A MAGAZINE FOR AIRLINE EXECUTIVES 2007 Issue No. 2 T a k i n g y o u r a i r l i n e t o new heights TThehe PowerPower ofof PartneringPartnering A Conversation with Abdul Wahab Teffaha, Secretary General Arab Air Carriers Organization. Special Section I NSIDE Airline Mergers and Consolidation Carriers can quickly recover 21 from irregular operations Singapore Airlines makes 46 aviation history High-speed trains impact Eu- 74 rope’s airlines The eMergo Solutions Several products in the Sabre Airline Solutions® portfolio are available ® ® through the Sabre eMergo Web access distribution method: ™ Taking your airline to new heights • Quasar passenger revenue accounting system 2007 Issue No. 2 Editors in Chief • Revenue Integrity option within SabreSonic® Res Stephani Hawkins B. Scott Hunt 3150 Sabre Drive Southlake, Texas 76092 • Sabre® AirFlite™ Planning and Scheduling Suite www.sabreairlinesolutions.com Art Direction/Design Charles Urich • Sabre® AirMax® Revenue Management Suite Design Contributor Ben Williams Contributors • Sabre® AirPrice™ fares management system Allen Appleby, Jim Barlow, Edward Bowman, Jack Burkholder, Mark Canton, Jim Carlsen-Landy, Rick Dietert, Vinay Dube, Kristen Fritschel, Peter Goodfellow, ® ™ Dale Heimann, Ian Hunt, Carla Jensen, • Sabre CargoMax Revenue and Pricing Suite Brent Johnson, Billie Jones, Maher Koubaa, Sandra Meekins, Nancy Ornelas, Lalita Ponnekanti and Jessica Thorud. • Sabre® Loyalty Suite Publisher George Lynch Awards ® ® • Sabre Rocade Airline Operations Suite 2007 International Association of Business Communicators Bronze Quill. 2005 and 2006 International Association • Sabre® WiseVision™ Data Analysis Suite of Business Communicators Bronze Quill, Silver Quill and Gold Quill. 2004 International Association of Business ® Communicators Bronze Quill and Silver • SabreSonic Check-in Quill. 2004, 2005 and 2006 Awards for Publication Excellence. • SabreSonic® Inventory Reader Inquiries For additional information about the eMergo distribution method, If you have questions about this publication please visit www.sabreairlinesolutions.com/emergo. or suggested topics for future articles, please send an e-mail to [email protected]. 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By eliminating on-site systems and associated hardware, software and infrastructure expenses, you can apply more of your budget toward initiatives that drive real value for your airline. To find out how you can drive a faster return on investment and lower your total cost of ownership, go eMergo™. Call 1 682 605 4482 or visit sabreairlinesolutions.com/emergo. smart. proven. bankable. contents 54 profile industry special section 8 54 One Size Fits all 42 Recipe for a Merger Airlines are making preparations for The Power of Partnering Under the proper circumstances, the Airbus A380. AACO has helped unite Arab airline mergers can be carriers so they can leverage their successful. 12 Dreamliner set strengths. for Takeoff 59 The Boeing 777 Dreamliner is S46 ingapore Airlines: To the Core perhaps the aircraft manufacturer’s A True Pioneer Some airlines are selling parts of most innovative creation. Singapore Airlines makes aviation their organizations and getting history by introducing the Airbus back to their core competency. 16 A380. Sport Tourism Soars 61 Sporting events can drive I49 t’s not Business Class, Boom and Bust significant revenue. it’s Eos Class Private-equity companies are taking Eos offers an extraordinary an interest in airline ownership. 18 end-to-end travel experience. Analyze This 63 Airlines must use three vital 46 A Bold GOL components for effective decision GOL Airlines assumes ownership making. of Brazilian rival Varig. 21 Bouncing Back Carriers can quickly recover from irregular operations. perspective 23 The Big Three Airlines can concurrently cut costs, generate revenue and retain customers. 27 Low Cost for the Long Haul Can low-cost carriers really make a profit on long-haul flights? 30 Who’s Cheating You? The right technology can help 32 airlines fight fraud. 