Thursday, December 30, 2010

Expectations.... Airlines in 2011

As 2011 approaches one wonders how will the industry cope after a great 2010 (15.1 Billion USD net profit). One thing for sure, we need to manage expectations.

- 2011 will probably not be as profitable as this year
- Air fares are going to rise again around 10% to 15% due to tighter capacity control and rising fuel prices
  (estimated at $100 a barrel).
- Ancillary fees are here to stay and are expected to spread beyond the USA and Europe.
- Traffic and revenues will be adversely affected due to a soft US economic recovery and a looming Euro
   Zone debt crisis.
- MENA/GCC will lead the industry in growth
- LCC segment in MENA/GCC will continue to grow and probably reach a 10% to 12% market share

I wish you all a Happy and Prosperous 2011

Wednesday, December 29, 2010

The Airlines Industry, 2010 in Perspective

As 2010 approaches its final days it is so appropriate to look back and put the year's events and highlights in perspective. 2010 is a memorable year.

Globally, 2010 was a stellar year for the airline industry with post tax profits of about 15.1 Billion dollars in profit as per the latest figures from  IATA. The best in this decade. Of course these profits have been partly driven by the dreaded ancillary fees and the tight reign airlines especially in the USA have exercised over capacity. The tight control of capacity caused fares, load factors and yields to go up.

Among the spectacular developments is the ascendancy of Social Media as an essential communication tool in emergency response and crisis management. This was displayed when the Ash Cloud hit Europe, AA handling of the bomb threat in San Francisco last August and the way the numerous snow storm caused disruptions and airport shut downs were/are being handled. Twitter and Facebook are now tools used by airlines and indeed other aviation organisations to engage, manage and capitalize on events that would have otherwise turned into a Public Relations nightmare. Social Media is an important tool to be used in branding.

As airlines tightened capacity, those in the GCC/MENA region have lead in capacity 13.2% vs an industry average of 4% in ATKs and in revenue 18.6% vs 8.5% ytd Oct 2010. The increase was lead by Emirates, Etihad and Qatar Airways. However, OMAN Air, Royal Jordanian, Gulf Air, Saudia, Flydubai and Air Arabia among others expanded their fleets. Almost every airline in the region has expanded their network by opening new stations. The profitability of the airlines in the region has improved lead by Emirates. Of interest is Etihad that has projected profits this year and Qatar Airways that announced an IPO in 2012 after 3 years of profitability implying 2010 may be a profitable year.

The success of Ultra Range flights by Emirates, Etihad and Qatar Airways that connected the world from the Americas to Australia and New Zealand through their hubs in Dubai, Abu Dhabi and Doha has triggered  violent reactions from major legacy carriers. European carriers lead by Air France asked their governments not to grant traffic rights and additional authorities to the region's airlines. The ATA and US and European carriers asked their governments not to grant export credits to the region's airlines. Air France called for the defense of Europe's position as the "crossroad of aviation" signalling the realization of European airlines that they no longer can control the shift of the Global Hubs from Europe to the GCC and MENA. Perhaps the most significant event this year is the deterioration of  diplomatic relations between Canada and the UAE over additional flights for Emirates and Etihad. With the Canadian Government claiming the potential loss of tens of thousands of jobs in Canada if they have accepted to Air Canada claiming Dubai is not a destination and no Canadians live in the UAE, a clear case of protectionism.

Last but not least is the coming of age of the LCC market in the region after 7 years from the launch of Air Arabia. The segment is expanding as more and more people are flying with the low fare carriers. The latest Travel Tracker from YouGov Siraj showed  a surge in business travelers (64% in 2010 vs 48% in 2009) and and increase in leisure travel (67% in 2010 vs 61% in 2009). Travelers are looking for value for money as they anticipate a hike in Air Fares in 2011. As far as business destinations India remains the most popular at 7% followed closely by KSA, Qatar and Jordan at 5% each. The sector witnessed the first airline failure, SAMA Airlines in KSA filing for bankruptcy and Bahrain Air withdrawing from the market and becoming a legacy type airline.

All in all 2010 has been a good year for the airlines and hopefully 2011 will be as good.

Monday, December 27, 2010

Airline Privatization in GCC/MENA

The region so far has seen two successful IPOs, Air Arabia and Royal Jordanian.

Air Arabia's privatization was quick and easy and it came after 3 profitable years, in March 2007.

Royal Jordanian's privatization was a longer and harder process, the IPO was launched in November 2007, after 3 years of profitability. However, the idea started in the late 1980s and was delayed by political events and armed conflicts. Non core activities were sold or partially sold off by the Government to pay off the airline debts and included the Duty Free, Catering, Training Center and Simulators, Maintenance and Engine Overhaul Facilities and its Corporate Aviation operation. The process was systematic and seriously started in 2000 with the sale of the Duty Free to Aldeasa and ended in 2006 when the government was ready to sell off 74% of the total shares.

At this time there are two airlines that are slated for privatization Saudi Arabian Airlines and Kuwait Airways. Both are unprofitable and highly subsidized by the their owners (governments).

Saudi Arabian Airline's privatization effort included a fleet renewal, a new network management system and sale of assets. 49% of Catering was sold off in July 2008 followed by the Cargo Operations (30%) in October 2008. The airline expects to be privatized in 2012 having signed up Al Ahli Capital and Morgan Stanley as financial advisers. The plan is to sell off Maintenance, Ground Handling and Flying Operations.

As for Kuwait Airways, the government has signed up Citigroup Inc, Ernest & Young and Seabury in August 2010 to handle the privatization of the Airline. The Kuwait Investment Authority is supposed to establish a new legal airline entity which will then be sold to investors, the employees and Kuwaiti nationals. No reports of structuring or fleet renewals have been published and to date all three carriers in Kuwait (Kuwait Airways, Jazeera Airways and Al Wataniyah) are not profitable.

Saudi Arabian Airlines seems to be on track in its efforts to privatize. However, the whole Kuwait Airways privatization process seems to be an enigma. Only time will tell

Saturday, November 27, 2010

LCCs Redefining the Travel Market - GCC and MENA

Air Arabia aptly celebrated its 7th anniversary by taking delivery of the first A320 of its 44 aircraft order having finished 28 profitable quarters. YouGov Siraj latest survey revealed that LCCs have changed the travel habits of UAE residents (click here for full story) and I am sure it did the same in the GCC and MENA.

The LCCs reshaped the market by making air travel more affordable and as a result expanded the market by introducing a segment of the population that traveled by land or sea to air travel and most importantly enabled middle class professionals to travel more often on holiday and business.

Seven years ago when Air Arabia started flying, legacy airlines did not pay attention, for them this was a fad and if you ignore it, probably, it will go away.

Well it did not go away, on the contrary the concept flourished and today there are about 7 or 8 airlines operating. The major ones being Air Arabia, Flydubai, NAS Air, Jazeera Airways and Nouvelair. Air Arabia has 2 operating Startups in Egypt and Morocco with the one in Jordan under set up. Jordan has 2 startups Royal Falcon and Petra Airlines and with Air Arabia Jordan coming up this market should prove to be interesting. Etihad has opted for an all economy operation using the A320 which is its version of a quasi low cost operation.

It is true that this year saw the bankruptcy of SAMA Airways in Saudi Arabia and the exit of Bahrain Air from the market to operate as a legacy type airline.  The market is getting crowded and it will eventually determine who is there to stay (at this time, other than Air Arabia all others are not profitable).

The segment faces many problems that range from

  • subsidies to Flag Carriers in Saudi Arabia and Kuwait.;
  • crowded markets in the UAE and Kuwait;
  • competitive pressures from legacy airlines of the region
  • competitive pressures from foreign low cost carriers operating into the region 
  • relatively small markets;
  • lack of secondary airports;
  • governments that will not award traffic authorities in order to protect their airlines 

Having said that, the LCC's market share will increase over the coming few years to beyond the existing 6 to 8 percent as it expands the local markets by enabling more and more people to experience air travel.

Tuesday, November 16, 2010

The Saga Continues, Air Services Agreement between Qatar and Canada

Canada has signed an Air Services Agreement with Qatar (here to read more) weeks after both the Canadian Government and Air Canada opposed it. It seems Mr. Al Baker's alluding to the possibilities and impossibilities of investments and trade had helped people in Ottawa make up their mind.

