Fox On Friday: Thoughtless statements from new Malaysia Airlines CEO.

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Fox On Friday: Thoughtless statements from new Malaysia Airlines CEO.

An excerpt from our monthly People-in-Travel report.


We expect company leaders to say anodyne things when they are appointed. But we look for indicators nevertheless – somewhat like reading-between-the-lines/China-watching.


But we are disappointed with statements from Peter Bellew*, new CEO of Malaysia Airlines (MA). We found few indicators, and not anodyne comments but almost puerile.


Here are some (may be paraphrased):


PB soundbite: “I am sure it will be a road to recovery with many interesting turns.”

Comment: Means he does not know what will happen. Although that might be true, that is not what he should be saying.


PB soundbite: “…great progress in the last 10 months with many turnaround initiatives working.”

Comment: Means some turnaround initiatives are not working.


PB soundbite: “We will stop doing things that lose money.”

Comment: Ah, if only life were that simple. So no more new routes (which, generally, lose money initially)? No more free food on board, say, because free food loses money?


PB soundbite: “We will start new routes to new unserved Asean destinations.”

Comment: First, verbosity: ‘start’ or ‘new’ is superfluous; so is 2nd ‘new’; so is ‘unserved’ (the airline cannot operate a new route to a destination already served).


But wait a minute. Doesn’t PB say (above) that nothing would be done that loses money? Are we to believe then, that all these destinations (no number, so this could just be two destinations) will make profits from Day 1?


PB soundbite: “We will operate some leisure flights from KLIA2 [KL’s budget-airlines terminal] in 2017.”

Comment: Same as above about doing nothing that loses money. The other comment is that leisure routes (if that’s what PB means) are more risky financially than multi-traffic ones, and usually seasonal. That said, PB gave no numbers, and as he said ‘flights’, this could mean just one leisure route from KLIA2, and more than once-weekly frequency. All cost savings will be passed on to passengers in lower fares; good news for passengers, but also means that it will not help MA’s profitability.


PB soundbite: “Profit seen in the last quarter shows that the financial gap between revenue and cost has significantly closed.”

Comment: PB may have ‘seen’ the profit, but we haven’t; MA keeps this information confidential. A ‘gap’ between revenue and cost, depending on what the figures are, is what we would call a ‘profit’ or ‘loss’. In addition, the gap cannot be ‘significantly closed’; it is either closed (ie breakeven or profit) or not (loss).


Earlier, MA said it was ‘marginally profitable’ in Q1 but added some unclear caveats, and so that profitability could be no more than creative book-keeping. See also WYSKs below.




*What You Should Know:

-MA’s Q1 revenue fell a jaw-dropping 22% (to what we don’t know), but the fact that capacity (ASKs) fell further, -30%, is relatively good news. But reflect; the airline is almost one-third smaller than it was in 2015, when it also downsized.


-MA’s previous CEO Christoph Mueller, who resigned after less than a year in the job, is now leaving this month, rather than in September as he said when announcing his resignation. Important only in that it shows MA company statements have reduced credibility.


-We understand Mueller is moving to the Gulf to either Emirates or Etihad (or one of its seven associate airlines). He is known at Etihad, which at one time owned part of Aer Lingus (then CEO, Mueller) before being bought by IAG (mainly British and Iberia). This would threaten credibility on the official ‘personal-reasons’ for leaving MA. In fact, we understood he left for professional reasons – not being able to do at MA what he wanted to do.


-Much is made of PB’s time at Ryanair (nine years; 4 jobs), the world’s 2nd-largest no-frills-airline. But:

-Most of his time there was in flight operations, as was his first job (from end-2015) at MA.

-He had an unexplained one year as head of S&M (albeit under the current head of marketing, Kenny Jacobs, for most of that time) – which seemed well outside his professional competence.

-Two months after he left S&M, Ryanair’s extraordinary traffic pickup started – two years of monthly 20-30% growths. The airline is now 25% bigger than it was when PB moved out of S&M. He might want to claim credit for starting that (this is a CV after all), but there are no indications that he was responsible in any way. We would credit Jacobs more than anyone else, and Michael O’Leary, head of the airline. Jacobs joined from a supermarket retailer strong in marketing, Tesco.



