Fox On Friday: Virgin on the cliff?

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FOX ON FRIDAY

 

Fox On Friday: Virgin on the cliff?

When the Virgin Atlantic airline was launched in 1984, I made the bold and brave statement that it would not last two years. 30 years later, I guess it is time to admit I was wrong!

 

But now I wonder again.

 

VA was protected almost 10 years by innocent managers at Singapore Airlines – who, despite having paid for 49% ownership of VA, and saving the airline from collapse, had zero influence.

 

SA sold to, ironically, an airline which once owned shares in SA itself – Delta.

 

Delta is a conservative and strong airline, and has survived in the maelstrom of the US airline business. I wondered why Delta decided to invest in such an operation as VA – which has a different management culture.

 

Was it an insurance policy for its US operations – always under pressure and with little chance of US support if times get tough? (Even now, leading the case against alleged government subsidy of Emirates, Etihad, Qatar, there is no government support or even encouragement.)

 

UK-based VA might not seem a good investment as security, however. True, the UK is part of the European Union (for the present; an in/out referendum is due 2016/17), but the UK is the most economically liberal of the EU markets, and in some ways more liberal than the US.

 

Now, the figures.

 

Our source does not provide timely figures. We have just VA’s half-year figures; in fact, just monthly, and we do the H1 calculation. These show a 5% fall in seat sales. And there has been a fall every month this year – in one, it reached 9%.

 

With Delta’s involvement I can imagine there is some ongoing rationalisation of schedules, prices, etc. But even for all-2014 growth VA’s growth was only 1%.

 

This time I will be more cautious, and not predict an early demise for the airline. But watch those traffic counts; if the current fall is confirmed for all-2015, then I may well dust off my prediction of doom.

 

 

 

The Fox

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

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Fox On Friday: Time for Air France to face facts?

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FOX ON FRIDAY

 

Fox On Friday: Time for Air France to face facts?

There has been much agitation over the Air France announcement that it might need to reduce its employee count over the next two years by just under 3000.

 

I will input some statistical realities into the argument, as some seem to have got lost.

 

 

Investors

Because many union and socialists in general make the remark that whilst employees are ‘losing’, investors (or ‘speculators’ if you prefer a word considered in France as even more inhuman than investors) are making big bucks.

 

At this time of the year in 2000, AF shares were trading at €20. In 2010 at €11. And now they are at €6.

 

Thus, far from making a lot of money, someone who invested €1000 in the company in 2000 would today walk away with €300.

 

 

Staff

Following the recent announcement by Air France that it may need to reduce its staff count by almost 3000, I note:

-The Air France group (AFG = AF Hop KLM Transavia) has 69,000 staff for its 235 aircraft. IAG (Aer Lingus British Iberia Vueling) 59,000 for 415 a/c. The Lufthansa group 119,000 for 622.

 

-The AFG cut of 3000 staff would be 4.2% of its total. So I calculate that AFG needs to reduce staff by 20,000, almost 30%, if it needs productivity close to its main competitors in Europe.

 

 

Profits

The distant dream.

 

In 2014 AFG reported an operating loss of €129mn. In the first half of this year, a €232mn operating loss – €25mn worse than for the same period in 2014.

 

It is not quite clear what AFG expects for all-2015. For sure, it targets lower costs (which should be helped a lot by lower fuel costs), but will that mean profits? Almost certainly not, because it has an overall ‘Perform 2020’ strategy plan.

 

 

Alitalia

Remember that AFG once owned 25% of Alitalia (recently; in 2009). From the beginning I said that rival bidder Lufthansa must have broken out the Sekt when it lost the bidding war.

 

Following various funding inputs – in which AFG did not participate – AFG’s ownership is now down to about 7%. And it is shut out almost entirely from management influence. Of the nine directors, 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 AFG did for its 25%! The figures are not always clear – this is the world of finance, after all – but Etihad paid about €560mn, AFG about €323mn.

 

And the final kick in the teeth was Alitalia’s announcement that it will not renew its partnership and JV agreements with AFG when they come up for renewal in 2017.

 

 

 

The Fox

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

 

WYSK – What You Should Know. Airlines in Europe.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

WYSK – What You Should Know. Airlines in Europe.

September results show another twist.

Air France – group

The Air France grouping (AF, Hop, KLM – AHK) shows a big leap (+20%) but that is because A pilots were on strike a year ago. YTD figures show a more sober +3%, although that is not a bad result, but – this goes on an on – those strike figures probably account for 1pt or maybe 2pts of that YTD growth.

That said, we believe H and K are growing (perhaps around +5%) and thus A is falling (-2%?); the figures are not separated so that we have to look for other indicators.