"This agreement responds to the needs of the Canada-Qatar travel market and is a first but important step in developing Canada-Qatar air relations," says John Babcock, a spokesman for Canadian Transport Minister Chuck Strahl.

Sounds great and should equally apply to the UAE which is almost 4 times a larger market with a much larger Canadian Community however Air Canada is still self delusional and dragging the government with it

Recently Air Canada chief executive Calin Rovinescu said the carrier "is not supportive of turning over our hard-earned network and flow traffic to state subsidised carriers of countries where there is no such reciprocal demand".

So in his eyes all of a sudden Qatar Airways is not a subsidised carrier and there is more reciprocal demand with Qatar than the UAE.

I respect the need to protect a "hard-earned network" including its feed to and from Star Alliance partners. It appears that Air Canada has an objection to a Dubai Global Hub and it fears that if Emirates, not Etihad per se, dumps capacity into Vancouver for example it will deter all other airlines from competing out of Vancouver and generating 275,000 new seats per year will decimate Vancouver as a hub and make it into a stub in Emirate's Dubai hub.

Air Canada has indicated that they oppose any increases in frequency or addition of flights to the UAE and Qatar, in order to protect their traffic to Frankfurt. Lufthansa (Star Alliance) will operate from there onwards to MENA and the GCC. Basically it boils down to a capacity issue coupled with a level of service. Air Canada does not have the lift to operate additional flights or to operate directly to the UAE and Lufthansa probably has different plans.

Canada is a popular immigration destination for professionals from MENA, GCC and the Indian Sub Continent. It is also a popular destination for higher education from the region. Hence, this is a growing market for "Visiting Friends and Relatives"

Air Canada needs to leverage its Star Alliance connections to tap more into this market or start operating its own flights to the region.

The unfortunate escalation between the UAE and Canada over this issue so far has been low key, even though to Canadian residents in the UAE it has an impact on the mobility of their non resident family members.

Hopefully, the issue will be resolved to the mutual benefit of all concerned.


Saturday, October 30, 2010

State of the MENA Industry (Aviation)

On 19 October 2010 the Arab Air Carriers Organisation (AACO) held its 43rd AGM in Cairo. Mr Giovanni Basigniani DG/CEO of  IATA addressed the AACO AGM on 20 October 2010 (Click to read the full remarks). Over the last decade MENA went from 5% to 11% of the global passenger traffic. The MENA region has more than $200 billions in aircraft orders. This is an admirable performance and a great challenge to sustain these successes.

I will touch upon three (3) of the topics that Mr. Basignani talked about; Safety, Environment and Government Involvement.

Safety
In 2009 the hull loss rate of western built aircraft was 0.71 accidents per every million flights a 36% improvement over the last decade. MENA had no hull losses in 2006 but the rate jumped to 3.32 accidents per million flights in 2009, 4.6 times the world average (click here for the 2009 Aviation Safety Performance). MENA airlines have so far this year eight (8) accidents of which half of them were in Iran.
The growth of aviation in MENA should be accompanied with improved Safety. Global standards such as IOSA (IATA Operational Safety Audit) are important but the region must pay more attention to safety standards. AACO should play a greater role in bringing up safety standards by working closer with affected carriers.

Environment
Qatar Airways has been a pioneer in the region in alternative fuels. The region is committed to the reduction of carbon emissions with an average fleet age of 11 years compared to a global 13 years average, it is contributing to improved fuel efficiency. Implementation of performance based navigation at six airports in the region and improving en-route airspace in the gulf is saving thousands of tons in carbon emissions.
In the last ICAO General Assembly, Aviation as a sector managed to ensure that market distortions are removed and that emissions are accounted for once. How would that reflect on EU-ETS (European - Emission Trading Scheme) no one is sure. However, 120 countries have formally registered their opposition to EU-ETS.

Government Involvement
The airline industry should be allowed to operate like a normal business. Government interference with the bilateral system produces very low profit margins in good years and massive losses in bad ones. Import fuel taxes and unilateral runaway charges by airports should be curbed. The airlines should not become cash cows to governments and airport concessionaires, a balanced consultative approach should be the means to meeting end user needs. This is not endemic to MENA only but is also seen in Europe. Open skies agreements with Europe and the USA and continuing restrictions within the region, has meant that long and ultra long range traffic developed faster than intra regional traffic. Airlines should have the commercial freedom to fly where business is.

Friday, October 29, 2010

Unregulated Open Sky

Middle East Airlines (MEA), the national carrier of Lebanon is a very resilient airline. It has survived decades of internal and external strife. And, in spite of all these challenges, the airline modernized its fleet from the venerable B707 to a modern fleet of A320/A321 and A330, rebuilt its world class MRO (MASCO) and made profits.


This title "MEA Wants To Deprive You Of Cheap Flights To Beirut" on Beirutspring.com caught my attention. The Chairman of MEA in an article by the Daily Star (click to read article) warned that unregulated and loose open sky policy could hurt the carrier's profit but acknowledged that the current political climate is affecting traffic. 


Lebanon approved the open sky policy in 2001 and was probably the first Arab Country to do so. Beirut was the first destination for every startup company in the Gulf followed by Damascus, Alexandria and Amman. Beirut is served by 55 airlines.


The open sky policy benefited the travelling public by providing alternatives, reducing fares and stimulating traffic. Traffic from the Gulf is no longer seasonal but is steady for most of the year. The problem as MEA sees it, is an unregulated and loose policy. The government does not demand reciprocity. In the case of Turkey, the Turkish authorities should not place any conditions on MEA expanding its services, than those that are imposed on THY by the Lebanese authorities.


The interesting part is complaining about the unfair competition caused by Gulf carriers that are subsidized by their governments. In support of his argument, the chairman cited how some leading airlines were already complaining about Emirates, Etihad and Qatar Airways for the same reason. He also cited (price) dumping by foreign low cost airlines as another contributing factor to the difficulties of MEA.


There is a traffic demand from the Gulf to Beirut, it is not only Lebanese expatriates visiting home more often. Lebanon is a popular holiday destination for Gulf nationals and others living there.


I doubt very much that MEA was not filling the flights from the Gulf, especially in Summer or that they did not deploy extra capacity during the season. MEA has the advantage of a lower operating cost base which allowed the airline to provide low budget flights to Dubai and some European destinations. 


The whole idea of the Open Sky policy is to expand the market beyond the capability and capacity fielded by MEA in order to stimulate tourism,  and it works. It made Lebanon the most popular tourist destination in 2009 and as a result MEA  made a record of USD 105 millions in profits (no complaints of loose and unregulated policy).


The Chairman admitted that the current political climate has affected the airline's bookings by 40% in 2010. However, this should also have affected other carriers even more. MEA should have been able to compete effectively with its modern fleet, home base advantage and lower cost structure.

It is evident that the authorities should tighten the policy a little to provide MEA with a more level playing field when competing for other markets, but what MEA wants is a tighter control that will bring back the bilateral regime. This will limit the market and adversely affect tourism.This is a case of weighing what is good for an airline versus what is good for the country.

Thursday, October 14, 2010

One Sided and Encroachment

Mr Clark sir, you did not have to put your job on the line over subsidies, I personally would like to thank you for your role in creating an airline that is scaring the daylight of so called major airlines and alliance leaders.

Air Canada contends that if the Canadian Government grants the UAE's request for additional landing rights for Emirates and Etihad, it will create a one sided agreement and of course no one seeks Dubai as a destination and there are no Canadians living here. Wake up Air Canada!!! This coming from a leading member of the Star Alliance comprising 28 airlines and a combined fleet and network many times larger than Emirates or Etihad.

I fail to see what Air France's CEO is talking about Emirates encroachment, both airlines have double dailies between Dubai and Paris, hardly very significant compared to Air France and its Sky Team alliance, 13 airlines.

Somehow European carriers have short memories, for years they used to fly passengers out of the GCC and MENA to the Americas, way before Emirates or Etihad where even formed.  So how come it was OK for them to do that and when some competition pops out they scream ENCROACHMNENT.

Emirates, had the foresight and took the risk of ordering aircraft, when every major airline in North America and Europe was reducing its fleet. Aircraft orders were made after 9/11 and SARS. Obviously, Emirates got good pricing which was translated into lower cost..

