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.
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.
As turnaround stories go, Air New Zealand's is about as good as it gets. In just over 2-1/2 years under MD and CEO Ralph Norris, the company has come from the nightmare of writing off NZ$1.45 billion-the largest writeoff in New Zealand corporate history-to posting combined annual profits of NZ$331 million over its last two fiscal years.
Low-profile but profitable, Turkish Airlines is on a roll with an order for 51 new aircraft and plans to build a new $350 million technical base (see box, p. 42), soaring on the winds of a robust economy and rising demand for leisure and business travel. Earnings are at record highs and passenger traffic was up 26% in the first half of the current year.
They won't have to move a mountain to build the grand new Terminal 5 at Heathrow but they did move two rivers, the Duke of Northumberland and Longford, from under the existing airfield and the middle of the T5 construction site. The diversion of the rivers into two new channels will allow the site to be surveyed by archaeologists as the construction teams move forward.
The nine largest US passenger airlines in aggregate reported a net loss of $2.26 billion for the spring quarter ended June 30 compared to a net profit of $171.9 million in the year-ago period (the 10th, ATA Airlines, did not release results in time to be included in this report). Extraordinary writeoffs at Delta Air Lines totaling $1.65 billion and soaring fuel prices masked significant improvement at most carriers, however.
Charles Darwin wrote, "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." British Airways CEO Rod Eddington warns that achieving that responsiveness is extremely difficult-"Changing airline culture is like trying to perform an engine change inflight," he maintains. While not all legacy airline CEOs have to face as daunting a task as that, the magnitude of reform required to meet the actual or threatened competition from low-cost carriers is enormous, and for many airlines seemingly impossible to achieve.
France is Europe's largest tourist destination, with 75.5 million visitors annually including some 15.5 million Germans, 12.7 million Britons and 12 million Dutch flocking to the country. Per capita GDP is above the European average, and with 61 million inhabitants it has the largest population in Western Europe after Germany. Yet air travelers in France have fewer opportunities to take advantage of low-cost airlines than those in almost any other country in Europe.
People may not be out in the streets demonstrating for change, but they are at their home PCs and Internet cafes making bookings for seats on a revolution sweeping across Asia. The era of the low-cost carrier has arrived and perhaps sooner than most would have expected in a region still making the transition from tightly drawn bilateral agreements to freewheeling open skies arrangements.
Airlines in 1964 were very excited about technology. The industry that had been pushing the limits of piston engines and propellers since the 1930s recently had been presented with the greatest gift imaginable-a deus ex machina if there ever was one-the jet airplane.
Airline relationships with each other have gone through an extensive period of maturation during the past 40 years, most dramatically in the international arena. The industry has transitioned from a close-knit association of thinly spread operators legally coordinating commercial activities in a sanctioned cartel, self-regulating fares and service levels to provide maximum benefits for both airline and passenger-or so they claimed-to today's system of alliances battling on a global stage increasingly open to free-market competition.
With its year-round fine weather, excellent beaches and inexpensive hotels and restaurants, Tunisia is a natural alternative for Europeans eager to enjoy a holiday on the Mediterranean without paying Southern Europe prices. Tunisair capitalizes on that market, particularly in the summer months when it operates its aircraft as much as 16 hr. per day on mostly short- and intermediate-haul flights into Europe.
If you ask Southern Winds President Juan Maggio to describe the business model of the airline he launched in 1996, he will say that it bears a similarity to a somewhat younger and better known carrier, JetBlue, in terms of its approach to operating costs and fares.
