Archive for November 6th, 2007

Dreamliner For LAN

The Boeing Company announced today that Chile’s LAN Airlines will receive 32 787 Dreamliners, marking the largest 787 acquisition to date for Latin America. The Santiago-based carrier has ordered 26 airplanes from Boeing, and will lease an additional six 787-9s from International Lease Finance Corp (ILFC).In addition to the Dreamliner order, Boeing said LAN also has committed to acquiring four 777 Freighters – two from Boeing and two to be leased from GE Commercial Aviation Services (GECAS).

LAN Dreamliner

The order for 26 Dreamliners, consisting of a mix of 787-8s and 787-9s, is worth approximately $ 4.5 billion at published list prices. The two 777 Freighters are similarly valued at approximately $ 500 million. The two direct-purchase 777 Freighters were previously attributed to an unidentified customer on Boeing’s orders and deliveries Web site.

With the 787, LAN will be able to provide its passengers with the very best in long-range air travel, including larger windows, higher cabin humidity, more space and a lower cabin altitude.

Thus far, two other Latin American carriers have committed to the 787 Dreamliner: Aeromexico, with three leased, two purchased, and Colombia’s Avianca, which has ordered 10.

The Boeing 787 Dreamliner, scheduled for entry into service in 2008, provides passengers with a better flying experience and operators with a more efficient commercial jetliner. Thus far, 51 airlines have logged 736 orders, making the Dreamliner the most successful commercial airplane launch in history. With the 787 Dreamliner, Boeing continues its leadership and innovation with a mostly composite airplane that consumes 20 percent less fuel and provides airlines with up to 45 percent more cargo revenue capacity.

The 777 Freighter is the sixth and newest member of the 777 family of airplanes and builds upon the family’s extensive use of advanced technologies. The 777 Freighter is based on the 777-200LR passenger model and is designed to facilitate easy interlining with the Boeing 747 freighter fleet. Eleven customers have ordered 82 777 Freighters, which are scheduled to enter service beginning in the fourth quarter of 2008.

Source: Boeing.com

By Szafi

Paper-free Air Cargo

IATA is working with seven key cargo airlines – Air Canada, British Airways, Cathay Pacific, KLM, Martinair, SAS and Singapore Airlines – freight forwarders (DHL Global Forwarding, Panalpina, Kuehne+Nagel, Schenker, TMI Group-Roadair, Jetspeed) and ground handling agents kick-started the move to a paper-free air cargo environment with the launch of six e-freight pilot projects. Starting today, cargo on key trade routes connecting Canada, Hong Kong, the Netherlands, Singapore, Sweden and the U.K will be processed electronically.

DHL image photo

“The paper-free era for air freight begins today,” said Giovanni Bisignani, Director General & CEO of IATA. “This first wave of pilots will pave the way for a global rollout of e-freight that will eliminate the paper that costs this industry $1.2 billion every year. Combined, these documents could fill 39 B747 cargo freighters each year making e-freight—a win for the business and for the environment.”

“E-freight is a revolution for an industry that is absolutely critical to modern life. For airlines it is a US$55 billion business that generates 12% of their revenues. More broadly air cargo transports 35% of the total value of goods traded across borders. The potential impact of greater efficiency in air cargo has very broad implications across the global economy,” said Bisignani.
E-freight pilots will systematically test for the first time common standards, processes, procedures and systems designed to replace paper documents that typically accompany air freight with electronic information. During the initial phase, selected shipments will travel without a number of key documents that make up the majority of the paperwork, including the house and master air waybills.  Results from the pilots will be used to expand e-freight to other territories.

IATA e-freight requires that business, technical and legal frameworks are in place to allow airlines, freight forwarders, customs administrations and governments to seamlessly exchange electronic information and e-documents.  The six pilot locations were selected based on their ability to meet these criteria along with offering network connectivity and sufficient cargo volumes.

