Quantas becomes a 3 brand operator

A solid result for Qantas Group for FY2010 illustrates a drastically changed company from where it was a decade ago. The only continuing profit centre from those days derives from the near-monopoly the Group has on domestic regional operations, the only area where the Qantas brand has expanded. Meanwhile, the highly lucrative frequent flyer programme (FFP) and low cost subsidiary, Jetstar, have generated all but a few dollars of the Group’s profitability over the past difficult year to 30-Jun-2010.

A vital Frequent Flyer Programme

It is hardly necessary to go past Qantas’ own words to express where the Group is heading: “Qantas Frequent Flyer achieved a record Underlying EBIT of AUD328 million which was AUD102 million higher than the comparative full-year.” (Note: this includes some accounting changes too).

This profit comes out of a total Group EBIT for the year of AUD468 million, of which Jetstar contributed another AUD131 million.

The high earnings from the programme however are coming at a cost. As Qantas reduces online capacity, and load factors creep up, the number of seats available for redemption diminishes: “The reduction in Qantas capacity has resulted in lower Classic Award redemptions. However, Any Seat and Frequent Flyer Store redemptions have increased 21% and 8% respectively, resulting in an overall increase in redemption margin of 10%.”

Thus, as planned, the inflated-cost “Any Seat” pricing is now generating substantial yields for the airline, often well above the “open” market cost of the seats involved. The combination of high “charges” (such as eg “fuel surcharges” which go straight to the airline’s bottom line) applied to redemptions and the lack of available “classic” seats are also driving a higher level of purchases from the FF Store. This is all good strategy, because it removes large lumps of contingent liability from the Group’s accounts.

But the squeezing of these programmes, which started as pure loyalty strategies, are now becoming one of the consumers’ biggest beefs, along with not always transparent ancillary charges.

See related article: Ancillary fees and frequent flyer reward seats head complaints against airlines

The last people Qantas should be upsetting are their largest frequent flyers, just as Virgin Blue seeks to penetrate the powerful hold that the bigger Group has on corporate business.

A rapidly expanding Jetstar

According to the report, “Substantial capacity growth during the year increased Jetstar’s passenger revenue by 21%.” This was on the back of an overall 50% increase in international capacity. New Zealand domestic routes were also transferred to Jetstar. And the Singapore operation is starting to gain traction, so that Jetstar Asia reported an EBIT of SGD6.9 million for the year; “the Singapore base provides a strong platform for future growth in Asia” now, says Qantas.

Domestically in Australia, Jetstar is “accelerating A320 deliveries for growth” increased capacity and will, in due course, be the first in the group to take delivery of B787 equipment to embark on the next phase of international expansion.

See related report: Jetstar surge and “two brand strategy” show way for other airlines in the region

The shrinking kangaroo

Meanwhile, Qantas mainline has again contracted, even in the face of significant expansion in capacity overall in international markets to/from Australia. Qantas mainline achieved an Underlying EBIT of AUD67 million for the full year, AUD63 million above the prior year result. This result reflects “effective capacity and yield management during tough economic conditions”, according to Qantas.

Passenger revenue declined 10% compared to the prior year primarily due to capacity reductions (-9.4%) across the international network “which was required to mitigate the softening in demand experienced as a result of the economic downturn.”  

Qantas mainline’s contraction is dragging Group capacity down.

Qantas Group RPK growth and ASK growth: 2005 to 2010

Source: Centre for Asia Pacific Aviation & Qantas

QantasLink however is aggressively expanding, riding the resources boom. The unit expanded its fleet by 15% in the past 12 months, adding seven new Q400s.

Outlook: Yields and fuel

In terms of future profitability, the direction of fuel prices and yields will be crucial. The latter are looking decidedly shaky, as the global economy remains highly uncertain and industry capacity levels continue to rise.

The emerging threat, according to Qantas, is new capacity being added in coming months, while the leisure market remains weak, even as business traffic is picking up.

Qantas stated, “In the Australian domestic market, business demand was also adversely affected (in the year to Jun-2010). Domestic capacity was managed carefully over the year, but, as market conditions improved, airlines have returned capacity. While business demand continues to improve, this capacity growth has placed some pressure on the low fare end of the leisure market.” Elsewhere Qantas also notes, “domestic leisure competition in the last quarter of FY2010 was intense”.

Weak premium demand impacted international yields particularly in the first half of the year and while yields began to recover in the second half, this was impacted by international events including Icelandic volcano disruptions and political unrest in Bangkok.

