1. BA-AA merger may be back on the agenda
British Airways may be re-visiting plans to merge with America Airlines. A statement from BA last night said: "British Airways is exploring opportunities for co-operation with American Airlines and Continental Airlines." Although BA refused to give details of the discussions it is understood they revolve around Continental joining the oneworld Alliance, where BA and AA are the dominant members. Sources told that while it would be difficult to take discussions beyond a partnership arrangement in the current regulatory environment, BA and AA have at least one eye on discussions due to take place later this month about further liberalization of the transatlantic market. A source said, "This is all about BA and AA merging. They have tried to do it before and failed because of anti-trust issues. What we are now seeing is this plan resurrected." Regulators from both sides of the Atlantic are due to meet in Slovenia later this month to hold discussions about the second stage of the transatlantic Open Skies agreement. The talks will centre on freeing up ownership rules of US airlines and allowing European carriers to operate domestic routes in the US. The regulators have until 2010 to reach an agreement.
Source: Economic Times;11.5.2008

2. IATA: Industry has taken “a turn for the worse”
IATA has announced passenger traffic for March but says the figures don’t tell the whole story. Compared to the same month in the previous year, passenger demand increased 5.8 per cent with load factors at 77.7 per cent. IATA noted that March passenger growth was positively skewed by the Easter holiday period which was in April of the previous year. "Adjusting for this distortion, real traffic growth in March was four per cent." The slowdown in demand growth continues the sharp downward trend which began in December 2007 as the impact of the US credit crunch began to be felt in the airline industry, IATA said. "International passenger load factors were equally skewed. When adjusted to take into account artificially high utilization over the Easter period, the March load factor was 76.1 per cent. "While still high, this is 1.7 percentage points lower than the 77.8 per cent recorded for the same month in 2007." IATA said the fall indicated that the slowing of demand occurred faster than airlines could cut capacity. "Traffic only tells a part of the story. Astronomical oil prices are hitting hard. And the buffer of an expanding economy has disappeared. The fortunes of the industry have taken a major turn for the worse,” said Giovanni Bisignani, IATA’s director general and CEO. "The slowdown in Asia-Pacific carrier traffic to 4.3 per cent is significant in that the region’s booming economies were expected to immunize them from the US slowdown," he added.
Source: Economic Times;14.5.2008
 

3. A chic Address around the world
Another UAE-based hospitality group is launching a luxury global hotel brand. Emaar Hospitality will operate its own five star hotels under the brand name of The Address Hotels and Resorts. Emaar’s flagship hotel will open later this year in the new Downtown Burj Dubai development. A second property will follow at Dubai Marina. Mohammed Ali Alabbar, chairman of Emaar Properties, revealed that The Address will have four sub-brands covering resort, retreat, urban and business in all markets where Emaar has a footprint. “The Address will be one of the prime drivers in our global expansion strategy in the hospitality and leisure business. Creating a new brand to operate our hotels and resorts globally is a key component of our business integration strategy,” he said.
Source: Business Standard;14.5.2008
 

4. Dnata to represent luxury hotels
Dnata Travel Services, part of the Emirates Group, is expanding its portfolio of luxury products and services with the creation of Luxury Hotels by Dnata. The new division is dedicated to representing the world’s most luxurious hotels in the Middle East and will offer sales, marketing and PR support to raise their profile in the region. Veronica Posteraro, product development manager, Luxury Hotels by Dnata, said: “The Middle East is becoming an increasingly important market for top end luxury hotels around the world. “The focus of attention is shifting towards this region, where there is a wealth of travellers for whom the option of staying in luxury surroundings in niche, boutique hotels is more important than the cost. “At the same time, these hotels sometimes have very little experience of this market and that is where Luxury Hotels by Dnata comes in," said Posteraro. “At Dnata we have unrivalled local knowledge, experience and expertise in the region, together with an unbeatable portfolio of products and services, many of them at the luxury end of the market. “Luxury Hotels by Dnata has very strict guidelines for the type of hotel we will represent, because we want to ensure each hotel is truly special. We are not looking to work with global chains, but rather with niche, boutique hotels, which have 5 stars and less than 300 bedrooms. “We will only represent a maximum of three hotels in any one location and initially we are looking at destinations which are easily accessible from Dubai.”
Source: Business Standard;12.5.2008

