Tuesday, January 25, 2011
Monday, January 24, 2011
Sunday, January 23, 2011
Canadian Govt.'s New Ticket Tax Will Hit Regionals Hardest
Since the new ticket tax was unveiled Dec. 11, it has provoked a significant groundswell of opposition from airline and community groups across Canada. The tax was included in the Canadian government's annual budget document, and will be used to fund a wide range of security initiatives that are controversial in themselves. The tax will be CAN$12 per trip, or CAN$24 per roundtrip, irrespective of the size of the carrier or length of route.
Regional airlines say that this new fee - which adds to an already lengthy list of ticket surcharges - represents a sharper price increase for a short-haul flight than for a more expensive long-haul flight.
The busy short-haul routes between Vancouver and Victoria, B.C., are a good example. The CAN$12 fee will be added to a ticket that can be bought for less than CAN$60, according to Pacific Coastal Airlines CEO Daryl Smith. Smith said it is "laughable" that a 300-mile trip is charged the same as a 30-mile trip.
Regional airlines say that this new fee - which adds to an already lengthy list of ticket surcharges - represents a sharper price increase for a short-haul flight than for a more expensive long-haul flight.
The busy short-haul routes between Vancouver and Victoria, B.C., are a good example. The CAN$12 fee will be added to a ticket that can be bought for less than CAN$60, according to Pacific Coastal Airlines CEO Daryl Smith. Smith said it is "laughable" that a 300-mile trip is charged the same as a 30-mile trip.
Publisher's Note
With the next issue, World Airline News will be merged into its sister publication, Airline Financial News. Airline Financial News will not only continue WAN's excellent coverage of worldwide aviation developments, but it also become your newest source for global airline financial developments. Our editorial team will provide the expertise that you have come to trust. So watch your mailbox the week of Jan. 7 for Airline Financial News.
Mesa Says Negotiations Will Not Lead To Contract Rate Cuts
Mesa Air Group is continuing to hold negotiations with its partners America West and US Airways to try and find ways to help the majors cut costs, but Mesa is adamant that no contract rate reductions will occur.
Industry observers believe that major carriers have been approaching their regional partners to ask for cuts to contract flying rates, in order to help them adjust to the grim post-Sept. 11 economic situation. However, so far only Northwest Airlines has managed to gain a contract rate cut from its partner Mesaba, and some experts believe that few rate cuts will occur.
Commenting on Mesa's quarterly earnings report, UBS Warburg analyst Jamie Baker said that America West is seeking a rate reduction from Mesa. He has modelled a 3-4 percent rate reduction into future estimates. In addition, Baker believes that Mesa will agree to allocate its share of the federal stabilization package to US Airways.
Mesa CEO Jonathan Ornstein told WAN's sister publication C/R News that his company has held discussions to try and find a way to give "cash-flow relief" to its partners. However, he said that Mesa will not be agreeing to a rate reduction with America West. Mesa "does not intend to sacrifice" contract rates that are already the lowest in the industry, Ornstein said.
He said that a number of other proposals to provide cash-flow relief have been made, however. "America West knows we have been a good partner in the past, as they have been to us," said Ornstein. "If we can be of assistance, we will do what we can."
Ornstein notes that Mesa is not the first group America West needs to negotiate with in its cost-cutting drive. But he said that America West knows that when it does come time to hold more discussions with Mesa, "we'll be there, and we will help them."
Regarding the US Airways talks, Ornstein said that allocating some of Mesa's federal bailout money to its partner is being discussed. However, the exact share is yet to be decided. US Airways "is entitled to at least some of the government money," Ornstein said, adding that "this is not an unreasonable position for them to take.........
Industry observers believe that major carriers have been approaching their regional partners to ask for cuts to contract flying rates, in order to help them adjust to the grim post-Sept. 11 economic situation. However, so far only Northwest Airlines has managed to gain a contract rate cut from its partner Mesaba, and some experts believe that few rate cuts will occur.
