IAG – The ego needs grounding

International Airlines Group, through British Airways, has a pivotal position at Heathrow so its statements on the vexed issue of a third runway need to be taken seriously.

It certainly does not help if, in the space of just a few weeks, the CEO threatens to leave Heathrow if landing charges are increased heavily to pay for a new runway and then threatens to leave if a decision on building the runway is delayed. However, the most worrying thing about Willie Walsh’s recent outburst is not what he said, but how he said it.

“If the government continues to dither over a new runway, then I’ll move my business elsewhere.”

The “I” in IAG stands for “International” not “Willie”. IAG belongs to its shareholders, not Mr Walsh.

Like a politician, a successful CEO has a limited lifespan. Too long in the job and they begin to think they are indestructible and somehow above the company they lead. The very best CEO’s know when to call time. If he were to leave, or depart upstairs, now he would be going on a high.

If IAG has any strong non-Executive directors, they should talk to Mr Walsh now and remind him firmly that he speaks on behalf of the company, not himself, and his public statements must reflect that. A gentle hint that he has been in the job for rather a long time might also be appropriate.

 

Stelios’ Greatest Hit

If you ever pick up a copy of The Stage you are bound to be see some small ads announcing that a famous comedy double-act of the 1990′s are looking forward to starring in pantomime in Crewe this winter or one of the big pop groups of the period thanking the staff at the Embassy Theatre in Skegness for their recent sell-out Sunday show. Readers of the financial press might have found the same sense of vaguely melancholic nostalgia in a series of ads run by Stelios.

“Twenty years ago Stelios created easyJet” trumpets the ad.

It then lists some of the other brands of the easy group including easyhotel, easybus, easygym, easyoffice, easyfoodstore and easymoney and asks any company interested in joining the success and licensing one of their brands to contact them.

Any entrepreneur who starts a multitude of new companies will have plenty of failures but, other than easyhotel and easybus, which are really very modest companies indeed, easyJet remains Stelios’ one and only big hit.

The ad boasts that Stelios remains the airline’s largest shareholder but that is hardly the whole story. He did a great job in getting the airline off the ground originally and was wise enough to employ some good people around him to get the nuts and bolts right. When it got to a certain size though, the company started to flounder and it has only really achieved genuine stability and growth since Stelios left. And since he left, he has been a loud critic of the management. There seems to have been a never-ending game of Stelios threatening that he would sell shares if the Board went ahead with some plans, the Board ignoring him, Stelios selling shares and the airline’s profits and share price increasing.

Maybe the easy brand has some huge new project up its sleeve that will once again propel it to stardom. Until then, I am pretty sure Stelios and his family can live very comfortably off the profits of his one big hit.

An Irish happy ending

When IAG first announced their interest in buying Aer Lingus we said this was a marriage made in heaven.

Aer Lingus had done well to put itself on a sounder base and was able to ride through the Irish economic troubles relatively unscathed. However, going forward, the airline was just too small to survive on its own. Furthermore, there were not many possible saviours around.

For IAG, Aer Lingus was attractive because of its base in Dublin and established routes to the US which will allow it to funnel traffic from Europe through Dublin, as well as take Irish passengers overseas via Madrid and Heathrow.

The Irish government could rid itself of a potential liability – and get some cash as well. And the staff of the airline would have a much more secure future in an airline group that is growing.

As we said at the time, it was just too good to happen. Something was bound to get in the way. Yet, one by one, the obstacles were overcome.

The unions might not have been hugely supportive (it is, after all, their job to look for any negatives) but they did not attempt to wreck the deal.

Irish politicians who could have been difficult about surrendering the Irish flag-carrier to foreigners (and partly British foreigners at that) were won over by the logic of the deal combined with the fear of what they would do with the airline if IAG walked away.

Finally, Ryanair, who had a large minority stake in the airline and could have proved very obstructive, gave in and agreed to sell their shares. They were even quite nice about it and wished Aer Lingus all the best in the future. Being Ryanair they could not resist a dig and commented that their original plan to buy Aer Lingus had been to give them a stake in the middle-market but since their “being nice” campaign had been so successful, they no longer felt they needed a more up-market brand. Of course, they have been able to cash in a holding for a good price and avoid the huge expense of further litigation. Even Ryanair can, on occasions, see when a fight is no longer worth the effort.

Business does not normally do happy endings but this genuinely seems like one where all parties win.

Will the magic work on TAP?

It takes a brave man to buy the troubled Portuguese airline, TAP. The government’s sale of 61% of the airline only attracted two viable bidders and a consortium led by the Brazilian-American, David Neeleman, won.