Overall, Qantas remains cautious about the outlook. Noting that domestic business and total international revenue are expected to improve, domestic leisure continues to be highly competitive.

Investors too have displayed some concern, sending the carrier’s shares down as much as 3.2% in early trade in Sydney, though the stock has recovered some ground since then.

Qantas notes that trading conditions have “steadily improved” and forward bookings indicate yields in the first half of FY2011 will be higher than the first half FY2010. That is not saying much, given the deep hole the carrier was in this time last year. 

The Group expects to increase capacity in first half FY2011 by 9.6%, driven mainly by Jetstar and QantasLink. Fuel costs for the first half of FY2011 are estimated to increase by 13% year-on-year (based on estimates as at 09-Aug-2010), due to higher forward market jet fuel prices and increased flying. 

Overall, margins remain lean, but Qantas is hopeful of better times ahead.

Qantas Group net profit margin: 2005 to 2010

Source: Centre for Asia Pacific Aviation & Qantas

Qantas expects first half Underlying PBT for FY2011 to be “materially stronger” than first half FY2010 if present conditions continue, but warned that changes in fuel prices, FX rates and general trading conditions could “rapidly impact earnings”.

The airline therefore declined to provide a more specific forecast, “given the volatility and uncertainty of the aviation market”.

Source: CAPA

ACI World Airport Traffic Report 2009

Today Director General of ACI World, Angela Gittens announced the release of ACI’s World Airport Traffic Report for 2009 – the most comprehensive source of global airport traffic data available on the market. 

 

Gittens says, “This is a unique airport industry reference product that provides an analytical review of traffic data for over 1350 airports, with illustrative charts and tables. Against the background of the worst global recession since the Second World War, total global passenger traffic at airports declined by 1.8 percent in 2009 relative to 2008.  Cargo tonnage fell by 7.9 percent, reflecting the direct impact on global markets and productivity during the severe economic downturn. We explain the underlying reasons for the traffic results and show how the trends evolved over the year.”

 

Headline results summary
•   Worldwide airport passenger numbers dropped by 1.8% in 2009 to 4.796 billion, from a high of 4.882 billion in 2008.
•   Middle East (+7.7%), Asia-Pacific (+4.9%) and Latin America-Caribbean (+1.5%) maintained growth.
•   Europe and North America registered significant decreases of 5.4% and 5.2% respectively followed by Africa (-0.6%)
•   Worldwide domestic traffic was flat (-0.2%) while international traffic dropped 3.9%
•   Worldwide aircraft movements decreased by 5.1% to 74.1 million
•   Total cargo volumes handled by airports fell by 7.9% to 79.8 million tonnes
•   38% of airports worldwide registered passenger growth, at an average of 10.2%. The gaining airports represent 31.7% of worldwide traffic
•   62% of airports worldwide lost traffic, at an average rate of 6.5% representing 68.3% of global passengers
•   Two thirds of airports with over 5 million passengers (147) lost traffic in 2009 at an average rate of -5.6% 

 

2009 AIRPORT* TRAFFIC SUMMARY
ACI Stats Regions	Total Aircraft Movements	% Chg	Total Passengers	% Chg	Total Cargo	% Chg
AFR	2 669 215	(5.5)	150 593 057	(0.6)	1 944 332	(9.1)
ASP	11 502 934	1.8	1 218 573 255	4.9	27 700 660	(4.3)
EUR	19 388 527	(6.6)	1 408 493 435	(5.4)	15 445 874	(10.9)
LAC	7 407 734	(0.5)	368 732 449	1.5	4 178 973	(11.4)
MEA	1 829 995	4.4	183 486 659	7.7	5 144 183	4.3
NAM	31 339 214	(7.9)	1 466 589 370	(5.2)	25 403 389	(11.1)
ACI	74 137 619	(5.1)	4 796 468 225	(1.8)	79 817 412	(7.9)
*AIRPORTS PARTICIPATING IN THE ACI 2009 TRAFFIC STATISTICS COLLECTION BY REGION: Africa (AFR) 176; Asia-Pacific (ASP) 185; Europe (EUR) 459; Latin America-Caribbean (LAC) 269; Middle East (MEA) 53; North America (NAM) 212; total 1354 N.B. One airport (Mascara, Algeria MUW) provided aircraft movement data for 2009, with no comparison to 2008, and as such is included in the overall ranking but not in the year over year comparison; rankings total 1355.
Passengers:  total passengers enplaned and deplaned, passengers in transit counted once.
Cargo:  loaded and unloaded freight and mail.
Aircraft Movements:  landing and take-off of an aircraft.