32 Passenger Bill of Rights s consolidation good for the airline industry? It’s a ques- Laws regarding flight delays need tion that seems to be filling more and more of our conver- to be clear and fair to all parties. I sations, yet doesn’t seem to lend itself to an easy answer. Although we’re talking about consolidation, we haven’t 36 reached a consensus on how it could impact air transport. Opinions Growing Like Wildfire on the subject are certainly mixed — both inside and outside Emerging countries are the industry — about the benefits of reducing the overall num- experiencing rapid growth. ber of airlines. Opponents of airline mergers point to the difficulty of combining fleets, employees (and associated labor contracts) 39 and cultures of two airlines. Proponents emphasize the synergies In Sync derived from eliminating duplicate functions, such as maintenance Integration can lower costs, increase or corporate functions, while instantly creating a stronger network. revenue and boost customer loyalty. ascend contents regional products company 74 90 Disaster Recovery 66 70 74 ® Maximizing Manpower Conquering Chaos Fast Track The Sabre Holdings company The right resources and tools Robust decision-support tools can High-speed trains have a substantial enhances its disaster recovery help airlines smoothly introduce help airlines quickly recover from impact on Europe’s airlines. program. new aircraft types. schedule disruptions. 79 91 68 73 Musical Chairs Going Private The Focal Point Virtually There U.S. regional carriers have After being purchased, Sabre Using an ASP gives carriers the Airlines should ensure customers become prominent forces. Holdings can more closely focus technological backing necessary receive up-to-date, real-time flight on providing state-of-the-art to optimally run their airline. information. 82 technology. Countdown to Beijing Beijing’s travel industry is gearing 68 up for the 2008 Olympic Games. 86 Opening the Skies Open skies between Europe and the United States give carriers more trans-Atlantic flying freedom. 91 with Tom Klein Group President, Sabre Airline Solutions/Sabre Travel Network U.S.-based industry analyst Ray Neidl has said he’s “not a fan to expand even further when it acquires a 75.1 percent share of airline mergers” because of the various challenges they present. of Condor from Thomas Cook. The remaining 24.9 percent share “They’re very costly and very messy,” he said. But Terry Trippler, another in the Germany-based no-frills airline will be purchased in 2010. industry analyst, said “a merger can streamline an entire operation. With the goal of dramatically expanding the market for low-cost, “So even though you have fewer seats that you’re offering, you long-haul travel, AirAsia X recently announced a 20 percent investment by can lower your prices because your seat cost per mile has dropped,” he said. Virgin Group. Icelandair Group signed a letter of intent to acquire Czech A number of other arguments for and Republic’s largest private airline, Travel Service. Northwest Airlines will against consolidation focus on the effect on travelers. invest US$213.3 million in its part of TPG Capital’s buyout of Midwest “It’s economics 101,” said Jerome Chandler, a con- Air Group, which was previously sought after by AirTran Airways. And tributing editor to Frequent Flyer magazine. “If you have fewer Brazil’s GOL made a bold move when it purchased top competitor Varig. players in the industry, you are going to have higher fares. It’s The list of current and prospective mergers and acquisitions goes almost inevitable. Mergers are about what’s good for the air- on and on, and it changes frequently, but it’s not just about who’s saying “I do.” lines — not necessarily what’s good for the consumers.” In the right circumstances, mergers can result in a stron- On the other side, Clyde Prestowitz, president of the ger, healthier industry. And our consulting practice can help airlines Economic Strategy Institute, has said because of the “unique dynam- determine when it makes sense as well as identify potential partners. ics of airlines’ networks,” consolidation would lead to “an increase In our special section, we take a look at sev- in competition and more choices for consumers, which is hardly the eral issues airlines should consider when choosing a part- doom-and-gloom scenario that some people propose would take place.” ner — different fleet types, cultures, labor agreements, etc. So, what is the answer? In some cases, it depends on And we also examine different types of money-making activity. who you’re talking to. Ask someone like Doug Parker or Jean- We hope you enjoy this issue, and we look forward to visiting Cyril Spinetta, both of whom have overseen successful merg- with you again in the coming months. ers, and you’d likely hear that consolidation is a good thing. Talk to some airline executives who’ve struggled to integrate pieces Wishing you smooth skies … into a coherent whole, and you might get a different answer. Regardless, it’s an issue that will not go away any time soon as evidenced by the amount of activity in the industry.