What conclusions can you draw in an airlines survey?

SIA courtesy SIA

WE continue to be fascinated by rankings of the world`s best airlines, although the results of most surveys – take away some bias here and there – are quite predictable and almost similar across the board. The winners by and large boast excellent cabin service, great food, comprehensive in-flight entertainment and innumerable choices, more generous legroom than what their competitors offer, and frills such as complimentary champagne and brand name overnight kit. It is all about creature comforts. And the impressions are understandably almost always skewed by the luxuries of the upper classes.

Traveller magazine Conde Nast has just posted its list of the world’s best airlines, surveyed among some 128,000 readers. Of course this is not the definitive list of excellence to the detail, in the same way that no other list can be as definitive without considering factors such as the type of respondents involved, the scope of the survey and the criteria adopted, but there are nevertheless interesting conclusions to be drawn from them. So often it is more interesting to look at the omissions.

Long haul can impress or disappoint

Singapore Airlines (SIA) is a perennial favorite of Conde Nast readers, ranking top for 27 of 28 years. It is hardly surprising, which to be saying it seems even redundant. The airline has long earned the reputation as one of the world’s best airlines, and is frequently celebrated in other surveys as well. It was ranked second after Qatar Airways in the last Skytrax survey. It is hard to find a match that depicts consistency in excellence. The real clincher seems to be in its long haul operations – such flights that are likely to elicit the flaks when passengers are apt to become more stressed and demanding. Here is where SIA is able to make the difference by a well-trained crew that anticipates a passenger’s needs, always mindful the passenger’s comfort first and foremost in the service.

All the airlines in Conde Nast’s top ten are long haul operators, with the exception of Porter Airlines which is more a city shuttle that flies between Toronto in Canada and US destinations such as Boston, Charleston and Myrtle Beach.

While the long haul impresses, it can also take apart an airline’s reputation, which explains why some airlines are inundated with complaints about being handled like a can of sardines. Interestingly, the Conde Nast list of best American carriers is made up of short-haul operators to the exclusion of the big three of United Airlines, American Airlines and Delta Air Lines. Virgin America is ranked first followed by JetBlue, Hawaiian Airlines, Southwest Airlines and Alaska Airlines.

Dominance by Asian and Gulf Carriers

Again, it is not surprising that Conde Nast’s top ten ranks are dominated by Asian and Gulf carriers, which together were placed in not only in the top three ranks but also seven of the top ten positions. The Gulf big three of Emirates Airlines, Qatar Airways and Etihad Airways were second, third and fifth respectively. Qatar was tops in the earlier Skytrax survey, ahead of Emirates (5th) and Etihad (6th). Other Asian airlines in the Conde Nast list are Japan Airlines (6th), Korean Air (7th) and Cathay Pacific (10th). Both SIA and Cathay were also ranked among Skytrax’s top ten airlines.

Dominance by Asian and Gulf carriers means the stark exclusion of airlines of other regions. Only one European airline – Virgin Atlantic – was listed, and in fourth placing. One asks: Where are British Airways, Air France and Lufthansa although going further down the list you will find Swiss International Air Lines (17th) and Finnair (20th)?

That and the marked absence of US carriers demonstrate the superior service culture of Asian and Gulf carriers and their growing popularity that continue to put pressure on their rivals in the competition. The US big recently accused the Gulf big three of unfair competition supported by state subsidies. In truth, North American airlines are not inefficient, but they lack the soft pampering touches of their competitors. There is a host of pertinent questions. Can US carriers be as friendly or, to go one further, do better? And, ultimately, do they even see the need?

Luxury improves image

Etihad boasts the “residence” suite that comes with a bedroom, private bath with shower and lounge. That is for now the forerunner in the race for the ultimate luxury in the air, leaps ahead of SIA’s first class suites and all the other airlines’ flat bed allures. There are also the extras: Etihad provides a concierge service that will make a dinner reservation for you when you land, and some airlines offer door-to-airport limousine services. The slant towards premium classes is to be expected, for that is what makes news even as the perks are limited to a smaller but more lucrative market of the travelling population. If there is one airline that seems to be doing much more for coach than many others, it is Air New Zealand, which offers “Skycouch” in economy – seats that can be converted into a lie-flat double bed – but then again, this is limited to only three seats in the cabin, reminiscent of the days when EVA designates a small number of seats as the ill-defined premium economy before the subclass takes on an identity of its own today.

Comparison is the crux

In any survey, the crux is the comparison, particularly when they are all said to be providing good cabin service and excellent food amongst the creature comforts. The Conde Nast survey again surfaces the rivalry between SIA and Cathay Pacific in the top ten, favoring the former. Interestingly, Japan Airlines (6th) is ranked ahead of All Nippon Airways (11th), and Korean Air (7th) ahead of Asiana Airlines. That indicates a reversal of order that has been the reading of many past surveys, and may well portend how the competition may be trending.

In the case of Gulf carriers, the ranking rivalry among Emirates, Qatar and Etihad is very much a close call going by several international surveys. At the same time, we cannot ignore the inclusion of Turkish Airlines in Conde Nast’s top 20. Turkish was fourth in the Skytrax survey.

