05.30.2008 | 10:43 am | Flight Comparison
It hardly seems like a second ago that the directors at business travel airline Silverjet were jumping up and down with relief that they had found a benevolent sugar daddy in the shape of UAE based investment company Viceroy. The company agreed to provide additional capital to see the airline through a troubled patch, in exchange for a substantial stake in the business.
However, the deal which was supposedly worth up to £50 million has floundered at the first hurdle after an initial payment of just £2.5 million was not made.
The situation is shrouded in mystery and, while many people had expressed their surprise when the deal was first announced, it seemed to have been signed, sealed and delivered. The shares were traded on the London Stock Exchange and the future of the group seemed to be secure. The airline directors were surprised when a request for part of the drawdown fund didn’t arrive last week despite repeated requests.
Even just last week the directors at Viceroy were still suggesting that the money would be available soon but just what happened is unknown. After another round of desperate talks with industry heads and external investors, Silverjet management was forced to ground the airline’s operations and suspend dealing in shares on the London Stock Exchange. While many believe that this is not the end of the story, it is the end of the road for Silverjet who have no funds available to continue the business.
Even if there is some recourse in the courts due to the lack of funding made available, it is too little too late for the airline. Another specialist business class airline bites the dust…
05.29.2008 | 10:14 am | Flight Comparison
A potential scandal has materialised in the form of the air which is filling the aircrafts in which we travel. A number of unconfirmed sources have approached the UK regulator over the quality of air pumped around aircraft as they fly passengers to and from the UK. As the story was breaking, a number of cabin crews came forward with claims that there have been a number of instances of ‘unclean air’ onboard some flights. While it is the Boeing 757, Airbus 319 and BAe 146 which have been mentioned as the main culprits, these are by no means the only aircrafts involved. So what is happening?
The UK Department for Transport has become involved, announcing plans to implement a thorough review of inflight air quality. While the main complaints seem to revolve around the cabin crew and the potential effect on their ability to fly the aircraft, the DfT will also look into the general situation. They are set to initiate a number of exercises to measure the quality of inflight air on five unnamed airlines. The results of the review will be released but the names of the airlines which took part will remain confidential.
This is the first time that there has been official involvement in the issue of cabin air. If any basis is found for the complaints, the airlines will be forced to undergo lengthy and expensive modifications to their aircraft at a time when money is tight. Quite what will happen in the future is unclear but it seems that we are in for another period of uncertainty in an industry which is already suffering.
05.28.2008 | 11:31 am | Flight Comparison
As the airline industry continues to tighten its belt, US Airways have announced today that they will be ending the tradition of free snacks on domestic flights. As of 1st June passengers will need to buy their snacks onboard with US Airways looking to reduce costs and increase income streams across the board. This is only the early stages of what looks to be a major overhaul of pricing and large scale changes in the airline industry.
When you consider that US Airways operate 3,800 flights a day to 230 destinations around the world, bringing in $11.7 billion in revenue and $427 million in profits in 2007, they may well have a lot of costs which they can cut!
While we have mentioned this in a number of posts over the last few months, the airline industry which went into the worldwide recession will not be the same as the one which appears at the other end. A number of smaller well-known companies have bitten the dust, and more and more of the larger ones are cutting out the luxuries from their services.
Will the industry be fitter? Will the industry be leaner when the economy starts to recover?
Even though there has been a great deal of cost cutting over the last few months as well as a number of price hikes, this is very much still the tip of the iceberg. The next stage will see corporate banks starting to turn the screw and asking companies to protect and strengthen their income streams. The airline industry needs the support of corporate banking more than ever at this stage of the economic cycle and the banks are very much calling the shots.
05.27.2008 | 6:41 am | Flight Comparison
It may have taken Willie Walsh to come out and say what the rest were thinking, but is he really right to call an end to the era of cheap flying? Should he be calling into doubt the future of budget airlines? Or is he just trying to improve the reputation of British Airways after the recent debacles?
Whatever reason Willie Walsh had to come out and call an end to the era of cheap flying, he does have grounds to make such a call. Oil has never been higher and looks like move further up in the short term, airport and flight tax increases seem to be never ending and passenger numbers are falling with the worldwide economy.