(Another reason for A to worry is the opening of a new base in Paris by Vueling, see next). A has its own NFA*, Transavia, but cannot get it going as it would like, because A unions don’t like it.)

IAG = Aer Lingus, British, Iberia, Vueling (ABIV)

Europe’s stars – although the Star Alliance is the Lufthansa laggards. Growing at 9% in the month and +10% YTD! Caveats though:

New acquisition A’s data is not included in most of this period, and it was having a bad year – +0.3% in H1, probably because a resurgent Ryanair (also based in Ireland although most of its traffic is out of London) grew at 20% in the same period, and probably took growth from A.

And IAG’s big growth is not from its big airline, B, but from its two Spanish operations – I and V. Not all comparable figures are published but B is growing around 3% compared with I’s around +14% and V’s around +16%.

Ironically, B has started and shutdown/sold two of its own NFAs* – Go and DBA – and is now part of a group that its thriving in part thanks to its NFAs. A is a sort-of NFA (except for its flights to the US), and so is V (it operates some flights for I, and on those it can be considered an LCA*).

V is moving fast, with bases in Rome and now in Paris.

IAG has one disaster. It’s called Open Skies which, despite that dumb name is actually an airline, operating a single route Paris-New York. I could never understand why B – which created it – did not call it ‘British Airways’. But now with A flying an out-of-sync operation across the Atlantic, will there be some restructuring with the out-of-sync Open Skies?

Lufthansa – group

What to say? Growth is not good – +2% for the group (L plus Austrian, Swiss – ALS) but -3% A, +3% L, +2% S.

And the group has problems-in-waiting. A faces competition at home not only from Niki, a sort-of NFA* (ultimately owned by Etihad, although I think Etihad may be trying to sell it, or change it). But from – dumb as it seems – a semi-subsidiary of L! (‘Semi’ because Turkish Airlines is an owner of Sun Express as well.)

So things may get worse for A, even if they ever get better.

S is ok, but that +2% is not encouraging. (Although Switzerland is not part of the European Union, it has an association agreement in certain economic sectors, including aviation, and thus S faces competition from EU-based airlines; Easyjet has a big base in Geneva, for instance.)

Then there’s Eurowings/Germanwings – whose results L hides in its own data, although we are surprised the Frankfurt stockmarket allows this obvious obfuscation.

Germanwings, L’s failed LFA (even before the suicide-crash earlier this year) was to be merged into Eurowings – again, planned before the crash. Eurowings is nearly everything – charter airline, LCA*, NFA (and almost an FSA* as it operates some flights for L). We cannot say if that strategy is a success, because L hides the figures. But we suspect not (if only that administrating such a potpourri to keep everything profitably busy, is hard).

Will L change? It needs to – to simplify operations – but it has had two major strategy changes over the past three years. With the result that everything has become more complex. There are no signs that management realises this. And there may be no change until two former chairmen – Wolfgang Mayrhuber, 68, and Juergen Weber, 74 – finally retire. They are still on the supervisory board, and both are engineers, and so favour old-style solid management.

*Notes:

-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 no-frills-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. If relevant, 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

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

 

Fox On Friday: France – one step to commonsense.

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FOX ON FRIDAY

 

Fox On Friday: France – one step to commonsense.

Yes! For many years – perhaps 10 – I have been saying France needed to be less-nationalistic (and linguistic) about the name of its destination marketing organisation.

 

What did it do? It changed its name from the bad ‘Maison de la France’ to the worse ‘Atout France’!

 

Even ‘worser’, because with the graphic for ‘Atout France’, the designers put emphasis on the ‘A’ in each word, so ‘AA’ is prominent.

 

So what’s ‘AA’? Nothing; it means nothing. 10/10 for the graphic designers; 0/10 for marketing commonsense.

 

But now, good news – the DMO has changed the name of its website from ‘rendez-vousenfrance.com’ to ‘france.fr’.

 

We would have preferred ‘france.com’, however. We have a few reasons, but just two: 1, ‘.com’ is more international; 2, ‘.com’ is often written into an international tablet keyboard; ‘.fr’ is usually on French-language tablets. We presume that most website visitors to ‘france.fr’ will not be French, and perhaps not French-speaking.

 

Unfortunately, the name ‘Atout France’ for the DMO remains. But if this website-move is any indication, maybe one day commonsense will prevail and the DMO will change its name to ‘France Tourisme’?

 

 

The Fox

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

Fox On Friday: Absurdity at Alitalia.

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FOX ON FRIDAY

 

 

Fox On Friday: Absurdity at Alitalia.

News:

-Silvano Cassano, Alitalia’s CEO, resigned last month. For commentary on Alitalia it does not matter whether he jumped or was pushed. Because the result is the same – dysfunction.

