Boeing blues

Three months after the grounding of the B787-Dreamliner and while Boeing struggles to resolve the issue to get the plane back up in the sky, a new problem has landed on its lap – this time, concerning the B737 jets. The US Federal Aviation Administration has issued an airworthiness directive for more than 1,000 B737 planes operating in its airspace (which also applies in Canada) to be inspected for faulty tail pins that may have prematurely corroded, causing pilots to lose control of the plane.

The FAA said: “We are issuing this AD to prevent premature failure of the attach pins, which could cause reduced structural integrity of the horizontal stabilizer to fuselage attachment, resulting in loss of control of the airplane.”

It is a precautionary move, but likely a costly one for the airlines that have a large number of the B737 jets in their fleet, such as WestJet Airlines of Canada. Since the B737 is a short to medium-range aircraft, it is likely that regional airlines including cargo operators are likely to be the most affected. But safety is not something that you can or want to downplay in the business of flying.

This could not have come at a worse time upon the heel of a Lion Air crash into the waters, short landing at Bali’s Ngurah Rai International Airport in Indonesia just this week. Fortunately all passengers survived. There was no connection between the incident and FAA’s directive – the way that the grounding of the B787-Dreamliner was consequent upon sparks aboard a Japan Airlines plane initially suspected to be caused by the lithium-ion battery pack – and investigators have yet to establish the cause. It might even be extraneous to Boeing. Lion Air, which is Indonesia’s second largest airline and one of the fastest growing in the region, is banned from operating within the US and European Union over safety concerns.

Photo: Reuters/Stringer Indonesia

Photo: Reuters/Stringer Indonesia

But what came across as frightfully familiar was how the fuselage of the Lion Air plane broke apart, recalling similar mishaps experienced by four other airlines that include Continental Airlines in 2008, American Airlines in 2009, Aires Airlines (Colombia) in 2010 and Caribbean Airlines in 2011. Mind you, the B737 has been around since the 1960s and is a favourite plane for regional flights. It is in fact the best selling jet in the history of aviation.

Boeing will have much to do to repair its image. The aircraft business is dominated by two players – Boeing itself and Airbus, and the competition is such that for the bigger jets, the decision to buy which make and model usually comes down to either one of them. Aircraft orders can span several years, and timing is important.

Then, of course, as things settle, there is the looming question of compensation for downtime if Boeing is found to be contributory to its customer airlines losing out on opportunities. At least one airline – Qatar Airways – affected by the grounding of the B787-Dreamliner has publicly announced it will seek compensation from Boeing. Qatar chairman Akbar Al Baker said: “Definitely we will demand compensation. We are not buying airplanes from them to put in a museum.”

Porter Airlines to challenge Air Canada and WestJet

CANADA’s short-haul operator of two-hour flights, Porter Airlines, looks set to compete with the country’s largest two airlines – Air Canada and WestJet – for the longer haul across Canada and beyond to the United States and the Caribbean. Likely destinations include Los Angeles in the US and Vancouver, Edmonton, Calgary and Winnipeg in Canada, to be reached from its present base in Toronto – Billy Bishop Toronto City Airport.

Porter chief executive Robert Dekuce said: “It’s now time to spread our wings and look at some destinations that are little further out.”

Porter plans to acquire new and bigger jets – 12 Bombardier CS100 with options for 18 more – which are more powerful, quieter and have a longer range than its current fleet of turbo-props. The order cost C$2.29 billion (US$2.26 billion), and the first of these aircraft will only be available in 2017.

Courtesy Facebook

Courtesy Facebook/Porter Airlines

However, the plan is contingent upon approval by the federal government, the City of Toronto and the Toronto Port Authority to allow the new jets to land and take-off at Billy Bishop. This means extending the airport’s main runway by 168 metres at each end. Additionally, the terminal would have to be expanded to accommodate the new aircraft, and the increased frequencies and loads.

Air Canada and WestJet are enjoying good loads on the main trunk routes, and there is certainly room for increased competition which will provide air travellers with more options.

As for Air Canada, according to spokesman Peter Fitzpatrick, the national airline is seeking access to Billy Bishop as well. Further investments by the authorities should be premised upon opening its doors to other airlines as well.

Air Canada and WestJet shake up Canadian skies

THE usual lack of excitement in the Canadian aviation scene is about to change.

