Long-haul low-cost – mission (im)possible?

The summer of 2014 might have marked a new page in the development of the global passenger air travel market. Only a few global media sources have missed out on covering the Norwegian’s latest ambition – to launch low-cost transatlantic flights from London.

A similar initiative is being also considered by the Chinese Spring Airlines, while Lufthansa is also being anticipated to announce its long-haul low-cost project in the nearest future. However, yet another attempt to introduce cheap long-haul routes faces a whole set of obstacles, including the HR-related ones.

In July 2014 the Norwegian airlines launched its flights from London Gatwick to three USA-based destinations with some tickets starting at 300 USD, or approx. half the price of those offered by “traditional” carriers. Moreover, the newly-launched routes are not the only long-haul destinations on the Scandinavian carrier’s map. The company is already operating flights from Norway and Sweden to Thailand and the U.S. East Coast.
In the meantime, the Shanghai-based carrier Spring Airlines has also recently announced its plans to launch long-haul routes, connecting Asia and Europe for as little as 100-200 USD per ticket. At the same time, Lufthansa plans to launch a long-haul low-coster already in the beginning of 2015. Allegedly, it will by carrying passengers from Germany to South Asian destinations.

“Less fuel consumption, more aircraft turn-arounds, minimum ground handing and maintenance time, no catering, no multi-class, optimized aircraft ownership and HR-related costs – these are the traditional factors which allow low-cost airlines to keep their ticket prices bottommost. However, lately the industry has been increasingly noticing that the distinction between traditional and low-cost business models is becoming less apparent,” comments Skaiste Knyzaite, the CEO of AviationCV.com.

For instance, according to KPMG, over the past several years the cost gap between traditional and low-cost airlines has fallen by an average of 30%, reducing from 3.6 to approx. 2.5 US cents per Available Seat Kilometre. Nevertheless, gaining the desired competitive edge on long-haul operations might prove to be a much bigger challenge for the carriers ambitious enough to try the new approach.

In addition, on average, aircraft ownership and maintenance account for 23-24% of all carriers’ expenses. Therefore, operating new aircraft models comes as one of the main factors allowing the development of a profitable low-cost model. New aircraft provide higher residual values (70% of the initial price in five years) and lower aircraft maintenance-related costs as they are usually covered by at least four-year long warranty maintenance with no major repair works required for the following several years. Unfortunately, both Boeing and Airbus are fully booked for years ahead, meaning that not all carriers which explore long-haul low-cost routes will be able to minimize some of their major expenses with newly-built aircraft.

Yet another factor is aircraft operation. In Europe most legacy carriers operate up to 300 block hours per month, whilst low cost airlines keep their aircraft in the air for 350-400 hours or even more during the summer season. The higher density allows maximizing profit generation from a single aircraft. However, when it comes to long-haul low-cost routes (e.g. London-Los Angeles), we are talking about 20-22 hours of a turn-around flight plus 2-3 hours on-ground time. This applies to both budget and legacy carriers.

So what allows low-cost carriers to offer cheaper tickets? Apart from more fuel-efficient aircraft, one should consider the seat number – approx. 240 in 3-class against up to 380 in 1-class Boeing 787-8. In addition, no interline/codeshare agreements allow a cheaper distribution network, while more flexible HR-management provides lower personnel-related expenses.

Sourcing both cockpit and cabin crews from the entire world is one of the main strategies implemented by low-cost carriers when seeking optimal HR-solutions subject to the price and experience of the personnel. But it is the demand for cheaper HR-solutions that has been recently raising more and more concerns within the pilot/steward community, particularly in Europe. 

“European pilots shouldn’t be overly concerned about the risk. While in Europe the average market-wide salary rate maintains at 9-11 thousand USD/month, other regions, particularly Asia, are at the 11-15 thousand USD/month point due to a substantial shortage of skilled personnel. However, the same cannot be said of cabin crew which does present a viable opportunity for the carriers to optimize their HR-related costs, as in certain cases European stewards earn twice as much as their Asian colleagues,” shares the CEO of AviationCV.com. “In other words, it is essential to maintain constant monitoring of the job market and continuous communication with potential employees in separate countries and regions in order to be able to balance one’s HR costs. Therefore, as the long-haul low-cost project is concerned, it is yet too early to speculate about its potential success or failure.”

