tag:blogger.com,1999:blog-43978429613527741652024-03-14T14:47:52.600+04:00Taxiway Lima<center>
<br>
<b>Remarkable comments, thoughts, and advise to all aviation enthousiasts and business entrepreneurs.
</b>
<br>
<br>
<b>
Don't say you were not warned! </b>
<br>
</center>Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.comBlogger48125tag:blogger.com,1999:blog-4397842961352774165.post-7734850811616494592018-09-25T11:29:00.000+04:002018-09-25T13:31:55.368+04:00OPINION: Alleged Emirates and Etihad merger<!--[if gte mso 9]><xml>
<w:WordDocument>
<w:View>Normal</w:View>
<w:Zoom>0</w:Zoom>
<w:TrackMoves/>
<w:TrackFormatting/>
<w:HyphenationZone>21</w:HyphenationZone>
<w:PunctuationKerning/>
<w:ValidateAgainstSchemas/>
<w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid>
<w:IgnoreMixedContent>false</w:IgnoreMixedContent>
<w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText>
<w:DoNotPromoteQF/>
<w:LidThemeOther>DE</w:LidThemeOther>
<w:LidThemeAsian>X-NONE</w:LidThemeAsian>
<w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript>
<w:Compatibility>
<w:BreakWrappedTables/>
<w:SnapToGridInCell/>
<w:WrapTextWithPunct/>
<w:UseAsianBreakRules/>
<w:DontGrowAutofit/>
<w:SplitPgBreakAndParaMark/>
<w:DontVertAlignCellWithSp/>
<w:DontBreakConstrainedForcedTables/>
<w:DontVertAlignInTxbx/>
<w:Word11KerningPairs/>
<w:CachedColBalance/>
</w:Compatibility>
<m:mathPr>
<m:mathFont m:val="Cambria Math"/>
<m:brkBin m:val="before"/>
<m:brkBinSub m:val="--"/>
<m:smallFrac m:val="off"/>
<m:dispDef/>
<m:lMargin m:val="0"/>
<m:rMargin m:val="0"/>
<m:defJc m:val="centerGroup"/>
<m:wrapIndent m:val="1440"/>
<m:intLim m:val="subSup"/>
<m:naryLim m:val="undOvr"/>
</m:mathPr></w:WordDocument>
</xml><![endif]--><!--[if gte mso 9]><xml>
<w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
DefSemiHidden="true" DefQFormat="false" DefPriority="99"
LatentStyleCount="267">
<w:LsdException Locked="false" Priority="0" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Normal"/>
<w:LsdException Locked="false" Priority="9" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="heading 1"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 2"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 3"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 4"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 5"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 6"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 7"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 8"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 9"/>
<w:LsdException Locked="false" Priority="39" Name="toc 1"/>
<w:LsdException Locked="false" Priority="39" Name="toc 2"/>
<w:LsdException Locked="false" Priority="39" Name="toc 3"/>
<w:LsdException Locked="false" Priority="39" Name="toc 4"/>
<w:LsdException Locked="false" Priority="39" Name="toc 5"/>
<w:LsdException Locked="false" Priority="39" Name="toc 6"/>
<w:LsdException Locked="false" Priority="39" Name="toc 7"/>
<w:LsdException Locked="false" Priority="39" Name="toc 8"/>
<w:LsdException Locked="false" Priority="39" Name="toc 9"/>
<w:LsdException Locked="false" Priority="35" QFormat="true" Name="caption"/>
<w:LsdException Locked="false" Priority="10" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Title"/>
<w:LsdException Locked="false" Priority="1" Name="Default Paragraph Font"/>
<w:LsdException Locked="false" Priority="11" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtitle"/>
<w:LsdException Locked="false" Priority="22" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Strong"/>
<w:LsdException Locked="false" Priority="20" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Emphasis"/>
<w:LsdException Locked="false" Priority="59" SemiHidden="false"
UnhideWhenUsed="false" Name="Table Grid"/>
<w:LsdException Locked="false" UnhideWhenUsed="false" Name="Placeholder Text"/>
<w:LsdException Locked="false" Priority="1" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="No Spacing"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 1"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 1"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 1"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 1"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 1"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 1"/>
<w:LsdException Locked="false" UnhideWhenUsed="false" Name="Revision"/>
<w:LsdException Locked="false" Priority="34" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="List Paragraph"/>
<w:LsdException Locked="false" Priority="29" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Quote"/>
<w:LsdException Locked="false" Priority="30" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Quote"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 1"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 1"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 1"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 1"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 1"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 1"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 1"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 1"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 2"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 2"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 2"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 2"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 2"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 2"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 2"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 2"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 2"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 2"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 2"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 2"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 2"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 2"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 3"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 3"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 3"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 3"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 3"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 3"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 3"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 3"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 3"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 3"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 3"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 3"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 3"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 3"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 4"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 4"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 4"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 4"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 4"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 4"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 4"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 4"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 4"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 4"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 4"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 4"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 4"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 4"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 5"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 5"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 5"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 5"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 5"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 5"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 5"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 5"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 5"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 5"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 5"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 5"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 5"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 5"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 6"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 6"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 6"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 6"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 6"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 6"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 6"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 6"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 6"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 6"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 6"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 6"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 6"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 6"/>
<w:LsdException Locked="false" Priority="19" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Emphasis"/>
<w:LsdException Locked="false" Priority="21" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Emphasis"/>
<w:LsdException Locked="false" Priority="31" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Reference"/>
<w:LsdException Locked="false" Priority="32" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Reference"/>
<w:LsdException Locked="false" Priority="33" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Book Title"/>
<w:LsdException Locked="false" Priority="37" Name="Bibliography"/>
<w:LsdException Locked="false" Priority="39" QFormat="true" Name="TOC Heading"/>
</w:LatentStyles>
</xml><![endif]--><!--[if gte mso 10]>
<style>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:"";
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin-top:0cm;
mso-para-margin-right:0cm;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0cm;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:"Calibri","sans-serif";
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:"Times New Roman";
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}
</style>
<![endif]-->
<br />
<div class="MsoNormal">
<span lang="EN-US"><span style="color: yellow;">Another holy cow! Just when I thought I had learnt it all when the airline of Abu Dhabi Etihad was rumoured to buy into Germany's Lufthansa, Bloomberg steps up the game by announcing that Dubai's Emirates Airlines would merge with Abu Dhabi's Etihad Airways. So, after I recovered from this potential news - and it took me a long time to recover! -, I started thinking and present you herewith with my two cents' worth.</span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">It seems that the GCC aviation industry –
and the whole political and economic region, for that matter - is not coming to
a rest. More than one year ago, under the leadership of Saudi Arabia, the
neighbouring countries of Qatar, including the United Arab Emirates and Bahrain,
imposed a political and economic blockade on the hydrocarbon-rich yet tiny
island in the Persian Gulf – or the Arabian Gulf, depending on who you ask, of
course. As a consequence, Qatar Airways recently reported heavy financial
losses due to increased operational costs, certainly heavy blemishes on the now
dented armour of the once sky-rocketing airline, in line to become the new
Emirates by providing even better services throughout the whole process chain
while spending just a bit less through the same chain than its rival across the
narrow sea stretch. Further up north, Kuwait keeps seeing its air operations
failing due to century old habits of ‘wasta’ and all subsequent consequences,
Gulf Air of Bahrain is a mere shadow of its former glory, Oman Air… has there
actually ever been something of importance to report about this small air
operation other than it still operates? Emirates has downsized its personnel
numbers, keeps aircraft parked, has entered into an alliance with arch rival Etihad
on such matters as procurement. The new Dubai airport, once dubbed the largest
in the world, still does not see air operations of any significance. Saudi and UAE
airports get attacked by Houthi forces out of Yemen as retaliation for the
proxy war fought by Saudi Arabia and its less important brethren – amongst them
the UAE being the best of the rest – against Iran on Yemen’s soil. As a
consequence of this turmoil in the region, and in combination with both fairly
low oil prices on the spot market and the recent introduction of VAT in various
GCC member states, Sheikh Ahmed of Dubai has seen to it that his two air
operations - Emirates and Fly Dubai – started utilising common business grounds
to take advantage of economies of scale; and now, the biggest step forward of
them all - that is, when it actually evolves to a viable business model with
politics taking a back seat: Bloomberg reports that Emirates of Dubai and
Etihad of Abu Dhabi are in talks to fully merge after both airlines already
explored and implemented strategic synergies over the last few months!
Obviously, spokesmen for both airlines were quick to dismiss Bloomberg’s
article but in all fairness, wouldn’t it make economic sense?</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">For those of you that have never lived in
the region: this story is as big as a potential merger of McDonald’s and Burger
King would be. Rubbish! The story is even bigger! We all remember when the
tallest skyscraper in the world was renamed from Burj Dubai to Burj Khalifa after
Abu Dhabi had bailed-out the more flamboyant Emirate of Dubai with an initial
loan of USD 25 billion. Similarly, other projects, such as highways were
renamed every time Abu Dhabi needed to gallop-in to the financial rescue of its
northern neighbour again. In fact, the Emirate of Dubai was known to have one
single sustainable economic success story only, and that was the one of its
airline Emirates. Yes, I have predicted many times that, in the mid run,
Emirates would face hefty headwinds when aircraft that are capable of flying
direct from Europe to the Far East would start entering the passenger market
and thus making a stop-over halfway through obsolete. The latter being the business
model Emirates and its neighbouring airlines are heftily relying upon. And no
doubt, we are slowly seeing these exciting times of technologic advances. Yet,
Rome was not built in one day and similarly, Emirates would not be driven into
insolvency within one year upon the entrance of such ULR capable aircraft. So,
other economic – and political - forces must be at work.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">For Etihad, the picture is clear. The
failure of its strategy to acquire voting-dominant minorities in (f)ailing
airlines around the world by its now departed former CEO has been observed and
commented upon many, many times (also by yours truly, I admit). The company faced
losses of around USD 2 billion in 2016, USD 1.5 billion in 2017, has
sold/returned a major proportion of its aircraft fleet early 2018, and is
rumoured to negotiate with Boeing to cancel the airline’s order for 25 B777X,
which pretty much sums-up the current state of the airline, I believe.
Emirates, however, is another story altogether. True, major established
airlines in Europe and the USA lobbied hard to have Emirates’ freedoms of the
air restricted and first successes have become evident over the last few months,
yet most of us always believed Emirates to fly above all economic laws with
unlimited (financial) supplies available to the airline anywhere and at all
times.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">The economy feels brittle, as a good friend
of mine told me a few days back on the state of the economy in the UAE. He
should know, of course, having been a resident of the UAE for the last two
decades or so. SMEs falter all around due to increased costs related to the recent
introduction of taxes and workers’ benefits. Oil prices remain low (currently
hovering around the USD 80 mark), alternative air routes to the Far East open
up, the war in Yemen costs the UAE serious money, the tourism hype of the rich-and-famous-wannabees
that imperatively needed to visit Dubai seems, if nothing else, to slow down
(during my last visit to the ITB Berlin last spring the GCC hall was
practically empty), the blockade on Qatar certainly does not inspire confidence
in the political stability of the region, and President Trump’s expressed
strategy – if one can call it a strategy - towards the region results in
reluctance to invest in the region by large parts of the rest of the world.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">Obviously, something needs to be happening
to shield-off the downward spiral. A radical step such as a full merger with
Etihad (and Fly Dubai) might very well be a strategy to explore. However, and I
never thought I needed to raise this query ever in relation to the GCC: who is
paying? Etihad is in tremendous financial woes, Emirates seems a bit better at
best, so that would leave, as usual, the two respective governments as the
owners of the two respective airlines. I doubt that the Emirate of Dubai is
able to stem the financial burden and it would make little sense for the much
smaller air operation to acquire the much larger - and healthier - one.
However, I do believe a potential United Emirates Airlines has its rightful
place in the aviation industry but can there be a way to be found that leaves
both sheikhdoms in their respective prides?</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN-US">From an operational point-of-view, the two
hub operation would need to be scrapped surely. Not a major hurdle for Dubai
since its Dubai International has been facing capacity restraints as long as I
have been involved in the aviation industry in the Middle East and I am sure
the sand the airport occupies can be sold at the usual inflated rates,
considering its location in the heart of the old Dubai business district. But
Abu Dhabi has shed major bucks to upgrade its infrastructure recently and would
be far from happy to abandon its investment with little return, if any. If only
there were an international airport somewhere in the middle between Dubai and
Abu Dhabi. Oh, wait….</span></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com2tag:blogger.com,1999:blog-4397842961352774165.post-23662209321870775402017-10-27T13:11:00.001+04:002017-10-27T13:11:55.735+04:00Corporate aircraft (operation) acquisition process<div class="MsoNormal">
</div>
<div class="MsoNormal">
<span style="color: yellow;"><span lang="EN-US">A few years back, when I was heading a corporate jet charter and management company in the Middle East, I developed this ‘checklist’ for internal use within our sales department. At the time, I realized that most sales executives were excellent deal negotiators but often lacked in-depth knowledge of the actual operations they were trying to sell. Of course, in the days of the World Wide Web, one easily gets caught off guard by demanding customers that themselves know quite a bit about your product or service. Since I have always believed in expanding one’s own horizon as much as possible, I initiated trans-departmental training courses – or is it inter-departmental, I never seem to get those two correctly apart – where each department was charged with developing and presenting a basic course on its scope. I am still proud of the success these courses had and it certainly showed what fine team I was working with!</span></span></div>
<div class="MsoNormal">
<span style="color: yellow;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: yellow;"><span lang="EN-US">Anyway, without too many supporting words, here is the checklist. Remember, it was specifically tailored to our operations at the time but I believe it might still prove to be useful for operational laymen of today. Of course, I developed the checklist not all by myself, so, as always, praise should go to many excellent professionals while criticism would only reflect on my poor research! </span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Introduction:</span></b></span></div>
<div class="MsoNormal">
<span style="color: #999999;"><span lang="EN-US">Define the process as aircraft OPERATION acquisition. Being presented with the opportunity to buy an aircraft often seems to force people into making rash, biased decisions. However, the mind always should prevail over heart in these matters (especially, since large amounts of cash are required to buy/lease aircraft seats in any form)!</span></span></div>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">The process:</span></b></span></div>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Define the requirement:</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Internal and external meetings, on-site inspections, consulting</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Who is going to utilize the aircraft</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">Incorporate corporate culture</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Aggressive marketing, cautious approach?</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Analyze the air transportation culture (have it done by unbiased professionals):</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Historical view of travel (at least 12 months)</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">i.e. most popular destinations</span></span></li>
<li><span style="color: #999999;">t<span lang="EN-US">rip frequencies</span></span></li>
<li><span style="color: #999999;">l<span lang="EN-US">evel and number of personnel, cost per seat-mile</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">planned travel needs for the future</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">City Pair analysis</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">travel solutions based on the before; focus on alternatives to own aircraft since buying an aircraft is a matter often ruled by the heart</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">evaluation of aircraft types</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">ex: the time difference between a 500 knots and a 400 knots aircraft is - over a flight of 350NM (i.e. KWI – DXB) - 11 minutes; the difference in purchasing price USD 13Mio, however.</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Don’t forget to incorporate NEEDED amenities, such as an APU in a hot, remote environment</span></span></li>
</ol>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">However, the price difference between a Be90 (able to operate into smaller airports and has lower operating costs (ATC, crewing etc.) and a GLEX is approx. USD 30Mio!</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Choose the operation acquisition method based on service quality, crew quality, security, operating costs, liability etc. only (i.e. tangibles):</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">In-house flight department</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Management company</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Joint ownership</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Charter</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Fractional ownership</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Combination of the above</span></span></li>
</ol>
</ol>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Next steps</span></b><span lang="EN-US"> (in case an own aircraft is the best solution):</span></span></div>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Determine the actual acquisition process, i.e. purchase or lease:</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">In solid economic times, popular aircraft actually APPRECIATE in value over the first 10 years of ownership</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">easing protects cash reserves</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">Draft the aviation policy, including:</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Who can utilize the aircraft</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Special cases</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Operating restrictions</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Pricing structure (internal and external utilization)</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">Establish the required personnel pool (legally and based on existing work schedules)</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Get insurance quotes (hull, liability for passengers and property, war risk)</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Get maintenance provider quotes, assuming that maintenance of the aircraft will be outsourced, which is almost always the way forward (always check with the aircraft OEM)</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">Do the same for line maintenance that often can be done in-house, however.</span></span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">Who is to keep the aircraft records and how are these records going to be kept? Check with the authorities’ requirements, get external and internal (software) solutions quotes.</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Establish a realistic and firm budget</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Where is the aircraft going to be registered – tax issues (check local authorities’ restrictions). Is an AOC needed (commercial operations)?</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Get quotes from training providers for:</span></span></li>
<ol>
<li><span style="color: #999999;"><span lang="EN-US">crew (check legal requirements)</span></span></li>
<li><span style="color: #999999;">ground personnel</span></li>
</ol>
<li><span style="color: #999999;"><span lang="EN-US">Where is the aircraft going to be parked (base) and what services is the local FBO capable of offering?</span></span></li>
</ol>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Aircraft management company:</span></b></span></div>
<ul>
<li><span style="color: #999999;"><span lang="EN-US">Aircraft is ‘given’ to the management company to operate as a turnkey operation</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">The management company charges a monthly fee and provides personnel, training, a base of operations, passenger scheduling and aircraft maintenance services (i.e. not the aircraft and its potentially needed AOC)</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Salaries, maintenance costs, operating costs (ex. fuel) are paid for by the management company and periodically invoiced to the aircraft’s owner.</span></span></li>
</ul>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Chartering the aircraft out </span></b><span lang="EN-US">(AOC needed, additional insurance requirements):</span></span></div>
<ul>
<li><span style="color: #999999;"><span lang="EN-US">Broker needed that is also capable of:</span></span></li>
<ul>
<li><span style="color: #999999;"><span lang="EN-US">Aircraft marketing</span></span></li>
</ul>
<li><span style="color: #999999;"><span lang="EN-US">Strict budget control</span></span></li>
<li><span style="color: #999999;"><span lang="EN-US">Strategic planning</span></span></li>
</ul>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: #999999;"><span lang="EN-US">Or, as my old flight instructor used to say: <b style="mso-bidi-font-weight: normal;">Plan the flight – fly the plan</b></span></span></div>
<div class="MsoNormal">
<span style="color: #999999;"><br />
</span></div>
<div class="MsoNormal">
<span style="color: #999999;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US">Q&A</span></b></span></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-64329933726355353802017-01-25T15:31:00.000+04:002017-01-31T23:01:20.870+04:00Published article on the alleged Lufthansa Etihad merger<!--[if gte mso 9]><xml>
<o:OfficeDocumentSettings>
<o:RelyOnVML/>
<o:AllowPNG/>
</o:OfficeDocumentSettings>
</xml><![endif]--><br />
<!--[if gte mso 9]><xml>
<w:WordDocument>
<w:View>Normal</w:View>
<w:Zoom>0</w:Zoom>
<w:TrackMoves/>
<w:TrackFormatting/>
<w:HyphenationZone>21</w:HyphenationZone>
<w:PunctuationKerning/>
<w:ValidateAgainstSchemas/>
<w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid>
<w:IgnoreMixedContent>false</w:IgnoreMixedContent>
<w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText>
<w:DoNotPromoteQF/>
<w:LidThemeOther>DE</w:LidThemeOther>
<w:LidThemeAsian>X-NONE</w:LidThemeAsian>
<w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript>
<w:Compatibility>
<w:BreakWrappedTables/>
<w:SnapToGridInCell/>
<w:WrapTextWithPunct/>
<w:UseAsianBreakRules/>
<w:DontGrowAutofit/>
<w:SplitPgBreakAndParaMark/>
<w:DontVertAlignCellWithSp/>
<w:DontBreakConstrainedForcedTables/>
<w:DontVertAlignInTxbx/>
<w:Word11KerningPairs/>
<w:CachedColBalance/>
</w:Compatibility>
<m:mathPr>
<m:mathFont m:val="Cambria Math"/>
<m:brkBin m:val="before"/>
<m:brkBinSub m:val="--"/>
<m:smallFrac m:val="off"/>
<m:dispDef/>
<m:lMargin m:val="0"/>
<m:rMargin m:val="0"/>
<m:defJc m:val="centerGroup"/>
<m:wrapIndent m:val="1440"/>
<m:intLim m:val="subSup"/>
<m:naryLim m:val="undOvr"/>
</m:mathPr></w:WordDocument>
</xml><![endif]--><!--[if gte mso 9]><xml>
<w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
DefSemiHidden="true" DefQFormat="false" DefPriority="99"
LatentStyleCount="267">
<w:LsdException Locked="false" Priority="0" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Normal"/>
<w:LsdException Locked="false" Priority="9" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="heading 1"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 2"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 3"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 4"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 5"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 6"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 7"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 8"/>
<w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 9"/>
<w:LsdException Locked="false" Priority="39" Name="toc 1"/>
<w:LsdException Locked="false" Priority="39" Name="toc 2"/>
<w:LsdException Locked="false" Priority="39" Name="toc 3"/>
<w:LsdException Locked="false" Priority="39" Name="toc 4"/>
<w:LsdException Locked="false" Priority="39" Name="toc 5"/>
<w:LsdException Locked="false" Priority="39" Name="toc 6"/>
<w:LsdException Locked="false" Priority="39" Name="toc 7"/>
<w:LsdException Locked="false" Priority="39" Name="toc 8"/>
<w:LsdException Locked="false" Priority="39" Name="toc 9"/>
<w:LsdException Locked="false" Priority="35" QFormat="true" Name="caption"/>
<w:LsdException Locked="false" Priority="10" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Title"/>
<w:LsdException Locked="false" Priority="1" Name="Default Paragraph Font"/>
<w:LsdException Locked="false" Priority="11" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtitle"/>
<w:LsdException Locked="false" Priority="22" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Strong"/>
<w:LsdException Locked="false" Priority="20" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Emphasis"/>
<w:LsdException Locked="false" Priority="59" SemiHidden="false"
UnhideWhenUsed="false" Name="Table Grid"/>
<w:LsdException Locked="false" UnhideWhenUsed="false" Name="Placeholder Text"/>
<w:LsdException Locked="false" Priority="1" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="No Spacing"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 1"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 1"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 1"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 1"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 1"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 1"/>
<w:LsdException Locked="false" UnhideWhenUsed="false" Name="Revision"/>
<w:LsdException Locked="false" Priority="34" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="List Paragraph"/>
<w:LsdException Locked="false" Priority="29" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Quote"/>
<w:LsdException Locked="false" Priority="30" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Quote"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 1"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 1"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 1"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 1"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 1"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 1"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 1"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 1"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 2"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 2"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 2"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 2"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 2"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 2"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 2"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 2"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 2"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 2"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 2"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 2"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 2"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 2"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 3"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 3"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 3"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 3"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 3"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 3"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 3"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 3"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 3"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 3"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 3"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 3"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 3"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 3"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 4"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 4"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 4"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 4"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 4"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 4"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 4"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 4"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 4"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 4"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 4"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 4"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 4"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 4"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 5"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 5"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 5"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 5"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 5"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 5"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 5"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 5"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 5"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 5"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 5"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 5"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 5"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 5"/>
<w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 6"/>
<w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 6"/>
<w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 6"/>
<w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 6"/>
<w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 6"/>
<w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 6"/>
<w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 6"/>
<w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 6"/>
<w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 6"/>
<w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 6"/>
<w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 6"/>
<w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 6"/>
<w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 6"/>
<w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 6"/>
<w:LsdException Locked="false" Priority="19" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Emphasis"/>
<w:LsdException Locked="false" Priority="21" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Emphasis"/>
<w:LsdException Locked="false" Priority="31" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Reference"/>
<w:LsdException Locked="false" Priority="32" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Reference"/>
<w:LsdException Locked="false" Priority="33" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Book Title"/>
<w:LsdException Locked="false" Priority="37" Name="Bibliography"/>
<w:LsdException Locked="false" Priority="39" QFormat="true" Name="TOC Heading"/>
</w:LatentStyles>
</xml><![endif]--><!--[if gte mso 10]>
<style>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:"";
mso-padding-alt:0cm 5.4pt 0cm 5.4pt;
mso-para-margin-top:0cm;
mso-para-margin-right:0cm;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0cm;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:"Calibri","sans-serif";
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;
mso-fareast-language:EN-US;}
</style>
<![endif]-->
<br />
<div class="MsoNormal">
<span style="color: yellow;"><span lang="EN-US">The news hit me hard: an Italian newspaper
reported that Etihad Airways has offered to buy 40% of Lufthansa’s shares with
the intention to eventually merge the two carriers altogether. Or, as an
industry colleague of mine put it: HOLY COW!</span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Holy cow, indeed. Such a merger would have
more drastic consequences to the aviation world as we know it today than the bankruptcy
of the American investment banks had in its day. Remember, a few months back
even, when Lufthansa, amongst other German carriers, lobbied hard to restrict
further access by the Gulf carriers to the German market? And now, it seems, and
if we can believe the news article, Lufthansa turned around 180 degrees
from its tactics and is in the process of adapting a more pragmatic approach
of: if you cannot beat them, join them.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Most of you that know me personally are
aware that I am not a friend of market protectionism and that I have lobbied,
and will continue to do so, against a strategy of
he-has-currently-an-inherit-advantage-in-Porter’s-5-forces-model-so-he-should-be-banned-from-my-play-yard-because-of-unfair-competition.
