Princess Juliana International Airport Media

Archive for November, 2007

November 29, 2007

The financial turnaround at airlines, especially in the United States, would be at risk in 2008 if unions were too aggressive in trying to recoup wages and benefits lost in restructuring, the chief of the industry’s trade group IATA said.

“Unfortunately, as the industry shows even fragile profitability, labor starts to look for a free lunch. Already we’ve seen strikes from France to Japan,” Giovanni Bisignani of the International Air Transport Association told an industry group.

“Several key US contracts will be negotiated next year — if labor pursues an agenda as an irresponsible adversary, our common future is limited,” Bisignani said.

Globally, labor represents 23 percent of airline costs, down 5 percentage points from 2001 — the start of a six-year restructuring accelerated by the 2001 attacks on New York and Washington.

During that period four US carriers, United Airlines parent UAL, US Airways, Delta Air Lines and Northwest Airlines, fell into bankruptcy and AMR, parent of American Airlines, nearly sought protection from creditors.

Bisignani also worries that US carriers could have a hard time upgrading their fleets due to general economic uncertainty and continuing credit woes where debt remains high relative to cash flow.

“Lenders will be cautious and even if orders are placed today, production lines at Boeing and Airbus are virtually full for the next three years,” Bisignani said.

About a third of the US fleet is more than 25 years old, reducing the cost advantages of depreciation and heightening the impact of fuel costs since older jets are less efficient than the newest models.

IATA is poised next month to revise the industry’s outlook to account for oil prices now pushing USD$100 per barrel. In September, the group projected 2008 profits of USD$7.8 billion, but the forecast was based on oil at just under USD$70 a barrel.

International carriers, especially in Europe, worry about US credit market turmoil because of the potential impact on financing conditions and corporate travel. Premium travelers — usually business customers — account for 25 percent of traffic aboard the top five European airlines on transatlantic flights, compared with 15 percent for US carriers, IATA figures show.

“That translates into a 30 percent yield premium for Europe,” Bisignani said.

(Reuters)

The International Air Transport Association (IATA) called for the White House and Congressional politicians in the United States to take more aggressive short-term action to mitigate air traffic congestion and the lingering security hassles.

“President Bush’s recent announcement about making limited airspace changes in an attempt to alleviate congestion during the holidays is a political placebo for a serious long-term illness,” said Giovanni Bisignani, IATA’s Director General and CEO.

He warned that there would likely be more air delays next summer if the Government continues to move too slowly in making capacity and efficiency improvements.

“Instead of addressing the problem, DOT wants to change the way people travel by making it more expensive at peak times,” Bisignani said.

The White House is considering peak pricing at New York JFK airport as a band-aid for delays, but Bisignani said that “congestion pricing has never worked effectively for air transport anywhere in the world so it is foolhardy to believe that it will work in New York.” Instead, the US Government should implement the IATA Worldwide Scheduling Guidelines and immediately implement operational and infrastructure improvements. “There’s already a list of at least 75 projects that could begin tomorrow and we can’t wait any longer,” Bisignani said.

In a speech to the Aero Club of Washington, Bisignani urged industry leaders in Washington also to focus on security and the environment.

Security: “The industry is now paying US$5.9 billion a year – $300 million higher than previous estimates – to comply with a growing list of security regulations. I see more hassle than value so let’s be open and transparent with the problems and the solutions. Too many knee-jerk security enhancement decisions are based on fear even though the threat hasn’t changed. We are wasting limited and precious resources. We need to cut through the government red tape and focus on harmonised processes around the globe and push for simplification. We must invest in new technology to help security become smarter, faster and easier to manage,” Bisignani said.

Financial Outlook: “US carriers have gone from industry sick-man to the most profitable of any region in the world. This is an incredible turnaround but it’s too early to open the champagne. Airlines are US$200 billion in debt and we could be heading for an economic downturn with little cash in the bank to cushion the fall. US carriers are operating aging fleets and labour is also putting pressure on airlines. It is disturbing that as soon as the industry shows even fragile profits, labour starts to look for a free lunch. If labour pursues an agenda as an irresponsible adversary everybody’s future is limited,” said Bisignani.

