Fox On Friday: nano Norway overtakes giant Germany.

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Fox On Friday: nano Norway overtakes giant Germany.

Another one hits the dust


Well, not yet. But this Q1, Norwegian from nano Norway overtook Air Berlin from giant Germany in terms of seat sales. There’s more.. ..


AB – which has been proudly saying that it is Germany’s No2 after Lufthansa – is substantially owned, and driven, by Abu Dhabi’s Etihad (run by an Australian who’s on a giant ego trip..but that’s another story).


So for AB to slip ranking like this is, well, like a slap.


Then there’s Norwegian, who has managed to find rules that allow it to fly such obscure routes , for a European-based airline, as from the US into France’s Caribbean colonies!


And from the UK to the US.


Which is why Norwegian must beware Brexit.


Norway is not a member of the European Union but pays for access to the EU market through various trade agreements – one of which covers airline services. In effect, Norwegian can act almost entirely in the same way as an EU-owned airline. Which explains how Norwegian can also fly UK-US (Norway is specifically mentioned/included in the EU/US bilateral air agreement).


But if the UK votes the wrong way and exits the EU, we think Norwegian will be kicked off those UK-US routes. Unless, and what would be cruel irony, a non-EU UK also agrees to pay for access to the EU market (which it will probably need to for economic reasons), and thus lets its airlines continue to operate within the EU.


(The Europe edition of our monthly Travel Business Analyst newsletter has a report this month on Brexit. It includes reporting the good-and-bad news for UK-based Easyjet and EU-based Ryanair. Not quite what you might think.)



The Fox

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


WYSKs – Asia Pacific inbound, outbound; Hotel-room pipeline; Travel Indices – Asia Pacific, Europe, US.

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WYSKs – Asia Pacific inbound, outbound; Hotel-room pipeline; Travel Indices – Asia Pacific, Europe, US.


Fox On Friday: WYSK – What You Should Know.


Asia Pacific inbound

Our calculation of AsPac visitor arrivals for latest-month December, in the current editions of the Travel Business Analyst newsletter, shows +6.7%. Arrivals weakened by fall in China, but balanced by boomboom in Japan.


Asia Pacific outbound

Our calculation of AsPac resident departures for latest-month January, in the current editions of the Travel Business Analyst newsletter, shows +15.8%. Boosted by Lunar New Year (against non-LNY month in 2015), thus big growth from China +20% (our estimates), but India only +11% (our estimates).


Hotel-room pipeline

We calculate, from Smith Travel Research data, for March, the number of hotel rooms in the pipeline has grown: World +11.8%, US +15.2%, AsPac +8.7%, Eur +17.9%.


Travel Index, Asia Pacific

Our Asia Pacific ‘TBA Travel Industry Index’ in the current Asia Pacific edition of the Travel Business Analyst newsletter, shows monthly traffic growth of: 2016: Jan 7E. 2015: Dec +5.3P; Nov +6.6; Oct +4.6; Sep +3.9; Aug +2.9; Jul +5.5; Jun +1.4; May +6.3; Apr +3.4; Mar +4.9. (Percentage change over previous year. E=estimate, P=provisional.)


Travel Index, Europe

Our Europe ‘TBA Travel Industry Index’ in the current Europe edition of the Travel Business Analyst newsletter, shows monthly traffic growth of: 2016: Jan 7E. 2015: Dec +6.5P; Nov +4.P; Oct +7.5; Sep +2.9; Aug +4.4; Jul +6.0; Jun +3.2; May +7.1; Apr +6.4; Mar +6.6; Feb +7.2. (Percentage change over previous year. E=estimate, P=provisional.)


Travel Index, US

Our US ‘TBA Travel Industry Index’ in the current editions of the Travel Business Analyst newsletter, shows monthly traffic growth of: 2016: Jan 4E. 2015: Dec +3.4P; Nov +5.2; Oct +5.0; Sep +4.8; Aug +3.8; Jul +4.3; Jun +3.6; May +4.0; Apr +2.8; Mar +3.9; Feb +4.2. (Percentage change over previous year. E=estimate, P=provisional.)



