Format Competition
BA launches ‘PrivateConnect’ jet service in North America
21 June 2010 | British Airways has teamed up with CitationAir, the private jet charter subsidiary of Cessna Aircraft, to offer its passengers a private jet connection within North America and the Caribbean. The new PrivateConnect service pitches itself as a ‘no-frills’ private jet service. Passengers can book online and ‘pay and go’ with a credit card, avoiding the need for upfront fees and long-term commitment that is usually associated with fractional ownership of private jets.
The service is available to anyone who has flown with BA in the past 12 months, members of BA’s frequent flyer programme, as well as employees of the airline’s corporate clients. BA customers can also use PrivateConnect to fly within North America if they haven’t arrived on or are due to depart onto another flight. Costs range from USD6,000 to USD10,000 per jet per hour depending on the type of aircraft. Chauffeured transport will be on hand after clearing customs to drive customers between their British Airways flight and CitationAir private jet. BA currently flies to 19 destinations in America.
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Low-cost airline Vueling departs point-to-point model, starts transfer service at Barcelona hub
11 June 2010 | Departing the traditional low-cost carrier business model which emphasizes point-to-point routes instead of transfers at hubs, Vueling Airlines will start connecting passengers through its base at Barcelona El Prat Airport from July 5, 2010. Passengers will have to buy only one ticket when booking the flights, and Vueling will connect baggage at no additional charge.
Vueling said that although the new hub model would result in new costs such as luggage handling and transfer counters at the airport, the additional costs are in line with its low cost base ethos. Says Vueling CEO Alex Cruz, “There will be no changes to our scheduling. We remain fundamentally a point-to-point airline. As a ‘new-generation carrier’ we won’t stop implementing ‘traditional’ products/services as long as we don’t break our main premise that a short-haul operation cannot survive today without obsessing on having the lowest cost structure.”
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Emirates orders 32 more A380s, grows A380 fleet to 90 aircraft
9 June 2010 | Dubai-based Emirates has signed a deal to buy 32 additional A380 aircraft in an order with a list price of USD11.5 billion. This brings the airline’s total A380 order to 90 aircrafts, nearly 40 percent of worldwide orders for the superjumbo. Emirates president Tim Clark said that all 90 A380s will be operating at the same time in the future, as “The first A380 aircraft we ordered will be retired from the fleet in 2020, and the last of this order will be delivered in 2017.”
The central location of the Gulf Region on the world map lets aircraft access almost every destination non-stop, as 85 percent of the world’s population is located within a 8,500 km range from the Gulf. Governments in the region have been developing their carriers over the past decades to help diversify their economies and reduce dependence on oil revenues. The so-called ‘Gulf Gullivers’ are increasingly redirecting passenger flows from Europe, Asia and the Americas through their hubs, making them serious competitors for established airlines.
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More ‘re-bundling’: Low-cost carrier Germanwings launches bundled pricing
20 April 2010 | According to ancillary revenues specialist Collinson Latitude the first wave of ancillary revenue was focused on unbundling, but today’s air traveler is getting lots of confusing messages, so repackaging will make ticket fares simpler again. Collinson Latitude sees 3 phases in the development of ancillary fees (full presentation here): The first ‘product unbundling’ phase is about introducing fees for services such as ticket booking, baggage check-in, and seat selection. In the second ‘product enhancement’ phase passengers can purchase paid extras such as priority security, lounge access and inflight Internet. The third stage is a ‘repackage / rebundle’ phase in which airlines rebundle paid services in packages.
Network carriers such as United and Air New Zealand (ANZ) are among the first airlines to introduce bundled fares. For example, United Airlines’ ‘Premier Line’ travel option combines checked luggage, airport fast-track and extra legroom. ANZ recently introduced new bundled fares on its short-haul routes that range from seat-only to the full works.
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Kuwaiti ‘no-frills chic’ airline Wataniya starts flights to Europe
In a home region where Gulf Gullivers Emirates, Qatar Airways and Etihad are rapidly becoming major global players, Kuwaiti carrier Wataniya Airways takes a no-frills chic approach towards flying. Launched in January 2009, the airline’s fleet of A320 aircraft are configured with premium economy and business class seats only, while prices are kept low. The airline says its A320’s are configured with the lowest seat density (122 vs. 145 seats on most airlines) of any A320 used on scheduled routes in the world.
