British Airways has announced its intentions to start a London (Heathrow) to Austin, TX flight initially flying 5x a week (all but SAT and WED) going to daily later in 2014. This new flight will start early next year and I’m pretty sure it marks the very first trans-Atlantic flight for Austin.
No, this won’t be using a 777 or a 747. It will be done with a 787-8 and it is a perfect example of what the 787 allows an airline to do. If British Airways can make this route successful at all, it will yield more revenue than asking American Airlines to bring the passenger to Dallas or United Airlines to bring the passenger to Houston.
But there are implications for the vaunted alliances and, in this case, Oneworld.
Why is it in an airline’s best interest to remain in an alliance and even a trans-Atlantic joint venture if it can simply deploy the right sized aircraft to the route and pick off all the low hanging fruit.
There are also implications for airlines who have not adopted the 787 in any great numbers. Some airlines continue to view the 787 as a 767 when, in fact, it isn’t. If all you ever needed was a 767, you would probably be better off buying a 767 from Boeing new (they still offer them). The 787 can do 767 missions but the genius of owning one is that it can also provide exceptional flexibility and provide more opportunities for profit than the 767 ever had a hope of providing.
Flexibility, we’re learning, is a key component to earning profits at airlines.
I believe that Delta Airlines has shown great restraint and excellent analysis in how it has so far managed its fleet in almost every respect. The one area I did not believe to be smart was their deferral of 787 aircraft. Tying their fortunes to continued use of their 767s will impact their ability to be flexible and entreprenurial on a global scale.
Likewise, I believe that we’ll see United Airlines start to truly exploit the possibilities of their 787 aircraft in the near future and that will provide competitive intensity to Delta Airlines that we have not yet seen so far.
The order games have begun at the Paris Air Show and there is one takeaway you should absolutely get from it:
It means absolutely nothing. For at least this year.
Both Boeing and Airbus will land orders, cry out in joy that they won this customer or that but the status quo will largely be maintained.
Airbus will engage in its silly and, in fact, already has by announcing an order for 20 A380 aircraft by Doric Leasing. Until proven otherwise, this feels like a silly order by a company who isn’t a “name” in aircraft leasing and who perhaps doesn’t understand just how limited the use of the A380 is for most airlines. Without a few airlines named as taking up these aircraft, I’m not sure I believe the order.
Boeing has announced its easiest order ever for this year: GECAS is ordering 10 787-10 aircraft.
Also notable is EasyJet who has ordered 135 A320 aircraft (35 CEO aircraft and 100 NEO aircraft) and it’s notable because I think Boeing might have been able to win this on price. Yet it appears Boeing wasn’t even trying to contend.
And Boeing has officially launched its 787-10 with United Airlines being the US launch partner with an order for 20 of the aircraft. Other “launch partners” are British Airways (an order for 10) and Singapore Airlines (an order for 10).
This won’t be a year of shock and awe and I suspect many will be glad for it as the industry has had enough shock and awe over the past few years to last quite a while.
British Airways, in partnership with VisitBritain, did this flash mob promotion in a mall in the center of Moscow. Some think it is a bit weak, I think it was actually quite well laid out considering the audience.
I’ve had some time to think about the new Virgin Atlantic / Delta Airlines deal and several things have occurred to me which make this a bigger threat than I think anyone necessarily perceived including me.
Virgin Atlantic knows its trade across the Atlantic and its got the London Heathrow slots to make a lot happen for Delta. For the first time in 30 years, American Airlines and British Airways may be facing a very real threat to their lucrative trans-Atlantic business.
Virgin has the aircraft and airports slots and Delta has the network. Delta has the network feed into New York City and enough network to actually draw Oneworld (AA/BA) customers away from Dallas and Chicago to Atlanta and New York City and even Detroit. AA and BA won’t lose their O&D traffic in those cities but it could lose a great deal of the network feed into those cities in favor of a Delta solution.
This will happen just as American Airlines prepares to scale up its operations with 777-300ER aircraft onto those routes and just as British Airways prepares to take delivery of its first Airbus A380s. If Willie Walsh and Tom Horton aren’t cursing Richard Anderson, they should be.
Virgin has 747-400 and Airbus A340-600 aircraft that it can throw at routes to the US and a newish fleet at that which represents great service and certainly service competitive with AA and BA.