Mr Neeleman is an optimist, as he clearly needs to be in view of the challenges faced by TAP. The airline has all the problems of a traditional, small scheduled airline combined with the specific problems of Portugal, notably a bad economy and a truculent workforce. However, the airline is not without its selling-points. They have a unique network from Lisbon to almost every major city in Brazil. For many Brazilians, it is easier to fly to Europe with TAP and change in Lisbon than it is to risk the excitement of changing in Sao Paulo. As the owner and founder of Brazil’s Azul Airlines, he clearly hopes to build on this and link the two airlines to make TAP the dominant force between Brazil and Europe.

Passengers might currently choose to fly with TAP because it is more convenient or because it is cheaper but they will rarely choose to fly with them because they are nicer. TAP customer-facing staff tend to combine the traditional surliness of Southern Europeans working for a state institution with the reserved (or, some would say, rather miserable) nature of the Portuguese. Making money as a full-service carrier does not just depends on routes and prices. To get over that waver-thin dividing line between profit and loss, an airline has to ensure that enough people fly with them out of choice – simply because they are a good airline to fly with.

This is where Mr Neeleman comes in. He made his name as the original boss of jetBlue in the US. That airline became hugely popular with passengers because it brought high standards together with friendly customer service. Group hugs with the flight crew and cabin staff before flights were encouraged and staff were told to “have fun” flying. The happy working atmosphere rubbed off on passengers and jetBlue succeeded when most had expected it to fail.

Converting the sullen staff of TAP to this “have a nice day” culture will be difficult but we must hope it works. Europe needs its strong airlines to withstand the overseas competition. At least now they have a small chance.

 

Route News Stop Press

• AeroMexico is cancelling its Mexico City–Rio de Janeiro service on 21st June.

• Air China launches a thrice-weekly Beijing–Montreal service on 29th September.

• Austrian is coming back to Manchester with the launch of a daily service from Vienna on 10th September.

• Brussels Airlines is cancelling its service to Nairobi from 25th October.

• Copa Airlines is launching a daily Panama City–San Francisco service on 27th September.

• Emirates will introduce a daily Dubai–Bologna service on 3rd November.

• South African Airways will be replacing Dakar with Accra as intermediate stop on four of its seven weekly flights between Johannesburg and Washington Dulles from 1st August.

• TACV Cabo Verde Airlines will launch weekly services to Natal and Joao Pessoa this autumn.

 

Learning to fly

Young pilots get a pretty harsh deal nowadays. Instead of generous airlines paying to train them, they have to fund their own studies at pilot-schools that work jointly with airlines, who then recruit them on low salaries to fly with passengers whilst still undergoing some training. Some older pilots complain the new, more computer-based, training courses are not as effective as the old ways of learning by flying small aircraft, and they disapprove of a system that lets airlines get young pilots on the cheap. 

The system can lead to abuse and it is hard not to disapprove of some airlines that charge young pilots a fee for “employing” them to fly for their first thousand hours of commercial flying. Not all airlines are so bad though. It is worth having a look at www.theaviatorblog.com/blog – it’s written by James May, a new easyJet pilot. The blog has followed James through his student days and has now ended with his first posting to the easyJet base in Berlin. Unlike many such blogs, it is actually well-written and gives a very good view of the training given. Those First Officers might look worryingly fresh-faced but they do know what they are doing.

The Sage of Necker Island nails it

We have said several times that the proposal by IAG to buy Aer Lingus makes perfect sense for all parties. It is certainly the best available option for the Irish government to ensure the stability and growth of Aer Lingus and its employees. The idea that IAG just wanted Aer Lingus for its Heathrow slots was silly because part of the appeal for the company was the opportunity to carry large numbers of passengers to and from Ireland via its hubs – and they could not do that if that stopped flying to Ireland. Anyway, the Irish government has now agreed to sell its shares so that leaves IAG the job of doing a deal with the two minority shareholders, Ryanair and Etihad, who will have to decide whether they want cash or would prefer to remain passive investors.

Whilst logic pointed to the deal being good for all parties, anyone unconvinced only had to read a letter Richard Branson wrote to the Irish government asking them not to sell because, according to him, such a sale “would not be in the public interest”.

You can guarantee that whenever old Beardie uses that phrase, he means “not in the interest of Virgin”. He trots out the same old phrase every time he thinks the Virgin group’s franchise fees might be hit. In fact, on this occasion, it is quite hard to see Virgin Atlantic losing much, if anything from the deal – though that, of course is beside the point because in the Branson universe, any move by British Airways or its parent, is bound to be “against the public interest”.

