but also providing in the same unit a profit earner on leaner (and in many cases more customer convenient) point to point citypairs. The pioneer of large hubbing aircraft with the hugely successful B747 range is effectively downsizing its future unit favouring a relatively smaller long haul airplane. Now close to its first flight, embracing advanced manufacturing and structure technology that have not been without introduction issues, introduction to service is some 18 months behind the Airbus offering .

So the 2 manufacturers are genuinely about to follow separate paths in terms of their long haul products.


The major hubs airports have developed as a result of full service carriers serving major conurbations over many years. The introduction of the 747 variants allowed development of heavy volume hub to hub services using ultra large air transport units across a limited number of major hubs per continent. Hub airports having invested heavily to support the historic air traveller markets are now offering parts of the product that this customer market doesn't want or need- with less geographically convenient location, runway and terminal congestion, complex passenger processing and transit facilities and fallible baggage transfer functions being just a few of the issues.

Inconvenience for many and now with a 'green' impact, clearly a minimum number of hubs results in the position of that hub being less practical and convenient for an increasingly large proportion of air travellers.

Regional conurbations would prefer not to be dependant upon those remote hub locations and where possible stand alone with their own transport infrastructure. Will the ever more important green considerations and the need to reduce 'home to terminal' carbon emissions roll the dice in favour of the regional citypairs?


Will one strategy win over the other? -Who has understood the future of air transport better? Or have the manufacturers in focusing on differing strategies stumbled across solutions that will allow both to survive and thrive in these and future difficult times?

Based upon total profit achievement against each model over its production life cycle, will Boeing win the profit race ?or will it be Airbus?

Airports during the downturn

The industry is witnessing the largest short term downturn in living memory with large declining volumes and revenues.



Reported UK passenger figures for February are seeing declines of 5-20% but like any industry, some are seeing greater decline and some are better weathering the storm . Air freight throughput is witnessing even greater reduction with declines of up to 50% at some UK airports .

So is there a regional issue here? It appears not. The south eastern airfields seem to be suffering equally compared with other UK regions. Major hubs and regional airports are equally suffering with legacy supporters seeing the biggest volume declines, whilst the 'adapters'- airports supporting both low cost and legacy operators are maintaining a better position .

The hub airports have both a high cost base to manage and shareholders who expect returns on investment in line with their business maturity in the marketplace. They have been less encouraging of the arrival of low cost operators who, during the current climate are showing greater innovation than their legacy cousins.

However the low cost routes are not without their problems . Certain eastern European routes are suffering. On the legacy front, premium cabin business has fallen through the floor across Europe and beyond.


At the niche airport end of the business local authorities, having invested in infrastructure on the ground to promote new services are eager to see the positive fallout and local prosperity improvements delivered by the arrival of these carriers . There is no doubt that the arrival of new low cost operations has had the benefit of re vitalising some communities .


Those airports designed around hub strategies had their historic development backed by legacy carriers and designed around the concept of full service airline model . They provide infrastructure which now at least is in part deemed unnecessary by both low cost carriers and the customer base that uses them. The rows of terminal check-in desks are now at risk of being idle against a background of terminal check being replaced by on-line check in, which the public now embraces in order to avoid the airport queues.

To an increasing proportion of air travellers, many airports provide infrastructure with product oversupply . Hub airports are seeing migration of the value for money customer across to smaller airports with better proximity to the customers starting point or destination. Those whose competitive position would have been unimaginable 5 years ago.

So if there are winners and losers in this air travel cycle, is there a method of compartmentalising a winning airport model. Those who have strategically adapted to accommodate 'both churches' are fairing better. Those small niche ''community'' airports who invested to attract, whilst also seeing footfall reduction are still significantly ahead compared with their positions 3 years ago.

True its not all sweetness and light having to cope with dominant locos, who sometimes appear to have the petulance of a 5 year old child. Like any industry there are awkward business partners with excessive demands and business plans that cast aside the profitability of other business partners in the name of business success.

Will any keep their heads above water in 2009? Will business success in small negative territory be classified as 'job well done''for 2009? Who will end up with the highest annual footfall ?decline ?

Marketing through the internet

So what is the cost of running an airline frequent flyer scheme? Well the back of a fag packet calculation suggests that by the time you 've created the team, bought and programmed the software,maintained its accuracy, displaced fare paying passengers and fed and watered them in flight , not to mention any associated airport lounge variable costs, revenue loss can be as high as 5-10%.