In the close rivalry between Qantas (15th) and Virgin Australia (19th), the former continues to enjoy an advantage over the latter.

What else matters? All the hype about going green as the world becomes increasingly conscious of the impact of climate change? That Korean Air prepares its food from humanely raised and organically grown produce. That El Al offers an iPad rental program. That Virgin Atlantic has a stand-up bar. That Qantas offers Select on Q-Eat that allows you to pre-order your meal. That Air New Zealand makes its safety presentation more entertaining than others. That British Airways allows you to log on to a movie as soon as you board and stay with it until the aircraft is docked at the gate on arrival. The list goes on. And one wonders.

This article was first published in Aspire Aviation.

Delta Air Lines extends its wings

Courtesy Airbus Industrie

Courtesy Airbus Industrie

The saga of Japan’s bankrupt Skymark Airlines has shifted attention from the plight of the damsel in distress to the competition among prospective white knights in waiting. Delta Air Lines has emerged as the frontrunner to the rescue of the beleaguered carrier, strongly favoured by Skymark’s creditors, Airbus Industrie and aircraft leasing firm Intrepid Aviation Group which have become kingmaker in the game. Of course, much also depends on the Japanese government’s position on a foreign carrier’s investment in the nation’s third largest airline.

Other foreign carriers that are said to have expressed an interest, if not now but in the early days, include American Airlines although it already has an alliance with Japan Airlines (JAL), China’s Hainan Airlines, and Malaysia’s AirAsia which had previously entered into a failed joint venture with ANA, which subsequently bought out AirAsia’s stake in AirAsia Japan and renamed it Vanilla Air.

Early indications pointed to ANA as Skymark’s best bet, but that would mean returning to a duopoly between JAL and ANA, not quite the desired situation preferred by the authorities if competition across the industry is to be encouraged. Airbus and Intrepid are trying to block such an eventuality, fighting a rival plan that would see ANA take up a stake of 16.5 per cent in Skymark. As the major creditors holding more than half of Skymark’s debt of 320 billion yen (US$2.6 billion), they are in a position of influence. The troubled budget carrier may also be handed heavy penalties for its cancelled Airbus order. Airbus and Industrie are proposing that Delta be invited to buy as much as 20 per cent of Skymark.

Intrepid believes the proposal “offers the best opportunity to preserve Skymark as Japan’s third largest independent carrier and is in the best interests of the carrier’s employees, suppliers and creditors.”

But is the issue really about preserving Skymark’s independence? Or even about its survival as prospective buyers take centre stage and observers wait to see how that would change the state of play. That can best be understood in the context of what really is at stake in the game.

For one thing, ANA is more a Boeing operator with a current fleet mix of only 6 per cent Airbus and the rest Boeing. It has also said it is not interested in taking over Skymark’s Airbus A330 leases. Delta on the other hand has shown increasing support of Airbus, favouring the European planemaker over Boeing with an order of 50 jets worth US$14 billion last year. Its current fleet mix is a growing Airbus 20 per cent to Boeing 58 per cent that tells the success story of Airbus penetration into the American market.

Skymark’s initial inclination was to work with JAL but was apparently advised not to exclude ANA. The benefit to any airline succeeding in the bid is Skymark’s 504 weekly slots at Haneda Airport, which is advantaged by its shorter distance to the city compared with Narita Airport. Although these slots are meant for domestic operations, it will add to ANA’s strength and increase its dominance at Haneda over JAL. However, ANA has already established other domestic brands that include Peach Aviation and Vanilla Air, and the likely outcome of such an arrangement may see Skymark being drastically downsized through fleet, route and capacity reduction, opening up opportunities for ANA and its subsidiaries – Skymark’s erstwhile competitors – to grow at Skymark`s expense. The authorities too may not be enthusiastic to see a diminished role for Skymark in the name of competition or some semblance of it for local travellers.

Courtesy Delta Air Lines

Courtesy Delta Air Lines

Delta is more likely to keep the Skymark brand intact, at least in the short term, as the Japanese carrier proffers an opportunity to extend its wings farther into the Japanese market. It is also about competition with compatriot rivals American and United Airlines outside the US. All three of them are mega carriers formed from mergers with fellow home airlines in a period of US aviation history marked by Chapter 11 protection, and consequently lifted by reduced competition at home to expand overseas. Since then, Delta has acquired a 49-oer-cent stake in Virgin Atlantic to strengthen its trans-Atlantic connections. It has also formed an alliance with Virgin Australia. What it needs now is an Asian, if not Japanese, partner, noting that both American and United have already forged alliances with JAL and ANA respectively. Hence Skymark looks like a timely opportunity.

Through Skymark, Delta will be able to gain access to many destinations within Japan, providing the channel for feed from and into Los Angeles (and perhaps other US points in the future). Viewed positively, it means Delta will have a piece of the local domestic market as well, something that is often not open to foreign carriers. Yet one is tempted to ask if Delta’s quest is all about banking on domestic connections, which many foreign carriers are quite happy to work through alliances with local partners. Delta will then be competing with JAL and ANA. Singapore Airlines tried and failed in Australia with the setup of Tigerair, which Virgin Australia as the new owner is trying to sustain as a completely local entity.