 

Commenting on the headline results, Gittens says, “In 2009, we witnessed two quite different semesters. During the first half of the year, overall traffic continued to spiral downwards due to the impact of deepening economic uncertainty, falling industrial production and falling GDP.  Exceptional factors such as the H1N1 influenza virus pandemic had an adverse impact on traffic in May and June, reaching beyond the borders of Latin America to North America, Asia Pacific and Europe.

 

“The mid-year months ushered in the glimmer of a rebound, with traffic losses slowing and even stabilizing in a few key developing markets.  Domestic traffic in emerging markets began to exhibit new expansion, not just a positive comparison to past poor performance, in part thanks to government stimulus packages that were boosting industrial output and economic stability. China, Brazil and India were leaders in this trend. As is often the case, domestic traffic is a precursor of returning international traffic and that is what we saw in the third quarter, with general improvements in almost all markets. 

 

"The end result for the year was that, despite the tremendous hit the industry took in the first term, renewed passenger traffic growth balanced out those losses and yielded a decline of 1.8 percent for the full year. At the same time, the 5.1 percent drop in aircraft movements indicates the extent to which airlines dropped routes and trimmed excessive capacity in an effort to stabilize their service offerings.  

 

“Cargo fared less well in 2009.  The vertiginous drops in freight traffic seen in the first months of the year provided a clear sign of global economic stress. The reversal of that downward spiral later in the year could not make up for such steep losses. As a result, traffic for the year dropped by an average of 7.9 percent.”

 

International cargo accounted for 63% of the total cargo volume and shrank by 9.5%; domestic cargo, accounting for 37% of total cargo volume, dropped by 6%. Memphis, USA remains by far the largest domestic cargo hub in the world followed by Louisville, USA. Despite a 7.5% fall, Hong Kong remains the world's largest international cargo hub followed by Incheon, Korea (-5%). Dubai has grown by 6% catapulting it to rank 3, up five ranks from 2008.

 

Commenting on regional differences, Gittens says, “Passenger numbers by region show a clear disparity between two groupings: growing traffic in Asia-Pacific, Latin America-Caribbean, and Middle East on the one hand, and losses in the African, European and North American markets on the other. While the Middle East continued to gain market share in the international sector throughout the year, Asia-Pacific and Latin America-Caribbean were cushioned by robust demand for domestic air travel.” 

 

The traffic drops in the first quarter were the deepest in Europe and North America and their recovery trajectory was shallow showing patchy growth in the fourth quarter. Africa experienced a smaller drop in traffic with stronger recovery signs. Latin America-Caribbean struggled with the fallout of the H1N1 outbreak over the summer which hampered underlying stronger growth, while Asia-Pacific emerged definitively from the crisis in the second half of the year.  

Source: ATN: http://www.airtransportnews.aero/article.pl?mcateg=&id=24990

Air Berlin joins oneworld – “the last member in Europe”

In an announcement yesterday morning, American Airlines said Air Berlin would be joining oneworld, which includes comprehensive codesharing and frequent flyer partnerships. It fills in the final gap for the alliance in Europe with Air Berlin’s extensive network in Central Europe. The two expect to implement the codeshare at American’s hubs at New York, Miami and Los Angeles as soon as all government approvals are received.

The intention is to add Air Berlin to the recently approved American/British Airways/Iberia anti-trust agreement. oneworld Managing Partner John McCulloch said that with the limited number of partners in Europe, the addition of Air Berlin would be the last in Europe. The alliance hopes other alliance partners will sign codeshare agreements with Air Berlin as well. “We hope to get agreements with British Airways and Iberia by next summer,” said McCulloch, who added the alliance had now filled out its European network.

“We are done now,” he said. “As you know we have never looked at adding carriers for the sake of network coverage and we are excited about the addition of the Air Berlin network and its expansion plans.”

Trans-Atlantic enhancement

Newly minted American President Tom Horton agreed. “This has been a big week for oneworld with the approval of the antitrust agreement which is a big step forward,” he said. “Now we are adding a very important airline in Central Europe. I think, with the ATI, we have the ability to sit down and discuss the future of Air Berlin within the trans-Atlantic joint business agreement.”

