Weekly Issue 021110
Commentary by Bob Booth
Flight Control Waves
Commentary by David Bentley
Waves from the Pacific
Waves from the
Fuel Waves by Larry Weaver
It’s all about alliances
sharing was launched in 1990 by American
Airlines and Qantas for flights
between a number of domestic
The following are code share agreements in this week’s issue of AirWaves, which in many instances can grow to become joint venture and/or other forms of alliances between carriers in the world.
· Icelandair and Sandinavian Airlines (SAS) enter code share this monh
· Olympic Air activates code share agreement with Etihad Airways
EVA Air started code share service
· Jetstar Airways and American Airlines receive code share authority
· V Australia to expand code share with Etihad
· Avianca and Lufthansa sign code share agreement
· Continental, SkyWest and United Airlines apply for code share authority
Stay tuned – it’s all about consolidation and alliances which enhance the bottom line of the airline business.
Flight Control Waves
Airline Business Confidence Index – October 2010
While we are confident about the future of the airline business in 2011, we are publishing key points from IATA’s Business Confidence Index, released on October 19:
· Expectations for airline profitability over the next 12 months fell slightly, with 60% expecting a further improvement compared with 69% in the July survey.
· Q3 profitability appears to have been very good, with the highest proportion of respondents indicating an improvement since April 2007.
· Further growth in passenger and cargo markets is expected, however the peak has clearly been passed and expectations are starting to diminish.
· Expectations for yields over the next 12 months fell sharply with the majority expecting no change, following a very strong Q3 outcome.
· Unit costs continue to stabilize as expectations of a modest increase over the next 12 months have now improved to no change.
· Growth in employment by airlines is now starting to slow, with 42% expecting to increase over the next 12 months.
· The results of this survey are consistent with IATA’s September forecast for $8.9 billion net profit this year, followed by $5.3 billion as business conditions become less favorable.
While we don’t agree 100% with the results of the survey, it is worth noting that 60% of the respondents are still expecting a further improvement, while down from 69% respondents in July – 60% is still the majority of those surveyed. I’m willing to bet that results in the full year 2010 will exceed IATA’s $8.9 billion in profits, and that its forecast for 2011 at $5.3 billion will be way below the final results.
Icelandair and Scandinavian Airlines (SAS) enter code share this month
share, which went in to effect earlier this month, includes routes beyond SAS hubs of
Air Berlin launches code share with American Airlines
share between American Airlines and Air Berlin also includes NIKI, the strategic partner of the
Berlin-based airline. This comes after Air
Berlin launched its twice-weekly non stop service between Berlin and Miami
on November 1, operating an A330-200; and will increase the frequency to three
flights weekly next May as reported last week in AirWaves. Great news, viva Air
Olympic Air activated code share agreement with Etihad Airways
airline has activated it s code share agreement with Etihad Airways for flights between
Norwegian to take delivery of fist B737-800 in December 2010
This is the first of 59 B737-800s with Boeing Sky Interior which will be delivered over the next several months. The airline reports passenger growth in October reached 21% to 1.3 million passengers compared to the same month last year. Stay tuned.
airlines are discussing the possibility of an investment of $10-20 million to enable
the airlines to operate A380 flight from
By David Bentley
Is the A380 getting too big?
If security was the talking point last week (the ‘print and toner cartridge bombs’), then this week it is safety, following the exploding engine incident on a Qantas A380 over Indonesia en route Sydney from London and Singapore. There is never a dull moment in this business.
There are two ways of looking at the incident I suppose. One says that engine shutdowns happen all the time, this was nothing new, the A380 can operate perfectly safely on three engines (or less), no-one was hurt, just a little inconvenienced, what are you worrying about?
The other says a big hole was blown in the engine cowling so that large pieces of it fell to the ground where fortunately they did not kill anyone, (and a critical piece of the machinery is still missing) a puncture wound appeared in the aircraft wing (hardly a mere ‘engine shutdown’), the other engine on that wing couldn’t be shut down when it landed – indicating damage to control units – and it is a miracle there was no fire, which could have spelt the end for everyone on board.