US carriers may gripe about Middle East airlines making inroads in the US market, but that too is quite a different story. First, Japan is not like the US. In fact, no single country is quite like the US unless you consider the countries collectively, such as the European Union where flying between member countries is not strictly domestic. Second, carriers such as Emirates Airlines are more interested in opportunities for direct access, connecting US cities with the world outside, operating viable links that US carriers may find eating into the domestic market for transfers.

Delta’s own experience of operating from Seattle to Haneda has not been up to the mark because of the seasonal traffic, a service which it will relinquish before the end of the year, making way for rival American to take up the Haneda slot with a second service to Tokyo in addition to its Narita route but flying from Los Angeles. This increases the competition threefold, American competing with not only Delta but also ANA. While Delta has said that the Seattle-Haneda service was intended to grow Seattle Tacoma Airport a gateway, the corollary challenge is growing the customer’s preference for Haneda, which lacks the international connections of Narita. But with an impending saturation at Narita, staking rights at Haneda is an investment for the future.

In a letter to the Department of Transport, Delta cited two reasons for the failed Seattle-Haneda service: “demand…is highly variable, peaking in the summer and declining in the winter; and Delta lacks a Japan airline partner to provide connectivity beyond Haneda to points in Japan and other countries in Asia.”

Interesting that Delta should attribute the failed service to its lack of a local partner, which therefore supports the case for courting Skymark. So also it seems the carrot is bigger than it looks. In 2010 when Skymark became the first Japanese carrier to negotiate a deal with Airbus for four Airbus A380 plus options for two more, it intended to use the aircraft for international routes from Narita to destinations such as London, Frankfurt, Paris and New York. The story sounds strangely familiar of a growing and ambitious airline, and one of a low-cost carrier that may have become neither sufficiently low-cost when buffeted by new competitors such as Jetstar Japan and Vanilla Air, nor adequately rebranded to attract corporate business and the higher end market. And the question, where Delta is concerned, is it looking a little too far into the future?

This article was first published in Aspire Aviation.

A conscionable call as oil price plummets: Will airlines reduce airfares?

AS the oil price plummets – some 55 per cent since June last year – the question topmost in the mind of the consumer must be: Will airlines reduce airfares?

Many of them have chosen to be silent on the subject, the excuse being that the historical volatility of the market is such that the trend can turn any time. But it has taken a while, and long enough for some conviction from the airlines, now that analysts are convinced that the cost of fuel is likely to stay low for at least another year.

Travellers on American carriers can stop wishing to share in the bounty, even as US carriers are reporting hefty savings as a consequence. Southwest Airlines estimated it would save US$1.7 billion on fuel in the current year, and Delta Air Lines more than US$2.0 billion. Other airlines that include Untied Airlines and Alaska Airlines are forecasting similar cost reductions. But, say the airlines, fare reduction is not on the card. Instead, shareholders will reap the benefits while the airlines themselves see this as a well deserved windfall and respite to recoup past losses and pare down debts.

Courtesy Getty Images

Courtesy Getty Images

United Airlines spokesperson Megan McCarthy delivered the cold reality of the business when she said: “It has been our position all along that fares are not cost-driven. They are demand-driven.”

That, we all know, is the simple economics of the law of supply and demand. So consumers have themselves to blame. Airlines are enjoying near-full loads that there is no incentive for them to want to lower the fare. In Europe, even budget carriers such as easyJet and Ryanair are looking forward to even higher profits from not only savings on fuel costs but also higher fares. So McCarthy was darn right there. But airlines too have learnt to make the formula work better for them, ceteris paribus, as they reduce capacity particularly in the US with merged operations to hold up demand and maintain airfares.

The consumer’s best hope lies in competition as how it should work in the liberal world, but with consolidation which has seen the merger of big entities in the US, raising questions about the assumed competition itself. Today four airline companies control more than 80 per cent of the US market. Little wonder how US carriers have collectively signalled that airfares will not fall in response to the falling fuel cost.

Where competition does not work, the consumer can hope that some conscionable authority will be able to address the fair fare issue. On that second score, you might fault McCarthy for turning a blind eye, but United, like any other, would contend with some validity that it cannot be both operator and watchdog. Company with conscience is a preacher’s prerogative, more idealistic than operative.

Still, the likes of United may be reminded that back in the days not too long ago when the fuel price reached giddy heights, airlines were raising fuel surcharges as many as four times within a year. Strange as it sounds, they have always maintained that the surcharge is not part of the fare, but not as far as the consumer is concerned. Even so, the corollary must apply as the fuel price dips. No lesser a person than Toby Tyler, director general of the International Air Transport Association (Iata), has said that airline fuel surcharges should begin falling as the drop in oil price works its way through the aviation fuel system. Tyler said: “In many cases, airlines operates now with a basic fare and a fuel surcharge of some kind and the fuel surcharge in many airlines is directly linked to the price they’re paying for fuel.”