5. Iberia results hit by fuel prices
Iberia’s first-quarter results, which the airline presented to Spain’s securities market commission (CNMV), were dulled by the sharp hikes in the price of aviation fuel, which translated into an additional cost of €66.8 million over the amount spent in the same quarter of 2007.The reorganization of the route network and the implementation of the most of the policies specified in the airline’s 2006-2008 Strategic Plan helped cushion the impact of higher fuel prices, and net results for the quarter showed a loss of only €400,000. Thanks to these policies, unit operating costs in the quarter show a 4.8% decline when fuel is excluded from consideration. Operating income reached €1.3 billion in the first quarter of 2008. There was a noteworthy increase in revenues from third-party aircraft maintenance clients, which climbed by 9.3% to €6.3 million. A larger number of high added-value aircraft engine maintenance jobs for other airlines explained most of this increase. Expenses rose by 2.5% from the same quarter of 2007, owing to the sharp rise in the cost of fuel, which now accounts for 24.6% of total Iberia Group operating expenses, and nearly 30% of its transport business costs. Employee productivity showed a 6.7% gain in the quarter, thanks in part to a 4.8% reduction in total staff. Fleet utilization increased by 3.1% to 9.7 hours per aircraft per day. Average punctuality of flights in the quarter improved by three points, to reach 84.9%, which places Iberia ahead of all other European network airlines, and more than five points above the average for members of the European Airline Association (AEA).The total number of passengers per kilometer carried by Iberia (RPKs) rose by 1.5% from the level marked in the same quarter last year, and the number of available seats per kilometer (ASKs) increased by about the same proportion, so the load factor remained unchanged at 79.4%, continuing to outperform those of other European network airlines. In the quarter, Iberia neared the conclusion of its review and optimization plan for the flight programme, as called for in the 2006-2008 Strategic Plan. Under the new programme, seat supply (ASKs) was increased by 15.5% from 2007 for domestic and medium-haul flights, and capacity adjustments were made to individual particular point-to-point routes. Average revenue per ASK declined by 2.0% overall, with the most severe decline –9%-- registered in the medium-haul segment, due to the added emphasis on the long-haul business, which now accounts for 63% of all production, and to the operation of longer flights within Europe, owing in part to the new routes to central and eastern Europe. Seat supply (ASKs) on long-haul flights was increased by 5.9%, while RPKs rose by 4%. The long-haul load factor came to 87.3%, 1.6 points below the level marked a year earlier, because of increased supply by competitors on routes to South America. The load factor on international medium-haul flights improved by 1.9 points from the first quarter of 2007, to reach 68.0%, as supply (ASKs) increased by 2.9% and demand (RPKs) by 5.8%. In keeping with Iberia’s strategy, seat supply on domestic routes diminished by 13%, and the load factor in this market reached 69.2%, a half-point below its level a year earlier.
Source: Financial Express;12.5.2008

6. Continental prepares for Misner departure
Continental Airlines has announced that its executive vice president and chief financial officer, Jeff Misner, has informed the company that he has decided to retire effective Aug. 31, 2008, following his 55th birthday. "Jeff has made great contributions to Continental during his 13 year tenure," said Larry Kellner, Continental's chairman and chief executive officer. "He has been a valued and trusted member of our senior management team, and everyone will miss him. We wish him well in his retirement." Misner has served as Continental's chief financial officer since 2001. He joined the company in 1995 as vice president of treasury operations and was promoted to vice president and treasurer in 2000. Zane Rowe, 37, Continental's senior vice president for network strategy, will succeed Misner as executive vice president and chief financial officer upon Misner's retirement. "Zane has served Continental for more than 15 years and has proven financial, analytical and operational experience," said Kellner. "He is an integral part of our senior management team and the perfect choice to succeed Jeff as our next CFO." Rowe was named senior vice president for network strategy in September 2006, after assuming responsibility for Continental's network strategy, including schedule planning and profitability analysis, as vice president network strategy in 2005. He joined Continental in 1993, and was elected staff vice president for financial planning and analysis in February 2001. He was promoted to vice president of financial planning and analysis in September 2003. Misner will continue to serve as executive vice president and chief financial officer until his retirement at the end of August, and will work with Rowe over the next several months to transition his responsibilities as part of the succession.
Source: Financial Express;11.5.2008

7. Amadeus poll paints optimistic picture
Amadeus has revealed the results of a recent online poll among UK business and leisure travel agents looking at how bookings have been affected by the credit crunch, and what is happening to hotel booking patterns in general. The results show an optimistic picture - the majority of both business and leisure agents feel that the credit squeeze did not impact on sales in March. Business agents were more adamant of this fact with 43.9% declaring the crunch did not affect sales. Some 28.6% of leisure agents echoed this. However, 31% of leisure agents did feel the prevailing US economic climate was being felt in the UK. Of those leisure agents who were seeing a downswing, 30.4% said it amounted to a 10-19% fall in sales. Some 31.3% of business agents who registered a chill factor from the US said bookings were down, but only by 5-9%.