Iberia Airlines, Spanish airline of the International Airlines Group, is in real trouble. Spain’s economy is horrific and competition from low cost carriers is killing them. Sounds like British Airways, right?
IAG CEO Willie Walsh says that there will be a massive restructuring of the airline with as many as 4500 people made redundant.
Mind you, he’s probably dead right about what needs to happen. I also think he’s going to be suffer the rage of Spanish unions and that will be an experience that makes his tangle with British Airways flight attendants seem like a summer romance.
Iberia’s problems, which come from having lived as a government sanctioned flag carrier for years (this is getting to be too familiar), have to do with a bloated staff, an unproductive set of agreements with flight crew and a Spanish economy that is miserable.
None of this was really unknown when Iberia and British Airways combined. So why did they do it? Pressure from other European airline mergers. British Airways felt it needed a merger or risk being diminished by other European airlines.
Now they’ve got their merger and one side of the partnership is a pair of rubber boots filled with cement. If Willie Walsh is able to restructure Iberia and bring them back into profitability, I will nominate him for Amazing Airline CEO of the Decade.
Gary Shteyngart wrote a story for the New York Times titled “A Trans-Atlantic Trip Turns Kafkaeque” describing a 30 hour transit from Paris to New York City that involved maintenance problems, returning to an airport (London), an overnight stay and more trouble getting home.
Any one trip can turn into a horror. It’s happened to the best of airlines. There are some telling points to this story, however. First, maintenance problems (again) start this off with delays that for American, shouldn’t be so difficult to deal with for an airline with substantial operations in both Paris and London. These problems aren’t happening in Omaha, Nebraska.
Given that they are happening major destination points for American and given that the bulk of the horror took place in London, a place where AA has a major operation and support from partner British Airways, it just shouldn’t happen. Finding a usable 767 shouldn’t have necessarily been the hardest thing to do. Nor finding a crew for that 767. In addition, even if a 767 couldn’t be found for the flight, it should have and could have been possible to take care of a great many of those passengers on flights with AA or BA.
It’s an example of an airline not trying. Trying counts for a lot. You’ll never keep all people happy but you can substantially reduce the impact of such events by just trying. There are 13 flights daily between JFK and London Heathrow if one considers both AA and BA. There are another 6 flights between London and Chicago (BA and AA again). there are 4 between London and Dallas and 4 between London and Miami and another 4 between London and Los Angeles. that’s a total of 31 flights from London to the “cornerstone” cities of American Airlines if one considers both American Airlines and its codeshare partner British Airways.
If every seat on that 767-300 was full (and I virtually guarantee they weren’t), there would be only 225 passengers to take care of. 30 business class and the remainder economy class. The math here isn’t hard. If you can’t deal with 225 passengers at your major European focus city, you have a problem that goes far beyond maintenance.
I’ll grant that accommodating international passengers in a foreign city is a touch more challenging than a domestic flight. Here is what you do:
Dispatch multiple agents including a British Airways representative to the gate to meet the flight. Make sure they have communications with them such as cellular phones that will allow them to communicate with company operations personnel.
Get the passengers through customs in a quick and organized manner and collect them on the other side into small groups of about 30 passengers.
Ask your reservations center(s) to allocate 6 to 8 agents with dedicated phone connections to the gate agents for fast re-booking.
Determine the final destinations of the passengers and start routing them to alternate hub cities where possible.
For the very few you cannot take care of, refer them to a final agent who should make accommodations available at a nearby hotel (preferably located on or near the airport) and book them on the first flights out that permit connections to their final destinations.
Flights cancel. It happens. Having a contingency plan and some staff on hand to deal with this problem is not hard. That aircraft turned around 1 to 2 hours away from London. That’s enough time to call in a few extra staff to help. It really is. Again, this wasn’t happening in Kabul, it was happening in American Airlines’ major European focus city where its prime trans-Atlantic partner was located.
Keeping passengers happy and, more importantly, keeping passengers such as a writer for the New York Times happy, pays big dividends in the end.
Calgary based WestJet has done another code share deal with a major legacy airline. This time, it’s with British Airways, a Oneworld alliance member. British Airways passengers on BA flights to Toronto, Calgary and Vancouver will be able to connect on WestJet flights to final destinations.