Environment: IATA’s four-pillar strategy to address climate change is: invest in technology; build and operate efficient infrastructure; fly planes efficiently; and then explore economic measures. “Our goal is carbon neutral growth in the medium-term leading to zero carbon emissions. The US Government was among the 179 States attending the Triennial Assembly of the International Civil Aviation Organization, which endorsed the strategy and IATA’s target to improve fuel efficiency 25% by 2020.

Europe is our biggest disappointment, as it is fixated on emissions trading. This is against the Chicago Convention and I support the US in challenging this in the world’s courts. I also have to ring the warning bell. Don’t wait for a communications crisis to start talking about the environment. We have a solid track record and an ambitious vision to become a zero-emissions industry. Now is the time to communicate to help passengers and stakeholders understand that aviation is setting the highest benchmarks in environmental performance of any industry,” Bisignani said.

November 27, 2007

Virgin America on Monday named former American Airlines global sales vice president David Cush to succeed Fred Reid as chief executive of the low-cost start-up carrier.

Cush will take over from Reid on December 10, completing a requirement by US transportation regulators that Reid relinquish his post after the company launched service. It did so in August.

Reid said in an interview that Virgin America was not required to clear Cush’s name with regulators but did give the Transportation Department a courtesy “heads up” about his selection.

Reid said a search committee of investors and executives, not including him, did most of the work and settled on Cush, who spent two decades at American where he worked with Reid and Virgin America’s chairman, Donald Carty. Carty is a former chief executive of American.

“This was a professional search,” Reid said.

British entrepreneur Richard Branson’s Virgin Group has branded Virgin America and helped finance its initial operations, prompting unusually close government scrutiny and complaints from industry rivals that Branson’s interests were really in control of the company in violation of US law.

In addition to requiring that Reid step down because of his ties to Branson and the international business community, regulators also required changes in Virgin America’s investment and ownership structure.

Reid and Cush, in a separate interview, said Virgin America has complied with Transportation Department requirements since applying to operate nearly two years ago.

Cush said he took the job with no reservations and he believes the ownership controversy, especially the resistance from his former employer and other carriers, was to be expected. He considers the matter “water under the bridge.”

At American, Cush was responsible for global sales and distribution. He also had senior level experience in operations and alliances.

Robert Mann, an industry consultant, said Cush has vast operational experience and has close ties to Carty. But Mann also noted that Cush comes from the complex world of network carriers.

“This would be new ground for him,” Mann said.

Cush declined to discuss company specifics but said his goals were to grow the customer service focus of Virgin America.

“Doing that will make travel fun again for the passenger,” Cush said.

Reid said Virgin America’s business so far “was quite encouraging” but would not discuss operating specifics. He did say passenger load factor, a measure of paying customers, was in the “normal to high range.”

He also said oil prices nearing USD$100 per barrel is a cost issue that “we can manage” and has so far not affected Virgin America’s business model or its growth plans.

Virgin America, which is not publicly traded, flies 10 Airbus A320s and serves a handful of cities, including its San Francisco base, New York, Washington, Las Vegas and Los Angeles. It plans to add San Diego in February.

Virgin America’s chief competition is JetBlue Airways , which said last month it had felt the effect of new competition on transcontinental business from Virgin America.

(Reuters)

November 23, 2007

The workers’ council at European aircraft manufacturer Airbus disputed remarks made by management on Thursday that the weak US dollar threatened the company’s survival, according to the Berliner Zeitung newspaper.

The strength of the euro creates a problem for the company but does not threaten the planemaker’s existence, Ruediger Luetjen, chief of Airbus’s workers’ council said, according to Friday’s editions of the newspaper.

Airbus Chief Executive Tom Enders had said on Thursday the weakness of the dollar is threatening the survival of Airbus.

The dollar hit a new low against the euro, the Swiss franc and a basket of currencies on Thursday.

(Reuters)

November 23, 2007

The weakness of the US dollar is threatening the survival of European planemaker Airbus, its chief executive, Tom Enders, told employees in a speech in Hamburg on Thursday.

Workers at Airbus had to prepare for further major cost cuts to help counter the impact of the currency, he said, according to a spokesman for the company.

