Baggage Woes

Courtesy Ryanair

Ryanair

Ryanair flew into a rough patch with Italian antitrust lobbyists following its decision to levy new fees for hand luggage. Unless you pay €6 (US$7) for priority boarding, you will be allowed to carry only one piece of hand luggage, which must be able to fit the space under the seat in front. Any second piece (up to 10 kg) to be checked in will be at a cost of €8.

Antitrust advocates said this could amount to unfair commercial practice as hand luggage should be “an essential element of transport”. It would distort fares and make it difficult for comparison across the industry.

In defence Ryanair said its policy was intended to “improve punctuality and reduce boarding gate delays”. In fact, it maintained that it would not make any money out of it and may in fact lose revenue when more passengers switched to carrying smaller bags instead of the the normally larger suitcases which must be checked in at a higher fee.

However, research by US travel consultancy IdeaWorks suggests that a third of the airline’s profits came from so-called “ancillary revenue” comprising £1.7 billion (US$2.2 billion) from charges for add-ons such as checked baggage and seat selection last year.

Swoop

Across the pond in Canada, new Calgary-based budget carrier by WestJet is also facing complaints about fees charged for a carry-on bag. The fee is C$35 (US$27) if paid in advance, C$50 if paid at the time of check-in at the airport, and C$80 at the gate.

Passenger rights advocate Gabor Lukacs has filed a complaint with the Canadian Transportation Agency, claiming that this is unlawful since the Canada Transportation Act requires domestic airlines to offer a basic fare for travel within the country that has no restrictions with “reasonable baggage”.

As in the Italian argument, Lukacs finds Swoop’s practice “deceptive”. While what constitutes “reasonable” may be debatable, the general rule thus far has been that the allowable one piece has to fit in the overhead compartment or under the seat. Ryanair has restricted the carriage at no fee to the space under the seat, but Swoop is not even considering that. In defence, Swoop says it is “confident that Canadians are appreciative of the ability to be in control of what they pay for.”

American carriers

Meantime south of the border, American carriers are taking turns to up their checked baggage fees. American Airlines joined JetBlue, United Airlines and Delta Air Lines in raising their fees from US$25 to US$30 for the first bag, and from US$35 to US$40 for the second bag. Budget carriers Spirit and Frontier are already charging between US$40 and US$50 per bag. For now, Alaska Airlines has kept its fees at US$25 for the first and second bags, while Southwest Airlines still allows passengers to check in two bags for free.

These fees generally apply to travel within North America and to destinations in the Caribbean. Internationally, the likes of United Airlines cannot afford to ignore the competition especially in Asia where many legacy airlines such as Singapore Airlines and Cathay Pacific are still generous with free carriage of two checked bags.

Indeed, ancillary services have become a significant billion dollar business world-wide in an airline’s portfolio as more operators including legacy airlines go “a la carte” to keep the fare seemingly low but charge extra for features that used to be part and parcel of the normal ticket price. And the list is getting longer to include also priority check-in, priority seats (with more leg room), meals and headsets. It will not stop growing as the permutation multiplies, as can be seen in the different ways charges are applied even within the same service category, such as the baggage fees imposed by Ryanair.

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Qantas is changing the game

Courtesy Getty Images

After the successful launch of the non-stop Perth-to-London flight in March, Qantas is now working on plans to introduce a non-stop Sydney-to-London flight, which is expected to take a little more than 20 hours. Boeing and Airbus have been invited to retrofit an aircraft that will fly the distance, and Qantas CEO Alan Joyce expected a launch by 2020.

This is set to be a game changer, continuing the momentum set by the Perth non-stop which, according to the Australian flag carrier, is performing well, and in fact, exceeding expectations. Mr Joyce himself said early signs were positive, and that the new route “is the highest rating service on our network.”

The task now is how to make the ultra-long haul comfortable enough to influence the pattern of travel and get non-believers on board. According to the Independent, a Twitter poll with over 1,200 responses showed that 40 per cent would prefer a non-stop flight, 30 per cent would want a break in the journey, and the remaining 30 per cent said it would depend on the fare.

“We’re challenging ourselves to think outside the box,” said Mr Joyce. “Would you have the space used for other activities – exercise, bar, creche, sleeping areas and berths?”