WestJet’s code share partners are now:
American Airlines (Oneworld)
British Airways (Oneworld)
Cathay Pacific (Oneworld)
China Eastern (SkyTeam)
Delta Air Lines (SkyTeam)
Japan Airlines (Oneworld)
Korean Air (SkyTeam)
WestJet appears to be very agnostic to alliances but hasn’t yet established any codeshare relationships with Star Alliance members to date. Why? Air Canada is in the Star Alliance. They do, however, have interline agreements with a variety of Star Alliance members.
Curiously, WestJet has aggressively sought relationships with large, multi-national legacy airlines and it appears to be paying off for them and their partners. This is a model that has worked well for Alaska Airlines and it’s notable that WestJet’s CEO, Gregg Saretsky, worked as a senior executive at Alaska Airlines prior to joining WestJet.
QANTAS and Emirates have done a deal to work closely together on codeshares and flying between Australia and Europe. This sees QANTAS backing away from a very long standing relationship with British Airways and a shift in using Singapore for QANTAS’ mid-point hub to Dubai.
This is a smart choice for QANTAS. The tie-up doesn’t impact their operations at all and it allows QANTAS to use Emirates to distribute customers to Europe more efficiently while also providing the same service to London and the UK as well.
Emirates has eschewed the alliance game mostly but this is a very good move for Emirates as well. Emirates will now have feed from a long established brand and it brings a greater legitimacy to Emirates.
But this hurts British Airways. The partnership it has had with QANTAS has allowed the two airlines to survive on that long Kangaroo route between Australia and the United Kingdom. Now BA must go it alone and that will be a tougher thing to achieve success on.
Oneworld will be impacted by this as well. Part of me once thought that some sort of union between British Airways (IAG), QANTAS and American Airlines would have made for a very, very strong network. Now, QANTAS is walking away from established behaviors and tradition towards doing business in a new way. Quite rightly, too.
QANTAS will likely remain in Oneworld and you won’t see the cooperation between QANTAS and other partners fade away either. But you won’t see any love between QANTAS and British Airways anymore either.
Frankly, I do wonder why QANTAS doesn’t just fly Australia to Dubai and let Emirates do all the work from Dubai onwards. It’s a good fit that would actually allow QANTAS to get more use from its aircraft than flying ultra-long haul routes.
I do foresee one change for my own local area: I think we’ll see an A380 flying the Dallas / Fort Worth to Australia route in the near future. Say in one year or less. I think this new Emirates union will free up aircraft and given the high demand that the DFW-Australia route has seen, QANTAS could use an A380 to fly SYD-DFW and DFW-SYD non-stop which would only help grow that route more by eliminating that nasty stop in Brisbane on the return portion.
Virgin Atlantic is expressing its dismay (formally) at the British Airways / IAG purchase of BMI from Lufthansa.
This, of course, surprised absolutely no one except, perhaps, some lonely person staffing a North Pole research station.
The truth is, Virgin Atlantic wanted BMI and Lufthansa didn’t want to sell to Virgin. The perception is price but I do wonder if there wasn’t more to it than that. The purchase by IAG is a good move as it allows British Airways to become an 1800 lbs gorilla instead of a mere 800lbs gorilla. I honestly think the EU will allow that purchase to go through with, perhaps, a requirement that a token number of slots at Heathrow be sold.
I also think that Virgin’s argument that Scotland will be hurt by this purchase is disingenuous at best. First and foremost, I’m not sure the rest of the EU including Britain cares very much about what happens to Edinburgh or Glasgow or Aberdeen. Second, this isn’t about Scotland and Virgin would do much better to make the argument that it is about slots at Heathrow. Slots that are extremely valuable and which constrain competition over and over again.
One has to wonder why if Virgin is so concerned for Scotland’s welfare, it doesn’t buy some aircraft and run the routes itself. In fact, I’ve been wondering for 2 years why Virgin doesn’t just operate a LCC carrier in Europe a la Virgin Blue but it doesn’t. It did once buy a Belgium airline and operate an LCC carrier in Europe from Brussells but that adventure wasn’t successful. Primarily because it was hubbed in Brussells and it was a purchased operation that didn’t itntegrate with Virgin Atlantic.