“The dollar’s rapid decline is life-threatening for Airbus,” Enders said in the speech. “The dollar exchange rate has gone beyond the pain barrier.”

Airbus’s entire business model had to be reviewed as “reasonable processes of adjustment” were hardly possible any more, he said, adding that management was looking at radical measures that would be introduced in coming weeks.

“There will be no more taboos,” Enders said.

All major costs would be examined, though this did not mean talk of additional job cuts and plant closures, the spokesman said.

Airbus is already shedding about 10,000 jobs and selling plants as part of its Power8 restructuring plan after delays to its A380 superjumbo drove the planemaker into a loss. Airbus says the weak dollar favors US rival Boeing.

The dollar hit new record lows against the euro on Thursday as the euro reached USD$1.4873, bringing the euro’s year-to-date gains to around 12.5 percent.

EADS acknowledged earlier this month that its controversial restructuring plans were inadequate to cope with the dollar’s slide. It said then that the aerospace group would have to find EUR1 billion (USD$1.48 billion) in new savings between now and 2010-11.

(Reuters)

Nov 20 2007

LIAT’s newly introduced special web fare is garnering significant interest from the public. Launched on November 15th 2007, the special offers discounted fares to customers who book online.

The procedure to obtain the discount fare is an uncomplicated one that requires customers to log on to the website www. liat.com, select their travel options and submit other pertinent financial information. The fares are subject to availability and it is therefore advised that persons wishing to travel should book in advance.

The initiative is just one of the areas LIAT is looking at to make travel more attractive to the everyday consumer.

Recently, the airline conducted a promotion with the Barbados Tourism Authority the “Companion Fare” which essentially offered a buy one ticket, get another free (exclusive of taxes) to persons flying into Barbados.

November 22, 2007

The US Thanksgiving air travel rush began in earnest on Wednesday with flights running smoothly for much of the day, but hitting turbulence later with storms and delays hitting some key airports.

Favorable weather throughout much of the country was the biggest plus for travelers as industry on-time performance ran at normal or near normal levels. But worsening winter conditions pushing across the Midwest and accelerated traffic volume gradually led to slow downs.

By evening, flights heading from the Northeast to Chicago O’Hare Airport, where United Airlines is based, were grounded for an hour due to weather problems.

Delays at Newark Airport in New Jersey, where Continental Airlines has a hub, approached two hours and more than an hour at New York’s LaGuardia, where US Airways has major operations.

FAA spokeswoman Diane Spitaliere said the aging air traffic control system, a point of criticism for airlines, worked efficiently, but noted the late-day delays.

“It’s all weather related,” Spitaliere said.

The 12 day November holiday travel period is the busiest of the year and a crucial revenue generator for airlines struggling to blunt the affect of sky-high fuel prices. Oil prices per barrel continue to flirt with the USD$100 mark, but fell on Wednesday, pushing industry shares slightly higher.

Carriers expect to carry some 27 million people over the period — 4 percent more than last year. Wednesday, the day before Thanksgiving, usually brings a travel rush. The real one-day crush is expected on Sunday, when travelers return home.

Delays have worsened this year due to exploding demand and airline over-scheduling at peak times. At times, the air traffic control system could not keep pace with the volume.

Airlines were nervous heading into November that worsening delays experienced during the summer rush would carry into this week. Worries were especially acute for the New York area, which handles one-third of all airline traffic.

To ease pressure on the air traffic control network, the US military cleared its coastal air space in the East for airlines from Wednesday to Sunday. Spitaliere said the FAA acquired access to it a few hours earlier than planned.

In addition, air controllers gave traffic priority to bigger airports around New York, creating some back-ups at secondary locations. The FAA also was prepared to slow flights around Boston and other New England states to ensure a smooth traffic flow in New York, if delays mounted in the East.

Service meltdowns at JetBlue and American Airlines last winter, as well as deteriorating performance over the summer, tarnished the industry’s reputation and prompted government and congressional scrutiny.

“We recognize the concern of our customers around these times and obviously there has been a lot of attention to this holiday in particular,” said Megan McCarthy, a spokeswoman for UAL, parent of United Airlines.

