I’ve had a good couple-of-months.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

I’ve had a good couple-of-months.

 

I have had a good couple-of-months – in vindication unfortunately, not money.

 

  1. Frequently, since 2007, I have been saying that the Air Berlin businessmodel was wrong, suggesting simplification. In September 2016, the airline announced it was downsizing (about 40%), moving some of its leisure operations into a new company, and more, to change what it called its “complicated business model”. (There is still more to do, however.)

 

  1. In 2015 I formalised my 7-year-old strategy for bigger airline groups. One section proposed expanding Hop, an Air France subsidiary, into a low-cost subsidiary to operate certain flights (short medium long) instead of AF and its associate KLM. In November 2016, the AF-KLM group said it planned to establish a low-cost subsidiary in 2017 to operate certain Asia and Atlantic flights instead of the two.

 

  1. In April 2016 I said the reported plan by Alitalia to buy 49% of Air Malta would not happen. In October 2016, it was announced that the sale would not take place.

 

  1. When Scoot was established in 2011 I said it should not have been, and Tiger expanded instead. This plan was dismissed by the owner of both, the Singapore Airlines group (SAG), end-2013. In November 2016, SAG said Tiger would operate under Scoot’s name starting 2017.

 

 

For those interested in more:

-What full-service-airlines need to do to survive. See
https://medium.com/@tbaoffice/airline-strategy-185fa3ef7d0c#.octgrysmf

-We’ve been reporting Air Berlin’s problems since 2006. See http://wp.me/pTv9-jJ

-AirFrance-KLM new subsidiary; we thought of it first. See http://wp.me/pTv9-jW
-Scoot = Tiger. We thought of it first. See http://wp.me/pTv9-k0

-How to save Air Malta and others. See http://wp.me/pTv9-jB 

-Alitalia to buy into Air Malta? See http://wp.me/pTv9-it

-Analysing Alitalia’s 2015 results. See http://wp.me/pTv9-in

 

 

 

The Fox

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

 

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Scoot = Tiger. We thought of it first.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Scoot = Tiger. We thought of it first.

An excerpt from our monthly Travel Business Analyst newsletter.

 

When the two NFA* subsidiaries in SAG (the Singapore Airlines Group) were moved into one holding company in May 2016, the next step was hardly a surprise – a merger, although it is not called that.

 

And indeed now, this month SAG has said (exactly who etc is not easy to determine, although all observers quote a ‘company announcement’) that starting mid-2017, Tiger will operate under the Scoot name.

 

When Scoot was established in 2011, we said that it should not have been. SAG’s existing Tiger NFA should have been expanded instead. Even more so that, astonishingly, Scoot did not do what it was established to do – fly no-frills on longhaul routes.

 

This is the conversation flow during an interview with senior SAG management in 2013:

 

 

Travel Business Analyst: “I thought you planned Scoot for longhaul routes, but it is operating only short- and medium-haul. Are you not shutting it down to avoid loss of face? The airline is a mistake.”

 

Singapore Airlines: “Who says so?”

 

We do.”

 

(Laughs [at the idea, not at the interlocutor]) “Well, we would respectfully disagree.”

 

Why didn’t you expand Tiger instead of creating Scoot? Why create another airline, which does almost the same thing on almost the same routes?”

(Paraphrased) “It is not almost the same routes. There are some Scoot routes that you can do with narrow body, but Scoot was set up to tap into that market segment that is looking for budget travel but over a slightly longer distance than the traditional NFA operates.

 

“Longhaul is in the plan, but with today’s fuel prices, the plan is to focus on medium-haul for now. [Oil was about US$90/barrel when Scoot was formed; about US$95 at the time of the comment.] There is some shorthaul but that tended to be partly for aircraft utilisation.

 

“Why Tiger can’t do it? Well, although we are the biggest single shareholder (just under 33%), we don’t control it; it is a separately-listed subsidiary, independently operated, and separately managed. [SAG] has nothing to do with Tiger on a day-to-day basis.

 

“But we own 100% of Scoot. We saw an opportunity to get into this new market segment and we did it.”

 

 

Our contemporary complementary comments:

 

‘That the launch of Scoot should not have happened after SAG realised that it could not operate longhaul profitably. If it wanted to operate medium-haul NFA routes, then it should have used Tiger. If that would have required increasing SAG’s shareholding and buying slightly-bigger aircraft, then do it.’

 

 

Subsequently, SAG did indeed increase its shareholding in Tiger in order to control it. Obviously at that time, when SAG management made its decision to merge the two NFAs, it also decided which would be the primary one.

 

This seemed to be Scoot as on more than one occasion SAG took Tiger off a route, or reduced its capacity, to let in Scoot. That is part of the reason Scoot seat sales are at +49% YTD with Tiger’s at 0.4% – although at the end of this year, Scoot will still be only 60% the size of Tiger.