Maybe think, along the line of a cruise?

One suggestion put forth was converting the plane’s cargo hold into sleeping pods.

With more non-stop ultra-long haul flights from Australia – Perth now, Sydney next and most likely Melbourne to follow suit – to London and possibly other European destinations such as Paris and Athens (and further down the road to key destinations in Africa and the Americas as well), how will this affect the competition?

The Kangaroo Route has been a lucrative route for Qantas and rivals that include Singapore Airlines (SIA) and Middle East carriers, notably Emirates Airlines (despite its alliance with Qantas), Etihad Airways and Qatar Airways, flying via their home airports. Even Cathay Pacific may be counted as a veritable competitor.

However, these airlines are themselves also operating the ultra-long haul, so they are not unaware of how the game may be changing. Take, for example, the Middle East: Emirates, Etihad and Qatar are all operating non-stop to Los Angeles, albeit from their different home airports of Dubai, Abu Dhabi and Doha respectively, in close proximity, and this is besides Saudi Arabian Airlines (Saudia) flying from Jeddah. Both Emirates and Qatar are also flying non-stop to Auckland.

Asian rivals Cathay Pacific and Philippines airlines both fly non-stop from New York to Hong Kong and Manila respectively, and will soon be joined by SIA connecting the Big Apple with Singapore. Cathay and Philippines are also competing on the non-stop option from Toronto, while SIA and United Airlines are taking on each other flying non-stop between San Francisco and Singapore.

Perhaps to the relief of Qantas, British Airways (BA) has expressed no interest in mounting non-stop flights between Australia and the UK. In fact, over the years, BA has reduced its interest in Australia, currently operating only one service from London to Sydney via Singapore.

It seems that the ultra-long haul aims at narrowing the rivalry on key routes where point-to-point traffic is the target, and is perhaps also an attempt to claim native rights, cutting out third parties jumping on the bandwagon. The question is whether there is adequate traffic to justify the operations.

The fortunes of some airlines may shift, so too those of some airports which rely on transit traffic with no real attraction other than being a convenient stop en route. One only needs to look back at how Bahrain Airport quickly lost its status when new technologically advanced aircraft able to fly a longer distance without refuelling emerged on the horizon.

Dubai International and Singapore Changi are two popular hubs on the Kangaroo Route. How will their fortunes change?

Yes, they may lose some traffic with Qantas flying direct from Perth, Sydney and Melbourne, but all is not lost so long as there continues to be up to 70 per cent of travellers who are yet convinced the ultra-long haul is the way to fly. The airlines themselves understand the dynamics, hence the dual strategy, offering the options. Qantas may reduce some flights, but it is unlikely to completely stop flying via Dubai or Singapore. Similarly, SUA will not cease making a stop at an Asian port just because it has introduced non-stop flights to Los Angeles and San Francisco.

Again, if one sees how Dubai International does what Bahrain could not do, reviving the importance of a Middle East hub with convenient connections to Europe and Africa, no less owing to the vast network of Emirates, and how Changi has enticed transit and transfer passengers with being more than just another airport, one can be hopeful of their future. They may even flourish as important regional hubs, feeding traffic from and into the ultra-long haul flights.

And don’t forget, non-stop flights cost more. People spend their dollar in different ways.

News Update: US carriers abide by China’s Taiwan ruling

https://www.todayonline.com/world/us-airlines-plan-accept-china-demands-naming-taiwan?cid=emarsys-today_TODAY%27s%20evening%20briefing%20for%20July%2025,%202018%20%28ACTIVE%29_newsletter_25072018_today

Refer Much Ado About China’s Geography, June 30, 2018
https://airlinesairports.wordpress.com/2018/06/30/much-ado-about-chinas-geography/

Will Singapore Airlines, competing with United Airlines, have the last laugh?

Courtesy Getty Images

Two years ago, United Airlines stole a march on Singapore Airlines (SIA) when it launched a non-stop service between Singapore and San Francisco four months ahead of its rival.

Then it did it again last year when it started flying non-stop between Singapore and Los Angeles while SIA awaits delivery of an ultra long range jet to ply the route probably by next year. However, this second service, barely a year old, will cease operations at the end of October.

It looks like good news for SIA, but is it really?

