News for Wednesday, July 01, 2009

@...Boeing, red-faced after delaying the test flight of its new Dreamliner 787, may inadvertently have staved off some order deferrals or cancellations by global airlines with sagging traffic. Since the company announced the latest delay last week, its customers have voiced their disappointment and frustration. But only one carrier -- Australia's Qantas Airways -- has cancelled Dreamliner orders. Qantas ditched 15 787 orders, blaming the flagging economy, not the 787 delay. Experts say it is entirely possible that behind their public displays of discontent, some airlines are secretly pleased they can put off taking delivery of expensive wide-body aircraft they may not be able to fill. "In some ways, it might work to their benefit," said Alex Hamilton, Jesup & Lamont Securities analyst. "Instead of making the cold, hard decision of having to defer it, certainly (Boeing) doing it kind of works. I absolutely think it could help." Boeing, the world's No. 2 planemaker behind Airbus, said last week it would postpone the first 787 test flight, which was to occur in the second quarter. The company cited a structural flaw but did not say when it expected to fly or deliver the plane, which is already two years behind its original schedule. The carbon-composite 787 promises to usher in an era of lighter, more fuel-efficient aircraft. It is one of the most hotly anticipated planes as airlines grapple with rising fuel prices. Boeing data show 866 orders on the books from more than 50 customers. The company has reported 45 787 order cancellations so far this year -- including the 15 by Qantas. Experts wonder if more cancellations might be on the way as the global economic recession grinds on and demand for international travel sags. The International Air Transport Association said on Tuesday that the world's airlines lost more than USD$3 billion in the first quarter of 2009. The trade group predicts full-year losses of USD$9 billion. Given the industry weakness, the Qantas cancellations might have occurred even without the Boeing delay, said Richard Aboulafia, an aerospace expert at the Teal Group. "You look at what's been happening with traffic, especially premium traffic, especially premium Asian traffic, that really kind of gives this more of a context," he said. "Traffic is just not making a recovery." "People sound almost relieved to not have to take planes right now," Aboulafia said. Boeing collects payment only when deliveries are made. Hamilton said Delta Air Lines, which bought Northwest Airlines last year and inherited 18 787 orders, may dump those orders to trim capacity and simplify its newly merged fleet. Delta has not commented on the possibility. Despite the relief some airlines might feel at not having to decide whether to keep their 787 orders, others would rather be able to make that decision themselves, said airline consultant Robert Mann. "From a capacity planner's perspective, new delays on the 787 programme move beyond frustrating toward incredulity," Mann said. "And they raise new and more serious questions about programme credibility -- its scalability, delivery pacing and performance benefits."

@...All Nippon Airways, Japan's second-largest airline, plans to raise more than JPY150 billion yen (USD$1.56 billion) in a public share offering, five sources familiar with the matter said. The share offering, its first in more than 3 years, will be used to shore up its finances following a sharp downturn in its core business and for new investment ahead of the expansion of Tokyo's Haneda Airport, the sources said. ANA could announce the planned share offering as early as Wednesday, the sources said, speaking on condition of anonymity because the deal has not been made public. A spokesman for ANA declined to comment. Raising JPY150 billion would require more than 400 million new shares at Tuesday's closing stock price, boosting the number of shares outstanding by more than 20 percent. As the global economic slump hit demand for air travel, ANA reported a group net loss of JPY4.3 billion for the year ended in March, its first annual loss in six years. By implementing plans to save JPY73 billion of costs, ANA expects to return to profit this year with a JPY3 billion net profit -- though the outlook for travel demand has been clouded somewhat by the global influenza outbreak. In addition to bolstering its finances, the fundraising is also aimed at preparing ANA for the expansion of Haneda Airport scheduled in the next 12 to 18 months.