American has six flights a day to France, so oneworld has substantial operations in France and, of course, through our partnerships with British Airways and Iberia there is ample connectivity to North America.”

The codeshare agreement with Air Berlin, the second largest carrier in Germany and the fifth largest in Europe, not only adds more cities to American's network throughout Europe, but will also offer customers a smoother, more convenient travel experience. American, a founding member of the oneworld alliance, currently serves Germany with service to Frankfurt from its Dallas/Fort Worth and Chicago gateways. With hubs in Berlin and Dusseldorf, Air Berlin offers service to more than 160 cities in Europe, Russia and the Middle East as well as to six cities in North America - New York, Miami, Los Angeles, San Francisco, Fort Myers and Vancouver.

Horton told CAPA during the press conference that the Air Berlin relationship is more comprehensive than what it now has with JetBlue at New York’s Kennedy which is an interline agreement which was expanded last week to include frequent flyer cooperation. “It may well grow beyond that in the future,” he said. “This deal with Air Berlin has the airline joining oneworld which brings a whole set of attributes with it. In terms of a bilateral relationship it will be a frequent flyer deal and a very fulsome codesharing arrangement across the Atlantic and at either end for both carriers, so it is a very robust partnership bilaterally.”

Horton also said that initially American will codeshare on 12 routes with Air Berlin – six trans-Atlantic and six within Europe. He also noted that American has flown to Air Berlin’s hubs at Dusseldorf and Berlin in the past. “The presence Air Berlin brings on this end may well offer us an opportunity to expand our presence in Europe with our own flying but that will unfold over time.”

In addition, Air Berlin will codeshare on 26 American routes. From New York's JFK gateway, American offers nonstop service to 56 cities. From its Miami hub, American offers service to 30 cities in Mexico, Central and South America. From its Los Angeles hub American serves 31 cities, including four Hawaiian destinations.

Additionally, the agreement allows customers traveling on codeshare flights to earn mileage credits in American's AAdvantage or Air Berlin's topbonus frequent flyer programs. American and Air Berlin are exploring a more comprehensive agreement that would include mileage redemption in addition to accrual across each carrier's networks.

Air Berlin CEO Joachim Hunold told reporters that it has been looking for an alliance partnership mostly at the request of its growing corporate travel network. “We were always aiming for a partner and we nearly had one but it disappeared into Star Alliance,” he said. “Luckily we found that American Airline fits much better and is bigger than we originally thought, especially flying into JFK, Miami and Los Angeles. We expanded our corporate contracts with major companies throughout Europe by over 1,300 and they have been asking us for a good alliance. We looked into both oneworld and SkyTeam and found this one fit. Our network has a long-haul gap and, on the oneworld side, it had a gap in Central Europe. We have a very strong footprint not only in German, but in German-speaking countries such as Austria and Switzerland and this year we expanded into Italy.”

Integration of a hybrid model

Both he and Horton defended the union when questioned how they reconcile the high-quality oneworld experience and joining with a low-cost carrier. “Just because you are low cost does not mean you are no frills,” he said. “There is a big difference. We wouldn’t have so many business travelers if we were no frills.”

Horton agreed. “Air Berlin is a very high quality airline and is more of a hybrid carrier more along the lines of JetBlue with many attributes of a full-service airline and yet with low costs,” he said. “They have a terrific product. We are not the only alliance faced with question involving reconciling bag fees on one and not another partner. I think, early on, the key is to communicate so folks know precisely what to expect. Over time my guess is more and more of these relationships will take the form of joint ventures with antitrust immunity and you’ll see more comformity on service, product offerings and pricing attributes. This is a great deal for American and oneworld and helps fill out a presence in Central Europe so it’s a great fit. The networks are very complementary with Air Berlin having service to some 50 cities that will be new to oneworld of the 160 cities it serves worldwide. This is a terrific expansion in the network for oneworld.”

McCulloch also agreed about the quality of Air Berlin. “I’ve flown Air Berlin twice now long haul and once you get on you immediately see that, whatever the understanding of Air Berlin, you’ll get a surprise,” he said. “It has business class on long haul. It is true on the hard product, it differs from some of our other carriers, but not all oneworld carriers have lie-flat seats. It has meal service and frequent flyer programs. We haven’t yet audited Air Berlin, but we are hoping to learn from them in terms of the way we work. Air Berlin sits on a quality spectrum that fits very well with oneworld. It is somewhat of a hybrid today but certainly in terms of its flexibility and its ability to move fast as well as its business acumen it is a very impressive partner. Yes we have work to do, but we have work to do as well with others in oneworld and I have no doubt we are in good hands with Air Berlin.”