The Fox

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


WYSKs – Europe’s top-3 airlines, Hong Kong Trouble, Ryanair-v-Southwest.

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

Foxtrots – leading the industry in a dance.


WYSKs – Europe’s top-3 airlines, Hong Kong Trouble, Ryanair-v-Southwest.

WYSK – What You Should Know.


Europe’s top-3 airlines – same size?

Europe’s top-3 FSA* groups are getting closer together – in size, that is. Part of the reason is changed consolidation – such as Transavia into Air France-KLM, Aer Lingus into IAG┼, Eurowings into Lufthansa Group.


In the first two months AFK sold 12mn seats, IAG 13mn, LG 14mn. Changes? IAG on track to overtake LG in 2017. Possibly this year if LG continues to have pilot problems protesting at expansion of the fast-growing Eurowings – growing +12% compared with Lufthansa’s +3%.



Trouble in Hong Kong

I did not realise it was going so bad. Visitor arrivals in Hong Kong in the first two months (cancelling out distortion caused by different Lunar New Year months) fell 14% – 1.5mn fewer visitors!


Of course all of this came from falls from China – a stunning -26% in February (but note that is compared with a LNY month in 2015 – when it grew 32%).


The 2-month count has not been that low since 2013.




At Q1 growth rates, Ryanair’s much-faster growth will still not be enough to catch Southwest this year and become the world’s biggest NFA*. I calculate that Ryan will be 10mn seats sold short – 109.5mn compared with 119.5mn. But the changeover seems likely for around June 2017.



International Consolidated Airlines Group (sic) – Aer Lingus, British, Iberia, Vueling.


*Travel Business Analyst definitions:

-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

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

Brexit; what will change for the travel business?

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

Foxtrots – leading the industry in a dance.


Brexit; what will change for the travel business?

An excerpt from our monthly Travel Business Analyst newsletter.


Flying out of the window

What will happen in the travel business if the referendum on the UK staying in the European Union goes the wrong way, and the UK leaves?


We make some observations on what that might mean – on access UK-EU/EU-UK for travellers; on Easyjet, Ryanair, other airlines; and others.


(We add that although there are some laws/rules – such as flights within the EU, flights from EU markets to the US, etc – that does not mean that everything will automatically follow those rules. There is always room for negotiation, and room for horse-trading – “I’ll do this if you do that”. There is also a lot that is not ‘written’ – because no country has ever exited from the EU.)


(We also note that the UK-leavers assume, almost promise, that they will get a better deal with the EU than they have now. We think they will be wrong, almost entirely, and some of our points are shown below. We also think that the EU will not do the UK any favours – if only because it does not want other countries to decide they would be better outside the EU.)


(Also, whatever those in the UK think, the UK is a small country/market when compared to a giant EU. National pride is not enough to ensure economic well-being.)



Access to-and-from the UK

We think for travellers this would be easier, because ironically, the UK-outside-EU will probably have to follow Schengen free-movement rules. We base this on the belief that if the UK wants a trade pact with the EU – which is likely – it will have to accept certain rules in exchange.


Non-EU Norway and Switzerland (plus Iceland, Liechtenstein) already do this – accept Schengen immigration rules in part-exchange for trade access to the EU.


(Ironically, the UK-leavers are using unwanted immigration from the EU into the UK as one of their reasons to exit. Unless the post-exit government is ready to lose a big part of the UK’s export market, thus damage the economy, it will have to accept Schengen or a Schengen-fudge.)


A Schengen-like deal on immigration would likely mean many more visitors for the UK from the world’s biggest (or 2nd-biggest, depending on how you count) outbound market – China. At present, travellers from China need one visa to visit 26 countries in Europe (plus three microstates) and a 2nd visa to visit just the UK. Unsurprisingly, many do not bother with a UK visa, and so the UK loses out. We estimate that with Schengen, the UK’s visitor count from China would double in 15 months, treble in 24 months.




As a UK airline, there is a fair chance it will lose its rights to fly within the EU, or at least some of them, and from EU markets to non-EU. That could mean shut down for its Geneva base, for instance. Switzerland could allow Easyjet to continue operate there (according to EU laws), but the EU might not let EJ – as a non-EU airline – fly into EU airports from Geneva.