Emirates fares are not the lowest in the industry. However, Emirates provide a superior service and on board entertainment  and their flights are full most of the time. Obviously there is demand, that is not met by these majors in their respective markets, otherwise why would Emirates require increased frequencies and double dailies. The alliances need to look at a different way to compete with Emirates and by extension Etihad and Qatar Airways other than whining and running to their governments screaming One Sided and Encroachment





Tuesday, October 12, 2010

David turns Goliath, The Case of the Gulf Carriers.

In the news,  the UAE and Canada have a political dispute over additional flights for Emirates and Etihad to Canada. The new frequencies are opposed By Air Canada (I can understand this) because of its traffic to Frankfurt and the Canadian Government ( I don't get that one with Canadian investment and over 26000 Canadians expats in the UAE). This is the latest of a series of events that have seen France and Germany refuse additional frequencies for UAE and Qatari airlines and QANTAS accusations in the media of Emirates being unsafe.

To complicate things there is the move that calls on governments (USA, UK, France and Germany) to limit export credits to airlines spearheaded by 10 North American and European carriers including the ATA, AA, LH and AF among others because in their view it distorts their ability to compete fairly with the airlines benefiting from export.credits. Having a look at the three world alliances membership (Star alliance 28, Sky Team 13 and One world 11) totalling 52 carriers of which half of these benefited from export credits and in turn contributed billions of dollars to the revenue of the complaining majors. I fail to see how a small or medium sized carrier in Asia, Africa or MENA can affect or compete with an airline like AA, AF, BA or LH.
So mega carriers expect governments to stop providing airlines with financial assistance that is repayable and is designed to promote national industries and services because AA  or AF can not fairly compete with an airline in Africa or Asia, mind boggling isn't it.

But we digress, Emirates, Etihad and Qatar Airways are the champions of Ultra Long Range flights with aircraft capable of flying 16 + hours. they use them effectively to take you from the west coat of the USA to the east coast of Australia with one stop in Dubai, Abu Dhabi or Doha. All new aircraft with the latest entertainment systems. Well the three world alliances were created to do just that and seamlessly with the same level of service regardless of the carrier. Seamlessly was overstated there is nothing seamless when you step from an A340, B777 or B747 into a 40 passengers regional aircraft with a beat up interior and no service.

The issue put forward is simply Gulf Carriers get cheaper fuel, airport charges and taxes and therefore they can offer cheaper tickets according to AF CEO, oh as if European carriers never got subsidies or cash injections. One has to take into consideration that these carriers are not promoting only their flights but also their hubs as destination at their own cost, so it evens out. But then these European majors opposed carriers entry into their markets as far as I can remember and way way before Emirates, Etihad and Qatar Airways were even started. So it is old policy in a new guise

Is it that alliances can not compete with Ultra Long Range Flights, maybe not on all routes. Let us take LA or San Francisco to Sydney as an example, QANTAS can fly you through their Singapore hub, a one stop flight just like Emirates, and Singapore is as attractive as Dubai. So it boils down to efficiency and productivity of each carrier.

Finally, the Gulf Carriers can only compete on certain routes, while the USA domestic or intra European markets are effectively barred to them. The three carriers combined fleet and network are not even close to Delta or United.

It boils down to the fact that the major carriers are resisting to increase capacity and not willing to extract more productivity from their employees for fear of conflict with the unions. So, more of old policies in new guise.

Saturday, October 2, 2010

The Communication Gap

Ever since Mr. Steven Slater made his spectacular exit, the  relationship between passengers and Flight Attendants (FA) has come under scrutiny, but precious little has been done about it. Well, The Crew Lounge a podcast hosted by two FAs Sara Keagle and Bobby Laurie that discusses current industry news, listeners' questions and other related topics are now on Daytime TV Show with a mission statement;


To bridge the communication gap between flight attendants and their passengers and therefore create a more pleasant inflight experience for everyone.


Indeed, life at 40,000 feet has changed especially since 9/11 in terms of security requirements and the rapid development of technology related to mobility and connectivity (mobiles and other related hi tech gadgets). 


Flying is a stressful experience for a lot of people, add to this long lines at security check points, new rules about the carriage of liquids, new rules about baggage and carry on luggage and you have frayed nerves. 
On the other hand you have the FAs, who not only have to cope with ensuring that the aircraft safety and security requirements are met, but with a few other unpopular tasks (restricted movement in the cabin and of course the infamous switch your mobile off for take off among others) and ensuring that the cabin is secured for an on time departure.


The industry as a whole have failed in the last few years to reach out to passengers and explain how things have changed and most importantly the implications of these changes. If your mobile is switched on during take off you are basically putting your life and everyone else in danger because of interference with electronic equipment or jokes about security, bombs etc. can cause aircraft diversions and can land one in trouble and indeed in a foreign jail. There is no time during the pre take off briefing to explain all this. This is something that has to be done systematically outside an aircraft.


Aviation is such that any small incident will be reported by the media and most of the time blown out of proportion. And while not all passengers and FAs are angels or devils, there will always be the odd incident that will hit the news big time to remind us that there is a communication gap that we need to bridge, each in his own way and capacity.


Kudos Sara and Bobby for taking the effort to bridge the gap.



Thursday, September 2, 2010

The Cost of Non Compliance in Aviation

Aviation is a very regulated industry and regulatory authorities keep a close eye on how operators, repair agencies and manufacturers conduct their business.

The FAA has the capability under the law to levy fines from organisations that do not comply and this includes foreign organisations operating in the USA. Airlines in the USA are very aware of the cost of non compliance; just a few days ago AA was slapped with a USD 24.2 million fine for not handling an Airworthiness Directive on the MD80 two years ago. The FAA actions are not limited to fines but will follow the same course of action outlined below.

Airlines operating under different regulatory regimes tend to forget that their actions or usually inactions carry a cost, maybe not in the shape of a fine but it can be massive. The wrap on the knuckles is what everyone expects, but it may go way beyond that. .
  • It starts from the suspension of a license of a technician or a pilot, which may cause a hiccup in a schedule; or
  • The grounding of an aircraft or more or the withdrawal of equipment which really disrupts a daily schedule; or
  • The suspension of an Air Operator Certificate (AOC) or an Aircraft Maintenance Organisation (AMO) certificate for a period until rectifications are made; or
  • Ultimately the AOC or AMO is revoked.
The cost is massive and it goes up to the point of going out of business.

So the next time a request for manpower or for funding for maintenance or operations comes up, it should not be rejected or reduced out of hand, based on the direct cost, but take the time and run a risk assessment based on the cost of non compliance and then make up your mind.





Saturday, August 28, 2010

Airlines of the Middle East lead in Capacity and Demand ...... Why Not?

IATA published the airline industry July 2010 results (click here to see the figures) and it showed the Middle East Region leading the world in terms of demand and capacity. The notion that this increase is because the Middle Eastern airlines are all owned and/or subsidized by governments is incorrect.

It is true that most airlines are owned by governments but it also true that several countries have fiercely competitive markets like UAE, Kuwait, Jordan, Egypt and Bahrain with several airlines competing in a limited market with no subsidies. In Saudi Arabia, Saudia gets subsidies and part of these subsidies was to keep domestic air fares low something that has not changed with the entrance of 2 LCCs. Kuwait subsidizes Kuwait Airways which is the worst performer in their market. One could say the Etihad and Qatar Airways are owned by rich governments and therefore have access to money.

But then why gripe about subsidies; Ryan Air derives 22% of its revenue from subsidies paid by secondary airports. Airlines like Iberia, Alitalia, Japan Airlines and Air France to name a few were propped up by money injection from their governments. In the USA the Essential Air Service Program compensated airlines for flying into communities that lost air services after deregulation. Similarly, in France airlines were paid for the losses incurred while providing air services to capitals of ex colonies or French Territories.

Why should the region be different?

Even though the ME region generated the highest capacity it also generated the highest demand and we are seeing passenger load factor of 81% in July 2010 compared to 75.9% July year to date in comparison to 2009. There is pent up intra regional demand and we have seen similar capacity increases after 9/11 and Pandemics like SARS and H1N1. The region is slowly embracing open skies and their is demand to be satisfied not only in the ME, but for travel into India, China, South East Asia and South and North America. The demand is as such that Emirates is thinking of adding another daily flight to LA and Houston. Qatar Airways opened up Sao Paolo and Buenos Aires and they were instant success.