Commenting on Mesa's quarterly earnings report, UBS Warburg analyst Jamie Baker said that America West is seeking a rate reduction from Mesa. He has modelled a 3-4 percent rate reduction into future estimates. In addition, Baker believes that Mesa will agree to allocate its share of the federal stabilization package to US Airways.
Mesa CEO Jonathan Ornstein told WAN's sister publication C/R News that his company has held discussions to try and find a way to give "cash-flow relief" to its partners. However, he said that Mesa will not be agreeing to a rate reduction with America West. Mesa "does not intend to sacrifice" contract rates that are already the lowest in the industry, Ornstein said.
He said that a number of other proposals to provide cash-flow relief have been made, however. "America West knows we have been a good partner in the past, as they have been to us," said Ornstein. "If we can be of assistance, we will do what we can."
Ornstein notes that Mesa is not the first group America West needs to negotiate with in its cost-cutting drive. But he said that America West knows that when it does come time to hold more discussions with Mesa, "we'll be there, and we will help them."
Regarding the US Airways talks, Ornstein said that allocating some of Mesa's federal bailout money to its partner is being discussed. However, the exact share is yet to be decided. US Airways "is entitled to at least some of the government money," Ornstein said, adding that "this is not an unreasonable position for them to take.........
AMR, LUV, CAL Shy Away From Guarantees
American Airlines [AMR], Southwest Airlines [LUV] and Continental Airlines [CAL] believe they will not have to tap into a $10 billion government loan guarantee program set up shortly after Sept. 11, according to ABN AMRO analyst Raymond Neidl. However, after visiting the three carriers on Dec. 6 and 7, he said they may apply for the loan guarantees before the June 28, 2002, deadline to keep their options open.
Meanwhile, it appears that Delta Air Lines [DAL] has not completely rejected the idea of applying for loan guarantees. On the other hand, the head of US Airways [U], Stephen Wolf, said on Dec. 11 the carrier does not plan to apply for loan guarantees, a declaration that surprised many observers who view US Airways as a prime candidate to file for Chapter 11 bankruptcy protection.
Neidl also said American, Southwest and Continental believe many analysts may be a bit over-optimistic about the timeframe for the industry to fully recover. According to Neidl, security is the key to regaining consumer confidence, and having the government assume responsibilities of security should help the industry. But he noted that the carriers expect, at least initially, that there will be delays and problems as the security system is revamped.
Continental believes its cash position is enough to get it through the current economic environment. If additional cash is needed, Neidl said Continental could sell Express, its owned regional feeder carrier. However, he added that in this environment it would probably be at a discount until Continental proves it is a survivor, since all Express business comes from Continental. Neidl also said Continental still wants the Express initial public offering to occur but is waiting for the industry and stock markets to stabilize.
Since Sept. 11, Continental has made strides in reducing costs, but the revenue side of the equation still remains the main concern, according to Neidl. So far, he said, Continental's traffic at all points has returned at a rate that is better than originally forecast. But yield still remains a problem even though the company believes it is running at a yield premium to the industry.
Overall, Neidl said the carrier is pleasantly surprised with load factors, traffic and RASM trends and has set a goal of reaching breakeven by the end of March. But this estimate, Neidl said, is probably on the "aggressive side," and the industry is likely in for a slower recovery. Because Continental recently increased its liquidity position through a recent stock offering, ABN AMRO raised its long-term rating to Add from Hold, although it still expects a short-term market adjustment for the airline sector as it heads into the slower winter season, unless oil prices continue to decline......
Meanwhile, it appears that Delta Air Lines [DAL] has not completely rejected the idea of applying for loan guarantees. On the other hand, the head of US Airways [U], Stephen Wolf, said on Dec. 11 the carrier does not plan to apply for loan guarantees, a declaration that surprised many observers who view US Airways as a prime candidate to file for Chapter 11 bankruptcy protection.
