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YIELD IMPROVEMENT v DEMAND MAINTENANCE Airlines perform delicate balancing act

The strong exchange rate and tactical offers are keeping travellers moving, but it is still a major balancing act for airlines trying to improve profitability, without impacting on demand. By Jane E. Fraser

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IRLINES will be performing a delicate balancing act over coming months, trying to shore up yields without damaging demand. Fare increases and fuel surcharges will be the key to saving yields and profitability in an environment of high fuel prices, but at what point will this start to impact on passengers’ desire to travel? IATA says there are “signs that price-sensitive passenger demand is weakening” as a result of surcharges and fare rises, adding to the problem of load factors that have fallen their lowest level in years. “The key issue for airlines now is whether the recent sharp fall in load factors, and weakening in supplydemand conditions, will allow fuel costs to be recovered,” an IATA report says. Thai Airways is a good example of the challenges faced, having reported a “rapid” rise in fuel prices and a “drastic” drop in demand due to the Japanese earthquake. Thai reports it is “facing difficulty in increasing (the) passenger fuel surcharge to offset the rising fuel price, while encountering fierce competition among the airlines”, resulting in a lower

profit for the first quarter of 2011 than the same period last year. Flight Centre spokesman Haydn Long says the company has not yet seen any evidence of fuel surcharges impacting on travellers’ plans. “One of the reasons for this is because the overall price customers are paying remains well below historic levels,” Long says.

demand high, while the strong Aussie dollar is creating huge savings on land content. Brodie says while VFR and corporate travellers might be paying close attention to fare levels, leisure travellers tend to look at the total price of the holiday. “Fares have increased slightly from what they were two years ago but we

‘At the moment, travellers can fly to the UK for less than $1300 in some instances; that’s a powerful motivation, even before the benefits associated with the strong dollar are factored in’ “At the moment, travellers can fly to the UK for less than $1300 in some instances; that’s a powerful motivation, even before the benefits associated with the strong dollar are factored in.” However, Long believes travellers are “aware of what’s happening with fuel” and will undoubtedly monitor prices when deciding when and where to holiday. Harvey World Travel head of marketing James Brodie believes there are enough mitigating factors in the current environment to offset fare increases. The number of tactical offers being released by airlines is helping keep

haven’t seen a dip in sales,” he says. “There are so many amazing tactical offers out there.” But statistics show demand is fragile for international carriers, which have seen contractions this year after bouncing back to pre-recession levels in 2010. The Japanese earthquake has been a major factor and the Association of Asia Pacific Airlines (AAPA) says the effects of that disaster are still evident. AAPA director general Andrew Herdman says while the medium to longer term prospects are very positive for Asia Pacific carriers, the immediate outlook is clouded by the lingering

effects of Japan and the sharp increase in oil prices. Global figures from IATA show airlines made a net loss for the first quarter of 2011, a result largely attributed to fuel costs. Load factors have fallen to prerecession levels, with capacity growing at about nine per cent and traffic growing by about half that amount. “Partly because of recent events depressing demand unexpectedly, capacity did not slow to match weaker demand,” IATA says. “Capacity plans are being cut, but supply-demand conditions look set to loosen further.” IATA says poor load factors are putting serious pressure on yields. “The sharp improvement in yields and unit revenues in late 2009 and through 2010 owed much to the improvement in load factors to record levels,” IATA says. “That process has now shifted into reverse due to the excess of capacity growth over demand.” While many airlines are now paying commission on fuel surcharges, Emirates set itself apart last month by removing them altogether. Emirates removed surcharges on all tickets after the price of oil pulled back, saying it had promised to do so as soon as it was commercially viable. travelBulletin June 2011

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Kenya Airlines expands network to more than 50 destinations KENYA Airways now flies to more than 50 destinations, having recently added Rome, Juba, Luanda, Nampula, Malindi and Muscat to its network. The airline, which is also preparing to add N’djamena in Chad to its line-up, operates daily flights between Bangkok and Nairobi, with direct connections ex SYD / MEL / BNE / PER / ADL. It also operates three weekly flights between Hong Kong and Nairobi, with connections from SYD / MEL / BNE / ADL / PER / CNS. Kenya Airways codeshares with Qantas between Sydney and Bangkok, providing daily connections to its own flights to Nairobi.