Providing initial benefit to the customer base in the carriers' home markets as its rationale, the 'away from base' benefits for the overseas customer base ran the risk of providing a 'busman's holiday' in return for loyalty unless the offerings included third party local benefits ( often at a business cost ) On the up-side, prior repeat business from the card holder should have more than covered this as long as the scheme itself has solely delivered the product loyalty.

But is air travel just a commodity purchase now? For the high use corporate customers are they not already tied in by virtue of their corporate travel purchase policies? -again secured against a contract incentivising volume use again adding to the cost of sales- thus making the frequent traveller schemes more a liability than an asset?

The last time someone tried to be all things to all men they ended up being nothing to everyone. Frequent flyer schemes have been around for some time - but like any business segment there is a product cycle. Have they passed their maturity point to now become an increasing drain on the business with little genuine business improvement to be expected?

Historic large advertising budgets invariably resulted in significant above the line print media and broadcast campaigns - essentially a controlled scatter gun approach with a success rate of hitting a useful audience of 10-15%. thus 85% of the cost was wasted on putting your product in front of people never likely to use it.
Below the line direct marketing introduced necessary audience focus but still at large cost .
Now new methods of interacting with existing and new customer bases cost effectively refining the ad focus and removing most of the lead time associated with direct marketing activities.New opportunities to interact with the customer base are varied and wide through the web. Areas previously recognised as ''the domain of the teenager'' are now being used by the service industry leaders to interact with both product supporters and critics . All have potential positive benefits.
MP3 players have such widespread acceptance now, marketing through podcasting and Vodcasting delivers the message in both focused and very cost effective way.

What about the ''I hate airlines'' blog sites? Some airlines would have them shut down if only they could find legal process to achieve it . Others of course see these sites as opportunity to learn and convert. Blogging has become the domain of the savvy business . Critics take the time to comment on shortcomings and by using this critical analysis, business learns to improve its product offering. Bye bye costly and time consuming focus groups !!
These potential business improvements come at little direct cost at a time when cost containment could be the difference between survival and closure.



Has the traditional above the line campaign reached the end of its life? Has the below the line platform, the frequent flyer scheme done its catalytic work ? Has this business asset become a liability . Just as above the line budgets migrated below the line to provide better returns, this is no time to keep any marketing method going just for sentimental reasons .



Time to replace low cost marketing with no cost marketing? Is it bye bye broadsheet and broadcast and hello blog and twitter??

What do you think?

BA business strategy

BA and its approach to the UK regions was always an awkward marriage. Lack of volume premium traffic to and from the regions did not sit well with its full service multi class strategy. Long haul regional operations in total were counted at best on the fingers of one hand. European services were stop/start. Meanwhile bilateral agreements and restrictions at the base hub protected the carrier and its profitable premium cabin and volume economy revenues from any competition intensity.

Creating regional subordinates with more attractive(cost wise) operating strategies failed over the long term to deliver returns on investment necessary to support regional continuation. Hiving off the regions to a regional carrier has been the next step. Is this done with a view to building up the operation based on a different 3rd party cost platform and then re incorporating back into the BA fold at some point in the future-- well only BA know that answer for sure right now.

Are we giving BA too much credit for shrewd business thinking?

Is there even a plan? Maybe its simple- they just abandoned the regions cause they couldn't make money and moved forward to further strengthening the Heathrow operation.

Meanwhile at fortress Heathrow premium traffic is in decline . It s major hub is under attack by major legacy carriers who have been granted further access through the liberalisation of restrictions . Its European economy traffic is under threat from the low cost carriers operating direct from/to more convenient regional points thus bypassing the need for an often awkward transit at the Heathrow hub. The availability of new slots to other carriers with the opening of the controversial third runway will shrink the future asset value of the large slot bank held by BA.

In BA's defense they have inherited high operating and pension costs that require to be managed.

Where can they go from here? Premium traffic in decline - some corporate travel supporters introducing a 'no premium cabin' travel policy in the current climate. European routes under threat in the back cabin from the low cost carriers. The unthinkable starting to happen - low cost models now appearing albeit in small numbers on competitive long haul services. Success will however encourage more. Little opportunity for BA in terms of new profitable Heathrow services- they've got the world pretty well covered from Heathrow hub with the destinations it feels are potentially profitable . Overseas European and long haul carriers successfully moving into the regions to take BA's European and long haul customer base.

