It is a well known fact that the dawn of the jet age was the final nail in the coffin of big rail in the USA. Not so in Europe where Big rail continues to flourish - albeit heavily subsidized by governments as a national resource. In the 1990s it was estimated once that DB lost more money than all the airlines combined. Talk about protectionism.
Similarly the Channel Tunnel and its rail service destroyed the UK-Europe ferry market to a large extent. However the business plan for EuroTunnel and Eurostar did not anticipate LCCs such as RyanAir and Easyjet. It assumed that it would be able to offer fares below the legacy carriers and hence siphon off traffic on lucrative runs such as London to Paris and London to Brussels. With enormous capacity - it should be remembered that every time a Eurostar train leaves the station it has the capacity of 2 747s.
Sadly for the railways this protection did not extend to passengers wallets. With the cost of a rail ticket between London and Manchester north of GBP 200 and rail tickets to Paris from London exceeding even the cost of a business class ticket - the Cross Channel rail services didnt quite reach their potential. Eurotunnel is again at death's door. What is big rail to do?
If you cant beat 'em join 'em. Hoping to emulate the airline alliances many European Rail carriers and Eurostar are going to launch a Frequent Traveller program. Tentatively titled "RailTeam" it will include Eurostar, DB, SNCF, NS, SNCB amongst others. However in much the same way as the South African carriers cried foul when Government owned (and loss making) SAA launched its own LCC - Fly Mango - we can expect to hear from the Euro LCCs on this one. If not then someone should be checking the respective government's check stubs.
Cheers
Charlie and Timothy
Sunday, April 29, 2007
Friday, April 27, 2007
Skybus roars on day one
We just spoke with Bob Tenenbaum, Senior Counselor to Skybus. He told us the company was off to a fabulous start. They sold 97,000 tickets in the first 18 hours - that's 90 tickets per minute.
Only ten seats per flight had $10 fares, so the revenue volume is way higher than one would first think. Despite glitches on their website over the initial first two days, sales have dropped to a lower level but, happily for Skybus, remained steady.
Tenenbaum remarked that the airline was "surprised" at the volume. No kidding. It may have been the world's busiest e-commerce site for that day. Assume $75 is closer to the average fare, then they raked in over $7m on day 1. A nice way to start business wouldn't you say?
Only ten seats per flight had $10 fares, so the revenue volume is way higher than one would first think. Despite glitches on their website over the initial first two days, sales have dropped to a lower level but, happily for Skybus, remained steady.
Tenenbaum remarked that the airline was "surprised" at the volume. No kidding. It may have been the world's busiest e-commerce site for that day. Assume $75 is closer to the average fare, then they raked in over $7m on day 1. A nice way to start business wouldn't you say?
Thursday, April 26, 2007
Emirates again speculates on "Pack'em In" Long Haul LCC
Vice Chairman the very nice Mr Maurice Flanagan again today speculated on Emirates launching a low cost low fare derivative of Emirates. Tentatively titled Emirate Express by insiders - the new LCC carrier would be based around the A380 on a packed double decker bus.
With capacity of up to 800 people its easy to see how such a program could be a huge winner for EK. With Emirates formal brand focussing on the sharp end of the aircraft these days and offering full services at the back - they now face a host of imatators in the region. But the idea is not new. EK for several years has been running the "Curry Express" from Birmingham to Dubai for VFR and worker based traffic for the large expat community in the Midlands. It is now up to 2 flights a day - no first class but some J. There are even new airlines LCCs being mooted for direct BHX or LBA flights to the Indian subcontinent.
With some diversion of revenue already occuring with more direct flights between the UK and the Indian sub-continent EK needs to offer a price competitive product and continue to funnel the traffic through DXB.
Why not now?
No A380s and the new terminal at DXB is not quite ready. But rest assured when Jebel Ali International starts operating in a few years time - you can be sure to see A380s pulling up to a specialized terminal packed to the gunwales with bargain hunters and VFR traffic.
Imagine just that - STN/BHX/LBA - Jebel Ali. 3X a day - 2 X would go to India and 1 would go on to Australia and New Zealand. Putting an additional flight on to JNB would relieve some of the near term artifiical capacity constraints on the lucrative ZA to UK market.
Not my cup of tea but definitely something Mr O'Leary would be considering if he wasnt so wedded to Boeing.