Fares ex Australia have been streamlined to include three destination zones and only two seasons and are now filed in the GDS. Kenya Airways is also paying commission on fuel surcharges on all eligible KQ published fares ex Australia. “These fares are very competitive and flexible and offer many combinations in conjunction with airline partners Qantas, Thai and Cathay,” says a spokeswoman for the airline’s Australian representative Global Aviation. “One of the more popular routings includes travel ex Australia to Nairobi via Johannesburg in one direction and Bangkok or Hong Kong in the other.”

LAN Airlines’ fleet expansion responds to demand LAN Airlines is catering for booming demand for travel in South America by rapidly expanding its fleet of A320family aircraft. The carrier last year confirmed orders for 50 new A320-family planes, on top of an earlier order for 30. The new acquisitions include the

A320, A319 and, for the first time for LAN, the A321. LAN now serves nearly 60 destinations in South America, spanning 10 countries. Overall, LAN boosted its network capacity by about 18 per cent in the first three months of this year, on the back of demand from

both business and leisure travellers. Its fleet is expected to climb to 149 by the end this year (compared to 131 aircraft last year) and to 168 aircraft in 2012. Next year should also see delivery of the first of LAN’s Boeing 787 Dreamliners.

Air Tahiti Nui’s Australian bookings surge

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AIR Tahiti Nui says it is experiencing a boom in bookings out of Australia, thanks to the continued strength of the Australian dollar and intense competition between holiday destinations. The carrier says the surge of bookings is made up of holiday travellers and business incentive groups. Statistics from Tahiti Tourisme show Australian arrivals at Papeete were up 29 per cent for the first two months of 2011, compared to the previous year. “The strong Australian dollar and highly competitive pricing between holiday destinations are combining to make a holiday in Tahiti a real option for many more travellers,” says Air Tahiti Nui regional director Australia Mark Hutchinson.

“Some are using the currency benefit to stay away for longer… others are trading up to the next level of luxury.” Air Tahiti Nui offers two weekly onestop services from Australia to Papeete, via Auckland.

Middle East expansion for Skyteam MIDDLE East Airlines – Air Liban, the flag carrier of Lebanon, has officially signed up to join Skyteam, promising the fast-growing alliance greater reach in the Middle East. The carrier, which will join the alliance sometime next year, will be the second Middle Eastern carrier in the group. Skyteam says the Middle East is an important strategic market for the alliance, with impressive growth in traffic over the past decade. Other carriers due to join Skyteam in 2012 are Garuda Indonesia, Aerolineas Argentinas and Saudi Arabian Airlines. Joining this year will be China Airlines and China Eastern, with daughter company Shanghai Airlines.

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Spacious Air France business class seat ‘wins approval’ AIR France says its new long haul business class seat is winning the approval of 97 per cent of passengers. The longer, wider and more spacious ‘full sleep’ seat has been gradually introduced to the carrier’s long haul network since December, with more than 20 aircraft now equipped. Air France says 97 per cent of passengers surveyed rated the seat’s comfort in the sleeping position as “good” to “excellent”. Nearly 95 per cent of passengers said they would recommend it. Positive comments received in the survey mainly concerned the quality of sleep during the flight, the horizontal position and the legroom. Air France says the seat is more than two metres in length and has a width of 61 centimetres, making it one of the most spacious seat beds in the market. The carrier says the positive response to the new seat has led to a commitment to have them installed on 63 long haul aircraft by mid-2012.

Left: Air France business class, and above: premium economy

A spokesman says the seat gives the airline a competitive edge to benefit from the global upturn in business traffic. Meanwhile, Air France has announced plans to operate non-stop services between Paris and Cape Town

from November 3, with three weekly frequencies. Aircraft operating the route will be those equipped with the new business class seat, as well as Air France’s well regarded premium economy cabin. Further expanding Air France’s

schedule will be three weekly services between Paris and Cancun from October 21. Air France is also now operating a daily A380 service between Paris and San Francisco, to cater for northern summer holiday traffic. The seasonal flight will operate until early September and takes total services on the route to 10 per week.