Source and image: AviationCV.com

Boeing, BOC Aviation announce order for 82 airplanes

Boeing announced today an order by BOC Aviation for 50 737 MAX 8s, 30 Next-Generation 737-800s and two 777-300ERs (Extended Range). The order, valued at $8.8 billion at list prices, is the largest in BOC Aviation's 20-year history and part of the Singapore-based leasing company's effort to grow its portfolio of fuel-efficient airplanes.

"Following the successful placement of the 50 Next Generation 737 aircraft that we ordered in 2006, this is a continuation of our commitment to be responsive to airline customers which are expanding or replacing older fleets," said Robert Martin, managing director and chief executive officer, BOC Aviation. "The 737 is known for its operational and fuel efficiency, and BOC Aviation expects healthy demand for the Next Generation 737 and 737 MAX variants in the next seven years."

The order adds to BOC Aviation's fleet, which is among the youngest in the leasing industry with an average of less than four years.

"BOC Aviation has established a proven track record in the airplane leasing industry," said Dinesh Keskar, senior vice president Asia Pacific and India Sales, Boeing Commercial Airplanes. "They have played an important role in the success of the Next-Generation 737 and the 777-300ER in the leasing market by helping place the airplanes with airlines worldwide. We're excited about our continued relationship with BOC Aviation and look forward to working with them on the new 737 MAX."

Source and image: Boeing

Norwegian opens new base for long-haul operations at London Gatwick

Norwegian continues to expand internationally and has decided to establish a new long-haul base at London Gatwick Airport. Both pilots and cabin crew will be based at London Gatwick. The airline has become a major player at London Gatwick and is currently the only airline offering low-cost flights between the UK and the U.S.

“Our hiring in the UK has been well received and many pilots are keen to be based at London Gatwick and work for an innovative and forward-thinking company that offers highly competitive wages and conditions as well as the opportunity to fly the most technologically advanced aircraft in the skies today, the 787 Dreamliner,” said Director of Flight Operations Torstein Hoås at Norwegian.

Recruitment of Gatwick-based cabin crew will take place early next year. Norwegian is also recruiting pilots to its JFK base, where the company already has a cabin crew base.

airberlin achieves positive net result in second quarter 2014

Air Canada issues 2013 corporate sustainability report

Air Canada issues 2013 corporate sustainability report

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Published on Tuesday, 26 August 2014 14:32

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Air Canada today released the 2013 edition of Citizens of the World, the airline's third corporate sustainability report. The document evaluates Air Canada's performance during 2013 in four key areas of sustainability: safety, the environment, the well-being of employees, and the company's community involvement.

"Communities are important to Air Canada because they are home to our customers and employees and connecting people and communities is the essence of our business. For this reason, Air Canada ensures economic, environmental and social sustainability considerations are part of its decision-making and one way we do this is by reporting on our activities through Citizens of the World, our corporate sustainability report. Today we are releasing our third report and it improves upon previous editions with a greater degree of disclosure, including more quantified data on our programs and accomplishments," said Calin Rovinescu, President and Chief Executive of Air Canada. "More than a report card on past activities, Citizens of the World provides stakeholders a means to hold Air Canada accountable in the future. By explicitly stating our goals for the coming year and beyond, the report not only helps focus our airline on its sustainability objectives but also lays down markers by which our progress toward them can be measured."

Air Canada's 2013 corporate sustainability report is available at www.aircanada.com/csr. It was prepared in accordance with principles of the Global Reporting Initiative, an internationally recognized standard for sustainability reporting. The report is framed around the findings of an extensive stakeholder survey undertaken to identify areas of most concern with respect to sustainability. It also contains a discussion of governance practices at Air Canada and tables of data quantifying the results of our sustainability activities. Highlights of 2013 include:

• completion of the Transport Canada Safety Management System Audit;
• continued support for the development of alternative, more environmentally-friendly fuels;
• a 21 per cent reduction in Lost Time Injuries;

NTSB ON UPS Flight 1354

The NTSB said on Monday it has revoked the party status of both the Independent Pilots Association and UPS Airlines relative to its ongoing investigation of UPS Flight 1354, an A300-600 air cargo flight that crashed on approach to Birmingham, Ala., last August, killing both crew members on board. 

Paramount Flies New Light-Attack Airplane in South Africa

South African defense company Paramount reported on August 13 the first flight of its Advanced High-performance Reconnaissance Light Air Craft (AHRLAC). The twin-boom, tandem-seat, pusher-prop design, powered by a Pratt & Whitney Canada PT6A-66B turboprop, has been under development since September 2011. It flew from Wonderboom airbase and will be followed into the air by a second prototype for mission systems and weapons testing.