When asked if there would ever come a time when alliance members would shuck their individual identities in favour of oneworld livery and identity, McCulloch told CAPA no. “Our strategy is very solidly with individual carriers maintaining their relationships with their customers,” he said. “That builds on the brand. But we wouldn’t build a brand that overlays that and tries in some way to assume that relationship with customers. People have been writing about that for 10 years now but the restrictions on ownership and capital ownership would indicate that alliances have a role to play. No, there won’t be the global airline of the future. The relationships you are seeing amongst the big groups, I think, is pretty permanent now unless there is some consolidation overlay or ownership change.”

AMR Chair and CEO stated: "We're very pleased to announce this partnership with Germany's second largest airline, Air Berlin, which has established itself as a highly respected European airline over the last two decades. This relationship will add significant value for our customers by substantially growing our worldwide network. It gives our customers wide access to Germany, Europe's biggest economy, as well as many other business and leisure destinations. And their US service complements three of our strategic cornerstone markets - New York, Miami, and Los Angeles."

Hunold added: "We at Air Berlin are very pleased about establishing our bilateral cooperation with American Airlines starting in the winter season of 2010/2011. We have agreed with our friends from American that we will link our hubs on both sides of the Atlantic, and that we will enter into an extensive codeshare relationship, covering all our flights over the North Atlantic and flights to selected destinations in the US and in Europe."

Oneworld looking to emerging markets

McCulloch is now turning attention to Latin America, China and other regions. “We look at Brazil as one of the key parts of the world for alliances and we are working on figuring that in,” he said. “Of course we are discussing with carriers down there and looking at other options within the group. We already have the best carrier in American and also have a strong North American partner flying into Latin America with Mexicana.” He agreed that the competition with other alliances to attract new members is always a “beauty contest.”

Horton reminded callers that it is already expanding American’s bilateral relationship with Gol in Brazil, calling it a good partner. “We’ll see where it goes down the road.”

Source: CAPA

Ultra-High Density Seating

From various media reporting we understand that some airline companies would even want to go for a “Stand-Up Cabin”? We are proposing a 23-inch pitch or less; the “SkyRider”.

Aviointeriors is one of the leading Aircraft Seat and Interiors manufacturers with extensive R&D on the subject. The “SkyRider”, is an ultra-high density seat presently completely engineered and to be finally tested. The SkyRider has been designed and engineered to offer the possibility to even further reduce ticket prices while still maintaining sound profitability, which, even with a dual or three class seating arrangement, will allow maximum certified passenger capacity of the aircraft.

With a much reduced seat pitch, the SkyRider preserves a comfortable position for the low fare passengers.

The SkyRider is intended as a new basic class. The passenger’s seating position is similar to that of a touring motor-scooter rider. This posture permits that the overall longitudinal space occupied by the seat with the seated passenger is far less than that of a conventional, very high-density 28” economy class seat.

Furthermore, in the SkyRider arrangement, a partial overlapping of the passengers seating between rows is allowed, thus further increasing the cabin density.

The seat structure itself also provides space for personal baggage.

Source: Air Transport News

EUROCONTROL advances bring Master Plan deployment closer to reality

EUROCONTROL, together with its partners, has moved forward on a number of activities which are key for Implementation Package 1 (IP1), the foundation for the ATM Master Plan

1. Flight Level Adherence Days: The first ECAC-wide Flight Level Adherence Days will take place on 29 and 30 September 2010. On these two days, airlines will be required to fly at the Requested Flight Level (RFL) as reflected in the filed flight plan.

Flight plan information is used by CFMU and FMP’s to optimize network operations, such as resolving anticipated traffic overloads in specific sectors through proposed re-routings and/or ATFCM departure slots (CTOT).