Cheers
Timothy
With capacity of up to 800 people its easy to see how such a program could be a huge winner for EK. With Emirates formal brand focussing on the sharp end of the aircraft these days and offering full services at the back - they now face a host of imatators in the region. But the idea is not new. EK for several years has been running the "Curry Express" from Birmingham to Dubai for VFR and worker based traffic for the large expat community in the Midlands. It is now up to 2 flights a day - no first class but some J. There are even new airlines LCCs being mooted for direct BHX or LBA flights to the Indian subcontinent.
With some diversion of revenue already occuring with more direct flights between the UK and the Indian sub-continent EK needs to offer a price competitive product and continue to funnel the traffic through DXB.
Why not now?
No A380s and the new terminal at DXB is not quite ready. But rest assured when Jebel Ali International starts operating in a few years time - you can be sure to see A380s pulling up to a specialized terminal packed to the gunwales with bargain hunters and VFR traffic.
Imagine just that - STN/BHX/LBA - Jebel Ali. 3X a day - 2 X would go to India and 1 would go on to Australia and New Zealand. Putting an additional flight on to JNB would relieve some of the near term artifiical capacity constraints on the lucrative ZA to UK market.
Not my cup of tea but definitely something Mr O'Leary would be considering if he wasnt so wedded to Boeing.
Cheers
Timothy
Wednesday, April 25, 2007
If US Airways orders the 787
The source of this rumor is no less the The Times. The Times says we will hear news by the weekend. This will be a tough blow for Airbus, with a likely consolation prize being a big order for more A320s.
Airbus will tout the merits of its order, as will not want to lose face. For Boeing it will be another flipped Airbus customer. The 787 is now marching towards 600 orders before its first flight at an accelerating pace; with orders this week from Air Canada and Virgin adding over 40 including options. By the time the Paris show starts, Boeing may headed towards 700 orders for this plane.
For Airbus the unstated issue will be yet another loss to its A350XWB - now increasingly seen as too little and too late and the outcome of the A380 debacle. What was a "captured customer" defecting over to the 787 will certainly make Airbus more aggressive. Note Airbus was already offering the A350 at over 50% off sticker prices. These are desperate days at Airbus.
Airbus will tout the merits of its order, as will not want to lose face. For Boeing it will be another flipped Airbus customer. The 787 is now marching towards 600 orders before its first flight at an accelerating pace; with orders this week from Air Canada and Virgin adding over 40 including options. By the time the Paris show starts, Boeing may headed towards 700 orders for this plane.
For Airbus the unstated issue will be yet another loss to its A350XWB - now increasingly seen as too little and too late and the outcome of the A380 debacle. What was a "captured customer" defecting over to the 787 will certainly make Airbus more aggressive. Note Airbus was already offering the A350 at over 50% off sticker prices. These are desperate days at Airbus.
Breathing life into the moribund GDS
Long Haul LCC - Oasis Hong Kong has joined Abacus as a participating airline. Does this mean that this prototype LCC long haul carrier has sold out?
No i believe that this is going to be the result of a new reality in the GDS/Airline relationship. Whether it is sustainable is to be seen - however all the GDS - Abacus included - need to show a positive result after the dramatic change in commercials from last year's PCA revisions.
Its win for both sides; Oasis needs more distribution, Abacus needs a new airline. Will Oasis use the GDS when it comes to the USA this year? Good question. Stay tuned
Cheers
Timothy
No i believe that this is going to be the result of a new reality in the GDS/Airline relationship. Whether it is sustainable is to be seen - however all the GDS - Abacus included - need to show a positive result after the dramatic change in commercials from last year's PCA revisions.
Its win for both sides; Oasis needs more distribution, Abacus needs a new airline. Will Oasis use the GDS when it comes to the USA this year? Good question. Stay tuned
Cheers
Timothy
Tuesday, April 24, 2007
Norwegian Gobbles up Flynordic - LCC vs HVC
For some this might seem to be a consolidation amongst LCCs. For others its a rationalization of the LCC model that shows its maturity.
Norwegian is not a traditional Low Fare LCC - rather it sits in a relatively protected market of Scandinavia where anything less than SAS's high prices is seen as a boon. Already it operates with a competitive schedule on some of the most highly profitable routes in the world which exist within Scandinavia. From its home base in Oslo it can charge relatively reasonable prices and make money. All the great attributes of a LCC.
Taking over FlyNordic is a win win for Finnair and for Norwegian. The former has stumbled a few times of late and who operate at the behest of SK. So this is good for them to go back to their core business. The latter confirms its move UP the airline food chain. Operating at a low end of the GDS chain you can book its products there but you have to pay a premium fee to the airline in the form of an additional fee (this was actually the prototype for the full service Amadeus fee that is now enacted for such airlines as BA).
