Signs of the Economic Times
European airports roll out the red carpet for Chinese travellers
25 January 2012 | Rising disposable income in emerging economies such as the BRICs and the N-11s has allowed the rapidly growing middle classes in these countries to start travelling by air. According to IATA estimates, the number of air travellers worldwide will grow with 800 million to 3.3 billion in 2014 (up from 2.5 billion passengers in 2009), with China alone accounting for more than a quarter of this growth. Although air travel in China is still mainly on domestic and regional routes, an increasing number of leisure and business travellers are flying overseas.
‘Red carpet’
With Chinese outbound tourism recording more than 20 percent annual growth in recent years and overseas spending by Chinese tourists in 2011 expected to total around USD55 billion, airlines, airports and tourism destinations around the world are rolling out the red carpet to make Chinese travellers feel more at home.
Says Reinier Evers, founder of trend agency trendwatching.com, “China is the new emperor, and outpaced companies, flailing nations and even broke monetary unions are looking to the Chinese to bail them out. No wonder red carpets are being rolled out wherever Chinese politicians and CEOs currently set foot. In 2012’s global consumption arena we see a similar picture: department stores, airlines, hotels, theme parks and museums, if not entire cities, around the world are going out of their way to shower Chinese customers with tailored services and perks, and in general, lavish them with attention and respect.”
Since there are around 160 cities in China with populations of over 1 million people, airlines such as KLM (Chengdu, Xiamen, Hangzhou), Lufthansa (Shenyang, Qingdao), Air France (Wuhan), Finnair (Chongqing), Qatar Airways (Chongqing) and Etihad (Chengdu) have opened routes to second-tier cities in the country. These airlines also employ Asian cabin crew on board and offer localized amenities such as Chinese food and beverages, movies, music, newspapers and magazines.
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After wave of new low-cost carriers, booming Asia sees launch of premium business carriers
15 December 2011 | GDP growth, increased trade flows, the rise of a new middle class, and market liberalization are the main drivers behind the rapidly growing demand for air travel in Asia Pacific over the coming decade. Airbus, for example, projects that by 2030 the region will account for 33 percent of worldwide revenue passenger kilometres, up from 28 percent today.
The growth in the region’s aviation market is resulting in a large number of new airline launches. In the past year, full-service airlines such as ANA (Peach, AirAsia Japan) and JAL (Jetstar Japan) have announced their own low-cost initiatives in order to take advantage of market deregulation in Japan, while the region’s largest LCC’s – AirAsia, Jetstar and Lion Air – continued their expansion. Singapore Airlines, meanwhile, has launched a low-cost long-haul subsidiary, called Scoot.
At the other end of the spectrum, the region’s booming economies and the resulting growth in business travel have led ‘challenger airlines’ such as Skymark from Japan (low-density A380) and Hong Kong Airlines (Hong Kong – London ‘Club’ service) to announce all-premium long-haul flights, while in Southeast Asia, Qantas, Malaysia Airlines and AirAsia founder Tony Fernandes have all revealed plans to set up their own regional premium carrier.
Qantas ‘Red Q’
Because of intense competition from Gulf-based and Asian carriers, Qantas’ international market share in Australia has fallen from 39 to 14 per cent over the past decade. The airline’s cost base for its international operations is said to be 20 per cent higher than that of its competitors. With its dominance at home eroded, Qantas in August 2011 announced a plan to establish an Asian hub, which is is expected to reduce its operating costs with tens of millions of dollars.
Says Qantas CEO Alan Joyce: “Our aim is to position ourselves in the Southeast Asian marketplace in advance of planned aviation liberalisation. In five years we plan to have a hub in the world’s fastest growing aviation region, feeding traffic into both our Qantas and Jetstar networks. This is how we will end the disadvantage of being an end-of-the-line carrier.”
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China Southern first Chinese airline to take delivery of A380
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18 October 2011 | China Southern on 14 October became the first Chinese airline to receive the A380, when Airbus handed over the first of five superjumbo ordered by the Chinese carrier. The double-decker planes will spearhead the state-controlled company’s drive to more than double the percentage of capacity deployed on overseas routes to 35 percent by 2015, said Yang Bo, the head of its planning department. “Flying A380s will put us in a completely different league. We hope to use the planes to build a good brand image and to raise our profile overseas.”