BA's share price sitting at less than 30% of it value 3 years ago and with a banking system reluctant to lend to even strong businesses for growth investment. Did its relatively protected position at Heathrow cause it to become lazy or undynamic ?-only to find that more dynamic business competitors have charged through the front door and landed an accurately placed

left hook on its glass jaw.

Is there a way out of the cul de sac? Is the unthinkable happening - BA loosing its 'global' status to become a specialist niche operator?

Maybe they should have abandoned the suits and ties a little earlier and moved Waterside to Glasgow, or Liverpool or Newcastle or anywhere apart from London to provide a little opportunity for some fresh thinking !

Do I hear cries for help?

The commercial pilot training environment

The traditional sponsored European pilot training programmes have all but disappeared. The airlines have largely released themselves from the burden of pre employment training costs leaving the potential pilots with the task of covering the costs to frozen ATPL of up to GBP70,000

Sure the UK situation is not aided by political positioning where VAT is levied against training costs leaving UK schools at a disadvantage compared with other more accommodating Euro governments.Thus UK training industry whilst arguably providing some of the highest levels of competency is disadvantaged compared with overseas training. European countries, by offering VAT exemption on training allow FTO's in those countries to offer significantly reduced comparable training costs.


But what of the instructor ratios?


These are not local airfield flying clubs catering for the private pilot, but organised professional flying training organisations with syllabus structure and timescales for student throughput. It has become apparent that even during the good times, some of the FTOs have been under pressure and the ratio of students to instructors sometimes sits at a 5 or 6:1 ratio. This, leaving the students to sit twiddling their thumbs and covering additional housing costs whilst they wait for their overworked instructors to allocate time to the students' one flight a week .

And what of the current climate ?

The industry as a whole and this segment included has a history of poor forward planning. During this downturn uncertainty of short term future pilot requirements and new graduate employment is having an impact on new student numbers.

Will the climate see the instructor volumes downsize and thus the organisations still under deliver to the student or will some sense prevail and the appropriate instructor /student ratios return.

Some FTOs will not survive this trough. Who will manage the business successfully through the cycle and who will stick their heads in the sand?

Are you a student at one of these FTO's ? What is your experience of the current training situation?

At best the passive carriers will just be left behind !

One thing is for sure - If you stick your head in the sand and hope it goes away-- IT WONT !


The airline graveyard is already full of once great and some not so great airlines for whom all of us still shed the occasional tear - ''Ah they were a great carrier- great people-fun times- shame they're not still around''

Carriers only marginally surviving during the good times now face possibly an impossible survival task.

The current economic cycle brings out the marketing aggression in the potential survivors and for the strategic thinkers, the stronger they work to survive, the more they are allowed to take market from the weaker, less responsive and less capable .



Looking at the weak from a pure business perspective how could this have been allowed to happen? A business strategy agreed at board level, which was at best marginal in times of economic strength and now in intensive care? Skills and leadership in poor measure? Not enough of one or not enough of both?

How many wise businesses 'put a bit aside against a rainy day' and how many others squandered the revenues made during the good times on questionable projects or consultants, only to realise that they now need that cash but no longer have the use of it?

Look at the carriers currently beefing up their commercial teams - bringing in individuals who can take a fresh view, who can identify fresh revenue streams to improve the business. Look at those who are not ! How many have already delivered their survival strategy and are already working ahead in expectation of business improvement in 12 months ?

Load factors down and high yield traffic falling through the floor for some carriers . With the airline graveyard becoming fuller by the month- who will be the next - Plenty are in 'intensive care' already .



Which will have the life support machines turned off by those who have contributed most to bringing the economy to this shameful point?

Heathrow third runway- a strange twist in the tail !

Having delayed the decision but finally announced conditional approval for the concept of the additional runway at Heathrow in January , the carbon emission issue once again rears its head after less than a month to threaten necessary expansion at other UK airports.

It appears now that in combination with the use of the established runways at Heathrow , a 3 runway operation at Heathrow is likely to use the UK 's agreed air transport carbon maximum almost completely by mid century. If not re examined and clarified, this would then limit use and expansion of all other airports nationally.

What a position UK government has got itself into !