Courtesy Airbus

Courtesy Airbus

But it looks like it is not happening quite as quickly as Mr Tyler was convinced that it would when he said in October last year: “You’ll see the fuel surcharge very quickly come down.” Still, better late than never. Better somewhere else if not in the United States. Japan Airlines (JAL) announced lower fuel surcharges for international flights from February 1, recognizing the genesis of introducing such levies back in February 2005 in response to rises in the cost of fuel. Now that is one conscionable airline. JAL said it would revise the surcharge, whether upward or downward, if the fuel price fluctuates further. Fair enough. American and other carriers waiting on the sideline, take note.

Qatar Airlines has also announced it will reduce the fuel surcharge although it has not committed to a date for implementation.

Courtesy flyertalk

Courtesy flyertalk

Australian airlines are among the first to drop airfares in response to the falling oil price. Two forces are at work: competition and the authority. Nowhere else in the world is there more bitter rivalry than that between the two Australian carriers of Qantas and Virgin Australia. Virgin took the lead, and Qantas followed suit. Virgin said it would not get rid of the fuel surcharge altogether, but incorporate it into the fares; however it is packaged, the bottom line should see a reduction. Virgin said the “reductions reflect the benefits of the decline in global oil prices” following monitoring over recent months and “in anticipation that fuel costs will continue to remain at lower levels than the record highs seen in recent years.”

At the same time, the Australian government is putting pressure on the airlines to respond to the drop in fuel costs. Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC) said: “It is not against the law to introduce a surcharge – what is against the law is to mislead customers.” The ACCC announced it was investigating the matter. In a statement that it released, it said: “The ACCC has confirmed that it is considering whether representations made by airlines imposing fuel surcharges, following the fall in wholesale aviation fuel prices, are misleading. Under the Competition and Consumer Act 2010 businesses must not make misleading, deceptive or false representations about the price of goods or services. This includes when making representations about the reasons for rising fuel costs.”

In this connection, Qantas said: “The bottom line for consumers is that Qantas fares already in the market are some of the cheapest in years. Fuel surcharges are already included in the advertised price and those fares remain extremely competitive.”

The issue is not about the fares already being the cheapest in the market but rather whether they should be even cheaper as a result of lower fuel costs that have saved the airlines millions to billions of dollars.

Meantime the British government is studying the need for intervention. British Airways circumvents the issue with no clear commitment, saying it has launched several sale initiatives. Virgin Atlantic said it has reduced the fuel surcharge before last Christmas and will “continue to monitor the situation and fuel surcharges under review to make them as affordable as possible.”

Courtesy Delta Airlines

Courtesy Delta Airlines

It is a world of ironies. The consumer may as well confront the hard truths about the market. The door does not always swing both ways. As the global economy improves, the demand for seats picks up. And when demand exceeds supply, the game belongs to the airlines so much so that Delta CEO Richard Anderson has suggested to passengers who are looking at reduced fares to “shop around”. He said: “The marketplace is incredibly competitive, and there are always differences in fares.” The consumer can only hope that competition is well and alive without the need for state intervention. If Anderson had come across as being somewhat arrogant, he probably knew he could afford it. But heed his advice anyway.

This article was first published in Aspire Aviation.

Competing to be the best: How reliable are survey readings?

Courtesy Cathay Pacific

Courtesy Cathay Pacific


SKYTRAX has named Cathay Pacific as the world’s best airline in 2014, displacing last year’s winner, Emirates. In second and third place are Qatar Airways and Singapore Airlines (SIA) respectively. Asian and Middle East carriers dominated the ranks of the top ten: Emirates (4th), Turkish Airlines (5th), All Nippon Airways (6th), Garuda Indonesia (7th), Asiana Airlines (8th), Etihad Airways (9th) and Lufthansa (10th). No American carrier was placed.

Are those really the world’s best airlines?

The winning airlines are unlikely to question the validity of any survey, as you can see how many of them are listing awards from all and sundry like a laundry list as endorsement of their good reputation. The corollary must be that if you accept the accolade willy nilly, so must you recognize one and all sideswipes.

Which leads to the next question: Is Skytrax the standard?

Skytrax claims its World Airline Awards to be “the global benchmarks of airline excellence”. The winners are decided by 18.85 million travellers from over 160 countries, and that should take care of any misgiving about the survey having an inadequate population and most importantly, the bias factor or its susceptibility to political influence.

Cathay CEO Ivan Chiu said: “The World’s Best Airline award is particularly important to us because it was decided by the votes of close to 19 million travellers from around the world.” Cathay was placed sixth last year and has won the award four times, previously in 2003, 2005 and 2009.

Emirates president Tim Clark said: “These awards are widely regarded as the industry’s benchmark for excellence. To be voted ‘World’s Best Airline’ by millions of discerning travellers is something… to be proud of.”

Qatar CEO Akbar Al Baker said: “These awards are highly rewarding as they are judiciously voted by passengers a true account of the overall experience felt by customers who have travelled with the airline.” Qatar won in 2011 and 2012.

