Friday, 25 February 2011

Cool KLM commercial

As promised in a previous post, here is another imaginative airline commercial, this time from KLM. It is remarkable how KLM seems to be one of the airlines that best understand the power of new media when it comes to marketing and have not hesitated to experiment: we have seen it in situations of crisis as well as on a more pleasant context. Keep it on!

(h/t @brandedskies)

Wednesday, 23 February 2011

Allplane quoted at AirObserver blog: commenting the new scenario at Girona airport after Ryanair's massive route cancellation

In this blog I speak often about the constantly evolving situation at Barcelona and Girona airports. It is a very interesting case of interaction, in one single metropolitan market (Barcelona-Girona-Reus) of pure low cost players (Ryanair), airlines developing an hybrid model (Vueling), an airline trying to develop a hub-and-spoke operation (Spanair), a retreating flag-carrier (Iberia) and all of this while it is becoming an emerging destination for major global carriers (Singapore Airlines, Qatar Airways, Delta Airlines).

This environment has not gone unnoticed to other European bloggers and AirObserver has just written a piece where it quotes me and presents my point of view about an hypothetic post-Ryanair Girona airport. This is a topic on which I am going to write a piece soon...In the meantime, great thanks to AirObserver for presenting my thoughts on the issue to its readers!

Tuesday, 22 February 2011

Airline adverts on Youtube

If Ryanair made the headlines recently with its educative hand-luggage packing videos on Youtube...other airlines are also using the popular video-sharing service to successfully launch new promotional campaigns. In this video Virgin Atlantic positions itself miles away from Ryanair, making a display of exuberance that evokes the long-gone glamour of air travel.

PS: in a coming post you will see a totally different but also very creative video by Dutch airline KLM!

Saturday, 19 February 2011

Why low cost carriers have not taken off in Russia

Russia has had its fair share of revolutions in the last century, but a more recent sort of revolution has totally skipped it: the low-cost airline revolution that has swept through Europe in the past 15 years has barely touched the Russian airline industry, only Sky Express and Avianova seem to have fully embraced the low-cost concept, and these remain really small operators.

To be fair, some European LCC have made timid forays into the expanses of Russia, for example Vueling operates a Barcelona-Moscow flight and so does Air Berlin with some flights to Germany. However, these are little more than anecdotes and the positioning of these two airlines is not that of a pure low-cost, but more of a hybrid model straddling the business and leisure segments of the market.

There are some factors at play that have prevented the development of a low cost airline industry in Russia.

According to Vladislav Filev, chief executive of Russian airline S7, and recently interviewed by Flightglobal, the conditions for low cost aviation simply do not exist in Russia. He mentions long flying sectors between Russia's main cities and lack of secondary airports as deterrents.

These are certainly obstacles on the way, I remain unconvinced about the distance factor being so deterministic, though. Many destinations in European Russia can be reached in a 2-3 hour flight from Moscow and, after all, low cost carriers elsewhere are successfully operating even longer sectors (see Ryanair's new base in the Canary Islands).

Regarding airports, not sure whether it is the lack of adequate facilities (would be interesting to know what is the spare capacity at Russia's regional airports) or rather their pricing policies that are making it difficult for low cost carriers to take off. If we read what Ural Airlines director says about this matter, it seems that airport fees are the obstacle.

No prospects for a low cost airline industry in the short term in Russia, according to Ural Airlines management

Low cost carriers in Western Europe have managed to extract very favourable terms from regional airports wishing to boost their traffic as well as from regional and local authorities. A certain degree of management autonomy is required to achieve such an outcome and I ignore if this is the case in Russia, however, we have the example of two very different countries, Spain and India, where, in spite of their heavily centralized airport management, low cost carriers have flourished in the last few years. Could this happen in Russia too?

Red tape is another story, starting with taxes on imported aircraft, that denies any would-be Russian low cost carrier the flexibility to define its own optimal seat configuration, unless it wants to pay a 20% for the aircraft (just ask Avianova!)

In fact, Russia has moved to abolish import taxes for some types of aircraft, including those on the 110-169 and 220-299 seat ranges, but the restrictions that remain in place are still a considerable hurdle, as they affect configurations that have proven to be popular among low cost carriers elsewhere (as an illustration, Ryanair would have trouble operating its 189-seat Boeing 737-800).

Why then, we do not see Western low cost carriers opening more routes into Russia? I suspect a lot has to do with the regulatory and institutional framework.

In particular flying rights, as there are still frictions between the EU and Russia regarding bilateral agreements regulating who can fly the routes between Russia and each European country. These regulatory framework has been progressively dismantled in with the implementation of the Single European Sky and deregulation has been extended to North American routes (the EU-US Open Skies agreement) and to some of the EU's neighboring countries, such as Morocco, with whom the EU has signed treaties liberalizing air traffic. This has allowed European low cost carriers, particularly the largest, Easyjet and Ryanair, to expand their networks beyond the borders of the EU.

