Caution keeps B737 Max jet grounded

Courtesy Getty Images

Carriers which had been hopeful that the Boeing B737 Max jet would return to the skies as early as next month have deferred scheduled dates to operate the aircraft.

Earlier in August, Boeing CEO Dennis Mullenburg was hopeful that this would happen in the fourth quarter of the year and the airlines could look forward to capturing the peak holiday season traffic.

American Airlines which owns 24 of the Max jet is pushing the date to Dec 3. United Airlines with a fleet of 14 is moving it further down the road to Dec 19. It looks like both carriers are still hoping to cash in on what shall remain of the peak season including the Christmas holiday. But Southwest Airlines, the largest of the Max operators worldwide with 34 aircraft has moved the scheduled date to Jan 5 next year.

North of the border, Air Canada (which owns 24 Max jets) and Sunwing (with 4 aircraft) are not expecting the aircraft to be operational until next year. For Air Canada, it is Jan 8. And for Sunwing, even later in May. WestJet (with a fleet of 13 Max jets) too is not scheduling Max flights during the year-end holiday season, but said the company might consider an occasional flight to ease the demand should the ban be lifted then.

WestJet’s vice-president in charge of scheduling said: “It’s a little harder to unmix the cake at that point, but we would look at peak days, the Friday before Christmas (for example) where we can still sell seats and we’ll put the airplane back in.”

Elsewhere across the world, affected carriers remain non-committal on their plans. Other major operators until the jet was grounded include Norwegian Air Shuttle (18 aircraft), China Southern Airlines (16), TUI Group (15), China Eastern Airlines (14), Lion Air (14), FlyDubai (14), Turkish Airlines (12), and XiamenAir (10).

The B737 Max jet was grounded globally following two fatal incidents, one involving Indonesian carrier Lion Air in Oct last year and the other involving Ethiopian Airlines in Mar this year, both crashes claiming a total of 346 lives.

Quite naturally, carriers which own the Max jet are keen to see its early return to the skies. Many of them have cut back capacity to cope with the shortage of aircraft and are reporting losses as a consequence. United which took out 70 flights a day in its September schedule will see the number increased to 90 in December. Together, the three airlines – American, United and Southwest – have cancelled 30,000 flights. Delta Air Lines, however, stands to gain from these airlines’ disadvantage as it does not own any Max aircraft.

Budget carrier Norwegian Air Shuttle which plies the ultra-long haul is said to be on the brink of collapse, and the grounding of the B737 Max jet isn’t helping. According to former CEO Bjorn Kjos, the restriction has cost the airline US$58 million. Norwegian, which took the US by storm with its low fares, raising objection from American carriers, has cancelled numerous flights between Europe and the U.S.

Both the US Federal Aviation Administration (FAA) and Boeing have suffered some loss of credibility in the wake of the two crashes. Stories about Boeing’s shoddy work at is plants and allegations of FAA’s relegating its oversight role to the manufacturer had hit hard. FAA’s delayed action to ground the Max jet after a number of authorities across the globe had done so also called into question FAA’s leadership role in the field.

However, FAA may have learnt its lesson. Following meetings between Boeing and various industry players where disagreement on the readiness of the Max jet was apparent, FAA had said, “Our first priority is safety, and we have set no timeframe for when the work will be complete. Each government will make its own decision to return the aircraft to service, based on a thorough safety assessment.”

Europe’s aviation safety watchdog – the European Aviation Safety Agency (Easa) – for one will not rely entirely on a US verdict on whether the Max jet is safe to resume flying. It will instead additionally conduct its own tests on the plane before giving its final approval.

Transport Canada has insisted on the need for essential simulator training in early discussions when Boeing said it was not necessary since the Max jet was a variation of the B737 master model. The authority said it “will not lift the current flight restriction… until it is fully satisfied that all concerns have been addressed by the manufacturer and U.S. Federal Aviation Administration, and adequate flight crew procedures and training are in place.”

According to a report by the Wall Street Journal, multiple regulatory bodies around the world were not satisfied with Boeing’s briefing on the Max software update. They contended that Boeing “failed to provide technical details and answer specific questions about (the) modifications.” Boeing is expected to resubmit documents providing more details, and that these should be first approved by FAA before a follow-up meeting is convened. This in a way reminds FAA of its oversight role.