I am a great believer in finding one’s own niche and to continuously adapt one’s
business model to continuously changing market conditions rather than focusing
one’s already hard-worked resources onto a culture of blame. If and when any
entity grows too large to quickly adapt, I would argue that the organization,
in its current form, has outlived its useful benefits to society.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Having said this, and I am sure that many
of you will not agree with, or even like, my opinion, let’s have an impartial
closer look at the article and its potential consequences:</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Lufthansa, the former German flag carrier,
ranks in the top three of the largest European air carriers and in the top ten
world-wide. LH is a member of Star Alliance. With its numerous daughters, such as
Swiss, Austrian and Brussels Airlines, it dominates its hubs, such as
Frankfurt, Munich, Vienna and Zurich. The company is currently in the process
of establishing Eurowings, another daughter that is structured around a low
cost business model. The group had a turnover in 2015 of around Euro 32
billion, transported around 107 million passengers, employed around 120,000
staff and operated more than 700 aircraft. In addition to the air transport
operations (passenger and dedicated cargo), the group also consists of a number
of aviation vendors, such as a large MRO, catering, ICT and training unit.
Almost 90% of the group’s turnover stems from European, North-American and
Asian-Pacific markets, leaving quite some potential in African, Australian and
the Middle Eastern markets. A similar picture emerges when addressing pure
cargo income.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Etihad Airways then is the flag carrier of
the United Arab Emirates. It was founded 2003 by the emirate of Abu Dhabi in
response to the success of Dubai’s Emirates Airlines. It operates 120+
aircraft, transported more than 17 million passengers, employs in excess of
26,000 staff and had an estimated turnover of USD 9 billion in 2015. Etihad’s
growth strategy encompasses minority stakes in flailing European carriers, such
as Air Berlin and Alitalia. Etihad is not a member of any major alliance and
its cargo carried stood at a mere 592,000 tonnes in 2015, standing in stark contrast
to Lufthansa’s figure of 1.6 million. Etihad’s only hub is Abu Dhabi
International and the carrier serves in excess of 110 destinations.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">So, digesting the above preamble, one would
say David takes on Goliath once again, wouldn’t one? Well, maybe not. Due to a
variety of underlying parameters – and I won’t go into the everlasting
discussion of do-they-receive-subsidies-or-not? – certainly a less expensive
salary structure, amongst others, the margin of Etihad is much healthier than
the one of its European rival. Even without addressing the subsidies question,
one does not need to be a rocket scientist to understand that a flag carrier
originating an oil-rich home base has certain financial advantages over a
competitor that is owned by widely held stock and operates from a diverse
economical market. </span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">The gains for both airlines are obvious. So
would LH:</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo1; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">improve its balance sheet
resulting in serious possibilities to address and counteract rising
competition, not only from no-frills airlines such as Ryanair but paradoxically
also from direct competitors to Etihad, such as Emirates and Qatar Airways;</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo1; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">gain greater access to mainly
Australian and Middle Eastern destinations that currently provide not enough
meat to operate as independent routes;</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo1; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">secure yet another customer for
its numerous daughters; and</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo1; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">4)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">build further on the budding
relationship with EY that started with incorporating parts of Air Berlin.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Likewise, Etihad would benefit from a
merger by:</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">participating in decades of
solid operational experience;</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">gaining access to political and
slot restricted destinations, including Germany and thus the EU, and as such
gain a serious advantage over its political rival up north;</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">receiving greater influence in
regulatory bodies, such as ICAO and IATA; and </span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo2; text-indent: -18.0pt;">
<span style="color: #cccccc;"><span lang="EN-US" style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">4)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><span lang="EN-US">exercising an economy of scale
approach when negotiating with suppliers, such as OEMs.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Win-win, you say? I would agree but there
are always two sides to the coin. After a solid number of years with, call it
spectacular for the lack of a better word, growth, recent months have seen the
Gulf carriers in a pressure phase that they have encountered for the first time
in their relatively short business lives. State households in the Gulf still
rely almost exclusively on hydrocarbon revenue and with spot market prices
being well below break-even points, many (state owned) projects end-up on the
shelves, resulting in fewer business travelers to Gulf destinations, decreasing
(state) hotel room occupancy levels and so on. Yes, I know, the Gulf carriers
derive their success mostly from the fact that they can easily connect
passengers from east to west and vice versa. But even so, modern aircraft are
capable to fly further and further and there will be a point in the not too
distant future when one can fly from everywhere in Europe and the US to
destinations in the Far East, routes that still account for the majority of pax
and cargo miles.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Serious and previously unheard of lay-offs
of staff at Etihad and Emirates prove the difficult times the carriers face. From
the outside, at least, it seems that Etihad’s strategy of buying minority
stakes in distressed airlines in order to gain access to their markets does not
work as well as planned. We all have heard the rumours that Etihad’s CEO was
supposedly on his way out a few weeks back (Update: it seems official as of
today. The CEO and CFO of the Etihad Group will leave the corporation mid 2017).
And what about the employee turmoil Lufthansa continues to face? The works
council of Lufthansa has made it quite clear for a number of years now that it
does not accept deteriorating remuneration packages, while Etihad would
certainly not accept triple salary levels of its sister.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">Of course, both carriers would also need to
find a way around the foreign investment regulations in both Germany and the
United Arab Emirates. Both countries specify that no foreign entity in its
whole may possess more than 49% of a national carrier, a rule that inherently
would be broken with a merger between the two carriers. Although I do believe
that both corporations employ both the necessary expertise and lobbyists to
elegantly circumnavigate such a roadblock, it might be worthwhile remembering
that 2017 is an election year in Germany and I do not see any high ranking
German politician wanting to burn his or her fingers on such a high profile deal.</span></span></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<br /></div>
<span style="color: #cccccc;">
</span><br />
<div class="MsoNormal">
<span style="color: #cccccc;"><span lang="EN-US">So back to square one? Probably, were it
not that Etihad has categorically denied the article in the Italian newspaper.
And we all have seen where denied rumours can lead to, haven’t we?</span></span></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com6tag:blogger.com,1999:blog-4397842961352774165.post-70954950401065826462016-08-10T15:37:00.000+04:002016-08-10T15:37:59.640+04:00<h2 class="article-title" itemprop="headline">
<span style="color: yellow;">Freelance instructors required</span></h2>
<div class="article-title" itemprop="headline">
<span style="color: #999999;">For an aviation management training start-up, I am looking for senior airport/airline personnel that would be interested in sharing their knowledge with aviation students. Time frame is a few hours per course over a time period of around two weeks so you could do it along your work. You would need to have extensive experience as a line manager and the company does not train students in post-holder functions. If potentially interested, please drop me a line on my personal e-mail and we'll take it from there. Please bear with me if you don't hear back from me immediately. Blue skies. </span></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-17529065940977475782016-02-23T13:46:00.000+04:002016-02-23T13:46:46.592+04:00Presentation about challenges and opportunities of the aviation industry in the Middle East<span style="color: yellow;">A brief presentation I was asked to give for an aviation consultancy on a topic that has almost become second nature. Needless to say that I exceeded the time limit by an incredible amount! Serves them right for wanting me as their speaker, right?</span><br />
<span style="color: yellow;"><br />
</span> <span style="color: yellow;">The presentation is based on a basic SWOT analysis. The underlying data is mostly IATA, IMF and my own. As always, if you like to have the whole picture or just want ot share your opinion, please feel free to ask or share. Blue skies!</span><br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.blogger.com/video.g?token=AD6v5dy6FmpKSRZJJ2PC1A3NRuIbfa5RVrtFuWMDXPy4A4_Mkl1u97AqR2IgcHQRWKdZQLa7agHYItVuIxJUMvgFzg' class='b-hbp-video b-uploaded' frameborder='0'></iframe></div>
<br />Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-27576058374828545742015-09-23T15:00:00.001+04:002015-09-23T15:00:18.236+04:00Frankfurter Allgemeine Article on Lufthansa Strike<span style="color: yellow;">With the 13th strike of the LH pilots in 18 months (or is it the other way round? I cannot seem to grasp the sheer numbers!), I wrote the following article for the daily newspaper Frankfurter Allgemeine Zeitung. I apologize that it is in German yet I am sure that Google will do a reasonable translation for you.<br />
<br />
It seems that the whole of the aviation industry in Germany is heading towards desaster if the decision makers continue on their current path. I do hope they will see the light, however, and reflect on their niche strengths before it is too late. Comparing yourself all the time with Emirates and Ryanair does not add anything to one's business model. Each airline has - or should have - its own niche from where it can add value to the public. If that means flying with a very limited fleet and concentrating on medium haul routes then so be it. Aviation is a service industry, in which one per definition serves its customers. One does not impose one's strategy onto one's audience. Back to basics, please, I sure would hate seeing yet another European state crumble into aviation oblivion.</span><br />
<br />
Es ist was faul im Luftfahrtstaate Deutschland. Der Konkurrenzdruck auf Regionalflughäfen ist so gewaltig hoch, dass regelmäßig Flugplätze Insolvenz anmelden, der neu zu bauende Flughafen der Hauptstadt wird - so hat es immerhin den Anschein – auf Jahre hin ein unfertiges Projekt bleiben, in der gleichen Stadt kann sich Deutschlands zweitgrößte Fluggesellschaft, nach Jahren von fehlender Strategie und Fehlinvestitionen, nur mit regelmäßigen Kapitalspritzen, getätigt in Petrodollars, in der Luft halten und jetzt wird auch noch das Aushängeschild der deutschen Luftfahrt seit Monaten von Streiks geplagt, die das letzte Vertrauen der bezahlenden Kunden in den ehemals stolzen Kranich verspielen.<br />
<br />
“Die VC knüpft nicht annehmbare Bedingungen an ihre Vorschläge”, hören wir vom Vorstand der Lufthansa. “Wir gewähren gewaltige Konzessionen in unserem Angebot, die Lufthansa will sich einfach nicht mit uns einigen”, sagt darauf die Gewerkschaft der Piloten. Bei diesem ewigen hin und her, ähnliches darf ich übrigens auch jeden Tag auf dem Schulhof meines Sohnes in seiner Grundschule erleben, steuert diese Impasse deutlich auf ein Desaster zu, das am Ende im besten Falle eine Übernahme – und damit mehr als ein Identitätsverlust – durch einen ausländischen Betrieb à l’Air France – KLM bedeuten könnte. An den schlimmsten Fall mag ich an dieser Stelle gar nicht erst denken.<br />
<br />
Unabhängig davon, wer nun eigentlich recht hat – wie immer in solchen Situation ist es mehr als wahrscheinlich, dass die Wahrheit irgendwo in der Mitte liegt – vergisst die gesamte Lufthansa Passage und Cargo, und damit sind sowohl der Vorstand als auch die Herren Piloten angesprochen, eines: der Konzern ist ein Dienstleistungsbetrieb, das, mit einigen Ausnahmen anderer Töchter, seit Monaten nur noch subpar Services im Angebot führt.<br />
<br />
Es genügt nicht zu sagen, die Lufthansa müsse mit den EasyJets und Emirates Airlines dieser Welt konkurrieren können und deswegen müssen jetzt und sofort Kosten gespart werden. Wer das Aufkommen der no-frills Airlines erst jetzt, mehr als 40 Jahre nach ihrer Entstehung, erkennt, hat deutlich nicht aufgepasst und Torschusspanik sollte sowohl auf dem Spielfeld, wie auch in jedem Betrieb, von dem zahlreiche Existenzen abhängen, nicht vorkommen. Genauso gut muss die VC sich darauf besinnen, was ihre eigentliche Aufgabe im Konzern ist. Auch wenn das deutsche Betriebsverfassungsgesetz dem Betriebsrat umfängliche Mitbestimmung in strategischen Fragen gewährt, so steht dies doch immer unter dem Aspekt der Ethik, Vertretbarkeit und Mäßigkeit. Das scheinbar herrschende old-boys-Netzwerk gehört sicher nicht dazu.<br />
<br />
Es ist an der Zeit, dass die Lufthansa Passage sich an ihr selbst formuliertes Strategieziel erinnert: “Das angestrebte Ziel der Lufthansa Group ist es, erste Wahl für Kunden, Mitarbeiter, Aktionäre und Partner zu sein.” Die erste Wahl für Kunden also. Da der Betrieb jedoch scheinbar in zwei Teile gebrochen ist, die sich partout nicht einigen wollen oder können, ist es sicherlich an der Zeit, dass die Black Rocks und Templetons dieser Welt kräftig auf den Tisch klopfen, bevor sie feindliche Übernahmen abwehren müssen.Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-32795373298572704402014-03-20T13:56:00.000+04:002014-03-20T15:21:52.452+04:00Aircraft fleet planning and management - the dark, deep money pit<span style="color: yellow;">As we all have heard numerous times in our aviation career: 'How do you become a millionaire? Simple, start with a billion and open an airline.' Oversimplified as it may be, in essence there is some serious truth in this overly utilized speech opener at various trade seminars and congresses. And the one aspect of any operation that has the potential to break your operation even within a few weeks is not mismanagement, a wrong strategy, or even underfunding, it is the one of aircraft acquisition.<br />
<br />
Think about it. One way or another 'soft' mistakes and errors, such as a falsely estimated budget, or the wrong skill set of key employees, can be altered in the short to mid term. True, it might not be easy, especially in cases where hard currency is involved, yet in these circumstances there is always light at the end of at least one particular tunnel. It is up to management to find and successfully enter that one tunnel with the light at the end. However, once you committed your investors' hard earned greenbacks on a piece of metal that the manufacturer claims is capable to take to the skies gracefully, safely, and economically, your balance sheet shows a large negative from day one. And with list prices in the high double millions nowadays - total investment in current dollars per aircraft seat has risen over the years - that large negative has the potential not only to become a haunting nightmare but more importantly to close your shop.<br />
<br />
Proper fleet planning and subsequent management is therefore not a luxury or a piece of research that only is done with large air operations. It should also not be an exercise only to be done by a few employees. The topic is so important that potentially all divisions within an airline, however small or large, together with aircraft sellers and manufacturers should make serious efforts to come-up with the ideal solution together. After all, the worst case scenario of having the wrong fleet is for the airline to go bust fairly quickly thus threatening each employee's job. And don't think that once you have any aircraft in your fleet, you are able to wrap the airline's strategy around the aircraft type. Despite what regulators like to tell you, aviation still is one of the most ridiculously regulated industries in the world. Even if you are able to find a strategy that works for a particular aircraft within a short time span, no regulator will act fast enough to grant you the necessary permissions to change your business model around in a time frame short enough to defer serious financial implications.<br />
<br />
But what exactly is fleet planning and management? And how do you go about it? This article tries to relate my personal experience as upper management with various air operations in a short and concise article. With the limited space I have here available, I do not claim that this article addresses all steps necessary in-depth. However, it should give a succinct overview that, if nothing else, provides you with a good starting point when a fleet change, or a start-up, becomes imminent. Please feel free to tell me if you feel that I missed a major aspect of fleet planning and management. Contrary to what my co-workers might tell you, I do not bite!</span><br />
<br />
Fleet management, as used in this brief, comprises the following integral aspects:<br />
<br />
<br />
<ul><li>Fleet planning and acquisition;</li>
<li>Fleet operations;</li>
<li>Fleet maintenance; and</li>
<li>Fleet disposal.</li>
</ul><br />
<br />
In order to have a successful fleet management strategy in-place, it is very important to address and implement the topic round-circle. You can have the best aircraft purchase strategy in-place, when you lose big bucks at the end of the aircraft's life-cycle, overall your operations will lose money and your shareholders will be less than happy with your performance. It is also important to remember that fleet management is a continuous process. General markets, and thus your audience, change continuously. Demographics change over-time. Purchasing power will rise or fall cyclically or after sudden spikes. Eve your airline strategy probably changes over-time. Hence your airline's optimal fleet changes continuously. Of course, it is virtually impossible to have the ideal fleet available to your audience at any moment in-time. After all, aircraft, despite its way of procurement, is always capital intensive and thus at least a mid-term investment. However, a suitable mix of owned, leased-back, dry- or wet-leased aircraft according to the airline's strategy will smooth-out, at least financially, most short-termed changes in demand.<br />
<br />
Unsurprisingly, and at the very basic level, the main objective of fleet planning is to have at least an efficient capacity equal to demand. Note the word efficient. An A380 easily provides capacity well beyond demand of a regional third-tier route. It does not require an MBA to establish that this solution does not make economic sense, however (although it might make sense to deploy an A380 on such a route for political reasons, for example). Efficient in this sense therefore refers to optimal payload-range, environment, operating and maintenance cost, insurance and legal capabilities. As stated, passenger appeal does sometimes spoil this hard fact research, as can be seen with the Emirates strategy of dispatching B777s and A380s on routes that would make more sense for smaller aircraft. JAL, on the other hand, switched its B744 fleet to B773ERs in order to lower emission output, operating, and maintenance costs.<br />
<br />
Ideally, the aircraft evaluation research should be aligned with the following current and future aspects of your operations:<br />
<br />
Network - not only own fleet - frequencies flown, which determines the fleet's payload requirements (don't forget to address belly cargo numbers and projections);<br />
Routes flown, including alternates and meteorological assumptions, which determines the fleet's range requirements;<br />
Airport data, such as runway length, obstacle clearance, meteorological conditions, taxiway and apron width and load-bearing factors, terminal capacity, which determines required fleet performance data;<br />
Current fleet and support facilities (incl. logistics and inventory costs), which establishes training and maintenance requirements;<br />
Passenger expectations, which establishes product and IF-service requirements.<br />
<br />
This first step within the fleet management research immediately presents you with a problem: it is based on demand models, and as with any assumed model, such a demand model possesses many variables with only a limited accuracy. The market establishes the airline's market share and thus potentially its revenue. However, all these variables are assumed and forecasted and thus prone to - sometimes quite considerable - variations.<br />
<br />
We all know that the current success of some of the GCC carriers is based on their central geographical position linked to a low-cost payroll. But what will happen to these airlines' current major fleet orders when (not if) aircraft range capabilities become so sophisticated that stop-overs in the GCC will be no longer necessary? After all, current orders only generate actual deliveries in a few years time by which time new technology will have experienced potentially huge leaps.<br />
<br />
There are basically two different forecast models in use today. The top-down model that links forecasted RPM to at least ASM (which again leaves you with the problem that any fleet is a static asset in the mid-term while markets are much more volatile), and the bottom-up model that takes current market data (not only of one's own airline) and starts developing different forecasts based on variables, such as network developments, new market entrants etc. The problem with the latter model is that there is obviously no historic data available for new routes and that small carriers usually do not have the budget necessary to participate in a GDS that is able to provide this data. In order to balance-out the inadequacies of either model as much as possible, one should always strive to combine both models to the largest extent possible.<br />
<br />
Cost analysis, i.e. fleet capital costs and operating costs, then is a "mere" accounting problem and can rely on much more reliable data. Not to over complicate matters, capital costs are usually (depending on the individual airline) divided into the following sub-categories:<br />
<br />
Capital costs =<br />
<br />
Aircraft list price<br />
+ Aircraft options<br />
- Negotiated discount<br />
<br />
= Aircraft contract price<br />
+ Agreed price escalation (something that airlines less and less accept)<br />
- Costs of services rendered by OEM "for free"<br />
+ Change orders <br />
<br />
= Fly-away price<br />
+ Product / service support (such as training, spare parts etc.)<br />
<br />
= Total investment<br />
<br />
And as already stated, total investment in current dollars per aircraft seat has risen over the years.<br />
<br />
There are obviously a number of other important aspects to fleet management. Powerplant analysis is such a necessary and important research. Life-cycle costs of engines have the potential to contribute up to 50% of total life-cycle DOCs. And one should always have a clear picture on legislation and insurance issues when considering aftermarket parts. As a rule-of-thumb, maintenance cost of engines is the key driver on short-haul operations with take-offs producing the highest stress on the engine's hot section and turbine, and fuel burn is the key driver on long-haul aircraft.<br />