Neidl also said American, Southwest and Continental believe many analysts may be a bit over-optimistic about the timeframe for the industry to fully recover. According to Neidl, security is the key to regaining consumer confidence, and having the government assume responsibilities of security should help the industry. But he noted that the carriers expect, at least initially, that there will be delays and problems as the security system is revamped.
Continental believes its cash position is enough to get it through the current economic environment. If additional cash is needed, Neidl said Continental could sell Express, its owned regional feeder carrier. However, he added that in this environment it would probably be at a discount until Continental proves it is a survivor, since all Express business comes from Continental. Neidl also said Continental still wants the Express initial public offering to occur but is waiting for the industry and stock markets to stabilize.
Since Sept. 11, Continental has made strides in reducing costs, but the revenue side of the equation still remains the main concern, according to Neidl. So far, he said, Continental's traffic at all points has returned at a rate that is better than originally forecast. But yield still remains a problem even though the company believes it is running at a yield premium to the industry.
Overall, Neidl said the carrier is pleasantly surprised with load factors, traffic and RASM trends and has set a goal of reaching breakeven by the end of March. But this estimate, Neidl said, is probably on the "aggressive side," and the industry is likely in for a slower recovery. Because Continental recently increased its liquidity position through a recent stock offering, ABN AMRO raised its long-term rating to Add from Hold, although it still expects a short-term market adjustment for the airline sector as it heads into the slower winter season, unless oil prices continue to decline......
Canadian Airline Group Protests New Security Surcharge
The British Columbia Aviation Council (BCAC) is raising significant groundswell support in its efforts to have short-haul commuter flights excluded from the new security ticket surcharge that the Canadian government unveiled recently.
BCAC President Gerald Lloyd has written to the Canadian and B.C. ministers of transport and finance to protest the fee. Lloyd said that many local mayors and community groups "are beginning to flood the minister of transport" with similar letters denouncing the surcharge.
Lloyd wants short-haul commuter flights to be excluded from the fee. Since the surcharge is not scheduled to come into force until April 2002, this gives BCAC and other airline groups "lots of lobbying time," Lloyd said.
The text of the letter is as follows: "The British Columbia Aviation Council is very concerned about the introduction of the $24 security costs scheduled for the spring of 2002. The small coastal air operators and those who serve the small northern communities will lose customers with the introduction of this fee.
"These additional charges will divert passengers to the ferry system in coastal communities and those in our northern communities will not fly. The members of the British Columbia Aviation Council would like some assurances that these fees will only be assessed on international, cross-border and travel across Canada.
"All the small air carriers in British Columbia seek your support to exempt them from this new fee." >TK America West Airlines [AWA]: Vanguard Airlines [VNGD]: America West Airlines [AWA]:........
BCAC President Gerald Lloyd has written to the Canadian and B.C. ministers of transport and finance to protest the fee. Lloyd said that many local mayors and community groups "are beginning to flood the minister of transport" with similar letters denouncing the surcharge.
Lloyd wants short-haul commuter flights to be excluded from the fee. Since the surcharge is not scheduled to come into force until April 2002, this gives BCAC and other airline groups "lots of lobbying time," Lloyd said.
The text of the letter is as follows: "The British Columbia Aviation Council is very concerned about the introduction of the $24 security costs scheduled for the spring of 2002. The small coastal air operators and those who serve the small northern communities will lose customers with the introduction of this fee.
"These additional charges will divert passengers to the ferry system in coastal communities and those in our northern communities will not fly. The members of the British Columbia Aviation Council would like some assurances that these fees will only be assessed on international, cross-border and travel across Canada.
"All the small air carriers in British Columbia seek your support to exempt them from this new fee." >TK America West Airlines [AWA]: Vanguard Airlines [VNGD]: America West Airlines [AWA]:........
