FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

June 14 2013

 

PAGPFT: Air Asia Japan, Fastjet.

 

Recent reports on Air Asia Japan (AAJ) and Fastjet (FJ) in Africa talk of surprise following two developments. You can guess who is not surprised – and I have the contemporary published reports to prove it.

 

These are two more examples of what I call PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.

 

 

 

Air Asia Japan

 

Air Asia made a public statement last week that AAJ “has been facing some challenges attributed to a difference of opinion in management, most critically on the points of how to operate a low cost business* and operating from Narita”.

 

AA clearly blames its partner, All Nippon Airways, noting that the AAJ management team “is predominantly comprised of ANA staff, starting with but not limited to the CEO and CFO”. Obviously, though, AA accepted this arrangement from the start.

 

When AAJ was launched, it seemed everyone loved the idea – because it seems everyone loves Air Asia (and is thus incapable of analysing the company coldly, which is my specialty), AA is a success (although because of the fawning, few spot setbacks), All Nippon Airways is a solid reliable airline, Japan is a solid reliable country, and travellers love low fares. What could possibly go wrong?

 

From the start, I said there were a few things wrong with the businessplan as announced. The launch was slow (more than 12 months). The Tokyo airport was wrong. It should not be Narita, but Haneda at least, but better Ibaraki. A320 landing fees for Ibaraki – 80km north of Tokyo – are US$1000 compared with US$2000 at Tokyo Haneda and US$1500 at Narita.

 

Then there is ANA.

 

I presume ANA insisted on Narita because it did not want to lose domestic traffic out of Haneda to a ‘competitor’ airline. Also, at the same time as the creation of AAJ was announced, ANA announced that it was creating a NFA* based in Osaka.

 

Eh? Of course if ANA wanted an NFA in Osaka, then AAJ should have had added a hub there. Not create another airline. To me, this showed that either ANA management was incompetent, or it did not want AAJ to succeed.

 

(Why start something you do not want to succeed? Answer: this is Japan.)

 

This prompted my contemporary quote – “Will AAJ succeed despite ANA?”.

 

But I do admit to one surprise concerning this matter. That AA published its disaccord with ANA. Surely AA management is aware that this is the most serious of affronts in Japan. That said, times change, and there is a possibility that ANA will be so ashamed following the AA announcement that it will do something positive. That said, again, I do not believe that ANA management is capable of understanding how an NFA needs to work.

 

PAGPFT.

 

 

 

 

Fastjet

 

Fastjet is based in Africa, which is far from my area of observation and thus knowledge. However, I made comments earlier because the airline was partly backed/owned by the founder of Europe’s Easyjet (EJ), and my general observation of the airline business.

 

As with Air Asia (see above), Stelios Haji-Ioannou (SHI) gets a good press. We have noted only that for Easyjet, SHI copied a businessplan (from Southwest in the US, which copied it from California’s PSA in the late-1960s).

 

SHI, head of the Easy Group, appears to think that because EJ is a success, that everything he touches will be a success. He has been proven wrong – with Easycar, Easycruise, Easycafe, and more!

 

Briefly, FJ planned routes (no precision, but intraAfrica international routes from bases in Angola, Ghana, Kenya, Tanzania). It was billed as an NFA*, later changed to a LCA* – different airline types to me, but possibly the same to others, including FJ management.

 

I said FJ’s start-up timetable (about six months from the announcement with operating plans detailed) was “optimistic, given the likely hurdles with traffic rights”.

 

I added that I could not see any of the aviation authorities in the four markets “readily giving traffic rights to a foreign-owned scheduled airline, even more so in that some would be in competition with existing airlines, many of which still have the state as a major shareholder”.

 

Further, I noted that most of Africa has no current need for NFAs, just LCAs. And NFA essential practices – such as internet booking, boarding-pass printing, no cancellations, no travel agencies, etc – are likely to be too complex for immature travel markets.

 

At present FJ is operating only domestic routes in Tanzania.

 

Now, an independent report says that FJ cannot get the traffic rights it was hoping for, and that in at least one market, Kenya, the state airline plans a NFA, Jambo Jet. That does not mean Jambo Jet will be a success, but it does threaten any support that FJ might have been hoping for.

 

In addition, says FJ management, costs in Africa are high, so operating a LCA is hard.

 

Eh? Wasn’t any of this foreseen? Also, FJ comment about high costs is a red herring – if that is possible in aviation. Generally, ‘low-cost’ means relevant costs. FJ should be aiming for lower costs than at present in certain parts of Africa – not in comparison with the US or wherever.

 

If FJ managers cannot cut costs below those of FSAs*, then they should be fired.

 

PAGPFT.

 

 

*Definitions at Travel Business Analyst are specific:

-FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

-LCA = low-cost-airline. (Not a low-fare-airline; see next.) An FSA but with lower operating costs (cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc. Usually similar to the parent airline, but a different name, and competition against parent airline allowed.)

 

NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: market freedom in terms of routes and aircraft choice; single aircraft type; where relevant, competition against parent airline allowed; fares that are extremely low when booked at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no service frills; single economy-class cabin; no seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

 

The Fox