Weekly Issue: 030711
Commentary by Bob Booth
Flight Control Waves
Waves from the Pacific
Commentary by D.J. Gosh
Fuel Waves by Larry Weaver
by Bob Booth
This week we focus on consolidation/code sharing and new flights
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
Volaris inaugurates flights
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
the CEO of the
French/Dutch airline group, announced this week: “Air France/
Monarch has launched new scheduled flight between
nonstop flights from
agreement, Air Niugini,
Air France and
Waves from the Pacific
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
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
Aviation Authority is reviewing the request from both Avianca/TACA and Copa Airlines Colombia to expand their
it expects to have 500 flights from
Venezuelan airlines report passenger traffic grew 23% in the first half of 2011
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
Mexican low cost airline inaugurated its new flights between
United States and Macedonia sign an Open Skies Agreement
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
president, Alan Garcia Perez, at the
inaugural of the new
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
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
Citigroup gains in
York-based Citigroup announced this
week that gains in
Copa Airlines to carry 1.65 million passengers in Q1 2011
“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
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.
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.
Panama has signed an aviation agreement with Barbados
agreement includes air services between both countries. The
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
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.
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,