Air New Zealand leads the pack

Courtesy Air New Zealand

Courtesy Air New Zealand

Air New Zealand is the world’s best airline according to AirlineRatings.com based on criteria that include fleet age, safety, profitability and leadership in innovation for passenger comfort. The agency’s Airline Excellence Awards program which lists the winning airlines is endorsed by the International Civil Aviation Organization.

Many travellers would recognize ANZ for its attention-grabbing in-flight safety video that takes them into Middle Earth, the kind of out-of-the-aircraft features that a few other airlines have tried to imitate but fared only poorly. AirlineRatings.com Editor-in-Chief Geoffrey Thomas said: “Air New Zealand came out number one in virtually all of our audit criteria, which is an exceptional performance.” The airline was favoured for its record-breaking financial performance, award-winning in-flight innovations, operational safety, environmental leadership and motivation of its staff.

Skycouch: Picture courtesy Air New Zealand

Skycouch: Picture courtesy Air New Zealand

But, of course, there are surveys and there are surveys that publish their own lists of favourites. Some airlines such as Singapore Airlines (SIA) and Cathay Pacific have a ubiquitous presence, and there also notable absences. This is where it is most telling, bearing in mind that the ranking is dependent on several factors such as the excellence-defining criteria and the population surveyed.

The other nine airlines ranked behind ANZ in the top ten list by AirlineRatings.com are in descending order: Qantas, SIA, Cathay, Virgin Atlantic, British Airways (BA), Etihad, All Nippon Airways, EVA Air and Lufthansa.

It is interesting to note that the top two airlines come from the remote Southwest Pacific. Qantas has in recent years been working on upgrading its product offerings, winning accolades for catering and airport lounges. Not surprisingly, innovation along with good service seem to be the driving winning streak going down the list – SIA and Cathay for their premium economy and revamped business classes, Virgin for its cabin ambience and friendly crew, BA for its leadership in in-flight entertainment, and Etihad for its equally impressive service in front and at the back of the aircraft.

Notable absences in the list are US carriers (no surprise there) and two of the big three Middle-East carriers (Emirates and Qatar).

Many survey rankings are skewed by the weight they place on service in the premium classes. However, Mr Thomas of AirlineRatings.com said: “We are looking for leadership and airlines that innovate to make a real difference to the passenger experience particularly in economy class.” Considering that the majority of travellers are seated in coach, it is time that airlines crowned with the halo of excellence pay more attention at the back of the aircraft, for this may well make the difference as the competition intensifies. And, it is where the differentiation becomes even more challenging. Perhaps too, this could be the reason why Emirates and Qatar, known for their lavish premium service, did not make it to the top ten of the list.

Another Virgin on the rocks

Courtesy Virgin Australia

Courtesy Virgin Australia

THE name Virgin is ringing in the air. Following on the heels of Alaska Airlines paying US$2.6 billion for Virgin America, wrenching the bid from rival JetBlue Airways, Singapore Airlines (SIA) announced it has increased its stake in Virgin Australia form 22.91 per cent to 23.11 per cent at a cost of A$3.18 million (US$2.39 million). SIA has approval from Australia’s Foreign Investment Review Board to increase its stake to 25.9 per cent.

Air New Zealand, the largest shareholder of Virgin Australia with a stake of 25.89 per cent, said it was considering an exit to focus on other growth areas. If SIA takes up its full allotment, it will be a larger partner than Etihad Airways, which owns about 24 per cent of the Australian carrier. The Virgin Group holds only a stake of about 10 per cent. There is speculation that SIA is poised to go higher, subject to approval from the relevant Australian authorities.

History repeats itself. SIA’s relationship with the Virgin Group goes as far back as 1999 when the Singapore carrier made headline news buying 49 per cent of Virgin Atlantic at a cost of £600m (US$844 million). What then appeared to be a coup turned out not be a lemon, which after years of lacklustre performance, was sold to Delta Airlines at a hefty loss in 2014 for £224m.