<br />
Avionics analysis then has become somewhat less important with new aircraft over the years since the current trend is for OEMs to supply the complete avionics as an integrated package. The advantage with powerplants and avionics is that passengers usually do care to a lesser extent what goes on technically in an aircraft. They very much do like to see the latest cabin and IFE technology but leave the actual cockpit instrument package to the pilots to worry about.<br />
<br />
<br />
I say it again, however, regulations do tend to get overlooked in any planning process and have the potential to seriously harm your future operations. For the ones that know me personally, the following piece of advice might therefore come as a bit of a surprise: keep a thorough and friendly relationship with your regulatory authority. If not for the sake of you personally, then for the sake of your shareholders and thus ultimately your job! And with that over to you...Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com6tag:blogger.com,1999:blog-4397842961352774165.post-67225085350087477472013-11-08T10:00:00.001+04:002014-03-20T15:20:46.281+04:00Strategy, the most misused business tool of them all<span style="color: yellow;">Recently, I have been asked to consult for a start-up airline that was about to launch operations. The company faced its usual hiccups, common for any start-up venture, and with the imminent launch, the board had decided to strengthen the start-up management team with some serious expertise in order to increase customer experience from the start. Needless to say that the board initially did not choose me! I came in only after the original consultant had run away in tears over the company's disorder (as any entrepreneur probably can tell you, you need to be an admirer of chaos when starting-up a company) and nobody else was willing to risk his reputation. Don't get me wrong, the company itself was not worse or better than any other start-up airline. The focus had been on operations - and quite rightly so, you might argue since this is the division at the forefront competing for all those critical and internet savvy passengers out there - and with the usual understaffed start-up team, a direct consequence was that the back office had not gotten the attention it surely was entitled to.</span><br />
<br />
Deciding quickly that the guys could manage operations without my help and that, as a consultant, I could not directly influence finances to the extent it deserved (you either have the money to survive the initial loss making period or you don't), I started focusing on all those nice departments that lack the glitzy and shiny perception of what a passenger thinks an airline is all about. I am talking about administration, human resources, business development... the boring yet necessary fundamentals of any company. So, after I successfully struggled to finally get my personal copy of the business plan (more often than not, consultants are apparently expected to consult on business structures that they do not know the company specific and applied fundamentals about), I started reading and on page one (I always skip the executive summary since I fortunately have enough time to make strategic decisions based on more than a page or two), I encountered the following highlighted statement that immediately started ringing all kinds of bells in my head: 'It is our strategy to provide high quality customer service.' Well, that is nice, obviously, but this strategy statement is missing its inherent point: A strategy of a company should never be about one issue alone. On the contrary, it only has an actual meaning that staff can truly work with when it addresses all aspects of the venture. This statement could very well be one of many goals to provide exceptional customer services, but it never can be a competitive strategy by itself. So, this made me thinking, how many airlines - or general organizations for that matter - have their competitive strategy right? Speaking from experience (including my experience from my own companies, I am not claiming that I have done things always right), not too many, I am afraid, and I believe this is because only few actually understand what strategy is all about.<br />
<br />
Broadly, strategy can be divided into two categories: Corporate strategy and competitive strategy. Most corporations mean the latter when they refer to their strategy since corporate strategy is basically an internal plan that specifies which industries the organization wants to invest in and which upstream logistics need to be in-house (or not).<br />
<br />
Now, competitive strategy should be based on a number of points raised in one's - hopefully sound - due diligence. These all should encompass the ever so important 'added value' to the passenger. Don't forget that at the end of the day you only receive your salary if your passenger is a) present and b) coming back for more. So, strategy should be laid-out around the following main areas:<br />
<ul><li>the targeted audience (not only geographical but also demographical) and its expected to be received service levels</li>
<li>the carrier's value proposition (or in other words: perception is reality as far as passengers are concerned)</li>
<li>competitive advantage. I.e. you either do it better or you do it for less. As unfortunate as it may sound, and I know that your business management professor told you otherwise, but the reality is that price is the number one factor upon which people decide to buy or to go to your competitor. If I recall correctly, an official study recently published that historically only 30% of all airline passengers have been willing to pay a premium over the lowest offering and then only if the perceived value to them (and remember: perceived is real) outweighs the price increase by far. Contrary to what the business gurus tell you: can you really afford to be different? You can when you are Concorde, you cannot when you are Kingfisher.</li>
<li>an optimized value chain (or, in other words, hire-in that expensive MBA to reflect for you on the assets of and their flows within the organization). Ideally, all the customer perceived benefits of the chain should be enhanced whilst all costs to the airline should be reduced. Yet don't make the mistake of changing individual processes without looking at the bigger picture.</li>
</ul>So, next time when sitting with your feet on your desk and a coffee in your hand, take a few minutes to think about your organization's strategy. Does it have a clear and communicated (without which the best plans fail instantly) targeted customer base? Do your sales people know that they are required to approach those private inhabitants, not more than 100km from your base, with families with at least 1.25 kids and an annual salary of at least triple the one of the airline's CEO since your flights are actually never more than 2 hours late? Has your audience been told (and I mean in such a way that they actually are aware of it) that they are able to fly from London Heathrow to Stansted without a stop-over in Singapore? Does you audience know that you charge exactly the same price as all the other airlines but your airline does provide them with free smiley stickers for their luggage so that they can easily spot it a the bazaar of their holiday destination? And does your maintenance manager know that he is supposed to find that MRO that is actually qualified to work on your fleet type, even though he has no family working there?<br />
<br />
I am being sarcastic, of course. Most airlines have a pretty clear picture in their minds of what their strategy should be. But believe me, communicating the strategy to stakeholders and actually living by it often seem to be forgotten business arts.<br />
<br />
One of the many dangers that the airline faces, and this is especially true for airlines that do communicate effectively, is, of course, instant imitation by its peers. With real time communications that we enjoy nowadays, challenges for managers to continuously improve their business models - and thus themselves - are greater than ever. As a direct result, micro-managing the value chain - i.e. the easy way out by discriminating stations in the value chain in one way or the other - has become an unfortunate trend in airlines that more often than not leads to failure of (parts of) the business model. It is always easy to judge a profit centre on its bottom-line numbers. And often it would indeed be a smart and solid decision to outsource the activities of a non-performing division. Yet, as I have already said in my article on <a href="http://taxiway-lima.blogspot.ae/2013/09/network-planning-mistery-101.html" target="_blank">network planning</a>, 1 plus 1 does not necessarily equal 2. And by that I mean that the individual contribution of any profit centre needs to be judged against the whole organization. It may very well be that the in-house heavy maintenance division loses money. Yet at the same time its closure and subsequent third-party provider would lead to delayed operational aircraft that in-turn would decrease the value of the airline for its customers. And as said before, perceived value is actual value.<br />
<br />
And, as a final word of caution before I let you go back to your well deserved cup of coffee: an airline's business model is often confused with its strategy. 'Our strategy is to be a hybrid airline.' This, as nice a statement as it may be, is not a strategy. Rather, it reflects the airline's business model. A strategy tells you how to achieve your set goals. A business model tells you the operations of your strategy, i.e. how revenues are made and what the costs of these revenues are. <br />
<br />
We all know that airlines face huge challenges from within their own industry and from outside. Oil prices sky-rocket while OEMs have not yet developed suitable propulsion alternatives. As a direct consequence, business models are continuously changing. Those that don't will ultimately be left behind and will fail the moment (financial) protection by its state falters. It is therefore necessary for any airline - even those that are currently enjoying solid growth - to have its basics right. As my old flight instructor used to tell me, 'it is better to have a prepared and well thought-of plan at your disposal and not to use it than to fly blind without a clue what is going to happen.' And he was right, of course, as could all those tell you who did not adhere to this wisdom... if they were still able to talk to us, that is.Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com5tag:blogger.com,1999:blog-4397842961352774165.post-35214133911180981542013-09-28T14:03:00.000+04:002013-09-28T14:03:31.679+04:00University of Connecticut - School of Business: interview on aviation opportunities in the GCC and Africa<span style="color: yellow;">I was recently honoured to be chosen by Sebastien Perraud - School of Business University of Connecticut - to provide the intel for his paper on trends and opportunities in the GCC and African airline markets.</span><br />
<span style="color: yellow;"><br /></span>
<span style="color: yellow;">I was impressed by the level of knowledge of an 'academic' in matters of practical business, and especially in start-up strategies. The whole conversation grew into a very pleasant interview and I do hope that my ramblings assisted in providing an interesting framework for his paper.</span><br />
<span style="color: yellow;"><br /></span>
<span style="color: yellow;">It should be noted that the expressed thoughts and concepts are entirely Sebastien's view so please give him the credit that is due. Sebastien, thank you again for your patience! </span><br />
<br />
<br />
<div style="text-align: center;">
<u><b>Interview Report on Trends<br />
<br />
Recent trends & opportunities in the airline industry: Start-up companies in the emerging markets of GCC and Africa</b></u></div>
<br />
<u>I. Overview of the industry</u><br />
<br />
With 239 IATA member airlines worldwide and hundreds of non-IATA affiliated, the airline business has been a constantly changing industry since its existence. In the United States, the Airline Deregulation Act of 1978 allowed entrepreneurs like Southwest Airlines’ founder Herb Kelleher to compete with major carriers such as the now defunct Eastern, TWA and Pan Am by trying new avantgarde business models (e.g. no-frills low cost carriers). To this day, most business models for flight operations have been experimented and many such as business class-only carriers proved unsuccessful. Majors airlines have to constantly produce new ideas to stay ahead of the competition and most investors in the industry are now looking at emerging markets.<br />
<br />
This healthy discussion confirmed the general idea that engaging in the establishment of a new venture in the airline industry in the developed world was not only risky but presented very poor prospects of profitability in the long term. Even though some airlines established in the US during the last decade such as JetBlue or Virgin America have fairly succeeded, most failed. We have to keep in mind that many of these capital intensive structures manage to keep afloat thanks to parent companies (Virgin America). Some European start-up airlines such as Norwegian Air Shuttle, EasyJet or Ryanair have also managed to become market leaders in 20 to 25 years of existence. It will be however interesting to note that these three case examples benefit from factors such as lower oil prices (agreement between Norway’s Statoil and Norwegian), EasyJet employees are paid in average 30% lower than the industry average and Ryanair treats both its customers and employees badly (high fees, trade unions forbidden and arguable EU regulations compliance when it comes to safety rules and labor laws).<br />
<br />
<u>II. Introduction of the interviewee</u><br />
<br />
After completing an MSc in Electrical Engineering in his home country, the Netherlands, Alex de Vos attended a flight school and began his career as a pilot and joined Continental after a few years of flying experience. Continental Airlines has been the only major airline/company he worked for. He later continued his career flying private jets in smaller companies, where he also held management positions such as head of the marketing department and operations department. This ground experience gave him the tools to pursue entrepreneurial opportunities in the Middle East, including Saudi Arabia and Bahrain, where he founded a consultancy company serving charter airlines. Mr. de Vos also completed an MBA at the University of Wales. He later founded Eastern Express, a regional airline operating scheduled flights from the United Arab Emirates and sold its shares a few months ago to finance the establishment of another consultancy company, Al Hajjar Aviation.<br />
<br />
<u>III. Discussion of the trends and changes</u><br />
<br />
"I would like to express my gratitude to Mr. de Vos for his patience and kind assistance. This interview would not have been made possible without his sharp insight and spontaneity. Thank you."<br />
<br />
<b>1. Could you briefly explain the direct effects of the GFC to the attractiveness of the market and the industry?</b><br />
<br />
The airline industry as a whole hasn’t had generated tremendous profits for the last 50 years. Start-up airlines must always produce new ideas to compete with established major airlines, which involves great risks. Emerging markets are less affected by the side-effects of the Great Financial Crisis, while we can qualify present times for established airlines in the developed world as ‘fairly catastrophic’.<br />
<br />
<b>2. In recent years, major airlines (Qatar, Emirates, Etihad) of the region have been growing significantly. Do start-up airlines operating regional and business jets also benefit from lower oil prices and operating costs?</b><br />
<br />
The GCC is a small region and these airlines’ growth comes at a price for some of them. Gulf Air has been in deep financial trouble for the past decade, Oman Air is not performing better than a loss-making US-based carrier, Kuwait Airways has been in a time of great turmoil and Saudi Airlines is very conservatively managed, which has as a direct consequence a business model with poor growth prospects. The GCC region as a whole is not performing better than the US or Western Europe. Even though Emirates and Qatar are good examples of wealthy companies, their main objective is actually to support the sister companies in the country, which might generate financial losses but creates profit for the whole GDP (airport taxes, tourism, etc.). Their strategy is to expand beyond any geographical limit by all means, translated into a tremendous growth rate on paper but also an unhealthy cash flow.<br />
<br />
<b>3. Incentives for entrepreneurs: is the Gulf Region a good place to start a business?</b><br />
<br />
Definitely, though it has its shortcomings. For example, the legal system is not as developed towards entrepreneurship as it is in the US or Europe since industrial life here has started around the 1940s. However, you are in general fairly certain to find funds for an airline even though it is a capital intensive industry. Petrodollars make the money available in the region and some routes are underserved or simply non-existent. For example, GCC carriers have always focused on long-haul flights and there was no dedicated airline flying domestically in the region. Our second opportunity was that there was no airline established airline based in Fujairah airport, where the infrastructure was state-of-the-art.<br />
<br />
<i>The nature of competition in it, and the attitudes and preferences of the customers it serves</i><br />
<br />
<b>4. Who are your main competitors for your consultancy and ad-hoc charter flights activities? What are the general trends in preferences and tastes of customers you serve and how does Al Hajjar Aviation attract and keep them?</b><br />
<br />
Our main competitors are established operational consultancy companies from Europe and the US. People in the region do prefer to see regional or local companies taking part of the economic development process. Basically, regional start-up companies like us compete with large established companies of the Western World, though some happen to fail because of the completely different legal and corporate systems. We have a fairly good advantage over industry leaders such as Lufthansa Consulting because we are trading under local owners, sponsors and names: Al Hajjar refers to the highest mountain range in the UAE.<br />
<br />
<b>5. Benchmarking: could you give an example of a major process, product or any other idea you borrowed from a competitor?</b><br />
<br />
When we set up the predecessor of Al Hajjar Aviation, we did not look at potential competitors so we tried to establish the best approach. We have our own and different expertise, which concentrates on the operational aspects of an airline and aerospace design. As a small company you need to focus on a niche.<br />
<br />
<i>What new opportunities have these changes created:</i><br />
<br />
<b>6. What new opportunities have these changes created for your activities?</b><br />
<br />
Offering flights from the UAE to Somalia under the name of Eastern Express. It was a war-torn country and our objective was to pioneer in Somalia to get aviation off the ground in a safe manner. Our establishment opened doors for catering and airport management. Our vision of entrepreneurship is to open doors both for you and the others.<br />
<br />
<b>7. Which significant regional macro-level market changes have benefited the industry including Al Hajjar Aviation?</b><br />
<br />
Even though the country was facing a reasonable amount of fighting, we saw the end of the civil war in Somalia as an opportunity. Moreover, the country was trying seriously to get out of a war-transition state towards a ‘normal country’. We considered the country safe enough to do business even though we came to the conclusion that we had to implement special safety procedures for our crew, passengers and local partners. Concerning the macro-level market attractiveness, average salaries are extremely low in Somalia and 95% of the population cannot afford an airline ticket so there was a dramatic need to consider a lengthy period of time without positive net income on ticket sales, hence we had to find ways to make profits. The group thus expanded to airline-related operations such as ground handling, which was nearly non-existent in Somalia.<br />
<br />
<b>8. With a yearly average growth of 5%, Africa has begun to become the primary focus for new market-seekers in the airline industry while African countries hold close business and diplomatic relations with the UAE: are you going to follow GCC-based companies’ moves to look for new opportunities?</b><br />
<br />
Africa is a fairly large landmass and the Horn of Africa should be the most difficult region to do business. Aviation safety standards are poor and we had to invent the whole process of running an airline from scratch. With traditional cultural links between the two regions, it is no surprise that many GCC-based companies from various industries such as real estate or engineering expand there.<br />
<br />
<b>9. In conclusion, would you think the industry presents strong opportunities for those aspiring to establish a start-up airline?</b><br />
<br />
Worldwide-seen opportunities for flight operations is getting more and more difficult, since most models have already been tried. There is no strong opportunities for the industry worldwide unless no major improvement in technology, e.g. revolutionary fuel-efficient jet engines. There are however plenty of opportunities even on established markets on the supplier front, i.e. airport handling or consulting. In consultancy, there is a need of having a certain level of wealth to make yourself successful. If you jump into a market at its very early stage, then the wealth is not sufficient to attract third party consultancy services.<br />
<br />
<u>IV. Opportunities emerging in the airline business</u><br />
<br />
There are new opportunities in both established and emerging markets. For instance, Japan has always been one of the hardest markets to penetrate for newcomers. Two main major airlines (namely JAL–Japan Airlines and ANA–All Nippon Airways) have been duopolizing the market for both domestic and international routes. Japan is in fact a challenging market: it has one of the<br />
strictest aviation safety regulations and customers expect a very high quality of service. However a dramatic change occurred in early 2012 with the launch of three low-cost carriers: Peach Aviation, AirAsia Japan and Jetstar Japan; the first one is partly owned by ANA, while the second one is a joint-venture between JAL and Malaysia’s AirAsia (which is also Southeast Asia’s leading low-cost carrier) and the third one is a joint-venture between JAL and Australia’s Qantas Group. They have been so far successful on legs such as Tokyo - Okinawa or Osaka - Sapporo especially among low-budget students. Services both in air and on ground are minimal, even though punctuality and a decent customer service are culturally critical factors, things that most European low-cost carrier passengers are less regarding about.<br />
<br />
The interview gave us an overview of the market in the Horn of Africa. I personally think that there is also a great deal of opportunities in West and Central Africa, especially in Senegal, Ivory Coast, Ghana, Nigeria, Cameroon, the Republic of Congo and Gabon among others. These countries in particular present cultural advantages compared to other countries on the continent: they are either English-speaking or French-speaking. They are natural resource-rich since they produce and export crude oil, precious woods, cocoa beans, phosphates, and ore in large quantities. The average growth in the region is of 5% and the literacy rate is slightly over 60% of the population. The rising middle class and a somewhat wealthy proportion of the diaspora in Europe compose a growing market. These politically instable and corruption high countries have more or less taken efforts towards a democratic transition but the main beneficiary is the corporate world: foreign direct investment is highly encouraged and free economic zones are created to attract investors and start-ups.<br />
<br />
<div style="text-align: left;">
