Monday, November 28, 2011

2011 A Challenging Year - Revisited

2011 A Challenging Year was written in May 2011and discussed the various challenges facing the airlines in MENA and GCC and of course globally.
Four (4) challenges were listed at the time
1. The natural disasters in Japan and the ensuing damage and problems;
2. The deepening Euro zone financial woes;
3. The political upheavals in MENA and GCC; and
4. The increase of fuel prices.

As we approach the end of 2011 three (3) out of the four (4) are very real. The world have moved beyond the  natural disasters in Japan and a couple of ash clouds in the southern hemisphere.

Political and financial upheavals are still with us and will probably spill over in 2012 and the price of oil, although relatively stable at this time, is still unpredictable. Most airlines in the region including those in the India has performed well. 

People still travelled and the airlines compensated by operating to new destinations;

- Air Arabia and Flydubai looked towards the CIS and specially the Ukraine among other destinations
- Several airlines started operations to new destinations in Saudi Arabia.
- Gulf Air started flying to Copenhagen, Nairobi, Milan and Geneva with Rome, Entebbe and Juba to follow
  and embarked on a marketing campaign "From the Heart" in an attempt to woo back passengers.
- Royal Jordanian is eyeing Africa with a plan to operate to Lagos, Accra, Nairobi and Addis Ababa in the
  near future in addition to several other destinations.
- Etihad is looking to start flights to Maldives, Seychelles, Chengdu, Dusseldorf, Shanghai and Nairobi.
- Emirates is looking at Dallas and Seattle, Lusaka, Harare, Dublin, Baghdad, St. Petersburg, Rio de Jainero
  and Buenos Aires
- Qatar Airways is starting flights to Entebbe, Tiblisi and Baku in addition to increased frequencies.

All airlines have posted increases in passengers carried and in revenues coupled with a reduction in yield, including the embattled airlines in India like Jet Airways and Kingfisher.

The effects of the Arab Spring, with the exception of Syria, are subsiding in most countries and economic activities are improving or are expected to improve. The deepening Euro Zone debt crisis is taking the world on a roller coaster ride, but eventually a plan will be devised and the world will limp towards recovery.

The kicker here is the price of oil, airlines have reported increases in their fuel bill for 2011 ranging from 40% to 80%. The airlines are reluctant to increase ticket prices; on the contrary they are discounting to stimulate traffic. With Europe facing financial problems, Europeans may be less inclined to travel especially if fares increase. On the other hand, the airlines need to offset the rising fuel costs, the traditional fuel surcharge may not be the best means, fares have to eventually reflect the true cost of travel and the realities of the market.

Airlines are between a rock and a hard place, they cannot raise fares to offset oil prices for fear of losing traffic.

This will probably be the biggest challenge of 2012

Sunday, November 13, 2011

Etihad Airways Eighth Anniversary

This is not meant to be a chronological history of the airline, but my impressions as someone who was involved with the starting of the airline.

Etihad Airways flew on 5 November 2003 from Abu Dhabi to Al Ain and then on 12 November flew its frst commercial flight to Beirut. At the time the airline had Beirut, Damascus and Amman as destinations. Etihad Airways has expanded at a relatively faster rate than its competitors Emirates Airlines and Qatar Airways. The airline started with 2 Airbus A330s leased from TAM and an A340 leased from Boeing to a fleet of 63 aircraft (100 on order) serving 63 destinations in 43 countries and a cargo operation serving 14 destinations.

Very few people know how Etihad Airways started. The Amiri decree forming Etihad Airways was issued in July 2003, also appointing HE Dr. Sheikh Ahmed Bin Saif Al Nahyan as the first Chairman of the airline. He also was the Chairman of GAMCO now ADAT.

GAMCO's commercial, legal, contracts and finance resources were mobilized to set up the initial business plan and proceed with the AOC. Two aircraft were leased from TAM and then one A340 ex Singapore Airlines from Boeing. An MRO team of engineers and technical personnel had to become the start up team for the airline. A building slated to be the training center became the head office of the airline and the team handled functions like recruitment, purchasing of catering and commercial  equipment. At the time Air Arabia was starting and GAMCO was called upon to provide full maintenance and engineering support for it and Etihad which was not a problem for an MRO. One challenge was to set up airline functions like scheduling and maintenance control from scratch. GAMCO had extensive experience performing these functions for Gulf Air using GF's facilities, eventually that function was tuned over to the airline.

The airline was set up between July and November 2003 with aircraft leased and delivered and all commercial and cabin equipment provided. One challenge was the IFE system which was from Rockwell Collins a system that was not very popular in the region. Collins was called on to provide support and ensure a greater than 95% dispatch reliability of the system. A task that they performed efficiently.

Another challenge, that I was personally involved with, was providing logistics support for the A330s and the A340 at short notice. A support package was prepared and acquired from AJ Walter Aviation. The agreement was made during the 2003 Dubai Air Show.

Etihad Airways is an airline that a lot of us are proud to have been associated with it and believed in the vision that now is a world class airline spanning the globe.

Finally, everyone is dazzled with the performance of the airline that they all forget that it all began in an MRO by a bunch of engineers and technical people.

Saturday, November 12, 2011

Dubai Airshow 2011 #dxb11

Twitter traffic bearing #dxb11 is on the increase as we near the opening of Dubai Airshow 2011.
Dubai Airshow usually brings cheer to an otherwise depressed industry with mega orders form the GCC airlines. Expectations are high, certainly because we have been told by Emirates and Qatar Airways to expect "bombshell" orders. What they did not tell us was what are the orders.

I don't usually like to speculate, but #dxb11 is tomorrow and it is a festive occasion  so why not.
Starting with the easy ones
- ALAFCO the leasing company from Kuwait announced they will order 50 A320 NEOs.

- Qatar Airways hinted strongly about additional A380s and A320 NEOs. Now, probably a
  Bombardier C series order (as a pay off for getting Canada traffic rights at the time the airlines of
  the Gulf were the bad guys) maybe forthcoming, someone has to cheer up Bombardier.

- Emirates will probably order some A380s (two dozen or so) and probably B777s. What will be cool
  is, if they have managed to push Boeing to offer the upgraded B777 bringing the aircraft performance on
  par with the A350.

Enough, so patience please, will find out in the coming few days, for sure

Saturday, November 5, 2011

Qatar Airways and The Iran Connection

Qatar Airways is increasing its presence in Iran. The airline added 31 flights a week to its schedule, bringing it to 52 flights from 31 flights a week, a 150% increase (read the full story). It added a new destination, Isfahan with a daily flight and increased its frequencies to Tehran, Mashad and Shiraz.

What is more interesting is the news that Qatar Airways will start domestic flights within Iran by code sharing with a local carrier (read full story) to get around ownership issues.

Iran has been suffering from sanctions which prevented it from getting spares needed for western aircraft. The safety record of Iran aviation leaves a lot to be desired, 13 incidents since 2008 (view here). Interestingly more incidents on Russian built aircraft than western ones. It is welcome news to have modern well maintained aircraft flying domestic routes. That will definitely be a boost to civil aviation safety.

Qatar Airways will commercially do very well and will be able to channel passengers away from the competition to its regional and international services out of Doha. However, politically this maybe an
enterprise fraught with danger, unless of course the Americans and Europeans have tacitly given their
agreement to this venture. No speculations here, the future will tell.


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