Yet the circumstances today might be a little different. SIA feels more pressured to secure its Australian market against national carrier Qantas. Together with the other partners, SIA is a contributor to an A$425 million loan to Virgin Australia to keep it above waters. While Virgin’s trans-Pacific flights to the US would accomplish a dream long in the making for SIA, it is not as imperative as it was then when it had hoped Virgin Atlantic would augment its trans-Atlantic foray into the US east coast. It could be worse if Air New Zealand’s stake in the Australian carrier falls into the hands of competing rivals that may threaten SIA’s wider market beyond Australia.

SIA paid dearly for the increases take in Virgin Australia at 46.72 cents per share which is well above the current price of 35.5 cents. So it is said that Alaska Airlines too paid a high price to take over Virgin America, which will enlarge Alaska’s west coast market and give it access to the east coast. Virgin chief Richard Branson proudly admitted: “They paid a high price for a great brand.” Indeed, Virgin America, voted consistently as the country’s best airlines in the past four years, could add to Alaska which itself is known for providing consistently good service at reasonable fares. Somehow Virgin Australia has tried hard but with not as much success as expected to bite off Qantas’ 80 per cent market share. How much more can SIA contribute, noting the struggle of erstwhile Tigerair Australia?

SIA and Virgin are reputable brand names. While there is a chance that they can build on each other’s strength, there is no guarantee that the chemistry will work twice as well.

Which Asian airlines might be interested to buy into Virgin America?

Photo courtesy Virgin America

Photo courtesy Virgin America

UP for sale, Virgin America has some suitors lining up. It has received takeover bids from JetBlue Airways Corp and Alaska Air Group Inc. In this era of the mega carriers (consider the mergers of United Airlines and Continental Airlines, Delta Air Lines and Northwest Airlines, and American Airlines and USAir), a tie-up with another carrier strengthen Virgin’s competitive ability. And while it is almost certain that the merger would be with another American carrier, with analysts placing bets on JetBlue as the best fit, apparently some unidentified Asian carriers have also expressed interest. Still, be that as a remote possibility, one cannot help but be curious and speculate who the likely candidates might be.

Two big names come to mind immediately because of their successes, networks and financial capability, namely Cathay Pacific Airways and Singapore Airlines. Both airlines are keen on expanding their US market. Cathay flies to Boston, Chicago, Los Angeles, New York and San Francisco while Singapore Airlines (SIA) operates to Houston, Los Angeles, New York and San Francisco. Both airlines have codeshare access to several other destinations. Cathay’s codeshare partners include Alaska Airlines and American Airlines while SIA already codeshares with Virgin and with JetBlue.

So it looks like SIA more than Cathay would be favoured on relationships alone. Since foreign ownership rules governing US airlines require the bid to be submitted jointly with a US partner. It would be convenient for SIA to join hands with JetBlue. Of course, Cathay may partner Alaska Airways, but historically Cathay is not quite interested in equity participation. Although it has a 20.3% stake in Air China and 49% in Air China Cargo, that could be a matter of expedience to secure its market in the growing China mainland market.

SIA on the other hand, limited by a hinterland market, tried in its early years to grow through acquisitions. In 1999, it bought 49% of Virgin Atlantic and subsequently 25% of Air New Zealand. Although both buys subsequently proved to be lemons, resulting in heavy losses, the misstep might be less strategic than circumstantial. Unfortunately that has hurt SIA deeply more psychologically than financially as the airline became more cautious about such moves. In subsequent years it failed in its seemingly reluctant bid for a stake in China Eastern Airlines, and the SIA Group was plagued by the poor decisions of its budget subsidiary Tigerair in joint ventures in Indonesia and the Philippines. In Oct 2012 SIA bought a 10% stake in Virgin Australia, joining tow other foreign partners namely Air New Zealand and Etihad Airways. In much the same way that Cathay needed to secure its market in China partnering with Air China, SIA needed to secure its Australian market against the competition by Qantas. Six months after, SIA increased its stake to 19.9%.