South African Airways, Egyptair, Royal Air Maroc, Ethiopian Airlines and Kenya Airways are among the top 500 African companies and link the continent to the world. They are competing directly with western airlines such as AirFrance-KLM, British Airways and Lufthansa Group on North-South routes thus are more profitable on transcontinental routes. Since the collapse of Air Afrique in 2002, a number of countries have lacked of a flag carrier, which gives many opportunities for entrepreneurs: in recent years, many domestic and international start-up airlines such as CamairCo (Cameroon), Arik Air (Nigeria), Equatorial Congo Airlines (Congo-Brazzaville), Air Côte d'Ivoire, Korongo Airlines (D.R. Congo) and Senegal Airlines have emerged, mainly because of their predecessors’ poor management and bankruptcy or ‘democratic transitions’. In many cases, these airlines are partly-owned by established parent companies such as Brussels Airlines and AirFrance or regional investment funds. Despite high airport tariffs and a highly regulated market–liberalization of intra African tradehas not been governments’ main objective so far – niches are likely to exist both for airlines and industry-related companies (i.e. airport management and consultancy). Culturally speaking, local companies are favored since lowly conscious western conglomerates face anti-imperialist resentment (e.g. Royal Dutch Shell), though European brands in the region are known for being reliable (e.g. Orange, AirFrance). I do not necessarily see new opportunities by adding another airline on the playing field but rather on reshaping it. Freshly founded start-ups in the region can develop and catch up with already established airlines by providing a locally-tailored high quality product at a reasonable price, provided that they encourage intraprenarial behaviors and get full support from government agencies. I have also noted that these companies have a fairly poor and outdated online/marketing exposure. On the supplier side, African airlines will be in need of more expertise and globally-minded human capital in order to grow internationally: hence there might be a future for consultancy companies in this market. All we can hope for the industry and the region as a whole is better governance (less corruption), more regional cooperation for liberalizing markets (lowering or abolishment of tariffs) and more public-private partnerships: macro-level evolutions and social and economic progress will do the rest.</div>
<div style="text-align: left;">
<br /></div>
<div style="text-align: left;">
Thank you for your attention.</div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com3tag:blogger.com,1999:blog-4397842961352774165.post-35553221476489068822013-09-19T11:37:00.001+04:002013-09-19T11:40:00.830+04:00Network Planning - Mis(t)ery 101<span style="color: yellow;">Not so long ago, I was asked by a well known regional carrier in Europe to head their network planning department. Intrigued by the request - I am probably better known to fill positions that require long hours with my feet on my desk and a coffee in my hand rather than doing actual work - I accepted the preliminary discussions with management and found the network planning department in dire straits. This made me wonder, after all the airline was one of the more successful ones in Europe and network planning is an important intermediary in creating the big bucks. What went wrong with this particular airline and with many airlines all over the world in general? </span><br />
<br />
Without doubt, the airline industry is a relatively new one compared to other industries in the modern world. Not that long ago - in fact, my grandfather actually remembers the prevailing headlines of his youth - two brothers hopped a few steps a few meters in the air on an engined crate that we now recognize as the initial predecessor of the B787, F35, and other mighty winged machines of today that are capable of performing incredible endeavours.<br />
<br />
It is therefore of little surprise that the airline industry is far from a sophisticated one (but don't tell your passengers that, they might get scared!). Quite rightly, the focus of airlines have lied and still do today on safety, environment, and shareholders equity. Efficiency, on the other hand, is a topic that airlines all over the world, be it in Europe or Africa, still only are trying to get to grips with.<br />
<br />
As an example, only in the 1970s was the ever so important topic of yield management developed (or should I say invented?). A lot had to do with regulatory bodies, of course. When IATA tells you that you absolutely cannot fly from A to B for less than 1,000 bucks and you can under no circumstances offer more than a cold, mushy sandwich and a bottle of water on that same route, who are you as airline CEO to worry about yield? Relax, have some coffee. After all, your competitor is bound to the same restrictions.<br />
<br />
And network planning is in a similar stage of evolution. Even with large flag carriers of today, network planning is often done by senior managers that have a gut feeling that a certain route might be a good one for the company. Middle management then sets to work on the new route planning, and lower management implements the plan while finding out that the current fleet of aircraft actually is a rubbish one for the new routes! Airlines are high tech? Think again! This article's intent is to give a very brief overview of where the industry stands today with respect to network planning and where I believe it should focus on (and in all fairness, quite a few airlines adhere to the discussed concept, so I am certainly not entitled to that Nobel Price just yet!). I fully realize that I probably kick a few industry seniors against their shins by stating my views but hey, I just return the favour!<br />
<br />
When we have a look at the current state of the industry's utilized networks, we quickly can see that airlines all over the world base their routes on two distinct network models:<br />
<ol><li>Hub and Spoke network; and</li>
<li>Point-to-point network.</li>
</ol><br />
Of course, as with any model structure, any combination of the individual models is possible, too. We would refer to this combination model as a hybrid model. Since logically a hybrid model comes with all the advantages and disadvantages of the individual models, for the sake of this brief overview, we will not further discuss it in this text.<br />
<br />
A Hub and Spoke model is the one that has been in existence since the early days of aviation. A Hub is an airport that is used by an airline to connect revenue traffic from at least two different flights. A Spoke then is an a flight that connects a Hub with a non-Hub airport.<br />
<br />
A Point-to-point network is just that. There is no connecting airport, all routes are operated directly.<br />
<br />
Both models come with individual advantages and disadvantages. The biggest advantage of the Point-to-point network is that very little network planning is required. This obviously comes with a considerable cost saving making it therefore the ideal network type for low cost (and this time I actually mean low cost as opposed to no-frills) airlines. Hubs come with other disadvantages too. So called banks (a cluster of arriving or departing aircraft to/from the hub) must obviously be scheduled in as short a time window as possible. After all, you do not want your fleet arriving spread-out throughout the day, keeping your resources bound and under-utilized. On the other hand, optimal banks create serious consequences for the hub. Just imagine having twelve A380s arriving within the same hour at the same airport. Apart from stand availability, baggage, catering, and cleaning bottle-necks, the airline would probably lose a considerable number of customers because of long immigration waiting times.<br />
<br />
A direct revenue consequence of the Hub and Spoke model is a lower aircraft utilization. It is hardly possible to create equal distance hubs an thus individual banks are difficult to optimize. The latter directly resulting in lower load factors since passengers do not like to wait a longer period of time during a stop-over.<br />
<br />
I would argue that this is also the key concept to successful network modelling. Traditionally, network modelling has been done based on individual financial aspects only. Obviously, this has been regarded as the optimum yield generating method. 1+1=2, right? Yet, by optimizing financial numbers on paper, one certainly might be able to please upper management but the most important yield generating parameter of the airline has been completely left out: the customer! An airline is, per definition, a company that renders services. Yet, good services please the customer and therefore generate better revenue overall. As a direct consequence, a low load factor on an individual flight should not necessarily be a reason for immediate termination of this service. If this flight contributes positively to the network as a whole, pro-rated yield could very well exceed individual yields thus creating added value to the network as a whole.<br />
<br />
In practice, network planning should therefore consist of three individual major stages:<br />
<ol><li>Network strategy;</li>
<li>Network design;</li>
<li>Network optimization.</li>
</ol>The network strategy comes directly from the top. It is derived from the airline's vision substantiated by its mission. For example, FlyHappy might have the vision to become the dominant carrier on Timbuktu to Brasil routes. Or it might want to be the number one feeder to the MilkyWay Alliance in Europe.<br />
<br />
The design of the network then comes-up with a number of banks that fulfill the airline's strategy, simulates their respective profitability to the network individually and collectively, and, as a direct consequence, also determines the ideal fleet mix.<br />
<br />
The last step fine-tunes, optimizes and monitors in real operations. This stage can also very well be used to evaluate additions to the network before handing over the network to yield management.<br />
<br />
Concluding, I would like to reiterate again that network planning should be just that: planning of a complete network. Profitability of individual routes should be valued against the network as a whole. As my financial professor told me a long time ago, the art of financial success is not to turn individual minuses into pluses, it is to combine many minuses to one big plus. I wonder if the guy should have been working for the airline industry?Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-43213188569712128422013-09-05T21:23:00.000+04:002013-09-05T21:24:39.281+04:00The WRONG investor<span style="color: yellow;">You might say that there is no such thing as a wrong investor. After all, any business needs money in order to survive. So who really cares where the money comes from? Well, you are right, obviously, and at the same time you are dead wrong! Confused? Then keep reading, it gets even better!</span><br />
<br />
Let's take, for example, an intelligent, smart and generally nice - and don't forget good looking - serial entrepreneur. He has established a number of companies already, mainly in the aviation industry. Just to give him a name, let's call him Alex.<br />
<br />
Now Alex has really done many things right in is illustruous career as a serial entrepreneur. He has managed to personally and professionally challenge himself on a daily basis, he has made a name for himself within - limited - industry circles, and - probably most importantly of them all - he has managed to keep his family not only well fed but also happy with his professional lifestyle! What he has never successfully achieved, though, is to find the ideal investor for his various businesses. Now, I am not talking about his one-man shows in the service industry that requires only minimal capital and where the funding was usually supplied by Alex himself. I am talking proper airlines, requiring big bucks.<br />
<br />
Alex has found an tried them all: institutional investors, private investors, larger numbers of investors, just a few of them... it always turned out to be a less than perfect marriage. "Now stop complaining", you will say. "At least this Alex chap found himself money for his businesses. We, on the other hand, have tried to do unsuccessfully, unfortunately, so he really should consider himself lucky"!<br />
<br />
And of course, you are right. Without money, no business. Without business, no income, Without income, one unhappy family!<br />
<br />
But look at the aspect from a different perspective: As an entrepreneur, you have put limitless efforts in your business idea. You live, breathe, and dream the venture. You know that the company will succeed because, well, it is just a splendid idea that the world is impatiently waiting for! And as a consequence, you do expect that any potential investor buys into your fab idea mainly because he feels the same way about it. The potential investor thinks of you nothing less than a hero who is here to serve the community. He will put in his money, sit back and waits patiently for you to get him his promised return. Simple. And any entrepreneur's dream.<br />
<br />
Reality is different though. As you might have found out during your fund raising sessions, the first question is always: "how much"? Good for you if you actually started your presentation about the required capital and not about the business concept. This way, you saved yourself probably many, many rounds of painful discussions.<br />
<br />
Any investor, be it a VC, a private equity investor, or any other money investing organization with usually a fancy address in New York, London or Paris as its head office, is interested in one, and one thing only: RoI. True, the fund or private individual might have a scope that dictates certain 'greener' or other society beneficial investments but in the end these funds need to deliver the results to their clients the same way as a conventional investor needs to do. No investor will accept a capital leak under any circumstances. Period.<br />
<br />
So what does that mean for Alex and you as an entrepreneur? Well, to put it simply: interference. Interference by the board in operational matters that goes above the mandated supervisory board duties. At best it means a drilling of the company's management team during the regular board meetings with some advice that is expected to be adhered to, at worst it means a CXO - often in the form of a board member - supplied by the investors. After all, especially in the case of an airline, the investors trust the entrepreneur with a considerable amount of money and they would like to be updated of the company's cash-flow regularly and preferably 24/7 in real-time. And what is the next logical step after receiving the intel? Correct. Act on it! And I do not even blame them. If it were my money, I would probably feel the same!<br />
<br />
Yet, what investors do not realize is that such behaviour is counterproductive to the company's efficiency and thus its income and bottom-line. Any outsider has per definition only a limited knowledge of the company. He might be a trusted professional in the company's industry but he certainly is not an expert in company internal matters. After all, you, as the entrepreneur, established your business idea on a niche market concept, right? And I doubt that the CXO cum board member has been studying this niche just as you have done over the last few years. And with limited knowledge arises disaster, as any Captain is more than willing to tell you about his First Officer.<br />
<br />
Now, in all fairness to the investor, there are two sides to the medal. The entrepreneur - often quite rightly - considers himself the expert and expects anybody else to respect his expertise while the investor has constant second thoughts about his investment strategy - and quite honestly, who wouldn't? - and would like to take an active role in the running of the company since it is a human trait to consider oneself the best in its field and the field of an investor comprises of the world, or so he likes to think. These two sides are obviously not compatible. Even a good ole Swiss compromise would only be beneficial to the company, and thus its generated profits, if the interference comes in the form of a perfect match to the company's culture and knowledge basis. And, by the way, and Rudolf really has a red nose!<br />
<br />
So, what is he solution to this dilemma? Well, one obvious possibility would be to start companies that require a cash amount that you are able to provide yourself only. It might not be very practical but this solution comes with an added advantage: if something goes wrong, you only can blame yourself!<br />
<br />
However, it would be a sad day if an entrepreneur can only succeed with concepts that require a capped amount of cash instead of ideas that he believes in. So here is my advice: if you find that your potential investors like the financial gains you promise them but are not interested at all in your product, say politely 'thank you for your time' and look somewhere else. Also, if your potential investor has a little knowledge of your specific industry, prepare an executable document that specifies the exact roles of the investors and their representatives. If your investors do not want to sign this, walk away! Remember, a little knowledge is a dangerous thing. And obviously, if your potential investors try to divert your idea to a path you do not believe in or you even have moral objections to, thank them for their time and call somebody else, right now. I mean it, right now! <br />
<br />
The idea of turning down hard cash might be a frightening one but believe me - I mean believe Alex, of course - he has been there when interference of a shareholder resulted in the collapse of an otherwise very valid business model. And the legal consequences of such a mess usually take all the entrepreneur's time that he rather should spend on a new business concept! Believe me, I, err Alex, has been there!Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com3tag:blogger.com,1999:blog-4397842961352774165.post-90441798132341706432013-05-28T20:52:00.000+04:002013-05-28T20:52:26.152+04:00Headhunters – right in harm’s way<!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:TrackMoves/> <w:TrackFormatting/> <w:PunctuationKerning/> <w:ValidateAgainstSchemas/> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:DoNotPromoteQF/> <w:LidThemeOther>EN-US</w:LidThemeOther> <w:LidThemeAsian>X-NONE</w:LidThemeAsian> <w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript> <w:Compatibility> <w:BreakWrappedTables/> <w:SnapToGridInCell/> <w:WrapTextWithPunct/> <w:UseAsianBreakRules/> <w:DontGrowAutofit/> <w:SplitPgBreakAndParaMark/> <w:DontVertAlignCellWithSp/> <w:DontBreakConstrainedForcedTables/> <w:DontVertAlignInTxbx/> <w:Word11KerningPairs/> <w:CachedColBalance/> </w:Compatibility> <w:BrowserLevel>MicrosoftInternetExplorer4</w:BrowserLevel> <m:mathPr> <m:mathFont m:val="Cambria Math"/> <m:brkBin m:val="before"/> <m:brkBinSub m:val="--"/> <m:smallFrac m:val="off"/> <m:dispDef/> <m:lMargin m:val="0"/> <m:rMargin m:val="0"/> <m:defJc m:val="centerGroup"/> <m:wrapIndent m:val="1440"/> <m:intLim m:val="subSup"/> <m:naryLim m:val="undOvr"/> </m:mathPr></w:WordDocument> </xml><![endif]--><br />
<!--[if gte mso 9]><xml> <w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
DefSemiHidden="true" DefQFormat="false" DefPriority="99"
LatentStyleCount="267"> <w:LsdException Locked="false" Priority="0" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Normal"/> <w:LsdException Locked="false" Priority="9" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="heading 1"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 2"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 3"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 4"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 5"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 6"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 7"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 8"/> <w:LsdException Locked="false" Priority="9" QFormat="true" Name="heading 9"/> <w:LsdException Locked="false" Priority="39" Name="toc 1"/> <w:LsdException Locked="false" Priority="39" Name="toc 2"/> <w:LsdException Locked="false" Priority="39" Name="toc 3"/> <w:LsdException Locked="false" Priority="39" Name="toc 4"/> <w:LsdException Locked="false" Priority="39" Name="toc 5"/> <w:LsdException Locked="false" Priority="39" Name="toc 6"/> <w:LsdException Locked="false" Priority="39" Name="toc 7"/> <w:LsdException Locked="false" Priority="39" Name="toc 8"/> <w:LsdException Locked="false" Priority="39" Name="toc 9"/> <w:LsdException Locked="false" Priority="35" QFormat="true" Name="caption"/> <w:LsdException Locked="false" Priority="10" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Title"/> <w:LsdException Locked="false" Priority="1" Name="Default Paragraph Font"/> <w:LsdException Locked="false" Priority="11" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtitle"/> <w:LsdException Locked="false" Priority="22" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Strong"/> <w:LsdException Locked="false" Priority="20" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Emphasis"/> <w:LsdException Locked="false" Priority="59" SemiHidden="false"
UnhideWhenUsed="false" Name="Table Grid"/> <w:LsdException Locked="false" UnhideWhenUsed="false" Name="Placeholder Text"/> <w:LsdException Locked="false" Priority="1" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="No Spacing"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 1"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 1"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 1"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 1"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 1"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 1"/> <w:LsdException Locked="false" UnhideWhenUsed="false" Name="Revision"/> <w:LsdException Locked="false" Priority="34" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="List Paragraph"/> <w:LsdException Locked="false" Priority="29" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Quote"/> <w:LsdException Locked="false" Priority="30" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Quote"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 1"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 1"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 1"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 1"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 1"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 1"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 1"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 1"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 2"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 2"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 2"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 2"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 2"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 2"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 2"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 2"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 2"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 2"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 2"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 2"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 2"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 2"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 3"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 3"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 3"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 3"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 3"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 3"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 3"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 3"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 3"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 3"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 3"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 3"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 3"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 3"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 4"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 4"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 4"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 4"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 4"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 4"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 4"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 4"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 4"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 4"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 4"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 4"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 4"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 4"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 5"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 5"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 5"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 5"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 5"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 5"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 5"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 5"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 5"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 5"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 5"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 5"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 5"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 5"/> <w:LsdException Locked="false" Priority="60" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Shading Accent 6"/> <w:LsdException Locked="false" Priority="61" SemiHidden="false"