Deviations from the flight plans can lead to inaccurate ATFCM measures, sector overloads, waste of capacity and less overall network capacity and flight efficiency. Over the past few years, the need to address this has been raised repeatedly by European ATM players. In early 2009, EUROCONTROL, on request from ANSPs, launched the “Flight Plan & ATFCM Adherence Campaign”, as a short-term performance improvement initiative in the context of DMEAN and the Flight Efficiency Plan. On the basis of two local flight level adherence trials by Maastricht and Karlsruhe centres, the Adherence Task Force (with ACI, IFATCA, ECA, IATA, IACA, EUFALDA and ANSPs) proposed the “Flight Level Adherence Days”. Preparation is now in full swing, including guidance and awareness material and wide publicity through social media such as Facebook and Twitter (see www.adherencedays.com and www.eurocontrol.int/adherence). This trial will provide essential input on the next steps toward improving network performance and reducing sector overloads.

2. Improved ab-initio selection procedures through the FEAST test: FEAST (the First European Air traffic controller Selection Test) service has reached a landmark since its inception in 2004. 20,000 young applicants for the job of ATC trainee from all corners of Europe have taken the FEAST selection tests.

In the very specialized selection process for ATC, only a few applicants have the combination of abilities and skills which suggest they have a good chance of being successful at the long and difficult ATCO training. The EUROCONTROL FEAST service currently provides 32 civil and military ANSPs in the ECAC area with the FEAST selection system for their own use in the recruitment and selection of ab-initio air traffic controllers. The online psychometric test battery which was designed specifically for ATC selection, measures cognitive abilities and skills of applicants. It allows selection decision makers to make better-informed and more objective judgments about the suitability of applicants.

As part of the service, EUROCONTROL offers full implementation support including the technical infrastructure for the delivery of the tests and professional support including Europe-wide validation of the test battery.

Performance measures of the FEAST service conclude that the tests have predictive validity and represent a cost effective solution for ANSPs.

3. AIM: Significant changes to the Standard and Recommended Practices (SARPs) on electronic Terrain and Obstacle Data (TOD) are underway thanks to the recent Amendment 36 and its corrigendum to ICAO Annex 15. the European TOD stakeholder group, co-ordinated by EUROCONTROL, has produced an initial Terrain and Obstacle Data guide to clarify the SARPs further and to address some of the outstanding discrepancies. ICAO intends to publish this as the official ICAO Guidance Manual so everyone can benefit from the European implementation experience.

4. Conclusion of the Digital SNOWTAM Trial: A pre-operational Trial was executed by EUROCONTROL between November 2009 - April 2010 in which the information contained in SNOWTAM messages (airport surface contamination with snow/ice, friction coefficient, etc.) was converted into digital AIXM 5.1 data. The data was used to create graphical views which were made available to Airline Operational Centres. Some major Airlines jointed the trial expressing full support for the concept and their desire for such data services to become fully operational and to also be integrated into the CFMU NOP Portal.

5. LINK 2000+: In support of the Data Link Services Implementing Rule, the TEN-T Executive Agency decided in Dec 2009 to fund the Datalink Incentives Scheme for Airborne equipage. EUROCONTROL is administering the fund and will ensure that all aircraft funded under the scheme are equipped in 2011 and 2012. A first call for tender to Airspace Users was issued in January 2010, as a result contracts are now being placed with 19 companies. A new and final call for tender was launched on June 25th to allow additional Airspace Users to join the scheme. EUROCONTROL expects to make associated contracts in September 2010.

Source: Air Transport News

Africa Aviation Outlook: Cooperation, liberalisation and protectionism

As African governments sought a path to successful locally-based airline operations, some attempted to gain the benefits of scale and coverage by forming joint airlines. With a good deal of support from European governments and flag carriers, two early examples of airlines jointly representing the interests of neighbouring countries shared resources, costs and – hopefully - the profits.

These examples of regional cooperation were:

1) Air Afrique, based in francophone West Africa (covering Benin, Cameroon, Central African Republic, Chad, Congo-Brazzaville, Gabon, Ivory Coast, Mali, Mauritania, Niger, Upper Volta (today’s Burkina Faso) and Senegal.); and

2) East African Airways, in ex-British administered countries (Kenya, Uganda and Tanzania) in the east of the continent.

From its founding in 1961, Air Afrique, originally with financial and operational support from France, struggled on until it eventually folded in 2001, reduced to a fleet of only three aircraft and with massive debts.

East African Airways had even earlier beginnings, but was dissolved in 1977, following which each of the three partner countries then set up their own flag carriers.

Another, more commercially-originated grouping was established by South African Airways in 1994, with a joint venture airline, Alliance, an international partnership between SAA, Air Tanzania and Uganda Airlines. However, Kenya Airways proved too competitive for the grouping and it ceased operations. Then there are the cross-border equity/operating investments, such as the now defunct Virgin Nigeria, as well as the more successful KLM-Kenya Airways JV.