In anticipation of higher traffic, airlines beefed up services, staff and flight schedules. Both United and American said they have made every effort to keep delays to a minimum.

“Today, we really expect things to go smoothly. We’ve got everything in place, weather is generally good around the system,” AMR spokesman Tim Wagner said.

Airline expert Terry Trippler said carriers were determined to clean up their sullied reputations.

“This is the most pro-active I have ever seen airlines going into a holiday season,” he said. “They are hiring extra baggage handlers, extra ticket counter staffers, extra gate agents. Some even have extra planes and crews, just in case.”

(Reuters)

November 22, 2007

Canada’s Bombardier, the world’s third-largest maker of civil aircraft, said no additional carriers have said they would stop using its Dash 8 Q400 aircraft after SAS’s decision to do so.

More than half of the 160 Q400 aircraft in service around the world were grounded in September after landing gear on Q400s flown by Scandinavian Airlines Systems collapsed on touchdown in a couple of separate incidents.

Japan’s All Nippon Airways also suspended all flights using Q400 aircraft temporarily.

“We are very disappointed with SAS’s decision, particularly on the fact that the investigation is still ongoing,” Todd Young, vice president at Bombardier, told a news conference in Tokyo on Thursday.

“To this point, we have received tremendous support from other Q400 operators… We don’t expect any kind of knock-on effect to other operators.”

SAS said last week it planned to cut 230 jobs in its Swedish business, partly due to the grounding of its 27-strong Q400 fleet after three of the aircraft had crash-landed in the last two months. No one was hurt in the crashes.

Bert Cruickshank, a director of industry and airline communications at Bombardier, said the sales prospects for the Q400 remain strong, with 276 Q400 aircraft on order and 164 aircraft in operation.

Australia’s Qantas Airways recently ordered 12 Q400s and had options on 24 more, while Yemenia Airways has indicated in the past few days that it was strongly considering the Q400 for its operations, he said.

(Reuters)

November 22, 2007

Air France KLM, the world’s biggest airline by revenues, posted a stronger-than-expected 28 percent jump in quarterly profit on Thursday and said full-year operating income would rise.

Profits were powered by strong demand, especially on longer routes, and by fuel surcharges and hedging which buffered the airline from surging oil prices.

Air France KLM said operating profit rose to EUR725 million euros (USD$1.08 billion) for the three months to the end of September, while revenues of EUR6.489 billion were up 5.8 percent.

Its fuel costs rose just 1.8 percent, as overall operating costs rose by 3.6 percent to EUR5.7 billion.

The airline said while passenger revenues grew by 6.1 percent, cargo revenues fell 0.3 percent.

“The passenger activity was dynamic during the second quarter, still driven by long-haul. In cargo, the recovery in traffic levels from the end of the first quarter was confirmed, but unit revenues remain under pressure,” it said.

KLM, the Dutch arm of the company, said separately that it had ordered two Airbus A330-200 airliners and five from Boeing, including 2 777-300ER long-range planes and three single-aisle 737-700s.

A capital gain of EUR202 million on the sale of a stake in the Amadeus reservations system helped boost its pre-tax performance.

“These are excellent results, essentially due to the strength of passenger demand, but also due to a plan of cost savings,” Finance Director Philippe Calavia told journalists.

“We are not seeing any weakness in passenger demand, even with the level of fuel prices where they are today, and even with the fuel surcharges we are applying.”

The airline also said its financial charges fell sharply.

Air France KLM confirmed its objectives of a further rise in operating income in 2007/08 from last year’s EUR936 million and a return on capital employed of 7 percent after tax for the full year, up from 6.5 percent.

“The first quarter was excellent; the second quarter was very good,” Deputy Chief Executive Pierre-Henri Gourgeon said.

The Franco-Dutch airline group, formed from a 2004 merger of Air France and KLM, aims to lift its return on capital to 8.5 percent by 2009-10.

It has promised its investors it will only pursue possible mergers with other European airlines if the deals protect its medium-term financial goals.

Vice Chairman Leo Van Wijk said this week that Air France KLM had not yet decided whether to bid for either struggling Italian carrier Alitalia or Spain’s Iberia, both of which are looking for buyers.

(Reuters)