UnhideWhenUsed="false" Name="Light List Accent 6"/> <w:LsdException Locked="false" Priority="62" SemiHidden="false"
UnhideWhenUsed="false" Name="Light Grid Accent 6"/> <w:LsdException Locked="false" Priority="63" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 1 Accent 6"/> <w:LsdException Locked="false" Priority="64" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Shading 2 Accent 6"/> <w:LsdException Locked="false" Priority="65" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 1 Accent 6"/> <w:LsdException Locked="false" Priority="66" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium List 2 Accent 6"/> <w:LsdException Locked="false" Priority="67" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 1 Accent 6"/> <w:LsdException Locked="false" Priority="68" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 2 Accent 6"/> <w:LsdException Locked="false" Priority="69" SemiHidden="false"
UnhideWhenUsed="false" Name="Medium Grid 3 Accent 6"/> <w:LsdException Locked="false" Priority="70" SemiHidden="false"
UnhideWhenUsed="false" Name="Dark List Accent 6"/> <w:LsdException Locked="false" Priority="71" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Shading Accent 6"/> <w:LsdException Locked="false" Priority="72" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful List Accent 6"/> <w:LsdException Locked="false" Priority="73" SemiHidden="false"
UnhideWhenUsed="false" Name="Colorful Grid Accent 6"/> <w:LsdException Locked="false" Priority="19" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Emphasis"/> <w:LsdException Locked="false" Priority="21" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Emphasis"/> <w:LsdException Locked="false" Priority="31" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Subtle Reference"/> <w:LsdException Locked="false" Priority="32" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Intense Reference"/> <w:LsdException Locked="false" Priority="33" SemiHidden="false"
UnhideWhenUsed="false" QFormat="true" Name="Book Title"/> <w:LsdException Locked="false" Priority="37" Name="Bibliography"/> <w:LsdException Locked="false" Priority="39" QFormat="true" Name="TOC Heading"/> </w:LatentStyles> </xml><![endif]--><!--[if gte mso 10]> <style>
/* Style Definitions */
table.MsoNormalTable
{mso-style-name:"Table Normal";
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:"";
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:"Calibri","sans-serif";
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:"Times New Roman";
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}
</style> <![endif]--> <br />
<div class="MsoNormal"><span style="color: yellow;">My twenty or so years in the aviation trade have seen me using a number of times the assistance of a recruitment firm. Sometimes I was the job seeker, and other times I had a position to be filled. The big difference between the two situations is that in the former you hardly get an acknowledgment from the headhunter, in the latter you get swamped with references to 'ideal' candidates that most of the time do not even know how to spell aviation. The most bizarre incident of a skewed trade perception happened when a headhunter – one of a very, very highly reputable executive search agency, I might add – called me to ask if I were interested in expanding the firm's aviation department. Not knowing an awful lot of this side of the consulting industry, I prepared a number of questions that I would have liked to discuss. And guess what, the reply I received by the headhunter was short and crisp: "I don’t have time to answer these questions, good luck with your future career." Needless to say that this executive recruitment firm does not figure high anymore on my company's preferred supplier list.</span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">This incident, certainly one that made my library of anecdotes that I tend to spill over startling party guests, made me think: what is nowadays the added value of a headhunter to one's organization? Regardless the side of the desk you are currently at, we all are witnesses of the current labour market situation, especially in the aviation industry. There is an abundance - and I do mean a large, large quantity - of qualified resources at all levels available, all desperate for a (near) quality position. And with internet platforms easily accessible, such as LinkedIn, Twitter, and to some extent even Facebook, it is easier than ever to connect to a company on the other side of the world and pop the question.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Of course, there are a few headhunters that do go the always promised extra mile for you. Similarly, there a few that are the preferred supplier for certain companies and thus are capable of offering positions unknown to the outside world. However, and my experience as somebody within an organization who actually tries to attract quality staff seems to underline this, most recruitment agencies seem to connect to an endless number of companies and individuals in the hope that someday these contacts might come in handy. By following this strategy, these particular recruitment agencies not only do not add any value to the recruitment process, they – maybe more importantly – tend to give a bad name to the industry as a whole.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">After all, it is as easy for me nowadays to connect with Far Away Airways via the internet as it is to connect to the flying club across the street. And when I am looking for a new position, I certainly would network the heck out it, wouldn't I? And by providing a large number of questionable – to say the least – resumes when asked to search for a certain quality professional, the respective recruitment agency most likely upsets the hiring manager to such an extent that the latter will reluctantly utilize the services of any headhunter in future. In the end, as Human Resources I would like to get pre-screened professionals, hopefully all more than capable of performing above standards. And don't forget that with virtual job fairs on the internet, it is as easy for the organization to connect to prospective candidates as it is vice versa.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">So what would be a solid strategy for the impasse the recruiters are in nowadays? Consolidation of the industry as a whole? Hopefully not, we all have seen where consolidation leads to and quite honestly, nothing seems to be a bigger paradox than a headhunter looking for a job.</div>Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com4tag:blogger.com,1999:blog-4397842961352774165.post-55744075099690199752013-03-04T17:09:00.000+04:002013-05-28T20:43:28.613+04:00Budgeting 101 in the airline industry<span style="color: yellow; font-family: inherit;">A few years back,
when trying to pitch my first aviation company to the people with the deep
pockets, I passed my financial projections to my dad for a quick inspection.
The quick scrutiny prolonged somewhat – to state it mildly – and when my dad,
who has no aviation experience whatsoever, handed my pride back to me he passed
me a fairly long list of comments as well. The most grave certainly being: “Your
profit/loss and cash-flow statements are in a completely wrong format! How on
earth do you expect financial analysts with little time on their hands and probably
dozens of business plans in their in-trays to adjust to non-common financial projection
layouts? You just have killed your project!”</span><br />
<span style="color: yellow; font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<br />
<span style="font-family: inherit;"><span style="color: yellow;">And he was right, of
course. Once an entrepreneur, with his headlines of the business plan, has finally
managed to catch the attention of a potential investor, he needs to follow-up
with streamlined, and easy to understand facts. And that includes an accepted
set of financial projections in an understandable form.</span></span></div>
<span style="color: yellow;"><span style="font-family: inherit;">
</span><span style="font-family: inherit;">Fortunately, ICAO can serve here as the cavalry that gallops-in
to the rescue. In all their wisdom, ICAO has established a set of accounting
rules for airlines that, if nothing else, establishes a set of conformities.
For the budding aviation entrepreneur, but also for seasoned airline managers
as a brief fresh-up, I present them here for you with a short discussion. As we
will see, even ICAO has made some questionable rules that are hardly practical
for an airline.</span></span><br />
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Generally, costs of any venture can be divided into</span></div>
<span style="font-family: inherit;">
</span><br />
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span>I.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Non-operating items;</span><br />
<span style="font-family: inherit;">
</span><span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;"><span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span>II.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Operating items.</span><br />
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Non-operating items can be defined as costs that are incurred
regardless the operating status of the organization. <span style="mso-spacerun: yes;"> </span>In the case of an airline, these comprise mainly
of:</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 40.5pt; mso-add-space: auto; mso-list: l3 level1 lfo2; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Gains (or losses) from retiring property and
equipment. Or, in another words, the difference between the depreciated book
value and market value.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 40.5pt; mso-add-space: auto; mso-list: l3 level1 lfo2; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Interest and dividends paid and received on/from
financial instruments.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 40.5pt; mso-add-space: auto; mso-list: l3 level1 lfo2; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Profits (or indeed losses) from affiliated
companies, such as catering companies.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 40.5pt; mso-add-space: auto; mso-list: l3 level1 lfo2; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Forex gains and losses, and gains and losses
from shares and securities.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpLast" style="margin: 0in 0in 10pt 40.5pt; mso-add-space: auto; mso-list: l3 level1 lfo2; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;">·<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Received government subsidies and payments.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Operating items then are items related to the operations of
the company. In the case of an airline, they re associated with the aircraft operations.
These are further divided into Direct Operating Costs (DOC) – costs that are
directly affected by the operation of the aircraft - and Indirect Operating
Costs (IOC) – operating costs that occur regardless the operation of the
aircraft.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Direct Operating Costs consist, as per ICAO, of:</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Costs of flight operations, including</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Flight deck crew salaries and expenses;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Fuel and oil;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">c.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Insurance of flight equipment and crews;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">d.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Rental of flight equipment and crews.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Costs of maintenance and overhaul</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; mso-list: l1 level1 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">c)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Costs associated with depreciation and
amortization, including</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Flight equipment;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Ground equipment and property;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">c.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Amortization of route development costs and crew
training;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpLast" style="margin: 0in 0in 10pt 1in; mso-add-space: auto; mso-list: l1 level2 lfo3; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">d.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Other depreciation.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Indirect Operating Costs then consist of (as
per ICAO):</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Station and ground expenses, including</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l0 level2 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Airport and en-route charges;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Costs of passenger services, including</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l0 level2 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">a.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Cabin crew salaries;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 1in; mso-add-space: auto; mso-list: l0 level2 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">b.<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Passenger liability insurance costs;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">c)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Costs associated with ticketing, sales and
promotion;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; mso-list: l0 level1 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">d)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>General and administrative costs;</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoListParagraphCxSpLast" style="margin: 0in 0in 10pt 0.5in; mso-list: l0 level1 lfo4; text-indent: -0.25in;">
<span style="font-family: inherit;"><span style="mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">e)<span style="font-family: "Times New Roman"; font-size-adjust: none; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span>Other costs.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Now, before we shout hooray and praise ICAO to the limit, let’s
have a closer look at what ICAO actually recommends.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Costs associated with the depreciation of ground equipment
and property do not rely on the aircraft operation. It is true that headquarters
of airlines do seem to grow bigger when the airline’s aircraft types get bigger
– probably to shelter the increased ego of the CEO - yet, this is hardly the
aircraft’s fault. As such these costs should belong under IOC.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Similarly, airport and en-route charges and even cabin crew salaries
do change with different aircraft types operated. A Saab340 with one cabin crew
on-board shows a smaller cabin crew salary account than the one for an A380
that is manned (or mostly womanned) with the population of a small town. Thus,
as per the definition, these costs should fall under DOC.</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">Clearly, the template provided by ICAO has its minor flaws
but it does serve as a solid foundation for budgeting and accounting purposes
in the airline industry. The recommendations also generate magnificent
benchmarking figures for you to compare your airline’s financial viability
with. What they do not do well, however, is to provide a viable platform for
cost structure analysis - what the financial industry calls management
accounting. </span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">From the structure provided by ICAO, it is difficult to
derive which costs are here for the short-term and can thus directly be influenced
by managers – and find me a manager that does not like a quick fix -, and which
costs the airline would need to live with, at least in the longer run. Or in
other words, which DOC has the greatest change potential on the costs incurred?</span></div>
<span style="font-family: inherit;">
</span><br />
<div class="MsoNormal" style="margin: 0in 0in 10pt;">
<span style="font-family: inherit;">To this end, DOC are often further divided into fixed and
variable DOC. Fixed DOC do not vary in the short term while variable DOC could
be avoided, at least to some extent, if a flight is cancelled. The so received structure
allows for in-depth analysis and thus can very well prevent you from making
very stupid decisions. Just don’t forget to factor-in a very high salary
allowance for the so needed analyst. They do not come cheap!</span></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-49165676648283996342013-02-24T23:44:00.000+04:002013-03-03T16:46:12.675+04:00Rotana Jet – Now or never<span style="font-family: inherit;">Mid September 2012, Rotana Jet (IATA: RG; ICAO:RJD) started operating scheduled domestic flights within the United Arab Emirates from Abu Dhabi International Airport (AUH) to Fujairah International Airport (FJR) and to Al Ain international Airport (AAN). Abu Dhabi Al Bateen Airport (AZI), the airline’s base, followed later as a destination in the carrier’s network. The equipment utilized is two Embraer RJ 145 (ERJ 145) regional jets. The company had been operating VIP-charter flights on a Gulfstream 450 and flights under the mandate of the Tourism Development and Investment Company (TDIC) to the islands of Sir Bani Yas and Dalma just off the coast with the capital Abu Dhabi.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">Almost six months into the venture, it is time to see what has materialized from the heavily announced first UAE domestic airline. After such a short operational time span, financial success or a break-even can hardly be expected. Yet, half a year should show the viability of the business model, its – hopefully correctable - flaws and its potential. For an operation of this relatively minor scale, six months into operations should give the owners the final go / no-go call, and we all hope that the guys at the steering helm are able to call out a loud and proud ‘GO!”</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">Let’s begin our short evaluation: <span style="mso-spacerun: yes;"> </span></span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">The ERJ 145 is a 50-seat regional jet airliner with 31 inch seat pitch (no-frills airline Air Arabia offers 31 inches or 32 inches on the A320) with rear-mounted Rolls-Royce turbofan engines. It is a stretched and modified version of the predecessor turbo-propeller aircraft EMB 120 Brasilia, and it made its first flight in 1995.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">The aircraft’s maximum take-off weight is, depending on model and equipment used, around 22,000 kg. The maximum ceiling of the aircraft is Flight Level 370 (around 11 km depending on atmospheric conditions) and according to Embraer’s specifications, maximum endurance is achieved when flying at the maximum ceiling. With a full cabin, this endurance translates into roughly 1,550 NM (around 2,850 km). The ERJ 145 is known to be limited to a fairly high minimum temperature at altitude (and thus optimal flight economy) but with the prevailing climate in the UAE, this is probably not an issue for Rotana Jet. However, with the short routes the airline is operating, the optimum flight level of FL 370 seems hardly achievable. In its performance brochure, Embraer specifies 18 minutes of climb under ideal circumstances to reach FL 350 only; hardly a flight environment that the crowded UAE airspace is capable of delivering.</span><br />
<span style="font-family: inherit;"> </span><br />
<span style="font-family: inherit;">I have no inside information on Rotana Jet’s ERJ 145 operating budget. And to be honest, even if I did, I would not disclose it. I believe such numbers to be the property of the respective airline. Yet, in order to get a somewhat accurate picture over the financial feasibility of Rotana Jet’s operations, I use the numbers of a now defunct European carrier. Obviously, being European operations in the mid first decade of this century, personnel (higher) and especially fuel costs (much lower) are to some extent out of balance yet the overall ratio picture should look similar to this:</span><br />
<span style="font-family: inherit;"></span><br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqPHm3qet2RfRlHZiMxl0cZVrrQ3Vx1vhS9ZgraU1HXyPwSM3d1GjE5Rruq3PhT9eRgxvlf8mjZ0MOQEc8QCUE49_IPAvU2H_lQIzIzPaC6DoFRnXdiZRhgTHNvtnJX0FjE_AQDypE2GE/s1600/TOC.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: inherit;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqPHm3qet2RfRlHZiMxl0cZVrrQ3Vx1vhS9ZgraU1HXyPwSM3d1GjE5Rruq3PhT9eRgxvlf8mjZ0MOQEc8QCUE49_IPAvU2H_lQIzIzPaC6DoFRnXdiZRhgTHNvtnJX0FjE_AQDypE2GE/s320/TOC.jpg" width="320" /></span></a></div>
