New Challenges for the global aviation industry

Aviation Event 2018, Düsseldorf Airport Conference Center, June 23th 2018/Foto: jwm

Düsseldorf was the ,venue´ of the Aviation Event 2018, the platform for senior-level dialogue between representatives of the aviation industry, business and politics. The approximately 200 participants came from airline companies, aviation associations, air traffic advisors and political representatives. The new challenges for air freight, safety and security, the impact of Brexit, the opportunities of the long-haul low-cost market, the management of airlines in the age of digitization and the problem of ground transportation were the topics of 2018.

“The future has not yet begun in air freight traffic,” warn Alexis von Hoensbroech, board member of Lufthansa Cargo AG and designated CEO of Austrian Airlines and Prof. Christoph Stoller, president of the Air Cargo Club Germany. It is about managing the challenge of progressive digitization in air freight traffic as well. E-commerce is the biggest driver and success in the future would have providers who offer the best and fastest door-to-door solution in the age of digitization.

Will Amazon or Alibaba one day overtake the air freight business? Alexis von Hoensbroech,Prof. Christoph Stoller and Markus Kropp, CCO Mitteldeutsche Airport Holdinig from left/Foto: jwm

It is conceivable that new players enter this market segment, or take over the entire area. Players who have huge amounts of customer data, such as Alibaba Group, one of China’s largest IT companies group, founded in 1999 by English teacher Jack Ma, responsible for the same-named B2B platform operates as well as for the on-line auction house Taobao. Alibaba’s headcount increased from 4,400 permanent employees in 2007 to approximately 66,500 today. Sales of the Alibaba Group’s Chinese retail platforms in 2017 totaled more than $ 4.8 trillion (€ 768 billion), compared to only € 768 billion to give some numbers and get an idea of what Alibaba is.
According to Hoensbroech and Stoller, the big question is: “Who will and can manage and control the entire chain in the future? ” But also important are the networks. After all, a global network that has a Lufthansa Cargo cannot be easily replaced. However, Amazon, which recently ordered 60 freighters, and Alibaba are at great risk.

Eurowings, currently one of the fastest growing airlines

Eurowings – the way forward” was the title of the presentation by Oliver Wagner, CCO of Eurowings. He apologized to the audience first, that the strikes of the Air Traffic Controller makes life difficult for Eurowings passengers.

Oliver Wagner proudly presented the figures of 2017/Foto: jwm

Wagner proudly presented the company’s growth figures from 2017. Eurowings was one of the fastest growing airlines with 30 percent growth, with over 30 million passengers, now 13 locations and 180 aircraft serving more than 200 destinations. Eurowings is the second largest airline within the Lufthansa Group. In 2018, 80 new destinations are to be added and another 30 aircraft, the number of flights should increase by 70,000 and the number of passengers by 8 million. Dusseldorf is Eurowings largest home base. One benefits from the affiliation to the Lufthansa Group and the “embeddedness” in their strategy. However, Wagner also pointed to the challenges of the aviation industry, which are also affecting Eurowings, such as overcapacity, ATC strikes across Europe, the sometimes outdated infrastructure at airports, delays in the delivery of new aircraft and above all pilot shortages. The aim of Eurowings is to become the leading European low-cost airline and more pan-European, to have market-leading digital know-how in the airline sector and to enter into strong partnerships.

Security and Safety: Challenges and Risks
Ernst Walter, Chairman of the Federal Police Union, Munich airport chief Dr. Gerhard Ott, BDL boss Matthias von Randow, Angela Pozo from IATA and the head of the German Airport Association ADV Ralph Beisel agreed that security at airports, especially at the access areas in the last 20 years, especially since 9/11, not much has been improved.

Ernst Walter, Chairman of the Federal Police Union, Munich airport chief dr. Gerhard Ott, BDL boss Matthias von Randow and Elmar M. Giemulla (from left) / Photo: Johanna Wenninger-Muhr

As before, the entrances to the airports are public areas without access control. Although this is so intentional, because airports also have economic interests in the area of retail business and experience economy, but counter-productive in terms of security. System change in Germany is required, more state involvement, as far as the costs in the security area.

There should be a lot more surveillance cameras installed at the freely accessible entrances, departure and arrival areas of the airports and it would be useful to have control and control of security around the airports in one hand. At many German airports, including in Frankfurt, there is still a separation of federal and state police, as well as the security services of the airports. That is not conducive to safety. As good example Munich Airport was mentioned. Here the airport security is in one hand.