Thursday, January 20, 2011
Wednesday, January 19, 2011
Canadian Govt.'s New Ticket Tax Will Hit Regionals Hardest
Airlines Say Flat Security Fee Unfair For Short-Haul Operations
Regional airlines in Canada are criticizing a new security ticket surcharge announced by the Canadian government, saying that the flat fee is particularly burdensome to short-haul regional operations and will drive away passengers.
Since the new ticket tax was unveiled Dec. 11, it has provoked a significant groundswell of opposition from airline and community groups across Canada. The tax was included in the Canadian government's annual budget document, and will be used to fund a wide range of security initiatives that are controversial in themselves. The tax will be CAN$12 per trip, or CAN$24 per roundtrip, irrespective of the size of the carrier or length of route.
Regional airlines say that this new fee - which adds to an already lengthy list of ticket surcharges - represents a sharper price increase for a short-haul flight than for a more expensive long-haul flight.
The busy short-haul routes between Vancouver and Victoria, B.C., are a good example. The CAN$12 fee will be added to a ticket that can be bought for less than CAN$60, according to Pacific Coastal Airlines CEO Daryl Smith. Smith said it is "laughable" that a 300-mile trip is charged the same as a 30-mile trip.
He said that when the security fee is added to existing surcharges, such as air-traffic control (ATC) and airport fees, the surcharges will actually comprise more than half the value of short-haul tickets.
Summary Of Canada's New Aviation Security Measures, As Announced In Budget 2001
Canadian Transport Minister David Collenette on Dec. 11 outlined the following details of the wide-ranging air security initiatives contained in the December 2001 budget.
The government of Canada will:
* Create, through legislation, a new Canadian Air Transport Security Authority responsible for the provision of key air security services. The authority will be a federal entity and will report to the minister of transport.
* Enhance pre-board screening at Canadian airports and provide new annual funding of up to CAN$128 million per year. This new funding represents a 78 percent increase over the airlines' expenditures last year for pre-board screening. In addition, the government of Canada will provide up to CAN$10 million this fiscal year to implement immediate improvements to airport screening practices.
* Contribute over CAN$1 billion over the next five years for the purchase, deployment and operation of advanced explosives detection systems (EDS) at airports across the country, covering 99 percent of all air passengers.
* Effective immediately, expand the program of armed police on aircraft that has already been initiated on flights to Washington Reagan National Airport, to cover selected domestic and international flights.
* Develop new standards and regulations for security improvements to aircraft design, and provide up to CAN$35 million to assist with modifications to existing aircraft.
* Make annual contributions for costs associated with aviation security- related policing at major airports and make one-time payments totaling a maximum of CAN$20 million this year for heightened policing and security at airports resulting from the terrorist attacks in the United States.
* Fund further significant increases to Transport Canada staffing associated with aviation security functions, including hiring new inspectors to provide increased oversight of aviation security.
Gulf Air holds annual conference for employees to review 2010 performance
AIRLINE INDUSTRY INFORMATION-(C)1997-2011 M2 COMMUNICATIONS
Gulf Air, a Bahrain based carrier, yesterday held its annual commercial conference where it reviewed last years performance.
During the conference the airline discussed ways to carry forward its mission of turning the carrier into a sustainable and successful business.
The gathering included over 250 employees from the carrier's 46 destinations, including commercial and airport managers.
AirTran Airways offers sale fares to all of its destinations
AIRLINE INDUSTRY INFORMATION-(C)1997-2011 M2 COMMUNICATIONS
AirTran Airways, a subsidiary of AirTran Holdings Inc (NYSE:AAI), said today that it is offering sale fares for travel to all of its destinations.
Ticket prices in the sale start at USD59 one way, for off-peak travel.
The sale fares are available for purchase until 20 January 2011 and are valid for travel through to 24 May 2011, with the exception of travel to and from Florida which must be completed by 16 March 2011.
Sale fares require a ten-day advance purchase but do not require a roundtrip purchase or an overnight stay.
The misery of flying
The glamorous jet-setting lifestyle
THE blizzards that grounded year-end flights in Europe and America, leaving thousands of passengers stranded at the airport or even on the runway, completed an annus horribilisfor the air traveller. Have passengers ever been less satisfied with flying?
