Weekly Issue: 030711
Contents:
Commentary
by Bob Booth
Flight
Control Waves
Waves
from the Pacific
Waves
from the
Financial Waves
Cargo
Waves
Commentary
by D.J. Gosh
Tourism
Waves
Fuel
Waves by Larry Weaver
Commentary
by Bob Booth
This week we focus on consolidation/code sharing and new flights
The July
issue of The Economist had an in depth look at the airline business. The
article “Climbing through the clouds” covers globalization as well as a host of
other important subjects. But it is their view of consolidation which caught
our interest. I don’t want to repeat the three page article but would strongly
recommend that you read it by contacting The Economist. They cover “Newcomers
in new places” which is all about Latin American airlines success so far this
year, with GOL’s acquisition of Varig
and the pending authority for the LATAM merger, which will make the LAN/TAM
merger the largest airline in the region and the 10th largest in the
world. They focus a lot on
Air France/
Air France,
American and
Volaris inaugurates flights
to
Flight Control Waves
IATA Premium
Traffic Monitor - May 2011
Key points from the full IATA report on premium and economy travel in May, 2011
·
May saw a sharp improvement in the number of
passengers traveling on premium seats, with a 9.5% increase over May last year;
·
Economy travel was up 5.5% over the same period;
·
This suggests the second quarter saw a stronger
expansion in air travel after the soft patch at the end of the first quarter,
hit by the shocks in Japan and MENA as well as high fuel prices;
·
However, there are reasons for caution before
extrapolating the strength of premium travel too far;
·
The average volatility of air travel from month to
month is 2-3% (its standard deviation);
·
International trade and business confidence, both
key drivers of business travel, are at levels consistent with premium travel
growth of 3-5% a year, rather than 9-10%;
·
Price-sensitive economy travel is now looking less
badly damaged by the rise in fuel prices, with market levels in May now back
above 2010Q3 levels;
·
But travel demand growth continues to diverge
significantly from market area to market area;
·
Encouragingly, the important
·
The boost to premium revenues will be a significant
help for long-haul network airline attempts to offset the impact on
profitability of still high fuel prices in the second quarter;
·
The outlook is for further growth in demand during
the second half of the year, however forward looking indicators like business
confidence suggest that, for premium travel, it will be at a slower pace than
May
Waves from
Air France/
Pierre-Henri Gourgeon,
the CEO of the
French/Dutch airline group, announced this week: “Air France/
Monarch has launched new scheduled flight between
The new
nonstop flights from
Air France,
With this
agreement, Air Niugini,
Air France and
Waves from the Pacific
American and
The expanded code share relationship to include
Is the headline in the July 15th
issue of MercoPress South Atlantic News Agency, which
leads with the following statement: ‘
TAM Airlines expanding its market in
The airline has recently opened its first
management and marketing office in
The two airlines have signed a code share
agreement designed to expand the network of both carriers. The agreement is
effective
AirAsia is
planning to sign a deal with All
According to a report from Reuters, the Malasian
airline, AirAsia is likely to sign a deal with All Nippon Airways (ANA) to launch a
low cost airline and a hub in
Waves from the
Avianca and Copa want more flights to
The Civil
Aviation Authority is reviewing the request from both Avianca/TACA and Copa Airlines Colombia to expand their
service to
Mincetur announces
it expects to have 500 flights from
Venezuelan airlines report passenger traffic grew 23% in the first
half of 2011
While
foreign carriers report 18% revenue growth in the first half of 2011,
Venezuelan airlines, according to the report from a government source, recorded
a 23% growth in passenger traffic in the same period. The same source also
predicts a 25% growth in 2011 compared to 2010. The president of the Venezuelan
Airline Association, (ALAV), Humberto Figuera
is predicting a 5% growth in July and August.
