Fast track into Africa

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FastJet, the new pan-African low-cost carrier backed by Stelios Haji-Ioannou, and one of the highest profile new entrants to the market this year, is at the show to explain its routes philosophy. The carrier will launch operations in Dar es Salaam, Tanzania in early November and plans to expand its fleet size up to 15 Airbus A319s within the first year of operations.

Chief executive Ed Winter says east African governments have been sympathetic to its arguments against taxation. "We've shown them that a reduction in the tax - and the stimulation of demand and the overall size of the market - will cause a rapid increase in the net revenues for government," he explains. "But it needs a bit of a leap of faith for governments to actually reduce taxes...

Doing business Down Under

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Emirates Airline, the flag carrier of Dubai, this summer announced that a code share partnership with Australia’s Qantas is likely to be signed within months.

The move follows the decision by Etihad Airways, Abu Dhabi’s flag carrier, to increase its equity stake in Virgin Australia to 10 per cent. It also comes as Qatar Airways voices renewed interest in Australia. Taken together, the hubbub spells a new phase in the long-running tussle between the Gulf carriers and their western counterparts for supremacy over inter-continental traffic flows...

Interview: Alex Cruz, Vueling CEO

Cruz says AENA fee hike will not derail Barcelona growth

Vueling will achieve net growth at its Barcelona El Prat hub throughout 2012, chief executive Alex Cruz tells Flightglobal, with the availability of spare capacity following Spanair's demise comfortably outweighing the impact of higher fees at the airport.

The low-cost carrier is lobbying AENA over the doubling of charges at El Prat and Madrid Barajas airports in "continuous" top-level private meetings, he says.

But Cruz does not anticipate any revisions to the higher fee structure - implemented on 1 July 2012 - and Vueling is instead pursuing "concessions" from the airports operator over the 5%-above-RPI increases planned for the beginning of 2013 and 2014. Though a goal for the airline, Cruz admits that such provisions will be "insufficient".

Hedging your bets

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When Delta Air Lines announced its intention to acquire an oil refinery earlier this year, the unusual move drew a mixed response from analysts. Some praised its innovation, arguing that its daily consumption of 210,000 barrels of jet fuel justified cutting out the middle man. Others questioned whether airlines should be in the business of refining crude oil.

But one thing no one disputed was the urgent need to offset fuel price volatility. According to IATA's latest forecast, Brent crude, the main European benchmark, is likely to average $110 a barrel this year - but in just six months spot prices have ricocheted wildly between $128 and $88.

For airlines that rely on stable ticket pricing to deliver profitability, such swings have brought fuel hedging firmly back into vogue during the post-2008 recovery. In its simplest form, hedging allows fuel prices to be fixed or capped for future expenditure, smoothing out unforeseen spikes in the oil price and bringing some certainty to margins...

Cracking up

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On 4 November 2010, in the skies above the Indonesian island of Batam, one of the four engines powering an Airbus A380 operated by Australian flag carrier Qantas blew up mid-flight. The force of the explosion was so great that shrapnel from the Rolls-Royce Trent 900 engine punctured the wing, sent fuel gushing from two tanks, and disabled an array of vital flight control systems.

Despite malfunctioning hydraulics, limited reverse thrust and no anti-skid brakes, Captain Richard de Crespigny successfully landed Qantas Flight 32 at Singapore Changi Airport. None of the 440 passengers and 29 crew aboard was injured.

In the months that followed, air safety investigators branched out from focusing solely on the faulty engine to addressing a new issue of concern – the discovery of hairline cracks in the Qantas A380’s wings. Though not a contributing factor to the mid-air explosion, it quickly became apparent that these newly identified fissures – located on nine-inch aluminium brackets connecting the wing’s outer skin to its inner rib structures – warranted further scrutiny...

