Archive for February, 2010
Air Europa officially launched the new London Gatwick to Lima service, via Madrid. The program of three weekly departures to the Peruvian capital follows the successful introduction of the summer and winter schedules, as well as twice daily flights from London Gatwick to Madrid in March 2009.
“Following a positive 2009, we are happy to have established this exciting new route from London to Lima, via Madrid” says Colin Stewart, UK General Manager, Air Europa. “Competitive pricing and a commitment to excellent customer service has facilitated the expansion of our destination portfolio in South America. Something we hope to build on in 2010”.
February 25, 2010
China Eastern Airlines is in talks with Star Alliance and the other two global airline industry alliances as it moves to boost its profile, a senior company executive said on Thursday.
China Eastern, the only one of the country’s three biggest carriers without a global affiliation, is exploring joining one of the industry alliances said the executive, who asked not to be identified because of the sensitivity of the matter.
American Airlines’ parent AMR is in advanced talks with China Eastern to bring it into the oneworld alliance, AMR’s chief financial officer Tom Horton said earlier this week.
But the China Eastern executive said the carrier did not have a preferred partner so far.
“We are holding parallel discussions with all three groups currently. We hope to join one of them eventually but we don’t know which one yet,” said the executive.
Shanghai Airlines, which China Eastern acquired in February under a government-backed deal, belongs to Star Alliance.
But that does not necessarily mean the alliance is a preferred partner of China Eastern, added the Chinese executive.
China has been a major bright spot amid a dismal global industry downturn which has pushed Japan Airlines into bankruptcy.
Chinese airlines carried 159 million passengers last year, up 15 percent from 2008, according to official data, as Beijing’s aggressive economic stimulus lifted consumer confidence.
Airlines worldwide, looking for a way to cut costs and increase scale absent full-blown mergers, are seeking more alliances and figuring out ways to cut costs using current ones.
China Southern Airlines is a member of SkyTeam already.
American Airlines had merger talks with US Airways and alliance talks with Continental Airlines in 2008, just after Delta Air Lines and Northwest merged. Those talks ended as Continental chose to pursue an alliance with United, a source had said.
(Reuters)
February 24, 2010
The Pentagon unveiled on Wednesday revised final terms for a USD$35 billion refuelling plane competition, but lawmakers said changes from a draft version were minor and may not suffice to keep Northrop Grumman in the bidding against Boeing.
Northrop and its European partner EADS won the last competition, but then lost the deal after government auditors upheld a Boeing protest. Northrop told the Pentagon last year that the draft rules favoured Boeing and it would not bid unless significant changes were made.
Neither company had any immediate comment, but industry officials said they were studying the Pentagon’s briefing.
Deputy Defence Secretary William Lynn, Pentagon acquisition chief Ashton Carter and Air Force Secretary Michael Donley, accompanied by dozens of senior officers and staffers, briefed lawmakers on the final request for proposals (RFP) for the contest, beginning early on Wednesday.
“We are confident that our acquisition strategy favours no one except the warfighter and taxpayer,” Lynn said in a briefing chart provided to lawmakers.
“The requirements are clear, achievable and we believe that both companies have the ability to not only make a competitive offering, but the opportunity to win the solicitation,” he said in the document.
The final rules included 230 changes, many made based on comments submitted by the companies, but lawmakers said the changes were minor and did not alter the fundamental approach.
The biggest changes included measures that would allow adjustment for inflation after the first two batches of production aircraft were built and a slight modification of the Pentagon’s fixed-price approach to development that calls for a 60/40 burden-sharing split with the government.
But the government is still sticking to a long list of mandatory requirements for the planes — 372 instead of 373 in the draft — and would only consider 93 additional capabilities if the bids were just 1 percent apart.
“It appears that the fundamental RFP has not been changed. I think this is a disappointment,” said Senator Jeff Sessions, a Republican from Alabama, where Northrop and EADS had planned to assemble the planes.
Sessions said there was no doubt the Northrop plane, based on the Airbus A330, would carry more fuel, more passengers and more cargo, but the competition rules still appeared to be skewed to favour the smaller Boeing 767.
