Friday, February 05, 2010 EU to see rising faresEU to see rising fares?

We suspect that the EU will see rising air fares from this spring. Why? Because the floor is going to rise - Ryanair is planning to increase fares. As they do this, we expect to see the entire system rise in sympathy.

As a result of revenue deterioration (plus slower future growth profile), Ryanair is planning to increase fares for the first time in four years. CFO Howard Millar stated the LCC is likely to raise fares from April 1, adding, “We’ve had a lot of discounting of fares as we’ve grown the business. We expect to increase profits by the combination of reducing costs and we think average fares will probably rise”.

If Ryanair is seeing its revenues plateau then what can this mean for its competitors? Just as Southwest grew to be the biggest US domestic carrier, and therefore had a huge influence on fares, Ryanair is now the biggest airline in the EU and has the same level of influence. Having this much critical mass means treading more deliberately because growth cannot come from the same places. MOL frequently speaks about more airlines going out of business. He hopes so because that is where the next growth spurts will have to come from.

Consequently Ryanair has to do the logical thing - push up fares. Now conveniently forgotten are MOL's words about flying for free with revenues coming from advertising and other non-traditional sources.

In other news:

• F-35 fantasy stymies Boeing's F-18 stop gap idea
  


• CSeries opportunities coming
  


• Republic makes fleet move
  


• BA's monstrous loss
  

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Thursday, February 04, 2010 Let us introduce you to KOITO

For most people this is not a household name. But you are about to get to know this name very well. Let's start with this. ANA just put out this seemingly innocuous press release.

Notice it starts with the word Apology. Then it talks about "Delay in Flight Commencement of the New Boeing 777-300ER Aircraft and Change of Launch Date for New Brand and Service". Really not quite sure what this is going on about? Here are the key words "We deeply regret to inform you that the new Boeing 777-300ER aircraft will not commence operation on Saturday, February 20, 2010 as scheduled, due to delay in development of Premium Economy seats." We added the underline.

ANA goes on to explain "Premium Economy seats scheduled to be installed will be tentatively replaced with Economy Class seats.
·Configuration Boeing 777-300ER aircraft
- First Class (8 seats) - Business Class (68 seats) - Premium Economy (24 seats⇒0 seats) - Economy Class (112 seats⇒139 seats) -Total: 212 seats⇒215 seats
*Reason for changes in above(1)and(2): Delay in development of Premium Economy seats (Koito Industries, Ltd.: Headquarter located in Yokohama)."

Seems there's a problem with the premium economy seat. But, wait there's more. It turns out the problem is possibly bigger than it seems. Koito's customers are worth noting: Japan Airlines Corporation, All Nippon Airways Co.,Ltd., Singapore Airlines, Ltd., Continental Airlines, Inc., Virgin Atlantic Airways, Ltd. Koito is a rather big supplier of airplane seats.

It appears that Koito's seats may have a problem. There is word the seats do not really meet the specs they are supposed to. As there is nothing official yet, words have to be carefully used. But as we can see, ANA is scrambling to replace one seat type. Another Koito customer has a plane waiting for delivery - its parked and there is no official word why the plane is not being delivered. A customer waiting for a delivery is a sign of something serious. Very serious.

The slowness of this story getting out shows that not only Koito, but also the airlines involved are either not informed yet, or are equally frantic to control the news. People are not going to be happy when they realize the seat they are sitting in for many hours may not be as safe as required. Indeed if the seat is known to not meet the safety requirements for airline use, the plane could be regarded as not meeting basic safety regulations. From what we hear, the size of the problem is estimated at thousands of seats.

If the airlines listed above have to park planes to replace seats, taking thousands of seats out the system, you can imagine the mayhem. If, for example, you have to park an A380 to replace 75 seats, all ~500 the plane has are not producing revenue. So its a big problem.

As this news creeps out, you might expect to see airlines blocking off cabins where these seats are located. The planes can keep flying until a fix is found. But a portion of the cabin will now probably depend on Koito providing compensation until the fix is complete. Lots of red faces coming soon.

In other news:

• Israel's RJ ambitions
  


• GE talks (a bit) about its UDF
  


• Ryanair had a good January
  


• Airbus sees huge Asia-Pacific market
  

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Wednesday, February 03, 2010 Coming to America

US Travel Association urged the US Government to more widely promote its new Electronic System for Travel Authorization. The system is used foreign tourists who are not required to obtain a visa to travel to the US. They will be required to register with the system.

Few foreign tourists appear to be aware of the program. From March 20 2010 carriers will face large fines if they allow tourists to board without registering.

So if you plan to visit the US, just register here. Then the DHS and TSA can do their homework, get to know in a digital sense, and the rest of us Americans can welcome you on the other side of the FIS at our airports.

In other news:

• More Russian consolidation
  


• GP7200 milestone
  


• 787-3 is dead, but...
  


• Watch out New York
  

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Tuesday, February 02, 2010 Would Ryanair move to Gatwick?