The fact that USA carriers increased capacity by 1% for the period up to July 2010 compared to the same period in 2009 is not a bench mark, their capacity in July 2010 increased by 5.8% compared to July 2009. The strict control over capacity has resulted in improved margins and yields because Air Fares increased in some cases by 20%, so did passenger load factors hitting 87.2%. Load factors in the high 80s, translates into passengers being turned away on certain city pairs and forced to use a competitor service or inconvenienced into changing the date of travel. There will come a point where the traveling public will find it cheaper and more time efficient to drive or take a bus for distances up to 500 miles, especially families going on holiday. The 5.8% increase in capacity in July 2010 is caused by the potential unsatisfied demand.

A lot of critics forget that in the Middle East region there are airlines with great business models and provide great service. Emirates, Etihad and Qatar Airways rank among the top ten. Royal Jordanian and Egypt Air joined One World and Star Alliance, putting them in the same league as the other partners in service and product delivery. Air Arabia, Flydubai and Jazeera Airways are leading LCCs in the region.

The Middle East region leads in capacity and demand because there is demand and because its carriers negotiate great prices from manufacturers when they buy at times their critics are either unable to secure financing or are too risk averse.



Tuesday, August 24, 2010

The Consolidation of the LCC Market

In the last few weeks three events happened which might indicate some changes in the Low Cost Carriers market in GCC in particular.

The most important is SAMA stopping operation after sustaining one (1) billion riyals ($266 millions) in losses. These losses were sustained during the period of Oct 2009 and March 2010. A government relief package and a shareholders' cash injection fell short in monetary and time terms to bail out the airline. SAMA competes against NAS another LCC and Saudia the national carrier. Saudia has been subsidised for years by the government to keep domestic ticket prices low. SAMA senior management are hopeful to restart operation, how soon and under what shape remains to be seen.

Last June Bahrain Air announced that they will exit the Low Cost Carrier market and become a "value for money airline" more like a regular aka legacy airline. They reckon the LCC model does not work in the GCC. Bahrain Air will go for code shares, alliances and a frequent flier loyalty program.

Finally, RAK Airways announced its relaunch sometime in the September/October period of this year indicated also they will not launch as an LCC, but as a full fledged service airline.

The three airlines are not major players, but are feeling and reacting to the effects of a crowded and very competitive LCC market dominated by Air Arabia, Flydubai and Jazeera Airways.

How the market develops in the GCC remains to be seen. I very much doubt that we will see more airlines than the existing four (add NAS to the big three). This may mean that the next market is going to be in MENA, giving credibility to Air Arabia's strategy of starting LCCs in Morocco, Egypt and Jordan.

Friday, August 20, 2010

Aviation and Social Media

This weekend I read two blogs at SimpliFlying the most influential website in Airline Branding and Social Networking. Both blogs were about large aviation organisations on whom I and millions depend on for their travels; Boeing and AA and how they successfully used/use Social media to communicate and enhance their brand and image. They are proof that this is an industry that revolves around people, people who travel and people who make it possible to travel.

Large organisations at best are slow at embracing change but both have shown a willingness to embrace social media and engage their respective audience.

Boeing is changing the way it communicates. Boeing has enhanced their website to engage more those who already visit and increase their numbers. What is amazing for such a well know brand like Boeing is the realization that it is only a name on a bunch of buildings. The real heroes are the people of Boeing. They are what make the name and the product. It is their real stories and successes that Boeing is communicating to the world. A warmer and more humane image of a gentler giant if we may. (Click here to read the full piece) .

American Airlines had a security incident on flight AA24 at San Francisco bound to New York.
The aircraft was delayed until the issue was resolved. Two passengers tweeted from on board the aircraft and became the source of information to the media. Enter @aairwaves who engaged the two passengers, took charge and responded to all media questions until the issue was resolved. A case study of crisis management online and in real time. (Click here to read the full piece) .

Kudos Boeing and American Airlines for embracing change and of course my friend Shashank for driving us all in the right direction.

Thursday, August 19, 2010

Aviation in MENA

I read on Zawya.com an article entitled "comment: aviation needs better management" click here to read the full article. Below is my comment on that article with a few more insights.

Like everything else in the MENA region aviation is affected by politics, both regional and international. Several countries and by extension airlines face sanctions mostly by the USA such as Syria, Sudan, Somalia to name a few. The region is beset by political turmoil and armed conflict. Yemenia was almost black listed by the EU, MEA can not fly to the USA and Iraqi Airways had to be shut down and cease international operations because of claims by Kuwait Airways.

There is also the matter of national pride that stops in the way of progress not only in terms of subsidies to national carriers but also in restricting access by other airlines.

The idea of a single market similar to the EU is very far fetched and will take decades to materialize. Simply we need a long period of peace and stability to develop into a single market and a political union, in the same manner that the EU did.

However, there are encouraging signs; there are more countries that embrace open skies like the UAE, Lebanon, Syria, Jordan, Egypt, Bahrain and Qatar to name a few, some more liberal than others.

There is also a trend for the national civil aviation authorities to embrace EASA's EU-OPS (the European regulatory regime) which will standardize regulations and make cross border movement of aircraft and aviation assets easier, acceptance of maintenance standards and licensing.

Unless the region experiences stability and peace the efficient management of aviation will be very difficult. The mere fact that the region has thrived, amid the worst recession in modern history and a few armed conflicts, is a tribute to the ability of individual airlines and authorities to manage crises.

Wednesday, August 11, 2010

Impressions of a Frequent Flier

This year I have traveled extensively and had the opportunity to experience on board service of several airlines on different flights (Ultra long, long, medium and short range) and different classes.

Here are some of my impressions

Ultra long range (12 to 16 hours) on Emirates, and any other airline for that matter, economy is not a joy if it was not for the inflight entertainment system (ICE). ICE makes all the difference, I am not a movie goer but with ICE I have seen 5 movies during one flight, a personal record, and still had 7 hours to sleep.

For some reason Emirates always serves the last meal on the flight too close to the arrival time, and results in the cabin crew really hustling to secure the cabin sometimes up to a few minutes from landing. And if you are sitting in the back you will never get your first choice when it comes to meals.

However, long and medium range flights on Emirates Business is a gourmet experience that stands true to their radio advertisements. I had my best steak ever on an Emirates flight.

Business class service on long and medium range flights of American Airlines, is an enjoyable although sometimes a very slow service depending on the flight attendant serving your side of the cabin. I understand there are laws and rules to prevent discrimination based on age and/or BMI, but please let us be reasonable here, having one's meal when the other side of the cabin is halfway through their siesta is not nice. The inflight entertainment system is adequate.

On the other hand a BA flight to Dubai during a UNITE strike day is a bloody awful experience. Minimum crew on the B777 (8 out of which 6 are of minimal experience). The service in Business left a lot to be desired, lucky it was a night flight and most of the passengers were asleep.

Willy Walsh should be grateful passengers are still flying with BA. Of course, I had better experiences on BA flights but this one was memorable.

Royal Jordanian's Business class on short flights (2 to 3 hours) is a relatively good experience. The flight attendants sometimes lack the sophistication and finesse of their counterparts in other One World carriers. The food is good and the crew are friendly and actually smile at you most of the time and I like it, but then I am biased (ex RJ).

As for Regional travel in the USA whether with American or Continental, the best you can do is nap. The seamless service and experience that we were promised in the 70s and 80s did not happen and it will never happen you can not compare a B777 to an EMB145. Service is not the issue. It is the feel and look of the aircraft that throws you off, the Majors need to look again at their regional feeders.

However, the one thing that EMIRATES surpasses all the others is the ability to deliver your bags in a reasonable time no matter where the aircraft is parked at Dubai airport. On Business class I found my bag on the belt and I use e-gate. Kudos Emirates

Friday, August 6, 2010

ETIHAD's Version of Low Cost !!

Etihad is ready to lunch its first "All Economy" flights on a 162 passengers all economy A320, starting with 2 and going up to 10 aircraft (click here to read full story).

This model was tried earlier this decade, when Gulf Air converted several B767 into all economy aircraft and based them in Abu Dhabi. The idea then was to placate Abu Dhabi and stop them from pulling out of Gulf Air.

This time is Etihad trying to ward off the Low Cost Carriers from encroaching on its turf. For the last 18 months rumors had it that a Low Cost Carrier is about to be launched in Abu Dhabi. The new entity was going to be managed by a UK carrier probably Flybe using EMBRAER 175/195.

Is this positioning for an independent low cost carrier spin off similar to Emirates Flydubai or just another product to be competitive on certain routes. So far, Etihad has maintained it is just a product to cater for routes that have very little premium passengers.