Conclusion is that LCCs who see a future as a conventional carrier can do that if they operate in a high priced market such as Scandinavia. This version of the HVS - Hybrid Value Carrier - sees the likes of GOL, EasyJet joined now by Norwegian.
Note Norwegian now has Finnair as a part owner (5% with an option up to 10%). That's just enough to keep SK off kilter and give them access to great feed for Finnair's alternative route structure - particularly to Asia. However they need more feed to other places.
Are we seeing a new trend of Symbiotic LCCs combining with FNCs? GOL+Varig is another example
Time will tell
Norwegian is not a traditional Low Fare LCC - rather it sits in a relatively protected market of Scandinavia where anything less than SAS's high prices is seen as a boon. Already it operates with a competitive schedule on some of the most highly profitable routes in the world which exist within Scandinavia. From its home base in Oslo it can charge relatively reasonable prices and make money. All the great attributes of a LCC.
Taking over FlyNordic is a win win for Finnair and for Norwegian. The former has stumbled a few times of late and who operate at the behest of SK. So this is good for them to go back to their core business. The latter confirms its move UP the airline food chain. Operating at a low end of the GDS chain you can book its products there but you have to pay a premium fee to the airline in the form of an additional fee (this was actually the prototype for the full service Amadeus fee that is now enacted for such airlines as BA).
Conclusion is that LCCs who see a future as a conventional carrier can do that if they operate in a high priced market such as Scandinavia. This version of the HVS - Hybrid Value Carrier - sees the likes of GOL, EasyJet joined now by Norwegian.
Note Norwegian now has Finnair as a part owner (5% with an option up to 10%). That's just enough to keep SK off kilter and give them access to great feed for Finnair's alternative route structure - particularly to Asia. However they need more feed to other places.
Are we seeing a new trend of Symbiotic LCCs combining with FNCs? GOL+Varig is another example
Time will tell
Friday, April 13, 2007
Beware the Ides of March 2010 - USA Air Transport Infrastructure
With apologies to Will S.
McKinsey - never one to be shy in trotting out bucket loads of information, has recently published a study on private investment in public transportation infrastructure.
http://www.mckinseyquarterly.com/PDFDownload.aspx?L2=19&L3=69&ar=1987&srid=17&gp=0
One of the trends the InTheKno team follow is the slow build up and saturation of Air Transport infrastructure. 2007 will rank up there as one of the worst years on record for delays and infrastructure hiccoughs. With no new airports and only few runway or terminals (O'Hare excepted) planned for the next 10 years in the USA - it is not hard to see how by 2010 we will be in deep kaka when we have a boom year.
However the US has two coming fact collisions which are going to exacerbate the problem. With nearly 700 million pax a year - the US market is the world's largest. Definitely by any measurement you put on it. But its growth has been stunted in recent years. Two constraints are now rapidly approaching, one is a capacity constraint, the other a major expansion of traffic.
The US Air Traffic Management system is probably the laughing stock of the world. Only the dedicated Controllers using improvised solutions keep the system running. Congress sees no need (and the Bush Administration would rather spend the money on wars) to upgrade the creaking system. It will break down and we will have problems. This is inevitable without serious attention now. Just look at Brazil if you don’t think it can have a serious impact.
The other capacity influence will be the growth of VLJ's - Very Light Jets. These new planes will be added to the market occupying the same air space footprint as RJs and smaller mainline passenger and cargo jets. The problem is a bit like a Freeway (Motorway, Autoroute, Autobahn, Autostrada...) where you have a metered on ramp at major population points. But imagine if you will - adding double the number of people using the Freeway coupled with a 5x number of on ramps. You don’t need to be a hydraulics engineer to see how this will disrupt traffic flows leading to more bunching and backups.
Will the USA double the number of ATC controllers to meet this demand? Will they order new radar equipment (that is BTW easily available) will they introduce an economic pricing model to match this demand hike?
Not for the next 2 years. which means given the lead times necessary to implement this - we will be having a crisis - oh in about Q1 2010.
Don’t say we didn’t warn you...
Cheers
The InTheKno Team
McKinsey - never one to be shy in trotting out bucket loads of information, has recently published a study on private investment in public transportation infrastructure.
http://www.mckinseyquarterly.com/PDFDownload.aspx?L2=19&L3=69&ar=1987&srid=17&gp=0
One of the trends the InTheKno team follow is the slow build up and saturation of Air Transport infrastructure. 2007 will rank up there as one of the worst years on record for delays and infrastructure hiccoughs. With no new airports and only few runway or terminals (O'Hare excepted) planned for the next 10 years in the USA - it is not hard to see how by 2010 we will be in deep kaka when we have a boom year.