BREXIT – and then?
Many companies that are involved in business with the British, including in the aviation industry, are not taken by Brexit, even hit hard. Tour operator Thomas Cook for example. Thomas Cook, based in London, who organized the first trips to Liverpool in 1845 and the first European tour for British tourists in 1855, ushered the era of package tourism. The roundtrip was a route via Brussels, Cologne, Heidelberg, Baden-Baden, Strasbourg and Paris via Le Havre or Dieppe back to London. Christoph Debus, Airlines CEO of the Thomas Cook Group, called for a solution at the aviation event in Dusseldorf an not to throw a away all the good things that were achieved in the past..
Two years ago, the British voted for “Leave” but are still in the EU. On March 29, 2019, the separation should first be completed. But the conflict between Remainers and Brexiteers breaks out again and again. EU negotiator for Brexit Michel Barnier is increasingly bothering the British. He threatens not only to throw them out of the security area of the European satellite program Galileo, which has co-financed London. He also threatens to deprive Britain of access to the Europol database and the Schengen information system and to throw it out of the group that is carrying out the European arrest warrant. Or how about the whereabouts of the British in the EASA, the European Aviation Authority? Many questions that also concern the aviation industry. The topic will sure be present at many meetings of the aviation industry and provide suspense.

Ground transportation – Airport bottlenecks and terminal capacities
“Seamless transportation” the smooth, relaxed air journey and flight, is becoming more and more a wishful thinking, because it pushes more and more to its limits.That was the clear statement on ground transportation. Twelve years ago, Fraport and Lufthansa launched the Hubcontrol Center at Frankfurt Airport in order to provide better control of what to do for ground transportation on the apron and around the airport for departures and arrivals. This was a big step into the right direction, says Karsten Benz, former Lufthansa Manager and now Senior Advisor Aviation.

Dr. Marco Emmermann, Dr. Karsten Benz, Jens Koenen, Handelsbatt (from left)/Foto: jwm

But basically, on the aprons of many airports for 70 years, not too much has changed. Business has been the same since the 1950s. Here, a step into digitization is urgently needed. But who has concepts for the digitized loading of aircraft? There are many “irregs” about irregularities, because many only have their own processes in view, there are staff shortages and the interaction of the big picture is missing. Problematic according to Benz are also the usually long contract terms. The majority of the contracts would have a term of at least seven years.

Sabine Richartz, Claus Unterkirchner/Foto: jwm

The objection of the Austrian Uber boss for operations and logistics Claus Unterkirchner was interesting: In Austria Uber tries to optimally control and use the private cars that Uber offers in Austria. This means no empty cars on return from any destinations, especially not from the airport. The new Uber leader Dara Khosrowshahi recently stated in an interview with the Frankfurter Allgemeine Sonntags Zeitung that mobility will become more diverse. Although taxis would be a part of it, but also Uber, car sharing, rental bikes and especially public transport. He believes that taxi drivers have long understood that cars waiting for hours and only driving with a passenger through the streets might have been okay 30 years ago, but in 30 years would be a disaster for people, the environment and the climate. The technology now offers the possibility to make everything much more efficient. And so it is not surprising that Uber also works on the development of airline taxis. This also announced Uber manager Unterkirchner in Dusseldorf. They are working on “Uber-Aviation” and want to launch a prototype in 2020, similar to the project of “Lillium Aviaton”, the Munich-based start-up company. Their VTOL jet should start however only 2025

Uber boss Dara Khosrowshahi sees cities as three-dimensional and that also applies to future traffic. You need the suburban traffic, on the ground and in the air. In five to seven years he wants to be standard on the market with taxis. His chief developer for airline taxis Eric Allison wants to make a decisive contribution here.
It should not be an offer for a well-heeled elite, but for the mass market. Airtaxis should be affordable for everyone. Uber is already negotiating on take off and landing sites with Los Angeles and Dallas. Plans are being drawn up and negotiations are underway with a number of other cities around the world.
An interesting new niche business model was presented by Sabine Richartz, Managing Director of A2B Business Service GmbH, a private VIP service, as she describes it, a very good niche product. A chauffeur service to and from the airport, hotel or cruise terminal. These types of butler services would be a niche and have a future.
So the future of ground transportation could be more than exciting.

Stefan Pichler – one who never gives up
How to run a successful Airline in the Middle East? – was the title of the lecture by Stefan Pilchler at this year’s Aviation Event. He, who began his career as a professional long-distance runner and was a member of the German national team, was one of the 25-kilometer distance to the top five in the world. In 1980 he qualified for the Olympic Games in Moscow.