In any case this is a new product that will definitely add competition to an already competetive and already crowded UAE market

Saturday, July 31, 2010

Saudia .... Changes on the Horizon

Recently I read an article at Zawya.com regarding some of the problems facing Saudia entitled "What Ails Saudia" (click here to read full story). Saudia blamed its 2008 losses on its passengers not cancelling their bookings when they decide not to fly.

In these modern times, airlines suffer from overbooking their flights and not from passengers not showing up. The problem of Saudia has a simple solution, do what all the other airline in the world do. If you book
1. through the airline website you pay in advance or;
2. through a travel agent or consultant, you are given a date to pay otherwise the booking is automatically canceled.
So simple shift the money problem to the passenger side of the equation.

But to come out and publicly blame your passengers for your problems shows a lack of sensitivity towards the traveling public and a lack of customer support culture within the organisation. No airline can afford to treat its passengers in such a way.

Saudi Arabia is an oil rich country that is liberalizing its civil aviation rules by allowing domestic carriers to operate and is adopting a more open sky policy within the region. The massive government drive to invest in industry and infra structure and the ensuing social changes that comes with development, needs to be supported by the aviation sector both domestically and internationally.

Saudia can not be complacent, as it approaches privatisation. The airline has a modern fleet with the latest technology. However, the competition will not be only with the domestic airlines but also internationally, with the likes of Emirates, Etihad, Qatar Airways and even the smaller carriers such as Gulf Air, Egypt Air or Royal Jordanian. They have to compete on service and customer relation and satisfaction.

To attribute your problems to your customers (those who eventually pay the salaries) is not the best way to approach your organisational problems. Saudia has inefficiencies, lack of sensitivity to customers and a different work ethics to those that exist in the region.

The privatisation effort should address all these problems and resolve them prior to the airline being actually privatised. These are core issues that need to be put in place as they constitue some of the core values of any airline.

Change will be painful as ever, but if Saudia wants to maintain its position it has to move towards a more customer centric culture, where the passenger is usually right.









Sunday, July 25, 2010

Aviation's Green Shoots

Other than what seemed like a global heat wave in the northern hemisphere, July has been good to the airline industry.

The mood is upbeat, the airlines of the MENA region experiencing the usual 10% to 15% increase in traffic uplift coupled with the expanding networks of Emirates, Etihad, Gulf Air, Air Arabia, Flydubai and Royal Jordanian to name a few. The announcement of a 10 years contract for component support between Flydubai and ADAT signals what maybe a new trend of regional work staying in the region instead of going to European MROs and consolidating ADAT's ambitions of becoming the HUB MRO for the region.

As usual, Emirates set the trend at Farnborough with their B777 order. What was refreshing was the resurgence of leasing company orders, a signal that credit and financing may be available.

But the most interesting and exciting news came from the USA. Most carriers there announced Q1/Q2 profits and traffic increases, something we have not seen much of in the last few years.

The outlook for the remainder of 2010 looks good. Most of the Summer and holiday season still ahead of us promising an increase in traffic and hopefully profits. Barring any major political upheaval, unpronounceable volcanoes or pandemics, 2010 may be the year the airline industry starts its recovery with an IATA profit forecast of two and a half billion dollars for 2010.

Green shoots, hopefully a little bit more, and about time too, it really has been overdue

Monday, July 5, 2010

Kuwait Airways .... Privatization Again

The Privatization of Kuwait Airways by the government has been in the news again with Parliament approving Kuwait Airways budget with a 180 million USD deficit for the fiscal year 2010-2011.

However the airline believes it can auction a 35% stake to foreign and local investors and 40% sold to Kuwaiti citizens (click here for full story from Arabian Aerospace On Line News Service)

For some reason the government believes that people will buy into an entity that has not made money in the last decade or so and have blamed the Iraq invasion in 1990 for all its woes. Furthermore, Kuwait Airways has been investigated since March 2010 for allegations of corruption.

A privatised Kuwait Airways will enter a market place that is very competitive supposedly without its government subsidies and losses. There has been a few failed attempts to restructure the airline and renew the fleet.

Kuwait Airways has lost market share to Jazeera and Wataniya in the last few years and will lose even more without the government support.

Kuwait Airways requires an investment in a major restructuring and fleet renewal that will transform it into a dynamic profit making organisation

Only time will tell how the privatization effort will go and how it will pans out.

I wish my friends in Kuwait Airways all the best.

Saturday, June 26, 2010

Royal Jordanian ... Exciting Times

In the last couple of weeks Royal Jordanian announced the lease of seven (7) new Airbus aircraft from AWAS to replace 6 Airbus aircraft currently operating in the fleet. The replacement consists of 4 A320s and 2 A321s and an additional A320.. The first delivery is scheduled for April of next year when 3 A320s will join the fleet, while 2 A321s and 2 A320s will follow in 2012. The aim is to renew the fleet, upgrade the IFE across the fleet and reduce maintenance cost.

Further, Royal Jordanian added flights to several destinations to meet demand during the Summer season raising the daily departures to about 110.

In addition two (2) Airbus A330-200 joined the fleet on 24 May 2010 to be used on the London and Kuala Lumpur routes starting June 1, 2010.

Earlier, Royal Jordanian announced their intention to refurbish at least two (2) of their four (4) A340s by changing the interior and the IFE system starting at the end of 201 early 2011.

Royal Jordanian will be facing more competition both domestically and internationally, QAIA has attracted more than twenty plus (20+) new and/or upgraded air services over that past year through both introduction of new airlines, as well as increased frequency and/or routes by established carriers

To add to the buzz Mr. Hussein Dabbas President and CEO of Royal Jordanian, brought up again the issue of mergers and consolidation. "There is room for airlines like RJ to merge with another carrier," he said. "I think consolidation will happen, but not now and it will be like Air France KLM, British Airways and Iberia, Lufthansa-Swiss…Airlines will maintain their national identity."

The fleet renewal and expansion of the fleet coupled with the refurbishment of the A310s earlier and the A340s later this year is an indication of Royal Jordanian’s efforts to improve its services to ward off the competition and position itself for a merger.









Saturday, June 19, 2010

Emirates at 90 A380s

On Friday 19 June there were several tweets regarding Emirates purchase of an additional 32 A380s to bring up the total of ordered aircraft to 90. The other issue was how will deal with Emirates recent order and the prospects of mergers between Emirates and Etihad or Etihad and Qatar Airways.

Emirates success so far did not come from luck but was and is the result of well thought strategies and most of all, the efficient implementation of these strategies.

I am not going to try to second guess Emirate's reasoning for their latest order however;

1. Emirates operates into many congested airports and the A380 is the best way to increase its traffic without adding more aircraft. This will reduce the operating cost in the long run.

2. Many countries even those that profess open skies and liberal regimes are protective of their airlines. Last week France rejected additional slots requested by UAE carriers.

3. The aircraft will be delivered by 2017 and hopefully the global recession will be over and traffic would have picked up and financing will be easier to obtain especially if Emirates keeps producing healthy profits.

The Merger buzz was started by Qatar Airways CEO in his remarks at the IATA AGM as reported on ATW (click here for full story.). He asserted that there will only be two carriers in the Gulf and Qatar Airways is one of them, and all others will disappear. The response was, the region's airlines will undergo some consolidation.

Looking at the three big carriers in the region Emirates, Etihad and Qatar Airways they all share a common trait; most of their traffic is transiting traffic through their hubs. However, the UAE carriers have an advantage, a larger population, almost 7 million, as opposed to 1.5 million in Qatar. This provides additional traffic from expatriates and their extended familiestravelling to and from the UAE to their home countries. Further, Dubai and Abu Dhabi are more popular as tourist destinations than Doha. Qatar Airways is in a more vulnerable situation than its two competitors.

Is there going to be mergers between any pair of the three, I don't think so, simply because all three are considered by their governments as an integral part of their development plans.

Will any of them disappear I doubt it, why should they when their catchment area goes way beyond the region to encompass the world. They have become global airlines with networks that span the world.


Tuesday, June 8, 2010

Air Arabia Jordan

Air Arabia has in the last six (6) years created a brand that transcends the GCC and MENA into the Indian Subcontinent, Africa, CIS and Southern Europe. The Air Arabia brand is probably one the most well known airlines in the region and the most dominant among the Low Cost Carriers in the region, Kudos.