The business model behind the budget airlines has always been high volume and low margins with a view to attracting as many customers as possible. They have also taken advantage of the internet and the low cost base model which it has brought to the flight industry. Add some very clever marketing and it’s easy to see why this could all unravel fairly quickly as prices continue to rise and passenger numbers fall. But is this just a phase the industry is going through?
At the moment it seems that the days of oil around even the $50 a barrel level have long gone and there is no reason why it should fall back to anywhere near that level in the short to medium term. The massive rise in the price of oil over the last decade has placed more and more pressure on the budget airline business model and seen many of the weaker companies struggle. However, that is not to say there is no space for some of the larger budget airlines - the ones who can still undercut the major companies and make a profit.
The next few years will be tough. We may see some well known names disappear but predictions of the death of the budget airline industry are a little premature.
05.22.2008 | 9:58 am | Flight Comparison
In a move that was always going to happen, it emerges today that American Airlines will be cutting flight numbers by 12% between now and the end of the year. As well as the flight cuts the company has also announced the introduction of a $15 surcharge for each bag checked in prior to travel. The squeeze is on and the airlines are desperate for your money!
As oil hits $135 a barrel the chase to secure as much income as possible goes on with more and more airlines across the world ready to cut back on flights and introduce a number of surcharges. The move towards bag surcharges is a break from the standard system whereby customers were able to check in two flight bags free of charge. While American Airlines has introduced a surcharge per bag, most other airlines have chosen to charge $25 for the second bag which you check in, leaving the first one free at the moment.
Many people are annoyed that the introduction of these surcharges has come at a time when families around the world are getting ready for their holidays. The vast majority have already booked up and paid and now face being hit with another charge upon their arrival at the airport. There have even been instances in the UK where travellers who have prepaid their holiday travel have been asked to contribute to the increased cost of fuel.
At a time when the industry needs to be attracting and retaining customers is seems as though the need for income and new funding is more important at this moment in time. While the surcharge may seem fairly small, can you imagine how much additional income it will produce over one year?
As the airlines turn the screw on passengers, will the regulators step in to protect the rights of passengers?
05.21.2008 | 9:39 am | Flight Comparison
At a time when airline industry costs are being cut and customers are leaving in droves, it’s refreshing to hear about Wizz Air and the success the company is enjoying in Eastern Europe. Wizz Air seem to have latched onto one of the only real growth markets in the aviation industry. But who is travelling to Eastern Europe, and what are the numbers like?
Accordingly to Wizz Air a total of 4.2 million passengers booked tickets for their Eastern European routes in 2007, an increase of over 40% on the 2006 figure. Interestingly the company expect to top the 6 million mark this year even in the present economic environment. It seems as though the area is under siege from both tourists and property developers alike, with more people now open to the attractions of places like Romania.
Many of the old Communist bloc countries have recently broken free of the Soviet Union with more and more looking to enter the European Union. Not only does membership of the EU guarantee increased visibility on the world stage, it can also mean hundreds of millions of pounds to spend on internal development. Aa massive chunk of EU funding seems to go towards improving what have often been neglected infrastructures and links with the outside world, with a direct benefit to the airline industry as new airports are built and old ones modernised.
Even though the pound has fallen recently against the likes of the Euro, many of the Eastern European countries have not yet adopted the European currency and the pound has faired reasonably against their local money. More and more people seem to be looking elsewhere for their holiday ventures, towards new and exciting areas of the world which are untouched by the West - places that Wizz Air have been targeting for some time!
05.21.2008 | 4:44 am | Flight Comparison
In a move which many airports around the world may be forced to copy over the next few years, the Australian authorities are toying with the idea of introducing US style travel cards to speed access through airports and ensure that there are as few security risks as possible. This seems to have been triggered by the evacuation of Brisbane airport last month due to a high level security risk.
As we have seen in the UK on a number of occasions, it only takes one possible security risk to bring the whole industry to its knees. The merest hint of a security problem can cause havoc and have a knock-on affect to other areas of the country and the world as a whole. So what exactly are the Australian authorities proposing?
It looks as though they may go down the fingerprint or iris scan route, with special cards holding other data about a person’s flight records, personal details and other data which may be relevant. The system will be based upon the US equivalent, if it actually reaches the market, and will cost the Australian travel industry a substantial amount of money.