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">From experience, with the fairly short routes (I.e. higher specific fuel consumption) in-mind, and with current Jet A1 market prices, I would claim that fuel costs set the company back around 30% of the total bill.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">On the route AUH – FJR (around 125 NM), Rotana Jet charges a minimum fare of AED 200 and a maximum fare of AED 400 one-way. There is no discount for return fares. The airline claims a block-time of 45 minutes but this time can be realistically reduced by a few minutes since neither AUH nor FJR know slot-times.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">The fuel burn for this route should average 215 US Gallons. At a rate of US Dollar 3.50 per US Gallon uplifted, the fuel cost for this trip alone equals AED 2,750. Hence, as per the above break-up, the overall cost of the trip is around AED 9,200.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">With an average fare bucket of AED 280 (including taxes), the maximum revenue achievable for this flight equals AED 14,000, leaving a maximum of AED 96 playing field per passenger for airport service charges and airline profit.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">A similar picture stems from the airline’s Abu Dhabi to Al Ain route. Here, the airline charges a minimum one-way fare of AED 150 and a maximum of AED 320. The stated block-time is 30 minutes but again, this short flight should be operated in a few minutes less.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">The fuel burn for this route should average 170 US Gallons. Again, at a rate of US Dollar 3.50 per US Gallon uplifted, the fuel cost for this trip alone equals AED 2,200 resulting in an overall trip cost of around AED 7,500.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">With an average fare bucket of AED 220 (including taxes), the maximum revenue achievable for this flight equals AED 11,000, leaving an even smaller maximum of AED 70 playing field per passenger for airport service charges and airline profit.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">Of course, it can be safely assumed that the TDIC will financially support in one way or another the airline’s operations to the islands. In a best case scenario, this so generated revenue could very well be used to counterbalance the loss making higher profile routes. Yet, with a highly marginal aircraft utilization – and fixed operating costs ticking – the business model used by Rotana Jet is probably rife for adaption.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">I would assume that Rotana Jet’s business plan foresees a partnership of some sort with Abu Dhabi based Etihad Airwyas. Mitigating costs, incurred on less profitable short-haul routes, onto more profitable long-haul routes is a common practice in the airline industry all over the world. Rotana Jet’s Abu Dhabi arrival timings would certainly seem to indicate such an aspired partnership.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">The flights from Fujairah arrive Abu Dhabi International Airport 12:15PM - although these flights are frequently cancelled – with possibilities to connect into the Subcontinent, Middle East and UK and 7:15PM - weekend flights operate into Abu Dhabi Bateen Airport – with possibilities to connect into the Subcontinent and Middle East. Flights from Al Ain arrive AUH 9:15PM connecting mainly into the Subcontinent. <span style="mso-spacerun: yes;"> </span></span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">Yet, so far – and contrary to the agreement RAK Airways of Ras Al Khaimah International Airport had in place – such a partnership has not been announced yet. This might have a simple reason, however: Etihad needs to audit actual operations first before committing to a partnership. Yet whatever the reason, Rotana Jet seems under quite some pressure since its load factors clearly indicate the immediate need for tying-up with big brother.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">It is probably safe to claim that the by Rotana Jet utilized equipment, 50 seater jets that have limited OEM and maintenance support in the region and a fairly low cargo potential, is far from ideal on very short routes with a highly limited audience. A turboprop in the Saab 340 class would have been, purely from a financial point-of-view, a more suitable bet. Of course, the prevailing position on turboprops in the region is very well known so the marketing guys would indeed have needed to work just a little bit harder in such a case.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">At the same time, connecting into AUH’s network of Middle Eastern and Subcontinent flights make little sense as well. Passengers from Fujairah will hardly fly west for 45 minutes in order to connect into an east-bound – and thus longer – flight to India when they have the choice of three major airports with numerous direct flights – including no-frills airline options - 75 minutes driving time from home.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">And lastly, I have recently heard a fair amount of industry professional enquiring after the operational status of Rotana Jet. True, the carrier seems to cancel regularly its mid-day flights to/from FJR. Yet, the airline is very much operational. However, only a few people actually seem to be aware of this! The marketing plan and/or effort by the carrier display major flaws - the most notable ones certainly the absence of any marketing strategy. It should be a fairly easy exercise for the airline to utilize its employees to spread the word. By employing guerilla marketing tactics that usually work best for limited markets, such as the airline faces, expenses can be kept fairly low and returns would dramatically increase.</span><br />
<span style="font-family: inherit;"></span><br />
<span style="font-family: inherit;">In the end, if the domestic operations of Rotana Jet have proven one thing only, it is that there is certainly a feasible UAE domestic air routes market. With the exception of the carrier’s fleet, all issues in the airline’s business plan can easily be sorted-out. It is up to the carrier to prove that they are not only capable to rely on peer planning but that they have the actual in-house skills and expertise to make the concept work! I for one wish them well.</span>Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com4tag:blogger.com,1999:blog-4397842961352774165.post-78601450625024523872013-02-20T14:30:00.000+04:002013-02-20T14:30:33.073+04:00Innovation in the aviation industry!<span style="color: yellow;">Sometimes even I do get surprised. Here I was thinking of all those static flag carriers never being pro-active, merely always reacting to external market forces. And then, one sunny (well, that is actually not hard in the UAE) morning I read the industry news before setting-off to work and voila: probably the sturdiest of them all comes with a great idea to counter-balance the ever looming threat by no-frills airlines:</span><br />
<br />
<span style="font-size: large;">British Airways offers cheaper fares to flyers without checked bags</span><br />
<br />
<a href="http://skift.com/2013/02/19/british-airways-offers-cheaper-fares-to-flyers-without-checked-bags/" target="_blank">http://skift.com/2013/02/19/british-airways-offers-cheaper-fares-to-flyers-without-checked-bags/</a><br />
<br />
<strong>by Oliver Smith, The Daily Telegraph</strong><br />
<div class="post-datetime">
<span class="date">Feb 19, 2013</span><span class="time">1:13 pm</span></div>
<div id="the-post-content">
<br />
<a href="http://www.britishairways.com/">British Airways</a> is to offer cheaper fares on selected routes to passengers who travel without checked luggage.<br />
<br />
The airline says the fares – which will initially be offered on flights from Gatwick to Amsterdam, Dubrovnik, Jersey, Tunis, and Turin – will give its passengers “more choice”, and is likely to be viewed as an attempt to compete with low-cost airlines such as <a href="http://www.ryanair.com/en">Ryanair</a> and <a href="http://www.easyjet.com/en">Easyjet</a>.<br />
<br />
“The suprise is not so much that BA has made this move, but that it has taken so long to do so,” said Nick Trend, <em>Telegraph</em> Travel’s Consumer Editor. “It appears to be a reaction to commercial pressure from its no-frills rivals, which quote lower headline fares because they don’t include the cost of checked bags. This can make BA’s fares look expensive and so less attractive by contrast.<br />
<br />
“BA says that the new fares are about giving it customers ‘more freedom to choose the kind of flying they want’, but they are also about giving British Airways the freedom to make its fares look cheaper.”<br />
<br />
He added that those passengers who do check a bag into the hold could eventually end up paying more.<br />
<br />
“Airfares are so variable that, within a few weeks, it will be impossible to know whether BA passengers without hold luggage are getting a better deal, or whether those who check in their bags are being charged extra,” he said.<br />
<br />
But Peter Simpson, director of Gatwick for British Airways, claimed that passengers who check in a bag will not be expected to pay extra to make up for those who choose the cheaper fares.<br />
<br />
“It is all about giving our customers more freedom to choose the kind of flying they want,” he said. “Many British Airways customers at Gatwick choose not to check in a bag as they’re already taking advantage of our generous two-bag hand luggage policy. Those who still want to check in a bag will simply pay the same price they do now.”<br />
<br />
The new “hand baggage only fares” go on sale next Tuesday (February 26), with starting prices ranging from £39 (one-way to Amsterdam) to £69 (one-way to Turin). BA said that, depending on the route, the fares are between £9 and £15 cheaper than usual.<br />
<br />
The announcement by BA – which axed free meals on some flights in 2009 in a bid to cut costs – follows <a href="http://www.klm.com/travel/us_en/index.htm">KLM’s</a> decision to begin charging customers who check in luggage on short-haul flights. KLM’s policy will be effective from April 22.</div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-14067087187216774312013-02-20T14:24:00.003+04:002013-02-25T09:00:37.541+04:00Start-ups and funding - a love-hate relationship<span style="color: yellow;">Nobody questions that start-ups, at some point or other, are always in need of funding. From a few dollars to millions of it. As a budding entrepreneur, this could very well seem overwhelming, especially when financial analysts and consultants start giving you advise.</span><br />
<span style="color: yellow;"></span><br />
<span style="color: yellow;">This article is a good starting point to get at ease over the topic. Remember that it is you, as the entrepreneur, that gets to call the shots. Most investors and consultants want you to make believe otherwise - it is my money and I do as I please - yet the entrepreneur has always the possibility to say no. Of course, he then might lose his funding but this could be better than to adapt a failing strategy for his company. </span><br />
<span style="color: yellow;"></span><br />
<span style="color: yellow;">Point number 4 raised in the article seems to sum it up quite nicely</span>.<br />
<br />
<span style="font-size: large;">The Non-Entrepreneur's Guide to Startup Funding</span><br />
<!-- Make individual group author appear --><br />
<div class="comment_bug" style="height: auto;">
<div class="arrow_icon" style="display: none;">
</div>
<div class="bottom_border" style="display: none;">
</div>
<div class="wrapper" style="display: none;">
<div class="called_out_sampling">
</div>
<div class="info">
<a class="scroll_to" data-initialized="true" href="http://www.forbes.com/sites/brentbeshore/2013/02/19/the-non-entrepreneurs-guide-to-startup-funding/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social#comments_header"> comments, called-out </a></div>
<a class="scroll_to post_your_comment" data-initialized="true" href="http://www.forbes.com/sites/brentbeshore/2013/02/19/the-non-entrepreneurs-guide-to-startup-funding/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social#comment_reply">Comment Now</a><br />
<div class="comments_follow followable_block">
<div class="followable_block" data-object-json="{"title":"The Non-Entrepreneur's Guide to Startup Funding","avatar_src":"","follow_count":""}" data-target-id="blogAndPostId/blog/post/2347-753" data-target-name="" data-target-type="article" data-tracking-link-name="articleLink_ArticleCommentsFollow" data-type-advoice="false">
<div class="follow_unireg">
<a class="follow_unireg_link" href="javascript://follow"><span class="option_follow"><span class="icon"></span><span class="text">Follow Comments</span></span><span class="option_following"><span class="icon"></span><span class="text">Following Comments</span></span><span class="option_unfollow"><span class="icon"></span><span class="text">Unfollow Comments</span></span></a><span class="follow_count"></span><span class="loadingstate"><img alt="" class="loadingstateimg" height="16" src="http://i.forbesimg.com/assets/img/loading_spinners/16px_grey.gif" width="16" /></span></div>
</div>
</div>
</div>
<div class="comment_teaser" style="display: none;">
</div>
<div class="no_comment_bugs_exist_yet">
<div class="comments_follow followable_block">
<div class="followable_block" data-object-json="{"title":"The Non-Entrepreneur's Guide to Startup Funding","avatar_src":"","follow_count":""}" data-target-id="blogAndPostId/blog/post/2347-753" data-target-name="" data-target-type="article" data-tracking-link-name="articleLink_ArticleCommentsFollow" data-type-advoice="false">
<div class="follow_unireg">
<span class="loadingstate"><a href="http://www.forbes.com/sites/brentbeshore/2013/02/19/the-non-entrepreneurs-guide-to-startup-funding/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social" target="_blank">http://www.forbes.com/sites/brentbeshore/2013/02/19/the-non-entrepreneurs-guide-to-startup-funding/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social</a></span></div>
<div class="follow_unireg">
<span class="loadingstate"></span> </div>
</div>
</div>
</div>
</div>
<div class="fleft clearfix article" id="leftRail">
<div class="body contains_vestpocket">
<div class="wp-caption alignright" style="width: 410px;">
<img alt="" height="273" src="http://blogs-images.forbes.com/brentbeshore/files/2013/02/400x.jpg" width="400" /><br />
<div class="wp-caption-text">
Getty Images</div>
</div>
<div align="center" style="text-align: left;">
</div>
<div align="center" style="text-align: left;">
A few months ago, I wrote <a class="exit_trigger_set" href="http://www.forbes.com/sites/brentbeshore/2012/12/10/the-non-entrepreneurs-guide-to-starting-in-startups/">“The Non-Entrepreneur’s Guide to Starting in Startups”</a> with the aim of helping those wanting to break into the entrepreneurial world. Now, let’s assume you’ve done your reading, attended events, have identified a solution to a specific problem, and are ready to start testing your hypothesis. What is the optimal path to gain the necessary resources?</div>
<div align="center" style="text-align: left;">
Before we get into specifics, here are six factors to consider:</div>
<ol>
<li><strong><a class="exit_trigger_set" href="http://www.forbes.com/risk/">Risk</a> vs. Reward:</strong> The more equity you give up, the more you diversify your risk and decrease your potential reward.</li>
<li><strong>Control:</strong> Who holds the power to make decisions about leadership and company direction?</li>
<li><strong><a href="http://blogs.forbes.com/velocity/">Velocity</a>:</strong> How much funding is ideal for you to reach your desired outcome? How fast do you need (not want) to grow? Too many resources can be as damaging as not having enough, allowing you to pursue poor directions for extended periods of time.</li>
<li><strong>Distraction:</strong> There’s a reason why good decisions aren’t made by committee. Those with a material interest will want to be informed, understand decision-making, and, in some cases, help make decisions. Hours dedicated to those activities are hours not spent building and selling.</li>
<li><strong>Mentorship:</strong> Wise and experienced mentors are anything but a distraction, providing knowledge that can bypass months of wrong turns and setting you on the path to success.</li>
<li><strong>Influence:</strong> Regardless of your business, deep relationships are practically priceless. Who can place a call to an old friend and open a golden door?</li>
</ol>
With those factors in mind, here’s a guide that covers the most-to-least autonomous options. As a reminder, the information below is intended for those new to the startup world, and is not intended to be an “end-all, be-all” of funding knowledge. If you’re looking for depth, jump to the end for a list of resources that dive into each area in detail.<br />
<a class="exit_trigger_set" href="http://blogs-images.forbes.com/brentbeshore/files/2013/02/shutterstock_105897602-23.jpg"></a><br />
<strong>Personal Assets (Bootstrapping)</strong><br />
<em>Overview<strong>:</strong></em> Bootstrapping means not taking any outside investment and funding the startup 100 percent from the entrepreneur’s personal assets and business cash flow.<br />
<em>Consider:</em> How many resources do you need now? What is your ability to fund the project now? What is your risk tolerance? Assuming the project fails, are you okay with the position you’ll be left in? Should the business generate enough cash to become self-sustaining within a reasonable timeframe?<br />
<em>Optimal for: </em>Those with a high-risk tolerance, a high net worth, or who need low necessary startup funding (or a combination of all three).<br />
<aside class="vestpocket" data-position="10"><div class="admin_controls" style="display: none;">
<a class="up" href="http://www.blogger.com/null">Move up http://i.forbesimg.com t</a><a class="down" href="http://www.blogger.com/null">Move down</a></div>
<em>Look to<strong>:</strong></em> Your bank account and intestinal fortitude.<strong> </strong></aside><strong></strong><br />
<strong>Consulting (Bootstrapping)</strong><br />
<em>Overview:</em> Using your professional skills to launch a consulting business with the primary aim of supporting your startup.<br />
<em>Consider:</em> Will consulting ultimately distract you from your primary purpose? Can you adequately juggle multiple projects at once? Are you disciplined enough to ignore “paying work” for your startup? Can your potential clients’ work provide the code base or intellectual property for your startup (ethically, of course)?<br />
<em>Optimal for:</em> The risk-averse, the skilled (hirable), and the disciplined. As Chris Guillebeau, author of the “The $100 Startup,” says, “Bootstrapping is fair game for most startups other than manufacturing or medical research, which require more funding.”<br />
<em>Look to:</em> Relationships with potential consulting clients and your psychological profile.<br />
<strong></strong><br />
<strong>Crowdfunding</strong><strong> </strong><br />
<em>Overview:</em> A crowd of people pre-buy your product, providing you with the cash to get the product built. No equity or debt is exchanged (to change shortly with new laws).<br />
<em>Consider:</em> Do you have a consumer product? If so, do you have a way to make it stand out in the crowd? Will the time investment of promoting the microsite be worth it?<br />
<em>Optimal for:</em> Sexy consumer products with mass appeal.<br />
<em>Look to:</em> Indiegogo and Kickstarter.<br />
<strong></strong><br />
<strong>Friends and Family</strong><br />
<em>Overview<strong>:</strong></em> Use your family and close personal relationships to gain access to resources. Their primary motive for investing is you, and not necessarily a return on their investment. Typically, this is considered “early seed stage,” and it consists of funding between $10,000 and $50,000.<br />
<em>Consider:</em> Will this harm personal relationships? Will this be an unnecessary distraction? How important is the money to the investors? What are the ramifications if the startup fails?<br />
<em>Optimal for:</em> Those with wealthy friends or family who love them dearly, are supportive of their endeavors, are looking at it more as a gift than an investment, and are comfortable with the startup’s likely failure.<br />
<em>Look to:</em> Personal relationships, the ability to have “difficult conversations” with friends and family, and comfort in likely celebrating an awkward Thanksgiving/Christmas.<br />
<strong></strong><br />
<strong>Accelerators</strong><br />
<em>Overview:</em> Typically, a 12-week program that combines light funding ($15,000 to $50,000) and mentorship to accelerate the startup’s progress. It usually culminates in “demo day,” where the class of startups give short (under 10-minute) presentations to a group of angel investors and VCs.<br />
<em>Consider:</em> Does your startup have high growth potential? Outside of Y Combinator and TechStars (field leaders), how established, successful, and focused is the program? What has been the experience of founders in the portfolio? How specific are they about the programming, mentors, and expectations?<br />
<em>Optimal for:</em> <a class="exit_trigger_set" href="http://www.forbes.com/startups/">Startups</a> with high growth potential looking to gain access to a network of mentors, capital, and influence.<br />
<em>Look to<strong>:</strong></em> TechStars and Y Combinator first. Read extensively on the accelerator’s philosophy, track record, and mentor bios.<br />
<strong></strong><br />
<strong>Angels</strong><br />
<em>Overview<strong>:</strong></em> Wealthy people with an interest in funding startups. They sometimes assemble into packs known as “angel networks” or “angel groups,” where they consume copious amounts of food and drink, review past investments, and listen to new pitches asking for $300,000 to $750,000 in seed funding.<br />
<em>Consider:</em> How much are you looking to raise, and why? What expertise do the angels (especially the ones who might serve on your board) represent? What is the person’s or group’s track record on exits and past relationships?<br />
<em>Optimal for:</em> High-growth startups that need early-stage capital to accelerate traction, and those looking to acquire money and perhaps a little expertise (in most situations).<br />
<em>Look to:</em> Local groups of angels, AngelList (Angel.co), Gust, or known independent angels in your area.<br />
<strong></strong><br />
<strong>Venture Capital</strong><br />
<em>Overview:</em> Professional investors looking for significant returns, who represent large sums of institutional money (universities, municipalities, and larger funds).<br />
<em>Consider:</em> They’re pros at investing, and you’re not — be careful. What else will they provide other than money (smart money)? Do you align philosophically? Are their expectations reasonable? Do they have a strong track record in your sector? Have you talked with CEOs in their portfolios? Have you spoken with multiple firms?<br />
<em>Optimal for:</em> Startups with significant traction that are looking for massive growth and are fine with giving up quite a bit of control (in most cases).<br />
<em>Look to:</em> Relationships that might have connections with VC firms. <a class="exit_trigger_set" href="http://www.forbes.com/companies/google/">Google</a> “venture capital” and start researching; then, contact specific firms that are actively looking for investments in your sector. *Note: Do not blanket the entire VC industry with a general introduction letter.<br />
<strong></strong><br />
<strong>Banks, Incubators, and Co-Working Spaces</strong><br />
Three other sources could be banks, incubators, and co-working spaces, but I have intentionally chosen to leave them out. Banks are highly regulated and need both collateral and a clear repayment path in order to provide a loan. Although some claim to offer good advice, unless you’re starting a construction company or looking to get into real estate, I’d take it with a grain of salt. While some make claims that sound similar to accelerators, incubators and co-working spaces are rent-driven and usually don’t come with a tremendous amount of “value added.” They are fantastic for networking, but don’t count on them to offer nearly the same resources as an accelerator.<br />
<strong></strong><br />
<strong>Further Research</strong><br />
As I said, the purpose of this article is to help give the newcomer a framework for exploring the world of startup resources. I highly encourage anyone thinking of starting a business to do a lot more research. Here are a few places to start:<br />
<ul>
<li>Chris Guillebeau’s <a href="http://www.amazon.com/100-Startup-Reinvent-Living-Create/dp/0307951529">“The $100 Startup”</a></li>
<li>Paul Graham’s <a href="http://paulgraham.com/startupfunding.html">Website</a></li>
<li>Brad Feld and Jason Mendelson’s <a href="http://www.amazon.com/Venture-Deals-Smarter-Capitalist-ebook/dp/B005CDYQSM">“Venture Deals”</a></li>
<li><a href="http://steveblank.com/tools-and-blogs-for-entrepreneurs/">Steve Blank’s Resource Center</a> (under “Founding/Running a Startup Advice”) </li>
</ul>
</div>
</div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-69988495310489386892013-02-20T14:14:00.002+04:002013-02-20T14:14:34.495+04:00Boeing - surely too big to fail?<span style="color: yellow;">An interesting article about the woes the Boeing Corporation has currently with its B787. I see the biggest financial impact yet to come, however, when the relevant airlines will have a reasonable overview over their B787 related incurred losses - and those range from extra provided accommodation to passengers to enormous replacement aircraft acquisition costs.</span><br />
<span style="color: yellow;"></span><br />
<span style="color: yellow;">I do not believe that Boeing will get into serious trouble though. With only Airbus competing the market pie is too big for the US government to have its iconic aircraft manufacturer fail. Yet, I do not believe that Boeing will be in a position to offer discounted purchase prices on future aircraft orders. Airlines feel the pinch, nowadays, so every cent that they are able to squeeze out of any transaction is highly welcomed.</span><br />
<br />
<span style="font-size: large;">Analysis: As parked 787s multiply, Boeing cash drain worries grow</span><br />
<br />
<a href="http://www.reuters.com/article/2013/02/20/us-boeing-dreamliner-delays-idUSBRE91J01L20130220" target="_blank">http://www.reuters.com/article/2013/02/20/us-boeing-dreamliner-delays-idUSBRE91J01L20130220</a><br />
<br />
<span id="articleText"><span id="midArticle_start"></span>
</span><br />
<span id="articleText"><span id="midArticle_start"></span>
<div id="articleInfo">
<div class="byline">
By Bill Rigby and Harriet McLeod</div>
<span class="location">EVERETT, Wash./NORTH CHARLESTON, South Carolina</span> |
<span class="timestamp">Tue Feb 19, 2013 7:43pm EST</span> </div>
<span id="midArticle_0"></span><span class="focusParagraph">
<br />