Courtesy Etihad Airways

Courtesy Etihad Airways


However, Etihad’s withdrawal from participation apparently over differences in the methodology may tell a different story. Although it had never won, Etihad was consistently placed in the top ten in the past five years, ahead of Emirates in some years. Despite its withdrawal, Etihad was still ranked in this year’s survey because according to Skytrax, “an airline cannot be withdrawn from the World Airline Awards since these results are directly decided by customers.” That statement should add to the survey’s credibility, yet without taking sides and arguing the toss about fairness, one can only suspect and understand that the subjective nature of the survey (and of any survey) is naturally exposed to dissatisfaction, whether baseless or with reasons which may well be valid, the way that the Oscars results do not sit as squarely with a lot of people. Now and then you get an outstanding actor declaring his or her disinterest in the awards.

The issue is usually one of weightage and relevance of selection. However designed, the respondents may to some degree be steered by what is being asked. Take, as matter of curiosity, the 2014 Skytrax survey readings for the top ten. SIA is ranked ahead of Cathay for inflight entertainment, cabin cleanliness, First Class amenities, First Class cabin overall, seats in First, Business and Economy, and First Class meals; but close behind Cathay in other areas except for its noted absence for airport services, Business Class amenities and Business Class meals. Yet Cathay takes the cake.

It is encouraging to see breakthroughs by airlines such as Turkish and Garuda in a game dominated by the familiar big names. Interestingly, Turkish ranks above everyone else except Emirates and SIA for inflight entertainment. It is no surprise that Garuda tops for cabin crew, the epitome of Asian service culture, in a category swept by Qatar (6th) and nine other Asian carriers: Cathay (2nd), SIA (3rd), Asiana (4th), Malaysia Airlines (5th), EVA Air (7th), ANA (8th), Thai Airways (9th) and Hainan Airlines (10th). In like fashion, with the exception of KLM (8th) and Qantas (9th), the airport services category belonged to Asian carriers: ANA (1st), EVA (2nd), Thai (3rd), Asiana (4th), Cathay (5th), Korean Air (6th), Garuda (7th) and Dragonair (10th).

Yet, giving credit where it is due, one may question the appropriateness of comparing a carrier having limited global presence with others that are more exposed in the global arena, and how a population of largely local respondents compares with the wider global population. Hence it may be more meaningful to look at niche rankings, but we all love the sweeping titles of the best overall, don’t we? Even regionalized readings must be viewed in their proper context. The Qantas Group went ga-ga over Jetstar Airways’ win as best low-cost airlines in Australia/Pacific over AirAsia X (2nd), Scoot (3rd) and Tiger Airways (4th), but the world’s best is AirAsia followed by AirAsia X in second place ahead of Jetstar Airways (4th). Note how the preferences change when the population mix changes.

Who then really is the best overall? It may be difficult to say for sure one definite airline, and under the circumstances a wider reading of the top three or five or up to ten may be a more sensible assessment. The contest is to get into that magic circle of the elite.

Courtesy TODAY

Courtesy TODAY


Equally significant is the consistency over time. Airlines such as Cathay, Emirates, Qatar and SIA may pat themselves on the back for being there long enough to deserve their stripes. Narrow that down further, and you will see that only two airlines – Qatar and SIA – have been consistently placed in the top three in the past five years. Asiana had a good run from 2010 to 2012. Cathay was just outside in 4th place until it tumbled to 6th last year and bounced back to be this year’s winner. The wider reading should lead some airlines such as Qantas to ask why it has dropped out of the respectable club.

One survey alone cannot be definitive, hence winning across notable surveys may strengthen the reading. Compare the Skytrax results with Conde Nast Traveler’s assessment by its readers – based on the same principle of uninfluenced feedback – and you will begin to understand why. In its ranking for foreign carriers (outside America), Etihad is placed 4th behind Emirates (2nd) and ahead of Qatar (7th). Cathay is 7th, and the winner is SIA. Korean Air (8th) did better than rival Asiana (18th), and so did Japan Airlines (16th) over ANA (21st). The Conde Nast top ten includes Virgin Atlantic (3rd), Air New Zealand (5th) and Swiss International (10th).

Then there is the annual Airline of the Year award given by the Air Transport World (ATW) magazine. The criteria take into consideration financial performance (which debunks the myth that the world’s favourite airline is not necessarily the most profitable or even profitable) and visible leaps forward in services. However, naming only one winner can often lead to suspicions of political influence (the way that some beauty pageants are said to be when a winner is crowned) and the tendency to pass the honour around although airlines such as ANA (2007 and 2013) and Air New Zealand (2010 and 2012) had been named twice. Cathay (2006), SIA (2008) and Asiana (2009) had all had their turns. Delta Air Lines is ATW’s Airline of the Year 2014.

Several other magazines also dish out their own annual awards, which may be based on their readers’ feedback, or assessed by a panel of judges or arrived at combining the two methods. Some of them target niche markets such as awards that recognize the best airline for business travel. That in a way avoids spillover or halo effects and sectarian prejudices as, for example, an airline that impresses in First and Business Class may pay scant attention to what happens in Economy.

