Join Date: Feb 2008
Our recent revenue figures have been making one thing clear - that it is still a very challenging market out there. The struggle on the revenue front continues, for both our passenger and cargo businesses, and there a number of factors – from uncertainty in the world’s economies to high fuel prices and increasing competition – that make the operating environment even tougher.
Translation: Emirates does it better and cheaper than us, and we can’t compete.
A look at revenue figures from August illustrates the extent of the problem. This was the peak of the summer peak period – our passenger revenue was 6% behind budget. It was not a load factor problem – the month’s loads were at 82%, which is about par for the course – but there was downward pressure on yield, partly because of the strong US dollar but mainly because of the extremely competitive environment. We also saw front-end market continuing the softening trend we have seen most recently.
Translation: Our pre-season guesstimates were way too optimistic. And Emirates does it better and cheaper than us, so we haven’t a hope.
For the year to date we have seen flat growth for passenger revenue yet our capacity through to the end of August was up by 6%. Obviously that is not a sustainable situation which is why we took the decision to trim some of our long-haul capacity from September and make other important cost-reduction moves such as speeding up the retirement of our 747-400 passenger aircraft.
Translation: Not enough pilots to fly these aeroplanes, so we’ll retire them before anyone notices.
The capacity reductions have already come into effect and for the rest of this year we will be posting negative growth in ASKs. This should put revenue growth and capacity growth more in balance. Most of the capacity reduction is on long-haul services but we are still showing positive growth in the Asian region which, most commentators agree, is the only growth area within aviation at the moment.
Translation: Negative growth. Can’t say we’re shrinking, ‘coz that looks bad. Negative revenue growth. Can’t say we’re making less money. Swire won’t like that. To my bonus.
We have just published our budget operating plan for next year and we will see a capacity decline for the first time in many years. Usually we look for positive growth of 4-5%. However, given the current economic climate this may not be a bad thing – it’s a transitional move to a more efficient long-haul fleet that will help us while the world is still in a sorry state. Realistically, we can’t expect any big turnaround in our business until we begin to see sustained positive growth in the world economy.
Translation: We’ve dreamt up another wildly optimistic budget, but not told anyone what’s in it, so we can fail to meet it so we don’t have to pay 13th month.
Turning to the latest weekly business report, the passenger performance was fuelled by traffic from National Day holidays and the Mid-Autumn festival in the week ending 29 September. Revenue, load factor and yield were all up on the previous week, though revenue was still behind budget by 10% and showed negative growth compared to the same week last year.
Translation: We’re doomed.
Our ASKs were the third lowest of the year.
Translation: We ****** up on predicting our BOP last time round.
Front-end revenue dropped compared to the previous week due to the holiday effect but in the back-end revenue dropped by less than the capacity fall, which means were able to achieve positive efficiency growth and push up yield. We cancelled 57 CX and KA flights during the week, mainly for commercial reasons but also a couple of Okinawa services due to the passage of the typhoon.
Translation: Lack of crew saved our sorry asses.
Looking at the routes, China and Taiwan not surprisingly put in a good performance thanks to the holiday traffic. The China route was partly supported by record ASKs while Taiwan’s result was driven by an improvement in yield thanks to a strong showing in the front end. However, both routes suffered a serious directional travel imbalance – for example, Hong Kong to Taiwan had loads in the high 80s, but the return sector was only in the 50s. Elsewhere, the Philippines put in a strong showing thanks to a rise in yield.
Translation: Blah, blah, blah.
On the cargo side, revenue was up 12.2% on the previous week though we were still some 21% behind budget. The month-end and quarter-end rush was boosted further by an increase in shipments before the National Day holidays, boosting tonnages to the highest since March. We operated close to a full freighter schedule for the first time in a while.
Translation: We did really well. No, we did really badly. No, no, really well. Or something.
Hong Kong and China benefited most from the increase in demand but there were positive stories throughout the network. In North America, the Houston team captured a big shipment of mining equipment at premium rates while Los Angeles and New York benefited from the pre-holiday surge into the Mainland. The Europe team also saw a month-end pick-up in demand, while Taiwan and Japan held up well.
Translation: Everyone did really well.
Elsewhere in the network, most India ports reported good month-end demand with the movement of cars and car parts on the rise, particularly into Japan and Europe. The strong performance out of Dhaka continued, with improved yields on transpacific services, while Australia benefited from asparagus movements to Japan and Taiwan.
Translation: Yes, really, everyone did really well. The DFO will talk more about asparagus.
The current reporting week started with some overflow from the pre-national holiday cargo and with the Hong Kong team securing an extra sector to Los Angeles and a charter to Riyadh. However, demand began to slow down from Tuesday and reductions in the freighter schedule will be put in place through to 10 October.
Translation: It’s all rosy, everyone did so staggeringly well that we need to cut our services. There’s no money in freight.
The operation was generally smooth over the past week and we saw our on-time performance climb by four points to almost 61%. There was a significant improvement in short delays but the bad weather resulting from Typhoon Jelawat did have an impact on our overall performance. After the typhoon moved away from Japan, our OTP on Tuesday climbed to an impressive 73% for on-the-dot departures – the highest in the past year.
Translation: I have to say something about on-time-performance, because we employ 27 people to monitor it.
Our frontline teams were kept very busy over the holiday peak and operations in the home hub were generally smooth aside from a few issues relating to unruly passengers. Despite the late arrival of Mainland flights due to ATC flow controls on Friday and Saturday, the HKIA team worked very hard to maintain hub connectivity for the holiday-makers over the long weekend. My thanks go to our staff at HKIA and all the other frontline teams who kept our operation running smoothly.
Translation: Well done for doing your jobs, you HKIA people. People make an airline.
There was an interesting event at the airport yesterday when an evacuation slide was activated on an aircraft that had just arrived from Chicago. Various rumours immediately began to circulate on social media so I’d like to clarify that the slide was actually activated accidentally during the aircraft cleaning process. No one was injured and we are talking to our cleaning provider to find out what happened - and to ensure it doesn’t happen again.
Translation: We have identified and sacked the individual responsible. Legal action has commenced to recover the costs incurred.
Finally, I’m pleased to say that another nine ports will be rolling out the Mobile Boarding Pass service from 1 November. This is a very useful tool for passengers that can already be enjoyed travelling out of Hong Kong and six other destinations. The latest expansion of the service will see it made available in six ports in Japan along with Amsterdam, Jeddah and Kuala Lumpur.
Translation: Praise be to Allah that our IT department hasn’t cocked this up too.
Wishing you all a great weekend!
Translation: I’ve got the weekend off, haven’t you?