But is SIA even interested in a stake in Virgin when its codeshare partnership with JetBlue already places it in an advantageous position to benefit from a JetBlue takeover of Virgin? Would a bid jointly with an Asian partner jeopardise JetBlue’s chances if the powers that be preferred an all-American merger a la the big three of United, Delta and American?

Besides Cathay and SIA, one should not ignore the voracious appetite of the China carriers in the national trend to acquire foreign assets. And why must it be premised on full-service carriers that are already serving destinations in the US? What about a budget carrier with dreams of new frontiers? Maverick AirAsia chief Tony Fernandes who models himself after Virgin guru Richard Branson and who had been where others were hesitant, even afraid, to go may yet surprise with an expression of interest even if it is no more than just that. He is one of the few airline chiefs who, like Ryanair’s Michael O’Leary and Qantas’ Alan Joyce, understood what an opportune good dose of publicity could do.

All this, of course, is speculative. Asian carriers are likely to be less concerned this time than when the mergers of the American big three took place. Together with Southwest Airlines, the big three control 80% of the American market. Virgin and its alleged interested parties JetBlue and Alaska are all largely domestic carriers. Even if Southwest throws in a bid (but for its size that may not pass the antitrust law as easily), it is still the same scenario. SIA’s connections with JetBlue and Virgin will continue to stand it in good stead, but if it’s Alaska that carries the day, then it is Cathay that stands to benefit from the new, extended connection. Or does it really matter when there are already subset agreements across partnership lines that allow you to fly an airline of one alliance and connect on another in a rival group? That’s how complex today’s aviation has become.

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.

Scoot to go where others failed

Courtesy AFP

Courtesy AFP

IT will happen, as it must. So it seems, but a matter of time. Scoot, the medium to long-haul low-cost subsidiary of Singapore Airlines (SIA) has made known its intention to extend its network to possibly include a destination as far away as London from Singapore. After all, London is a prime destination for SIA, and one that has helped it flourish in its early days, so it should be an encouraging start for Scoot to test the budget long-haul.

Scoot chief executive Campbell Wilson said: “The West is definitely on our cards.” Lest, you forget by definition it is a medium to long haul low-cost operator and think its fortune is confined to regional flights. It is eyeing the Middle East up to London.

Never mind the failure of others that tried, most memorably Hong Kong’s Oasis Airlines that inaugurated its route from Hong Kong to London in October 2006. The budget airline added Vancouver in June 2007, and won several awards that year including “World’s Leading New Airlines: and “Asia’s Leading Budget Airline” at the Annual world Travel Awards. But barely into its third year, it folded its wings in April 2008.

Another low-cost carrier that faced a similar fate was Canada’s Harmony Airways that ventured beyond North America from Vancouver to Manchester (UK) and planned to expand into Asia, eyeing in particular the China market. That was not to be, when the airline collapsed in 2007, three years after it repositioned itself for the long-haul.

More recent and closer to home is AirAsia’s subsidiary AirAsia X in yet another attempt to keep budget pioneer Freddie Laker’s dream alive. In fact, its first aircraft was named “Semangat Sir Freddie” (“Spirit of Sir Freddie”). The budget carrier operated from Kuala Lumpur to two European destinations – London and Paris, connecting traffic from other destinations such as Melbourne – which it has since suspended, together with others, but it continues to operate some shorter hauls. Parent airline AirAsia is unlikely to admit to its offshoot’s failure as being final as its chief Tony Fernandes had said it planned to return some day.

So is Scoot going where angels fear to tread or where the brave dare not go to prove it is not an impossible dream after all?

On a more optimistic note, it is certainly a welcome breath of the erstwhile spirit and vigor that characterised the success of SIA when as a new airline it quickly became the world’s most envied operator that could do things that others were reluctant or afraid to consider. Indeed, it is difficult to think of Scoot without parent SIA – a quiet overshadowing that sibling SilkAir has for years tried and still does to dispel, and into which increasingly 55-per-cent owned Tigerair is moving. While pedigree connections cannot guarantee success, experiential wisdom is not something to be scoffed at. The issue is also one of relevance. SIA is very much a premium carrier that has been pushed into venturing into the lower end by increased competition from low-cost carriers and by peer rivals that have sprouted budget subsidiaries, a good example being Qantas and its budget subsidiary Jetstar.