Air Canada launches budget carrier Rouge

Courtesy Air Canada

Courtesy Air Canada

Air Canada’s new low-cost carrier Rouge will take to the skies in July next year. It will start with two Boeing 767s and two Airbus A319s, flying initially from Toronto and Montreal to leisure destinations in Europe and the Caribbean, with plans to expand the fleet to 50 aircraft eventually and to also fly to destinations in Asia.

In a way, Air Canada is re-attempting to do what it failed to achieve with previous budget projects Tango and Zip. The appointment of former chief executive of Thomas Cook North America Michael Friisdahl with expertise in the leisure industry to head the new carrier may be a plus.

Cost is obviously the key driver of the strategy, and Air Canada expects cost savings to be derived 50/50 from lower wages and staff benefits and from the high-density aircraft configuration. Having an independent budget offshoot makes it easier to start with a lower base of staff costs and focus on the price-sensitive niche leisure market. There will be 20 per cent more seats on Rouge than the normal configuration.

For some time now, Air Canada has been struggling with costs and red ink. It faces stiff competition from key rival WestJet and other leisure operators such as Transat A.T. and Sunwing that offer much lower fares. Increasingly, airlines are ditching a one-size-fits-all modus operandi for a separate and more focused niche market strategy.

WestJet launches regional carrier WestJet Encore

Courtesy Wikipedia Commons

Courtesy Wikipedia Commons

WestJet for one is launching a new regional carrier WestJet Encore in the second half next year. The new carrier will offer fares up to 50 per cent lower than normal for short hauls, in direct competition with Air Canada Express. WestJet CEO Gregg Saresky does not anticipate a price war, as he prefers to call it a process of “rational pricing”. It is ironical that short haul flights should cost as much as they are now. Mr Gregg told analysts at a recent briefing: “If you’ve ever tried to buy tickets for a short-haul journey in Canada, you’ve had to open your wallet and dig deep. Short-haul fares in Canada are very, very high.”

Apparently Air Canada president Calin Rovinescu had anticipated WestJet’s regional initiative. A price war it is that has begun and is expected to intensify. Both airlines are looking to expand their network to cover outlying business communities, for example, in the oil exploration region.

WestJet Saresky hoped that by lowering fares, travellers would fly more often and there would be new customers. He said: “When we lower the fares, it’s not carrying the same people at lower fares. It’s lowering the fares so that we can make the market expand.”

WestJet reported a stellar Q3 performance with profit increasing 80 per cent to C$70.6m (US$71.2m). Higher load factors more than made up for the rise in fuel prices. According to Mr Saresky, fuel makes up a third of WestJet’s operating expenses.

Air Canada WestJet plan premium economy

The premium economy concept has been somewhat of an uncertain development in the industry. Not many airlines are quick to embrace it, and Canadian carrers may be said to be latecomers in the game. But really the increased segmentation within the legacy configuration is a reflection of the uncertain demand for premium seats. Is the premium economy an enticement for upgrading, or a safety net to catch any fallout from the upper class – whether intra or inter-airline? At worst, it may be deemed hedging in an uncertain market; at best, a competitive edge in offering options and alternatives amidst the uncertainty.

Air Canada plans to introduce the new in-between class on its new Boeing 777s next year and on its 787 Dreamliners which are expected to join its fleet in 2014.Its Asian competitors such as Cathay Pacific Airways and EVA Air are already in the game. WestJet also has plans to introduce its version of the premium economy next year. Both Canadian airlines are eyeing the growing Canadian business travel market.

Travellers should benefit from an active competition between Air Canada and WestJet, but do not expect drastic differences. The two airlines are apt to stay close to each other’s range. The real competition will play out beyond Canadian borders when Air Canada commences Rouge operations. Budget long haul is not a tested concept although one-hop sun destinations are likely to prove popular. The good news is that analysts are optimistic about Rouge turning in a profit even in its first year. But will this be at the expense of the parent airline’s performance?

Canadian airlines report improved loads

CANADA’s largest two airlines – Air Canada and WestJet Airlines – reported better loads in June compared to a year ago.

Air Canada’s load factor rose to 85.6 per cent from 84.2 per cent a year ago when the airline suffered a strike by customer service agents. However, the improvement was also due to the increased passenger traffic by 1.5 per cent while at the same time the airline had trimmed capacity by 0.1 per cent.