Nevertheless, surveys are useful tools in maintaining competition. Everyone loves to win, unless you do not give a hoot about how the world sees it and how that may affect your bottom line. So too, everybody loves a winner; but that is no guarantee that the traveller will necessarily fly with the named best airline. Without downplaying their influence on the market, such awards probably mean more to the airlines than the travellers.

This article was first published in Aspire Aviation.

Gulf carriers compete for world dominance

WHILE Gulf carriers Emirates Airlines, Etihad Airways and Qatar Airways have become daunting competitors to other airlines across the globe, they are themselves competing with each other for world dominance.

All three airlines have been up there in the charts as world’s best in one category or another, garnering awards mainly for premium travel. A recent announcement by Etihad of its decision to no longer participate in Skytrax surveys – allegedly over disagreement on the rating system – has come as a surprise. Yet it may be a sign of there being one too many that points to a meaningless pursuit in a class deemed to be without real competition, and which can only lead to embittered rivalry. In the last Skytrax survey (2013), Etihad was the world’s “best first class”, “best first class seats” and “best first class catering”. But in the “best airline” category, it was placed seventh, far behind Emirates and Qatar which were ranked first and second respectively.

Is there even competition for Etihad’s new Residence suites? (see Extreme luxury: What price prestige? Jun 25, 2014) The race is on: Emirates has said it would introduce a similar product, and it is unlikely that Qatar will want to be left behind.

Interestingly, apart from spending big to acquire the best of equipment and pushing the limits on creature comforts, all three airlines seem to be pursuing different strategies for market dominance.

Courtesy Airbus

Courtesy Airbus


Emirates Airlines

Emirates is replicating the Singapore Airlines (SIA) story of the ‘70s and ‘80s, growing organically with giant strides as it expands its network. Last year it carried 44.5 million passengers to more than 133 cities in six continents. The number far exceeded Etihad’s 12 million passengers to more than 90 destinations and Qatar’s 18 million passengers to over 125 destinations. There are no indications of a likely change in course as Emirates continues to add new destinations in its expansion. Unlike Qatar, which has since joined OneWorld, and unlike Etihad, which has been on a binge to acquire equity in foreign carriers, Emirates remains very much a loner in the game, relying on its own strength and reputation for growth – again, quite reminiscent of the younger SIA.

But unlike SIA, which is a leading member of Star Alliance, Emirates does not believe in alliances. Echoing the sentiments of Virgin Atlantic chief Richard Branson, Emirates senior vice-president of commercial operations worldwide Richard Vaughan said in 2010: “We don’t believe in alliances. We intend to stay as an independent airline.” He believed that alliances reduce the airline’s ability to react swiftly changes in the market place and that they actually reduce competition and lead to higher fares. So true it is that when a passenger books a ticket with an alliance member airline, there is no guarantee that the passenger will be flying with the airline of choice. Under the circumstances, Emirates would have felt its product compromised.

Emirates’ stance has not changed. It has held out impressively during the economic crisis that saw many airlines scrambling to cut back services and subsequently entering into extensive commercial agreements with partner airlines. While Emirates maintains its independence, it has entered into code share agreements – a common industry practice – with a small number of airlines that include All Nippon Airways, Cathay Pacific and Air New Zealand. Its extensive non-equity partnership with Qantas made headline news in 2012, but it was a deal seen as impacting the Australian carrier more than Emirates. The Gulf carrier continues to steer clear of mergers and acquisitions although there was speculation of its interest in acquiring an ailing Indian carrier as India relaxes its rules on foreign ownership. The question remains as to whether Emirates can continue to buck the trend.

Courtesy Etihad Airways

Courtesy Etihad Airways


Etihad Airways

Etihad on the other hand has been acquiring stakes in foreign carriers besides a list of code-share partnerships that include Air France, American Airlines, All Nippon Airways and Cyprus Airways. The cash rich Gulf carrier partially owns Air Berlin (29.21%), Air Seychelles (40%), Aer Lingus (2.987%), Virgin Australia (10%), Jet Airways (24% – to be formalized), Jat Airways which has been renamed Air Serbia (49%), Darwin Airline which has been renamed Etihad Regional (33.3%) and Alitalia (49%). Some of those airlines have been shrouded in financial problems, such as Jet Airways of India and Italy’s flag carrier Alitalia which is already partially owned by Air France-KLM. In the case of Virgin Australia, Etihad also shared ownership with two other foreign carriers – SIA and Air New Zealand.

While code-share partners do little more than allowing airlines to sell seats on each other flights, equity alliances play a more forceful role for partner airlines to feed traffic into each other and provide seamless transfers in an extended network. For the ailing airline, Etihad is the white knight. For Etihad, it proffers the opportunity for growth via a third party. Alitalia, which is reeling in debts of about 800m euros (US$1.1bn), is looking to further injection of capital by Etihad to not only save it from the brinks of bankruptcy but also growth from then on. Italy’s transport minister Maurizio Lupi was elated by the deal. He said: “It’s increasingly clear that this marriage should happen because it’s obvious to all that we are dealing with a strong industrial investment that will offer our airline concrete growth prospects.” Someday Air France-KLM might wish it had enough gumption and money to raise its stake of 25% which has as a consequence dwindled to 7%. But Air France-KLM chief executive Alexandre de Juniac said Alitalia was not a priority at the moment. Still, Mr de Juniac viewed Etihad’s investment “with favor”, adding that the doors to KLM-Air France raising its stake were not closed.