But getting Russia to negotiate such an agreement with the EU as a whole is going to get more complicated, as Russia keeps a stronger negotiating position by talking to each country individually, and in the background there is the still unresolved issue of Siberian overflights, with European carriers paying several hundred million dollars a year to a competitor (Aeroflot) for the right to fly to Asia through the shortest route (over Siberia)

An additional factor must be taken into account: low cost travel relies on independent travelers, and Russia is not an easy market for independent travel. This goes both ways: there is a limited flow of European budget travelers to Russia: visa requirements, the lack of a modern budget and mid-range hotels and the fact that Russia is far from being a mainstream tourist destination, all play a role.

Russians also need visas, this is possibly the main cause that most Russian holidaymakers buy packages supplied by tour-operators that usually include the charter flight. There is obviously an elite that is used to travel independently, but I am not sure that words such as "budget" and "low cost" would be really sell well in this market segment. In summary, not the best environment for the Easyjets and Ryanairs to thrive...

However,the EU-Russia air market is a 10.7 million passenger per year reality and the forecast is that this amount could double in this decade and some new entrants might be needed in order to exploit the full potential of this growing market. In the meantime, talks go on...

Most Russian holidaymakers travel in charter flights, such as those operated by this Transaero Boeing 747

Tuesday, 15 February 2011

A hub in the Med? What strategy should Barcelona airport follow

Barcelona airport is a sort of unusual case in Europe, it is one of the continent's top ten airports by number of passengers, however it managed to get this spot without having a flag-carrier based there and with a minimal offering of long-haul flights.

So Barcelona has been mainly a feeder market for Europe's main airlines and an important short haul destination on its own right. I have already expressed my point of view of what routes would enhance considerably the reach of Barcelona's airport but this was based on the idea of BCN becoming a spoke of other hubs. But what could be the strategy to make of BCN a hub on its own? is it feasible?

It is too late for Barcelona to become a generalist hub, it does not have the sort of legacy carrier that would make this possible. In think that any small chance of Barcelona achieving hub status depends on its ability to find a market niche and becoming incredibly good at serving it (think Finnair and its Asian strategy!).

In my opinion Barcelona should focus on becoming the gateway of the Western Mediterranean.

If you take a close look at the map you can see how Barcelona is at the centre of a Mediterranean arch that goes from North-Western Italy to South-Western Spain, the contour of its coast clearly lit, a densely populated area. Destinations such as Marseille, Nice, Turin, Genoa, Cagliari, Algiers or Alicante can all be reached within 1-1.5h from Barcelona, that itself has a large airport with plenty of capacity and considerable Origin-Destination traffic.

The hub of the Western Mediterranean?

If you have visited the city of Barcelona and strolled down the Ramblas towards the sea, you might have noticed a large medieval building at the end of this promenade. It now hosts the maritime museum, but in its time this was one of the largest civilian buildings in the World, the Royal Drassanes (Shipyards) are a vivid reminder of an age when Barcelona managed to become the main trading port of the Western half of the Mediterranean...the example might be a bit anachronistic, but that shipyard seating at the edge of the town was the medieval equivalent of today's largest air facilities... and not too far from there, some 12km. further South, now sits the largest air terminal on the Mediterranean rim. Can we reinvent Barcelona as the hub of the Mediterranean?

Let's do some SWOT analysis!

BCN has some strengths to show for:

It has some critical mass of its own (it is capable of generating a traffic of 30 million passengers a year with virtually no transit passengers) and, despite the surge of tourist numbers in the last two decades it keeps a fair number of business traffic too (just look at the visitor figures of the Mobile World Congress that is taking place in the city as I write these lines)

It has a magnificent new terminal that has added plenty of spare capacity

It has quite a good geographical position to fulfill the role of West-Med hub, with the whole Iberian Peninsula, the Southern half of France and the coastal towns of Italy and North Africa all within 1,5h. flight time.

Plus it has reasonably good (although they need to improve in some areas to reach full potential) overland connections with its hinterland, the Mediterranean coastal corridor (the big arch going from Marseille to Alicante) and the Ebro valley (that links with the interior of Spain and the Atlantic), including high-speed railways (although at the moment these do not pass through the airport). The main passenger port in the Mediterranean (with both cruise and regular shipping lines) is also next door.

Now the weaknesses:

And the first and most obvious one is...there is no local airline currently able to run the mix of long-haul, short-haul services that would make it possible to develop BCN as a hub. True, Vueling is coordinating with its part-owner Iberia in order to provide connection flights and to start feeding some long-haul flights, but there are reasons to doubt the scale of Iberia's commitment to operating long-haul flights at BCN, not least because its main hub is so close!

