Eurocontrol’s October Network Manager Report confirmed that growth is continuing, with October 2015 average daily movements 1.2% higher than for October 2014. The last five months (June to October) have achieved the highest monthly totals recorded and traffic has now grown back and passed the previous high year of 2011.
Another week, another press release voicing concerns about social dumping in the aviation sector. This time, it was the turn of the European Economic and Social Committee (EESC) to call for further restrictions on the use of indirect employment contracts in the aviation industry and the outsourcing of airline staff to lower-wage countries.
Some have suggested that the maritime industry may offer a solution to European aviation’s labour woes.
Too often we see the aviation industry using buzzwords and rhetoric in an attempt to mask a lack of detail or data to support an argument. Well, we’ve had enough.
Our new game is designed to highlight the most guilty and shame them into using defined terms correctly and to stop using vague, un-defined terms.
In this article, Margriet Bredewold, CEO Co-Guard GmbH explains her concerns with interpretations of the ‘Just Culture’ approach.
Safety management system-based operations are being introduced across aviation. Consequently, the discussion about ‘Just Culture’ is increasingly relevant. The European Commission, EASA and various trade associations have taken up the concept and are making a serious attempt to oblige operators, maintenance organisations and ground handlers to adopt a ‘Just Culture approach’.
Most of these attempts involve regulatory frameworks, policies and signed declarations stating that ‘honest mistakes’ are accepted as long as reported, but cases of ‘gross negligence’ and wilful conduct are a matter for the courts.
Until recently, the aviation industry has been able to remain largely exempt from climate change targets. This is despite it accounting for around 3% of CO2 emissions. That does not sound like much; the industry spokespeople certainly want you to think it is not much, but it actually means that the aviation industry emits about the same amount of emissions as the UK. Anyone want to argue that the UK should not be subject to climate change mitigation targets?
An article in the New Yorker last year alleged that airlines have adopted a strategy of ‘calculated misery’ in order to encourage customers to pay extra fees. The argument is that the basic service provided is designed to be so degrading that passengers are willing to pay extra for services such as priority boarding and premium seating just to avoid the discomfort of an economy service.
It is certainly true that there is a growing trend towards ‘unbundled’ airfares. Historically, a standard airfare included a choice of seats, a meal on-board and an allowance for checked-in luggage. Now, many airlines offer a basic ticket that excludes many of these services with the option for passengers to purchase add-ons to improve the comfort of their journey. In 2014 alone, global airline ancillary revenues were reported to be over $38 billion.
This has two aspects that are curious.
ICAO’s pricing guidelines are considered by some to be the final word in airport charges. Discussions of airport charges between airports and airlines (and regulators) often focus on whether they are consistent with ICAO’s pricing guidelines document.
However, a reliance on these guidelines may actually be detrimental to both airports and airlines.
As we discussed in this month’s Aviation Intelligence Reporter, more needs to be done to address airspace congestion and government-driven initiatives such as SESAR shouldn’t be relied upon to address the issue. Just doing what we are currently doing faster is not a solution.
In Europe, ANSPs are now starting to face financial incentives to improve their on-time performance. As part of the Single European Sky initiative, ANSPS face losing up to 1% of their revenue if they do not meet prescribed targets for en-route delays. They may also receive up to 1% in additional revenue if they exceed these targets.
The question remains, however, as to whether 1% of revenue is a sufficient incentive for ANSPs to make the necessary changes and investments to increase capacity.
Start as a billionaire and buy an airline.
It’s an old joke that continues to be relevant, even as the industry posts record profits for 2015. It also captures the great anomaly of the airline industry: why do airlines continue to operate despite apparently never making a decent profit?
Economists often talk about the Weighted Average Cost of Capital (WACC) as a benchmark for whether a firm’s profits are reasonable. The WACC is a calculation that attempts to capture the risk associated with an investment by estimating how much return potential investors would need to earn on their investment to be willing to invest in that firm, rather than in another firm.
Profits below the WACC are typically seen as evidence that a firm is making insufficient profits. Theory dictates that should this continue, the firm would eventually go out of business.
Yet, according to a 2013 report by IATA, between 2004 and 2011 the airline industry persistently made profits below its WACC. This suggests that either the estimated WACC is wrong, or that investors in airlines are irrational.
The decision as to whether to build an additional runway at Heathrow is increasingly likely to a political – rather than an economic – decision. Therefore, the various affected parties have all been busy publically voicing their opinions on the recommendations set out in the Davies Report. And it is all very predictable.