As at every other airport in the US, business bottomed out at San Francisco International immediately following 9/11. While many airports struggled back to their feet as passengers returned, it's been an uphill climb for SFO. Rather than wait for nature to take its course, managers launched an aggressive, innovative marketing campaign to increase business and draw new carriers to the beleaguered facility.
The factors that contributed to a buoyant market for air cargo last year should continue in 2005, with solid traffic (FTK) growth propelled by trade from Asia, particularly the booming China market, which had exports valued at $851 billion in 2003. Through the first 10 months of 2004, IATA airlines reported that international FTKs rose 14%, with double-digit increases recorded across all regions.
On any given day, the specials at Bryan Owens' Unclaimed Baggage retail store in Scottsboro, Ala., include deals like a $75 Sharper Image pillow for four bucks, a brand-new Trivial Pursuit 20th anniversary edition board game for $15 and a Schwinn double jogging stroller in excellent condition for just $40.
Five years ago, the airline industry was buzzing with claims of 20% savings on aircraft purchasing by shrinking the multitude of options offered to and demanded by airlines when ordering aircraft. Today, with acquisition costs and airline yields moving in opposite directions, the need for standardization and simplification is more pressing than ever. Yet progress remains slow, and what has been achieved is being driven more by manufacturers eager to pare costs and complexity out of the production process than by airlines intent on cutting sticker prices.
Has Gol's success caused TAM to reevaluate its own business model? When you have a new entrant in a market that is in the process of deregulation, it finds a low entrance barrier. This is the first competitive advantage it had. The second advantage is that it was born on a new technological platform-high-tech aircraft. And the third is that it was also born in a new e-commerce environment. Therefore we had to adjust to this reality, defending our market without losing our characteristics.
By virtue of the symbiotic relationship between Regional carriers and their mainline partners, the Regionals consistently are watching the bottom line as their partners consistently try to cut costs. There was a sharp reminder of this fact of life when United Airlines in early November issued an RFP to replace flying currently being done by its ally of nearly 20 years, Air Wisconsin.
The universe of profitable US airlines shrank further during the third quarter ended Sept. 30 as fuel prices climbed throughout the summer while back-to-back-to-back-to-back hurricanes pummeled those carriers with extensive route networks in Florida and the Caribbean. Yields in the hypercompetitive domestic market continued to erode, although a rise in load factor offset about half the decline.
The stronger-than-expected traffic recovery this year in conjunction with the emergence of a thriving low-fare sector in many parts of the globe has contributed to a healthy restoration of demand for new and used transport aircraft, leading to a reduction in the overall number of stored jets and driving up lease rates for the more popular types, experts say.
Managerial grit that sometimes borders on cockiness seems to keep El Al Israel Airlines aloft against all commercial odds as perhaps the ultimate ethnic niche carrier. Maybe it's a mindset composed of equal portions of self-reliance and chutzpah (a Yiddish expression loosely translated as utter nerve or supreme self-confidence) that somehow translates into viability for the small airline with the outsized reputation.
Next year, Cargolux Airlines International will celebrate its 35th anniversary. Established in 1970 by Luxembourg national carrier Luxair, Salen Shipping Group, private interests and Loftleidir Icelandic-which recently acquired a 10.1% stake in easyJet-the airline has outperformed its founders' wildest expectations, growing to become the ninth-largest cargo airline in the world, according to IATA, and Europe's largest all-cargo carrier, with revenue expected to exceed $1.1 billion in the current year.
Eastern Airways CEO Richard Lake came to the annual European Regions Airline Assn. fall meeting here with a sense of optimism that this year the organization might bestow its Regional Airline of the Year award upon the Aberdeen-based carrier. Instead, for the second time, Eastern came up just a bit short with a second-place finish. But Lake was philosophical about the outcome, saying, "We must try that little bit, little bit harder."
Of the lessons learned from the shocks that have jolted the airline industry over the past few years, perhaps the most valuable is the resilience of air cargo. Despite SARS, terrorism and avian flu, Asian airlines have managed to derive ever-increasing revenue--in one case, up to 48% of the total--from freight.