Billing itself a ‘premium service airline’ Wataniya has its own dedicated terminal at Kuwait International Airport, and passengers have Wi-Fi access as well as USB and power ports in every seat. The airline’s premium economy class offers 96 seats with a 34-inch seat pitch and the 26 business class seats have a seat pitch of 44 inch. Wataniya currently operates five A320’s, a sixth aircraft is scheduled to be received in June 2010 and a seventh later in 2010. The airline is listed at the Kuwait Stocks Exchange.
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EasyJet and AirAsia expand their no-frills hotels
18 March 2010 | Low-cost airlines easyJet and AirAsia have both extended their no-frills concept to the hotel sector. Similar to low-cost airlines, easyHotel and TuneHotels.com are keeping rates low by offering limited service and a pay-as-you-use system for extra amenities such as towels. The no-frills hotels encourage guests to book online and the further people book their stay, the cheaper the room. With small, clean and modern rooms, they cater to those on a budget, and tourists who spend most of their time sightseeing. Says Tunehotels.com’s CEO, Mark Lankester: “[Our guests] appreciate being able to spend less on a room they will only really spend a few hours in, while still having peace of mind that they will be getting a good, safe night’s sleep at the end of a full day.”
In August 2005, easyHotel opened its first property in London’s Earls Court and it just opened its 12th location in Berlin, and its next opening will be in Porto in summer 2010. The budget hotel will also unveil its first property outside Europe, in Dubai, later in 2010. Chargeable facilities including satellite TV, wifi, luggage storage and extra towels. The group now has six properties open in London (including hotels at Heathrow and Luton airports), as well as hotels in Basel, Zurich, Budapest, Sofia, and Cyprus. Room prices start at EUR 15 to 25 per night.
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Business class-only services holding up despite recession
17 February 2010 | Despite the economic recession and the subsequent fall in business travel, the business class-only niche is holding up surprisingly well. Initiated by private start-ups such as eos, Silverjet and l’Avion in the pre-recession boom in premium travel, the model has been incorporated by airlines such as Lufthansa, British Airways, Singapore Airlines and ANA. Now with premium travel recovering slightly, airlines are considering growing their premium-only services again.
British Airways recently said it may expand its ‘Club World London City’ service to other U.S east-coast locations, such as Boston and Washington. BA says its flights from London City to JFK, which started in September 2009, reached 75 percent seat occupancy in December. The carrier also revealed it looked at starting flights to Dubai that would be refueled in mainland Europe, but decided against the plan. While BA’s westbound flight to JFK has to refuel in Shannon (Ireland), the ability to clear U.S immigration controls at Shannon enables the layover time to be put to use. However, such a stop could not be justified for many other potential routes from London City.
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Long-haul low-cost carrier AirAsia X goes lie-flat in Business Class
2 February 2010 | AirAsia X, the long-haul operation of budget carrier AirAsia, has been growing rapidly to eight planes serving eight destinations today. In the second half of 2010, the carrier will add 4 new aircraft as part of its order of 25 A330s. The long-haul low-cost carrier currently flies from Kuala Lumpur to London (Stansted), Australia (Gold Coast, Melbourne, Perth), China (Hangzhou, Tianjin, Chengdu) and Taipei, and in 2010 will launch services to Sydney, Mumbai and New Delhi (it will also discontinue its route to Abu Dhabi due to a lack of demand). Plans for flights to Japan (Tokyo, Osaka, Fukuoka) as well as more Chinese destinations (Xi’an, Wuhan and Shenyang) are also on the table.
In a move to improve its premium product and increase the density in its economy class, AirAsia X is upgrading its business class to lie-flat seats. The seats are slightly angled, so they are not 180 degree flat, but AirAsia X claims it is the first budget airline to offer passengers a premium seat like this. The 28 ‘non-reclining’ black leather seats on AirAsia X’s 6 A330s will be replaced with 12 lie-flat beds, since, according to AirAsia X, the economics are very similar between 28 premium economy seats and 12 lie-flat bed seats, and therefore it might as well opt for the latter and up the quality of its product. The carrier will also replace the current 30 recliner seats on its 2 A340s with 18 lie-flat seats.