 

Part of the reason for preferring Scoot could have been some earlier bad news for Tiger – including a government-forced shutdown for technical reasons (which presumably meant safety) for its then-owned Tiger Australia subsidiary, problems with schedules reliability for its Singapore-based subsidiary, partial-shutdowns and/or sales of its subsidiary airlines in Indonesia and Philippines.

 

We presume this is the reason it decided to change the airline’s name. But if that was indeed the reason, then it appears to have been badly handled – because the change was from Tiger Airways to Tigerair! (We hope no one was paid for that!)

 

Strangely, none of these bad management moves and negative developments seems to have touched the source – SAG itself. Is it because in Singapore, SAG is such an admired institution that it is considered also to personify Singapore?

 

 

 

*Our 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 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; paid 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.

 

 

See also:

-AirFrance-KLM new subsidiary; we thought of it first. See http://wp.me/pTv9-jW

-What full-service-airlines need to do to survive. See

https://medium.com/@tbaoffice/airline-strategy-185fa3ef7d0c#.octgrysmf

 

The Fox

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

AirFrance-KLM new subsidiary; we thought of it first.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

AirFrance-KLM new subsidiary; we thought of it first.

AF-KLM has just announced plans to create a lower-cost subsidiary airline to operate (at least currently limited to) Asia and transAtlantic. And taking over some unprofitable routes of the two airlines.

 

We first presented/published our ideas – where an airline type such as this AF-KLM proposal we would describe as an LCA* – long ago. Although parts we defined earlier, the 3-airline-type split into what we call FSAs* LCAs NFAs*, was set with some specific definitions seven years ago.

 

At the end of October, days before the AF-KLM announcement, we published a 3000-word White Paper on ‘What full-service-airlines need to do to survive’. See

https://medium.com/@tbaoffice/airline-strategy-185fa3ef7d0c#.octgrysmf

 

This was aimed at what are becoming what we call AGs (Airline Groups). We also have proto-definitions for these AGs – and AF-KLM fits into this category.

 

Specifically, in the section on AF-KLM we proposed:

 

‘AKAG [AirFrance-KLM Airline Group] needs to expand its Hop subsidiary/affiliate to operate on other routes (short- medium- or long-haul) where profitable operation is hard, traffic is light, market is low-spend, or a new market. And not just those little local routes that it has today.

 

‘For instance, AF started and stopped a route to Kuala Lumpur within 12 months. Hop should have taken over from AF.

 

‘Also, AKAG keeps Hop out of the main hubs in France — Marseille, Nice, Paris CDG, Toulouse. But why is not Hop operating, say, Nice-Paris in competition with Easyjet rather than AF – which must be losing a lot of money on that route?

 

‘And why not inter-continental flights from Marseille and Nice? Amazingly, MRS — France’s 2nd-largest city — has no US route, and from NCE only a US airline operates. And nothing from either city to Asia  - giving most of the market to Emirates over Dubai.’

 

But why is AKAG planning to create a new airline when it already has one doing half the same job? And why limit AKAG’s proposed LCA to just Asia and Atlantic? There are many domestic, intraEurope, African, Middle East routes where an LCA might profitably be used. Plus of course new routes.

 

Other comments:

 

-Unions at AF in France will block the creation of AKAG’s proposed new LCA, perhaps tearing more shirts. (Another reason to use Hop, which is already there.)

-AKAG management might realise before planned end-2017 launch that it makes more sense to develop an airline that is already there.

-End-2017, the planned start of the new LCA, is steam-engine-slow. Summer 2017 at the latest (also, better for seasonal traffic).

 

 

*Our 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 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; paid 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.

Tracking UK travel; in the fog.

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FOXTROTS

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

Foxtrots – leading the industry in a dance.

 

Tracking UK travel; in the fog.

Ah, not getting any easier. Or, as this is November in the UK, getting foggier.

 

Inbound:

Our calculation of August inbound shows +3.6%, although official figures show a rounded +2%. (Year-earlier figures are presumably changed, but not published.)

 

These days, such a difference could be important. We do not normally track monthly visitor-spend figures – but these are not normal times. They show +4%, faster than the growth in visitor-arrivals.

 

Generally, a fall of the UK currency would cause a growth in spend. Even if trip costs might be cheaper for a visitor spending foreign currency, a visitor would probably spend more in UK pounds – and not take advantage of the currency fall and have a cheaper trip.

 

Outbound:

Our figures may match. We calculate +6.0%, and official figures show a rounded +6% (but that could be between 5.5-6.4%). So it seems that UK travellers (heavy holiday traffic in this month) did not hold back because the cost of their trip would have been higher (up to 20%!).

 

Although, once again, this is still too early to guess what effect the late-June Brexit-vote had on these patterns, it would appear that it encouraged travel. And that, of course, makes little sense.

 

Then there is traveller-spend data – +10% in August. That appears to be understandable. The fall in the UK pound would have had an immediate effect (higher trip costs for those paying in UK pounds).

 

 

 

The Fox

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