At each location cargo experts from participating airlines, freight forwarders, ground handling agents, local customs administrations and airport authorities worked together closely over the past 10 months to prepare the pilots.
“High oil prices and cumbersome processing requirements are handicapping air transport’s competitiveness with sea shipping,” said Bisignani. “Sea shipping is expected to grow at 6% annually over the next five years, compared to 4.8% for air cargo. E-freight makes a four-decade leap, bringing strengthened competitiveness by cutting costs and improving transparency and consistency throughout the supply chain. This good news for the customer will help shore-up air transport’s competitiveness with sea shipping and other modes of transport.”

E-freight is one of five Simplifying the Business projects being led by IATA to improve service and cut costs. The industry has set a deadline of the end of 2010 for the implementation of e-freight wherever feasible.

Source: IATA.org

Easyjet Opens Old-new Sales Channels

When I saw it in the news that easyJet will sell its seats via GDSs, my first reaction was “oops”. What is a GDS and why is it surprising for the airline industry?

What is a GDS?

The abbreviation stands for Global Distribution System and there are a few of them available in the world. You might have read about Amadeus, Gabriel, Galileo, Worldspan, Apollo or Sabre in our blog.  Airlines use these systems to distribute their products: seat availability and prices. This is the traditional sales channel for airlines. Travel agents also have access to GDSs and they use them to reserve places through them. The reason why low cost carriers do not use this channel is that there are costs attached to each end every transaction and it might happen, that a booking is cancelled, but the airline had costs with it.

Why is it suprising that easyJet starts using GDSs?

Now easyJet opens towards this sales channel, which will definately increase its sales costs. It says it will add a point-of-sale fee to fares booked through the GDSs, ensuring that its Web site “remains our primary distribution channel and fares will always be cheapest when booking direct online. €7.50 will be paid for a one-way ticket, €12 for a return ticket and €5 per segment for a ticket that includes more than 2 segments. Taking the fact GDSs normally charge USD 2-3 per segment for a transaction, they must have thought about cancelled bookings by creating the new fees.

 Why is it still very logical?

The intention behind easyJet’s step was to open towards business travellers. The characteristics of business travellers are that

– they usually travel in and out within a day or maximum 2-3 days – by this characteristic low costs are better for a traveller as traditional airlines usually charge much more for these short returns than low costs

– they like loyalty programs, especially if the company allows them to collect miles during business trip that they can use for leisure purposes – this is something low costs do not have yet, although I believe there are some low costs seriously considering it.

– they do not arrange their trips for themselves, they have travel agents to arrange it for them – now this is the weakness of low costs, because the real big agencies like Amex will do their best to make their reservations via GDSs, so they loose business by not being present in them. And this is the point where Easyjet decided on taking action.

Easyjet

Low cost trends

easyJet is a follower with this strategy. They just copied the model of 2 US low cost carriers: Jet Blue Airways and Southwest Airlines. So what is happening in the airline industry?

The classic low cost model is that they save money on sales channel costs and spend it on direct advertising, thus generating direct traffic for themselves. It is a clear trend that the gap between low costs and traditional network carriers is narrowing.  Network carriers are forced to keep up in the tough competition with low costs, so their reaction against the low cost attack was reducing sales cost by directing more passengers towards their direct online sales channel (their website), stopping costly services like hot meal on board, basically giving less service for a lower cost. Besides that they give even higher services and better for their business and first class passengers to gain more revenue from that segment.

On the other hand low costs have to compete with each other, too. So we can see they start giving sandwiches and refresheners on board (for example Sky Europe) and start selling tickets via GDSs. Next steps can be loyalty programs, code share flights or at least strategic cooperations and different cabin classes, but the latter one is less realistic. The tendency is clear: at the end there will be very similar airlines, some of them offering long haul and very high niveau first class services, but for us, “the rest” it will be irrelevant whether we will fly a low cost or a traditional airline.

Related articles:

Easyjet acquires GB Airways
Self designed uniforms at easyJet

By Szafi 

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