Stefan Pichler/Foto: jwm

In 1983, he started his career as head of sports promotions for Nike in Beaverton, Oregon. But Pichler quit his job and studied law and economics in Augsburg. In 1989, Pichler moved to Lufthansa, where he initially worked as marketing and sales manager for France. In 1991 he was appointed director of France. In 1995 he became director of Lufthansa’s core business in Germany and in 1997 global marketing and sales director. From March 2001, Pichler was CEO of Thomas Cook AG. In November 2003, Pichler resigned from his duties at the urging of the two shareholders Lufthansa and KarstadtQuelle.
Between 2004 and 2009, Pichler served as Chief Commercial Officer for Richard Branson’s Virgin Group in Australia. He was responsible for transforming Virgin Blue into a network airline. Pichler also founded Virgin Australia, Australia’s new long-distance carrier, as Chairman of the Board in 2008. Pichler was Chief Executive Officer of Jazeera Airways, a listed airline in Kuwait from September 2009 to August 2013.
He changed the business model of the airline from a low-cost airline to a scheduled airline. In September 2013, Pichler became CEO and member of the board of directors of Fiji Airways, where under his leadership in 2013 a five-year plan was worked out to bring the airline back into profit. The target was achieved in 2015 with a dividend payment of 2.5 million Fiji dollars. In November 2014, Pichler was appointed Chief Executive Officer of Air Berlin with effect from February 2015. With the support of Etihad Airways he developed a strategic reorganization concept which planned to split the company into three different business units. The first unit acted as a wetlease partner to lease 40 aircraft to Deutsche Lufthansa AG. The second unit, the tourism business with the involvement of the Austrian subsidiary Niki, was sold to Eithald Airways in order to bring this into a joint venture with TUI AG. And the rest, the so-called “new Airberlin”, was to be converted into a network carrier with hubs in Düsseldorf and Berlin. The necessary agreements were concluded by December 2016 with the aim of keeping Airberlin alive in a shrunken form. Stefan Pichler resigned from his position in early 2017 to become President & CEO of Royal Jordanian.
He described how the airline is getting on the right track and leads its niche product in a lively and entertaining way in the style of Pichler. It is the Levante airline, it does not want to fight with the big boys in Dubai, but does its business in a niche, the Levante.
In Pichler’s exciting career long-distance running, one wonders: What’s next? Anyway, he’s one who never gives up – just a long-distance runner, Chapeau!

How to manage aviation in a digital era?
Digitalization is connectivity. Social media drives the business, and the question of how digitization can increase the effectiveness and reduce costs, says consultant Kim Flenskow. Today, APPs are a must to be able to orientate oneself accordingly. This would have to be understood by companies, their managers of all levels and the employees and to deal with them accordingly. One that successfully operates this is Jouan Juhani Oksanen, e-commerce boss of airBaltic. His tip on how digitalization can succeed in a company: first of all knowing and organizing the contents that need to be digitized, and then gaining the appropriate acceptance from management and employees so that the changeover succeeds. It may sound simple, but it is probably a mammoth task in many companies.

Newstart for the business modell Lowcost Longrange?
‘Lowcost Long Distance’ started in 1977 with Freddy Laker. He initially worked with his airline Laker Airways primarily in the charter and package travel market. The first aircraft were retired aircraft of the British Airways predecessor BOAC. As of 1977, Laker Airways was the first company to offer long-haul no frills flights. The tickets for the “Skytrain” mentioned flights, first from London Gatwick to the USA, were very cheap with prices of partly under £ 60. However the passengers had to pay all desired extras, for example the on-board catering. In 1979, Freddie Laker was knighted by Queen Elizabeth II for his services to civil aviation. Due to outstanding claims in the amount of £ 270 million, the lending banks of the company refused in 1982 any further payments, so Laker Airways had to stop operations. Laker itself subsequently sued several major airlines for alleged price fixing, which should drive Laker Airways out of business. Laker tried several times to resume operations, which failed despite public donations in the amount of £ 1 million ultimately at the British aviation authority. He then moved first to Miami and later to the Bahamas, where in 1992 the newly founded Laker Airways (Bahamas) started. The flight operation was taken with two Boeing 727-200 from Freeport in the US. Between 1996 and 1999, some long-haul flights with DC-10 took place. The new airline, known as Laker Airways (Bahamas), also suffered ups and downs and eventually had to shut down in 2005.Freddie Laker supported Richard Branson and Stelios Haji-Ioannou, the founders of the new British Airways rivals Virgin Atlantic and Easyjet in the 1990s, mainly by swiping at British Airways.