Conditional approval was announced in the face of much backbench disapproval for the concept in addition to 'green'' objections. And now the approval is potentially alienating the rest of the country who overwhelmingly support the wish to use local departure points . These regional airports have their own detailed expansion plans . In fact regional airport expansion has been very much encouraged by this very government whose detailed papers and forecasts up to 2030 highlighted the enormous local benefits attached to regional air transport operations and the need to develop them further. Whose existence and success brings much local prosperity, and arguably provides a 'greener' air transport solution. This by encouraging air travel from local points requiring much less surface travel delivery distances and by reducing the need for much carbon producing surface transport volumes required to deliver customers to the hub near Hounslow. So how much of this regional asset is now threatened and how much regional customer convenience is ignored in order to maintain Heathrow as a showcase global hub?

Is this a case of another embarrassing gaff with government just not thinking it through? It confirms once again that when it comes to air transport, government really has NOT got its act together .

Tasked to manage the country ? I'm not sure I can trust them with the skill to put a hook up in my garage !!

What do you think ??

What future for the traditional high street travel outlets?

Historically the travel retailer existed because the travel principals, whether airline, tour operator or cruise company needed a point to and through which products could be seen and sold at high street level . The customer of course was less travel savvy a generation ago and there was a reliance to also receive destination information with the travel principal effectively covering the cost of both activities through commission structures.

The current climate sees a reduction in the use of full service airlines. Additionally the leisure product range is under some pressure with the customer base trying to reduce its travel budget. This and a visible migration of travel revenues to Internet based sites, thus bypassing the travel agent equates to tough times for many a high street retailer.

The retail community has already accommodated the general reduction in commissions made over the last 5 years as travel principals have sought to reduce point of sales costs. The corporate travel agents have moved towards a management fee based approach . What does the average high street retailer have to offer for which alternative charges (and a method of survival)can be levied on the customer?

The low cost airline model is arguably more resilient in the current climate. Loss of some traditional passenger volumes being replaced at least in part by alternative market segments 'downgrading' from traditional full service in order to contain travel costs. - Given most if not all revenue generation is direct to the carrier via the Internet , this resilience does little for the retail community.

In a territory which has advanced adoption of the web, inventory and product has been increasingly deliverable direct to the customer for several years. Many traditional travel principals have significantly less reliance upon the high street as a result.

Distribution through a third party with its associated loss of direct access to the customer has always sat rather awkwardly for the travel suppliers. It has been been the thorniest of issues for the low cost carrier. Recent legal action against websites accused of 'screen scraping' only highlights the wish of the no frills carriers to remain independent of third party involvement.

So will the low cost carriers embrace the retail community - well for the genuine locos I think the expression is ''hell will freeze over first!'' .However for the hybrid carriers - those parked between the genuine locos and full service, possibly! Thus throwing the retailer a little lifeline.

Is the high street retailer becoming a bit of a dinosaur ? Relegated to the scrap heap by the Internet with its unlimited wealth of travel information and direct access to air seats, tour products, rail seats and cruises. Well in the case of corporate travel, the retailer still has a value in the chain but for an increasing proportion including the leisure traveller, independence from the retailer is growing.

In the UK, Association of British Travel Agents now has 5500 retail members . A high of 7500+ less than 5 years ago indicates a rationalisation that is already underway


How long has this sector of the industry got ?? What can it provide to add value to the customer booking process and in doing so earn a revenue stream.



How will the retail industry look in 3 years ?

What do you think?

A time to use your talent or waste your talent?

This is not the first economic downturn experienced by the aviation industry.

As with any industry effective control of costs is paramount in terms not only of survival but in anticipating the return to positive growth.

The industry seeks to control and minimise expenditure in order to maintain some level of direction towards profitability. Of course many costs are contractually fixed and thus attention is focused on those variable areas, inevitably including employee costs highlighted particularly by the bean counters.

But are these employee 'costs' or would they be better described as 'talent assetts'. For sure there are areas of employment that directly relate to the health of the business . More passengers can mean more check in agents, more cabin crew, more pilots etc and vice versa. But recent press has highlighted disproportionately large staff reductions relative to declining business volumes. Were these positions so fundamental in the good times?

Does business not have the courage to resolve staff level issues other than in times of business downturn - thus the downturn becomes the excuse rather than the cause for some proportion of staff reduction!

So what is aviation trying to achieve -the survival and improvement of the business as a medium term strategy or just a short term cost cutting exercise - the 2 options are often less than compatible.