Courtesy Qatar Airways

Courtesy Qatar Airways


Qatar Airways

Qatar is the only airline among the three Gulf carriers that has joined a global alliance, in its case OneWorld, whose members include Qantas, British Airways, American Airlines, Cathay Pacific and Japan Airlines. At its induction in 2013, Qatar chief executive Akbar Al Bakar said: “Alliances are playing an increasingly important role in the airline industry today – and that will continue long into the future. Becoming a member of OneWorld… will strengthen our competitive offering and give our customers what they fully deserve – more choice across a truly global network served together with airline partners.”

That is the ideal scenario, but in reality airline relationships are more complex than that. Without downplaying the benefits of global alliances such as wider network connections, shared facilities (Qantas/British Airways/Cathay Pacific premium lounge at Los Angeles Airport) and a dedicated terminal to enhance coordination (London Heathrow’s terminal 2 for Star Alliance members), member airlines have also entered into bilateral agreements across alliances. It is not uncommon to find rival airline connected in some way through a third party. Perhaps, in this context, lies the reason why Emirates and Etihad have so far not been convinced of the need to join any of the global alliances.

Whatever the strategy adopted by the Gulf carriers as they compete for world dominance, they have become daunting forces in the global market. Lufthansa’s new man at the helm Carsten Spohr has identified the competition posed by Gulf carriers as a major concern in Europe. In Asia, SIA is facing increased pressure from Gulf carriers tapping into its traditional market for traffic between Europe and Asia-Pacific and on the kangaroo route. While they have the means and resources to cut a product above the competition, it is their increased popularity that worry more their rivals, which will be relieved to see the Gulf carriers shifting their energies to outdoing each other instead, for the time being, in pushing the limits for the best Residential suites in the sky.

This article was first published in Aspire Aviation.

Emirates’ Airbus order cancellation raises questions

Courtesy Airbus

Courtesy Airbus


THE cancellation of an order for 70 Airbus A350 aircraft amounting to US$16 billion (based on 2007 list prices) by Emirates Airlines has turned the focus on the Airbus company. In an obvious attempt to play down the drama, Airbus chief operating officer (customers) John Leahy said: “It is not the world’s greatest news.” That did not check Airbus shares from falling 3.7 per cent and engine maker Rolls-Royce by 1.7 per cent on the back of Emirates’ decision. Mr Leahy even brushed it aside as if it was something to be expected, adding that Emirates president Tim Clark “does change his mind from time to time.”

In truth, airlines do change their mind about aircraft orders. In 2012, Qantas cancelled orders for 35 Boeing Dreamliner jets worth US$8 billion following a net loss of US$256 million – its first annual loss since 1995 when it was privatised – and expected lower growth requirements. The Australian flag carrier is keeping its fleet options open. Qantas CEO Alan Joyce said: “We will maintain complete flexibility over the fleet.” He explained: “In this business there is always potential for great headwinds and tailwinds… there is no intention that every aircraft is guaranteed to come or that it’s not going to come.”

Only very recently did budget carrier Tigerair – which is 40-per-cent owned by Singapore Airlines – also cancel orders for nine Airbus A320 aircraft in light of perceived overcapacity in the region of its operations.

But a decision by Emirates which is not in the same financial straits as Qantas and Tigerair must raise questions even as Mr Leahy insisted that he was “not particularly worried at all.” To suggest that it was a whim of Mr Clark was quite unwarranted. But Airbus did express its disappointment. Apparently, Emirates’ decision followed ongoing discussions between the two parties as the airline reviewed its fleet requirement. In fact, Emirates has ordered an additional 50 A380 aircraft.

Courtesy Airbus

Courtesy Airbus

So, naturally, we ask the big “Why?” and speculate on the ramifications of that decision.

Is Emirates dissatisfied with the aircraft model?

Allegedly Emirates is unhappy with particularly the performance of the A350-1000 model, which makes up 20 of the 70 aircraft orders, the others being the A350-900 model. Even as Airbus said Rolls-Royce was working on the upgrade, the writing was already on the wall when in November 2012, Mr Clark told Aviation Week that Emirates’ order for the aircraft was in limbo, and that the A350-900 “is starting to look a bit marginal to us because of its size.” That provided another perspective to the issue – one of suitability. Mr Clark explained: “Gauge is the way we grow, you cannot get any more aircraft into the Dubai hub.”

Has Emirates over-estimated its growth capacity?

The focus is so much on Airbus that it has become convenient to not ask any question that may suggest that Emirates’ decision is driven by more an internal than an external situation, or at least in part due to it. It is almost unthinkable in light of Emirates’ sterling performance when it posted a 43-per-cent increase in profit to Dh3.3 billion (US) for financial year 2013-14. According to Emirates chairman and chief executive officer Shaikh Ahmad Bin Saeed Al Maktoum, the airline’s profit margin was more than double that of the industry, the result of flying 44.5 million passengers – up 13 per cent – and close to a 80-per-cent load factor. It was a year of expansion as the airline increased its capacity for both passenger and cargo, and as it added new destinations across the globe.