A recent survey found that 98% of those who used Australian airports believe that the current security system could be improved. While this is not to say that the Australian authorities have not made great strides already, the general opinion is that the task is not yet complete.
However, will this 98% of the travelling population feel the same when they need to foot the bill for ID cards? Will they be as keen to put their hands in their pockets and cover what may be a substantial cost? Are we seeing the second wave of tightened security measures in the airline industry? Only time will tell.
05.19.2008 | 5:51 am | Flight Comparison
In a surprising move, British Airways is taking the unusual step of grounding part of its fleet in order to cut back on costs. When you consider the cost of the planes and the cost of maintenance whether they fly or not, this move to cut the number of flights looks fairly serious. So what has brought this about?
The obvious reason is the rise in the price of oil, which has now hit $128 a barrel, although the fall in customer numbers due to the weakening worldwide economy has also had an impact. The problem we have now is the fact that unprofitable flights may be at risk in the short to medium term as the industry comes to terms with the massive increase in costs over the last twelve months. While it is British Airways that has broken ranks and is the first to publically announce such a tactic, it now seems inevitable that more will follow suit.
The industry is currently in turmoil, and while it is totally understandable that many unprofitable flights may come under pressure, there will be a knock-on effect to these destinations. Many people forget that the spending power of travellers around the world is immense. The more flights that are cancelled the more income will be lost by a number of economies, many of which have actually been built around the activities of travellers.
However, this is undoubtedly a sensible approach by British Airways and one that has perhaps sharpened the mind of governments around the world. The industry is struggling, airlines are under pressure from all sides and they are receiving very little back-up from regulators and governments around the world.
05.16.2008 | 8:43 am | Flight Comparison
The airline industry may be feeling the pinch but it seems that there is still substantial money in the Middle East, with Qatar Airways announcing plans to add five more flights to its Bahrain route. These will take into account Europe, the Middle East, Africa, the Far East, the Indian subcontinent and North America.
This increase will take the number of flights on the route to forty seven and substantially increase the airline’s exposure in the region. Qatar Airways seems to be one of the few airlines around the world that is on an expansion program at the moment while others suffer with increased costs and lower passenger numbers. Quite how long this can continue for Qatar Airways remains to be seen, but they are certainly putting their stamp on the region.
The- increase in flights on the Bahrain route has gone down well and it is interesting to note that the company has ordered an additional two hundred aircraft at a combined cost of $30 billion. Doha International Airport will forge an online presence in 2010 – a development which will have cost in the region of $14 billion when complete.
Qatar Airways seem to be swimming against the tide and has benefited from an increase in both business and tourist numbers. The lure of the black gold has seen more and more businesses setting up branches in the region and the tourist attractions are growing by the day.
In general it seems that the Middle East is the only area of the world where the economic bite is not yet being felt. The increase in the price of oil has boosted the region’s wealth and with little likelihood of a substantial fall in the oil price in the short term, further growth in economic activity seems likely.
05.15.2008 | 11:24 am | Flight Comparison
In the aftermath of the massive earthquake which has caused major disruption and loss of life in China, it is refreshing to see that the air travel industry has managed to stay intact. This vital route in and out of the country has been largely unaffected by the disaster, with many claiming that other areas of the world would not be able to cope so well.
While China is still a fairly closed country politically speaking, there have been major moves to open it up to outsiders. Flights to China are big business in the Far East with countries such as Malaysia operating a number of profitable routes in and out of the country. In the first two days after the earthquake there were a number of flight cancellations but the problems were not experienced across the board.
Even when you consider the size of the country, many will be surprised to learn that nearly 900 million tourists visited China in 2002. More recent figures a little more difficult to come by. The infrastructure of China, and particularly the airline industry, has seen massive investment over the last decade and many businesses have opened offices to gain a foothold in the region. China is vital to the airline industry and, as more and more of this beautiful country is opened up, many are predicting that more travellers will visit the country.
The airline industry in China has benefited greatly from the increase in access to other countries. There has also been a marked increase in economic activity in China with more foreign money flowing in than ever before. China is fast becoming one of the most popular travel destinations in the world.
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