Is this industry like many others in the western world exhibiting elements of 'shorttermism''. Listening to a economic issue being developed into media driven crisis. Giving too little thought to the needs in 12 months as green shoots start to re- appear. A quick fix to reduce the responsibility for employing and the associated HR issues that attach.


A reduction in passenger and cargo throughput may require a measured adjustment of workforce. But some see it as an opportunity to contract out functionality with fixed costs being replaced by variable.- why now? If it is such a good business practice, why not do it in times of positive growth?

Who is driving this strategy? HR or the accountants? Are the blind leading the blind?Experience suggests that many making the decisions are least qualified to judge the resultant impact on the business.

Often loosing the skills base and contracting out function to a third party who will have to learn your business whilst being charged with the only interaction with your customer base can be a dangerous place to be . Keeping skills within the workforce, particularly those supporting the customer interaction - airport functionality marketing/sales and telesales functionality inclusive at least maintains the quality of interaction everyone strived so hard to keep high during the good times.


So for those planning such cuts, is the lack of short term cost strain worth the long term talent drain. Cost reduction in terms of employment costs but with the associated increase in third party contract costs will often lead to poorer customer service, allowing your revenue streams to be 'controlled' by a third party whose task after all is to look after their own business first and the principals second.



Caution is advised - the saving of costs for 10 staff for a one year economic glitch will be lost in revenue many times over in the subsequent years once the issue fades and is replaced by more positive economic trends. The loss of talent can be permanent .

So should the current focus be more talent retention and less cost containment?

What do you think?

Finally-- Heathrow runway approval-Objectors take the high ground!

Finally the UK government has ''approved '' the proposal for a third runway for London Heathrow.

BUT opposition groups to the scheme once again have occupied the high ground - The government has failed to get its act together and is forced to play a defensive bat in supporting the approval. This , rather than understanding the concerns voiced by opposing parties and pro actively delivering a campaign answering those questions regarding climate change and local noise increase impact before they even get aired in what inevitably would be a negative way.

Its not as if the opposers' position has been a well guarded secret - campaigns have clearly identified the rationale behind opposing this planned expansion .

As indicated in a previous blog, the government and aviation just cannot seem to provide a positive collective voice on the subject of air transport and climate impact and while this remains it will leave itself open to repetitive whippings from any and all anti-aviation lobbies. With this being just one of several major UK aviation related projects, surely there is enough sense within the industry to pre-plan and answer these environmental issues before the questions are raised . Is it that we are now all too cynical to believe that anything government says has any element of truth in it . Or maybe we are being overly generous regarding their collective intelligence and ability to put together a convincing and constructive argument on the subject

The opposition to the plan by London's Mayor must be causing some bemusement. His concept of a Thames estuary site for a new airport rather than Heathrow development has an element of deja vu , the concept having been proposed and firmly rejected some 25 years ago during a project to identify and secure air transport infrastructure for UK south east. Why did no one tell him ??

Any government walks a narrow line between the positions of supporting improved economic prosperity for its country and the balance of the important issue of climate protection. Climate deterioration however does not recognise territorial boundaries and one country's stand will have negligible impact if the remaining polluters carry on polluting! The government has to protect the economic position of the country here whilst seeking a global approval for emission reduction. At least the UK government is amongst the few already willing to incorporate aviation emissions within the concept of overall emission reductions.

Years of discussion already on the subject and still 10 years before this runway will be available for commercial use .

I would suggest that its not too difficult for aviation and government to find a team knowledgeable enough to drive this pro actively now and re establish the high ground - not just for Heathrow but for the many other projects that continue to receive negative attention.

Who are the real innovators?

Innovators in the air transport industry? Well it depends on your view point

Some make a success out of taking an established range(established by someone else of course with at least a core customer base) of operations, adding some real marketing flair and delivering point of sale direct to the customer. Furthermore, delivering that which was promised and successfully competing against the incumbent.

Lets be honest - they're stealing the customer base of the established carrier ! Really? Well why did the incumbent leave the door open?

Others start with a completely clean sheet of paper. New never before flown routes, theoretical customer volumes, new marketing concept, new inventory distribution, new (or no ) on board service - throw all the original rules out of the window and develop to take on the established carriers in terms of size carryings and profitability.