Senator Richard Shelby, a fellow Republican from Alabama, said the final RFP conjured “an illusion of a fair competition in which the warfighter and the taxpayer lose.”
Shelby and Sessions are holding up votes on some key officials nominated by President Barack Obama for top Pentagon jobs over the tanker dispute.
Sessions said he would still urge Northrop to submit a bid, given the large number of jobs at stake, but said that could prove difficult if Northrop did not feel it had a fair chance to win, especially given the expected USD$50 million to USD$80 million cost of submitting a second bid. Analysts estimate Northrop spent about USD$100 million to prepare its first bid.
MINIMAL CHANGES
Defence consultant Jim McAleese said the Pentagon had made minimal changes to accommodate Northrop’s complaints, but the rules were still geared to reward “whoever proposes the cheapest tanker.”
Lynn insisted the Pentagon’s approach would weigh both price and non-price factors, including the plane’s war-fighting effectiveness and the cost of ownership over 40 years, and said even a bidder with a higher price could potentially win.
Senator John McCain, whose investigation of an earlier USD$23.5 billion sole-source tanker deal with Boeing ultimately killed that deal, said he was still reviewing the data.
Asked if he were confident the final terms for the competition would guarantee a level playing field for both parties, he said: “Put me down as cautious.”
Representative Norm Dicks — a Democrat from Washington, where Boeing has aircraft assembly operations and a strong supporter of the Boeing bid — said he sees only minimal changes in the final request for proposals.
“They’re trying to make it transparent. They hope both companies will bid. We’ll just have to wait and see,” Dicks told reporters after the briefing. “I think the changes here have been rather minimal,” he said.
This is the Air Force’s third attempt since 2001 to begin replacing its current fleet of nearly 50-year-old KC-135 tankers, which were built by Boeing. The first two attempts failed amid ethics violations and technical problems.
A Pentagon briefing document included following items:
– It said it found no conflict of interest due to Northrop’s work in developing a computer refuelling model that is being used to help assess the bids and said the company had implemented adequate firewalls.
– The tanker contract would be a fixed-price incentive for development, with a 60/40 ratio of shared risk between the government and the winning bidder.
– The first two production lots of tankers would be on a firm fixed price contract, while lots 3-13 would include provisions to adjust for inflation.
– The RFP exempts ongoing World Trade Organisation disputes over aircraft subsidies, but the Air Force would include a clause to prevent any effect of future rulings on pricing.
(Reuters)
February 25, 2010
Consolidation in the US airline industry is “inevitable,” the president of the US Air Line Pilots Association union said on Wednesday.
Captain John Prater told the Reuters Travel and Leisure Summit that under current circumstances, a combination between United parent UAL and Continental Airlines made more sense, as the carriers have little route overlap.
However, Prater added that he had no indication from the companies that they were having merger discussions.
This week, executives at United parent UAL and US Airways told the summit their carriers were open to consolidation opportunities.
Prater, who said that ALPA was in bargaining at half of the 38 airlines where it represents pilots, said his union would support mergers that save jobs.
“We’re for the right consolidation, consolidation that actually protects and enhances jobs and creates a profitable carrier,” he told reporters in New York.
He said potential catalysts for a next round of airline mergers could include a big rise in fuel prices or perceived success of Delta Air Lines, which acquired Northwest in 2008, against rivals. That merger made Delta the world’s biggest carrier.
Prater added that mergers could also come among regional carriers, which he said will face a pilot shortage over the next couple of years as workers defect to larger carriers.
“I think we’ll see some consolidation in the regional industry and it’ll be for efficiencies,” he said.
Laura Wright, Southwest Airlines chief financial officer, also said the regional airline industry could be poised for transformation.
“There’s no question that the economics of their operating model have been affected greatly by energy prices,” said Wright. Southwest does not work with regional airlines.
Prater said ALPA was optimistic about being able to negotiate pacts that would help recoup some of the wages and benefits pilots lost in the past decade as bankrupt airlines were able to extract concessions.
(Reuters)
Jamaica’s Tourism Minister Edmund Bartlett has sought to
reassure members of the international business community that the
fallout from the impending divestment of Air Jamaica is anticipated to
be minimal.
