World Memo
To: All World Airways Employees
From: Larry Montford
Date: July 17, 2009
RE: Infoline Update
Welcome to this month’s edition of Infoline. There have been a number of questions recently regarding how our company is doing in the midst of the economic turmoil that is occurring around the globe. Almost every day we get another dose of humbling news that adversely impacts the way most companies now have to conduct their businesses. Many have re-shaped themselves while others have simply ceased to exist. Nearly everyone has been affected one way or another.
I am aware of certain rumors circulating regarding World’s financial condition and the overall state of the airline. From an operations perspective, I am pleased to say that we have rebounded from a difficult month and are beginning to deliver improved results. It is absolutely imperative that we all focus on doing our best to ensure that this positive trend continues. Operational performance - operational excellence - is the one thing that each of us has power over, where each of us can contribute directly to the well-being of our company. So, while it is true that some things are beyond our control, this much of our destiny at least is in our own hands.
We have continued to wrestle with the unprecedented decline in air freight markets and the impact this has had on World. This decline and the resulting pressure on revenues has not yet abated. How long this trend will continue is anybody’s guess. Recent economic indicators have been mixed at best and the only thing the financial experts seem able to agree on is that no one really knows for certain how long this global financial crisis will last.
In response to these realities, a number of air carriers have recently announced painful measures to tighten their belts (such as fleet reductions, capacity decreases, deferrals of new aircraft deliveries, reduced capital spending, layoffs, etc.). World is not immune. We do have a viable “go forward” plan to ensure our survival. This plan is not etched in stone, as we must retain the flexibility to react to rapid market changes. We have taken certain actions to implement our plan and we’ve been forced to make some difficult decisions. Regrettably, more action may be needed and we will be challenged. As stated earlier, declining revenue is a major concern and the outlook for the remainder of the year is not encouraging. That reality forces us to aggressively manage costs so they are in proper alignment with the operation. This will lead to further adjustments to our plan in a number of areas. We will begin announcing some of these within a few days.
As we work through these difficult financial times, we must always remember that we are a service company. Ours is a very competitive environment and to survive we must maintain a competitive edge. I am certain other COOs are telling their team members the exact same thing. And there is no mystery to any of this. The formula is well-known. The companies that exceed the expectations of their customers through hard work, pride and dedication will be the ones that not only survive the coming months and years but thrive. Our task is to ensure World is one of those.
Current Operations
For the month of June, World Airways operated 749 departures, with an overall controllable on-time performance of 84.6% against a goal of 90%. Our completion factor was 98.6%. Our AMC mission performance during this period ended at 86.7%. The three-month rolling on-time percentage for AMC stood at 88.8%. For the month, World recorded a total of 15 AMC mission delays out of 112 mission originations.
Controllable on-time performance for our other key customers during June was at 91% for Etihad, 84% for Lufthansa, 73% for Sonair, 94% for Arrow Air Cargo, 86% for ANA Aviation Ltd, and 100% for Lufthansa Cargo Charters.
Performance across this very important sector was basically flat from the previous month and below goal for the most part. As previously noted, there has been improvement in the first half of July.
Here is a snapshot of June’s results, with brief explanations regarding the performance targets. The penalty column is intentionally blank.
Many of you have asked for more information regarding the recent decision by Sonair to end their contractual relationship with World in May of next year. I asked Bob DuBois, a member of our Marketing department, to provide a summary as our guest contributor for this month.
Thanks for all you do each day.
Robert DuBois, Director Passenger Sales
We continue to receive many enquiries from our flight crews and other employees regarding the SonAir contract. I would like to take this opportunity to provide some additional background information that I hope addresses some of your questions.
SonAir has been one of our key commercial passenger customers for more than eight years. As a matter of fact, World Airways was instrumental in the initial development and evolution of what is now known as the Houston Express. The Houston Express was and continues to be one of the most unique air service operations in support of a single industry.
Sonangol is the government-owned national petroleum company of Angola, and as such, is the key agency responsible for maintaining, developing, and exploiting Angola's vast petroleum resources. Sonangol is also the parent company of SonAir, an Angolan government entity involved in the transportation of oil industry employees to the various oil fields and rigs throughout the country. That these services should also ultimately extend to the United States was inevitable due to the U.S. petroleum industry's significant role in Angolan oil production. This necessary American link led to the creation of the Houston Express.
The success of the Houston Express was not immediate, and the initial years proved to be challenging to SonAir. Once that corner was turned, however, and the service became better known within the industry, the non-stop air service from Houston to Luanda proved to be the travel mode of choice for oil workers wishing to avoid the congestion of Europe's airports as well as the additional travel time.
Encouraged by the increasing passenger and cargo loads, and fueled by increased oil exploration and production, Sonangol wanted to expand the scope of the Houston Express concept and purchased two ex-ANA B-747-400 aircraft towards that end.
SonAir itself does not have operating authority between the United States and Angola (only a U.S. flagged carrier can operate the route) and SonAir, for its own reasons, decided to invite a number of U.S. carriers, including World, to submit proposals to operate its newly acquired B-747 aircraft on the Houston-Luanda route.
World submitted what we believe was a very competitive bid because we were very interested in continuing our relationship with SonAir. We recently learned, however, that SonAir selected Atlas Air, and we were informed that one of the key reasons for this decision was Atlas Air’s willingness to operate the program with integrated cockpit and cabin crews. As this program is operated under the DOT’s private charter rules, SonAir will eventually need to file for DOT approval. World has preempted this filing with its own application to operate scheduled service into Angola, which would dispense with the need for a private charter service between Angola and the United States. How this will all play out in the end is unclear.
World's current MD-11 contract with SonAir is scheduled to operate until May 30, 2010, and while we are greatly disappointed by SonAir’s decision, we will continue to provide the same quality service and product that are associated with the Houston Express.