There are questions: Is the SIA stable getting a little crowded with intra competition even as Scoot and Tigerair now claim they are performing better with cooperation? Scoot and Tigerair will soon be combining their reservations systems. Can SIA define the market such that they do not overlap and that it merely shifts the business from one pocket to the other? The move seems to be towards more commonality. SIA’s Krisflyer perks are now open to customers of subsidiary carriers.

And the big question: Is it Scoot in its own right flying to London or is the operation under the SIA banner, the way it is so difficult to tell AirAsia X from parent AirAsia? But then, AirAsia is itself a budget carrier. Nevertheless, the bet is likely to favour the probability of SIA (driving Scoot) succeeding if anyone should finally succeed in the budget long-haul.

This is not forgetting that SIA itself has not had lemons in its basket – its failed stake in Air New Zealand, its lacklustre investment in Virgin Atlantic, and the premature termination of its all-business class flights. While its slow entry (or re-entry if you consider the short-lived non-stop Los Angeles and New York runs) into the premium economy (PEY) market may have been the result of an over-cautious retreat, its performance thus far may have also emboldened it to take a more adventurous approach. Additionally, the PEY is doing well on the Vistara joint-venture in India, even as Cathay Pacific, a forerunner of the new PEY, has decided to take it off Indian routes.

Besides, the climate for expansion is encouraging. Mr Wilson said: “We are on an upward slope towards profitability. We see yield maturity building over time and we are observing that across our routes.” The SIA Group has just announced Q1 (Apr-Jun) profit of S$111 million (US$81 million), an increase of S$72 million. Parent SIA made a profit of S$108 million compared to S$45 a year ago. Tigerair broke even. And Scoot recorded an operating loss of S$20 million, an improvement of S$5 million over last year. Passenger load factor for Scoot increased 2.9 percentage points to 81.4% on the back of increased passenger carriage by 11.0%, far exceeding the 6.9% capacity injection. And, of course, the industry is blessed with the continuing low costs of jet fuel.

What about the competition? Without any indication of AirAsia X’s resumption of the long haul services, Scoot has a pretty much open field although Norwegian Air Shuttle operates from Oslo and Stockholm to Bangkok. In fact, with airlines such as Garuda Indonesia offering low fares to London in the attempt to retain direct traffic between Indonesia and the UK, Scoot may become the alternative SIA in the competition. Mr Wilson said: “We might be a bit more niche when it comes to long-haul operations.” Generally, the budget market is driven by the dollar, and the niche factor, whatever Mr Wilson meant by it, may make the difference. But note how many a budget operator that came and went had always maintained that they were not like the others, and that too may be predicated on the expectations of long-haul travellers.

Nevertheless, it is invigorating news although Mr Wilson said the plan “is not immediate but it is not something we are closed to.” It has been almost 50 years since Sir Freddie founded Laker Airways in 1966, and it is still a field where few dare venture. We wish Scoot good luck when it finally happens, and hope it succeeds.

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.

Qatar Airways nets a prized catch, expanding westwards

IT may seem somewhat crazy, but it is definitely not surprising in today’s aviation landscape of fast changing and crisscrossed relationships, some of them making most unlikely bedfellows. The ends justify the means.

Courtesy British Airways

Courtesy British Airways

Qatar Airways has acquired a 10% stake in International Airlines Group (IAG), better known as the owner of British Airways (BA) and Iberia. IAG also owns Spanish budget carrier Vueling. The act of acquisition itself by the cash-rich Middle East carrier does not surprise. Qatar lags behind rival Etihad Airways in this respect; Etihad already owns Alitalia (49%), Air Serbia (49%), Air Serbia (49%), Air Seychelles (40%), Etihad Regional (formerly Darwin Airlines) (33.3%), Air Berlin (29.21%), Jet Airways (24%), Virgin Australia (10%) and Aer Lingus (2.987%).