One thing's clear. The original operator was too arrogant about his market position or missing a trick or two and leaving a gap for the newcomer to establish a competitive ( and many times better) operation. How well did he know his customers and those customers' needs? Looking at the headstones in the airline graveyard, maybe not well at all. And given the contraction of 'legacy'' operations Europe, wide this arrogance or ignorance continues.

Well good for the innovator!-- You need the 'out of the ordinary' to come along and shake up the industry once in a while.



Innovation is not just seen in the Low cost environment. There are plenty of success stories in a number of legacy carriers . Neither is there a protective cover around the low cost model ensuring that it is immune from failure. There have been and will continue to be failures in this area - you need a good combination of innovation, sound finance and business principals and the inevitable stroke of luck or two to carry it off.


But why then are the innovators luckier than the 'head in the sand' brigade? !" Sometimes the staff from the 'old school'' just haven't got what it takes to innovate and from a marketing perspective are too risk averse.



And the same applies to airports . Those who sit and wait for the established airlines to improve frequency or wait for new carriers to turn up with new operations find those services being delivered down the road at the competitor. Birmingham is seeing new operations and some respectability in volumes whilst Manchester has seen a quarter with passenger and cargo monthly volumes decline by up to 10% year on year. So who is innovating and who is resting on its laurels? Manchester is not alone . Those too reliant upon full service operators and traditional markets are witnessing similar volume deterioration.

Those who want to surive should have been innovating for some while now. Those innovating stand a better chance of survival . Who are practicing the ''same old, same old'' and seeing their volumes decline and market share deteriorating?

What do you think ?

Where were your marketeers during the last downturn

The air transport industry has suffered more than many industries over the last 30 years, having been affected at a local level by global issues both economic and political. About 5-7 years between each crisis is about par for the course. If its not an economic downturn , its the fallout form a terrorist event or a country invasion.



Since the last economic downturn, interaction with the customer has improved dramatically with web based applications delivering information and decision making ability to the web savvy customer. The cost of sales for the carrier has declined as a result with benefit to the business bottom line.


Tariffs and inventory can be adjusted almost instantaneously and communicated out to the market and the principals have regained control of their market . But the strategy for delivering success still comes from the mark 1 human brain. It is clear that some carriers are struggling to get to grips with the current situation . Lateral thinking is required . The chances are - some of the industry's marketeers were not even teenagers during the last downturn .



True the distribution of inventory has improved significantly and the ability to interact with the customer has improved beyond recognition. Those carriers who's inventory sales are web orientated should at least have no excuse for crying ''cash flow'' as a crisis. Revenue at least is collected at point of sale before travel,rather than with a delay of up to 6 weeks as in the case of BSP revenue collection and apportionment . So the revenues accrue before many of the costs.


But it is possible that in some carriers there is little experience of handling this type of ''crisis''. The systems are in place but are the brains? So should the response be ''brisk but not hurried''?

Well the statistics for the last quarter are showing 10% passenger reductions to from the UK. Similar for air cargo . Out of the top 20 UK airports only 1 showed a November year on year growth. Some airlines and airports are bleeding revenue heavily. But not all !


Yes the marketing guys around at the last downturn of course made mistakes but hopefully also learned from them and most of the carriers then survived .

Traditional airports occupied in the main by legacy carriers seem to be affected to a greater extent than the adaptors-those airports who have a legacy base but have recognised the better resilience seen in passenger carryings by the major locos. They have adapted their product and resultant pricing to encourage incremental/replacement passenger through-put derived from new loco operations.

And what of the airlines? Observation suggests a wide variation in response to the current economic climate. Some achieving revenue stability through aggressive marketing and some slipping backwards through lack of necessary response to the changing marketplace.

Between Europe and the Middle East, some commercially pro active carriers are still launching new operations with high load factors on early operations. View Turkish Airlines early successes on its new Birmingham operation. Some other carriers have 30 year maturity operations between major hubs with forecast 30% load factors over the next quarter and no realistic strategy to resolve and improve. Be in no doubt all those involved in air transport have the opportunity to respond to improve or at least stabilise revenues . Some carriers however cant because they don't have the skills or vision.

Any chief executive who hears a list of excuses from the marketing guys that nothing can be done instead of plans to exploit opportunities should be seriously concerned that he has the right team in place!

History it appears is repeating itself and selecting the survival of the fittest. The same mistakes are occurring again in some carriers purely because the skills available to to manage the crisis were not used. The resolution of this situation is available to all . Who will have the courage to recognise the need for change and act ?