Volaris inaugurates flights
to San Diego, California
The
Mexican low cost airline inaugurated its new flights between
United States and Macedonia sign an Open Skies Agreement
The two
countries reached an Open Skies Agreement this week which will allow airlines
of the two countries to select routes,
destinations and prices for both passenger and cargo service based on consumer
demand and market conditions. It is the first aviation agreement between the
two countries. Open Skies agreements allow unrestricted access by the airlines
of both sides to fly to, from and beyond the other’s territory without
restrictions on how often airlines fly, the aircraft they use and prices they
charge. The new agreement makes
President Garcia announced more air transport reflects economic growth
Peruvian
president, Alan Garcia Perez, at the
inaugural of the new
Financial Waves
Lufthansa reports 10.1% growth in passengers in first half of 2011
The
airline carried a total of 50.2 million passengers in the first six months of
2011 for an increase of 10.1% year-over-year. Revenue was up 9.1% on capacity
increase of 11.9% in the period. The
total passenger increase for the airline group was 14.8% in the period Capacity
for the group increased 14.5% with SWISS
carrying the most passengers with 7.8 million, followed by Austrian Airlines with 5.1 million, bmi with 2.8 million and German Wings with 3.4 million. Stay tuned.
Norwegian carried more than 4 million passengers in the second quarter
The
airline reported it carried four million passengers in the second quarter for a
26% growth over the same period last year. The turnover was just over 2.7
billion
Citigroup gains in
The New
York-based Citigroup announced this
week that gains in
Copa Airlines to carry
1.65 million passengers in Q1 2011
The
“model airline” reported it carried 1.65 million passengers in the first
quarter, for a 12% increase over the same period in 2010. Second quarter
results will be reported in August. The first quarter increase is largely due
to the expansion of the airline’s hub in
Aeromexico Group reports
passenger traffic grew 35% during June
Argentine economic activity expands 8.1% in May; 8.9% in five months
Is the headline in the July 19th issue of MercoPress South Atlantic News Agency, which
leads with the following: “Economic
activity in
Cargo Waves
Maximus Air Cargo new
aircraft conversion on schedule
The
conversion of a new Airbus A300-600 regional freighter purchased by Maximus Air Cargo is on schedule for its
mid-summer entry into the company’s fleet. According to Maximus Air Cargo President and CEO, Fathi Hilal Buhazza its
entry into operations will significantly boost the airlines operational
capabilities. “When it arrives back in
Abu Dhabi in August, the aircraft, built in 2002 will be the youngest aircraft
ever to be converted from a passenger plane to a freighter…and this will
provide both increased reliability and being more fuel efficient than the older
varian of the A300-600, so we can reduce our
operating costs and pass savings on to customers.” Viva Maximus Air Cargo – stay tuned.
Commentary
by D. J. Ghosh,
An entrepreneur since 1993, Ghosh
has been creating new air cargo market opportunities and his website is
“intended to create, develop and refine the business intelligence that will be
needed to support the science of independent air cargo operations.”
A strong believer that the air cargo business has come of age and is no longer
“a grown up child that has lived for too long under the same roof as his
parents,” Ghosh says that it is important to
understand that air cargo operators cannot stay for too long “under the
umbrellas of their passenger counterparts.”
What are the necessary ingredients that make up a cargo airline?
Talking to ACNFT, Ghosh pointed out:
“If you look at the ideal cargo airline, the only ones which really fit the
definition are the integrators.
"They have an end-to-end product where they define the expectations and
the parameters of the cargo offering. “Everybody else has a diffused offering,
and the reason they have a diffused offering is because they do not control the
supply chain.” He says that most cargo airline operators have to “rely on
partners who are extremely unreliable and who also have their own definitions
of service.” The Ghosh prescription, therefore, is
that “until we have an integrated service offering, the air cargo proposition
will not stand by itself.” If that is the case, are the high belly cargo
figures really ‘air cargo’ as he understands it?
“I don’t even think belly cargo should have existed,” says Ghosh.
“It just happened by default.”
He explains that most of the freight that is carried in bellies is done so
because there is empty space in the belly of aircraft. Of course, it has
developed into a bigger product. “But I think to get our game in order, you
really have to provide a main deck offering,” he says. He went on to detail
that trade is growing exponentially along with the expanding economies. “The
volume of business is going up and I guess that’s where the size of the pie is
growing. “But the offering of air cargo itself is still a long way to go and
the reason it has a long way to go is that it is still a much diluted offering.
It is confused between the passenger offering and the freight offering.
Until this becomes a separate discipline on its own, I think it won’t stand by
itself,” Ghosh justifies.
The “thinking” entrepreneur said that air cargo operators started cargo, but
with a disparate offering.