In the same vein, WestJet’s improved load factor from 75.7 per cent to 79.0 per cent was the result of passenger traffic increase by 6.7 per cent outpacing capacity increase by 2.3 per cent.

Adjusting supply to better reflect the market’s demand has been a strategy that many airlines usually resort to in a sluggish market. As the industry continues to face uncertainty globally, the real stability test is in the months to come after the summer peak travel season. However, WestJet president and CEO Gregg Saretsky expressed confidence of the positive trend continuing. He said: “Advanced bookings for July and August remain strong.”

Air Canada president and chief executive Calin Rovinescu too was confident about the airline achieving its first profit in years, although the airline last reported a net loss for the quarter ending March 31 of C$210 million (US$207 million), which was 11 times higher than the C$19 million loss in 2011. He said the record load factor for June was the result of a “strategy to manage capacity to ensure high efficiency.” Indeed, the keyword is “efficiency”. Hopefully Air Canada’s labour problems are a thing of the past.

Canada’s regional carrier Porter Airlines, however, saw its June load factor dropping from 64.6 per cent to 62.0 per cent, but the airline maintained that the numbers “met our expectations”. This was because the higher number last year benefitted from a strike by workers at Air Canada. Also, while traffic grew 4.1 per cent, capacity went up higher by 8.5 per cent.

But all is not rosy for charter airline Air Transat, which posted a second quarterly loss of C$26.2 million. This would reduce the operator’s hope of returning to profitability this year, as the company’s president Jean-Marc Eustache admitted: “It doesn’t look like it’s happening, is it?” Mr Eustache is now eyeing Asia as the European market continues to lose its lustre. This would be in competition with Air Canada, which has already announced plans for a low-cost carrier to the region. But Mr Eustache insisted that Air Transat is a tour operator, not an airline.

Canada moves to protect passengers’ rights

THE obligations of airlines to compensate passengers for disrupted and cancelled flights has long been an elusive subject, and definitely one clouded with fuzzy arguments that make it difficult to implement any clear solutions or remedial action.

The Canadian Transport Agency is making another go at protecting passengers’ rights, saying that in the event of an overbooked, delayed or cancelled flight, passengers should be given the option of a full refund and a free trip home if the occurrence jiggles up their travel plans. Airlines may be required to book stranded passengers on the first available flight, even if it means on a competitor’s flight.

The screws have been made tighter in that passengers would be entitled to a full refund compared to the past practice of airlines reimbursing only the unused portion of the itinerary. Of course, there is the exclusion caveat of disruptions caused by circumstances outside the airlines’ control such as inclement weather and security issues.

CTA’s regulation would affect Canadian airlines, namely Air Canada, Westjet and Air Transat. The agency had already in the past made it a necessary condition for their operations to visibly display their obligations such that passengers are aware of their rights.

As experienced by the European Union (EU) for some years now, implementation is going to be a challenge. The EU has threatened to resort to legal action against airlines that do not comply with its rules. For example, EU rules require that passengers must be reimbursed for hotel accommodation and meals for the whole period that they are stranded but some airlines will only pay for 24 hours.

Airlines are unhappy with the rules, expressing concern that there is no limit to what they have to pay out. This has resulted in a backlog of claims that for some airlines accumulated for as many as 500 flights. In the end, passengers are no better off than they were, in a continuing and enervating battle whose sign of victory, if any, constantly eludes them. For both parties, fortunately for the airlines and unfortunately for their customers, time is the great healer.

But it remains a worthy pursuit, purely in the name of fair play.

 

Air Canada goes budget

AS the popular folk ballad ‘Blowing in the Wind’ goes, “When will they ever learn?” In announcing plans to consider launching a long-haul budget carrier, has Air Canada not learnt from the failure of Hong Kong-based Oasis Airlines, which commenced operations first between Hong Kong and London in 2006 and then between Hong Kong and Vancouver in 2007 only to fold up its wings in 2008?

So also is it said that fools rush in where angels fear to tread, but can Air Canada do it any differently in order to succeed where other hopefuls had so quickly failed?

Besides Oasis Airlines, Air Canada could have also considered very carefully the case of defunct fellow carrier Harmony Airways, which started as HMY Airways in 2002 and was renamed in 2004, operating to various destinations within Canada and beyond to the United States, Mexico and United Kingdom. The airline received favourable customer feedback and was eyeing the growing China market, but that was to be an unrealized dream when it ceased operations in 2007.

