Air France; bad to worse

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Air France; bad to worse

Interpreting what Air France is saying and doing is getting like China-watching. Every move has to be watched carefully, and every statement reinterpreted to decide whether the airline is doing what it says, something different, or hiding something.

 

Thus it is with AF’s statement that Hop (sic), its not-no-frills-airline subsidiary for regional routes, is to take over “short-haul activity” from summer 2015. I assume ‘short-haul activity’ means AF shorthaul routes, but maybe not, and maybe AF is waiting to see how the unions react before clarifying.

 

Actually, AF says Hop!Air-France (sic; HAF) will perform that ‘activity’. You and I can only guess what HAF is. Is it a new airline, or just a way of saying something to pretend that AF is not giving routes to Hop, but to HAF – which does not exist!

 

Get my point about China-watching?

 

As an aside, Hop does not have enough aircraft (and/or the right type) to operate AF’s shorthaul routes. So will it lease AF aircraft (with, what the unions will surely demand, full AF crews)? Then where’s the saving – the whole point of the exercise?

 

I suspect this whole Hop plan follows AF’s inability to get its no-frills-airline Transavia to operate some shorthaul routes. That plan was stopped by the unions.

 

Yet AF must cut costs. The problems are that the unions will prevent cost cutting if that would mean any staff being fired. And the airline cannot be bailed out by the government because 1, that might be stopped by European Union competition rules, or 2, the government has no spare money.

 

AF could raise loans in the market or seek an airline partner. But an airline partner looks unlikely given KLM’s sad experience of its link with AF, and the fiasco of AF’s investment in Alitalia.

 

In another incidence of poor AF management, it is about to be shut out entirely from the control of Alitalia – in which it bought a 25% stake in 2009, a share that has now been cut to about 7% following new-capital input.

 

Of the nine directors at the recapitalised (again) Alitalia, six are appointed by the Alitalia (=Italy) side, and three by the new 49%-owner, Etihad. For that 49% Etihad paid about the same that AF did for its 25%!

 

 

The Fox

Remember, I’ll be famous after I’m dead.

 

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Troubled airlines – Air Asia,Malaysia Airlines,Thai Airways, Virgin Australia.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Troubled airlines – Air Asia,Malaysia Airlines,Thai Airways, Virgin Australia.

An excerpt from our monthly Travel Business Analyst newsletter.

 

Air Asia

It was not supposed to be like this. The no-frills-airline may be different from other airlines in its operations. But when news is bad, it follows industry-style – talk about something else.

 

Its report for Q3 jumps over or ignores the bad news that I see in the latest traffic figures. These are the main ones, in order of damage:

 

-AA Malaysia, the core operation, seat sales were flat (+0.47%).

-AA Indonesia seat sales fell 10.1%.

-AA Philippines, despite being a relatively-new operation (2012) seat sales fell a shocking 15.4%. And its seat factor is at a dangerously-low 62.9%.

 

For all AA divisions, Q3 growth was just 1.2%. YTD growth, at +10.3%, still looks reasonable, even though this is half the rate in 2013.

 

AA India’s first figures reported; no comparison of course. Its seat factor was a reasonable 76.3%, but I estimate that it needs to be at least 5-points higher.

 

Reading AA’s announcements you would not guess anything was amiss. I think either Tony Fernandes (sort of super-CEO) or CEO Aireen Omar need reprimanding. In the US, one of them would risk being fired for badly-planned or –executed expansion.

 

The other bad move was, of course, the first Air Asia Japan with All Nippon Airways. The faults in that deal were easy to see; we saw them and reported them – at the time the plans were announced, not when the proposal collapsed.

 

 

 

Malaysia Airlines

No relief in sight. September figures show a 12.9% fall in international seats sold although YTD is still 2.4% ahead. Surprisingly, domestic is almost as bad, down 11.8% in the latest month; normally this would be expected to recover sooner.

 

 

 

Thai Airways

It’s getting worse! September figures show a 23.4% fall in international seats sold and YTD -22.9%! Although we don’t have all the figures, the problem seems to be more domestic traffic than international. Some measures (RPKs) show -44.1% in September and -27.9% YTD. I expected a slight recovery around this time; these figures are bad.

 

 

 

Virgin Australia

I get the sense that management does not like releasing operating data – and only does so because it is a requirement for companies quoted on the stock market.

 

Recently, VA changed again its manner of presenting data, although I can still make the adjustments to present a standardised view. With this, I can see that there are some measures indicating that all is not well at the company – which may be the reason it has changed its reports.

 

(The change is primarily to report Quarterly and not Monthly as before. Data is available only via the stockmarket, not the company.)

 

Some comments on VA’s latest report:

 

-Growth in seat sales on domestic-Australia is bad, -1.9% in Q3 and +1.8% YTD.

-International growth in seat sales is weak (for a newish operator internationally), just +2.1% in Q3 and 6.3% YTD. That said, seat factor is good – 83%, 81%.

-Tiger Australia, now part of the VA group, is also weak. Q3 growth was +5.6% (on figures which are restated – although VA does not tell you that). That may look reasonable – but not for a relaunched no-frills-airline. YTD looks better, +8.0%, but I think it should be closer to 15%.

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.

Did You Miss This? Inbound China, Thailand; outbound China, India.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Did You Miss This? Inbound China, Thailand; outbound China, India.

Excerpts from our monthly Travel Business Analyst newsletter.

 

 

China outbound travel

We calculate growth 13.6% Jan-Aug, and almost the same, 13.9%, in August. Is this lower rate (for the past four years it has been +18-22%) the new reality?

 

 

China inbound travel

The DMO is starting to provide deeper data. Summarising, the Jan-Sep visitor total shows a high non-leisure share – which we long suspected but could not see in the data. Although these might not be perfect separations, only 33.9% is defined as Leisure; 20.5% Business; 2.3% VFR.

 

The rest includes crew and ‘workers’ (not otherwise defined), but then 30.7% ‘Others’. We presume that includes diplomatic visitors but perhaps also those travelling with official and semi-official delegations. All this makes the non-core categories (core are leisure, business, VFR) the biggest single share, with 43.3%. These categories are shown by country counts – but that leads to the other big caveat.

 

The breakdowns are by passport, so many of those American, Australian, British, and other visitors, will actually be living in Hong Kong, Singapore, Tokyo, etc. Caveat lector.

 

 

India outbound travel

We have started a monthly estimate, as official data is slow to be published, and is usually produced annually. For Jan-Jun this shows 8.3mn, a 1.2% fall.

 

 

Thailand inbound travel

Overall visitors -7.0% in September (although on official figures given in 2013, we calculate the fall to be -10.1% – perhaps the new government counts differently?). The two markets to watch – China -6.3% (still down; we thought it would start to pick up around now), Russia -19.7%.

 

At Bangkok airport, where you can assume there are more business travellers, VFRs, others, it was worse – China -18.1%, Russia -34.2%!

 

YTD that leaves the all-country total -10.3%, China -17.4%, Russia still up, +3.2%.

 

 

The Fox

Remember, I’ll be famous after I’m dead.