@...A Yemenia Airbus A310-300 with 153 people on board, including 66 French nationals, crashed into the sea off the Indian Ocean archipelago of Comoros as it approached in bad weather early on Tuesday, officials said. A 14-year-old girl was found alive in the sea, Comoros Communications Minister Abdourahim Said Bakar said. Earlier reports had said the rescued child was five. The Paris airports authority said 66 French nationals were aboard the plane, which was flying the final leg of a trip from Paris and Marseille to Comoros via Yemen. A Yemeni aviation official said there were also nationals from Canada, Comoros, Ethiopia, Indonesia, Morocco, the Palestinian territories, the Philippines and Yemen on the plane. It is the second Airbus to plunge into the sea this month. An Air France Airbus A330-200 crashed into the Atlantic Ocean killing 228 people on board on June 1. A preliminary report on that crash is due on Thursday. The Paris-Marseille-Yemen leg of the Yemenia flight was flown by an Airbus A330. In Sanaa, those passengers who were flying on to the Comoros changed onto a second Yemenia plane, the A310 that crashed. FAULTS DETECTED French Transport Minister Dominique Bussereau said faults had been detected during inspections in France in 2007 on the Yemenia A310, and that it had not flown to France since. "The A310 in question was inspected in 2007 by the DGAC (French transport authorities) and they noticed a certain number of faults," he told the I-tele television channel. "The company was not on the black list but was subject to stricter checks on our part, and was due to be interviewed shortly by the European Union's safety committee." "The question we are asking... is whether you can collect people in a normal way on French territory and then put them in a plane that does not ensure their security. We do not want this to happen again," he said. Yemen's transport minister said the plane was thoroughly checked in May under Airbus supervision. "It was a comprehensive inspection carried out in Yemen... with experts from Airbus," Khaled Ibrahim al-Wazeer said from Sanaa. "It was in line with international standards." The EU suspended permission for Yemenia to maintain EU-registered planes in February after it failed a set of audit inspections, the EU's aviation safety agency said in Brussels. The move would not have affected the doomed Airbus A310 plane since it was registered in Yemen. But it provides further evidence of European concerns over the airline's operations after the EU Commission said the plane which crashed had sparked an EU inquiry two years ago. The EU's Transport Commissioner Antonio Tajani said it would contact Yemenia and planned to propose a global blacklist of airlines deemed unsafe. Yemenia is 51 percent owned by Yemen and 49 percent by Saudi Arabia. Its fleet includes two Airbus A330-200s, four Airbus A310-300s and four Boeing 737-800s, according to its website. French television showed pictures of friends and relatives of the passengers weeping at Paris's Charles de Gaulle airport, many of them railing at the airline. Families arriving at the airport in Marseille, where there is a large Comoran community, were met by Comoros consul Stephane Salord. "The Comorans save up for several months in the year to go to Comoros with their families. In this plane there were entire families, parents, children, elders who were with them." AIRBUS INVESTIGATORS Ibrahim Abdourazak, an official at a crisis centre in Comoros, said the 14-year-old girl was from a village in the centre of the Indian Ocean archipelago. Airbus said it was dispatching a team of investigators to the Comoros. It said the aircraft was built in 1990 and had been used by Yemenia since 1999. Its engines were built by Pratt & Whitney. A Yemenia official said there were 142 passengers including three infants, and 11 crew. The plane was flying to Moroni, capital of Grande Comore, the main island of the archipelago. "The weather conditions were rough; strong wind and high seas. The wind speed recorded on land at the airport was 61 kph (38 mph). There could be other factors," Mohammad al-Sumairi, deputy general manager for Yemenia operations said. The French military sent army and civilian medical teams, boats and divers to the crash site aboard a plane from the Indian Ocean island of Reunion. Comoros authorities sent small speedboats. France and the Comoros have enjoyed close ties since the islands' independence in 1975. France estimates 200,000 people from Comoros live in mainland France, and remittances from France are an important part of the islands' economy.