And Spanair has also expressed interest in the hub option (this is actually its "raison-d'etre" and the only reason the airline has managed to survive through public support) but it needs to sort out its finances first.

The outlook remains a bit foggy for Spanair

We will get back to the airlines later, because there are other weaknesses that I must mention and these are more structural.

One of them is the peripheral nature of the Mediterranean market and the fact that a large share of the traffic this area generates is related to tourism, and this is a segment where any hub-and-spoke airline would have a hard time competing with low cost carriers and charters focusing on origin/destination traffic.

But some uncertainties surround Vueling's competitive position too...

And let's not forget that all European hubs, including the most consolidated ones are currently under pressure, as the center of gravity of aviation is moving East (to the Gulf, to Turkey) and this will certainly have an effect on traffic patterns.

Moreover, whereas emerging markets in Eastern Europe are making steady economic progress, the Med remains plagued with political unstability and sluggish economic performance...

Are there opportunities? Of course!

First of all, there is currently no strong hub on the Mediterranean rim, Madrid is not far, but it has a rather transatlantic orientation, Alitalia's chronic problems and underinvestment at Italian airports have prevented Rome and Milan from taking this role and Paris is a long way up North.

I said previously that the lack of long-haul airlines is a weakness, but the fact that there are not one, but two airlines, is, actually, a great opportunity. And both have links to strong alliances, in the case of Spanair, it looks as if a Mediterranean hub would fit really well in its current network, that is strongest in Northern, Central and Eastern Europe.

The gap in Star-Alliance's network

And then we have the aircraft industry producing models that seem well suited for the sort of niche positioning that Barcelona should pursue. The Boeing 787 will improve the economics of long-haul thin routes and the next generation of regional jets, such as the Bombardier CSeries or Embraer E-Series could do the same for the short haul sectors.

There would be threats of course, as competitors would not seat idle. Iberia, Alitalia and Air France would not be happy with an hypothetic Star Alliance hub in their backyard and Vueling is already facing a tough fight with Easyjet and Ryanair in its own main base.

The high degree of political control over the Spanish air travel and airport industry (even after an eventual partial privatization), including commercial and pricing policy, slot allocation and bilateral agreements with non-EU countries, is something to be accounted for. Infrastructure management and politics often mix in Spain...

Finally, the increasing share of low cost carrier traffic, although not necessarily bad news, might have some long-term implications for BCN's aspiration to become a hub. The perception that BCN is becoming a mostly tourism-oriented low cost airport could become a reality if low cost carriers take enough market share to make routes operated by full-service network airlines unprofitable, this could result in a self-reinforcing process, whereas BCN ends up being a limited choice of carriers, limited connectivity to other major airports and an almost exclusively low cost traffic.

In any case, I admit there was a lot of wishful thinking involved in this the goal here was just to summarize the multiple factors that can play a role in the development of a hub at Barcelona airport. But most of these are secondary factors, and whether Barcelona will become a hub or not is something that ultimately depends on the airlines that choose to operate there. And this is something I am going to write about soon...

Sunday, 13 February 2011

Allplane featured in the media

The Spanish air travel market is one of the favourites of this blog, as so much is going on there at the moment. The effects of the economic crisis are having a deep impact on this sector and, therefore, it does not come as a surprise that the media are often reporting on aviation related issues, and it is in this context that Allplane got featured twice recently...

I would like to thank Companias Low Cost for presenting Allplane to its readership. Companias Low Cost, a highly recommended blog, provides an overview, in Spanish, of the news in the low cost air travel sector. I am also very grateful to David Rodriguez for writing some nice words about Allplane in the Catalan newspaper Ara. If you happen to understand Catalan I recommend reading his regular column on this newspaper about infrastructure and transportation issues!

By the way, and in connection with this latest article, the future of Lleida airport is again under discussion after Vueling and Pyrenair have canceled their routes to Barcelona, Vigo and Madrid. The Catalan government is going to draft a strategic plan with a view to guaranteeing the economic viability of this facility...something worth following up!

Thursday, 10 February 2011

Ryanair teaching Belgian students a lesson in packing

An incident between Ryanair and some of its customers is hardly any news, the latest one involved a group of Belgian students that were removed from the plane that was going to take them from Lanzarote, in the Canary Islands, to Charleroi, Belgium, after having a row about hand-lugagge fees.

Setting aside the circumstances of the incident, these students have inadvertently provided the material for Ryanair's latest PR stunt. I have to admit I am quite impressed by the packing ability of this guy, but it is true that you can really fit A LOT on one of this standard-size Ryanair-approved suitcases...I am talking from my own experience...!