While affected airlines are looking forward to normalising their operations with the return of the B737 Max jet, what happens post-ban is another story. In fact, it may present a more difficult problem to handle than the technical aspects of the saga as the carriers try to win back the trust of travellers. If, indeed time is the healer, then taking the time to be absolutely convinced of the jet’s airworthiness before lifting the ban may be a good thing for the airlines.

2019 Skytrax World Airline Awards: Who are the real winners?

It’s that time of the year when the airline industry is abuzz with the Skytrax World Airline Awards announced recently at the Paris Air Show.

There are surveys and there are surveys, if you know what I mean. Skytrax, which launched its survey back in 1999 (according to its website) is generally viewed with some regard. It is said that more than 21 million respondents participated in the 2019 survey.

But what can we read of the results?

Which is the real winner: Qatar Airways or Singapore Airlines?

Qatar Airways switched places with last year winner Singapore Airlines (SIA) to be the world’s best airline.

As far back as 2010 until now, the two airlines have been ranked one behind the other in the top three spots, except in 2012 when Asiana came in second place between Qatar the winner and SIA in third position. In the ten year period, SIA came behind Qatar in eight years, except in 2010 when SIA was second and Qatar third, and last year when the Singapore carrier became the world’s best ahead of Qatar in second placing.

It looks like a tight race between Qatar and SIA for the top spot, and going by the survey results, Qatar has outranked SIA. It has become the first airline to have won the award five times, one more in the history of the awards.

But SIA is still ranked ahead of Qatar for first class and economy class.

In the first class category, Qatar is not even a close second to SIA in first placing but fifth behind Lufthansa, Air France and Etihad as well

In the economy class category, Japan Airlines is tops followed by SIA and Qatar in second and third placing respectively.

Besides SIA has the best premium economy in Asia, second only to Virgin Atlantic worldwide. But,of course, Qatar does not offer that class of travel.

Additionally SIA tops for cabin crew, and Qatar is farther down the list in 9th position.

But Qatar wins for business class, followed by ANA and SIA in second and third placing respectively. So it seems there is heavier weightage for this segment which has become probably the fiercest battleground for the airlines. First class included, it also suggests the halo effect of the premium product, but it is the business class that is the primary focus in today’s business.

It also attests to the impact of the recency factor. Qatar obviously impresses with its cubicle-like Qsuite that comes with its own door to provide maximum privacy. Quad configurations allow businessmen to engage in conference as if they were in a meeting room and families to share their own private space. And there is a double bed option.

Which brings up the importance of having to continually innovate and upgrade the product to stay ahead in the race.

The top ten listing: Consistency equals excellence

The ranking does not shift much from year to year. Besides Qatar and SIA, there are some familiar names: All Nippon Airways (3rd this year), Cathay Pacific (4th), Emirates (5th), EVA Air (6th) and Lufthansa (9th). So there is not much of a big deal as airlines switch places so long as they remain in the premier list.

Hainan Airlines (7th) is making good progress, moving up one notch every year since 2017. Qantas (8th) is less consistent, moving in and out of the top ten list, Thai Airways retained its 10th spot for a second year.

It is no surprise that the list continues to be dominated by Asian carriers which are generally reputed for service. You only need to look at the winners for best cabin crew: Besides SIA, the list is made up of Garuda Indonesia, ANA, Thai Airways, EVA Air, Cathay Pacific, Hainan Airlines, Japan Airlines and China Airlines. With the exception of Qatar, no other airline outside Asia is listed.

If you to look to find out how the United States carriers are performing, scroll down the extended list of the 100 best and you will see JetBlue Airways (40th), Delta Air Lines (41st), Southwest Airlines (47th), Alaska Airlines (54th), United Airlines (68th) and American Airlines (74th).

Home and regional rivalry

Rivalry between major home airlines or among competing regional carriers is often closely watched.

Air Canada, placed 31st ahead of rival WestJet at 55th can boast it is the best in North America. That’s how you can work the survey results to your advantage.

ANA (3rd) has consistently outdone arch rival JAL (11th). In fact, ANA has been the favoured airline in the past decade till now. It has Japan’s best airline staff and best cabin crew. Across Asia, it provides the best business class. Internationally, it provides the best airport services and business class onboard catering.

Asiana (28th) is favoured over Korean Air (35th ).

The big three Gulf carriers are ranked Qatar first, followed by Emirates (5th) and Etihad (29th).