Paramount said that thanks to its pod system design, the AHRLAC can perform tasks that “previously required four separately configured aircraft…or complex unmanned aerial surveillance systems.” The tasks include close air support, cargo transport, training and surveillance.

As well as Pratt & Whitney Canada, Cobham and Zeiss are key suppliers to the project. Martin-Baker’s lightweight Mk 17 ejection seats will be fitted. But Paramount emphasizes that the AHRLAC is an all-African design. “Leading-edge defense solutions like AHRLAC present African states with the opportunity to build up their own intelligence, militaries and national police to combat the continent’s insurgents and extremists,” said Paramount Group executive chairman Ivor Ichikowitz. In 2010, this South African industrialist separately created the Ichikowitz Family Foundation to foster various environmental and educational causes in Africa.

Dr. Paul Potgieter, CEO of AHRLAC Holdings, noted that the aircraft was assembled from computer-designed, pre-drilled and machine-made parts, without the need for jigs. “We have made all the tools for production for all sheet-metal pressings and composite parts so it enables us to hit production much more quickly than other aircraft,” he said. “AHRLAC is creating the next generation of engineers on the continent,” he added.

No orders have been announced yet. The AHRLAC is likely to compete with established designs such as the Beechcraft AT-6, Embraer EMB-314 Super Tucano and Pilatus PC-21, and possibly with another new private venture, the Textron Airland Scorpion twinjet.

Iceland volcano not a concern for UK airspace, says aviation watchdog

Britain's aviation watchdog has played down fears that a volcanic ash cloud from Iceland could stop flights across Europe, saying there is no prospect of a blanket closure of airspace in the event of an eruption.

Earthquakes of magnitude 5.3 and 5.1, the biggest since tremors started last week, were recorded early on Sundayday near the Bárðarbunga volcano. A decision on Saturday by Icelandic authorities to raise the warning code for airlines to the highest level has fuelled concern that an eruption could ground planes across Europe as volcanic ash clouds did in 2010 and 2011.

On Sunday Iceland lowered its aviation alert level from red to orange, signalling a volcanic eruption remained possible in coming days but was not imminent.

The Civil Aviation Authority (CAA) said it would not close UK airspace in the event of an eruption. New guidelines and advances in the detection of ash and better understanding of its risks mean volcanic clouds similar to those seen at the start of the decade would no longer have a significant impact on air travel in Europe, although a bigger eruption could disrupt schedules in affected areas.

Under new guidelines, the Met Office will identify specific areas of ash. Planes will be allowed to fly through low density ash – up to 2mg per cubic metre of air – which has been deemed safe by engine manufacturers since 2010. At medium density – 2mg-4mg per cubic metre – airlines can operate if they have agreed a safety case with the CAA, as many already do. Even in areas of predicted higher densities, airlines could continue to operate if they can demonstrate to the regulator they have robust risk mitigation measures and additional safety procedures.

In 2010, ash from Iceland's Eyjafjallajökull volcano led to the closure of much of Europe's airspace for six days, cancelling more than 100,000 flights and disrupting travel for more than 10 million people. Holidaymakers were stranded and many imports, such as fresh vegetables, disappeared from supermarket shelves. The cost was estimated at more than £1bn. The second eruption, in 2011, caused less severe disruption.

A small area of airspace above the Bárðarbunga volcano that had been closed reopened on Sundayday. The region has been evacuated. Iceland's met office said it had concluded that there had not been a small lava eruption under the glacier. So far, no ash has been emitted. The office said seismic activity at the volcano was not slowing, with the downgraded level of alert to orange signalling "heightened or escalating unrest with increased potential of eruption."

The CAA said it would issue a notice to airlines should an ash cloud form but it would not close airspace. Individual airlines will decide where to fly.

EasyJet said there would be no change to its schedules. It has been successfully testing a volcanic ash detection system for aircraft in recent years which it is planning to fit to its fleet.

British Airways said: "We're just monitoring the situation closely. All the indications are it wouldn't be a repeat of 2010."

Guidelines have been modified since 2010, when BA's chief executive, Willie Walsh, condemned the closure as a "gross overreaction" and flew a test plane into the ash cloud to prove his point.

A CAA spokesman said: "There have been great changes since 2010 and a huge amount of work done. If we have the same amount of ash as in 2010 there would be no realistic impact. It really depends how dense the ash is – if, of course, the volcano does erupt."