(Reuters) - Paine Field Airport, next door to <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/finance/stocks/overview?symbol=BA.N&lc=int_mb_1001">Boeing</a></span> Co's (<span id="symbol_BA.N_0"><a data-ls-seen="1" href="http://www.reuters.com/finance/stocks/overview?symbol=BA.N">BA.N</a></span>) widebody plant north of Seattle, is getting
crowded as 10 new 787 Dreamliners flank the runway, sparkling with contrasting
and colorful liveries, including Poland's LOT, Britain's Thomson Airways and <a data-ls-existing-link-tracked="1" data-ls-seen="1" href="http://www.reuters.com/places/china" title="Full coverage of China">China</a> Southern <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/sectors/industries/overview?industryCode=60&lc=int_mb_1001">Airlines</a></span> (<span id="symbol_600029.SS_1"><a data-ls-seen="1" href="http://www.reuters.com/finance/stocks/overview?symbol=600029.SS">600029.SS</a></span>).</span><span id="midArticle_1"></span>
<br />
It is a similar story several thousand miles away, outside the company's
North Charleston, South Carolina final assembly building, where space is taken
up by four 787s destined for Air India AIN.UL.<br />
<span id="midArticle_2"></span>
<br />
A month after the global fleet of the carbon-composite jets were grounded as
U.S. and Japanese regulators carry out investigations into overheating
batteries, the parked airliners are a stark symbol of deepening problems this is
causing <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/finance/stocks/overview?symbol=BA.N&lc=int_mb_1001">Boeing</a></span>.<br />
<span id="midArticle_3"></span>
<br />
At Paine Field in Everett, Boeing plans to move some of its other planes
around to make room for new 787s coming off its two production lines, and says
it has room to store all the 787s it is making.<br />
<span id="midArticle_4"></span>
But Boeing is finding it increasingly difficult to convince Wall Street that
its balance sheet is not going to be strained by the crisis. Until the
Dreamliner is cleared to fly again, which could be several months, Boeing will
be starved of delivery payments but still has to keep producing and maintaining
the 787s it is making.<br />
<span id="midArticle_5"></span>
<br />
The world's largest planemaker is being hit on a number of financial fronts,
as well as suffering potential damage to its brand image. It is unable to
deliver the five Dreamliners being produced per month, missing out an about $200
million in final cash payments from customers every month the 787 is grounded,
while it has to pay out millions of dollars to clean, maintain and insure the
parked planes. The delay may also force Boeing to postpone plans to double
production by the end of this year.<br />
<span id="midArticle_6"></span>
<br />
Meanwhile, it is spending as much as $1 billion a month to keep the
production line running, according to Russell Solomon, an analyst at Moody's
Investors Service, as the 787 program is still in the early, cost-heavy
stage.<br />
<span id="midArticle_7"></span>
<br />
On top of that, it will have to pay the extra costs of putting engineers to
work on the battery problem and the expense of reworking the 100 or so
Dreamliners that have so far rolled off the production lines once it resolves
the problem. Wall Street initially pegged those costs at $350 million to $625
million, but as investigations drag on with no clear indication of a fix,
analysts have held back on updating those figures. The longer the delay, the
more complex and expensive the fix is likely to be.<br />
<span id="midArticle_8"></span>
"They've got all that carbon fiber sitting on the ramp, when they'd like to
have the cash," said Carter Leake, an analyst at BB&T Capital <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/finance/markets?lc=int_mb_1001">Markets</a></span>. "This is going to be a slow slog
for a long time."<br />
<span id="midArticle_9"></span>
<br />
CASH DRAIN<br />
<span id="midArticle_10"></span>
<br />
The company's $13.5 billion in cash and short-term investments provide a
cushion, as does the $3.7 billion in free cash flow generated in the fourth
quarter of 2012, but both will be eaten away each month the plane is
grounded.<br />
<span id="midArticle_11"></span>
<br />
So far, analysts and one source familiar with Boeing's thinking do not expect
the cash squeeze will prompt Boeing to borrow more, even at current low interest
rates. The company itself said only that it has not adjusted its cash management
strategy.<br />
<span id="midArticle_12"></span>
<br />
Boeing's cash flow could be cut by as much as $1.5 billion over six months if
the 787s are still unable to fly, analysts said.<br />
<span id="midArticle_13"></span>
<br />
"The longer the plane is grounded, the greater the risk of the company's 2013
cash flow meaningfully declining," said Solomon at Moody's.<br />
<span id="midArticle_14"></span>
<br />
So far, Boeing's stock has held up at around $75, higher than for most of
last year, and customers are expressing faith in the plane and its maker. <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/sectors/industries/overview?industryCode=60&lc=int_mb_1001">Airlines</a></span> are being notified of late
deliveries, but none has canceled any orders.<br />
<span id="midArticle_15"></span>
<br />
The shares have fallen 3 percent since the 787 grounding in mid-January,
compared to an 11 percent gain for Airbus parent EADS (<span id="symbol_EAD.PA_3"><a data-ls-seen="1" href="http://www.reuters.com/finance/stocks/overview?symbol=EAD.PA">EAD.PA</a></span>).<br />
<span id="midArticle_0"></span>
<br />
Boeing says it is still too early to quantify the financial impact of the
grounding, and its 2013 financial forecasts excluded 787 costs.<br />
<span id="midArticle_1"></span>
<br />
Bob Crandall, former head of American Airlines and an industry figurehead,
said Boeing will suffer, but most airlines would not be overly fazed by delivery
delays, as they can lease replacement jets and bill Boeing for it, or factor
those costs into discounts on future plane purchases.<br />
<span id="midArticle_2"></span>
<br />
"It's a shame, and will inconvenience airlines and passengers, and hurt
Boeing financially. But progress and safety are the two <span class="mandelbrot_refrag"><a class="mandelbrot_refrag" href="http://www.reuters.com/sectors/industries/overview?industryCode=199&lc=int_mb_1001">games</a></span> in play," he said.<br />
<span id="midArticle_3"></span>
<br />
"They (Boeing) will fix the problem and get the planes back in the air. It
will cost them money, but nobody in the aviation community will fault them," he
added. "Aviation progresses by constantly learning, and here the lesson is about
the nature of lithium batteries."<br />
<span id="midArticle_4"></span>
<br />
Favorable market conditions are helping Boeing and its rival Airbus sell and
produce record numbers of jets, worth about $88 billion last year, said Richard
Aboulafia, a senior aerospace analyst at the Teal Group in Fairfax,
Virginia.<br />
<span id="midArticle_5"></span>
<br />
High oil prices are prompting airlines to order new fuel-efficient planes,
and low interest rates make the purchases easier to <a data-ls-seen="1" href="http://www.reuters.com/finance" title="Full coverage of finance">finance</a> them and make
the loans attractive to investors looking for yield. "You could not ask for
those three variables to get any better for airplane output," he said. But, he
added, it's unclear how long it will last.<br />
<span id="midArticle_6"></span>
<br />
DELAY LOOMS<br />
<span id="midArticle_7"></span>
<br />
The U.S. and Japanese investigations into burning lithium batteries are
moving slowly, and there is no sign of a resolution.<br />
<span id="midArticle_8"></span>
<br />
The longer that goes on, the longer deliveries are pushed back. More
importantly, it suggests that the work Boeing will have to do to rectify battery
problems on the more than 100 Dreamliners it has already produced could be
significant and will hamper its efforts to ramp up production.<br />
<span id="midArticle_9"></span>
Two weeks ago, Chief Executive Jim McNerney said Boeing was sticking with the
ambitious plan - hatched long before the current battery problems came to light
- to increase 787 production to seven a month by mid-year and 10 a month by the
end of 2013.<br />
<span id="midArticle_10"></span>
<br />
Boeing spokesman Charles Bickers said that is still the plan, and it is too
early to know what the financial impact of the 787 grounding will be.<br />
<span id="midArticle_11"></span>
<br />
The steep ramp-up is crucial to the profitability of the 787, as the lion's
share of outlays happen early in a plane program. The quicker Boeing can refine
the process and ramp up production, the quicker it will reach the target of
1,100 planes, the point where it calculates it will break even on the program.
At planned production rates that is already a decade away.<br />
<span id="midArticle_12"></span>
<br />
"A slowdown would be crushing," said Leake at BB&T. "As long as the
program accounting assumptions don't change, Boeing can keep booking the same
margin in the current production block. But once production rates change or
slow, their assumptions on both revenue and cost will have to change."<br />
<span id="midArticle_13"></span>
<br />
Revenue will likely go down as Boeing will have to offer aggrieved customers
more concessions on future purchases to keep them happy, while it loses hundreds
of millions of dollars in "progress" payments, which airlines pay as planes near
completion. At the same time, costs will stay higher for longer than Boeing has
been counting on.<br />
<span id="midArticle_14"></span>
<br />
Boeing's credit rating is not immediately under threat, but the trend is
concerning analysts.<br />
<span id="midArticle_15"></span>
"If the grounding persists for many more months, planned increases in the
monthly production rate look increasingly suspect - and expensive, possibly
further eroding Boeing's otherwise strong credit profile," said Solomon at
Moody's.<br />
<span id="midArticle_16"></span>
<br />
(Additional reporting by Alwyn Scott in Seattle; Editing by Edward Tobin and
Richard Chang)</span>Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com2tag:blogger.com,1999:blog-4397842961352774165.post-67120725679310431442013-01-28T12:37:00.001+04:002013-02-20T13:44:24.918+04:00Our draft commercial for the Somali operations<iframe allowfullscreen="" frameborder="0" height="344" src="http://www.youtube.com/embed/4xxH2FdJ96Y" width="459"></iframe><br />
<br />The problem with operations into / out of remote areas always is: where and in what form do you actually advertise? The people within Somalia do not have the best internet connection in the world, so you would be looking at something very simple and fast loading. Yet, your customers outside Somalia do expect a good quality ad, so by broadcasting a clip on Somali TV, you always need to find an acceptable compromise. We went for an animated commercial and it worked quite well. Obviously, the final version was indeed a higer resolution one.Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com0tag:blogger.com,1999:blog-4397842961352774165.post-89827153982120748232012-11-14T20:32:00.000+04:002013-03-03T16:47:55.540+04:00My book on airline business models<span style="color: yellow;">The foreword of my yet to-be-published book "<strong>Black Holes in the Sky</strong>". It is all about the (financial) viability of airline models and since I believe that nobody actually bothers to read a foreword, I put it here so that it can have its brief moment of glory!<br /><br />As always, you are most welcome to pass criticism but go easy on me, it is my first attempt to transgress myself into the higher league of credible published authors! </span><br />
<strong></strong><br />
<strong>Foreword</strong><br />
I learnt it the hard way. After twenty odd years in aviation, from being a humble pilot to eventually running airlines, with numerous nights spent in meetings with all kinds of stakeholders while applying all my enthusiasm for the trade, I have come to the conclusion, or should I say: the conclusion has been forced upon me, that the traditional airline model does not work in current times. Now I am not old enough – fortunately - that I am able to claim, or not, that airlines ever worked as viable business concepts, yet certainly modern economic times and the widely common go-with-the flow-airlines do not seem compatible.<br />
<br />
Too many examples of failed airlines over the years quite possibly may prove my theory right whilst projected passenger perception at present does seem to support my thesis as well. Contrary to a few years back, when one either had the choice of taking the country’s flag carrier, the destination country’s flag carrier, a boat or a car only, passengers now generally are offered an abundance of travel options, ranging from various land transport means, over high-speed rail networks to various airline models. And behold our choices: the rise of the no-frills airlines in virtually every region of the world has indeed been a success story in itself.<br />
<br />
The underlying tenor seems to be simple: a desire to get farther with less. Yet, contrary to the gurus of no-frills airline theories, there is still a business to be invented where lower revenues mean higher returns. When traditionally, or at least our parents so claim, love made the world go round, nowadays Wall Street rules the skies and the love-hate relationships in a boardroom of an airline alike. Returns on investment for both shareholders and customers have become more important than ever. And how do traditional full service carriers react to slumping demand for their services? They start lobbying with their respective governments and then simply go out of business.<br />
<br />
Now, don’t get me wrong: I am an avid supporter of traditional airline business models. I believe them to be much more humane in every respect (apart, of course, from the few rotten apples one seems to find in any industry); more humane towards its passengers, suppliers and, most importantly, to its staff. Have you ever seen a Cabin Crew member smiling on his/her fourth rotation of the day? Hardly ever, probably, but when you encounter one it will be most likely on a flight of a traditional full service airline rather than a no-frills carrier.<br />
<br />
Yet, this book is not about the battle between full service airlines against no-frill airlines. Many exceptionally well written books on this ghastly subject have been published already. So who would I be to contribute here even further when probably everything on this fascinating topic has already been said and undeniably said well? I recall doing long and painstaking research for my MBA-thesis and finding no relevant literature on my chosen topic – regional carriers in the Gulf Cooperation Countries – yet an abundance of literature on no-frills airlines. Even my thesis supervisor despaired over the lack of suitable research material and prodded me in true Greek fashion to amend my thesis topic ever so slightly to no-frills airlines (airlines is airlines was probably the rational thought behind it). I obviously refused in a similar Dutch fashion called stubbornness.<br />
<br />
Indeed, this book is about a much broader, yet probably at least an equally important topic: what needs to be done to establish a successful and sustainable airline and potentially more importantly: how?<br />
<br />
Is it indeed a question of starting with a billion and ending with a million, as the somewhat blunt anecdote in aviation for airline start-ups goes? Fortunately, a number of recent airline start-ups prove this saying wrong. So it might be just a case of getting an aircraft, an air operator’s certificate, a few crew members and off we go into the mighty blue sky? Well, this approach might work - if one is lucky - but generally, I would give the incumbent little chance of clearing the first obstacle after take-off, let alone reaching sustainable bridge capital rounds.<br />
<br />
My professional life in aviation has brought me from failed, over hanging-in-there, to successful airlines. And while no two business models are alike – if there is only one thing you take from this book, please let it be that buying a business plan on the web with the idea of copy-pasting it onto your new airline really does never work – I have seen a number of similarities in the models of successful airlines, at which point I hear you say: “We all know that already. We have learnt all about successful corporations and the reasons behind their success stories.”<br />
<br />
True, many MBA or similar professional education curricula teach the potential manager how to make a business work. What usually does not get taught though is one generally, and especially in any start-up where work hours never seem to end and salaries always seem be too low, has little time to reflect on the latest organizational behavior theories or how to market a product utilizing not only a large number of human resources, but also a long time and, more importantly, a hefty amount out of the limited marketing budget.<br />
<br />
So, to give you at least one checklist that you could utilize in your organization, the successful airlines I have experienced all have a number of factors in common. These airlines preach: <br />
<ul>
<li>Passion, </li>
<li>Accountability, </li>
<li>Service, </li>
<li>Integrity, and </li>
<li>Teamwork. </li>
</ul>
<div>
</div>
<div>
Mind the word preach. It has become a common habit for organizations to print fashionable company values and stick them into fancy frames and onto the walls of the boardroom and the CEO’s office where they soon get dusted-in, if they are lucky, or indeed get over taped by the latest snapshots of the fancy management holidays on the Bahamas.</div>
<div>
</div>
<div>
<strong>SAFETY</strong>! You thought I had forgotten about this ever so important topic, right? Actually, I have not. True, safety is certainly the most important business process in any company. Luckily, I know rather few companies that prefer a buck regardless the way it has been generated. And I do believe that our industry is a shining example when it comes to a safe environment. Yet, and let the flak begin, safety has become too rigid a process. Nowadays, safety often hampers valuable and right business processes by burdening them with over cautiousness consequently often making them lose their credibility and viability. Safety is paramount, no doubt about that. Lives and health depend on it. Nevertheless, safety should be common sense. No employee in his right mind would physically work on an active runway. And if he does, get him a job as an accountant or HR assistant far away from danger. Why do we need to send workers on courses where they are taught the procedures to dodge landing aircraft? It costs the airport a lot of money, often does not really improve the mind of the employee, and, most importantly, it does not make any common sense!</div>
<div>
</div>
<div>
Unfortunately, large organizations, and airlines form no exception, lose their entrepreneurial spirit once they reach a more mature business stage. A common strategy seems to be to ‘go with the flow’ and start focusing more on the competition than to follow its own, hopefully, predetermined path to glory. Almost any mature airline suffers of this syndrome. Once it has become harder and harder to find viable routes, products, and services, the airline tends to benchmark itself financially against its nearest rival and determine its business plan accordingly. The usual immediate consequences? Mergers and acquisitions of some sort. Especially where the airline’s regional target audience is limited in size, we can observe this trend almost on a weekly basis.</div>
<div>
</div>
<div>
If one were to be cynical, and believe me that the twenty odd years in airline management have indeed rendered me cynical, one could even argue that a merger between two airlines is the last and final stage of the newly formed airline. It is, so to speak, the beginning of the end. Exaggeration? Possibly, yet one only has to study airline history a little bit to realize that this statement - although certainly taken to the extreme - quite possibly could be true. </div>
<div>
</div>
<div>
A word of warning though: if there is one thing that I have come to realize in my illustrious, and sometimes not so illustrious, career, it certainly is that applying a few elsewhere proven tactics do not necessarily generate success. So, as much as I would like to give you a foolproof recipe to airline success, this is not an achievable goal. This book, however, relies on my and aviation industry greater minds. So the least it does is to tell you how not to start an airline. And that, I believe, is already something. I wish I had something like this when I started my airlines. It probably would have prevented me from establishing quite a few failed concepts. But then, it also would have taken quite a bit of fun out of my life. So actually, I really have gotten the best out of two worlds: dodging the Black Holes in the Sky while having fun! Pretty good, really.</div>
<div>
</div>
<div>
Alex de Vos</div>
<div>
Dubai, October 2012</div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com2tag:blogger.com,1999:blog-4397842961352774165.post-46320466166779211502012-08-23T13:59:00.003+04:002013-03-03T16:52:28.915+04:00MBA Thesis: REGIONAL AIR PASSENGER SERVICES IN THE GCC: AN ECONOMIC VIABLE MODEL?<span style="color: yellow;">The executive summary of my MBA thesis. It took a long time to get to this stage and although I fully realize the shortcomings of my publication, I am still pretty proud of the achievement. After all, it is already hard enough to successfully balance your professional life with your personal life when you are setting-up airlines in remote/hostile areas for a living. Adding a full MBA study to a day that has only 24 hours is even more challenging. Apologies to my son for not being able to play "pirates" with me as often as he wanted to. I make it up to you!</span><br />
<br />
<span style="color: yellow;">As always, if you liked more information, please do not hesitate to contact me!</span><br />
<br />
The Gulf Cooperation Council member states are nowadays at the forefront of aviation technology. A smart vision, in combination with funding generated by hydrocarbon generated wealth and strategic planning has led a number of GCC countries to become global aviation hubs. However, the prevailing airline models utilized in the region prominently miss the one of a dedicated regional air carrier. Traditionally, regional air carriers operating smaller aircraft are perceived as old-fashioned, even unsafe. In addition, with profit margins on regional airlines usually being smaller than with traditional long-haul carriers due to overhead spread, the model generally lacks of highly needed funding, be it seed or bridge capital.<br />
<br />
As a potential consequence and with the exception of early aviation days in the GCC, there has been little interest in regional passenger air services. The aircraft used early on by airlines were mostly twin engine piston aircraft, such as the famous DC 3 that missed the range capabilities of current modern airliners. At the same time, European airlines, such as KLM, had already an extensive long range route network between Europe and the Far East with technical stops in the Middle East making it difficult for new airlines to enter the already served market.<br />
<br />
Current legislation does not foresee for a firm definition of the term regional airline. Hence, this study establishes its own within relevant parameters as airlines operating the majority of their fleet in a passenger configuration of less than 108 seats or its weight equivalent in a cargo configuration. The typical route network consists of low-density scheduled routes usually with a flight-time of less than two hours.<br />
<br />
This study evaluates the model of a so defined dedicated regional air carrier. It scrutinizes historic, present and future trends, financials, and threats to the model of a regional airline within the GCC. It relies on three detached sets of research data, namely an on-line to the general public living in the UAE distributed survey questionnaire, an in-depth interview with aviation experts living in the UAE, and the business plan drafted by Gulf Executive Aviation for Eastern Express, a start-up dedicated regional air carrier out of Fujairah, United Arab Emirates.<br />
<br />