“We have been taking steps to ensure
that other United States (US) carriers are increasing their rotations
to Jamaica,” Bartlett said.
“The sale of Air Jamaica is not expected to leave existing gateways without service, as Caribbean Airlines will provide the necessary continuity.”
The minister, who was addressing a Canada-Jamaica Business
Council Luncheon and Table Top Mini Expo at Rose Hall Resort and Spa in
Montego Bay, St James, said the cost of the national airline to the
Government is unsustainable.
He said that financials as at the end of June 2009 showed an accumulated deficit of US$1.4 billion.
“Our
objective is to ensure that there is adequate coverage of the gateways
that are important to our tourism,” Bartlett added. “We have been
successful in attracting 12 new gateways during the past 12 months, and
there is every indication that more carriers will be flying to Jamaica.”
Bartlett
credited the growth in Canadian visitors for the increase in arrivals
to Jamaica. Statistics indicate that total stopovers from Canada
increased by 22.9 per cent from 236,193 in 2008, to 290,307 last year.
While
Jamaica and Canada have had long-standing business ties, Canadian High
Commissioner to Jamaica Stephen C. Hallihan said his country was
actively negotiating a bilateral trade and investment treaty with
CARICOM.
“Our foreign policy currently identifies Afghanistan,
the engagement of emerging nations, such as China and India, and our
role in the Americas and the Caribbean as our three overarching
priorities,” Hallihan said in his remarks.
“In this regard,
our engagement with CARICOM, as official government policy, is now
focused on democratic governance, regional security and mutual
prosperity.”
One challenge
Hallihan
said the second round of discussion between Canada and CARICOM would
continue in September, following on negotiations that were held last
November in Barbados.
“One challenge might be dealing with
CARICOM’s preference to have a development assistance component
included in the treaty,” he outlined.
“Another issue may be
the reluctance of some states to accept Canada’s proposal that side
agreements be included on environmental security and labour rights that
would require all parties
to enforce commitments that have already been agreed to in international discussions.”
Top executives at two of the five largest U.S. airlines said on Tuesday they are open to a merger, adding that the airline industry needs to consolidate to return to profitability.
Speaking at the Reuters Travel and Leisure Summit in New York, United Airlines chief financial officer Kathryn Mikells said the third-largest U.S. airline is open to merging with U.S. or foreign carriers.
“UAL has been supportive of consolidation for a long time,” Mikells said at the summit. “It is something we will continue to look at.”
US Airways Chief Financial Officer Derek Kerr, in a separate interview at the summit, said his airline was open to merging with another U.S. carrier.
The fifth largest U.S. airline is not interested in merging with a foreign airline, Kerr said, because that would not help the domestic market.
“I don’t think that will make a difference,” he said. “Domestic is where there is too much fragmentation and there are too many airlines.”
Either way, both executives are looking for the right merger, and the two had come close to merging with each other in 2008, sources had then told Reuters.
The airline industry has lost $50 billion in the past 10 years, including $11 billion of red ink in 2009 alone, according to the International Air Transport Association.
The trade association expects the industry to take at least three years to recover from the slump in demand caused by high fuel prices and a pullback in spending amid a weak economy.
“Consolidation is one of the major ways this industry can become profitable,” Kerr said.
When asked why US Airways was not approaching another carrier, Kerr said: “It’s difficult for the No. 5 player to make a move on No. 1 through 4.”
The four largest U.S. carriers are Delta Air Lines, American Airlines, United and Continental Airlines.
Neither United nor US Airways are strangers to mergers: US Airways was acquired by America West in 2005 and it tried, and failed, to buy Delta in 2007.
Sources had told Reuters that US Airways had parallel talks with United and Continental about a possible merger in 2008, when Delta was merging with Northwest. The talks ended as United decided to pursue an alliance with Continental instead.
“It’s five major carriers, it’s too fragmented,” Kerr said of the U.S. airline industry. “You have too many hubs, all chasing the same passengers trying to connect through the country. We believe that it needs to be consolidated.”
BARRIERS TO GLOBAL M&A
Mikells said barriers preventing foreign airlines from entering the U.S. market were blocking global mergers at a time when airlines needed scale. Current U.S. law restricts foreign ownership of U.S. airlines to 25 percent of voting stock.