For some reason, Sir Richard Branson and Virgin Atlantic seem quite afraid to organically build a domestic branch inside the UK and if it is reluctant to do so, why should anyone care about them in the BMI deal?
I’m not sure we’ll see much in this territory for SkyTeam or Star Alliance. They’ll continue to succeed and be smart in their attempts to gain more dominance in more parts of the world. I think Oneworld is going to be smarting through this next year as a function of health problems at founding members American Airlines and QANTAS. I also think that gaining the LATAM membership is not nearly as “sure” as they think it is.
The Middle East
After ordering an insane amount of widebodies in 2011, Emirates will order another insane amount of widebody aircraft and beat up on Boeing about its 747-8i. This has begun to feel like an addiction problem.
The airline industry in India has imploded and we’re just watching the mushroom cloud of debris settle. For 2012, more explosions and more governmental heads will push even deeper into the sand. Air India has already become the new Alitalia.
The Far East
Chinese airlines will order more aircraft and I expect we’ll see orders from them for 777s and A380s and possibly some A350s. Not unlike 2011. I don’t think we’ll hear about any stunning orders from that part of the world, however.
China will tout its COMAC C919 even harder and most of us will try desperately to keep from laughing even harder. Ryanair will back away from this aircraft quietly, I think.
Japan will find ANA deploying more and more 787s on more and more routes with more and more success with that aircraft. JAL will take delivery of its 787s and find that they not only work well for JALs needs but actually exceed expectations. I think we’ll see an order for some more Boeing aircraft from JAL this year and I think it will be the 737MAX and 777-300ER. No huge numbers but large enough to make a splash.
LATAM got its approval from Brazilian and Chilean authorities (barely) and LATAM will begin consolidating its operations to make more money. I think we’ll see a largish order from LATAM and it will be for an airliner to replace aircraft on both the Brazilian and Chilean side of the airline. The aircraft of choice will be, I think, the Airbus A320NEO and I think they’ll bump up orders for the 787 and 777 as well. TAM has 27 A350-900s ordered and I think that order *might* be at risk. The strategy of using Airbus for narrow bodies and Boeing for wide bodies seems to be a smart one for airlines in that region.
I don’t think we’ll see more consolidation in South America but I do see South America becoming a bit of a battle ground between airline alliances. Most see LATAM going with Oneworld and while I can’t disagree with the arguments, I think that SkyTeam and/or Star Alliance might just swoop in with one hell of a package that may be too hard to resist. If this happens, Oneworld and American Airlines gets kicked in the groin in South America.
Aerolineas Argentinas? The Alitalia of South America in 2011 and the same in 2012. Enough said.
British Airways managed to get through 2011 without any huge problems and saw Willie Walsh move up to the CEO position of International Airlines Group which means Willie’s still in charge. Iberia, British Airways’ sister airline, saw Willie stirring things up with plans for a LCC subsidiary. Iberia pilots decided to strike because shooting onself in the foot can’t be just an Indian thing. IAG also managed to get a tentative deal to buy BMI from Lufthansa and become the Emperor of slots at London Heathrow . . . maybe.
Virgin Atlantic didn’t die, didn’t find new partners and didn’t extricate itself from the chokehold that Singapore Airlines has on it. Richard Branson actually didn’t make the news very often except to shout, stamp his feet and act insulted that Virgin Atlantic wasn’t able to do a deal to win BMI. Expect Virgin Atlantic aircraft to start carrying some message against the IAG deal for BMI. I actually think that Virgin Atlantic will have to find an airline alliance to join and if I’m right, I would lay very heavy odds on it being the Star Alliance.
Lufthansa did itself a favor and got rid of BMI and I expect they’ll continue their very conservative mangement of the airline and the subsidiary airlines. I do wonder how much longer Lufthansa can rely upon its A340 aircraft and somewhat expect Lufthansa to bite the bullet and buy the 777.
KLM/Air France: I see nothing here at all. Not in 2012. I don’t expect a large widebody order nor a narrowbody order.
I do expect Ryanair to make an order and I do think it will be the 737MAX. In fact, I think it may well end up being the 737MAX-9 instead of the 737MAX-8. Instead of repudiating the C919, Michael O’Leary will just quit talking about it. Instead, he’ll suggest stripper poles could be installed on Ryanair aircraft.