International expansion
China Southern has already boosted international capacity with 33 percent this year as it aims to develop Guangzhou airport in Guangdong province – China’s biggest region by economic output – into a global hub rivaling Hong Kong, which is located less than 200 kilometers (125 miles) away. China Southern plans to boost its total fleet to 645 aircraft by 2015 from 425 today. Says Si Xianmin, Chairman of China Southern, “The economics offered by the A380 will undoubtedly improve our competitiveness on international routes and it is the perfect asset to help China Southern Airlines achieve its goal of becoming a leading global carrier.”
Qantas is already noticing the increased competition from China Southern, as the Chinese airline has significantly grown its Australia services as part of its intercontinental push. Similar drives in Europe and North America will follow, partly to offset competition from high-speed trains on domestic routes in China. China Southern Airlines’ focus on domestic flights made it Asia’s largest carrier by passengers. As Qantas CEO Alan Joyce tells Bloomberg, “The Chinese carriers are in an amazing position. They have got the scale that will make them huge and I think they will be a big challenge for the Middle Eastern carriers as well as the Asian carriers.”
‘Pearl of the Skies’
China Southern has selected a three-cabin configuration for its new A380 flagship, which it has dubbed ‘Pearl of the Skies’. The airline’s superjumbo has 506 seats in total: Eight ‘Platinum’ suites in First Class, 70 lie-flat Business Class seats and 428 seats in Economy. The eight First Class suites are located at the front of the lower deck in a 1-2-1 layout and look like the ‘closed’ version of the Acumen/Countour First Class seat, an ‘open’ version of which is also installed on Korean Air’s A380’s. Read full article »
How Lufthansa and British Airways are competing with Emirates on Indian routes
13 October 2011 | As the global economy dynamically changes, all major airlines are focusing on the rapidly growing middle class and business markets of the BRICs and the ‘Next 11’ as a new source of growth. According to Boeing’s latest outlook, these emerging economies will collectively occupy over 60 percent of passenger flows by the year 2030.
India
Last month we discussed how Emirates is capitalizing on new passenger flows, for example connecting Asia with Africa and with Latin America via its Dubai hub. A good showcase of the challenge that the rise of Emirates is posing to European legacy carriers is India, since the subcontinent is the second largest market for both British Airways (50 weekly flights to 5 destinations in India) and Lufthansa (52 weekly flights to 7 destinations), after the United States.
India is also Emirates’ largest operational market with 185 flights a week to 10 destinations. Says Orhan Abbas, vice president India and Nepal at Emirates, “The Indian market is a very important one for us as Indians have overtaken the British as the single largest tourist group on Emirates.” In the 2010-2011 fiscal year, Emirates’ revenues from India grew 24 per cent to USD1.7 billion, while traffic grew with 10 per cent.
Emirates’ aggressive approach has resulted in significant market shares on international flight routes from India; the airline currently holds 35 per cent on routes from India to Britain, 40 per cent to France, 20 per cent to Germany, and 31 per cent to New York. The airline’s low prices and large network in India make it an attractive option, and on the popular route between India and North America, Gulf airlines such as Emirates are virtually the only practical option for travellers from second-tier Indian cities. A passenger from New York on the way to, for example, Thiruvananthapuram, has to connect twice when flying via Europe (e.g, at Frankfurt and at Delhi), compared to a single connection at Dubai.
Besides the large number of Indians working in the Gulf states, “one of the reasons for Emirates’ success is that so many Indians love transiting via Dubai,’’ says Madhav Oza of Blue Star Travels, one of the biggest travel consolidators in Mumbai. “The shopping, easy visas and simply the familiarity with the city often makes them choose it over colder and more congested European hubs like Frankfurt, Paris or Brussels,” he says.