By all accounts it does not look like Emirates is about to stop expanding, or even slowing down, despite the revised forecast by the International Air Transport Association (IATA) that showed astagnation in profitability for the industry in Africa and a dip for all the other regions with the exception of North America. Of course, the state of the industry does not necessarily reflect the fortune of Emirates, which in the past year has experienced healthy growth in all the regions that it operates. Still, the question must be asked: Has Emirates over-estimated its growth capacity, noting too the limitations of Dubai Airport? To be sure, the airline will continue to expand, having announced plans to add five new routes to Abuja, Brussels, Chicago, Kano and Oslo, but perhaps at a slower rate. It could be in this context that Shaikh Ahmad recognized the need for “efficient new aircraft” amongst other things to sustain profitability,

Will Emirates’ decision affect other airlines’ orders?

Courtesy Airbus

Courtesy Airbus

Emirates’ decision raises questions on the impact it may have on other airlines with similar orders, more notably the Gulf carriers namely Etihad Airways (with an order for 40 A350-900s + 22 A350-1000s) and Qatar Airways (43 + 37). Besides Etihad and Qatar, airlines that have placed orders include Air France-KLM (25 A350-900s), Aer Lingus (9 A350-900s + 9 A350-1000s), Aeroflot (14 + 22), Air China (10 + 10), AirAsia X (10 + 10), Asiana Airlines (12 +10), Cathay Pacific (20 + 26) and Japan Airlines (18 + 13). But Mr Leahy of Airbus was confident that other airlines would take up the slots vacated by Emirates. He maintained that there would “no hole in production” and therefore no impact financially since the first deliveries were only planned for 2019 and spanned out to 2034.

Is Emirates setting the stage for heightened competition between Airbus and Boeing?

This is not a new story about the rivalry between Airbus and Boeing, but more a reminder of it. It is all the more significant when Emirates is the world’s largest operator of the Boeing 777 and Airbus A380 in a fleet of 217 aircraft. In 2013-14, it received 24 new aircraft including 16 A380s, six Boeing 777-300ERs and two Boeing 777Fs. If there is a customer that both manufacturers want to please most, it has to be Emirates. Airbus is unlikely to let Emirates’ concerns go unattended even though the latter had cancelled its order; that will become history. For Airbus, it is more than just about losing an order. More importantly, it is about the competition with Boeing. Clearly, he who pays the piper calls the tune.

It was by the size of Emirates’ order a big deal after all, and Emirates is one of the world’s leading airlines. Mr Tim Clark may well have the last laugh.

Checked baggage: ANA compares poorly

Courtesy Reuters

Courtesy Reuters

IF you expect some flexibility in your checked baggage allowance, you may get it at some airports, but do not take your chance with All Nippon Airways (ANA).

A family of three travelled from Singapore to Vancouver via Tokyo (Haneda) on ANA, each with one piece of checked baggage. At Singapore, they were allowed a combined weight of up to 23 kg each. Returning from Vancouver, one bag was 2 kg above the 23 kg limit but they were not allowed to combine the weights of the three bags even though the other two bags were way below the individual bag`s limit. They were told to pay the excess fee, or get rid of stuff from the bag in question, or be prepared to be offloaded. All the bowing and words of apology from the Japanese supervisor could not convince them to ever again book on ANA. Besides, they had found out that compared with other airlines such as Singapore Airlines, Cathay Pacific and Air Canada, they had a bad deal for the fare that they had paid in addition to the long stopover of five hours at Haneda Airport on the return leg.

Although there are published standards by universal conventions, air travellers are often confused by the varying practices even by the same airlines at different ports. A number of airlines, principally those operating from the United States, have moved away from the traditional complimentary free two-piece for economy to only one-piece and even none in the case of many domestic services. Charging for the second bag and excess weight has become a lucrative revenue source along with other ancillary services. There is also the confusion between the piece and weight concepts, and for travellers that switch airlines en route, the problem is compounded by different airline practices. “No problem” at a previous port does not guarantee the same concession at a latter port.

Then there is the industrial issue of baggage handlers at certain airports being protected by union regulations from lifting bags that exceed a certain weight, generally cut off at 32 kg. There have been instances of such bags being repatriated to the culprit station. Do not think that you can escape that clamp-down with self-check-in and bag drop; at Vancouver International Airport, for example, the weight is automatically read before the bag disappears down the chute and the handler is ever ready to take it off it is found to be overweight.

Except for travel to and from or within the United States which uses the piece concept, many airlines still practice the weight concept. The latter is more prevalent with airlines that operate to and from Asian destinations. At a time when competitor airlines such as SIA, Cathay and Malaysia Airlines are using generous baggage allowances to lure customers, ANA compares poorly. Compared to ANA’s only one piece up to 23 kg for economy, other airlines including Cathay, SIA., Air Canada, Qantas and home rival Japan Airlines allow two pieces up to 23 kg each on flights to North America.