RJ fleet enhancement reflects ‘dedication to passenger comfort’ ROYAL Jordanian Airlines is bringing new A320 and A321 aircraft into its fleet, which is already one of the youngest fleets in the world. The new aircraft are replacing planes that are only five or six years old, which Australian manager Iain Ferguson says is “a very clear demonstration of Royal Jordanian’s dedication to passengers’ comfort and enjoyment”. Ferguson says the new aircraft will offer the latest inflight technology, maximum leg room and other comforts for passengers, while maximising fuel efficiency and performance for the airline. “These aircraft join the new A330

FJ includes commission on fuel surcharges

Pre-order meals with Finnair business class

AIR Pacific is now paying commission on fuel surcharges, by including them in the fare rather than the taxes. The carrier is also now operating as a direct airline office, in new premises in Sydney’s Pitt Street, rather than being represented by World Aviation. On the fare front, Air Pacific has fares to Los Angeles on sale until the end of June, with tax-inclusive return prices from $1572 out of Sydney and Brisbane and from $1662 out of Melbourne. The fares are valid for travel completed by March 31, 2012.

FINNAIR is now offering business class passengers the chance to pre-order their meals on intercontinental flights. Travellers can use the ‘manage my booking’ section of the Finnair website to view the menu and select their main course. On departure from Helsinki, there are three additional main courses to choose from that are only available when pre-ordered. These meals comprise a healthy option, a hearty home-cooked style option and a gourmet cuisine option. Orders can be placed online between 30 days and 24 hours before departure.

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fleet already serving the Australian market until 2014, when Royal Jordanian takes delayed delivery of its 11 state-of-the-art Boeing 787 Dreamliners,” Ferguson says. Ferguson says Royal Jordanian’s medium haul fleet is not only young but includes near-flat seats in business class, along with “the same, awardwinning level of attention to its customer care that is experienced on its intercontinental flights”. “The (medium haul J class) chair is supremely comfortable, with large screen, adjustable audio and video on demand, and reclines almost flat,” he says.

The friendliest people. The world’s friendliest airline.

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Sydney Air Pacific Routes

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Codeshare Routes Pacific Sun Routes

Air Pacific, Fiji’s national airline, has been operating for over 59 years and has earned an envious reputation as the prime carrier on the Australia-Fiji route, offering typically gracious Fijian service with an abundance of warm smiles.

Christchurch

Fiji is home to the world’s friendliest people and the natural island warmth of the cabin crew is the hallmark of Air Pacific’s service, whether travelling in Tabua (Business) Class or Pacific Voyager (Economy) class. Of course, younger travellers are well catered for by our friendly crew, and discounted fares apply. Our fleet of Boeing 747s, 767 and 737s fly from Brisbane, Sydney and Melbourne to Nadi and beyond to Honolulu, Los Angeles, Vancouver, Hong Kong, Auckland, Christchurch, Samoa, Tonga, Vanuatu, the Solomon Islands, Tuvalu and Kiribati. All flights allow a Fiji stopover. As a full service international airline, all flights from Australia include complimentary meals and beverages. There is also a wide choice of complimentary in-flight entertainment options with free headsets, and the Boeing 747 fleet is fitted with in-flight entertainment systems in every seat. So the fun begins the moment you step aboard.

B747 operates ex Sydney; B767/737 operates ex Brisbane and Melbourne. braveAIRP3049_FE

Kadavu

In addition to our ‘Tabua Club’, Air Pacific is a partner in the Qantas Frequent Flyer programme and members can earn and redeem points, as well as credit those points towards tier status. Air Pacific code-shares with Qantas on AustraliaFiji, Auckland/Christchurch-Nadi and Nadi-Los Angeles routes; with Alaska Airlines on the Los Angeles-Vancouver route, and Cathay Pacific on the Nadi-Hong Kong route. Within Fiji, Pacific Sun is Fiji’s premier regional and domestic airline and operates all domestic and South–Western regional routes offering services that are reliable, comfortable and competitively priced, as well as having a comprehensive range of schedules to connect to and from international arrivals. Pacific Sun services Nadi, Suva (Nausori), Labasa, Kadavu, Savusavu, Taveuni, Levuka, Vanuabalavu and Lakeba. For Reservations call 1800 230 151 airpacific.com

