Can you control your destiny?

April 18, 2010

For several days air transport has been interrupted in Europe. A vulcano in Iceland has erupted. As soon as the wave of compensation claims will be rolling, and it will, airlines and travel agencies will happily confirm that it was a natural disaster, thus an Act of God.

The disaster shows the capacity of stakeholders to plan ahead. Contingency planning has been practiced for decades in almost any sector of activity. For instance, delays have been common in air transport so that airport operators and airlines have become very experienced. One result is their ability to reject ompensation claims.

Man is however unable to predict the future and will always remain so. He can only make educated guesses. In this he inspires himself from from past events which he has overcome successfully. This adds to man’s experience which shapes  his present. Later it becomes his past and thus history as well.

Our oral and written past shows that there remains the unexpected. It is not really unexpected. It is only so owing to our incapacity to identify what will come with certainty. It is surprising since most of us and this includes stakeholders are convinced that everything is under control. From time to time this belief is shattered. Something unanticipated happens. In this case the appropriate reaction is to attempt to avoid any risk. Once the initial shock is over such decisions are usually criticised as excessive.

The reactions to the air traffic shutdown mirror this fact. At first, everybody agreed that this was the thing to do despite the massive inconveniences. Later, aviation experts claim that the authorities overreacted.

Three lessons can be drawn from the air transport shutdown:

First, rely on your past experience which has made you cautious. In this respect the grounding of air traffic is fully justified. Imagine the outcries if this had not been the case and an incident would have occurred.

Second, remain aware of the fact that you cannot predict the future. There will always be a surprise lurking following the next bend in your road of life. So be aware of this fundamental dilemma.

Third, understand that there is a way to cope with this. Plan for the worst and work for the best. Based on this, learn that nothing is granted in your life. You can only minimize the probability of a surprise but never eliminate it.

So, try to think the unthinkable: You cannot always control your destiny.


Beware of the Power

April 12, 2010

Why has Poland lost a large part of its elite? Because its members overestimated themselves. This is the most probable cause of the TU-154 crash, even if there is room for conspiracy theories.

It must be envisaged that one, maybe several of the members of government, maybe even President Lech Kaczynski himself, forced the pilot to land despite the adverse conditions.

This raises an old question: Who is in charge of an aircraft? Nobody but the Flight Captain. Whoever the passengers are, he should never yield to pressure. His decisions are always in the flight guests’ interest. Pilots have families as well. It can be taken for granted that Captain Arkadiusz Protasiuk wanted to see his again. So he intended to do his best but was prevented from doing so.

Yet another lesson should be drawn. Decision makers for a country, a company or an organization should never all travel together. There always remains a residual risk.

Both the fact that the pilots should be allowed to do their job in the interest of the people who rely on them and the idea that there should be a minimum of precaution when it comes to group travel of stakeholders have been known for a long time.

One question remains open: When will they ever learn?


Solarimpulse vole

April 7, 2010

Aujourd’hui, 7 avril 2010, le Solar Impulse de Bertrand Piccard a pris l’air pour la première fois à Payerne.

Dès le départ, l’idée de contourner le monde par la seule énergie solaire a passionné et inspiré les spécialistes et le public. De temps à autre, des critiques ont également été entendues.

Bon envol, Bertrand!

Bon envol, André!

Et vous, que pensez-vous de ce projet?


Solarimpulse fliegt

April 7, 2010

Heute, am 7. April 2010  fand der Jungernflug des Solar Impulse von Bertrand Piccard in Payerne statt.

Von Anfang an hat die Idee, die Erde ausschliesslich mit Sonnenenergie zu umfliegen Fachleute und das Publikum gleichermassen fasziniert. Vereinzelnt gibt es auch Kritik.

Und Sie, was halten Sie von dieser Idee?


Sunward Ho!

April 7, 2010

Today, the Swiss pioneer Bertrand Piccard had his great day. The Solarimpulse took to the skies for the first time today, 7th April 2010 in Payerne.

In case you shouldn’t know it, he is the first to attempt a round-the-world flight by solar power. During the day solar cells power the aircraft and charge batteries. When the sun is below the horizon, the aircraft draws its energy from the battieres.

From the very beginning the venture has fascinated professionals and the public. Some have rejected the idea as useless and a dream of fancy without any potential for aviation. Do you think Solar Impulse is a good idea or not?


