Thursday, 30 June 2011

Santander looks East as demand for Spanish operating leases grows

Santander, the only bank currently arranging Spanish Operating Leases (SOLs), has told Aviation Exchange it is pitching to potential clients in the Middle East and Asia as it witnesses growing demand for the tax leases. The structures, originally developed by Caja Madrid, allow lessees to receive tax benefits through accelerated depreciation and have previously only been closed in Latin America and Europe.

Spanish flag carrier Iberia secured the first ever aviation SOL in September 2005 after going on the hunt for alternatives to Japanese Operating Leases (JOLs). Caja Madrid provided 21% equity while RBS financed 79% debt, delivering savings of 6.5% through a reduced rental stream on two Airbus A340s.

The JOLs previously favoured by Iberia tended to deliver larger savings, but according to Gregorio Herrera, Santander Global Banking & Markets, Europe, there are several additional benefits entailed within SOL structures.

Tuesday, 7 June 2011

Flying Through EU Skies? Then Expect to Play by EU Rules

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America's airlines are at it again. Barely a year after quashing European efforts to reform the transatlantic Open Skies treaty -- a lop-sided agreement which gives U.S. carriers unfettered access to Europe, while barring our airlines from operating domestic flights in the U.S. -- America is now bellyaching about EU efforts to curb global warming.

When Phase II of the EU's Emissions Trading Scheme (ETS) comes into force next year, it will at long last hold the aviation sector accountable for its CO2 emissions. The scheme has gradually been rolled out across Europe since 2005, allocating carbon permits to large companies and forcing them to purchase extra credits if they exceed their allowance. By attaching a financial incentive to energy efficiency, the ETS is estimated to have delivered annual emissions reductions of 2.5 to 5 percent since its launch...

Wednesday, 1 June 2011

Interview: James Hogan, Etihad CEO

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To most casual observers, the challenges faced by Etihad chief executive James Hogan during 2011 would appear quite exceptional. In the space of a few short months the Abu Dhabi-based carrier – still only seven years old – has been forced to contend with a dramatic oil price rise, civil unrest on its doorstep, and a combined tsunami-cum-nuclear crisis which sent shockwaves around the globe.

But for a man whose résumé includes breakneck expansion in the face of countless prior crises – including the SARS pandemic, the global financial crisis, and aviation-related terrorism, to name just three – the turbulence of the past few months is nothing out of the ordinary.

Hogan was drafted in to head up Etihad in 2006, having served prior senior management stints at Bahrain’s national carrier Gulf Air and the UK airline, bmi. With more than 35 years of industry experience to his name, the Australian native understands the cyclical nature of aviation better than most. His business model is the stuff of nightmares for Etihad’s legacy rivals...

FlyDubai eyeing new horizons

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When FlyDubai began operations in June 2009, chief executive Ghaith al Ghaith said he was bringing a "low-cost alternative" to residents of the Middle East. His choice of words might seem clichéd to European travellers, who have long been accustomed to the cut-throat, no-frills model pioneered by Ryanair. But in the Gulf, low-cost air travel has always been a notoriously elusive creature.

Take Air Arabia, the region’s first low-cost carrier (LCC), which took to the skies in 2003. Despite being in the business of no-frills travel, its passengers can check in a bag weighing up to 30 kilos free of charge – generosity which is quite literally unheard of in western no-frills markets. In Europe, hapless travellers who turn up to the airport with the same piece of luggage face fees of up to EUR 250 ($350)...

Sunday, 1 May 2011

Dogfights over Iraq

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In May 2003, shortly after coalition troops invaded Baghdad, the US Federal Reserve Bank of New York set up the Development Fund for Iraq (DFI). Its remit was to shield the country's vast oil revenue from compensation claims against the former regime, ring-fencing proceeds for reconstruction and development projects.

Under Chapter Seven of the UN Charter, five per cent of those petrodollars had to be siphoned off as war reparations, gradually reimbursing Kuwait for losses incurred during Saddam Hussein's brutal 1990-91 occupation. More than $30 billion in compensation has already been distributed to foreign claimants, but on 30 June 2011, the DFI mechanism will expire.

This looming transition spells uncertainty not only for the governments of Iraq and Kuwait - who must set aside their historic differences to strike a deal over the $20 billion outstanding - but it also ushers in a dangerous new phase in the decades-old dispute between their flag carriers...

