A New Beginning for Boeing?

It has certainly been a bad year for Boeing, following the grounding of the B737 MAX jet in March after two fatal crashes that killed 346 people.

Boeing had hoped that the jet would be put back into service before the end of the year, but of course is out of the question now. While some remain hopeful of a late January or February date, many airlines are now resigned to it being longer. American Airlines, for one, has moved schedules for its likely operations to April, to avoid disruptions.

One thing clear is that the Federal Aviation Administration (FAA) is asserting (or resuming) control of the situation after the bad press of lax oversight. FAA has said it will take all the time that it needs to ensure that the the MAX is safe. It said in a statement that “the agency will not approve the aircraft for return to service until it has completed numerous rounds of rigorous testing.”

FAA Administrator Steve Dickson has made it clear that “the FAA fully controls the approval process” and will not rush the certification at the request of Boeing.

News reports about the shoddy work at the Boeing plants continue to damage the manufacturer’s credibility. In October, one of the company’s employees was said to have misled the FAA about the Max’s MCAS anti-stall technology, that he had “basically lied” to the regulator. That raised more alarm bells.

Courtesy CNBC

There has been a lot of pressure on Boeing CEO Dennis Mullenberg to resign his post, not least from the US Congress. But Mullenberg held on with the support of the Board of Directors, which conceded a little by stripping him of his Chairman title but continued to express confidence in his leadership. They were to finally fully concede as Congress questioned among other things why Mullenberg hasn’t given up his pay (US$23 million in 2018) and suggested that the buck should stop with him in “a culture of negligence, incompetence and corruption”.

Mullenberg is stepping down with immediate effect, to be succeeded by the current chairman David Calhoun who will on January 13 assume the CEO post as well. In the interim, CFO Greg Smith will be at the helm.

In a statement issued by Boeing, “the Board of Directors decided that a change in leadership was necessary to restore confidence in the Company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders.”

Could this have come earlier? No use looking back, but if it was a clean break that Boeing was looking to make, it had dragged its feet. For too long, the saga continued to hang over its shoulder like the albatross of Coleridge’s ancient mariner.

The uncertainty of the delay in putting the MAX back into service has forced the company to suspend production of the aircraft. Confidence in the company is slipping, and whether Qantas’ decision to pick pick Airbus over Boeing to fly the world’s longest route from Sydney to London is an indication of this or not, the timing doesn’t help. Worse, the problems of the MAX have coloured the traveller’s perception of the other jets in the same family. Boeing knows only too well that satisfying the regulator and customer airlines of the MAX’s safety is one thing, but regaining the confidence of travellers is another, which may turn out to be a greater hurdle.

Now with Mullenberg’s resignation, will the new year mark a clean break for Boeing? Seems aptly so if it could clean out whatever else is left of the skeletons in its cupboard.

Flying across North America: Peanuts are a big deal

FLYING the short 50-minute leg from Seattle to Vancouver aboard Alaska Air (the flight was operated by Horizon Air) , I wasn’t really expecting much of inflight service and was quite content with a cup of water and the roomy Q400 seat. But when I flew six hours from New York to Seattle aboard American Airlines, I did wish there was a complimentary packet of peanuts (or pretzels or mixed snacks) to go with my soda.

Gone were the days when these tiny packets whose contents could be consumed in less than a minute would be handed out more as a welcome gesture than as meaningful victuals to satisfy the stomach, something perhaps to soothe the nerves or for a brief respite to take your mind off the dread of boredom on a reasonably long flight across the continent. You see, not handing out the peanuts has become a big deal on North American flights or else you might not dish out your credit card for a packet of chips.

So it was when I flew Air Canada from Vancouver to Toronto, but what an impression the smaller Air Canada Express made on my short onward journey of an hour or so to Pittsburgh. There was only one flight attendant in the small propeller aircraft and she had to walk back up the aisle to the head of the aircraft if someone wanted coffee as that was where the urns were installed. And you get a snack pack of pretzels to go with your coffee (or soda or juice).

Courtesy Delta Air Lines

Courtesy Delta Air Lines


But not all North American airlines are stinging on the peanuts. Flying from Pittsburgh to New York on Delta Air Lines, an equally short journey, the flight attendant came round with a snack basket for you to pick what may tempt you from bananas to granola bars to peanuts. You cannot deny that it makes a difference.

The good news for globetrotters is that outside North America, particularly in Asia, many airlines have kept the customary complimentary gesture which you no doubt appreciate even if you don’t really like peanuts.

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?