However the US has two coming fact collisions which are going to exacerbate the problem. With nearly 700 million pax a year - the US market is the world's largest. Definitely by any measurement you put on it. But its growth has been stunted in recent years. Two constraints are now rapidly approaching, one is a capacity constraint, the other a major expansion of traffic.
The US Air Traffic Management system is probably the laughing stock of the world. Only the dedicated Controllers using improvised solutions keep the system running. Congress sees no need (and the Bush Administration would rather spend the money on wars) to upgrade the creaking system. It will break down and we will have problems. This is inevitable without serious attention now. Just look at Brazil if you don’t think it can have a serious impact.
The other capacity influence will be the growth of VLJ's - Very Light Jets. These new planes will be added to the market occupying the same air space footprint as RJs and smaller mainline passenger and cargo jets. The problem is a bit like a Freeway (Motorway, Autoroute, Autobahn, Autostrada...) where you have a metered on ramp at major population points. But imagine if you will - adding double the number of people using the Freeway coupled with a 5x number of on ramps. You don’t need to be a hydraulics engineer to see how this will disrupt traffic flows leading to more bunching and backups.
Will the USA double the number of ATC controllers to meet this demand? Will they order new radar equipment (that is BTW easily available) will they introduce an economic pricing model to match this demand hike?
Not for the next 2 years. which means given the lead times necessary to implement this - we will be having a crisis - oh in about Q1 2010.
Don’t say we didn’t warn you...
Cheers
The InTheKno Team
Transatlantic For 12 quid
Perfectly feasible. Now on the radar courtesy of RyanAir's Mr O'Leary.
A canny Irish man that he is (an accountant by training in case you were unsure where his potty mouth came from), Mr O'Leary has formally announced that he will start a new sister airline to Ryanair for Transatlantic travel. Given the now enormous feed into and out of Stansted his ability to move passengers Americas to EU will be a short incremental piece rather than a leap of faith. Consider this:
1. He doesn't need a whole new aircraft - even though he wants to order 50 brand new A350XWB or 787s. In fact the Boeing 737 for which all his pilots are trained is available in an ER version (both 737-700ER and 737-900ER). http://www.boeing.com/commercial/737family/index.html
The 737-700ER unmodified has a certified range of 5510 miles. This will take you from Stansted to ISP (3478 miles) or OAK (5375 miles). Even San Diego (also mentioned in his announcement) is possible.
2. He has the right to switch aircraft sub types in his Boeing order (actually he can do pretty much what he likes with the order - the Boeing guys LOVE him)
3. The longest route on Ryanair is today 3 1/2 hours. (Marrakesh to London). The record flight time from Boston to London (Eastbound) is around 5 hours. Not a big difference in structure.
4. RyanAir has one of the best ontime records in Europe today.
So Mr O'Leary - why wait 4 years? Boeing can deliver you a brand new plane built in around 2 weeks. So Next April sounds fine don't you think?
Cheers!
The InTheKno team have just published the first study examining the LCCs and the Travel Trade. For more information go to www.inthekno.com or email sales@inthekno.com
A canny Irish man that he is (an accountant by training in case you were unsure where his potty mouth came from), Mr O'Leary has formally announced that he will start a new sister airline to Ryanair for Transatlantic travel. Given the now enormous feed into and out of Stansted his ability to move passengers Americas to EU will be a short incremental piece rather than a leap of faith. Consider this:
1. He doesn't need a whole new aircraft - even though he wants to order 50 brand new A350XWB or 787s. In fact the Boeing 737 for which all his pilots are trained is available in an ER version (both 737-700ER and 737-900ER). http://www.boeing.com/commercial/737family/index.html
The 737-700ER unmodified has a certified range of 5510 miles. This will take you from Stansted to ISP (3478 miles) or OAK (5375 miles). Even San Diego (also mentioned in his announcement) is possible.
2. He has the right to switch aircraft sub types in his Boeing order (actually he can do pretty much what he likes with the order - the Boeing guys LOVE him)
3. The longest route on Ryanair is today 3 1/2 hours. (Marrakesh to London). The record flight time from Boston to London (Eastbound) is around 5 hours. Not a big difference in structure.
4. RyanAir has one of the best ontime records in Europe today.
So Mr O'Leary - why wait 4 years? Boeing can deliver you a brand new plane built in around 2 weeks. So Next April sounds fine don't you think?
Cheers!
The InTheKno team have just published the first study examining the LCCs and the Travel Trade. For more information go to www.inthekno.com or email sales@inthekno.com
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