Harmony Airways preferred to be called a niche player than a low-cost carrier as it took pride in providing good service and serving hot meals on board. But it was hurt by soaring fuel prices in a highly competitive environment. It did not have the muscles to stand up against the larger carriers like Air Canada and WestJet. According to spokesman Peter Bruecking at the time, Harmony Airways had banked its future on gaining access to the China market, but delays in agreement between the two countries inevitably forced it to reshape its course, hence its demise.

Perhaps it was this very disappointment expressed by Harmony Airways then that has given new hope to Air Canada today as both China and Canada relax the rules for more Chinese travellers and carriers to enter Canada. Vancouver International Airport (YVR) has been working hard to promote itself as the gateway to North America and not just Canada. As admitted by President of the airport authorities Larry Berg, “Much of Vancouver Airport Authority’s focus in attracting new routes, passengers and airlines over the past number of years has been on Asia, given the growth potential of markets in the region.”

Three major airlines from China, namely Air China, China Eastern Airlines and China Southern Airlines, are already operating to Vancouver. A fourth airline, Sichuan Airlines, will inaugurate services on 22 Jun. YVR is also well served by other Asian carriers such as Cathay Pacific, China Airlines (Taiwan), EVA Air, Japan Airlines, Korean Air and Philippines Airlines.

How well the new Air Canada carrier will fare against the competition is a real poser, especially when the parent airline itself is highly prone to industrial disruptions and not as highly regarded for service as some of its competitors. However, as a low-cost operator, the new carrier will understandably compete on price, but considering the low fares charged by some of the established carriers, the differential may not be adequately compensatory for the deprivation of creature comforts on a long-haul flight.

Yet again, this raises the question as to whether the budget long-haul is a viable proposition, having seen the dissolution of Oasis Airlines and, lest you cite AirAsia X otherwise, you will note that the Malaysian carrier has ceased its long-haul operations from its home base in Kuala Lumpur to London, Paris and Christchurch, and is refocusing on shorter runs.

All said, Asia is still the Holy Grail that most airlines are after. Interestingly, when Air Canada chief executive officer Calin Rovinescu first mooted the idea of a budget carrier, he was thinking of Europe, But with the economic crisis hanging over Europe, the priority shifted to tapping the potential of Asian destinations instead.

Unfortunately, geographically, Air Canada is not as fortuitously positioned as, say, Qantas, to penetrate the region, which leaves it to either dress up or dress down its operations and to rely on sustaining the flow of long-distance traffic between Asia and North America. That is why China, with its growing nouveau riche, is an attraction. Yet, unlike Qantas, which believes the demographics favour a regional premium carrier (however, understandably so considering the proximity of Australia), Air Canada intends to go low-cost to attract the masses.

Almost paradoxically too, when the Harper government of Canada has been courting businesses in China to connect with Canada, and its successes would boost traffic between the two countries.

 It may be said that Air Canada has been somewhat slow in latching on to the frenzy of budget travel beyond its national borders. Mr Rovinescu has said the launch of a budget carrier is a top priority. In a speech to shareholders, he said: “We need to participate in this segment of the market in one manner or another.”

A more interesting development in the plans allegedly is for Air Canada to eventually operate only domestic flights and flights to the United States, Mexico and the Caribbean. All other flights beyond these countries will be handled by the new budget carrier in which Air Canada will participate as a partner. When that happens, Air Canada will have completed its transformation from full-service to budget status, since its domestic and regional flights are already largely no-frilled. O Canada, can you see that day coming?

Full airfare disclosure: Canadian airlines take the lead

CANADIAN carriers have taken the lead to disclose full airfare to make it easier for their customers to arrive at the full cost of flying – ahead of the government’s intention to make it mandatory, following in the footsteps of the European Union and United States.

Westjet Airlines was first to advertise fares that show the final cost payable, including all taxes and surcharges such as fuel surcharge, insurance and air security charges and airport improvement fee. This was followed by Air Canada occasioned by a seat sale to mark its 75th anniversary.

Canada’s third carrier Porter Airlines, which operates regional flights from its base at Toronto City Centre airport, said it would follow suit.

Credit to these airlines for not making an undue fuss over what can only be a fair and sensible move in their passengers’ interest. They now have every reason to demand that other airlines operating to and from Canada be not exempt when the rule comes into effect.