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China’s airlines upgrade cabins to increase their international competitiveness
5 August 2011 | The prospect of an airline from Mainland China joining the top 10 ranks of the Skytrax world’s best airlines list may not sound that far off, if one takes into account that the ranking is dominated by Asian carriers, including ‘Chinese’ carriers such as Cathay Pacific and Singapore Airlines. Airlines from China still have some way to go to improve their international competitiveness, but two of China’s largest airlines, China Southern and Air China, have recently embarked on major upgrade programs. Meanwhile, Hainan Airlines, China’s fourth largest airline group, recently has been awarded a 5-star status by Skytrax (although this status can be debated).
Air China
Air China is China’s flag carrier and third largest airline, as well as the world’s most profitable and largest carrier by market value. The airline’s major hubs are Beijing, Shanghai, Shenzhen and Chengdu and as of December 2010 the Star Alliance-member operated flights to 47 international and 91 domestic cities with a fleet of 393 aircraft. Compared with China’s other major carriers, China Southern and China Eastern, Air China leads in terms of international destinations, which make up 50 percent of its routes, followed by China Eastern (30%) and China Southern Airlines (25%). Air China holds interests in Cathay Pacific (29.99%), Air Macau (80.9%), Shenzhen Airlines (51%) and Shandong Airlines.
Cabin revitalisation programme
In mid-July, Air China took delivery of its first Boeing 777-300ER, which features the carrier’s new premium products, including 180-degree flat bed seats in business (2:2:2 configuration) and first class (1:2:1 configuration) and a self-service bar, located between First and Business. The seats in Air China’s ‘Forbidden Pavilion’ First Class are Contour’s ‘Venus’ seating product with sliding privacy screens for centre seats and an adjustable ottoman that provides a seat for a guest as well as extra stowage. More images of the cabin can be found here).
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Lufthansa’s new 747-400 First Class consists of a seat and a separate flat bed
14 March 2011 | When Lufthansa introduced its first A380 to its fleet in May 2010, the airline’s new superjumbo also featured a new First Class cabin (as well as new seats in Economy). At the same time, Lufthansa also started an EUR400 million revamp of all classes across its entire fleet. For example, in December 2010, Lufthansa unveiled a ‘new European cabin’, adding slimmer, lighter seats on its short-haul aircraft.
First Class on 747-400s
Lufthansa has just announced it will also upgrade its First Class on its B747-400 aircraft. However, instead of installing the new First Class cabin introduced on its A380 last year, Lufthansa has opted for a radically different design for the new First Class on its B747-400s.
The airline is converting every window seat in its existing First Class cabin – which currently fits 16 passengers – into a permanently flat bed, reducing the total number of seats to just eight. The full-flat beds have a sleeping surface measuring over two metres in length and a top-quality mattress. Essentially the new First Class seat on Lufthansa’s B747-400 now will consist of two seats, with the upright seat appearing similar to an older version of Lufthansa’s First Class seat on the pictures. Cabin seating is configured just 1-1 with the upright seat adjoining the aisle to allow for easier meal service and socializing, while the bed is positioned alongside the window for more privacy.
First class passengers will also get 17″ monitors for inflight entertainment, temperature-regulating blankets and pillows and an amenity kit from Porsche Design. Furthermore, just like the First Class on Lufthansa’s A380s, sound-absorbing curtains and sound-deadening insulation beneath the carpet will make the cabin more quiet. Read full article »
Smart and light-weight designs major theme in aircraft interiors today
21 September 2010 | Last week, the Aircraft Interior Expo took place in Long Beach, California. As airlines stress weight savings to burn less fuel with higher oil prices and stricter environmental regulations ahead, the main innovations the drew attention at the show were smarter and lighter solutions in seating, inflight entertainment and onboard catering.
At the European edition of the event, earlier this year in Hamburg, MmilleniumM Group’s ‘Air Sleeper’ seat concept made headlines, and this time Italian aircraft interiors specialist Aviointeriors unveiled its ‘SkyRider’ saddle-style seat. The ultra-high density configuration lets passengers sit at an angle with just 23 inches of legroom (versus the standard 30 inches) and would allow airlines to increase passenger capacity by up to 40 percent. The seats also have a foldable shelf for carry-on bags and hooks to hang a jacket or purse. Aviointeriors is positioning the SkyRider as a seat for a new ‘basic class’ on three to four hour flights.