@...Frontier Airlines is scooting its animal-adorned tail out of the Yampa Valley after its first ski season here. Frontier won’t fly to Yampa Valley Regional Airport this winter, spokesman Steve Snyder confirmed Wednesday. Snyder said Frontier could return for future ski seasons. The Denver-based airline, which is in Chapter 11 bankruptcy, added flights from Denver to the Hayden airport last season. “This particular year there are a couple factors at work,” Snyder said. “First, the market didn’t really perform like we were hoping for, expecting for, last year, and we only have a limited number of aircraft, and we think there are some better opportunities for them.” The airline flew to YVRA from December to April using Bombardier Q400 aircraft operated by Lynx Aviation. On Mon­­day, Indianapolis-based Re­­pub­­lic Airways Holdings announced that it planned to buy Frontier. Frontier and Lynx would become wholly owned subsidiaries of Republic. Andy Wirth, Steamboat Ski & Resort Corp.’s senior vice president of marketing, and other Ski Corp. officials work with airlines to schedule flights each season. The resort and local businesses pay to guarantee a certain amount of revenue to airlines that fly to YVRA. Frontier wasn’t part of that program. Passenger numbers were down overall at YVRA in 2008-09. December through March deplanements, or arriving passengers, decreased 14.7 percent compared with the same period in 2007-08. December through March enplanements, or departing passengers, decreased 12.5 percent. Wirth said 2009-10 flight capacity is 12 percent less than in 2008-09. That’s compared with flights loaded in June 2008 and doesn’t necessarily account for adjustments airlines made during the season, Wirth said. It also doesn’t include last year’s Frontier seats. YVRA expects to see about 139,000 round-trip seats this year, compared with about 158,000 last year. Those numbers are comparable to the 2003-04 and 2004-05 seasons, Wirth said. They’re higher than 2005-06 numbers. “We recognize this is a step backward, but we think it’s prudent,” Wirth said. American Airlines, Contin­­ental Airlines, Delta Air Lines, Northwest Airlines and United Airlines flew to YVRA in 2008-09. Those airlines are scheduled to return. Delta acquired Northwest last year. Ski season flights will come in from Atlanta, Chicago, Dallas, Denver, Houston, Minneapolis, New York, Salt Lake City and Newark, N.J. “We think it’s very ample capacity to maintain Steam­boat’s accessibility,” Wirth said. Last year, airfares spiked during the key booking season because of soaring oil and jet fuel prices. They later dipped along with the economy. This year, Wirth has said he expects fares to be more reasonable. A spot check shows that a round-trip American Airlines ticket from Chicago to Hayden from Dec. 24 to Jan. 2, 2010, is about $490. A round-trip Continental ticket from Hous­ton to Hayden for the same time frame is about $453. Wirth attributed Frontier’s challenges partly to its late entry into the Steamboat market last year and to its having too much capacity. Frontier started with three daily Denver flights. Airport Manager Dave Rup­pel said he appreciated Fron­tier’s presence. “We enjoyed having the additional service up here,” he said. “I think it was a challenge for them competing with the ones that had been here.” Snyder said Frontier would continue flights to destinations including Aspen, Colorado Springs and Durango. The company will discontinue its Grand Junction flights, he said. Snyder wasn’t able to say how the acquisition by Republic might affect routes. “It’s probably still early in the process to tell,” he said. “What we’ve talked about from the beginning ... Frontier and Lynx will continue to operate as we have.” Ruppel said he was sorry to see Frontier go. “As far as the community goes, the more opportunities and options we can provide in the valley, the better we are,” he said.

@...The instructions in Air New Zealand’s new in-flight safety video are given by employees who are nude except for body paint and strategically placed seat belts. Passengers on the video’s maiden flight Monday — the 7 a.m. from Auckland to Wellington, on New Zealand’s North Island — may have never paid more rapt attention to the line “undo the seat belt by lifting the metal flap.” The video — and a related ad campaign — are rare moments of levity in an industry that has been savaged by drastic drop-offs in passenger travel and air freight. Airlines around the world, including Air New Zealand, have had to cut flights, employees and investment plans.

@...South Korea plans to spend about Won4,000bn ($3.1bn, €2.2bn, £1.9bn) by 2015 to expand Incheon Inter­national Airport – already voted the world’s best for its high-tech facilities. The government plans to add a new passenger terminal and expand its cargo terminal, roads and other infrastructure to help the airport handle 41 per cent more passengers a year and 29 per cent more cargo by 2015. Incheon’s expansion will be funded with the ­airport’s operating profit.

@...An Illinois Democrat is making airline luggage a top legislative priority. A bill U.S. Rep. Dan Lipinski introduced this month would set a federal limit on the size of carry-on bags and personal items passengers can take onto airliners. He says safety and convenience are at issue.