“What they haven’t done is define the product offering. Every cargo requires
some degree of sensitivity and some dedication in the business model itself,”
says Ghosh. He gives the example of pharmaceuticals
that “we have to move in a certain temperature controlled environment. As for
perishables, there is a whole variety. Moving garments on hangers or
transporting computer chips: all these are products that,” according to Ghosh, “require a scientific definition and a scientific
approach to moving them logistically. So until we provide the definition,
everything is going to move in the generic space and there’s going to be no
dedicated offering for these products.” He then points out emphatically that
the passenger business alone cannot provide the kind of dedicated service that
is needed.
The man is preparing a plan and hoping to start the “intelligent” cargo airline
in the
The process to transform the air cargo industry has begun: “That’s why we’ve
created a model; we’ve put up a website. We want to create the definitions of
each and every aspect of the air cargo airline business. As of now, I think
IATA has done it to a certain extent. But they really haven’t gone and taken
this game to a new level. This business is still a very scattered one. We
intend to provide a definition and a scientific base which will take air cargo
to a level where everybody who gets into this business is pre-qualified and
competent to get into this business,” says Ghosh.
A frequent attendee at most aviation and air cargo events, Ghosh
says international organizations do not have it on their agendas to provide
scientific bases for the industry. Instead, “what they have on their agenda is
bringing people together. They provide a network where you bring like-minded
people together, but to get into the nitty-gritty of the business you really
need research and people who are extremely competent in their subject matter,”
he says. And that is what Ghosh and American
Friendship want to do. “We intend to develop what you call domain expertise
even in the movement of a particular product, in the way a container is built,
an aircraft is financed, an airport is selected, in the way pilots are trained
– all of these will be well documented on our site. In short, it will be like
an A-Z manual dealing with every aspect of the cargo business.”
For the moment, however, Ghosh sees immense
opportunities – downturn or no downturn. “I think the biggest opportunity
exists in economies like
As reported in Flying Typers Vol. 10 No. 67 THE GLOBAL AIR CARGO
PUBLICATION OF RECORD SINCE 2001 Thursday July 14, 2011. D.J. Ghosh is founder and president of the New York-based
American Friendship World Air Cargo Corporation.
Tourism Waves
Panama has signed an aviation agreement with Barbados
The
agreement includes air services between both countries. The
Fuel Waves
By Larry S. Weaver
Oil
prices finished yesterday with moderate falls following the moderate rises from
Friday. During July, oil prices (WTI spot oil) changed direction nine times
over the past 11 business days. The net result is that Brent Crude, although
oscillating, has stayed in a pretty tight range for over a week.
As
noted last week, there is still some dispute between the IEA and OPEC concerning the release of 60
million barrels of crude from the “emergency” stocks of the world. The
discussion is continuing although a “final decision” is expected to be made by
the end of the week as to whether the major consuming countries of the IEA are
going to draw further from their stocks. OPEC, naturally, continues to state
that these releases are not necessary, that OPEC is capable of supplying any
shortages in the market
This
despite information that some OPEC members are considering decreasing their oil
output, to “retaliate” against
Crude
oil prices continue to oscillate, subsequent to the rapid increase during the
end of June and the first part of July which followed the drop earlier in June.
The continuing dispute between OPEC and IEA will tend to keep crude and product
prices higher with the economic problems in the eurozone
and the Euro and the weak U.S. Dollar also pushing up petroleum prices. On top
of these concerns, there is the real seasonal demand for gasoline/petrol and
aviation fuel as vacationers take to the roads and the skies. This should peak
commencing the end of July and through August when a large portion of the
Europeans go on “holidays” augmenting the summer driving “craze” of the U.S.
motorist.
Today's
report from the U.S. DOE shows a dramatic drop in crude stocks of 3.7 million bbls contrary to a forecast of analysts of a 1.3 million
bbl increase. (API reported a drop of 5.3 million bbls
last night) This was explained by an increase in refinery production with more
production of both gasoline and middle distillates in the
All
considered, however, we do not see prices sliding and expect the current jet
fuel prices to continue their slow rise through much of the rest of this year.
Larry Weaver is an Aviation Fuel
consultant headquartered in Tampa,