The Fox

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


Travel stocks. Europe special review, all-world standard review.

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Travel stocks. Europe special review, all-world standard review.

This report is divided into two – Europe special review, and our standard monthly review.


  1. Europe special review

An immediate reaction to the UK’s vote to leave the EU – so-called Brexit – has been stock prices, and the value of the UK currency. We are not qualified to comment, or track, currency movements.


And our special review of stock prices here is entirely within the travel business. And not our usual full coverage of Asia Pacific, Europe, US.





  1. End-June prices over end-May.

-Airlines were hit much harder – -23%, compared with -9% for hotels and -10% for Others.


-Although we think the no-frills-airlines Easyjet, Norwegian, Ryanair are most under threat, the market thinks otherwise – or thinks differently. IAG (Aer Lingus, British, Iberia, Vueling) was -31% in London and -37% in Madrid!



A separate report in the Travel Business Analyst newsletter shows 36% of Ryanair’s capacity is UK-EU (and which could be lost), and 10% of Norwegian’s capacity (excludes its UK to non-EU points, also at risk). Plus Easyjet’s intra-EU capacity (also at risk) is 24% (excludes Switzerland – where EJ has a base – which is outside the EU but which pays to access the EU market).


-Least hit airline was Turkish, -8%, although that is a sad irony given the terrorist attack on Istanbul’s main airport two days ago.


-Among hotels, biggest fall was at NH -17%, although most of this is probably a result of that company’s disarray – following the move of some shareholders last month to fire its chairman and CEO.


-Among others, Eurotunnel – whose routes London-Brussels/Paris look vulnerable – was -18%. That looks slight when compared with the hit for airlines.


-But the biggest ‘Others’ fall was -24% for Frankfurt-quoted TUI – because one of the company’s subsidiaries is a big UK tour operator, Thomson. Perhaps TUI now regrets its move in 2014 to absorb its UK-quoted TUI Travel into the parent TUI AG.



  1. End-June over end-2015.

Much worse:

-Airlines -27% against hotels -14%, Others -13%.


-Biggest falls -39% at IAG, -38% at Easyjet. (IAG Madrid was -47%!)


-InterContinental is the only one of the hotel groups we track that was ahead, +4%.


-Among Others, Thomas Cook was down 48%. Perhaps investors do not know TC is German-owned, and has most (65%?) of its business outside the UK.


-But also hit was TUI, -39%, for the reasons given above.


-A winner was Kuoni, +31%. It must be extra pleased it sold off its UK (and other) tour operations in 2015.


-Tech companies (see our Net Value Travel Tech index, below) also were relatively untouched (-4%, and -6% end-Jun over end-May).





  1. World standard review

The following is our standard monthly report.


Note that changes in this section are, as usual, based on a comparison with previous-month prices, not end-2015. And that this is a worldwide report, not just Europe.


Travel stocks (US, AsPac, Eur) in June. Airlines: biggest growth, Thai AW +34%; biggest fall, IAG -31%. Hotels: Dusit +41%, NH Hoteles -17%. Others: Hertz +14%, TUI -26%.


Previous month: Airlines: biggest growth, Thai AW +24%; biggest fall, Air China -13%. Hotels: NH Hoteles +9%, Wynn R -24%. Others: Avis +15%, T Cook -13%.


TBA Travel Stocks Index: World 155, AsPac 86, Eur 107, US 274. Index previous month: WW 165, AsPac 87, Eur 126, US 281.


NVTT (Net Value Travel Tech) Stocks Index: 104; previous month 109.


Stockmarkets. Biggest growth, London +4%; biggest fall, Dublin -13%. Previous month: India +4%; Istanbul -9%.


Info via Travel Business Analyst. Details in next month’s newsletters.