Interview: Howard Millar, Ryanair CFO

Ryanair defends hedges despite higher Q1 fuel bill

Ryanair will continue to hedge fuel costs with the same swap instruments that prompted heavy mark-to-market losses for the industry in 2008/09, despite taking an apparent hit on its fuel risk management strategy in the first quarter, says chief financial officer Howard Millar.

The airline's average fuel price increased by 21% year-on-year during the first quarter, rising from $820 per metric tonne (pmt) last year to $998pmt in Q1 2012/13.

This came despite a 6% reduction in average jet fuel prices across all benchmarks over the corresponding period, according to global energy information provider Platts. Average global prices between April and June stood at $994pmt, data from Platts shows, compared with $1,057pmt during the same months last year.

Gambling with a clear game plan

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In its 2006/07 annual report, Dubai-based Emirates Airline proudly announced that its “fuel risk management programme” – more accurately described as an oil hedging strategy – had delivered savings of $197 million against spot prices for jet fuel. Gary Chapman, president of group services at the carrier, said the programme had saved Emirates $1 billion over eight years.

One year later, on the precipice of the worst financial crisis in living memory, the airline vowed that it would continue to “achieve a level of control over jet fuel costs so that profitability is not adversely affected” by volatile market prices.

It failed to do so. By the time Emirates’ 2008/09 report was being audited by PricewaterhouseCoopers, the company had written down annual fuel hedging losses of Dhs1.57 billion ($428 million). It may have succeeded in positioning itself defensively against higher oil prices, but it did not mitigate the downside risk of a price crash, which inevitably accompanied the global recession. The mistake was repeated in airline boardrooms around the world...

Interview: Ed Winter, FastJet CEO

FastJet eyes late summer launch alongside Fly540 brand

FastJet, the pan-African low-cost carrier planned by EasyJet founder Stelios Haji-Ioannou, expects to launch operations in three to four months, chief executive-designate Ed Winter tells Flightglobal.

It will initially operate alongside Fly540 - the Nairobi-based airline acquired by Stelios-linked investment firm Rubicon - and will start by taking over the carrier's highest density east African routes as well as international services from Ghana. The Fly540 brand will then be phased out as FastJet takes delivery of new leased jets, which are likely to be either Airbus A319s or Embraer 190s.

Flybe in balancing act as UK economy stumbles

UK regional carrier Flybe is mitigating the downturn in its home market by shifting capacity to Europe, pursuing new codeshare partnerships at Manchester airport, and increasing its oil hedging exposure, chief executive Jim French and CFO Andrew Knuckey said in a media briefing this morning (11 June).

Speaking after the company posted a pre-tax loss of £6.2 million ($9.64 million) for fiscal 2011/12 – marginally beating analyst forecasts – French blamed losses at Flybe Finland, the new joint venture with Finnair, and the opening of a new training academy in Exeter for bringing down the full-year results.

But he emphasised the "resilience" and "scale" of the business model, promising that new regional partnerships and flexibility over aircraft options will mitigate short-term headwinds, positioning the airline to benefit from an eventual macroeconomic recovery.

Qatar ready for take off

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When the New Doha International Airport (NDIA) opens its doors on 12 December 2012, the Gulf's youngest aviation hub will be able to handle 12.5 million passengers per year – more than eight times the current population of Doha. By the time it is completed in 2015, the 5,400 acre site will be almost two-thirds the size of the capital.

Qatar Airways chief executive Akbar Al Baker, who also heads up the development of NDIA, admitted last month that the project would come in more expensive than planned. His latest estimate pegs it at $17.5 billion (QR64 billion), and few will be surprised if costs rise further.

But for Qatar, which has allocated 40 percent of its budget between now and 2016 to infrastructure projects, this is undoubtedly a price worth paying. The tiny Gulf emirate places aviation at the heart of its economic growth plans – matching commitments by the governments of Abu Dhabi and Dubai – and NDIA will be the centrepiece of Doha's strategic vision to become one of the busiest transit hubs in the world...