The so received data - the primary research questionnaire has been sampled according to the stratified random probability method with the strata in-line with the target audience groups established by Eastern Express - has been further analyzed and a best practice model including recommendations to current and potential regional airlines in the GCC has been established. In the discussion of this study, the evaluated model is compared with the one in the business plan by Gulf Executive Aviation, the outcome of which contributing to general regional carrier model in the GCC.<br />
<br />
With aircraft capabilities and technology changing and improving, there is a realistic possibility that the GCC will be unable to rely on its current transit model for much longer. If the region wants to continue being at the forefront of aviation, alternatives need to be thought of and with the missing ground infrastructure for regional travel, dedicated regional airlines might very well be part of the alternative.<br />
<br />
Yet a newly to be established air service dedicated to regional traffic would probably be not without risks to implement. Not only knows the GCC few secondary airports that are able to cater for smaller aircraft, the model has also not been tested before in the region making it a fairly high risk one for its shareholders. Operational and financial benchmarking for any start-up regional carrier is therefore almost impossible.<br />
<br />
In addition, one can argue that at some point the already planned expansion of regional land services infrastructure will indeed be commissioned, taking away at least some share of the regional air service. Profitability could therefore very well be reduced to unsustainable levels if the projected demand exceeds reality.<br />
<br />
In order to evaluate the (financial) risk of a dedicated regional airline in the GCC, this study frames its research questions asked as follows:<br />
<ul>
<li>Why has there historically been little interest by the established GCC carriers to address regional air passenger services?</li>
<li>What are the key success factors for a regional airline within the GCC?</li>
<li>Similarly, what are the main challenges for a new entrant to the regional air industry in the GCC? </li>
</ul>
<div>
The research outcome not only serves as a supporting model for existing and potential regional airlines in the GCC, it also enhances available literature on regional airlines in general. A highly needed objective since relevant literature and benchmarks on regional air carriers, and especially in the GCC region, are limited available.</div>
<br />
Due to travel and time constraints, this study is limited to a potential UAE base of the regional operations. At the same time, it opens doors for further research into adjacent topics, such as regional airlines’ modus operandi worldwide and in the region, their key performance indicators, their alternatives (especially in the GCC), and their overall best practices model is needed.<br />
<br />
One might argue that airline is airline, be it a long-haul, no-frills, or regional one. Yet, as this study shows, there are small but relevant differences between the three models. Especially when operational costs are concerned, where aircraft fuel costs within a regional airline is not capable of being spread-out over a large number of available seat-kilometers, directly influencing ticket prices.<br />
<br />
As with any new entrant to an industry, challenges and threats are part of the business model. In the case of a dedicated regional airline in the GCC, this study concludes the following ones:<br />
<ul>
<li>Personal cars on short routes;</li>
<li>Established airlines on longer routes; and potentially</li>
<li>Potentially a perceived negative stigma of financially viable turbo-prop aircraft. </li>
</ul>
<div>
This study concludes that a dedicated regional air carrier in the GCC has good potential to be an economic viable model, albeit a risky one, if certain strategic parameters and key success factors are managed properly, them being:</div>
<ul>
<li>Frequency offered;</li>
<li>Ticket price;</li>
<li>Connectivity created;</li>
<li>Aircraft type operated; </li>
<li>Services offered; and</li>
<li>Sales outlets strategy.</li>
</ul>
By doing so, the projected 800% increase in passenger numbers by the consultancy company Gulf Executive Aviation over a span of a few years only might certainly be realistic. Yet, at the same time, any dedicated regional airline is advised to focus on the essentials, the demand spectrum by the airline’s targeted audience, and to keep as flexible a model as possible in order to be able to adapt the business model, by nature always a smaller, and thus less static one than the one of the larger long-haul carriers, rapidly to changing market demands.Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com1tag:blogger.com,1999:blog-4397842961352774165.post-86262200122712846842012-06-26T14:15:00.001+04:002013-02-20T13:47:01.171+04:00Change of flightpath for UAE airline<span style="color: yellow;">And here we go again... another sensationalistic masterpiece on us. Check-out the aircraft picture and the so-called quote by me out of context (by the way, the second time this quality newspaper has used exactly this out of context quote). Do journalists actually care what they write about? Here is the link: </span><a href="http://www.7daysindubai.com/Change-flightpath-UAE-airline/story-16442768-detail/story.html">http://www.7daysindubai.com/Change-flightpath-UAE-airline/story-16442768-detail/story.html</a><br />
<br />
<br />
A UAE airline that previously announced plans to operate the country’s first ever domestic air routes has said it’s inaugural flight will take-off next week - headed for war-torn Somalia. Attempts by Fujairah-based carrier Eastern Express to provide flights between the emirate and Abu Dhabi, have been stymied by delays.<br />
<br />
<br />
Fleet delivery problems clipped the company’s wings when it tried to jet into UAE skies in the first quarter of this year.<br />
<br />
<br />
<img src="http://www.7daysindubai.com/images/localpeople/ugc-images/276156/Article/images/16442768/3906993.png" /><br />
<br />
<br />
A UAE airline that previously announced plans to operate the country’s first ever domestic air routes has said it’s inaugural flight will take-off next week - headed for war-torn Somalia.<br />
<br />
<br />
Flying to highly troubled Somalia however - which has topped international think-tank the Fund for Peace’s ‘failed state’ index for the past five years - seems to present no such problems for the fledgling carrier. “There has always been a need for internal and regional flights in Somalia,” the airline’s business development manager Mike Carvath told 7DAYS.<br />
<br />
<br />
“Somalia is a huge place but a lot of the country’s roads are unsafe and unsuitable.” Eastern Express will initially fly to Garowe in the north east of Somalia and the country’s main port of Basoso which serves the Gulf of Aden - the scene of numerous heists by ruthless Somali pirates.<br />
<br />
<br />
However, Carvath is confident there will be no shortage of flyers from the UAE, particularly among the substantial number of Somalis living in Dubai. “We expect to get business from businessmen and their families,” he says. Eastern Express plans to serve Somalia twice a week - and is targeting 30 to 35 passengers per flight. However the firm will do so from Sharjah International Airport, rather than Fujairah.<br />
<br />
<br />
The airline alsos plan to fly to Djibouti, Addis Ababa in Ethiopia, Nairobi in Kenya and - in time - the Somali capital of Mogadishu. Eastern Express admitted Fujairah-based domestic services to other emirates in the UAE were “still delayed” - but declined to say for how much longer.<br />
<br />
<br />
In March this year, CEO Alex De Vos admitted to delegates at an aviation conference in Dubai that the delay of the carrier’s launch had “financial implications” for the Fujairah flyer, adding: “A lot of other businesses would have shut its doors and said ‘it’s just not worth it’ - yes, but we’re stupid.”Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com0tag:blogger.com,1999:blog-4397842961352774165.post-60124011418934757212012-06-26T14:01:00.000+04:002013-02-20T13:35:24.961+04:00<span style="color: yellow;">Appreciation time!</span><br />
<br />
The Higher College of Technology - Fujairah awarded members of Eastern Express today for our contribution towards HCT's Marketing and Human Reosurces classes. Pretty nice, right?<br />
<br />
And I must say that I was suitably impressed by the presentations on the respective subjects. Well done, ladies!<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfQHObXICs5k2I2rvUq0hK52_0q76bR5b1j0Qx9TrnXqz3X9UY8PLsCNieoeUZ0uK6MAk8D6q_bYYXFpEizphwKcZDb30R0ZNmFxJox6H9Te0vJRbUtBGwTuBWL3N2bDkh7U_FUVihmDM/s1600/HCT+Certificate+of+Appreciation.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="232" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfQHObXICs5k2I2rvUq0hK52_0q76bR5b1j0Qx9TrnXqz3X9UY8PLsCNieoeUZ0uK6MAk8D6q_bYYXFpEizphwKcZDb30R0ZNmFxJox6H9Te0vJRbUtBGwTuBWL3N2bDkh7U_FUVihmDM/s320/HCT+Certificate+of+Appreciation.jpg" width="320" /></a></div>
Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com0tag:blogger.com,1999:blog-4397842961352774165.post-69199986561034888782012-04-13T11:56:00.000+04:002013-02-20T13:34:14.196+04:00Living in the GCC?For those of you who missed the chance to take part in my MBA dissertation because you do not reside within the UAE, here is your chance (but only if you live in the GCC, please). Don't say that I am not a nice guy!<br /><br /><a href="http://freeonlinesurveys.com/s.asp?sid=3np7vx8zsgw7pkj27988">http://freeonlinesurveys.com/s.asp?sid=3np7vx8zsgw7pkj27988</a><br /><br />Thank you for your time!Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com0tag:blogger.com,1999:blog-4397842961352774165.post-59958106240674509272012-04-02T13:43:00.001+04:002013-02-20T13:33:31.028+04:00Living in the UAE? Please take 5 minutes to fill-in the below questionnaire.Dissertation time for my MBA! I would appreciate if you spare 5 minutes of your busy time and fill-in the questionnaire at the link provided below. Thank you!<br /><br /><a href="http://freeonlinesurveys.com/s.asp?sid=vvauxwyme8up3gk18377">MBA survey on GCC regional services</a>Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com0tag:blogger.com,1999:blog-4397842961352774165.post-39986911157231281872012-04-01T18:44:00.000+04:002013-02-20T13:32:43.369+04:00Speech during the Aviation Outlook MENA March 2012<span style="color: yellow;">Here I was, invited to give a presentation to my industry peers. Just after Emirates and Air Egypt Express, so the companies kept getting smaller. Good to know that after my presentation we all had lunch or else we would have ended with a model aircraft enthusiast.</span><br /><br /><span style="color: yellow;">My Business Development Manager was probably more nervous than I was since he expected me to spill the beans but obviously I did not. Unfortunately, I am unable to upload the slides I used during the speech. If you are interested in them, please drop me a line.</span><br />Good afternoon, Ladies and Gentlemen.<br /><br />What a day it has been so far. After the coffee break, we started off with arguably the number 1 in the region, moved on to a regional carrier, and now we have reached domestic services. It is a good thing that there is no presentation after mine because we probably would be hearing about a bicycle service between the Dubai Mall and Burj Khalifa!<br /><br />It is a real pleasure for a manager of a small start-up regional airline to speak alongside all these distinguished hosts and to interact with esteemed industry colleagues such as you. So first of all I would like to thank Terrapinn for inviting me here to speak and special thanks to Lynsey for her patience shown with me.<br /><br />My name is Alex de Vos, and I am the CEO for Eastern Express in Fujairah, a start-up regional carrier for the UAE. Eastern Express has been incorporated last summer and is scheduled to launch operations on domestic and regional routes summer 2012.<br /><br />So here I am, talking to you about UAE domestic services. Domestic services in a country that figures high on the economic and political world map yet at the same time has only twice the size of my home country, the Netherlands. And I am sure you all know that in Holland we have signs in our trains stating that it is forbidden to lean out of the window without having a passport on you since you would technically enter Germany.<br /><br />Just last week I was at a seminar in Abu Dhabi and one of the UAE’s high profile consultants approached me. While taking me aside, he told me bluntly: “Alex, your project is not going to work. The country is too small and besides, your aircraft choice is all wrong.” Of course, I later found out that the very same consultant had secured a project with one of our competitors and that he had previously unsuccessfully tried to sell us a turbo-prop aircraft. The very same aircraft he is now convinced will not work on our routes. So I am obviously somewhat biased of his sincere intentions but nevertheless, his opinion seems to be the norm in the UAE.<br /><br />So what would make us, and with us our stakeholders involved, think that domestic air services are going to work in such a small country? Bear with me for the next few minutes and I will tell you why domestic air services are indeed needed for the UAE in order to progress even further economically.<br /><br />A long time ago, sometimes during the last century even, I, as all young lads, went to my father and asked him for career advice. “You want to make money, you go into banks or insurance” was his advice before he returned to his science section of the newspaper. And as all good lads, I ignored his advice completely and went into aviation. Why? Because I wanted to be surrounded by people like Bob Crandall.<br />
Bob arguably is one of THE biggest names in aviation. He has been awarded with the Tony Jannus award; he has practically invented yield management, and he led an airline successfully through deregulation. Major achievements that keep inspiring most industry colleagues and they certainly keep inspiring me. Not that I dare to compare myself with Mr. Crandall, yet we have one thing at least in common, we both call ‘a spade a spade’, which, undoubtedly, makes us both unpopular with many regulatory bodies from time-to-time. Yet, this airline is not all about me, so I believe this a small price to pay as long as I help the airline to prosper.<br /><br />One of the aspects of how-to-make-an-airline-work is to sit back, relax and reflect on the airline’s strategy. Now I must warn you: I have scored a very weak mark on my strategy paper for my MBA-course so don’t take my views on this complex topic as carved in stone! Yet I have learnt a thing or two from my professor and probably the most important one is: kan het niet zoals het moet dan moet het maar zoals het kan, which roughly translates into: when it is not possible the way it ought to be done then it ought to be done the way it is possible. Apologies for the lousy translation, English was apparently not my strong point either!<br /><br />So here in this beautiful country, modern in any way, and probably going to, if not already, leading the way in transport, what public transport is available to us? Taxi? - yes; Bus? - yes and no. You can take a bus from Fujairah via Sharjah to Dubai and then get on another bus to Abu Dhabi but the country border stops the busline. Train? - no, not yet, at least. Aircraft? Well, we are getting there…And what would the public like to see available to them? Obviously the largest choice of transportation means available to them, and that, if you like it or not, includes domestic/regional services. Here is why:<br /><br />The famous Gulf Aviation, the holy grail of the airlines in the Middle East. Forced to fly, due to aircraft performance restrictions amongst other reasons, regionally. Let BOAC do the profitable long-haul routes, and leave the much harder, lower operating margin routes to the regionals. I am pretty sure this was the way BOAC thought back then.<br /><br />However, this short-haul focus ended when regional airlines, and by that I mean airlines in the region, were capable of acquiring modern, longer range aircraft. The consequence?<br /><br />A320s, B737s, A330s, A380s even… all very modern, exceptionally comfortable, highly reliant and safe aircraft. Efficient too, but only within their respective design envelopes. 25 passengers on a 40 minutes flight in a wide-body? Normal here and obviously very nice for the passengers but the efficiency factor? Well, maybe not so great.<br /><br />Now, don’t get me wrong. I do believe the GCC has a few of the finest airlines in the world. Within a few decades, the regionals managed to challenge established airlines all over the world. Even if the focus is slowly shifting to the east, to the Chinas and Cambodias, nobody can take this achievement away from them.<br /><br />I believe it to be an accepted aviation business statement that more money is made on medium and long-haul routes. So quite rightly, airlines in the region chose their fleet types according to maximum efficiency on these routes. That is the perfect smart thing to do from a business perspective. Yet at the same time people in the UAE wanting to travel domestically are restricted in their transport choice to land transport means.<br /><br />Fujairah International Airport to Abu Dhabi International Airport equals 260km. With the new highway stretch from Fujairah connecting into the old Kalba to Sharjah highway, it takes you around 3 hours to reach Abu Dhabi, assuming no traffic bottlenecks.<br /><br />Yes, I have heard from numerous people, including police officers, I might add, that they can do it in around 2 hours. But believe me, this way you spend more on speeding fines than you would on an air ticket. I speak from experience, last week I had to pay for two speeding tickets coming from Abu Dhabi. Apart from being mad at myself, my wife is now also mad at me because I could not buy het that shiny necklace anymore. Is that really worth it?<br />
A flight takes around 30 minutes, add to that 30 minutes embarking and 15 minutes disembarking time and you have saved almost 60% of your travel time.<br /><br />Of course, as has been argued before, by driving yourself you have the advantage of a car at both ends. True, yet Eastern Express provides you with a pick-up / drop-off service. So instead of traveling more than 6 hours for a business meeting in Abu Dhabi or Fujairah, going by air means a travel time of only 2 ½ hours both ways. I would claim this to be worth serious consideration, if nothing else.<br /><br />True, once we had made our plans known to the public, some companies and individuals had a close look at our business plan, modified it slightly and started planning the execution of domestic and regional operations. Do I see there one or two faces turning pink? Let me assure you, we do mind only to a limited extent since Eastern Express has worked on the concept for almost 3 years now and that time span cannot be caught-up within a few months time only.<br /><br />We have done our homework, some of it exceptionally well and some of it not that well. Yet, what we have definitely achieved by now is that we are on the map of the stakeholders involved. And fortunately, I am in a position to say today that all stakeholders support us. I am sure you all know that this ‘getting there’ time span takes always longer than one might hope for. And here we are, having achieved it to a large portion.<br /><br />We have been, and still are, introducing the product to potential passengers, to the relevant authorities, and to industry peers. We are confident that we have a head-start over potential competitors. In the end it is the public that decides whose product will succeed. Competition never kills a business, poor and hasty planning and execution, however, does.<br /><br />We have been fortunate enough to attract high caliber and regionally very experienced staff. Some of them actually do sit here somewhere in the audience. As if we would not have enough to do at the office! So please remind me to give them a very stern warning during lunch! Just kidding, of course. What is true, however, is that without them our journey so far would not have been possible. Period. So before you think to yourself: “that Dutch chap is actually pretty smart”, give those guys the credit they deserve.<br /><br />Of course, we have had our difficulties along the way. I believe this to be normal for any kind of start-up business. It is general accepted business acumen that you try to stop potential competition as early as possible from operating. And it has happened to us numerous times. As a consequence, we have been forced to delay our launch from Q1 2012 to Q2 2012.<br /><br />Our original concept foresaw an ACMI-leased aircraft fleet. Shortly before launch date, we were officially informed that this concept would not be allowed. So we switched the aircraft acquisition model around, with all subsequent financial implications. Fortunately, we were able to raise the additional capital needed that will cover the increased short-termed negative cash-flow.<br /><br />Again, we have been lucky enough to have the continuous backing of a number of stakeholders involved. Many other astute businessmen would have closed shop and cut their losses when confronted with the obstacles laid into our path. Yet, everybody at Eastern Express, from staff, over management and board level, to external stakeholders believes in the product and I am convinced that the received sound support will materialize into a superior quality product.<br />
Sure, there is still the perception in the region that turbo-props are old-fashioned and unsafe. Yet here we are: starting with turbo-prop aircraft on our routes. So yes, we make our lives that bit more difficult by educating our market segments that turbo-props are actually perfectly safe. They even have numerous advantages over jets on shorter routes. Advantages that I certainly do not need to describe here for you.<br /><br />I agree with you this to-be-undertaken education process forms a risk to our business model. Fortunately, we have some risk mitigation factors built-in but in light of the earlier addressed competition, I am not going to disclose them to you!<br /><br />Somebody is always first. Southwest Airlines was. And look where they are now. And Air Arabia was first in the region. Of course, those success stories do not guarantee the success of Eastern Express. As much as we all would like to see Eastern Express prosper; the one thing that we already have achieved and nobody can take away from us is that we have changed the mindset of the aviation trade in the region.<br /><br />With all the aviation firsts and grandeurs that the region currently possesses, it becomes increasingly difficult for our industry to find potential lucrative regional markets. I am not claiming that we have invented the wheel, far from that. Numerous airlines have launched successful, some very successful, and some plain failed domestic carriers in other parts of the world. Yet, as the attempts to copy our model have shown, aviation professionals in the region start realizing that there always will be another market niche to conquer.<br /><br />In the end it really does not matter who comes-in first and who second. What matters though is that each business, and contrary to what many believe airlines are a business, delivers a superior product and adds value to its socio-economic environment. One way to do so is to talk to each other from early beginnings onwards.<br /><br />I would like to see other entities and individuals buzzing us and saying: “hey, here is what we are going to do.” Naïve? Perhaps, yet what would be lost in such a scenario? Don’t be afraid! We do not have the resources to take-over your business model. And at least this way we would coexist rather than compete with each other.<br /><br />4 different continents, 4 different successful airlines. The thing in common though is that they all add value to Big Brother. As Big Brother, what would you rather have: flying 30 minutes with your very own wide-body hauling 25 passengers or outsource it to a dedicated regional airline, leaving the financial risk mostly with them?<br /><br />My choice would be obvious. And I believe that is indeed an obvious choice for everybody involved. We have looked at the UAE and I strongly believe we have seen what the population wants: a choice of travel possibilities.<br /><br />And with that, I thank you again for your patience. Enjoy the rest of the illustrious speakers, shukran and tot ziens in the UAE airspace.Alex de Voshttp://www.blogger.com/profile/03872998930402832170noreply@blogger.com2