And likewise, those EJ routes such as France-Germany, Italy-Malta, France-Morocco might be stopped.


If that is bad, the possible outcome for Ryanair could be good for EJ – see next.




As an EU-based airline, Ireland’s Ryanair would seem to be in a strong position. It could even take up many of those routes and bases – such as Geneva – that EJ might be forced to stop.


But Ryan has a big operation in the UK, flying to many EU areas from its 16 UK bases. If the EU stops these, Ryan could lose 20% of its traffic overnight – and travellers would lose access to the airline’s low fares. (It has a 16% share in the UK – between the top-3, Ryan, EJ, British.)


But just as Ryan might be able to take over EJ’s EU routes and hubs, then EJ might be able to take over Ryan’s UK-based routes into the EU – a giant boost for EJ.



Other airlines

-IAG (comprising Aer Lingus, British, Iberia, Vueling) might need to make some adjustments, but with a UK-based airline, British, as well as EU-based Aer Lingus, Iberia, Vueling, it should not have difficulty. For instance, ownership of its Open Skies (an airline, despite that strange name) operation Paris-US could be switched to one of its EU-based airlines.

-Norwegian. Trouble. Even though a non-EU airline, as noted above, it is included in some EU agreements. One is aviation. Norway, as a member of the European Economic Area, participates in many EU agreements, including free movement (although it pays a fee for that free movement!) of labour and goods. The US/EU aviation agreement specifically included Norway. This sometimes has surprising results – for instance, Norwegian flies US to the France’s Caribbean colonies of Guadeloupe and Martinique.


But almost certainly, the US would take this opportunity to try again to stop Norwegian’s operations from the UK to the US.




We do not think operations such as Eurostar would be affected, although given the attitude of France’s anti-world unions, this is possible. But some less-prominent operations (such as France’s state-owned rail company SNCF’s intra-UK operations) might be threatened.



The Fox

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


The Economist on Malaysia Airlines. My response.

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The Economist on Malaysia Airlines. My response.

The following is my response to a report in The Economist – ‘Malaysia Airlines; Recovery phase’, April 2, see end.


That’s not quite how I see it:

-An earlier restructure plan seemed to be working; in 2013, MA traffic growth was an impressive 28%. But the tragic loss of those two B777 aircraft in 2014 ended that recovery.


-I estimate that MA’s international seat sales were still falling in 2015, possibly to under 10mn. In 2013, that count had soared passed 10mn. I thought there would be a Dead Cat Bounce for the last three months of 2015. Not only did that not happen, by a long way, but also the fall may have been greater – down around 25% in Q4.


-You exaggerate Christoph Mueller’s skills. At Aer Lingus, he followed the policy set by his predecessor (Willie Walsh, who had moved on to British Airways and then the airline-holding company IAG that recently, ironically, bought AL). That policy was to operate AL as a no-frills-airline in Europe, and full-service-airline transAtlantic. The motivating factor for this was that AL was facing homebase competition from Europe’s smartest (commercially) NFA, Ryanair. AL could not beat Ryanair (probably no-one, at present, can), so it joined them.


-Back to Malaysia where MA, similar to AL, is facing homebase competition from Asia’s smartest NFA, Air Asia.


-Will it work? You hint Mueller solved the (Ryanair) problem at AL. I would dispute that. I estimate (data no longer available from IAG) AL sold 5% more seats in 2015; Ryanair sold 17% more. But Ryanair is 10-times the size of AL, so those growths meant 0.5mn more seats sold for AL, 15mn more for Ryanair!


-In Malaysia, the newly-private MA no longer publishes results, but I estimate, as above, 10mn international seats sold. Air Asia’s Malaysia division (including domestic) sold 24mn and for all its six major divisions, 54mn.




-Lufthansa subsidiary Eurowings is not the new name for Germanwings, but GW was merged into an already-operating EW in 2015 (a decision made before the GW accident).