The novel design may draw interest from ultra low-cost carriers such as Ryanair, Spring Airlines (China) and Tiger Airways (Singapore, Australia). Ryanair recently unveiled a concept that would let passengers stand during flights, leaning against a flat padded backboard and restrained with a strap stretching over their shoulder. European regulators said Ryanair’s design would not meet safety rules as current rules determine that each passenger has to be provided with a seat or berth. Aviointeriors, meanwhile, claims the Skyrider is effectively a seat, and says that if a carrier commits to installing the new seats it will apply for proper certification.
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Asia-Pacific long-haul low-cost airlines getting ready for further expansion
24 June 2010 | Asia’s fragmented geography makes air travel an attractive option. Especially low-cost airlines have allowed many Asians to travel by plane for the first time, and there is major scope for LCC growth on medium and long-haul routes as the rapidly growing middle classes of Asia are increasingly traveling longer distances. Market liberalisation is the other growth engine, with the opening of new routes between secondary destinations, especially in China, India and Southeast Asia.
Low-cost carriers already fly many 5-hour routes across Asia, such as Jin Air and Jeju Air from Seoul to Bangkok, and Tiger Airways from Singapore to destinations in Greater China. Indonesian low-cost carrier Lion Air also has plans to expand its regional network to China, Japan and South Korea. According to Airbus in 2009 Asian budget carriers flew an average 1,800 kilometres per flight. In comparison, the average flight length for Southwest Airlines (USA) was 1,019 km, and 978 km for Easyjet (Europe). The Asia-Pacific region is also home to 2 of the 3 long-haul low-cost airlines in the world, AirAsia X and Jetstar (airberlin is the third one). Read full article »
Lufthansa takes delivery of first A380 and unveils new First Class
20 May 2010 | Lufthansa has just taken delivery of its first A380 aircraft, which also features the carrier’s new First Class cabin. Lufthansa’s A380 has 526 seats, configured in three classes: eight seats in first class (the same number as on the airline’s smaller B747′s), 98 seats in business class, and 420 seats in economy class.
The airline’s new First Class offers flat-bed seats, designed with wood veneers and brown and beige leather. The flat bed measures 2.07 metres in length and 80 centimetres in width, and each passenger has an individual wardrobe. Amenity kits are designed by Porsche Design. First Class passengers will have two large bathrooms at their disposal with wash and changing areas separated from the lavatory area. The Lufthansa First cabin looks like a slimmed down version of SWISS’ First Class, which was also designed by Priestmangoode. The colors, materials and shapes used are also intended to create a smooth transition from Lufthansa’s first-class lounges to the aircraft. When departing or arriving in Frankfurt, First Class passengers are chauffeured in a Porsche Cayenne or Mercedes between the terminal and the aircraft.
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Air New Zealand goes single class on short-haul routes and radically rebundles fares
24 March 2010 | Fierce competition on the Tasman and South Pacific routes has led Air New Zealand (ANZ) to radically overhaul its short-haul fares and service offerings. The airline has decided to remove business-class seats from its A320 aircraft that fly from New Zealand to Australia and the Pacific islands, increasing capacity by an extra 19 seats to 171 seats. Instead, the single-class A320s will have four options of service, priced accordingly.
A ‘Seat’ option allows one carry-on bag of 7kg, tea, coffee and water and access to some entertainment options but no new release entertainment. ‘Seat + Bag’ allows one carry-on bag and one checked bag, tea, coffee and water and some entertainment. ‘The Works’ offers carry-on and checked bag, meal and drinks and a seat request, and ‘Works Deluxe’ allows two priority bags, a carry-on bag, meal and drinks, a seat request, a guaranteed empty seat next to the passenger, premium check in, lounge access and better entertainment options. ANZ said a Works Deluxe airfare would be around NZD500 (EUR270, USD360) cheaper than a current business class fare and the seat-only option would be “in exactly the same place” as budget airlines. The airline is also introducing automated check-in procedures similar to those currently used on domestic flights, in which a RFID chip can be used to check in.