@...Travel between the U.S. and Cuba has been banned since 1962, but President Obama eased restrictions last spring. One new route to open up between the countries begins today on the Los Angeles-Havana route. Cuba Travel Services of Long Beach, Calif., will operate weekly flights on the 5-hour route every Tuesday and can accommodate 150 passengers. The route will be flown on Boeing 737-800 aircraft operated by Continental Airlines. Introductory fares start at $689, according to the Orange County Register. But the newspaper also warns would-be Cuba visitors to “read the fine print first.” The Register notes that while the Obama administration did ease rules, significant restrictions apply. The Register writes “the vast majority of travelers are expected to be those with relatives in Cuba. Others eligible include those on journalistic, educational and a small number of other ‘allowable’ trips.”

@...The Monday night (ET) crash of Yemenia Air's Airbus 310 flight near the Comoros Islands has analysts reinvigorating the timeless debate about the age of aircraft and performance. "Aircraft are usually retired due to economics rather than due to wearing out," said Bill Voss, president of the Flight Safety Foundation in Alexandria, Virginia, an international aviation safety think tank, told The Associated Press. The Yemenia aircraft that crashed into the Indian Ocean was 19 years old. Aviation safety experts believe that aircraft can remain in use for decades without incident, so long as the airline meets the manufacturer's inspection recommendations. One major problem contributing to the decline in older aircraft performance is the pirating of fake aircraft spare parts. This is a real problem with aircraft, like the A310, that are currently flying but no longer produced. The A310 hit the skies in the late 1970s, but Airbus discontinued the aircraft after it debuted the A320 and A330.

@...Airline customer satisfaction has declined for a third consecutive year to a four-year low in 2009, according to J.D. Power and Associates Tuesday. Even as airlines landed more flights on time this year, the decline is driven by lower passenger satisfaction with in-flight services, flight crews and costs and fees. Citing Department of Transportation data, the agency says the overall rate of on-time arrivals has improved by more than five percentage points from 2008 to 78% in 2009. "Any improvements in customer satisfaction are being offset by passenger displeasure with cutbacks on in-flight amenities, increases in fees and attitudes of flight crews,” says Dale Haines, senior director of the travel practice at J.D. Power and Associates, in a statement. The survey, which queried nearly 13,000 travelers, measured airlines in seven categories: cost and fees; flight crew; in-flight services; aircraft; boarding/deplaning/baggage; check-in; and reservation. For a fourth consecutive year, JetBlue ranked highest in the low-cost carrier segment. J.D. Power says it performed well in two of seven categories measured - aircraft and in-flight services. Southwest Airlines and WestJet followed, in a tie. "Southwest Airlines performs particularly well in the cost and fees and reservation measures. WestJet, included in the study for the first time in 2009, performs well in the boarding/deplaning/baggage; check-in; and flight crew measures," he says. Among the legacy network carriers, Alaska Airlines ranked highest for a second consecutive year. Continental and Delta, respectively, followed.

@...Transatlantic airline OpenSkies is in danger of shutting down as early as this fall, according to a report Tuesday by MarketWatch. The British Airways subsidiary was launched a year ago with all business class seats to target international road warriors who are willing to pay more than economy fares but less than traditional premium class prices. But the global recession and a steep drop in business travel could force British Airways to cease the operation, it says. British Airways is reviewing the viability of OpenSkies and is expected to issue a verdict in about two months, according to MarketWatch, quoting OpenSkies' managing director Dale Moss. OpenSkies, which is still not profitable, has four jets and two routes, flying to New York from Paris and Amsterdam. "I think there are a variety of options," Moss told MarketWatch. "I'm going to keep holding my fire on which one is my favorite or which is the one I think it's going to go to because I am just a part of the process, and I have to be very respectful of my shareholders." Moss says customer yields, or the price a passenger pays to fly one mile, "is not where we would like them to be."