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Gulf Gullivers keep expanding amidst global downturn
11 January 2010 | The rise and rise of Emirates (Dubai), Etihad (Abu Dhabi) and Qatar Airways has been well documented. These so-called ‘Gulf Gullivers’ have placed multi billion-dollar aircraft orders, expanding their airports and developing their tourism infrastructure, with the aim to turn the geographically ideally situated Gulf region into the world’s aviation hub. Some of the ingredients of their model: high frequencies to major urban destinations, target large metropolitan areas without direct connections (for example, Manchester, Birmingham in the UK, Düsseldorf, Hamburg in Germany) so passengers can bypass busy hubs in their region and transfer at the carrier’s 24/7 Gulf hubs, and large investments in their premium services.
The past year, major airlines in Europe, North-America, and Asia-Pacific have put their brakes on fleet expansion amid significant drops in passenger volumes and yields. Nevertheless, Emirates, Etihad Airways and Qatar Airways have continued their aggressive fleet and network growth, introducing more than 30 new widebodies between them during 2009. Middle East airlines saw passenger grow 11.2 percent in 2009 according to IATA. By contrast, passenger demand dropped 5 percent in Europe and 5.6 percent in the Norh America, as well as in Asia Pacific. And plans remain bullish: With a new wave of aircraft coming, most notably Emirates and Qatar Airways are now turning their attention to other European metropolitan catchment areas and to Japan.
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Low cost carriers force European flag carriers to rethink short-haul product
30 November 2009 | Europe’s legacy carriers have long found low-cost airlines a nuisance, but the recession has turned them into a serious problem, as both business and leisure travelers trade down to cheaper tickets. Furthermore, airlines such as Air France and Iberia also face strong competition from high-speed trains. In order to stay competitive on short-haul routes, Europe’s ‘Big Three’ are rethinking their product offering in order to drive down unit costs.
The latest news comes from Lufthansa, which will introduce denser seating in its European economy class next year. To free up more ‘knee space’ for passengers, the seat back pocket will be elevated at the same time. Lufthansa also wants to simplify its catering (it currently serves six different options, depending on the type of flight and time of day), which will allow It to reduce the space needed for kitchens onboard. The airline says “the aim is that Lufthansa becomes more profitable and less complex,” and is reportedly targeting a 40 percent reduction in costs on its European network.
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Air France restructures its short-haul product to counter loss of passenger to low-cost carriers
12 November 2009 | Air France has anounced it will restructure its European service to counter the loss of passengers to low-cost carriers and to make its short and medium-haul business (which account for 40 percent of its revenue) profitable again. Air France says the new European product will increase its market share by lowering its cheapest fares with 5 to 20 percent (depending on the route) and its most expensive tickets with 19 to 29 percent. Customers will also be allowed a greater flexibility to change bookings. The restructuring also means lower operating costs for Air France, for example by serving simpler meals and increasing the number of internet bookings. Air France’s new Europe product will come into affect from April 2010, with tickets on sale in January.
According to Air France, its customers (passengers, travel managers and travel agents) all indicated they want two clearly differentiated products for short-haul air travel. At the one hand, they want a simple and inexpensive economy product, and on the other hand a more affordable premium product, for those that require additional flexibility, more comfort and a more efficient journey. According to Air France CEO Pierre-Henri Gourgeon “regarding short-haul travel, customer requirements have changed. They now want reliable, efficient air transport, with an appropriate service, at the lowest possible price, while retaining the Air France touch”.
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Iberia to set up new ‘lower-cost’ feeder airline to serve Madrid hub
Picture courtesy of Matt Hintsa
28 October 2009 | The economic crisis and fierce competition from low-cost carriers and high-speed rail are forcing European network carriers to think about structural changes in their short-haul operations. One of the hardest hit airlines is Spanish flag carrier Iberia which has lost some of its most lucrative domestic routes to Spain’s expanding high-speed train network, while low-cost carriers (Ryanair, Easyjet) have hit its European services. In what Iberia calls nothing less than a ‘paradigm shift’, the airline has announced plans to replace its domestic and European operations with a new lower-cost feeder airline and focus the main Iberia operations on profitable long-haul sectors, mainly to Latin America.
Iberia said previous measure taken, including cuts in staff and capacity and the grounding of aircraft, had proved insufficient and that the current situation is unsustainable, saying: “We have a structural problem in our domestic and European operations. Thus we are proposing a total different model, with markedly lower operating costs and no ‘legacy’ work practices, which will allow us to compete with other carriers and the high-speed train.” As part of its restructuring plan Iberia will also lay off all flight attendants above the age of 55, and wages are frozen for two years for all employees.
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