Air Arabia's hub airlines, although new are proving to be successful, both Air Arabia and Air Arabia Morocco have weathered the global recession fairly well and managed to extend the brand reach into Europe. The start of Air Arabia Egypt will only increase that reach.

The announcement of Air Arabia Jordan will further extend that reach into Europe.

Jordan is a different market;
1. For starters it is the least populous with six millions as compared to the UAE at 8 millions or Morocco at 29 millions or Egypt at 75 millions;

2. Most of the Jordanian expatriate community is located in the GCC where competition is very high; on the other hand

3. Jordan has a very liberal aviation regime with unused bilaterals

4. The Tantash Group has one of the largest travel agencies in Jordan which will allow packaging of holidays.

5. Jordan has a vast tourism potential.

One major pitfall is the pace of expansion, that affects the corporate team.

The expansion into Jordan of Air Arabia will definitely change the way Jordanians view air travel in the same manner it has affected the UAE market.

Sunday, June 6, 2010

Airlines and Iraq

Aviation in Iraq was in the news in the last few weeks and it was a mixed bag, the good news is that in the last few weeks both Emirates and Air Arabia announced services into Iraq with Flydubai to follow.

This brings air services into Iraq from three (3) MENA counties; Royal Jordanian and Royal Falcon from Jordan, Gulf Air and Bahrain Air from Bahrain and Etihad, Emirates, Air Arabia with Flydubai following soon from the UAE.

These are countries that either have a large Iraqi expatriate community or can provide a venue for Iraqis living abroad to visit their country or both. These airlines are taking calculated risks and reaping the benefits to provide links to Iraq.

The bad news is the dissolution of Iraqi Airways as a result of Kuwait Airways claims against the airline in the UK. The government is contemplating a new private airline for the replacement of Iraqi Airways. Finding investors and the startup phase is a process that will take anywhere between a year to two years, in addition to the effort to transfer bilaterals and aircraft orders. This will delay the development of an airline that can meet the needs of the people of Iraq and the countries development requirements.

Friday, May 21, 2010

MENA Airlines... Bucking The Trend

In the last decade or so the MENA airlines bucked the world airline industry trends, ever since 911, SARS, Avian Flu, H1N1 and even the current Recession. In every occasion the MENA airlines traffic and networks expanded, stayed profitable or sustained minimal losses. There are a few airlines that has always been high loss makers regardless of conditions like Kuwait Airways and Gulf Air to name a few.

The MENA airlines have a different way of achieving productivities and efficiencies than North American and European carriers. The conventional wisdom in North America and Europe is to downsize, lay off people and defer aircraft deliveries.

MENA region carriers actually react in the opposite way.
1. Aircraft deliveries are seldom deferred, but once delivered they are utilized because:
2. The airlines open up new stations that generate additional revenues and passenger uplift;
3. As traffic to North America and Europe reduces the intra MENA region traffic tends to increase and offset any losses on other routes.
The above achieve asset efficiencies

4. The airlines very seldom layoff personnel, except in cases of restructuring. They rely on recruitment freezes, attrition and unpaid leaves.
The above provides employee efficiencies and ensures the availability of highly trained and motivated staff when conditions change and the need to expand is urgent.

5. The airlines will look at means of reducing and realigning costs such as catering, overheads, and fuel to enhance their profitability.

The region suffers from the same world problems but reacts using different dynamics.

Tuesday, May 18, 2010

HUB MROs..... Dinosaurs Or Wave Of The Future.

To start, what is a Hub MRO? basically a one stop shop. In the 1970s and 1980s up until the mid 1990s most major legacy carriers operated large Maintenance and Engineering departments which took care of all their fleet maintenance requirements.

In the USA, it was cyclic with legacy carriers outsourcing some of their maintenance and downsizing with every downturn. Maintenance work was brought back in when airlines discovered they had no control over their fleet disposition when it was down for maintenance.

Europe took a more collaborative approach, with the introduction of the B747 and the other wide body aircraft, European legacy airlines formed Maintenance Consortia. KSSU (KLM, SAS, Swiss Air and UTA) and ATLAS (Air France, Lufthansa, Iberia, Sabena and Alitalia) these airlines shared the work along aircraft types (B747, A300 and DC10 and their associated engines and components). However, when the fleets expanded the lines were duplicated and eventually each carrier went on its own.

In the 1990s and 200s the Component OEMs and Engine manufacturers discovered a new revenue stream, repair and overhaul, essentially they competed with their own customers. It was very easy to control the market because the controlled technical data. Of course if you were a big airline and put in mega orders you could dictate to the OEMs whatever you wanted.

There are a dozen or so Hub MROs, mostly major airlines and a few MROs affiliated with other major carriers. Will they edge out the smaller niche MROs? probably not. Will they survive?depends on a few important factors:
1. Ability to finance expansion
2.Technical Support from Manufacturers
3. and the most important factor is a sustainable supply of efficient, cost effective and trained work force.

The human capital issue is going to be the detrimental factor, with all the discussion about the shortage of skilled technicians and engineers.

Thursday, May 13, 2010

Air Arabia vs flydubai.... Interesting Times

For starter's I have to admit I am an alumni of Air Arabia, I have spent four (4) years there witnessing its expansion, so I may be a little biased.

Air Arabia and flydubai are starting to look more like easyJet and Ryan Air. Starting from the equipment they fly to how they structure their fares.

Air Arabia is well established and is without any doubt the major force in establishing the LCC sector in MENA. The market is where it is because of Air Arabia and in the process it had to fight off almost every legacy airline in the region. It has revolutionized air travel by providing people with affordable air travel, not only at the traditional major destinations but at other under served population centers.

On the other hand flydubai enjoys the backing of the extensive network of Emirates who provides a link to connect with flydubai on its website. It also allows interlining, through check in and baggage handling throughout both networks.

As flydubai's fleet increases and it adds more destinations, it goes into head on competition with Air Arabia. Notwithstanding the wealth and buying power of the population, the UAE market is after all a finite market that is around five (5) to six (6) million people. This prompted the Air Arabia strategy of starting new subsidiary LCCs like Air Arabia Maroc and Air Arabia Egypt.

So the battle will have to be fought not only in the UAE but in the development of the markets in every station they both compete in. flydubai may have a slight advantage by capitalizing on Emirates ability to provide feed and visas, whereas Air Arabia has been present in these markets for years and knows them very well.

There is no doubt that the LCC segment in MENA will develop to eventually become 15% to 20% of the market. Air Arabia will probably remain the top airline in the segment for the coming few years with flydubai catching up as its fleet and network increase.

These are interesting times ahead to watch for as LCCs develop in the MENA region.


Wednesday, May 12, 2010

On The Way To Recovery... Gulf Air

Gulf Air seems to be on the way to recovery. In a statement to Reuters the CE of Gulf Air announced that in the last six months 500 jobs have been cut through attrition, non renewal of temporary contracts and a freeze on recruitment and have cut their total cost by 3% in the first quarter.

A voluntary redundancy and retirement scheme has been introduced to cover Bahrain nationals and nationals of the member states (Qatar, Oman and Abu Dhabi). The great news is that this has been accepted by the Gulf Air trade union ending months of contentious relationship with senior management.

Traditionally the Gulf Air trade union has been able to thwart several programs and plans that affected the well being of the staff. click here for related blog

With the labour issues behind him, Samer Majali can now concentrate on the real business of the turnaround and eventual privatisation of the airline.

Kudos to both the CE and the Trade Union to coming to an agreement that resolved months of disputes.

Tuesday, April 27, 2010

Safety In The Air

On 25 April 2010 an Emirates Airline B777 encountered severe turbulence and 20 passengers out of 350 were injured, the aircraft landed safely. On every flight of every airline the PA announcement recommends that one keeps his/her seat belt on while seated, precisely to avoid incidents like this one.

In the late 1970s and early 1980s Lounges on airliners were the in thing. Lockheed had lower deck lounges on some of their L1011s and Boeing had lounges on their B747 upper deck. With time the fad disappeared mostly because lounges took up space and weighed heavily and they had to give way to economic realities, this same space was used for cargo and/or seats. Even lower deck galleys disappeared to give way to cargo space.

In the 2000s Airbus comes in with the A380 and sells the aircraft as one where you can have lounges, gyms, bowling alleys and shopping areas (click here) with passengers walking around. Fortunately most of these did not materialize.