@...Tough times in commercial aviation have forced St. Louis airport officials to reach into a new bag of tricks in their search for money. Among the revenue sources being considered are: — Selling the naming rights to concourses, parking garages or passenger lounges at Lambert-St. Louis International Airport. — Piping in music over the airport sound system with advertisements sprinkled into the mix. — Letting companies pass out samples of their products. The St. Louis Airport Authority today will consider hiring Airport Marketing Income LLC to identify some of these nontraditional sources of money. The company, based in Beaverton, Ore., does similar work at Boston's Logan International Airport, Cleveland Hopkins International Airport and several others in the U.S. "I think airports and any businesses have to be looking at everything," Lambert Director Richard Hrabko said. "Creating revenue and saving revenue. That's not new." Like their counterparts at other airports, Lambert officials say they are taking steps to replace revenue lost to sagging passenger counts and cuts to airline schedules. American Airlines, for instance, has slashed its schedule twice in the past year. The latest cuts will eliminate 18 departing flights. Passenger boardings were down to 2.53 million — or 15 percent — in St. Louis through May of this year, compared to 2.97 million during the same period in 2008, said Lambert spokesman Jeff Lea. Under the proposed three-year deal with the city of St. Louis — which operates Lambert — AMI would pay a fee to the city that would be based on a percentage of gross revenue. The agreement also must be approved by the city Estimate Board. RELATED LINKS bullet Get more business news, blogs and opinion Faced with a stubborn recession that has stunted the demand for air travel, airports are placing greater emphasis on nonaviation revenue sources, said Spencer Dickerson, senior executive vice president of the American Association of Airport Executives. Dickerson said some airports "are going through tremendous financial pain," and are delaying public works projects and shedding payroll in response to the downturn. While hardships have forced airports to seek new revenue, he said, major cities may not be ready to sell the naming rights to entire airports. "I think we are some ways away from that," Dickerson said. "Once you get into the naming rights of the whole airport, it gets complicated. You get politics involved." Hrabko said the city would get the final say on any revenue-generating proposals brought in by AMI, including any long-term naming rights agreements. Cleveland and Boston have sought bids to name airport parking facilities, but nothing has materialized. Operators of the Detroit Metropolitan Airport hired General Sports and Entertainment LLC to handle the naming rights for the new north terminal, which opened in September. "They are still actively pursuing sponsorships," said Michael Conway, an airport spokesman. "We are in a tough economic climate. Nobody is sponsoring anything now. It's pretty bad." In Boston, Logan International Airport earned about $800,000 last year through an agreement with AMI, said Jack Hemphill, business general manager at the Massachusetts Port Authority. "In the past couple of years, it has caught on," Hemphill said. Dunkin' Donuts, for instance, has large outdoor signs on a pedestrian walkway and 8-foot-tall Dunkin' coffee cups in airport terminals, he said. The airport now has its own "radio" network, featuring easy listening music punctuated by commercials and public service announcements produced by AMI. In Cleveland, AMI helped the airport reach a five-year deal making PepsiAmericas the official beverage provider at Cleveland Hopkins International Airport. More airports have turned to companies such as AMI during the latest downturn, said Julie Olson, the company's director of marketing. Despite the sluggish economy, companies still want to place their brands in front of the traveling public. "You have this captive audience," Olson said. "It's a very high-end demographic."