Among the European carriers, Lufthansa (9th) leads the field, followed by Swiss International Air Lines (13th), Austrian Airlines (15th), KLM (18th), British Airways (19th), Virgin Atlantic (21st), Aeroflot (22nd), Air France (23rd), Iberia (26th) and Finnair (32nd).

What about low-cost carriers?

Worthy of note is how some budget carriers are ranked not far behind legacy airlines. AirAsia (20th) is best among cohorts. EasyJet (37th) and Norwegian Air Shuttle (39th) are not far behind the big guys in Europe. Among US carriers, Southwest Airlines (47th) is third after JetBlue (40th) and Delta (41st).

Also, pedigree parents do not necessarily produce top-ranked offshoots. Placed farther down the list are SIA’s subsidiary Scoot (64th) and the two Jetstar subsidiaries of Qantas – Jetstar Airways (53rd) and Jetstar Asia (81st). So too may be said of so-called regional arms. Cathay Pacific’s Cathay Dragon is ranked 33rd, but SIA’s SilkAir is way down at 62nd.

Pioneer of the modern budget model Ryanair is ranked 59th.

Down the slippery road of decline: Aisana Airlines and Etihad Airways

If it is difficult to stay at the top, it is easy to slip down the slippery road of decline. Asiana and Etihad are two examples.

Asiana was ranked world’s best airline in 2010 and became a familiar name in the top ten list up to 2014, after which its ranking kept falling: 11th (2015), 16th (2016), 20th (2017), 24th (2018) and 28th (2019). Its erstwhile glory has been whittled down to being just best cabin crew in South Korea.

Etihad did reasonably well for eight years until 2018 when it was ranked 15th, and a year later suffered a dramatic decline to the 29th spot. That, despite beating Qatar to be this year’s best first class in the Middle East.

As I stated at the onset that there are surveys and there are surveys. Some are not specifically targeted , whether its interest is business or leisure for example. There is always an element of subjectivity and bias in the composition and weightage, and this renders no one reading as being definitive. At best, we can read across several creditable surveys to know with some conviction how the airlines really measure against each other.

Read also:

https://www.todayonline.com/commentary/can-singapore-airlines-overtake-qatar-worlds-best-airline

Joon’s failure re-validates old lessons

Courtesy Getty Images

In just a year after its launch, Air France is shutting down its low-cost subsidiary airline Joon which promised to carve out a new niche market among millennials. The reason, said Air France, is because the brand had been “difficult to understand from the outset.”

Strange as that may sound, it shows how a major player like Air France itself has failed to understand the market forces at play. Or, an ill-timed miscalculation of the market trend.

A little history is appropriate here. When budget travel first emerged on the scene, legacy airlines were inclined to dismiss the upstarts as unlikely competitors, believing their markets to be markedly different. The established carriers, so to speak, were not interested in the budget market and were quite happy to let low-cost operators be.

The failure of many an ambitious budget carrier supported that view, particularly at a time when the volatile fuel price moved like a yo-yo but largely trending upwards. That hit the budget carriers hard since fuel is a significant component of their cost, and cost is all that budget travel is about.

But some like Ryanair and easyJet survived the storm and made good progress. That was when the big boys decided they too wanted in on a flourishing market. A number of them set up their own budget arms, such as United Airlines’ Ted and Delta Air Lines’ Song. They didn’t last long.

As the line of competition began to blur with low-cost carriers soon attracting business away from the traditional sources, more legacy airlines carried the battle cry into the fray. Among them, British Airways which started Go, which it later sold; Singapore Airlines (SIA) which went into partnership with Ryanair to start Tigerair; and Qantas which set up Jetstar.

The budget threat heightened with low-cost carriers venturing into the long-haul. There were casualties along the way, a notable one being Oasis Airlines which flew from Hong Kong to London as well as Vancouver. Hailed as a trail blazer for good service on a shoe-string budget, it could not survive the barrage of rising costs.

But that didn’t stop others to boldly go into a domain dominated by full-service airlines, a move which many observers thought was foolhardy. Today, low-cost carriers such as Norwegian Air Shuttles, Wow! Air and AirAsia continue to rattle the hitherto safe market of the Goliaths.

It seems independent low-cost carriers are more successful than budget offshoots of legacy airlines with few exceptions such as Jetstar. Why so is this? The failure of Joon only serves to revalidate the lessons of past failures.