Russian investigators are homing in on RDX, the main ingredient in C-4 and Semtex, as the explosive that triggered the near-simultaneous destruction of a Tu-154 and a Tu-134 over Russia on the night of Aug. 24. The materials are believed to have been carried into the cabin inside the clothing or carryon bags of two suicide bombers who detonated the RDX at altitude, killing all 89 passengers and crew on the two aircraft.
Three years of airline industry turmoil and restructuring have left their mark on the maintenance, repair and overhaul aftermarket, where suppliers are scrambling to stay abreast of the changing needs of their airline customers while coping with tough competition and excess hangar capacity, itself a result of some of those changes.
Thai Airways International's advertisements always have promised passengers a "smooth as silk" ride and the airline often has delivered. But for the carrier itself, the flightpath has been more like dodging the severe thunderstorms for which Bangkok is famous. A major cause of the turbulence has been government meddling combined with a lack of understanding by the bureaucrats of the critical role Thai plays in the development of the tourism industry.
In early October, the price of oil topped $52 a barrel, representing a 60% increase over the year-ago period. According to the Air Transport Assn., every $1 increase in the price of a barrel adds $425 million in annual operating expenses for US airlines. That means they are spending an extra $9.93 billion on Jet A this year compared to 2003.
Reducing airline labor costs is usually fraught with turmoil, but curtailing fuel consumption is a task on which management and labor usually can agree. For those carriers with cash in the bank, a risk management strategy involving financial instruments may be the most complete-and rewarding-way to smooth out the peaks and valleys. When prices just keep rising, however, as has been the case over the past 12-18 months, even hedging has its limitations. And many cash-strapped airlines simply lack the funds to participate.
For a person whose largest customer is on the financial ropes, Riccardo Raimondi seems remarkably composed. The Executive VP-Aeronautical Activities of Aeroporti di Roma, which operates Romes two commercial airports, Fiumicino Leonardo da Vinci and much smaller Ciampino Giovan Battista Pastine, is confident that the continued health of the properties does not rest on the survival of Alitalia. Fiumicino is more than just an Alitalia hub, he declares.
You've got to spend money to make money. Easier said than done when it comes to the airline industry, where cash is a scarce commodity at any time and particularly when oil prices are through the roof and fares are under attack by a bevy of lower-cost operators with a simple message: "We're cheaper."
Driven by stringent noise targets, the designs of the two engines for the A380 are remarkable not only for the size of their fans in relationship to thrust produced but also for the very shape of the fan blades. No longer straight shafts of metal, these blades swoop and turn with a sinuous grace that looks, well, sort of sexy--or maybe that judgment is just the consequence of staring at too many engines in a full-frontal sort of way.
With losses of close to $58 million over the past two years-including an estimated $32 million in the fiscal year ended last July 31-Air Malta cannot continue to operate with a business-as-usual attitude. That is the message coming out of the executive office, where CEO Ernst Funk, a Swiss transplant who took over in fall 2002, and Air Malta Group Chairman Lawrence Zammit are shaking things up at this formerly sleepy Mediterranean carrier.
The birth of Astar Air Cargo, which celebrated its first anniversary in July, was not particularly painful, but sticky questions of legitimacy were raised from the outset by UPS and FedEx, rivals of DHL Worldwide Express, from whence the new carrier traces its parentage. A four-year campaign by the two package/express giants to have the airline declared illegitimate finally was put to rest in May when the US Dept. of Transportation determined that Astar complies with federal law forbidding foreign nationals from holding more than a 25% voting stake in a US carrier.
If the saying "think globally, act locally" is a valid proposition in the airline business, then Gol Linhas Aereas Inteligentes S.A.--translated as Gol: The Intelligent Airline--is doing its part to make it happen.
As the variety of profitable budget airlines demonstrates, success comes in many shapes and sizes. WestJet, Ryanair, JetBlue and AirTran all have taken different paths to arrive at the same destination. This is also true when it comes to how low-cost carriers approach pilot training. JetBlue is building its own facility while Jetstar has outsourced virtually its entire training requirement to a third party. Yet experts agree that most LCCs share a common trait: A determination to think outside the box.