@...United Airlines has caused an uproar among travel agents with plans to force them to the pay credit-card fees when their customers buy tickets with plastic. The agents say it's an unfair move by United to shift a cost of its business on to their backs. They add that if other airlines copy United's move, it will end up costing consumers because agents will pass along the fee. United, the nation's third-largest airline, sent notices to some travel agents in the past two weeks saying that beginning July 20, they must pay the credit-card fee when leisure or corporate customers buy tickets with Visa, MasterCard, American Express or another card. In the notice, a United vice-president told the agencies to report the sale to the airline as a cash transaction. He warned that agencies that try to assign the credit-card processing fee to United's account would be dinged $75 per ticket. Credit card companies charge, on average, between 2 per cent and 2.5 per cent of the transaction amount per card swipe, said Friedman, Billings, Ramsey&Co. analyst Scott Valentin. He noted the fee a card company will charge a merchant varies by the size of the transactions and number of transactions completed each month. So for example, a credit card company might charge a smaller fee per transaction for Wal-Mart than it would a local mom-and-pop store. United won't say how many travel agencies got the notice or exactly how they were selected. Some agents believe United picked on smaller agencies or ones that do little business with United to minimize the hard feelings if the airline drops the plan. The move could push agencies to buy tickets for their customers on United's Web site rather than using one of the global airline ticket distribution systems such as Sabre and Galileo. That would force United to foot the credit-card fees but avoid paying fees to the distribution systems. It's easy to see why United would consider such a move. United parent UAL Corp. lost $382 million in the first quarter after losing $5.35 billion last year, and some airline analysts rank it behind only US Airways in having the greatest risk of falling into bankruptcy protection. Chicago-based United has been aggressively cutting costs to match a steep decline in traffic, especially in lucrative first-and business-class tickets. Like other airlines, it has imposed fees on baggage and other items, and expects to raise $1.1 billion this year with those charges. "Credit-card processing costs are escalating at a high rate and represent several hundred million dollars each year," says United spokeswoman Robin Urbanski. "We're exploring ways in the current economic environment to reduce our costs and run an efficient airline." The move has drawn opposition from the American Society of Travel Agents and the Business Travel Coalition, whose leaders say they will ask federal and state officials to investigate possible collusion if other airlines follow United's lead. Kevin Mitchell, president of the travel coalition, called United's move a trial balloon, comparing it to an effort by Northwest Airlines to impose a distribution-cost surcharge on travel agents in 2004. Northwest backed down. Travel agents, who were forced to adapt when airlines took away their commissions on tickets several years ago, say forcing them to pay United's credit-card fees on merchants is a step too far. "The credit card fee should be a cost of doing business by the maker of the product, whether it's an airline or a store," says Jean Covelli, president of The Travel Team Inc., an agency in Buffalo, N.Y. Agents say they will be forced to pass the fee on to their customers, and it's not spare change. "We have multimillion-dollar accounts, so you can see what a 3 per cent fee would do," says Covelli. Agents also said consumers wouldn't be able to get their credit card company to resolve a dispute with United because the card transaction would be through the agent instead. Chris Russo, owner of Travel Partners in Colorado, said United's goal might be to shift more ticket sales to its own Web site, something airlines have been trying to do for years. "We look at this as a very large threat to our ability to compete at selling airline tickets," Russo said. "We are their largest distribution system, but we're also the one they think costs them the most money." Russo says if United's plan sticks, he'll have to shift more of his work to selling cruises, tours and vacation packages, something he started doing when commissions were cut. "We'll have to reinvent ourselves again, but we'll survive," the travel agent says. "We were supposed to be gone a long time ago."

@...Travelers are increasingly dissatisfied with airline service as carriers cut in-flight benefits and increase fees, according to a study released Tuesday. Overall customer satisfaction dropped for the third consecutive year to a four-year low, J.D. Power and Associates said. Among the traditional full-service carriers, Alaska Airlines had the best customer satisfaction score, performing well in customers’ appraisals of flight crew, aircraft, boarding/deplaning/baggage, check-in and reservation categories. Continental Airlines was No. 2. The study also looked at in-flight services and costs and fees. Fort Worth-based American Airlines was "about average," the study said, with several airlines scoring higher. Northwest Airlines, United Airlines and US Airways lagged behind American among the full-service carriers. Among what J.D. Power classified as low-cost carriers, JetBlue Airways ranked the highest for the fourth year in a row. Dallas-based Southwest Airlines tied WestJet Airlines for second. Southwest was the only airline in the study that improved overall in 2009 compared with last year, with higher scores in reservations, check-in and boarding/deplaning/baggage. "Despite the economic stresses that airlines are under, they are recognizing the value of passengers’ time and trying to make air travel more expedient and efficient," said Dale Haines, senior director of the travel practice at J.D. Power. "Unfortunately, any improvements in customer satisfaction are being offset by passenger displeasure with cutbacks on in-flight services, increases in fees, and issues with the helpfulness and courtesy of flight crews." Although fliers were less satisfied in 2009, they reported that flight delays decreased by eight minutes and average wait times to check baggage or to get boarding passes dropped to 12 minutes, down from 14 in 2008. J.D. Power conducted the study between May 2008 and May 2009 and included responses from more than 12,900 passengers.

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