Great looking lounge areas for the use of the First and Business Class passengers are very unsafe during an encounter with severe turbulence with passengers standing or sitting around the lounge. They will probably bounce off the ceiling, literally.

It is time to go back to basics and have a review of how safe are these lounges and act accordingly.


Saturday, April 24, 2010

ERP 201 ... Volcanic Ash and Beyond

The last week was a time of revelations, it showed how fragile was the air transportation system was. A volcanic ash cloud over Europe closed the airspace grounding the majority of the airlines in that region. It also affected almost every airline in the world. The losses to the industry was USD 1.7 Billion in a week, imagine if it went on longer. This is what the airline lost and does not account for what other industries that relied on air cargo across the world lost.

That week was in a way an educational week. It showed how airlines and ancillary services reacted, some with compassion others just followed the rule book. Nevertheless, there are several lessons to be learnt here.

1.The airline industry is very global and very vulnerable to disruptions. The closure of the European airspace affected airlines across the world. The industry just stood gawking helplessly, at what potentially was its own demise, as losses mounted at the rate of USD 200 millions a day. No contingency plan or business continuity plan was effective. This was a scenario that no one foresaw, the airlines had no idea what to do with passengers, staff or aircraft. There were no protocols for the testing of volcanic ash and its potential effect on aircraft engines and airframes. The health impact was not even addressed.

2.Emergency Response; I bet no airline Emergency Response Plan catered for such a disruption. The traditional means of communications, although important were not adequate to cope with the scope of the disruption and the amount of queries. The traditional media, print, radio, TV and even websites were not fast enough or real time to respond to an evolving situation which increased in number and complexity, with each day bringing on more stranded passengers to the already chaotic scene. Enter Social Media to the rescue with Twitter and Facebook playing a major role allowing airlines and Eurocontrol to interact with passengers and to give up to date information and responding to questions in real time. Several airlines refined their internal social media processes to meet the challenge.
Every airline must review its Emergency Response Plan to take into account of such or similar disruption. The last time this volcano erupted it lasted for more than a year. However, the most important revision should be in Communications. It is a must that Social Media be acknowledged as a means of responding to crises and keeping passengers and their families and friends along with all other stake holders in the information loop. It should not by any means replace press conferences, call centers and other media channels.

3.Protocols and processes must be agreed by all stake holders (authorities, OEMs and airlines) to test and gauge the safety impact of volcanic ash on people's health and aircraft safety, allowing flights to operate in the presence of the ash.

4.Just like the airlines, Import/Export businesses that rely on air transport for their survival, must look again at their contingency and continuity plans and act accordingly.

Let us not waste a good crises.

Friday, April 16, 2010

Of Things To Come ... Aviation in MENA

I recently attended the 16th Middle East Airline Maintenance & Engineering Conference at Abu Dhabi organized by UBM Aviation. I have attended several of these conferences and even co-chaired one. However, this one was one of the most interesting I have attended. It came at a time, the aviation industry in the region and globally is ready to undergo changes.

Several topics were discussed but the most interesting (for me at least) were

MRO Hubs in the region and the relationship with OEMs. In the last few years OEMs have become more aggressive in setting up MROs in order to generate more revenues, and in the process competed against their own customers. The concept of a HUB MRO, a one stop shop, only works if you are a big airline or one with a big aircraft order, so you can browbeat the OEMs. Abu Dhabi Aircraft Technologies (ADAT formerly GAMCO) is one such entity. It has Mubadala and Etihad backing it up and making OEMs bring in technology into the UAE. The other MROin the region are basically into airframe work with some engine works or components thrown in. So it seems MENA will get its HUB MRO.

EU ETS (Emission Trading System) was another subject which is causing controversy globally. In theory ETS is a great idea if it was not that the money collected will probably never be invested in aviation or climate change research. Of course the other problem is that the EU wants to collect on all emissions generated outside the EU just because the flight originates, ends or overflies the EU. This is causing problems for the airlines who in theory will pay several time for emissions by virtue of overflying several countries or territories. Ideally, emissions generated by a flight should be accounted for once.

Other subjects of interest were bio-fuel and greener engine technology. Well Bio-fuels are here to stay. Companies are working on bio-fuels that do not require edible products as the source. It is no good to starve in order to be greener, but are looking at other sources of vegetation or algae. Greener engine technologies are those that relate to the reduction of NOx and Carbon. It deals with design of engine parts that improve fuel burn and reduce engine weight. Such an innovation is P&W Geared Turbofan (GTF) which allows the Low Pressure System and the High Pressure System to rotate each at its optimum speed, thus increasing efficiency and fuel burn and reducing noise and emissions.

Last but not least is the Changing Regulatory Requirements, with the introduction of SMS and all the associated cultural changes that come with it (risk management, reporting regimes, just culture and so on). One topic of discussion was how to deal with regulatory authorities. The relationship between the regulators and the airlines and support activities should be a true partnership. I realize the partnership label is a great buzz word, but it needs to be changed into a reality. The relationship should be mutually supportive so it becomes a true win win system.

Thanks again to UBM Aviation for providing a venue for networking and sharing ideas about the industry.

Wednesday, April 14, 2010

A Protectionist Open Sky

I know, somehow it does not sound right, but bear with me.

In the last few days a row between Saudi Arabia and Egypt Civil Aviation Authorities erupted over traffic authority for NAS and SAMA to operate between Madina and Cairo.

The MENA region is moving towards Open Sky no doubt, however protectionist policies have put a twist on Open Sky. UAE, Lebanon, Jordan, Syria and Egypt among others have open sky policies.

However, Egypt has always had a protectionist policy towards Egypt Air. The row erupted because NAS and SAMA wanted to operate Madina to Cairo under the terms of the Open Skies bilateral between the two countries. Egypt, has declared that Cairo International Airport does not receive LCC flights, which is a strange way to get into open sky.

Egypt CAA has refused Air Arabia access into Cairo in 2003, forcing Air Arabia to operate into Alexandria's secondary airport Al Nozha. This has actually improved traffic into Alexandria from three carriers (Egypt Air, Lufthansa and Olympics by the way Lufthansa pulled out) to having every regional carrier operating there on daily basis or seasonal summer traffic (Emirates, Royal Jordanian, Gulf Air, Etihad and a few others demonstrating the power of open skies, recently Air Arabia Egypt, with an Egyptian AOC was refused access to Cairo and will operate from Alexandria.

The whole point of restricting LCC and other traffic is to protect Egypt Air. Even Egyptian unscheduled carriers have restrictions imposed on them.

The question is does Egypt Air require protection? Egypyt is a country of almost 80 million inhabitants and a large expatriate population spanning the globe. For a long time the largest Arab carrier and has recently joined the Star Alliance. So why does a world class airline require protection?

Egypt Air did not have the reputation of being an efficient and lean carrier. This has changed and even though they are not the leanest airline in the MENA region they have improved enough to join the Star Alliance and to have a robust MRO that does cater to foreign carriers' maintenance requirements.

So is that an Egypt Air requirement to be protected or is it a government authority that kept doing whatever it was doing for decades. Open Sky is good for a country witness the growth in Alexandria.

It is about time the Egyptian CAA changes its protectionist policy towards Egypt Air (this protectionism does not extend to other Egyptian carriers) and embrace a true Open Sky policy.

Wednesday, April 7, 2010

Memories

It is cool to have an aunt who is a published author. A Nun without a Convent is the first part of an autobiography of my maternal aunt Ms. Nuha Batchone, written in Arabic and published by Dar Ward for Publishing and Distribution. I read the book on a flight back from Amman, I just could not put it down.

Reading about her chilodhood and early adulthood life and by extension my mom's and the rest of their family in Yaffa (Jaffa), Palestine brought tears, smiles, laughs and revelations.
It is nice to know that they were as mischievous as us, even though their ways differed.

The book brought memories of family members who have passed away decades ago, those who I knew when I was very very young, during my teenage years and beyond. It brought memories of gatherings at my grand parent's house and of great aunts and uncles that were in the back of my memory

Their lives were a part of a tragic episode in Arab History, the start of the Palestinian Diaspora and learning how they coped with the difficulties of being uprooted and starting again and what they have endured and how events shaped their lives and eventually mine brought an insight and answers to questions I never knew existed.

I look forward to the second part, her life and work in Bahrain, that is when I come in.