Air Finance in Geneva – Day 3

March 27, 2010

… and it is already over. Today I had my third and last day at the 24th Aircraft Finance & Commercial & Business Aviation conference in Geneva.

Nigel Taylor, Senior Vice President Project and Structured Finance at Airbus outlined the effects of the crisis on the often complex Airbus financial operations. The traditional export credit agencies of the Airbus countries have maintained their role. As far as leasing operations and transactions involving commercial banks are concerned, the picture has changed over the last few years. Chinese institutions have become more dominant at the expense of traditional western providers. Yet another sign of the rise of China or the decline of the Occident?

Every year the organizers invite one or two exceptional speakers. The first was Bertrand Piccard who – once again masterfully presented his Solarimpulse project. Most of the attendees were impressed. A minority remained sceptical. Will Whitehorn, President and CEO of Virgin Galactic presented the current other aerospace dream. It is commercial space flight. When you look at the ticket prices, you know that you are going to stay on ground a little while longer.

The next speaker forced the auditorium back into mass transit Cattle Airways. Adam Pilarski from the legendary Avitas consulting company confirmed what all participants knew anyway. Air transport as an economic sector had never been profitable in its whole history. Fortunately individual operators had been. He also confirmed that latest trends suggested an economic recovery. Examples were again bookings and cargo. One huge challenge remains oil price. He disagreed with others who concluded that rising fuel cost jeopardized flight. It encourages the manufacturers to offer more efficient products. Both Airbus and Boeing needed cash to survive. As a result they encouraged new sales through often elaborate financial constructs even if this meant an overcapacity.

Their situation might get less comfortable in future. The recent Republic order of the Bombardier CSeries shows that the market has accepted this model. it promises substantial advantages over the existing “A + B” narrowbodies. The Russian Sukhoi Superjet 100 and the Chinese ARJ21 and Comac 919 projects are inferior to the established A320 and B737 series. They will provide learning experience to their manufacturers. In the future these may be able to offer competitive hardware. It seems that the Airbus-Boeing duopoly will come to an end. As a result, the whole airframe market will be shaken.

Fuel price was dealt with afterwards. Julian Lee from the Centre for Global Energy Studies (CGES) confirmed that global crude oil outputs had been stagnating since 2004. The main reason behind this new trend was not the Peak Oil or beginning of physical rarefaction of petrol as a growing number of observers concludes. These have been grouped themselves into the Association for the Study of Peak Oil (ASPO). It is rather the huge demand from China and the outdated refinery capacities in the U.S. and Europe which prevented an increase of crude oil extraction.

Finally the question of alternative fuels was discussed in a panel. Unlike cars or home heating aircraft cannot be engineered to be hybrid. For physical reasons they need fuel to be burnt to produce thrust. There has been a strong trend towards more efficient engines. Gains in lower pollution have been neutralized so far by the growing number of machines. In 1970 there were 3759 commercial jet aircraft. By 1990 this number had risen to 8129. Currently 19829 units are in service. By 2030 there may be some 49000. On the other hand air transport has been responsible for just three percent of overall fuel-related impact.

Owing to the specific nature and its low contribution to pollution, other easier ways of fuel savings should be explored. The obvious one should be heating where relatively cheap measures such as isolation will have a huge leverage effect. Energy supply should also be attacked in priority. Through the use of natural gas and plant optimization substantial reductions are possible. Measures against “thirsty” cars will take far longer to have a positive impact. As outlined above, types of alternative fuels are limited. For the time being, algae and biomass are favoured. A new coordinating agency, the U.S.-based Commercial Aviation Alternative Fuels Initiative (CAAFI). All actors are aware that there remain tremendous risks and inconsistencies. One of them is competition with food production, especially in the Third World.

In parallel the European Union is actively promoting the Emissions Trade Scheme (ETS). It has been critizised by almost all air transport actors and will be presented more in detail shortly in this blog.

As a whole the 24th Aircraft Finance & Commercial & Business Aviation conference has offered once again much insight. In addition, it allows to “feel” the way the often high level delegates live the air transport world. After the 2009 depression they are becoming once again cautiously optimistic. Like them I hope that the upcoming 25th event will again be positive as were earlier gatherings.

Some concluding remarks are to come soon.

Thank you to the organizers, the speakers and panelists and you, fellow delegates. All of you, you did once again a wonderful job.

Many happy landings to you and your families wishes,


Aircraft Finance in Geneva – Day 2

March 26, 2010

On its second day, the Aircraft Finance & Commercial & Business Aviation conference mostly focused on airframes.