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KLM expands network with US, China, Scandinavia services KLM has undergone significant expansion of its route network, with new services to the US, China and Scandinavia. In March, KLM began nonstop flights between Amsterdam and Miami, with four services per week. This came as its partner airline Delta launched daily, nonstop services between Miami and London Heathrow and was followed by Air France launching three weekly services between Paris and Orlando. The three airlines are operating the Florida flights under their trans-Atlantic joint venture, which also includes Alitalia. The joint venture allows the carriers to coordinate flights and share costs and revenues, while giving passengers more choice on destinations and scheduling. Together, the carriers now offer more than 250 daily transAtlantic flights. KLM also launched its seventh destination in China in March, with direct services between Xiamen and Schiphol. The new service brings KLM’s total weekly flights to China to 53, in partnership with China Southern Airlines. Another new destination on the KLM network is Aalborg in Denmark, with twice daily services operating since late March. At the end of October, KLM will add the Dominican Republic to its offering, with a twice-weekly service to Punta Cana Airport.

Johannesburg next on Emirates’ growing list of destinations EMIRATES has announced Johannesburg as the next destination for its A380s, with daily services to start on October 1. This follows the launch in late April of A380 services to Shanghai, which became the third destination in China for Emirates’ A380 services, joining Beijing and Hong Kong. Emirates is operating three weekly A380 services to Shanghai, departing on Wednesdays, Fridays and Sundays. The planned addition of Johannesburg to the airline’s A380 route network follows a 34 per cent jump in revenue from the South African market for the year ended March 31 this year. Passenger volumes for the calendar year 2010, in which South Africa hosted the successful FIFA World Cup, were up 20 per cent.

“The very positive trends we have witnessed over the last 12 months will only be boosted by the arrival of our flagship A380 aircraft,” says Emirates president Tim Clark. “We anticipate very strong demand from leisure and business travellers keen to experience its unique features.” The 489-seat Emirates A380 is configured with 14 first class suites, 76 flat-bed business class seats and 399 economy seats. First class passengers have access to showers, while all premium passengers on the upper deck can use an onboard lounge. Meanwhile, Emirates has declared a record profit for the year ended March 31, with group profit up nearly 43 per cent. Revenue for the group was up 26 per cent, despite natural disasters,

Lufthansa simplifies baggage allowances LUFTHANSA has simplified its baggage allowances for all new flight bookings. The carrier has adopted the piece concept, with passengers able to check in a specified number of bags depending on their travel class. Weight restrictions also apply and are graduated by travel class, with more generous allowances now applying in all three classes. Economy passengers can check in one bag up to 23kg, while business class passengers can check in two pieces weighing up to 32kg each and first class passengers can have three pieces up to 32kg each. The airline previously worked on weight only, with passengers able to check in any number of bags up to the designated weight.

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Emirates’ A380 business class inflight entertainment

political instability and other challenges during the reporting period. More than 31 million passengers

flew with the airline over the year – an increase of 14.5 per cent on the previous year.

Star Alliance releases new Micronesia Airpass product THE Star Alliance has released a new fare product, the Micronesia Airpass, which allows for the purchase of up to 10 flights on the Continental Airlines and United network across Micronesia. Travel on the pass can commence from Cairns, Guam, Hong Kong, Manila, Nadi, Palau, Saipan or any Star Alliance destination in Japan and is available with an international Star Alliance flight into any of these destinations. The Star Alliance says travellers have previously had limited choice of air travel in Micronesia and have had to purchase separate tickets on different airlines to get there. Fares for the Micronesia Airpass are set according to distance, starting at $US75 for flights up to 150 miles and rising to $US375 for flights covering between 2001 and 2250 miles. Itineraries must comprise at least three flights and need to include at least two 24 hour stops at different destinations.