-Mueller ‘ruthless’ at Sabena? He joined in 1999 when it was a Swissair subsidiary, and thus primarily ‘managed’ by Swissair. Losing money for years, Sabena was weak, and Swissair could not save it. 9/11 – blamed by many travel companies for their demise – made things worse. Mueller, ‘ruthless’ or not, could not save Sabena. He shut it down in 2001; I could have done that.


-I think MA should have changed its name last year, at least to Air Malaysia. It actually did make a change, but its formal acronym to MAB* from MAS. As I remark, was this just ‘BS’?

*MAB=Malaysian Airlines Berhad, MAS=Malaysian Airline System.




Malaysia Airlines

Recovery phase

Two years after flight MH370 vanished Malaysia’s flag carrier is still in trouble

Apr 2nd 2016 |

DISASTER struck Malaysia Airlines twice in 2014. In March, flight MH370 from Kuala Lumpur to Beijing, a Boeing 777 carrying 239 passengers and crew, disappeared an hour after take-off. Experts think it crashed in the southern Indian Ocean, though no one is sure why. Only a few fragments of debris have turned up, off Africa’s coast. Four months later Russian-backed militia in eastern Ukraine shot down MH17, another 777, killing all 298 people on board. Two years on, Malaysia’s struggling national carrier is still flying, but its financial health remains under scrutiny.

Both crashes appeared to have been beyond the firm’s control but hurt business nonetheless. Customers deserted the airline. Chinese flyers feared it was jinxed: sales in China, a crucial market, fell by 60% immediately after the first crash. Shortly after the second disaster, in August 2014, Malaysia’s government renationalised the airline, rescuing it from collapse.

In fact the airline was in a mess before the two tragedies. Malaysia last made a profit in 2010. In 2013 the firm lost $356m. As demand for air travel in the region grew, rivals such as Singapore Airlines and Air Asia, a low-cost carrier, hugely expanded capacity. Malaysia itself went on a shopping spree, buying 15 A330 wide-body jets and six A380 superjumbos from Airbus. But too many seats pulled down fares and profits across South-East Asia.

Malaysia has all the attributes of a bloated national carrier—too many staff and costs that far outweigh leaner low-cost carriers. It has made some cuts. Last year it fired 6,000 of its 20,000 workers. And the government appointed a new boss with a reputation for slashing costs at underperforming airlines. Christoph Mueller, a former pilot, restored the fortunes of Aer Lingus, Ireland’s flag carrier, by cutting loss-making short-haul routes and focusing on cheap transatlantic flights. He also proved ruthless at Sabena, the now-defunct Belgian flag carrier.

Mr Mueller plans to shrink the airline to become a regional carrier, giving up on making Kuala Lumpur a global hub. Unable to compete with the likes of Air Asia for the low-cost market or with Gulf airlines for long-haul customers, Malaysia will concentrate on middle-distance routes. In December it announced a tie-up with Emirates, letting it withdraw from most of the long-haul destinations it still serves in Europe. It plans to get rid of aircraft, including some of the superjumbos.

Malaysia has tried this before. Previous bosses returned it to profitability in 2007, by slashing domestic routes and most of its international flights. Mr Mueller has other plans too. The airline will rebrand itself after improvements such as introducing on-board Wi-Fi, tarting up its lounges and providing tastier food. The aim is to change customers’ perceptions of the firm. That seems to have worked for Swiss International Air Lines, reborn from the bankrupt remains of the country’s national carrier, and more recently with Eurowings, the new name for Germanwings, which suffered a blow to its reputation after one of its pilots deliberately crashed his plane into a mountainside.

The airline’s aim of making profits again by 2018 looks optimistic, however. The low cost of jet-fuel, priced in dollars, is a boon for airlines but the weakening of the Malaysian ringgit, the currency in which the firm earns most revenues, cancels out much of that benefit. China’s flagging economy is likely to mean slower growth in passenger numbers in the region. The South-East Asian market as a whole looks difficult. Low-cost airlines have expanded capacity by more than half over the past three years. As a result the biggest 16 airlines in the region barely broke even last year, according to CAPA, a consulting firm. National pride and public money mean Malaysia Airlines will stay in the air, but it will be a bumpy journey.


The Fox

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