Thursday, May 21st, 2015

The dangers of progressive ANSP management

The recent announcement that Richard Deakin, the CEO of UK NATS for the past five years, has decided to move on is yet another timely reminder of the difficulty in attracting and retaining strong talent into the very senior ranks of the ANSP industry.

Deakin is very well regarded for the job he has done to develop NATS. Through technical innovation and the development of its commercial activities he has driven NATS‘ operational and financial performance where today it has become arguably the best ANSP in the world. He is a loss to the industry and we wish him well.

Like so many of his ANSP peers over the years however, Deakin too has suffered at the hands of politicians and the media.

It is no way for a competent professional who has done a difficult job to be remembered but unfortunately this is all too familiar territory to watchers of this industry. In recent years equally competent leaders of ANSPs in the United States and in Australia have experienced underserved and difficult departures largely because they pursued change and were worked over by the politicians and the media.

Attracting progressive CEOs into the ANSP industry is not easy. It is dominated by governments and difficult unions, it operates a high consequence business requiring highly reliable systems, and it has inbuilt resistance to change. If this isn’t enough, a reform oriented CEO runs the risk of being subjected to ridicule by shortsighted politicians and the cheap media headline.

No wonder a job like this is hardly likely to bring a rush of candidates who are committed to long-overdue change.

The aviation industry deserves better.

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Monday, May 18th, 2015

Time to start thinking about ATM liberalisation

Would anyone like to argue that the liberalisation of European airline industry in the late 1980s and 1990s was anything other than a success? Consumers have benefitted from lower fares and increased choice. New airlines have been able to enter the market and existing airlines have been able to access new markets. Sure, we have had some consolidation but competition in the European airline industry remains healthy. Indeed; so far, so good.

But one major part of the aviation industry still remains fiercely closed to competition: 18 years after the full liberalisation of European carriers, the air traffic management (ATM) industry is largely limited by state boundaries and almost entirely run by state-owned Air Navigation Service Providers (ANSPs). There is no good reason why this situation should continue.

The liberalisation of the ATM industry would bring a number of benefits, not least to consumers. These benefits would likely include lower airspace fees (and therefore lower fares for consumers) as ANSPs would be forced to improve their efficiency in order to compete. We might also expect the ATM industry to have greater incentives to innovate and offer new products and improved choice to airlines who, for example, seek differing levels of priority when using ATM services. Fancy that: customer focus.

At the time, there were some who opposed liberalising the European airline industry. They voiced concerns that national flag carriers would find it difficult to adapt to the new market conditions and that this would place jobs and air services at risk, that competitive pressures would leave airlines to cut costs and threaten safety and security, and that it would be difficult to enforce standards. All this is a diplomatic way of saying that increased competition can be hard work.

While we have yet to see anyone from the ATM industry convincingly explain why their industry cannot be liberalised, the safety argument is never far away.

It is telling to see that the concerns associated with airline industry liberalisation have not been realised. Safety and security remain top priorities for the airline industry. After all, the existence of an aviation industry is inexorably linked with safety. Many of the legacy operators remain, and some have indeed prospered, since the liberalisation of the industry. Meanwhile, the emergence of new carriers has in fact increased the number of jobs in the aviation industry.

Liberalisation of ANSPs is unlikely to happen overnight, nor would it be seamless process. There are a substantial number of issues that would need to be addressed, such as how to continue to regulate safety, the practicalities of smoothly transitioning away from state ANSPs to cross-border operations, and the challenge of getting agreement from the large number of states involved. It would likely also require ANSPs to change the way they operate and the technology they use.

Some very small steps have already been taken towards ATM liberalisation. This includes opening up the provision of ATM services at airport towers to competitive tender. As a result, NATS are currently managing air traffic control services in a number of Spanish airports while DFS manages the Gatwick tower. However, as the situation currently stands, ANSPs will continue to operate largely free of competitive pressures.

All this doesn’t mean it’s not worth having ATM market liberalisation as a goal and the focus should be on the long-term benefits of liberalisation.