The overall market has shifted from one distinct full-service vs budget scenario to a common market for all airlines. For many travellers, it is a conscious choice between legacy and budget carriers, the consideration not so much in name as in value for what it costs. For many travellers, the comfort and convenience of full-service still outweigh the savings of flying budget, particularly for the long haul. But for a growing number too, despite the higher risk of flight disruptions by low-cost carriers, why not?

Studies have shown that millennials have different priorities, and the budget model of paying for only what you want may have some appeal as it means control over how you spend your money. The new and younger travellers are more adventurous and not averse to taking chances.

The shift in the market is becoming more evident in how legacy airlines are in fact no longer completely full-service as they used to be, adopting increasingly the budget pricing model in charging for ancillary services what used to be part of the package deal, such as seat selection, priority boarding, and checked baggage.

It is not a given that a successful legacy airline will be as successful in operating a budget subsidiary. On the contrary, it faces the challenge of separating the two entities to operate them on their own terms. Too often this may be compromised with the parent airline subsidising the struggling offshoot. At the same time, the parent’s product may be diluted.

Much as the parent airline likes to maintain its distance and many of them have declared that their budget offshoots are running on their own steam, the reality is far from being so. Their influence is inevitable, however indirect and unintended. That may lead to tweaking the low-cost model to be less budget and more a copy of the old block, resulting in higher costs.

This is also not helped by the expectations of the customer when the budget offshoot carries the association with the reputable parent’s brand name. For example, while SIA has earned the reputation of being one of the world’s best airline, the same could not be said of Tigerair whose customers were sadly disappointed when the carrier ran into frequent bad patches.

What can be worse is when the budget subsidiary begins to compete with the parent company for the same low-end business.

American carriers however have found a solution to that: instead of operating separate budget offshoots to compete with independent low-cost carriers, they have introduced basic economy fares with similar terms to be accommodated within the same aircraft. The practice of offering different fare types even within the same class of travel is not new, but basic economy is aimed at keeping customers who may switch to budget carriers. And the model is gaining popularity across the industry.

Some observers may think Air France’s decision to shut down Joon premature as it has not allowed the latter time to grow. But not being clear about the product or the direction it is heading, it would be a hazy road ahead. It might as well nip the problem in the bud.

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.

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/

As fuel prices go up, so will fares

IT looks like the good times are running out. Airlines, faced with rising fuel costs, are raising fares. Delta Air Lines for one is expecting its fuel costs for 2018 to be US$2 billion higher than they were a year ago. Its CEO Ed Bastian warned travellers that “with higher fuel prices, you;re going to expect to see ticket prices go up as well.”

And Delta is not the only airline heading in that direction. Other carriers are likely to follow suit if they have not already done so.

On the other side of the Pacific, Air New Zealand (Air NZ) and Jetstar have raised domestic fares by five per cent, and Air NZ is reviewing fares for international routes. According to Air NZ chief executive Christopher Luxon, every dollar increase for a barrel of fuel “adds $10 million of costs to Air New Zealand’s bottom line.”

Mr Christopher Luxon, Photo courtesy Air New Zealand

International Air Transport Association (IATA) chief executive officer Alexandre de Juniac warned that against this background, “next year will be less positive.”

Mr Luxon of Air NZ painted this picture of the likely scenario: ”The normal cycle in aviation is that fuel goes up, prices rise, demand may fall and capacity gets reduced.”

So what are airlines doing about it, apart from raising fares because that alone has its limitations in view of the competition and the impact it may have on the consumer’s propensity to travel?

Delta has already made known its intention to withdraw flights serving the less popular destinations. So too will other carriers after the summer peak.

Beyond that, many airlines are ramping up hedging. Major European airlines including budget carriers Ryanair and EasyJet, for example, are increasing the ratio of hedged fuel to as high as 90 per cent of needs. Low cost carriers especially, because of their limited ability to hedge, were badly hit the last times when fuel prices careened upwards. But hedging is not a completely safe bet. Equally so, many airlines also reported significant losses when fuel prices came down.

The good news is that with more fuel-efficient aircraft in operation, the impact of the increased fuel costs may not be as hard on the airlines. Higher fares are as good as being ready to be rolled out, but the question is how far can the airlines go without losing customers, particularly at a time when the price of the fare is likely to matter more than allegiance?

Again, to quote Mr Luxon, ”All airlines, whether you’re in Australia or around the world are working hard to see how they can take prices up and ultimately how much of that cost increase can you recover through pricing.”

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?