There are two main aero engine manufacturers
now, Rolls Royce and the Engine Alliance, which is an amalgam of Pratt &
Whitney and General Electric (GE). They are rivals every bit as fierce as
Airbus and Boeing with the same degree of politics attached. Rolls Royce did
not develop its
However, not all the existing five A380 operators (SIA, Emirates, Qantas, Air France, and Lufthansa) have the Trent 900 in their A380’s (it’s roughly 50:50) – Emirates, the largest operator of the type for example uses the Engine Alliance GP7000 and is standing back aloof from the current controversy, as Emirates does.
For now, Qantas’ A380s remain grounded, while
the other operators using the
And ‘pressure’ might prove to be the operative
word here. As I write this Qantas is admitting that it worked its A380s harder
than the other operators. No sooner had this one touched down after a 15 hour
Airbus is worried of course. Its share price
is all over the place with the city suits hanging on every fresh word about the
incident. It isn’t that long ago that a
But should we all be worried? Not just because
technology might be getting ahead of itself but because so many of the
airplanes we will be flying on in the future will be powered by this gear? More
than that, now the A380 programme is back on track
and gaining fresh orders (I stick by my prediction from 2005 that it will never
make money, but that’s a separate issue), the number of passengers they will
carry will grow. The five existing users, especially Emirates, have kept
capacity down in the 450-550 seat range, but a recent order came from Air
Austral, the airline of the French protectorate of
Now I learn that the first LCC, the Japanese
airline Skymark, has come to a ‘basic agreement’ with
Airbus for four A380s to be configured in a 700-seat capacity for use on both
domestic (where there is heavy demand in
Can you imagine what would happen if Michael O’Leary was to become a fan of the ‘superjumbo’? He’d put over 1000 seats in a stretched version, I’m certain (even Branson at Virgin has mused over that possibility) and charge others ‘taxes only’ to strap-hang or squat in his ‘vertical seats’ for hours on end. The prospect of hundreds of people queuing up with their pound or euro coins to use the single toilet is the stuff of nightmares.
On a more serious note, what would be the consequences for aviation if one of these gargantuan tubes fell out of the sky with 800 people on board? The passengers on QF32 might have been lucky – time will tell.
David Bentley is Joint Managing Director of Big Pond Aviation, a British-Canadian air transport research and consulting company and who has been an industry media commentator and analyst for much of the last decade. During this time he has researched and written 12 management reports on a variety of subjects including airport privatization and financing; low cost airports, airport security and airline financing. www.bigpondaviation.com
Waves from the Pacific
EVA Air started code share service
Jetstar Airways and American Airlines receive code share authority
authority from the
share agreement was expanded on October 31 on JAL flights between
expanded code share agreement will include flights operated by Etihad to
Andrew Herdman, director general of the Association of Asia Pacific Airlines (AAPA), predicts Asia Pacific to become world’s biggest aviation market, saying region’s carriers already carry 25% of global passengers and 40% of global cargo. Stay tuned.
Waves from the
British Airways, Virgin
result of efforts by the ASUR group
of airports and the Tourism sectors in Quintana Rio, British Airways has announced plans to launch non stop flights
Avianca and Lufthansa sign code sharing agreement
airlines announced last week they will launch the code sharing flights between
Aerolineas Argentinas to sign MOU to reinstate membership in IATA
The national airline has announced that it plans to reinstate membership in IATA Clearing House, necessary step to join SkyTeam alliance. It is also phasing out part of its B737-500 fleet as part of its plan to increase it s total fleet. Stay tuned.
Continental, SkyWest and United Airlines apply for code share authority
(soon to become two) US airlines have applied to the US DOT for authority for
code share between the
Aeromexico announces new flights to Montreal
Mexican legacy airline will launch daily non stop flight between
Brazil is the most important country for Spain’s Banco Santander
article in the November 5th issue of the Inter-American Dialogue’s Latin America Advisor, it reports on the
bank’s CEO, Emilio Botin’s
Jazz Air takes delivery of first two of six B757-200s
Canadian airline will also take delivery of four additional B757-200s in
December. The aircraft are from Thomas
Cook Airlines. Jazz to
operate the aircraft to the
ALTA reports September traffic (RPKs) increased 11.0%
The Latin American and Caribbean Air Transport Association (ALTA) reports the member passenger traffic in September increased 9.1% while RPKs were up 11%. The member airlines carried 11.1 million passengers in the month, year-to-date passengers were up 14.4%. Capacity increased 2.8%, pushing the load factor up 5.6 points to 76.1%. Freight ton kilometers increased 16.3% in September and 33.9% year to date. For details of the report go to www.alta.aero. Viva ALTA.