Who is already there?
Max Oldorf, chief commercial officer of ch-aviation, an independent supplier of airline data worldwide, reporting about 3, 5 million flight schedules, data from 46 000 aircraft, 9 200 airlines and 5 500 airports explained to the participants of the 2018 Aviation Event that the Lowcost Long-distance business has just started again. Norwegian, flydubai, WOW, Eurowings and Jetstar just to name a few are eager to make the business model a success.

The Business with Lowcost long-distance flights has just started again / Photo: jwm


A total of 153 aircraft are currently in the air in this market segment. Led by Airbus A330-300 with 38, followed by Boeing 787-8 (28), Boeing 787-9 (26), B767-300 (23) and Airbus A330-200 (18). 116 aircraft have been ordered, including 70 Airbus A330-900s and 35 Airbus A321s. The race in the costs will be won over the high seating density. According to research ch.aviation, this has increased from 112 seats in 2005 to 147 in June 2018. As an example, he shows the seating comparison of Oman Air and Lion Air.

A fact is also that many large established carriers now hold a certain ticket quota for low-cost offers and it is difficult to draw a clear line between the offers of pure low-cost carriers and established airlines.

Heike Birlenbach, Michael Garvens, Simone Schwab and Rüdiger Kiani-Cress, Aviation Journalist (from left) / Photo: jwm

In the subsequent panel discussion with Heike Birlenbach, Lufthansa’s CCO Hub Frankfurt, Simone Schwab, Senior Vice President of Sales & Customer Relations Faport AG, Micheal Garvens, former Airport Manager of Cologne and Senior Consultant, the challenges for the business model Lowcost Long-Distance became clear once again.According to a survey mentioned by Fraport manager Simone Schwab, only six percent of respondents would want to fly Lowcost long-haul. On long flights, according to Schwab, comfort is required and not ten or even twelve hours the tightness of a tightly-seated low-cost long-haul aircraft. Why the North Atlantic with a maximum of eight hours of aircraft, the market for low-cost long-haul was the most interesting. Simone Schwab sees potential, but only as a niche product. Low-cost carriers could use off-peak and off-peak times in Frankfurt and other major airports. There are no capacity problems with the opening of Terminal 3 in Frankfurt. However, the major airports in Germany are already at the limit regarding ATC, says Michael Garvens. But Lowcost long haul will find ways, which he is sure and the market for it will grow.

There is a bottleneck in Germany

He sees the bottleneck in the German aviation market and fears that the low-cost long-distance traffic to other European countries migrates. Airports like Brussels or Amsterdam would be more than happy to get this traffic. It is therefore extremely important that the German government considers airport master plans. After all, one expects an increase of more than 70 million passengers by 2030. How should this be managed?Lufthansa definitely wants to be part of if it Lufthansa manager Heike Birlenbach says that one is well aware that there will be growth in this segment. Lufthansa wants to participate in this growth in any case and do everything possible to manage this.At the same time she appealed to the other players. Managing the growth also applies to the airports. The passenger’s journey does not begin when they board the plane, but when they leave home or at the hotel, arrive at the airport, or go to the departure halls. It was about managing the entire travel chain. Here, it would be about an optimal interaction of many different players who are responsible. She hopes for more cooperation from all parties involved in the future in order to be able to offer an optimal product, but she is not sure that everyone involved in the process is aware of this responsibility. It must be talked about and discussed again and again, so that Germany can participate in the growing low-cost long-distance market.

Managing both – Lowcost and Legacy

The challenge for the Lufthansa Group would be managing both at the same time – legacy and low cost. “We have to think carefully about which low-cost destinations we choose, how many times a week we want to fly from which airports and which aircraft should operate the routes.” Lowcost Long Haul is not dependent on feeder flights like regular long-distance flights therefore using smaller aircraft with sufficient range would fit on the North Atlantic routes for example. At present, the profitability of Lowcost long-haul is still intensively tested. Answers must be given to questions such as whether low-cost long-haul works as a separate business model, or must be combined with other business models, Eurowings-Lufthansa, for example. Answers for questions what the further expansion of the retail business, the additional business on board can bring about the mere sale of tickets. For all these questions still answers would have to be found.
Johanna Wenninger-Muhr

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