All in all, I think it will be a tough year for European airlines. The financial crisis on that continent will make it very hard to earn an honest profit and Middle Eastern airlines will continue to erode the long haul traffic that European airlines have enjoyed for decades.
Tomorrow, a summary of what I see for 2012 and the world airline industry.
I am somewhat stunned at the lack of nominations for choices of Airline of the Year. That said, I did manage to spend quite a bit of time thinking about the subject.
Domestic airline of the year isn’t hard and withour further ado, I name:
Believe it or not, it was a touch call. I did consider Southwest Airlines as well for the obvious reasons of its own moves throughout 2011. However, I think that American Airlines was more consistently in the news for both good and bad reasons. The airline spent 2011 managing its problems, announcing poor financial results, trying to come to agreements with its labor groups (and sometimes failing), buying a new fleet from both Boeing and Airbus and, finally, announcing its bankruptcy. Southwest Airlines was in the news quite a bit as well but more inconsistently overall.
For International Airline of the Year, it was harder. A number of airlines made heavy news at one point or another. Most recently, QANTAS had quite a thundercloud around it with its shutout of labor. Lion Air made noise with its Boeing 737MAX purchase committment as well. LAN and TAM airlines were prominent as a function of their tortured merger needing approval in 2 different South American countries.
But there is one airline who did make more noise as a function of its creation and how its managed its brands. For International Airline of the Year, I name:
International Airlines Group (IAG), operator of the British Airways and Iberia .
IAG is perceived as an airline holding company but it really isn’t operating like that and for proof look no further to Willie Walsh and his prominence in answering Iberia’s labor problems late in the year. They are two brands that will operate and are already operating quite closely together. They’ll harmonize more over time but IAG is “the airline”.
In addition to operating as an airline in 2011, Willie Walsh’s prominence on issues regarding both brands and aircraft purchases, IAG also managed to snatch the purchase of BMI right out from under Virgin Atlantic (though the deal still has to be approved in the European Union.)
Over the next many days, I’ll be doing my traditional year in review for 2011 on what has happened and what will happen with airlines in 2012.
A startup airline calling itself Odyssey Airlines has ordered 10 Bombardier CSeries aircraft to use on a startup venture providing business class service between London (London City Airport) and New York City (JFK) in direct competition with British Airways who currently provides such service with A318 aircraft.
The airline says that by using these aircraft, a stop in Ireland wouldn’t be necessary.
I’m scratching my head over this. The CSeries is planned to offer as much as 2800nm of range and that route is about 3500nm in distance. Granted, reducing the seat count makes for a lighter aircraft and stretches range but this still feels a touch pie in the sky at this moment.
In addition, how many seats can you fly and will it really make sense on a trip cost and per seat cost basis? I’m going to guess that, at most, they’ll manage a 2-1 aisle configuration and no more rows than the BA A318 (8 rows) giving just 24 seats vs British Airways’ 32 seats. That doesn’t feel warm and fuzzy either. Yes, BA has to stop in Ireland on the way to NYC. It also has the infrastructure there to do that with very small incremental costs.
Furthermore, British Airways has a business class brand and the infrastructure in both London and New York to make the business class traveler feel pampered. It’s a trusted service product and I don’t think you can pop up and attract travelers to your business without lowering prices substantially. The truth is, these flights aren’t sold on price anyway. They’re sold on service and if others can’t beat British Airways service, what makes Odyssey think they can?
This is a stinky plan, in my opinion, using the wrong aircraft (which *will* need ETOPS to do this by the way) and I don’t think it gets off the ground in the long run. If the demand is actually there already, British Airways would serve it with more frequencies using more A318s. They might not have anymore in the fleet but sourcing a long haul A318 isn’t exactly hard to do since anyone who owns one is generally looking to sell it.
I do not see this taking off, pun intended, and I think it’s more publicity related than anything else since you don’t need 10 aircraft to do the London-NYC run from London City Airport. One wonders if there is another agenda going on with this startup that hasn’t been revealed yet.
In light of American Airlines bankruptcy filing and its status as a founding member of Oneworld, I thought about alliances in general and wondered if Oneworld isn’t in real trouble at this point.