Delta Airlines reports October traffic up 8.6%
System RPMs in October increased 8.6% year over year, on a capacity increase of 9.5%, decreasing the load factor by 0.7 points to a still profitable 83.4%. While domestic traffic declined 6.4%, international traffic was up a healthy 12%. The Pacific led the international traffic results with an increase of 22.6% on 13% increase in capacity, decreasing the international load factor by 0.8 points to 84%. Passenger cargo ton miles were up 34.2% in October. Stay tuned.
Alaska Air Group reports RPMs grew 15.9% in October y/y
which includes Alaska Airlines and Horizon Air reported
Air Transat has launched Air Transat Cargo on November 1
Canadian subsidiary has launched air cargo service between
Emirates Sky Cargo launched new cargo service from Dubai to Sao Paulo
The new non stop all cargo service was launched on November 1 with B747-400F aircraft. The airline also reported increase in revenue during the fiscal 1H 2010 of 48.4% to $1.19 billion, with cargo tons up 23.7% to 897,000 tons. The parent company, Emirates, also reported net income in the 1H 2010 up 351% to $925 million, with revenue up 35.5% to $7.2 billion. Viva Emirates. Stay tuned.
ABXAir to begin
the Jamaica Product Exchange conference, held on October 24 in
Arnette Cardenas, president
of Panama’s Chamber of Tourism stated
recently that increasing air service to
By Larry S. Weaver
The U.S. Federal Reserve announced last week that they were going to inject $600 Billion into the economy. This amount, cf additional dollars can only put more pressure on inflation and a weakening of the U.S. Dollar in the world economy. In a separate – but possibly related note - China's central bank said Wednesday it will raise banks' reserve requirement ratio by half a percentage point from Tuesday, the fourth such increase this year, as concerns about excessive liquidity increase. This move will require banks to keep more money at the central bank will drain funds from the financial system, relieving some of the pressures on inflation within China which continues to grow at a rapid rate despite sluggish growth in the developed world.
These combined actions are forcing down the value of the US dollar and raising the price of petroleum. WTI (the U.S. Marker crude) on the NYMEX has moved to a new 2010 high, climbing over $87.50 per bbl on Tuesday and – at the time of writing this – shortly after Noon on Wednesday – is at $87.87 per bbl while Brent crude on the ICE is at $89.11 per bbl. Since October 1st to date the price of WTI crude has averaged $82.55/bbl. According to the US EIA's latest forecast, however, states that WTI will be at $83/bbl this winter (October 1 to March 31). This is an increase of $5.50/bbl over last winter and $3/bbl more that what the EIA projected just last month. They are forecasting that by this time next year, the average price of crude will then be at the current level of $87/bbl. (So much for the expert's forecasts.)
The EIA forecast for world
supplies estimates OPEC crude oil excess capacity to be 5 million bpd while
OPEC says they currently have 6 million bpd of extra capacity – that can be brought
on-line immediately in the event of a shortage or a price spike due to
perceived shortage. This spare capacity compares to 4.3 million bpd experienced
in 2009 and 1.5 million bpd in 2008. On jet fuel demand, the EIA report
To counter/support the US EIA, the
International Energy Agency (IEA) issued its World Energy Outlook 2010 covering
their forecast for energy demand through 2035. The IEA says the rate of
economic growth will affect short-term petroleum demand, while long-range (the
25 year forecast) the response of governments’ to climate change and energy
security will shape petroleum's future. The IEA forecasts petroleum demand will
grow 1.2 percent annually over the next 25 years, which would be a 35 percent
rise over the 2009 levels with consumption reaching 99 million bpd in 2035 –
some 15 million bpd over the consumption level of 2009. The IEA report states
the net growth in consumption will be from non-OECD countries, with about half
Larry Weaver is an
Aviation Fuel consultant headquartered in Tampa,