Anyone who still had not made up their mind by this stage would surely have been swayed by another letter from that well known philanthropist, Donald Trump. Even he joined in the bandwagon by saying a sale would “not be in the public interest” because he was worried about the provision of air services for golfers at a new course he was developing. No doubt if golfers come to play in sufficient numbers at the new course, IAG will be only too delighted to fly them in.

With both Branson and Trump against the deal, IAG must have known the sale was as good as done.

Turkish Airlines reveals too much

Airlines can try to reverse a  poor reputation by spending a fortune on new liveries, glossy advertising and new aircraft and then, rather too quickly, a chance remark reminds the world that not so much has changed.

Turkish Airlines had a shocking reputation for safety and service and, to its credit, it has improved though not as much as it needs to. They are definitely not an airline that should be handing out advice to Lufthansa on how to train pilots. 

The CEO of the airline, Temel Kotil, apparently has the Germanwings crash all sorted out. “The crash happened after the pilot broke up with his girlfriend” he said in an interview with a Turkish magazine, which is why Turkish Airlines “encourages” its pilots to marry. He also said that his airline was anxious to recruit more female pilots for the same reason.

He is clearly a man of many talents. Not only the CEO of an airline but a world-class psychiatrist as well. Those who have studied the issue of depression will no doubt be fascinated to hear Mr Kotil’s thesis that depression affects single men so much more more than married men or women.

Suggesting that pilots should be “encouraged” to marry has a slightly ominous tinge to it in the context of a country that is veering towards a form of Islamic dictatorship.

There has long been an understanding that airlines never comment publicly on the accidents of other companies. The CEO of Turkish Airlines needs to be forcibly reminded of this.

Meanwhile, these silly remarks are unlikely to make passengers travelling with Turkish Airlines feel any safer.

 

What has gone wrong with Virgin Atlantic?

The water cannon salute is a traditional gesture made by airports to mark the first, or sometimes, last flight by an airline or a type of aircraft. It happens several times a month around the world without incident. Unfortunately, the most recent salute went wrong when fire crews welcoming a new Virgin service from Atlanta to Manchester (which replaces flights by their shareholder, Delta) pressed the wrong button and covered the aircraft in foam rather than water.

Cue much amusement around the world. 

True, the incident was not funny for the passengers hoping to travel on the aircraft who were delayed overnight but it is hard not to see the funny side. It is like watching a man drive his brand new Mercedes into a car wash and having it flooded because he had forgotten to close the windows. You really shouldn’t laugh but…

In the old days, Virgin Atlantic’s over-active PR people would have been sure to join in the fun. When everyone else is laughing at you, the only sensible option is to join in. We would have expected a few witty one-liners at the very least.

Instead, the most Virgin Atlantic could do was to dispute the fact that the flight was cancelled. According to them, it was merely delayed overnight for the operating crew to take the legal minimum rest. And that simply begs the question as to why they did not immediately replace the aircraft and crew with another aircraft and crew from Heathrow.

In the same circumstances, we imagine even the normally straight-laced US airlines would have found something amusing to say. But Virgin, once the airline that was so eager to put the “fun” back into flying is a very different airline today. 

Ryanair have the last laugh

Last week Ryanair said that the Board had given agreement to start flights to the US within four years. Then, a few days later, Michael O’Leary stepped in and said it was all a mistake and the airline had no such plans.

Cue a long list of articles in travel business publications claiming that the airline had made fools of themselves.

Actually, the people who had made fools of themselves were these supposedly serious publications that had immediately followed Ryanair’s initial announcement with long, pontificating articles about how Ryanair would be able to shake up transatlantic flights and – even – threaten the future of current major airlines.

As we said when Ryanair made its original “announcement”, there was really very little that was new – just a vague remark that the airline could start flights within a few years. There was no commitment and, as we added, the airline did not have any current orders for suitable aircraft. Ryanair have tossed around this idea so many times. We are quite sure they have many thick files on the subject and periodically set feasibility teams to work. One day, they might well give it a go but there was nothing to suggest that a launch was in any way imminent or even that it was being planned.

As Michael O’Leary once said, you should never believe anything Ryanair say in public. All the so-called experts who broke that rule should feel suitably embarrassed.

Of course, there is one way that Ryanair might start transatlantic flights quite soon. There are vague whispers that they might make a bid for the struggling Norwegian. Ironically, part of the reason for that airline’s problems is its new longhaul network. Ryanair do not normally buy airlines – it is cheaper to watch them disappear and then pick up the routes they want – so we would not place much credence on these rumours. But you never know.

If that happened, the assembled mass of travel business journalists would probably hyperventilate.