Friday, 1 April 2011

Adopting the brace position

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The International Air Transport Association (IATA), the airline industry’s main trade body, has never been shy about talking up the perils of an oil shock. Even in May 2005, when a barrel of Brent Crude set you back just $50, IATA was calling jet fuel "The Fifth Horseman of the Apocalypse".

But with Middle East unrest now pushing oil prices to double that level, the group's latest warning has touched a nerve with airline bosses. The last time crude passed the $100-mark the world was tumbling into its deepest recession for decades, and few industries hit the ground harder than civil aviation.

In 2009, as global financial markets began pulling themselves back from the abyss, air traffic was still falling at its fastest rate since records began. Cash-strapped holidaymakers were opting for staycations; business travellers were downgrading to Economy; and stunted economic activity was choking off demand for cargo. All told, the industry lost $9.4 billion...

Tuesday, 1 March 2011

Blockades on the new silk road

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When the UAE’s ambassador to Canada says that negotiating new air links has been a “protracted and frustrating” process, he isn’t kidding. Half a decade of quarrelling reached boiling point last autumn in the form of a full-scale diplomatic crisis, with Canada’s military being booted off Emirati soil, and its citizens being hit by visa entry fees of up to C$1,000.

On the surface, the dispute hinges on UAE demands that two of its carriers – Emirates and Etihad – be allowed to increase flight frequencies to Toronto, as well as add new links to Calgary and Vancouver. But at stake is far more than the competitive threat such expansion poses to flag carrier Air Canada. The web of protectionism blocking a deal actually stretches beyond North America, spanning the Atlantic and ensconcing aviation’s former masters, the European legacy carriers....

Monday, 1 November 2010

Airport security is a necessary inconvenience

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Julian Glover is right to urge restraint in the west's response to the cargo bomb plot. Anyone who calls for military intervention in Yemen has failed to learn the lessons of the Iraq war, which gave al-Qaida a recruitment boost that it draws strength from even to this day. But the need to protect our interests in the skies has never been greater. It is time for aviation officials to stop whining about the economic fallout of security checks, and wake up to the game-changing nature of the threat these new devices pose.

Michael O'Leary's appearance on the BBC this morning epitomised just how reluctant the industry is when it comes to acknowledging the risks, even in the face of irrefutable evidence. "These [bombs] haven't been on passenger airplanes," the Ryanair chief insisted when asked about the dangers to the flying public. Of course we know this is simply not true – one of the devices was bundled on to two scheduled flights before eventually being found in Dubai, and indeed globally around half of all cargo packages are now transported on passenger jets. "There hasn't been a breach of any European airport security," O'Leary shrugged, refusing to diagnose the flying of military-grade explosives into East Midlands Airport for what it clearly is – a flagrant and deeply troubling breach of European airport security...

Monday, 14 June 2010

Ryanair's hypocritical attack on fair comment

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Rebuttal by Ryanair's Head of Communications, Stephen McNamara, also on

When Evening Herald journalist Aoife Anderson was asked to review Ryanair's new softsided carry-on bag, produced by Samsonite and specially designed to comply with the airline's strict weight and size limits, she probably thought nothing of it.

Anderson's subsequent review in the Irish newspaper was all but a paragon of fairness, praising the bag as "the perfect accessory" for minimalist travellers and saying its €79 (£66) price-tag "could be worth every cent". Her write-up was a million miles off being an attack on the product, although she did question its size, adding: "You'll need to be a ruthless packer ... it won't fit more than a toothbrush, one change of clothes and a towel."

Sadly for Anderson that flirtation with criticism was deemed a step too far by Ryanair, whose response was to humiliate the journalist publicly before effectively blackmailing her into a retraction...

Thursday, 20 May 2010

Why risk flying British Airways? It's a good question

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BA boss Willie Walsh will no doubt be incensed by today's court of appeal ruling, which overturns an earlier judgment at the high court and paves the way for fresh strikes by cabin crew.

The airline had secured its injunction on the admittedly flimsy grounds that Unite broke strict rules over reporting ballot results. But while lawyers and industrial relations experts will be gleefully dissecting the new judgment, for most air passengers it is of surprisingly little consequence. In their minds, BA has long been synonymous with uncertainty.

Had the injunction stood, Unite was pledging to re-ballot members immediately. Strikes that were planned for May would have been pushed back to July. Now they're back to May again. And the promised third ballot, by the way, is most likely still going ahead...