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Premium economy gains further ground on long-haul flights
9 March 2010 | For cost-conscious business travellers as well as wealthier leisure travellers, premium economy was born as a hybrid between economy and business class and is currently offered by a dozen airlines, mainly from Europea and Asia-Pacific. With company travel budgets squeezed during the economic downturn, this ‘value for money’ class is being offered by an increasing number of carriers. In 2009, V Australia(February 2009) and Air France (October 2009) introduced a premium economy class. Air France says its new Premium Voyageur cabin will increase its operating income by EUR 120 million a year from 2010 on.
Alitalia, Malaysia Airlines, Cathay Pacific, Etihad
In June 2010 Alitalia will introduce a new premium economy cabin, called ‘Classica Plus’. Malaysia Airlines will fit a ‘super economy’ class on its A380’s (first delivery expected in April 2012), saying it would serve “those organisations that maintain an economy-class travel policy for their employees, even after the recession.” On a similar note, Cathay Pacific says changes in passenger demand have convinced it to install a Premium Economy product across its network by 2012, as such a cabin could help capture a clientele looking to trade down from Business Class. Finally, ‘Gulf Gulliver’ Etihad is reported to consider a premium economy zone for its A380s, which are scheduled to start being delivered in 2012.
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Marriott opens TelePresence meeting rooms for rent by the hour
28 January 2010 | Cisco’s TelePresence system is a life-like high-definition conferencing facility that allows participants to meet eachother across a virtual table. To enhance the feeling of being in the same room, participants’ eyes are at the same level and the walls are often painted the same color. Cisco claims that its TelePresence system comes closer to the face-to-face experience that other solutions have been lacking sofar. Until recently, a private Cisco TelePresence system was only available to businesses at prices ranging from USD 34,000 for a simple set to USD 300,000 for a full-blown system capable of hosting 18 persons.
Cisco says that currenty more than 3,500 TelePresence systems have been installed worldwide by more than 500 companies, and by introducing public TelePresence rooms for rent, Cisco aims to broaden the use of its technology. Since 2008, Tata Communications has operated such public rooms in London and Boston as well as at 5 locations in India in partnership with Taj Hotels and the Confederation of Indian Industry.
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10 trend predictions for 2010
7 January 2010 | Looking forward to what will be another challenging year for the airline industry, here are 10 quote that sum up what’s on the horizon for 2010. From increased awareness of security to legacy-low cost convergence, the real-time web and business as unusual.
1. The State of the Airline Industry. “Following a decline of 4.1% in 2009, passenger traffic is expected to grow by 4.5% in 2010. A total of 2.28 billion people are expected to fly in 2010. Industry revenues are expected to rise 4.9% to USD478 billion in 2010. However, revenues remain 11% below the peak of USD535 billion in 2008 and 6% below 2007 when passenger traffic was at similar levels to what is expected in 2010. Airlines will remain firmly in the red in 2010 with USD5.6 billion in losses. In 2009, passenger yields plummeted by 12% (the world’s airlines will lose USD11.0 billion in 2009) […] and are not expected to improve. This is being driven by two factors: excess capacity in the market and reduced corporate travel budgets. […] For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3%. But fuel costs are rising and yields are a continuing disaster. […] The industry is structurally out of balance. The precipitous fall in yields will likely never be fully recovered” (IATA Industrial Forecast 2010).
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9 airline quotes for 2009
31 December 2009 | As 2009 has come to an end, here’s our take on some of the most interesting quotes of the past year. Together they give a nice indication of the major trends currently shaping in the airline industry. Happy New Year!
1. Customer Experience. “They [legacy carriers] basically should get out a clean white sheet of paper and start again. Most of them are beyond repair. They got far too big and have management groups that don’t care about customer service. The experience the traveling public gets on those other carriers is pretty dire. […] If I was them, I’d start a new airline. I just don’t see how they can rescue their current airlines.” – Virgin CEO Richard Branson on what legacy carriers could learn from Virgin America (in Advertising Age).
2. The New Normal. BA’s CEO, Willie Walsh, recently observed a “structural shift” was occurring, noting “it may be that demand in the highest-yielding, fully-flexible premium business market will never recover to the levels we were seeing in 2007. […] That is a sobering message for all traditional airlines. Premium travel has been central to the viability of their business model for a very long time”. – What to do with a broken airline model? (Centre for Pacific Aviation).
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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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