Saturday, 5 February 2011

Too much of a good thing? Brazil's airports are suffering a growth crisis

Images: Wikipedia

One of the countries that has been experiencing sustained growth in the last decade is Brazil. The country's magnificent rates of growth have had its reflection on the aviation sector too and the number of air passengers in Brazil has more than doubled in less than a decade, from 71 million in 2003 to 154 million in 2010. This growth has taken place amidst a total transformation of Brazil's airline sector, that included the demise of what used Brazil's traditionally two largest carriers, Vasp, in 2005, and Varig, that in 2006 got absorbed by GOL, one of the entrants that have managed to take a significant part of Brazil's market. The emergence of Star-Alliance member TAM and low cost carriers GOL and Azul (founded by David Neeleman of JetBlue fame, by the way it is not a coincidence that "azul" is Portuguese for "blue"!) have more than made up for the disappearance of the traditional carriers.

But all this growth is reaching a bottleneck: the country's airport infrastructure. Capacity at Brazil's airports hasn't expanded quite as fast as traffic and the country may be heading for serious turbulence if it does not upgrade its infrastructure before the upcoming World Cup and Olympic Games, due to take place in 2014 and 2016 respectively. There are serious doubts about the capacity of Infraero, the government institution with links to the military, that manages most Brazilian airports, to deliver in the face of such such an important challenge. We will see whether a solution is found, either in the form of more public investment or through the privatisation of some of these airports. In any case, I am sure this is a problem that many countries would like to have right now (just thinking about our series on Spain's empty airports), and a reminder that not everyone is currently in crisis!

The legendary air shuttle Barcelona-Madrid: the "Puente Aéreo"

Early morning at Madrid airport, a familiar view for many Barcelona-based passengers

If in my previous post I explained how the Spanish airport authority is using replicas of some venerable aircraft to advertise her state-of-the-art facilities and, for this post, we are not leaving Spain yet, because during my recent trip to Madrid I had the chance to experience another of Spanish aviation's legendary institutions: Iberia's "Puente Aéreo" (the Air Shuttle Barcelona-Madrid).

For those who are not aware, Barcelona-Madrid happens to be the air route with most traffic in the Europe, with nearly 3 million passengers per year and around 70 daily frequencies in each direction.

A large share of this traffic went through Iberia's "Puente Aéreo", an air-shuttle that was conceived as a commuter service, where you do not need a previous booking, you just show up at the airport and get on the next available flight. If a plane is full another one departs shortly after, with frequencies at peak hours could rival those of overground public transportation, every 15 minutes or so. The idea is to provide plenty of flexibility and short waiting times at airport.

The "Puente Aéreo" has its own brand identity and fare structure, separate from Iberia's other flights, even when they are doing the same route (around half of Iberia's frequencies on the Barcelona-Madrid route correspond to the "Puente Aéreo" service, with the rest being regular flights that require reservation.

The "Puente Aéreo" has been a sort of second home to generations of businessmen and politicians, ready to pay for all this flexibility and convenience and it is no wonder that, for years, it has been Iberia's most profitable route (in a way, the "Puente Aéreo" is to Iberia what LHR-New York is to British Airways)

However, a number of changes that have affected the competitive environment in which the "Puente Aéreo" was born and developed.

The first one was the liberalization of European skies. As soon as European skies opened up, new entrants Spanair and Air Europa decided to give it a try. The route quickly became a mainstay of Spanair, that now boasts 8 daily frequencies on the route and has branded the service with a similar name, making use of the concept of "air bridge", although for legal reasons it can not call it "Puente Aéreo", so it has "Puente a Barcelona/Pont a Madrid" instead. Next came low cost airlines, with Vueling entering the fray, it has now 11 daily frequencies. Surprisingly Easyjet chose not to compete on the route in spite of having a base in Madrid. Despite all this new competition, Iberia's market share on the Barcelona-Madrid air market remains at around 45%

The completion of the high-speed railway between Barcelona and Madrid has had a stronger effect on the route as it has emerged as a real alternative in terms of frequency and comfort for business travellers, taking half of the market on the Barcelona-Madrid corridor. It has forced Iberia to reduce capacity, maintaining frequencies but deploying smaller aircraft. However, the 600 kilometers between Barcelona and Madrid are really at the edge of what is considered to be a competitive distance range for high-speed railways and the airplane remains competitive, even for origin-destination traffic. Competitive pricing and the high volume of Catalan transit passengers at MAD have helped the airplane hold its ground on this route.

I am wondering what will happen the moment Ryanair starts flying between the two cities, it now has a base in both so it sounds like a logical next step...but I think the other airlines operating the route will feel the pinch, as they rely on a more price-conscious type of travele. My guess is that the "Puente Aereo" itself will be relatively inmune.