But coming lately, Qatar has bagged a prized acquisition, considering IAG’s bases at two major European hubs, in particular London Heathrow, and the strong transatlantic networks of BA and Iberia. Qatar chief executive Akbar Al Baker said: “IAG represents an excellent opportunity to further develop our westwards strategy.” It should be a strong partnership. Together, their networks cover Europe, North and South America, Africa, the Middle East, India and Southeast Asia.

In 2013 Qatar became a member of OneWorld, becoming the only one of the big three Gulf carriers to join a global airline alliance. More than an apparent Qatari interest in things British, this was a step forward to forge a closer relationship with BA. Qatar said it may increase its stake in IAG for which it paid £1.15 billion (US$1.73 billion). However, EU regulations have placed a cap on non-EU ownership at 49%.

Courtesy Qatar Airways

Courtesy Qatar Airways

Quite unlike Etihad, which has entered the arena as a white knight in many cases, Qatar is buying into one of Europe’s more profitable outfits. Clearly it is a strategic move. While European carriers are becoming wary of Gulf carriers making inroads in the EU market, the competition is at the same time a race among the big three Middle East carriers themselves- Qatar, Etihad and Emirates Airlines. This has become all the more prominent in recent years as they out-compete each other within their region and seek aggressively to push out their geographical boundaries, leveraging on the success of home bases such as Dubai, Abu Dhabi and Doha as hubs for international traffic connecting Asia Pacific, Europe, Africa and the Americas.

The rivalry for supremacy is clear in a jibe made by Mr Al Baker on the race to top the chart for extreme luxury in the air, something that carriers outside the Gulf are less disposed to think about at the same level. He said: “We always raise the bar for our dear friends around the area to try to copy us.” (The big deal about extreme luxury, Jan 19, 2015)

Courtesy PA

Courtesy PA


The timing could not have been better for Qatar as IAG looks likely to succeed in a new takeover bid of Irish carrier Aer Lingus after two failed attempts previously. This would gain IAG more take-off and landing slots at Heathrow. What is interesting is the composition of Aer Lingus partners, which include Ryanair (29.8%) and Etihad. Any opposition to the deal is likely to come from the Irish government which owns 25% of Aer Lingus, but it may be a price well worth paying for the crucial air links between cities in Ireland and Heathrow as the world’s largest hub (until topped by Dubai recently) and beyond. Ryanair has itself attempted unsuccessfully to take over Aer Lingus and objected vehemently to IAG’s proposal in the past for reasons that are not difficult to see. IAG’s chief executive officer Willie Walsh and Ryanair’s chief Michael O’Leary are not exactly the best of friends. But if money talks, the latest offer of €1.3billion (US$1.47 billion) by IAG may well carry the day.

Airline relationships in today’s industry are more complex, if not blatantly promiscuous. While global alliances offer the broad framework for cooperation, it is not uncommon to find rival airlines connected in some way through a third party. The numerous cross-border codeshare arrangements are testimony to the multi-faceted connections. Less than half the world’s airlines belong to any of the three global alliances: Star (27 members), SkyTeam (20 members), and OneWorld (15 members). Although many major carriers are already members, there are notable exclusions such Virgin Atlantic (although CEO Richard Branson who made an about turn in 2012 announcing Virgin might join one of the alliances soon) and the other two of the big three Gulf carriers Emirates and Etihad. While Aer Lingus itself is unaffiliated, and so are part owners Ryanair and Etihad, IAG’s influence cannot be precluded although it has said Aer Lingus would continue to operate independently.

It is best to adopt a detached view of the business. Alliance membership may but not necessarily suggest a like-mindedness that brings friends to the same table. There is no reason why friends and foes alike may not put their money in a common proposition that will help further their respective positions. OneWorld membership may have eased Qatar’s way into the IAG stable, making it easier for Mr Walsh to be “delighted to have Qatar Airways as a long term supportive shareholder.” Not sure if he would be any less delighted if it had been Emirates or Etihad. But for Qatar, as part owner of IAG which is set to take over Aer Lingus, it is stealing a march on rival Etihad.

This article was first published in Aspire Aviation.