American Airlines won’t be engaging in any serious growth or aggressive strategies for some time to come now. Every real move they make will be under the scrutiny of bankruptcy stakeholders and their attention will be focused on re-scaling the airline to fit the new realities for success.
To me, that means that AA won’t have much to offer its partners in Oneworld. It doesn’t mean they won’t benefit from AA but it does mean that working in concert with these partners to achieve a more aggressive growth for the alliance is probably off the table for now.
Furthermore, QANTAS isn’t exactly shining with success these days either. They cannot use their A380s as they want and they have as serious labor problems as American Airlines does. More and more, QANTAS seems at real risk to serious competition from both within Australia as well in the South Pacific/South Asia markets. I’ll point out that QANTAS is also a founding member of Oneworld.
So, two of the Big 3 in Oneworld are currently hampered by their problems. That’s kind of serious, I would think. How does one make a strong business case to LANTAM for their alliance when that situation exists today?
In the meantime, SkyTeam and Star Alliance are racking up new partners and, more importantly, they are planning strong growth with a strategy that continues to seem far more coherent than Oneworld. They question I ask is this: Is there some scenario under which existing Oneworld partners start scattering to other alliances? If one bolts, will others follow?
I don’t see British Airways / Iberia leaving anytime soon but what about the lesser partners such as Cathay Pacific or JAL or LAN says “Buh Bye”? I think we would see several others looking for new relationships. (It’s notable that Oneworld is so clueless as to still have Mexicana’s name on their website.)
The other scenario is that both Oneworld and other alliance partners separate and form a new alliance that displaces Oneworld. More possible than one might think since Star and SkyTeam are clear dominated by just a handful of airlines. Some partners in those alliances may be chafing to play a bigger role in an alliance and with enough world partners, creating a new alliance may well be not only possible but smart.
Nigeria has fined British Airways $135 million and Virgin Atlantic $100 million for:
“. . . for abuse of a dominant position, fixing prices, abusing fuel surcharges and taking advantage of passengers. . .”
Apparently Nigeria can’t resist acting like the stereotype of an African country. What this is about is Nigeria wanting its flag airline, Arik Air, to do better financially and to compete on the same level as those two world class airlines. Let me point out that right now you could pick any one of the US based SuperLegacy airlines and discover that they, too, would have trouble competing with the services provided by those two airlines.
Airlines have long been the source of national pride for nations and particularly so in Africa. And when they find they cannot compete effectively, they decide to blame it on the Imperialists. I take note that that isn’t limited to Africa. India is engaged in the same shennanigans with European airlines in an effort to protect their flag airline, Air India.
Why? Because those governments can’t stand looking their own citizens in the eye and telling them that competing means operating efficiently and effectively like the rest of the world. Instead, they preserve the airlines at any cost in order to preserve what are perceived to be high profile jobs for their citizens.
Rather than pay those extortionate fines, I would suggest that British Airways and Virgin Atlantic withdraw their services to Nigeria and prevail upon the British government to withdraw landing rights to Arik Air at any airport within the UK borders. This is a case of “they need us more than we need them” in my humble opinion.
It’s being reported that Lufthansa is in negotiations to sell its BMI subsidiary due to losses its incurred as a result of unrest in North Africa where BMI has a strong presence. BMI’s real asset is slots and guess who wants them. . .
International Consolidated Airlines Group S.A
Better known as British Airways / Iberia. Lufthansa and International Consolidated Airlines Group S.A have come to an agreement in principle and are negotiating the details now. Virgin Atlantic was reportedly interested in this purchase as well but struggled to raise the financing to make an offer.
Concluding this deal would, on the surface, give International Consolidated Airlines Group S.A control of 53% of London Heathrow slots and I think this couldn’t be worse news. It would mean that British Airways would effectively control the airport and with now additional capacity being added at Heathrow, I think we would see a shutout of meaningful competition.
Yes, it’s almost certain that International Consolidated Airlines Group S.A would sell off some slots to some airline(s) such as Virgin Atlantic to make the deal palatable for regulators but the amount that would be sold off to make someone happy would pale in comparison to the hold it would have over the airport.
Europe would be wise to nix this deal in favor of other, better competition.