End-June closing prices of travel company stocks, Europe

Company* Growth┼,% Growth╪,%
Air France-KLM -21.0 -18.5
Easyjet -29.2 -37.6
IAG London -30.9 -39.4
IAG Madrid -37.0 -46.5
Lufthansa -16.4 -27.5
Norwegian -15.9 -11.1
Ryanair -19.7 -24.6
SAS -29.8 -34.4
Turkish -8.0 -22.6
Wizz -17.3 -12.1
Accor -11.3 -13.3
InterContinental 3.5 3.6
Melia -11.9 -20.6
Mill & Cop -7.7 -12.9
NH -17.3 -25.0
Airbus -7.7 -16.6
Amadeus -5.7 -3.5
eDreams -10.2 6.3
Eurotunnel -17.5 -16.1
Fraport -6.7 -19.3
Kuoni -0.3 31.4
Lastminute -1.8 -14.5
Thomas Cook -18.1 -48.2
TUI -25.5 -39.4

Notes: *May not be full formal name. ┼Over end-May. ╪Over end-2015. Source: stockmarkets, Net Value, Travel Business Analyst.



The Fox

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

New in the air – AGs.

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New in the air – AGs.

As the number of airline groups (AGs) begins to grow, we start to compare structure.


For our proto-definition, an AG comprises at least three airlines, preferably of different types – full-service, low-cost, no-frills* – and with different names.


The pattern in Europe is clearer.  In Asia Pacific, none of our three fit precisely that definition, although Qantas and Singapore come close.


(Unfortunately, the acronyms of three are not positive – LAG QAG SAG – but we use them nevertheless for consistency.)
The main AGs are:



-AKAG (our acronym), built around Air France and KLM as FSAs*, and Transavia as an NFA*. The AG’s Hop airline could be the group’s LCA*, but it operates as part-NFA, part regional-FSA.


-IAG, International Consolidated Airlines Group, built around British and Iberia as FSAs, Vueling as a NFA. And its recent acquisition of Aer Lingus is a hybrid, operating as an almost-NFA on some routes, and almost-FSA on other routes (transAtlantic). However, we believe AL will be converted to become IAG’s LCA.


-LAG (our acronym), has three FSAs (Austrian, Lufthansa, Swiss) and Eurowings. EW is a hybrid, and as we believe this business model no longer works, we think it will be restructured. That said, EW is already a restructured operation, absorbing NFA Germanwings (a decision made before GW’s suicide-crash in 2015). EW was a charter, part-FSA operation. Now it defies interpretation.



Asia Pacific

-AAAG (our acronym), mainly geographical divisions built around Air Asia, which has different airlines but these are all NFAs with a geographical distinction, apart from Air Asia X, which is a medium-haul NFA. AAX has stopped its longhaul operation.


-QAG (our acronym), built around Qantas and comprising a LCA international operation (named Jetstar), and NFAs in Asia and Australia (although these two are, confusingly, also named Jetstar).


-SAG (our acronym), which has Singapore Airlines, and two NFAs (Scoot and Tiger). And no LCA – its Silk Air is more a regional-FSA, even if this makes no business sense. (Although having two NFAs makes no business sense either; sometimes they operate the same route!)



Middle East

-EAG, Etihad Airline Group. That group comprises seven airlines in which Etihad owns a share – Air Berlin, Air Serbia, Air Seychelles, Alitalia, Darwin, Jet, Virgin Australia. Results are not consolidated (and the Etihad ownership share varies), and Etihad itself does not consistently report operating figures.




-AAAG: 15.0mn Q1 seat sales total for AG, ‘parent’ airline 43% share.

-AKAG: 19.9mn, 57%.

-IAG: 20.4mn, 63%.

-EAG┼: 23.5mn, 15%.

-LAG: 22.3mn, 59%.

-QAG: 12.9mn, 54%.

-SAG: 7.6mn, 61%.



Total traffic counts 100% of seat sales of its subsidiaries, even if Etihad does not own 100% of all.


-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.

Trottings: Shortcomings at Trip Advisor, AirBnB.

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Trottings: Shortcomings at Trip Advisor, AirBnB.

Trottings = Trip Jottings.

Shortcomings at Trip Advisor, AirBnB.


Trip Advisor would allow me to change my phone number only if I accessed my listing. And they would send the keycode to access my listing to my phone number. Yes, to the number that was no longer working.