However, for this to happen, we need those who share such views to come together and form a strong and focused voice for change. The benefits of ATM market liberalisation need to be clearly communicated, and the concerns of those against market liberalisation responded to. Airlines need to be involved as well, of course. They are likely to be the big winners from this process.

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Thursday, May 14th, 2015

The Cat is out of the Bag – SESAR is nothing more than a plan to use the market to reduce costs

The game is up. The true market driven aims of SESAR have been discovered by Miguel Viegas, a Member of the European Parliament. Miguel’s National Party is the Partido Comunista Português, and he is a member of the Confederal Group of the European United Left – Nordic Green Left.
Miguel, in a written question to the running dog lackeys of the Imperial ruling class capitalists over there in the European Commission has told them straight “It has been feared from the start that [The Single European Sky initiative] may be too strongly geared to reducing costs and too closely directed towards the market, with the aim of handing a series of activities that have until now been the responsibility of national governments to private companies.”
Miguel is seeking an explanation from the Commission of how this has come to pass, and why SESER is not a “100% public joint venture”. Anything less than that is simply not acceptable. The Commissariat risks several years of re-education camp if they do not get it right. Soon.
Of particular concern to him seems to be that a (whisper this) Spanish company – Indra has joined the SESAR Joint Undertaking as a full member and is now part of this spiteful Public-Private partnership.
The alternative view, that perhaps the current system is not a perfect model of efficiency and well-being maximisation, gets no truck from our Miguel. Better to have the most expensive ATM in the world, inefficiently delivered, than the risk of customer focused, efficient innovative ATM.
The existing system delivers ATM like it is 1955 – VHF radio and radar included – but at least each controller has a chicken in every pot.
We shall watch the response of Commissioner Bul? with great interest.

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Tuesday, May 12th, 2015

March 2015 Eurocontrol Traffic Report: Traffic growth flattens but LCCs continue to grow.

Total Traffic for Europe (average daily departures) continued the recovery which commenced in April 2013, but the rate of growth has fallen back.
March 2015 traffic was 1.4% higher than March 2014 and the twelve months rolling traffic trend was also 1.4%. This is a reduction on the twelve months rolling traffic trend of 1.8% that was reached in December 2014.
338 average daily flights were added in March 2015(v Mar 2914):
• Low Cost Carriers (Ryanair, Easyjet, Aegean, Vueling, Pegasus and Wizz continue to provide most of the growth adding a total of 421flights);
• Turkish Airlines which maintained its growth with 64 additional flights; and
• Middle East carriers (Emirates, and Qatar) added a total of 38 flights
Reductions in flights were again led by Lufthansa (230 flights) which was partly offset by an increase in daily flights by Germanwings ( plus 155 daily flights).
Air France, SAS and KLM also had reductions in average daily flights..
Ryanair and Easyjet now account for 9.4% of average daily flights.
Istanbul/Ataturk and Istanbul/Sabiha Gokcen had a combined increase of 72 average daily flights. Athens, London/City Madrid, and Dublin also all had growth of at;least 20 additional daily flights.
Of the top ten airports four (Paris CDG, Frankfurt, Munich and Copenhagen) had reductions in daily flights.

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Thursday, April 30th, 2015

It’s not fair!

There’s been a lot of talk about unfair competition recently. Air France and Lufthansa have been complaining to the European Commission that the Gulf carriers benefit from financial support from their local state and that this gives them an unfair competitive advantage over European carriers. Meanwhile the US carriers have been complaining for months that state subsidies to Gulf carriers contravene the Open Skies agreements between the US and the Gulf states, and that these agreements should be renegotiated to protect US carriers and American workers from unfair competition.

Sounds like a bunch of whinging 10-year olds, doesn’t it.

Most economists would be tempted to describe the allegations put forward by the US and European carriers as anti-competitive behaviour. The alleged state subsidies provide the Gulf carriers with an ability to price their services below their true cost. This could force other carriers out of the market or limit their ability to enter Gulf markets if they are not able to price their fares at a similar level. This sort of behaviour is often referred to as ‘predatory pricing’.