It seems United might have sprinted too soon only to lose stamina to sustain the race. Yet it is anyone’s guess as to when the timing is right, and United stood to gain first-mover advantage, benefitting from the early start to build up brand loyalty.

Courtesy Reuters

SIA itself used to fly non-stop to Los Angeles and New York before the flights, introduced in 2004, were suspended in 2013 because of poor yields against the backdrop of a declining world economy and unfavourable fuel prices.

But things have since changed – the global economy has recovered from the 2007/2008 financial meltdown, fuel prices have steadied, and more fuel-efficient aircraft are reviving interest in the ultra-long range.

A big problem faced by airlines though is anticipating the change and making timely adjustment, failing which may mean lost opportunities or sunk costs depending on how the market is trending.

If there is a lesson that United has learnt from operating the non-stop Los Angeles run, it is the constant need to re-strategise. In terminating the service, it is hoping to replace it with a second non-stop San Francisco service, thus upping the ante in competition with SIA.

United said in a media statement that the changes were in response to “customers’ desire for alternative departure and arrival times.”

Travellers will now have a choice of three non-stop flights between Singapore and San Francisco, the number leaning in favour of United which is said to be also offering cheaper fares. While SIA, having earned the reputation as one of the world’s best airlines, will leverage on its superior service, the pressure on fares cannot be ignored.

Clearly, both airlines, which are Star Alliance partners, are not thinking of end-to-end traffic alone. Certainly in the case of SIA, the sole Singapore market will not have the volume to support the operations. Connecting traffic therefore is a key component.

In this respect, United boasts an extensive domestic network in the US and numerous connections to other cities in North and South America. For SIA, Changi Airport is the region’s major hub.

The game plan is explicit in the words of United’s senior vice president Worldwide Sales Dave Hilfman when he said at the launch of the Los Angeles service: “United is making travel to Singapore easier and even more convenient than ever before and customers arriving in Los Angeles will have multiple opportunities to connect to hundreds of United destinations in the US, Canada and Latin America.”

As United wraps up its Los Angeles operations, the main driver for its San Francisco service remains unchanged.

SIA CEO Goh Choon Phong expressed the same sentiment when he announced plans to once again fly non-stop to New York in October ahead of the Los Angeles service. He said that “the flights will help boost connectivity to and through the Singapore hub.”

Rivalry between SIA and United is expected to intensify. The US has been traditionally a strong market for SIA, and United is the leading American carrier in Asia. But it would be a mistake to think that the competition is confined to only these two airlines as many Asia-Pacific carriers are also well connected directly to the US.

When SIA suspended its non-stop New York services in 2013, Cathay Pacific filled that void with connections out of Hong Kong.

With more ultra-long range services connecting major cities directly, airlines thriving on connecting traffic such as SIA will be challenged to make it worth the traveller’s while to fly via their home ports to the final destinations.

Mr Goh said at the recent annual meeting of the International Air Transport Association in Sydney that SIA was looking into more non-stop services to other US destinations. Besides New York, Los Angeles and San Francisco, the airline currently also serves Houston via Manchester in the UK.

This will set the stage for a different ball game altogether if SIA moves increasingly to feed directly into US destinations, chipping away at United’s domestic strength. The question is whether there is enough load to justify more non-stop flights.

In tandem, SIA is said to be reassessing its stopover flights to the US, but it is unlikely it will skip stopovers altogether in favour of non-stop flights. While it is true that some passengers may prefer a break in their long journeys to get off the plane and stretch their legs, SIA is also able to tap into the traffic that originates or ends at stopover airports. It therefore makes economic sense to continue operating some flights via Hong Kong, Taipei, Seoul and Tokyo.

United’s cessation of the Los Angeles-Singapore service will not deter SIA from mounting a similar non-stop flight, although New York takes precedence when the new Airbus A350-900ULR aircraft joins its fleet in September. What SIA has now is lead time to build up demand for the service. On the other hand, if United succeeds in mounting a second non-stop service to San Francisco and it becomes a threat, this may hasten plans for an earlier launch to promote Los Angeles as an alternative gateway to the US.

Where United has failed, SIA may succeed since it had been down that road before. Only then can SIA confidently have the last laugh.