I explained this Catch-22 to TA. They suggested I call them. I replied they should call me, as they had caused the problem.


I then received a reply saying that they had tried to call me, but could not reach me, so the number I gave them must be wrong. They suggested again that I call them, and gave me a number to do this.


I replied my phone number I gave them was not wrong, and asked when did they call, and please give me a time when they could call again. Also, I queried their number for me to call them – was the first number ‘1’ the local area code (in this case, Paris), or a country-code, Canada or the US. And could they give numbers instead of letters for the rest of the number because my phone had numbers only; no letters.


They replied. No response on explanations for the phone number (apart from repeating it), and nothing at all on recalling me. Just an “understanding of” my concern, and to assuage that concern, they suspended my account with them!


The moral of this message is that TA needs to look seriously at its call-centre operation. This one (judging from the names) is in India.


Meanwhile, for those who followed earlier my AirBnB fraud, still no response from ABB.


To recap, ABB took a commission on a booking where the host advertised something he did not have and which I needed (in this case, off-street car parking).


When I discovered the problem, I cancelled my booking. My would-be ABB host refunded my payment. But ABB not only kept its commission money, it has never responded to my messages, and continues to allow this false advertising to continue.


I accept that neither of these are big issues for these two big companies. But both show a shortcoming in their service, which they should not be too big to resolve.



The Fox

The Fox Trots: Travel Stories from The Fox.


Fox On Friday: Qantas and Singapore – bad sinking

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Fox On Friday: Qantas and Singapore – bad sinking

Now we have IAG (British, Iberia, etc), EAG (Etihad etc), it seems that ‘AG’ could become the new way to describe multi-airline groups. As well as Qantas and Singapore, others include Air Asia, Air France, Lufthansa


I have quickly jumped, in case this becomes a bandwagon.


By my proto-definition, to be named an ‘AG’ a group needs to have at least three airlines, preferably of different types – full-service, low-cost, no-frills. (See my other posts on my definitions for FSAs LCAs NFAs.)


But in Asia Pacific, the results do not sound encouraging for those two AGs – Qantas and Singapore. They become QAG and SAG – hopefully not a prophecy for their future.


Obviously this needs a resink, sorry rethink.




The Fox

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

Shouting some shocks: Virgin, Fly Be, Wizz.

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WYSK – What You Should Know.

Shouting some shocks: Virgin, Fly Be, Wizz.

An excerpt from our monthly Travel Business Analyst newsletter.


Virgin on trouble

It wasn’t supposed to be like this.


Figures I have seen on Virgin Atlantic (the airline does not publish them) indicate all is not going well. OK, they are bad.


For all-year 2015 I have a 3% fall in seat sales to 5.8mn following a particularly-bad December – -14%.


But this year has started worse. I have Q1 seat sales at -7%. The 1.1mn total that represents compares with 1.2mn sold in 2015, and the peak of 1.3mn in 2014 – which was a 4% growth on 2013.


I am not saying VA is not long for this world. (Ed: that’s an improvement as you said they would collapse within two years after they were established – 30 years ago.)


But will owners Branson and Delta clash? Branson was able to deal easily with his previous supporter, Singapore Airlines, but Delta may be harder to fool.



Fly Be, or not-to-be?

But if you are looking for doom in the UK, then look at Fly Be. True, its seat sales were +1% in Q1 (ie better than VA’s -7%), but its seat factor was a disastrous 66%. I reckon the airline needs at least 14pts more than that.


I propose that FB management (that’s Fly Be, not Mr Zuckerberg) campaign strongly for Brexit. If the UK makes the wrong decision and quits the EU, FB can take over some of the many UK-EU routes that Ryanair will likely be forced to abandon.



Wizzing ahead

Ready for another? Wizz – Hungary-based but think East Europe – is on track to overtake (sorry, wiz past) Air Berlin in 2017.


Poor Air Berlin. It is tumbling faster – -7% YTD, -8% latest month. And that change would follow on from the ignominy of being overtaken this Q1 by Nano-Norway’s Norwegian.




The Fox

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

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.


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