So why this preoccupation with the term ‘unfair’?

‘Unfair’ suggests a lower standard and a weaker justification than anti-competitive. So far the US and Europeans are not suggesting the Gulf carriers are acting illegally. Aviation is not covered by the traditional trade laws, making it difficult to point to any particular law that the carriers are breached. Probably a good thing too as we imagine there are a few other airlines who might have breached some of the trade rules typically enforced by the World Trade Organisation.

The use of this language merely highlights that the US and European carriers are seeking their own protectionism as Gulf carriers expand into their traditional markets, rather than any direct response to the Gulf carriers.

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Thursday, March 26th, 2015

How do you get to a Single European Sky with 42 ANSPs?

Let’s start with FABs, they said. Well, they do mirror the 19th Century military alliances that were on the historical path that led to the EU!

But now, perhaps, at last, some progress. The Borealis Alliance, a pan-FAB alliance involving nine European Air Navigation Service Providers (ANSPs), last month announced “…. the launch of a programme to deliver seamless and integrated free route airspace across the whole of Northern Europe by 2020, enabling airspace users to plan and take the most cost effective, fuel efficient and timely routes across the entire airspace managed by Borealis members.” Wow. Sounds like a Single North European Sky! Just need to work out how the nine Borealis members will manage the airspace. That, sadly, was not disclosed.

A further step will be enabled by Aireon which “.. plans to provide the first opportunity for global air traffic surveillance (using ADSB) as early as 2017.” Aireon has announced an agreement with Blue Med FAB ANSPs which will support action “… already establishing an efficient platform for the harmonization of surveillance throughout the Mediterranean Area.”

Does this look like ANSPs willing to contract in what have previously been considered core functions? The list started with charging systems and the AIS database and then, sometimes, ab initio ATC training. Aireon can add provision of surveillance data. Step-by-step we are getting closer to monitoring and control of enroute airspace as an outsourced service.

What next?

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Wednesday, March 25th, 2015

What is a level playing field under open skies?

The spat between the US and Gulf carriers over government subsidies that we discussed in last month’s Aviation Intelligence Reporter continues, with the French and German transport ministries now also raising concerns to the European Commission.

The hastily-formed lobby group Americans for Fair Skies claims that subsidies of $40billion to the Gulf carriers undermines the intentions of the Open Skies Agreements and means they do not compete with American airlines on a level playing field.

So what does a level playing field look like? Here are three suggestions to start with.


Carriers should be easily able to enter or leave a market, implying no (or limited) barriers to entry or exit. Barriers to entry may include large capital investments needed to enter a market (for example, establishing a hub), the strength of the brand and advertising associated with an existing carrier, and access to essential resources such as the right to land at an airport.

The latter is a significant issue and was a source of tension between the United Arab Emirates and Canada in 2010 while Emirates Airline has long complained about securing rights at German airports.

And, of course, there is the issue of slots. Incumbent carriers often have ‘grandfather rights’, whereby they are able retain control of desirable slots for perpetuity. This can be a major barrier to a carrier looking to enter a market.


The actions of one carrier should not impose a cost on other carriers (ie, externalities). For example, a decision by a carrier to increase its flights from a particular capacity-constrained airport may lead to congestion, and thereby increase the costs of other carriers whose flights are subsequently delayed.


Prices should reflect costs. This implies that prices should not be below the cost of providing the service (including an appropriate cost of capital).

That is not to say that every carrier will face the same costs.  For example, a carrier offering a premium service will likely have higher costs than a ‘low-cost’ carrier. Carriers operating with more efficient aircraft may also have lower costs than other carriers who use older aircraft. International carriers’ costs may also differ if they are able to take advantage of their countries’ comparative advantages, such as cheaper labour (this has led to concerns from some about ‘social dumping’).

However, it does not suggest that carriers should be able to avoid costs that a typical carrier operating in that market would otherwise face. As we mentioned in last month’s Aviation Intelligence Reporter, the Gulf carriers have pointed out that US carriers do not pay for ATM services.