In north Africa, a more limited form of alliance, known as the Arabesk Network Coordination Project was formulated in 2005 under the aegis of the Arab Air Carriers Organisation. Arabesk, along with several Arab carriers, includes EgyptAir and Tunisair and was designed to increase the mutual power of its members, coordinating schedules and consolidating joint fuel purchasing.

Individual airlines in countries with domestic markets, stronger economies and longer experience have however been more successful, with South African Airways, EgyptAir, Air Algerie, Royal Air Maroc and Ethiopian Airlines being conspicuous examples of long-term operational survival – often with some help from European airlines and, frequently their own governments. Kenya Airways too has staked a strong reputation since its post-EAA inauguration and there are newer examples which may also prosper, as liberalisation seeps through and private airlines are established.

See related report: Outlook for global airline alliances in Africa

Many African nations have concluded Open Skies agreements with the US – but not with each other

Zambia was the most recent African nation to conclude a liberal “open skies” bilateral air services agreement with the US, but over the past decade, the list has become impressive, as the US gathers supporters to its liberalisation crusade.

African nations with Open Skies agreements with the US

Tanzania	Provisional	11.3.99
Namibia	C&R	2.4.00
Burkina Faso	In force	2.9.00
Ghana	In force	3.16.00
Gambia	In force	5.2.00
Nigeria	Provisional	8.26.00
Morocco	In force	5.2.00
Rwanda	N/A	10.11.00
Benin	N/A	11.28.00
Senegal	C&R	12.15.00
Uganda	In force	10.27.09
Cape Verde	In force	6.21.09
Madagascar	Provisional	3.10.04
Gabon	In force	5.26.04
Maldives	In force	5.5.05
Ethiopia	Provisional	5.17.05
Mali	In force	10.17.05
Cameroon	In force	2.16.00
Chad	Provisional	5.31.06
Liberia	In force	2.15.07
Kenya	C&R	5.30.08
Zambia	In force	16.3.10

Source: Centre for Asia Pacific Aviation and US Department of State

However, many of these agreements are still not fully effective, if at all. Nor, in most cases will there ever be direct services to the US from these countries.

However, depending on their precise terms, the agreements facilitate indirect services, a feature that becomes increasingly important (and sometimes surprising to the non-US party) as alliances and codeshare partners are able to exploit the terms more effectively.[1]

The flexibility and usefulness of these agreements in turn often necessitates liberal access terms in the understandings with third countries within the region, if through services are to incorporate fifth freedom operations. These rarely exist, despite the obvious advantages of liberalisation among often excessively jealous neighbours.

The bottom line is that, despite the unwillingness of African nations among themselves to liberalise, these open skies agreements may offer some impetus to reforming local regulation. As the clamour for new sources of energy continues unabated, the prospect increases that foreign airlines will leverage every opportunity to use the agreements to establish new access, either directly or through a combination of bilateral agreements and alliance relationships.

As a minimum, they stand as symbols of what might have been. They also represent a very strong hint to African states that multilateral – or at least bilateral – liberalisation among themselves is the only serious way to proceed.

This is an extract from an article, available for CAPA Members, or by individual purchase, which includes the following sections and analysis:

• 2. The dilemma: protectionism or liberalisation – or both?
• 3. Better to look for international partnerships and liberalise intra-regionally
• Conclusion: In the end the market will have its way; but infrastructure will be found wanting

Source: CAPA

Greater flexibility required to adjust to unfavourable economic conditions

The EUROCONTROL Performance Review Commission (PRC) has issued its Performance Review Report for the year 2009, which was marked by an unprecedented traffic downturn. It presents an assessment of the performance of European Air Navigation Services (ANS) under the Key Performance Areas of Safety, Punctuality & Predictability, Capacity & Delays, Flight Efficiency, Environmental impact, and Cost-Effectiveness.

The report highlights that:

„X While there is a continuous increase in the reporting of incidents in many States, the number of reporting States remains relatively low and has not increased in the last five years.

„X Not all the States have taken the necessary measures to achieve a fully non-punitive reporting system and ¡§just culture¡¨ should be implemented where this is not already the case.

„X States and ANSPs should use automatic detection and reporting tools so as to further improve the transparency of ANS safety.

„X Increases in en-route delays over the period 2003-2008 nearly cancelled out the benefits of improvements in cost-effectiveness, hence the need for a balanced approach to performance.