Of the leisure agents polled:

* 31% think that the credit crunch impacted on sales in March while 28.6% disagree

* Of the agents who have seen an impact, 30.4% said it was by between 10% and 19%

* However, 35.7%, the majority view, said they thought the outlook over the next three months was unchanged compared to the same period last year

Of the business agents polled:

* 43.9% said the crunch had not affected March business

* Of the 19.5% of them who said sales had been hit, 31.3% said it was only by between 5% and 9%

* The majority, some 24.4%, foresaw no change in business in the next three months compared to last year

The majority of agents, across both sectors, said that they felt bookings over the next three months would be no different to the same period last year, indicating further optimism that the economy would not affect them adversely in the short term. In fact, 23.8% of leisure agents believe bookings will be up by 10%. For hotel bookings, the message from the agents polled was location, location, location as it was the number one requirement of clients booking through agents, both business and leisure. A close second for leisure agents was value for money with 87.1% saying this is what their clients demanded. Brand came much lower down, with 37.1% saying this was a factor when booking. GDSs still figure as the predominant booking channel with calling the hotel direct the next most popular method. Viewdata, however, was used to book accommodation by only 12.5% of leisure agents – a sign of the times, with online travel agents clocking more than double that at 28.6%. As for how agents accessed information on accommodation, GDSs and property websites were equally popular (58.8%). But Web 2.0 is creeping up and a whopping 26.8% said they now used review site such as Trip Advisor to get details on hotels and apartments. Brochures are seeing a decline in popularity – a resounding 75% said they no longer used them when booking accommodation. But those who did still use them declared their value lay in being easy to access, providing something tangible to the client and detailing T&Cs and deposit details more clearly. Leisure and business agents believed booking accommodation had got an awful lot easier since their careers had started and put this down to the internet, more properties being loaded onto the GDS and more efficient technology.
Source: Financial Express;10.5.2008

8. Star Cruises updates website options
As a direct result of agent feedback, Star Cruises has updated its website giving agents the opportunity to book cruise only packages with the cruise line. The new function means agents can independently package a short cruise with a pre- or post- cruise stay in the Asia Pacific region allowing for tailor made holiday options with live availability and instant confirmation. Star Cruises has reported an increase in cruise-only sales as they allow agents to book further components with increased flexibility. In addition to the cruise-only booking platform at www.starcruises.com, Star Cruises is also available to book via Amadeus and with tour operators specializing in the Far East. A three-night cruise-only aboard Star Cruises’ SuperStar Virgo departing Hong Kong and calling at Sanya (China) and Halong Bay (Vietnam) starts from £240 pp. Departures are available until the end of October 2008.
Source: Financial Express;10.5.2008

9. Summer travellers feel the heat as air fares rise
The rising air fares seem to be dampening the spirits of Indian leisure travellers this summer. While the average load factors on domestic routes are down by around three percentage points that on international destinations have taken a two percentage-point hit. Globally, the load factors are at 68 per cent, down from 70 per cent last year. In India, the numbers stand at 72 per cent, down from 75 per cent last year. Average ticket price this summer ranges from Rs 4,000 to Rs 7,000 (including taxes and surcharges) between Mumbai and key southern cities such as Chennai, Hyderabad or Bangalore, an increase of Rs 1,500 to Rs 2,000 from last year. Travel industry experts say fuel surcharge is the main reason for the increase. According to Mr C.V. Prasad, President of Travel Agents Association of India, on the domestic side, especially on short haul destinations, fares have touched threshold levels. “People’s loyalty is shifting towards railways and buses on these routes!” he told. Interestingly, this is for the first time that the industry experts are saying that people are going back to railways and roadways as preferred modes for travel after Air Deccan began the era of low-cost air travel in India in 2003. The airlines too are going through tough times. “The rising air fares are turning out to be a double whammy for airlines because the fuel prices are at a record high and as they increase the fuel surcharge correspondingly, the tickets become unaffordable for average middle class people, who had taken to air travel in a big way.” On international routes, especially Singapore, Malaysia and other South East Asian countries, demand for leisure travel did not pick up this summer due to rising inflation.Mr Siddhantha Sharma, Executive Chairman of Spicejet, one of India’s low cost carriers, said that there has been a correction of around five to seven per cent in load factors of low cost carriers with an increase of 20 per cent in the average ticket price compared to 2007.However, Air India’s spokesperson said that there has been no visible change in load factors as yet. Fuel prices are spiralling and there might be some impact felt later this year, he said.
Source: Business Line;12.5.2008

10. Jet Chennai-Pune daily service
Jet Airways will be commencing a daily direct flight between Chennai and Pune from May 15. It already operates daily services from Chennai to Pune via Bangalore. With the introduction of this daily direct flight, the airline will enhance its frequency on this sector, said a statement. Jet will introduce the service on the Boeing 737-800 aircraft with Premiere and Economy class configuration. The company claims that with the induction of this new flight, Jet Airways' passengers from Pune can have convenient connections to Kuala Lumpur and Toronto, via Chennai. Jet Airways' shares closed at Rs 534.85 down 1.89 per cent on Monday from the previous close of Rs 545.15.
Source: Business Line;12.5.2008
 

Prepared by
Jennifer Kumar, BBA (NAU) Alumni
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2652 4399
http://www.skylinecollege.com