“Clearly, outside of the U.S., consolidation is under way,” Mikells said. “Not being able to participate in that in a more material way just really positions the U.S. companies detrimentally, relative to international carriers.”
Absent mergers, the airlines are focusing on making the most of alliances. United and US Airways are both part of Star Alliance, a global network of carriers that allows them to streamline costs while sharing revenue.
Star Alliance, which competes with Oneworld and SkyTeam, is seeking more partners, Kerr said. United’s Mikells also said the carrier was looking to add members to its alliance, especially in regions such as South America and Africa.
Kerr said alliances are not complete substitutes for mergers but do help in getting some synergies. “One thing that is very hard to do across alliances is cost-cutting,” he said.
Source: reuters.com
February 24, 2010
The European Commission has launched an investigation into a loan worth EUR€94 million euros (USD$127.7 million) granted to national carrier CSA Czech Airlines by a state-owned company, the EU executive said.
“The Commission cannot exclude the loan and its subsequent de-collateralisation, which the airline will use to finance costs linked to the operation of the company, constitutes state aid,” it said in a statement.
(Reuters)
February 23, 2010
Air passengers in Europe picked their way through flight disruptions on Tuesday as French air traffic controllers went on strike and Lufthansa tried to get its planes back into the air after a stoppage by pilots.
In France, airlines had to cancel half of the short- and medium-haul flights at Paris’s Orly airport as well as a quarter of flights at Charles de Gaulle airport, as the French workers went on strike.
French unions have called for a five-day strike to protest plans to modernise air traffic, signed by Germany, Belgium, France, Luxembourg, the Netherlands and Switzerland. The unions fear the reforms will lead to layoffs.
German flag carrier Lufthansa’s pilots in Germany went on strike on Monday, causing about 900 flights to be cancelled and leaving thousands of travellers around the world stranded.
Lufthansa has said that one day of strikes on that scale would cost it about EUR€25 million euros (USD$34 million) in lost revenues alone.
“That is just a part of life, that people are not happy about the future and try to secure their jobs,” said Aldes Persolis, a passenger from Latvia who was stranded in Munich.
A few hours after the strike began, Lufthansa asked a court to halt the strike, which was meant to last until Thursday.
A judge convinced the union in a hastily convened hearing to suspend the strike until March 8 to give both sides a chance to work out their differences. If the parties fail to find a compromise by then, the pilots could go back on strike.
“We are ready for talks,” said Ilona Ritter, a representative of trade union Vereinigung Cockpit.
Lufthansa workers fear that the airline, which aims to cut EUR€1 billion of costs by 2011, wants to expand the foreign units while shrinking “Lufthansa-Classic”, because pilots and cabin crew make less money outside of Germany.
OPTIMISM ON TALKS
“We are cautiously optimistic that both parties will find a solution without further strike measures,” said BHF Bank analyst Nils Machemehl, adding that he does not expect a resulting compromise to be a major burden for Lufthansa.
The pilots have returned to work, but Lufthansa said it expects its flight schedule to return to normal no sooner than Friday. It expects 1,400 of the usually scheduled 1,800 flights to take off on Wednesday, it said.
“Of course it takes some time until the planes are back at all 200 locations that the Lufthansa network comprises around the world, and the crews need to be positioned again, too,” Lufthansa spokesman Klaus Walther said.
Cabin crew union UFO is also due to hold talks with Lufthansa soon after threatening a warning strike if the carrier failed to engage in wage negotiations.
Travellers are also waiting for news on when cabin crew at British Airways plan a work stoppage, after the union Unite voted on Monday in favour of industrial action to protest cost cuts.
British Airways wants three-quarters of its crew to accept a pay freeze this year, along with other cost-cutting measures.
It is the union’s second attempt at industrial action after a court forced the workers to abandon plans for a 12-day strike over Christmas that would have affected a million passengers.
(Reuters)
February 23, 2010
United Airlines is open to merging with US or foreign carriers as the industry is “poised for consolidation,” the airline’s chief financial officer said on Tuesday.
“UAL has been supportive of consolidation for a long time,” CFO Kathryn Mikells said at the Reuters Travel and Leisure Summit in New York. “It is something we will continue to look at.”