For a start, John Feren, Senior Vice President of the Aviation Capital Group confirmed yesterday’s good news. The overall economic footprint of leasing companies remained still limited. He expects the number of leasing transactions to double this year. In his experience, air transport has “nine lifes like a cat”.

Kostya Zolotusky, Managing Director of Boeing Capital Markets Development, followed with a look into the shifting financing paradigm of aircraft financing. It has been a long way from the traditional credit operations in favour of the ordering airline to today’s aircraft asset-focused financing often involving leasing companies as intermediaries. It should be noted that the objective of these instruments has been to enable the expansion of smaller and weaker airlines.

Back in the 1980s they largely contributed to the expansion of air transport as a response to two symbiotic phenomena. The first was globalization following delocalization of industrial production and service provision to “low wage” countries. It was mainly the IT and telecom revolutions that made this possible. The second was the general pressure on cost of production. It became known as neoliberalism. As we all know it focused on the immediate profit instead of the long term gain… and is the root cause of the current crisis. Well, that is another story. Nowadays, an operator can chose among four ways to secure new or used aircraft.  These are assistance by commercial banks, punctual operations on the capital market, traditional export financing assumed by the country of manufacture of the hardware and leasing operations. In practice, they are often combined.

One detail did not escape attention. As in almost any economic activity, the weight of the Western or “First” world is slowly but gradually declining. New entrants from the Middle East and China confirm the relative stagnation or even decline of the Occident. In this context, the specific Islamic financial institutions are noteworthy.

James Halstead, a senior aerospace analyst of “Aviation Economics” conducted a not too serious survey about the perception of air transport by the participants. Most of them agreed with the speakers that the worst of the recession was over. In their opinion, the airlines would find back to pre crisis profitability only after 2012. They were also sceptical about the sustainability of the current luxury interiors of the A380. As early as 2015 the operators would squeeze more seats in their machines in order to make them more profitable. The real clincher was the vote about the manufacturer who would initiate the next major technology leap in the narrowbody market. It was Airbus and no longer Boeing. Maybe this mirrors one facet of the long discussed “decline of the U.S.

Finally the eagerly expected product update of “A + B” came. Despite a low net order income, the last year had been excellent again. The market share was 66 percent net. The 1000th A330, the 4000th A320 narrowbody and the 6000th Airbus aircraft were delivered. The latter was an A380 of Emirates.

Since 2004, the year the Boeing B787 Dreamliner was launched, Airbus had sold 600 A330 aircraft. The A350XWB is now well under way and has reached 505 firm orders by 32 customers. it is an open secret that even Toulouse has to overcome more problems than expected with their composite reply to the B787. One insider even warned that, like the challenger from Seattle, the A350XWB may be delayed by up to one and a half years. Although it remains small there is a growing faction of specialists who are critical about composite materials promoted as the next revolution in airframing.

As all insiders confirm, Airbus will most probably hold to the successful A320 narrowbody design for at least another decade. It will be revamped instead. A first optimization is the “Sharklet” winglets which reduce fuel consumption by 3,5 percent. A major step, most probably announced later this year, will be the adoption of a new engine. Airbus hopes to limit investments and hopes that its competitor will be in the same situation.

Boeing is getting over the recent crisis. It should be noted that it has underestimated the huge difficulties with the B787 Dreamliner. Finally it had its maiden flight in December 2009. The other new programme is the latest version of the B747 Jumbo Jet. Dubbed the B747-8 it is bound to set the new standard in the freighter market. Like Airbus it hopes to keep investments limited. Therefore Boeing has launched optimizations for still successful B737 series.

Both manufacturers are indeed put under pressure by the new CSeries under development by Bombardier. As Philippe Poutissou, Vice President Marketing of the Canadian company pointed out, the new aircraft family with a capacity from 100 to 149 seats will be a game changer. It promises far higher efficiency. Therefore this clean sheet design may become a serious competitor to the established narrowbodies of Airbus and Boeing.

For once both manufacturers agree. They will try to prevent the emergence of this new competitor. At the same time they intend to keep investments down. This pressure is the main motivation of the systematic updates. Their customers remain in the established fleet path dependences. The new CSeries seems by now accepted in the market. After a first spectacular oder by Lufthansa for its Swiss subsidiary, a leasing company and some days ago Republic ordered some 90 units altogether.

The future may keep some surprises in store.

Meet you tomorrow at the concluding Day 3.