As usual, in this little aviation world, it matters how you treat people. People enter the industry and float around it all their lives. So treat somebody badly and you will have to pay for it - sooner or later. The folks at Ryanair understand that. So the relationship they had with a certain Stewart Wingate, while perhaps fractious when he was paid by BAA, now might become a whole lot more congenial.

The policy of separating London airports from BAA's monopoly might be working. If Gatwick's new owners are able to bring Ryanair out of Stansted there would be a substantial change in travel around London. Stansted has created its own little industry of transportation from London to get people to the airport. Take Ryanair away from there and the transportation industry dries up a lot. Bring Ryanair into Gatwick and we will have heightened fare wars between easyJet and Ryanair - a wonderful thing for Londoners and visitors. Indeed, only the neighbors will be irritated - but they were that way to start with.

Competition is a wonderful thing. BAA will have to respond to the market. Let's see if it can. Meanwhile Gatwick Airport owner, Global Infrastructure Partners, plans to sell a 12% equity stake in the airport to South Korea’s National Pension Service, for just under £100m.

In other news:

• IAE fumbling?
  


• AA learns from BA
  


• Russia news from United Aero
  


• DoT budget numbers
  

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Monday, February 01, 2010 New Report on Boeing

The AirInsight team has published a new report on The Boeing Co. This follows previous reports on Airbus, the emerging competitors to Airbus and Boeing and Re-Engining the A320 and 737 families all published since August 2009. The reports are produced with Ernest Arvai of The Arvai Group and Scott Hamilton of Leeham & Co. The Boeing report contains a competitive assessment vis-a-vis Airbus, updating our Airbus report published in August; a close look at Boeing’s programs; its relationship with labor; the prospect for replacing the 737 and 777 to meet Airbus competition; the KC-7A7 and

Monday, February 01, 2010 Air AsiaX blinks

AirAsia X plans to suspend Kuala Lumpur-Abu Dhabi A340 service from February 21 2010 for “commercial reasons”, citing “underwhelming” demand. The carrier reduced frequency to three times weekly in January 2010. AirAsia X stated it hoped the move was only temporary, with flights up to October 2010 so far canceled, and aims to resume the service with smaller A330 aircraft. "We are not going to be flying, period, to Abu Dhabi until we figure out what’s the right strategy, the right hub, the right aircraft and we’ll probably come back again,” Azran Osman-Rani, CEO.

This move is going to attract all sorts of punditry with one essential message; the Gulf is no place for a long haul LCC. The Gulf is home to airlines with the most grandiose of fleet plans and whose airlines are aimed at offering the industry's highest levels of service. These same airlines do not offer the most transparent financial results and are statelet owned.

The reality is that the UAE used to be the go-go part of the world with Dubai at the top of the pile. Things are rather different now. But those people still living there continue to require low cost labor to do the work of cleaning, building and offering otherwise menial labor. Nations across the Gulf have turned to SE Asia for the low cost labor and flying people between these two regions is going to be the domain of LCCs.

Consequently, we do not count out Air AsiaX yet. The A340 may have been the wrong plane for the task. But their business model is able to provide the market what it needs. The smug smiles at Abu Dhabi with the departure of Air AsiaX may be short lived.

In other news:

• Ryanair looks at Brazil?
  


• Air Seychelles to serve the Falklands?
  


• Qantas trims first class
  


• Asia-Pacific the biggest market - IATA
  

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United fined for price advertising violationJanuary 15, 2010 4:03 p.m. EST

The Department of Transportation imposed a $30,000 penalty on United Airlines for breaking price advertising rules.

STORY HIGHLIGHTS

• Under DOT rules, airlines must disclose the full price of air travel to consumers
  
• United violated price advertising rules twice in five months
  
• Government taxes and fees per passenger are the only exception to the rules
  

RELATED TOPICS

(CNN) -- The U.S. Department of Transportation slapped United Airlines with a $30,000 fine Friday for violating price advertising rules, and the airline also will have to pay the balance for a previous infraction.

Under DOT rules, airlines must disclose the full price of air travel to consumers.

"Our fare advertising rules are designed to ensure that consumers know how much they will pay for a ticket and are able to compare prices when choosing which carrier to fly," Transportation Secretary Ray LaHood said in a statement.

The department found that United failed to disclose a 7.5 percent federal excise tax for 60 hours on the initial results page of its Web site.

United said it is committed to advertising its fares clearly.

"In this unique case, due to a programming error, the initial fare display inadvertently placed the 7.5 percent federal excise tax in the 'taxes and fees' section, rather than in the base fare," said spokeswoman Sarah Massier in an e-mail.

"Immediately upon learning of the programming error United took action to move the tax to the base fare."

Government taxes and fees per passenger are the only charges that are not required to be included in the published fare, according to the DOT.

The new penalty means United also will have to pay the balance on a fine for a violation over the summer.

In August, the DOT fined United $75,000 for not disclosing taxes and fees in the initial advertised fares on its Web site and for showing one-way fares that were only applicable for round-trip travel.

The airline was required to pay $37,500 of that penalty, with the understanding that half would be forgiven if it had no further violations within the next 12 months.

United now is required to pay the other half of the $75,000 fine