The disruptions seem endless, from snowstorms to Icelandic eruptions. Fares keep jumping: airlines have just added another surcharge to cover higher fuel costs. Airlines keep finding new things to charge for, from pillows to checked-in luggage. The staff are demotivated, even surly. Security grows ever more intrusive.
The misery of flyers has revived demands for better regulation (and prompted the International Air Transport Association to caution against a hasty reaction to what was, after all, unusually bad weather). Britain’s transport minister wants fines to be imposed on airports that were unprepared to respond adequately to the snow. In America there are calls to speed up the extension of laws prohibiting domestic airlines from keeping passengers waiting on the tarmac for more than three hours to international carriers as well.
By chance, the mass grounding of aircraft coincided with the death on December 27th of the pilot of airline deregulation. Alfred Kahn was the head of America’s Civil Aeronautics Board, and the driving force behind the deregulation of air travel that took effect in 1978, under President Jimmy Carter. His reforms were subsequently copied to varying degrees in much of the rest of the world.
Previously, Uncle Sam had to approve every route flown (across state lines), every fare charged and every new entrant to the industry. The results were limited competition, little innovation and sky-high prices.
The unleashing of market forces has produced far more flights, to far more destinations, at considerably lower fares than would have otherwise been the case. Competition has spurred innovations such as hub-and-spoke routing systems and new low-cost carriers such as Southwest Airlines and JetBlue in America and easyJet and Ryanair in Europe. Several studies have found that the benefits to consumers of deregulation have amounted to billions of dollars each year.
Nonetheless, a case can be made that deregulation is to blame, at least in part, for the current misery of so many flyers. Air travel has become more competitive and efficient, but is subject to significant market failures. One is that many passengers, especially infrequent travellers, know very little about the quality of service of any given airline. So they are disproportionately influenced by the ticket price, says Kevin Neels of Brattle, a consultancy. The internet accentuates this: a ticket that costs only a few dollars more may not show up on the first page of an online search.
Airlines have little financial incentive to take into account the cost to passengers of, say, delays. Instead, they cram their planes to bursting, taking the view that every empty seat is a bundle of money flying away. When freak weather strikes, they have little spare capacity to replace cancelled flights. So it might make sense for regulators to impose some cost on airlines when passengers are stranded for a long time—so long as the cost is not too great.
Mr Neels also worries that airline bosses’ financial incentives make them do things that yield short-term profits but risk harming their firms’ reputations. They cut costs by skimping on service, for example. They may even economise on safety. There is concern among regulators that some pilots are now paid dangerously little.
Airlines are operating in a mostly deregulated market, but they are using infrastructure that is largely government- owned and heavily regulated. Even as the number of flights and flyers has soared, the airports that must accommodate them have been neglected. Market forces have not been allowed to allocate access to scarce infrastructure more efficiently. A system of peak pricing for landing slots, for example, would ease congestion in good weather and bad.
Instead of market forces, there is massive political interference. Gleaming but empty airports are built in places represented by powerful politicians. Security checks are excessive because no politician wants to be blamed if a terrorist gets through. New technology that would allow more planes to fly but put air-traffic controllers out of work is blocked by unions. “The aviation system is collateral damage to the political problems we are seeing in all mature democracies,” says Michael E. Levine of New York University, a longtime proponent of deregulation.
When bad weather strikes, market forces could determine which passengers and flights should go first, says Mr Levine. For example, airlines could bid for the right to be prioritised in the event of an airport’s capacity unexpectedly being cut. Passengers would then be able to choose (and pay more for) an airline that is less likely to leave them stranded for long. That would reveal the currently hidden costs of congestion and increase the likelihood of airlines competing on service quality as well as on price. For now that seems politically impossible. But as Alfred Kahn showed, what seems terrifyingly radical today can seem normal and sensible tomorrow.
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