Thanks Nona



Monday, April 5, 2010

Royal Jordanian, the Brand

To start with I am biased, I have worked for Royal Jordanian eighteen (18) years but I left fourteen (14) years ago. Further, I have not flown with RJ for almost three (3) years. Having said all this, I will try to be as impartial as possible.

I traveled from Dubai to Amman and back on a Y/J ticket (staff ticket with a confirmed economy seat upgradeable to Crown Class subject to load).

At Dubai I checked in and requested an upgrade, the RJ supervisor was very courteous and I got my upgrade on the spot. The Crown Class was full I must have taken the last seat.

This was a morning flight on an A321 which had leather seat and IFE. The aircraft could have looked better, but it was clean and bright. The breakfast service was a little bit disorganized, but the Cabin Crew smiled and were very courteous. One thing I missed on that flight was the Ya Hala Service (the cabin crew wearing a modern traditional dress) which branded the Crown Class for years.

At Queen Alia International Airline I checked in at the Crown Class Check in which took a few minutes. I was invited to the Lounge pending the change of my boarding pass. The Crown Check in has its dedicated security check point and takes straight to desk 1 at immigration. the whole process took a few minutes and everyone was friendly.

The new Crown Lounge is awesome, spacious and overlooks the apron. It has a game room with a pool table and kids playing room. Hot food and snacks are served. It is a great improvement over the previous lounges and provides free wi-fi and dedicated TV viewing stations. It is a pleasure to spend time there.

The flight back was a night flight, the service was similar to the breakfast service and the Cabin Crew were as courteous, efficient and friendly as their colleagues.

The service and equipment are great and it is a far cry from what they offered a few years back.

However, Royal Jordanian needs a more definitive Brand, something that will make it stand out in the crowded MENA region and among its partners in One World.

Kudos Royal Jordanian, keep it up




Sunday, April 4, 2010

AMMAN

I never knew how much I have missed AMMAN until this visit. No work , no meetings and no audits, just visiting.

AMMAN has changed new buildings, new areas were developed yet it is still the same.

I remembered what I actually was missing. The weather is warmer than usual, windows were open to allow a gentle cool breeze, no rumbling of air conditioning as yet and in the early morning one wakes up when the sun filters in along with the sound of birds. The chirping of birds is what I missed most. Throughout the day, as long as the window is open, you hear that natural twittering.

I grew up in AMMAN, a chaotic city with underlying order. The streets that resemble village roads, no lane dividers yet there is some kind of an insane order. I fell in love here and raised a family.

AMMAN is where I lived my formative years, both as a child and as an adult and a professional.

I will never forget these hills, the houses surrounded with trees and most of all the quietness accompanied with the songs of birds.

Thursday, April 1, 2010

Turning Points

I always maintained that as long as the itch for doing something new, exciting or innovative persists one will endure all difficulties. However, as life goes on and we navigate through it, the challenges grow and one is pushed to the limits.

Recession is a good excuse for incompetent management to hide its inadequacy, just dump on your staff. Remunerations are cut in the name of savings and unrealistic targets are set at a whim and every one is left to his own devices without leadership. The leadership is busy undermining its staff.

Professionals manage, they know what they have to do and they will always find a few who will carry the day and meet the challenge of an impossible target. Sadly, success is met with silence at best or petty complaints and childish outbursts.

As long as the itch persists you don't care, you are still loving the challenge and actually enjoying the work. Until, incompetency and delusions of power and grandeur set in and they, they being very senior management, stop listening, or use selective listening (only what they want to hear) and believe their own version of reality.

What goes round comes round and sometimes faster than we like, what was great a few months back like savings, cutting down and not listening to those who deliver, catches up with them. The impossible target was delivered and the rest of the organisation that was taking it easy failed to deliver. The project is at a standstill and we are in headless chicken mode trying to recover the situation.

The nightmare starts, tantrums and outbursts become the norm and one is faced with a TURNING POINT, is what remains of that itch and the challenge worth the crap?

Turning points are terrible things, they hit and arrive at the wrong time. Nevertheless, they are good, they provide us with the opportunity to reassess things, do we zig or zag. Going through life is like navigating the Mississippi, you never know what is behind each turn.

Yes, a turning point is upon us and will see......


Wednesday, March 17, 2010

Distinction, Class Distinction

I travel with Emirates Airlines because they provide direct services to most places and their service is better than most.

Achieving Silver Status on Skywards or any other airline is a great deal for me, I get to use the lounge.

Emirates Airlines is a classy airline except when it gets to its lounges. They have one for First Class, Business Class and Silver Skywards members, and they do not mix. In Hamburg Silver Members are not allowed to use the lounge. In Dubai is the same, one has to walk for almost 15 minutes either way to get to the Silver Skywards lounge which is in Terminal 1.

I am not a populist, but really Emirates Airlines, are we so bad we are not allowed to mix with your darlings. I know the answer would be no space, but then why did you build Terminal 3 which was too small the day it opened.

No matter what the excuse, I feel like I am discriminated against.

Sunday, March 14, 2010

The WOW Factor

A few days back I was asked off the record why do Etihad, Emirates and Qatar Airways always place in the top ten or top five rankings of travel and airline surveys.

Well, the cynical answer is their PR departments wine and dine magazine editors and journalists to write good things about them. Maybe.... but I don't think so.

To start with these are heavily branded airlines associated with football clubs, F1 racing, Tennis tournaments and other high profile cultural and sport activities. Most importantly they have what I like to call the WOW Factor;

1. New aircraft with brand new leading edge technology interiors
2. IFE systems so loaded with movies, music and games that time flies by.
3. Good point to point routes both short and especially long range that minimises multi stops
with their associated hassles of airports and airport security.
4. Good food and good service usually with a smile, consistent and enjoyable. I am not saying
they do not make mistakes but on the whole they are good.
5. And last but not least a serious commitment from the top down towards passenger service.

Not many legacy airlines can claim all the above attributes, the European carriers are starting to fray at the edges and the US carriers are so obsessed with security in the cabin that flying with some feels like being in a classroom, so uptight they sometimes forget to smile. There are the exceptional fun airlines but then most are not all Legacy Airlines.



Saturday, March 13, 2010

Fitting In

Have you ever been to a place and felt as if you belonged regardless of the setting Growing up in Jordan, and I suppose the Levant in general, where the culture is entwined and influenced by all these powers that passed through the region.

Two such cultures, having their roots in the same place, what was ancient Greece, are the Ottoman and Byzantine. They both occupy the area which was ancient Greece, the same culture the Arabs built on their advances and discoveries in Mathematics, Medicine, Social Sciences, etc..

I have visited both Greece and Turkey, and notwithstanding the settings, the language and to some extent religion, I felt that sense of familiarity and fitting in at both places. It may have been the similarity in customs, food, music and ancient ruins, it is hard to describe or pinpoint.

Both empires were viewed by Arabs as occupying powers whose aim was to assimilate the region within their respective spheres of influence. Yet, these three cultures (Arab, Byzantine and Ottoman) have interacted, merged and influenced each other for millennia. That the net result of that evolution is etched in our collective memory.

Saturday, March 6, 2010

Ancillary Revenues ... Revisited

This morning I read an HBR Daily Status entitled 'Shipping Your Luggage Can Save Money'

'Nearly $260 in savings. If you're traveling with heavy luggage, sending your
stuff via a shipping carrier can save you a lot, according to Airfarewatchdog.com. On
at least one airline, a heavy, oversized bag can run you nearly $300 if you check
it on a domestic flight, but shipping might cost only $40, depending on carrier and
route. Other advantages: Better tracking and less schlepping, Airfarewatchdog.com

Well SWA declared that it has made more money attracting passengers than if they charged for carriage of baggage, a great value proposition.

But I digress, if people like FedEx, UPS and others can ship luggage cheaper and deliver on time while providing us with the means of tracking the luggage at every step of the way and I bet they will pick up from our place of residence or work. This is a new twist on an old business.

Sure, we might all be sceptical now, but at the rate airlines are raising their fees to carry bags, I am sure passengers will seriously look at alternatives (either you switch to a carrier that does not charge or ship at a much lower cost).

Knowing legacy airlines they will milk this source of revenue dry and when they discover what happened, they will feel the pinch of a couple of hundred million dollars, that are no more, and there will be wailing and gnashing of teeth.

Far fetched, I don't know, but a few years back who ever dreamt of a bag fee.

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