Mikells declined to comment on whether United’s parent company, UA, was in talks with other carriers, but added that the airline is seeking more alliances, especially in regions such as South America and Brazil.
In 2008, sources said that United was in talks with Continental Airlines and US Airways about a possible merger with either company. Mikells declined to comment on whether those talks had resumed.
She said barriers preventing foreign airlines from entering the US market were blocking global consolidation at a time when airlines needed scale. Current US law restricts foreign ownership of US airlines to 25 percent of voting stock.
“Clearly, outside of the US, consolidation is underway,” Mikells said. “Not being able to participate in that in a more material way just really positions the US companies detrimentally relative to international carriers.
“We are hopeful as we move into this recovery period… that folks will focus again on the fact that we need to have the same ability to make changes in our industry as other industries clearly have,” she said, referring to sectors such as autos and technology.
INDUSTRY LOSSES
The airline industry has lost USD$50 billion in the past 10 years, including USD$11 billion in 2009 alone, according to the International Air Transport Association. The trade group expects the industry to take at least three years to recover from the slump in demand caused by the recession.
Mikells said United was seeking more alliances and was planning to eke out more cost savings from current partnerships, which typically focus on sharing revenue.
“We are now focusing more on the cost side by co-locating at airports, sharing IT systems, doing joint investments in information technology,” she said.
When asked if the 2008 merger between Delta Air Lines and Northwest Airlines had made the combined carrier a stronger competitor, Mikells said the market had spoken: Delta’s current market capitalisation is nearly $10 billion, about twice that of United and Continental Airlines combined.
(Reuters)
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| The Montana Hotel that James and McAlpin were checked into was reduced to rubble in the quake. | |||||
ST JOHN’S, Antigua, February 24, 2010 – With lab tests expected to confirm what they already believe, family and colleagues of two Eastern Caribbean Civil Aviation Authority (ECCAA) officials who perished in the Haiti earthquake are now grieving their loss.
The ECCAA announced yesterday that the bodies of Director General Rosemond James and Director of Flight Safety Gregory McAlpin, who were in Port-au-Prince to attend a Caribbean Aviation Safety and Security Oversight System (CASSOS) meeting when the devastating quake hit on January 12th, have been found. The discovery brought an end to the six-week search for either the men or their bodies.
The ECCAA said yesterday that the Civil Aviation Authority of Haiti (OFNAC), one of the entities representing the authority in the recovery efforts, said the bodies were retrieved on Monday from the rubble of the Montana Hotel which partially collapsed in the quake.
“Although the bodies were identified based on their jewelry and their driver’s licenses, secondary confirmation through a laboratory identification process will be conducted by the end of this week. When this is completed, the repatriation process will take place,” the ECCAA statement said.
The authority offered condolences to the family and friends of the Trinidadian McAlpin, and St Lucian-born James, who had made Antigua his home.
The Chairman, Board of Directors, management and staff of LIAT also expressed their sympathy to the family, friends, colleagues and workmates of the two.
“Both of these officials at all times exemplified the highest standards of professionalism, integrity and dedication to the ideals of aviation safety and security, and their passing represents a tremendous loss to the civil aviation community in the Eastern Caribbean,” a statement from the airline said.
James’ wife, DenVanter Roach-James, issued a statement late yesterday, in which she spoke for the first time since her husband went missing.
She said the last six weeks has been a tremendously difficult time for the family and the most difficult part of the ordeal was “the uncertainty of the outcome”.
Roach-James said the news that her husband’s body had been recovered allowed the family some measures of comfort, even though the grieving process has just begun.
“We wish to take this opportunity to thank the Eastern Caribbean Civil Aviation Authority and the search team which they were instrumental in putting together as well as the Haitian Civil Aviation Authority for their support. They have gone above and beyond their
She also expressed sympathy to McAlpin’s relatives, saying the two families were united in their grief.
The ECCAA has already appointed an interim team to take the organisation forward. A recommendation has been forwarded to the Heads of Government and Ministers of Civil Aviation in the Organisation of Eastern Caribbean States for the endorsement of Donald McPhail to act as the Director General, it was announced earlier this month.