„X Issues leading to high delays in the top 30 delay generating sectors have to be resolved urgently.

„X Given the severe economic downturn, there is a need to effectively implement the planned cost containment measures so that they materialise into genuine cost-savings for airspace users and contribute to improving the total economic cost of ANS.

„X The design and use of airspace for both civil and military needs has to be further improved and a more effective use of airspace released to civil operations has to be made.

„X Airport stakeholders should constructively engage in the PRC-led process of development of indicators and targets addressing operational performance at and around airports and in the building of a comprehensive and reliable database that can adequately support it.

The economic downturn has affected the aviation community throughout 2009 with unprecedented severity, requiring greater flexibility on air navigation service providers and EUROCONTROL to adjust to new unfavourable economic conditions. In this context, the pressure to genuinely improve costeffectiveness is high on the agenda of airspace users¡¦ expectations¡¨, says John Arscott, Chairman of the PRC.

The full report is available here: www.eurocontrol.int/prc 

Source:  Air Transport News

Emirates declares war on the world’s flag carriers with order for 32 more A380s

If anyone was wondering where Emirates was planning to place its 58 A380s, it was obviously not CEO, Tim Clark. Yesterday at the Berlin Airshow the astonishing airline made another firm orders for 32 of the mega-jumbo. This takes to 90 the number of A380s to Emirates' account. The vast size of the order, the largest in aviation history, is dramatic in its direct challenge to the old airline industry. But it also carries with it equally massive indirect implications.

The order for the additional aircraft has a list price of $US 11.5 billion (AED 42.2).  The agreement was signed today during a ceremony at the Berlin Air Show by His Highness (H.H.) Sheikh Ahmed Bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates Airline and Group and Tom Enders, Airbus President and CEO which was witnessed by German Chancellor Angela Merkel and other dignitaries.

Seated at the table making today’s announcement: His Highness (H.H.) Sheikh Ahmed Bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates Airline and Group (left) with Tom Enders, President and CEO, Airbus (right). Looking on in the back row, left to right: John Leahy, Chief Operating Officer –Customers, Airbus; Tim Clark, President, Emirates Airline; Angela Merkel, German Chancellor; Rainer Brüderle, Federal Minister of Economics and Technology; Dr. Peter Ramsauer, Minister of Transport; Louis Gallois, Chief Executive Officer, Airbus.

“This latest order, adding to 58 A380s previously ordered, affirms Emirates’ strategy to become a world leading carrier and to further establish Dubai as a central gateway to worldwide air travel.  The A380 is our flagship in terms of passenger comfort, innovation, operating and environmental efficiency and revenue generation,” said H.H. Sheikh Ahmed Bin Saeed Al- Maktoum. “Our latest commitment signals Emirates’ confidence in the growth to come in a thriving aviation sector as we build our fleet for tomorrow,” he added.

“Emirates supported the development of the A380 from the earliest days, a project employing tens of thousands of Europe’s best people and today’s increased order, is the best endorsement I can imagine. On behalf of all of us at Airbus, we thank Emirates for their support. The A380 is indeed a remarkable eco-efficient aircraft, a profit generator for airlines and a great flying experience for passengers,” said Tom Enders.

Emirates, the second largest airline in the world in available seat kilometres, is on track to become one of the largest airlines in the world.  In addition to the orders placed today, Emirates has 48 Airbus 380s, 70 Airbus 350s,  18 Boeing 777-300s and 7 Boeing air freighters on order totaling 143 wide-body aircraft worth more than $US 48 billion. In a year where the aviation industry was rocked by the economic downturn, Emirates Airline recently reported its 22nd  year of profit, up 416 percent to close at US$ 964 million (AED 3.5 billion) over its 2008-09 profits of US$ 187 million (AED 686 million). From the delivery of its first A380 in July 2008, to receiving it 10th A380 on 7th June 2010 from the Airbus plant in Hamburg, Emirates is now serving eight international destinations with the super-jumbo aircraft including London Heathrow, Toronto, Paris, Jeddah, Bangkok, Seoul, Sydney and Auckland. The airline will start A380 services to Beijing from 1st August, Manchester from 1st September and will return service to New York’s John F. Kennedy (JFK) airport on 1st October.  Emirates’ looks forward to expanding the list of destinations at more than 100 airports around the world as A380s become ready.

Sources: CAPA, Emirates.com