 

-Chairman Luca Cordero di Montezemolo sort-of takes over the CEO title, but the job’s responsibilities are split between COO Giancarlo Schisano and CFO Duncan Naysmith.

 

We have been here before; see following.

 

 

The (recent) past:

-Cassano was the airline’s 4th CEO since 2012: Cassano August 2014-September 2015; Gabriele Del Torchio May 2013-August 2014, Andrea Ragnetti March 2012-January 2013.

 

 

About them:

-Cassano has an impressive CV up to 2010. He started at American Express in charge of Italy, then Hertz responsible for Europe. Then Fiat (where he was CEO of one of its divisions). Then in 2003 to Benetton as the first head outside the Benetton family. But he left in 2006, joining Grandi Navi Veloci, a 10-ship local-ferry operator in the Mediterranean.

 

His experience at GNV would have been familiar to him at Alitalia – GNV has had almost constant changes in ownership or capital input – substantial ones in 2004, 2011, 2012, 2013.

 

Since leaving GNV in 2010 (reasons are unclear) Cassano was in the wilderness of consultancies, and in 2014 moved to Dubai – where he presumably met James Hogan, Etihad’s CEO, up in neighbouring Abu Dhabi.

 

 

-Del Torchio had been CEO of Ducati, motorcycle maker – probably an easier ride. In 2013 he said that his task was to lead Alitalia into profitability. Instead he led it into the salesroom; Etihad bought 49% in 2014, when Del Torchio restated what had been his task –he said he had been tasked to find a partner.

 

 

-Ragnetti, before Alitalia, had international managerial experience in Netherlands and Portugal as well as in his native Italy. At Philips he had CEO roles at two of their divisions.

 

-After Ragnetti left, then-chairman Roberto Colaninno also took on the CEO post, and with two other VPs, Elio Catania and Salvatore Mancuso, looked for another CEO.

 

 

What we said in 2014 when Cassano took on Alitalia’s CEO job:

 

-“[Cassano’s] task – as for previous CEOs – seems hopeless, until the airline can cut half its staff. That indicates he will simply be managing the decline. The question is whether Etihad or other owners will demand improvement nevertheless – and make changes if they do not happen. We therefore think Cassano will not be with the company for more than two years.”

 

 

The Fox

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

Trottings: Walking in Japan, Emirates, Airports – Dubai Incheon Haneda

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TROTTINGS = Trip Jottings

The Fox Trots: Travel Stories from The Fox.

 

Trottings: Walking in Japan, Emirates, Airports – Dubai Incheon Haneda

 

Walking trail in Japan

I took the train from Tokyo to Hachinohe near the tip of Aomori prefecture (thus near the tip of Honshu, and a crossing port for Hokkaido). Some comments:

-It’s a 3-hour ride from Tokyo on the Green Hippo (my name for the Shinkansen E5 train type).

 

-I hiked a section of the unsnappily-named Michinoku Sea Breeze Trail*, which starts in Hachinohe and is planned to be a 700km coastal trail – along the coast that the 2011 tsunami damaged.

 

-*I suggest a new name. ‘Michinoku’ is a geographical region of northern Honshu, and thus has factual logic. And ‘Sea Breeze Trail’ has a pleasant sound. But together the MSBT is a marketing dud – for an international audience. Either Shiokaze Trail (sea breeze) or Kaze Trail or run a social-media campaign to find a snappier name.

 

 

 

Dubai airport

-I walked out of two toilets because they were dirty. Third was also, but I was running out of time. The airport lives off transit passengers. Is it losing the task of serving them?

 

 

Emirates

-It seems that problems with touch screens on board Emirates aircraft is becoming common.

 

 

Seoul Incheon airport

Good, although I have never thought it is better than Singapore Changi. Some comments:

-As a transit passenger recently, I had problems because you need a boarding pass to get through security to the desk where they issue boarding passes!

 

-Free massage chaise-longues . But I exited before the program finished because I felt this was a rogue chair intent on destroying backs.

 

-Movie rooms, chaise-longues, etc. In general good and clean.

 

-One fault I am surprised has still not been corrected. The moving walkway in the terminal fingers travel in only one direction. Hong Kong airport made that same mistake when it opened, and corrected it within a year. Seoul has not yet learned.

 

 

 

Tokyo Haneda airport

-With improvements, now much better than Narita in comfort, style, modernity, cleanliness (Narita is clean, of course, but Haneda is sparkling).

 

-No longer poor domestic cousin to Narita.

 

 

 

The Fox

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

 

FOX ON FRIDAY: Slamming Lamy, Now I get it (not no-frills), Not a Bel-mond for everyone.

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FOX ON FRIDAY

 

Slamming Lamy, Now I get it (not no-frills), Not a Bel-mond for everyone.