As with most things, interpreting the definition of level playing field is not black and white. What do you think a level playing field implies under the Open Skies Agreements?

For more insight on similar issues, including the issue of ‘social dumping’, subscribe to the Aviation Intelligence Reporter 

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Wednesday, February 18th, 2015

Now its good taste that is being mangled

Not content to mangle both words and figures, we did not have to wait long to see what else would be in the US legacy carriers’ crosshairs.  Good taste.  Manners are for wimps, apparently.  Complaining about the alleged subsidies the Gulf carriers receive, America’s legacy airlines are on a media offensive.  It is clearly not a charm offensive.  It is offensive and it is in the media, so let’s stick to calling it a media offensive.  The airlines’ CEOs have fanned out and are talking to anyone that will listen.

Speaking on CNN the Delta CEO, Richard Anderson, brushed aside the counter-claim that America’s Chapter 11 legislation was an unfair advantage by saying that they would not have needed to use if but for the 9/11 attacks, and they came from Arabia, and the UAE has the word Arab in it, and gosh, the other nasty airline is from the Arabian Gulf, and thus, it was only fair.  I can only hope that Mr Anderson’s mother did not see the interview, because it is hard to believe that she would have brought her son up to behave like that.

It is almost impossible to know where to start on this.  First, none of the 9/11 terrorists came from the UAE, or Qatar.  Etihad was not formed until after 9/11.  The airlines of America were plundering the get-out-of-jail card that is Chapter 11 long before 9/11 and there is a chance, just a chance that this sort of xenophobia is not really edifying.

This would be the same Richard Anderson, by the way, that trousered US$60 million in grants and subsidies from governments, and in particular the State of Pennsylvania when he purchased an oil refinery in 2012.  That was different, obviously.  It was good old fashioned right thinking American money, and thus can never be defined as subsidy.

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Tuesday, February 17th, 2015

Airlines not afraid to mangle numbers as well as words…

Away we go again. The US carriers, not content to mangle the language by calling for less competition in the name of more competition also want to mangle the numbers. They are claiming, in a puff piece of terrible, unthinking reporting, that their market share is down by 5%. Interestingly, the science and economics says that it is 1%, oh, and by the way, the fares are down too, which is good for the economy, not bad.

The academic study is here:

The conclusions, on page 21, are worth repeating in full:

The empirical results suggest that these effects are small but statistically significant; that is a 1% growth in total Gulf carrier traffic to or from the U.S. is associated with a less than 0.1% drop in U.S. carriers’ international passenger traffic and a less than 0.1% decrease in air fares. From a consumer perspective, the latter is, of course, a desirable outcome of increased competition in international aviation markets. U.S. carriers, however, are likely worse off following Gulf carrier entry.

The bigger error here is to say that market share is down, without noting that the actual market size is up. Add in all the passengers that cannot fly on US carriers to various parts of India, Asia and Africa and you can see that the market is improving.

There is one truth that cannot be denied – if passengers are opting to travel two-thirds of the way around the globe instead of over the Pacific using US carriers, that says more about the airlines than it does about the passengers.

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Sunday, February 8th, 2015

When Airlines call for more competition they actually mean less competition…

Aviation never says what it means – the freedoms of the air are actually the restrictions of the air; the one thing that is not actually shared in a code share is the code; open skies treaties stop airlines flying certain routes. The list goes on and on, but we must now add a new example to the list: the US legacy carriers want the open sky agreement with the Gulf to be rescinded, ‘to ensure competition is preserved and enhanced.’

If you don’t me believe me, read it here:

You could not make this stuff up. Kitchen too hot?

Partially, the issue is that any competitor wants the opposition to be weakened, that is natural. But the real problem here is that by preserving the ridiculous Chicago System, airlines that cannot stand the heat of evolution have a lever they can demand be pulled.

If you changed the rules of football, any code, it is not important, to say that goals kicked by my team were worth 12 points, but goals kicked by opposing teams were only worth 1 we could happily rewrite most of the world’s championships. But we would look silly.

A bit like the US legacy carriers.

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