Much Ado About China’s Geography

Since the United States (USA) have recognized the one-China policy (following a resolution of the United Nations in the early 1970s that legitimized the sole representation of the People’s Republic of China), it would appear groundless, even against logic, that it should protest the Chinese demand for US carriers to reflect Taiwan as a Chinese territory (this applies also to the autonomous regions of Hong Kong and Macau) on their websites.

While many airlines including British Airways, Air France, Lufthansa and Singapore Airlines have reflected the change in their booking itnerfaces to comply with the ruling, US carriers – United Airlines, American Airlines and Delta Air Lines – have yet to agree, apparently at the urging of the Trump administration. But China is not budging while extending the deadline from May 25 to July 25, at the same time rejecting the US request to discuss the issue.

It may be said that there’s a fine line between politics and business, that it is difficult to separate the two. Yet it seems only expected that any company that wishes to engage in business with a country should respect its sovereignty. A way out – even if it means turning a blind eye – is to recognize the independence of business operations, that the decision of the airlines concerned is purely commercial.

So it is with Qantas, which has decided to comply with Beijing’s request after the initial resistance. As with the USA, the Australian government, while embracing the one-China policy, was critical of the Chinese ruling, but conceded that how Qantas structured its website was a matter for the company. Australian Foreign Minister Julie Bishop said: “Private companies should be free to conduct their usual business operations free from political pressure of governments.”

So, will US carriers comply or be prepared to stop flying to China?

Airlines dangle the premium economy carrot

IT looks like the traditional economy class may be heading toward a split between premium economy and basic economy, with the in-between normal economy not quite as exciting in terms of perks or costs.

While basic economy as already introduced by American carriers (American Airlines, Delta Air Lines and United Airlines) and Asian rivals such as Cathay Pacific and Singapore Airlines (SIA) in an attempt to stamp a potential loss of the business to low-cost carriers, the premium economy in a way will make up for reduced profit at the very bottom of the scale.

Courtesy Singapore Airlines

United Airlines may be Johnny-come-lately, but it promises to be as good as the slew of airlines that are already in the game. Its version of the class to be known as United Premium Plus will have more spacious seats, and customers according to its spokesperson will “enjoy upgraded dining on china dinnerware, free alcoholic beverages, a Saks Fifth Avenue blanket and pillow, an amenity kit, and more.”

EVA Air may be said to be a pioneer of such seats, but it is Cathay that has created an exclusive class with its own cabin that has propelled the popularity of a product that is better than economy but not quite business class, particularly for long-haul flights.

But airlines, which have been cautious about hopping on the premium economy bandwagon are not going to abandon the old workhorse but will instead make it work harder. A number of them are already making plans to increase more seats at the back of the aircraft,with British Airways announcing recently that economy seats in its new planes will no longer be able to recline.

More space in the forward sections of the plane can mean less legroom at the rear as airlines dangle the premium economy carrot to entice customers to upgrade.

Legacy airlines go the budget way

It’s yet another sign of how legacy airlines are feeling the heat of the competition posed by budget carriers.

Courtesy Getty Images

British Airways (BA) will operate planes for the short haul with seats in economy that cannot recline. The airline said the seats will be “pre-reclined at a comfortable angle”. Affected flights up to four hours include runs from Heathrow to Rome, Madrid and Paris.

BA which already ceased providing complimentary booze and meals for the short haul last year admitted to the pressure. It said the move will allow the airline to “be more competitive” as it will then be able to “offer more low fares”.

Many legacy airlines are already adopting the “pay for what you want” model of budget carriers, charging for extras such as checked luggage and seat selection at booking.

The big three US carriers of American, United and Delta have introduced “basic economy” fares which will board such ticket holders last with seat assignment only at boarding. There may be other restrictions.

Asian rivals Cathay Pacific and Singapore Airlines (SIA) are also moving in the same direction. Cathay’s economy supersaver and SIA’s economy lite do not permit seat selection at booking and do not accrue full mileage perks. SIA is also charging additionally a credit card service fee for tickets purchased out of certain ports. (See Same class, different fare conditions, Jan 5, 2018)

While legacy airlines are finding ways to cut costs to offer lower fares, this can be a double-edged sword that only serves to narrow the gap between them and budget carriers. What price, therefore, the differentiation? But, good news for travellers not too fussy about brands.