 

Slamming Lamy

Pascal Lamy, head of WTO’s ‘World Committee of Tourism Ethics’ (in punctuation marks because I am not clear what the WCTE does). He gave the keynote speech at last week’s JATA Tourism Expo in Tokyo. As I told him after the following episode, that his presentation was good, interesting, and motivating, but that his social/professional skills were very poor.

 

Among my points:

-I said his presentation seemed to presume that all travellers (arrivals, which he called ‘tourists’) were leisure travellers, because he was talking about the attraction of culture for many of them.

 

-He said 40% of visitors were motivated by culture. I challenged that, and he said he got the figure from the WTO, implying that therefore it was correct. But he seems to have misinterpreted it. The same figure was used in a WTO presentation later, but with a qualification that 40% of visitors included culture as one of their reasons for travel; a big difference to how Lamy used the 40%.

 

-He had said that the number of outbound travellers from Japan was “stable”. I said in fact it was falling. He then mumbled something like “what do you expect with a falling population” – which is a naive reaction. But then he partly contradicted himself by adding (and repeating what he had said in his presentation) “No, it is not falling, it is stable”. This year the outbound-travel number has fallen 5% which I, and we believe most others (except euphemists [don’t bother to look it up; it exists only here]), would not define as ‘stable’.

 

-He called I M Pei ‘Chinese’. This is racialism. Pei is an American of Chinese ethnicity. (Pei left China when he was around 20 to study in the US, and never again lived there.) Again an example of Lamy using, or misusing, facts to suit his argument.

 

He also said Pei was employed to design a pyramid for the Louvre museum in Paris. Was the pyramid decided before? Surely many can design a pyramid; was it necessary to employ a costly renowned architect to design just the pyramid?

 

In fact, the pyramid was first proposed for another Pei-designed structure in the US (so the Louvre was a sort-of ‘copy’), and Pei’s job specification involved much more than that now-lauded pyramid entrance.

 

-I asked Lamy for his business card. He said he had run out (day one at an event in Japan, so I presume he was lying). So I am not sure how he presents himself; who he worked for that day.

 

Lamy is also involved in efforts to win the next World Expo and Summer Olympics bids for Paris (he is French). To me this indicates he will do anything and adapt his knowledge and arguments to suit his current paymaster. (Because the Olympics and Expo are bad for economies for a destination – which I presume he knows – but doing such work is good for personal prestige and on a CV.)

 

 

 

 

Now I get it (no-frills-airlines change their minds)

Bangkok-based NokScoot (or is it ScootNok? Snok?) is due to start Bangkok-Taipei flights this month.

 

Now I get it. I have always assumed that Snok, and its Singapore-based equivalent Snook, were what they said they were – longhaul no-frills-airlines (NFAs). Or at least medium-haul.

 

I admit that I could not understand when Scook started Singapore-Bangkok that, even if you stretch it, is hardly even medium-haul. But I let that pass.

 

And Nook’s Singapore-Bangkok-Taipei/Osaka. I let that pass also.

 

But with this new Snok’s route, I finally get it – or them:

  1. Routes/flights/passengers/sales/authorisations can be intermixed. Who’s to know if you are flying Scoot or NokScoot when you fly Bangkok-Taipei? In fact, of course, both could be in one flight.

 

2, and this is the most important. These NFAs are no longer medium- or even long-haul NFAs – strategically speaking. They are simply a lower-fare (to the passenger), lower-cost (to the airline) alternative to their main parent airlines – what I call full-service-airlines. Those FSAs may no longer be able to offer lower fares demanded by the market, because of their higher cost base.

 

Do the owners realise that they have changed their strategy?

 

(Not a stupid question, because they may have made their plans based on commercial opportunities, and not necessarily given any attention to the strategic implications. That is left to pseudo-travel-industry-intellectuals such as myself.)

 

 

 

 

Not a Bel-mond for everyone

Roland Hernandez, chairman of Belmond Hotels, on firing John Scott, its CEO, said “[he wasn’t the right leader], not to do what has been done so far, but to take us to the next level.”

 

Yet Scott was previously CEO of Rosewood Hotels, and would seem to be perfect for the Belmond job.

 

Conversely, not so for Hernandez, who joined Belmond in 2013, just a few months after Scott joined. Hernandez headed media companies; even Belmond could think of nothing better than to describe him as a “media and entertainment executive”. His main position was heading Telemundo, the second Spanish-language TV group in the US after Univision. How did that job qualify him for Belmond?

 

I believe the new CEO, Roeland Vos, has a dull if solid CV. He was long-time (30 years) Europe head for Starwood, before being eased out in 2013. And he followed a corporate plan at Starwood; he did not lead it. Also, Belmond may not be a good long term bet with possible more strategy and even corporate changes coming.

 

 

 

The Fox

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