I think performance guarantees and output-based subsidies are standard in these contracts. See the Flybe example. Otherwise the airports would be acting even more foolishly than they already do. However, these guarantees of ocurse do not stop airlines walking out of the contract completely, and then the airport is in trouble deep if it has made long-term investments.

The recent Norwich and Tees-Side examples to some extent illustrate a wind of change - apparently the airports are no longer willing to be held ransome by LCCs that demand everything from the airports but are unwilling to live up to their promises.

I wouldn't want to call Peel Holdings Bluff. I know they are ruthless in the business they conduct. They are very cheesed off at the moment after selling off a very valuable piece of land on the Liverpool waterfront to a company building a helicopter landing area. ( The land was undervalued because of building restrictions. Tough they never thought of a heli-pad ) Maybe they are trying to recoup some of the money they have lost?

On the other hand SMB has been in this game for a long time and I wouldn't want to get on the wrong side of him either. The LHR will be pulled at the blink of an eye if he gets cheesed off. Can't ever believe he would of agreed such a deal anyway. As for the management of DTV, incompetence springs to mind. Do they have any experience in Aviation management? I had heard Sarah was scared of flying and had never flown in an aircraft! Does that matter? Probably not, but her lack of business competency does.

Virginblue

I understand the likes of the Flybe Norwich contract to deliver X passengers by a set date (which i dont think was an overly long period) could be common practice and a good idea to ensure both the airline and airport work together to market the route and deliver the pax, but i find it highly unlikely that BmiBaby promised to deliver every single operated flight at full capacity for 10 years, am sure this would have been a broken promise within the first few days and as you cant deliver more than 100% pax on a flight they would never have been able to correct this over time. They might have agreed to something but surely not the impossible

I guess this can be attributed to lousy journalism. Certainly the deal was not about a 100 per cent load factor, but about "full planes" in a more general sense.

My guess is that Peel will drop the claim in exchange for a long-term commitment of bmi to the LHR route. What they apparently fail to see is that any such contract would be as useless as the previous bmi baby contract unless they ar able to built in some really nasty penalty clauses.

Durham Tees Valley
 

My thoughts on this story draw some comparisons with the deal Peel struck with Easyjet for their LPL operations. The Easyjet deal apparently included an exclusivity clause to prevent operations from MAN. This was subsequently settled out of court for Peel so they could avoid any Competition Commission enquiries into a 'restraint of trade' or 'anti-competitive' allegations.

But then again, a 'deal' requires the signature, and thus the agreement of both parties. For a business to attempt to sue one of it's best customers in a declining market could be viewed as an 'interesting approach' to commercial development. Richard Jenner at NWI could offer some helpful advice ...

Well, there are two logical explanations:

Either Peel know that bmi will disappear from MME completely sooner than later, so it does not matter to bite the hand that will only feed for a very limited period of time.

Or they use the claim as a bargaining chip negotiating about the fate of the LHR route.

DTVA vs bmi
 

Has anybody got confirmation of this other than from the "Mail on Sunday" story? Just curious that nobody else has picked it up?

I suppose they know the route will probably be axed when Lufthansa takeover BMI so they might as well try to get as much money off them while they can!

If this story is true then it would appear that Peel are after one of the big boys and are playing big boys rules to do it. Presumeably they have taken legal advice before taking this step and only advice from a QC who specialises in contract law would do. It would have to be a QC because of the amount of damages being claimed. If the QC has advised to take proceedings then they must have a very strong case indeed. If this is merely a negotiating tactic then the QC I believe would not be able to proceed with the case because of his ethics. They are a strange bunch barristers and much better at ethics than solicitors who are often made more pliable by their client's wishes.

Airport looks to spread its wings
 

from the Evening Gazette

DURHAM Tees Valley Airport is looking to expand its range of European destinations and cash in on the booming in-bound tourism market to boost passenger traffic to two million by 2012.

Owner Peel Airports said it would work with airlines currently operating flights to and from Teesside to increase the range of options available to passengers and consolidate the airport’s position as “a gateway to the region”. Neil Pakey, deputy chief executive officer at Peel Airports, said: “We will target summer sun spots in Europe and look to increase traffic between Teesside and Heathrow and Amsterdam – two destinations that give us access to the global market.“In addition, we will look to take advantage of in-bound tourism, which is one of the fastest growing markets in the aviation industry.”

Despite rising fuel costs and air passenger duty tax, which are squeezing airlines’ margins and hitting holidaymakers’ pockets, Mr Pakey believes the airport’s access to “a multitude of markets” leaves it better protected than others. “Our airlines give us a balanced economy,” he said. “They allow us to operate in the in and out-bound business and leisure markets.”

The airport, which works with budget carriers RyanAir, flyglobespan and Polish-based Wizz Air said it handled more than 46,000 passengers in March, a rise of more than 16% on the same period in 2007. Low cost services showed “significant growth”, with flyglobespan operating fights to Alicante, Malaga, Palma, Lanzarote and Tenerife.

Newly appointed airport director Kerry Quinn said demand for holidays in the sun was still strong in the region. She said: “Nationally there is a projected downturn in the charter market, but this is not the case in the North-east”. Yesterday, the airport began work on a £3m scheme to install airfield ground lighting along the runway. Work is expected to be complete by October.

This actually sounds encouraging, especially the £3m airfield ground lighting - who's paying for that though?

£3m airfield ground lighting. Is this CAT 2 or 3 lighting or just replacing the old system.

£3m airfield ground lighting, your average punter might think that there is no lighting at present or a load of petrol cans along the runway edge:}

Never heard of Mr Pakey before where did he come from?

QUOTE

I suppose they know the route will probably be axed when Lufthansa takeover BMI so they might as well try to get as much money off them while they can!


REPLY BYALPHAINDIA

I don't think BMI or indeed LU will axe the LHR services, If DTV do go to court over Bmibaby, Then they will lose out completely.:hmm:

By taking BMI to court, They are kicking a gift horse in the mouth??:ugh:

DTV could quite easily end up like HUY in the future??:confused:

You really think Lufthansa will stick at a marginal route like LHR-MME when they could use the slots for longhaul?
As for DTV losing, I don't think they'd risk taking this case unless they were pretty sure they could win.

No one would enter a court case unless they thought they could win and are being advised by their lawyers they have a chance of winning, but the reality is probably that they would hope it wouldn't get that far, and that bmi would settle out of court. The point being made however was that even if they won the court case they would still lose as bmi would almost certainly pull the LHR flight in retaliation.

Oh no ! here we go again, more bl**dy titles, what with Airport /Deputy directors, Chief & Deputy Chief Exec's, then there are Directors of Operations, Marketing and Communications Managers & together with all the assistants & the like, my question is which one is actually the cleaner ?
Once it was 'Flag poles & Fish tanks' that were indicative of problems ahead, clearly now it is simply fancy titles..:sad:
N707ZS Hmmm... Maybe Neil Pakey was possibly once the Cleaner ? Anyhow this is probably a new position & 'Pikey' is trying to impress by making his mouth go with little positive to say that hasn't already been heard coupled with a bit of "jingoistic rhetorical cr*p" eg oh dear! isn't that not what Emma has been trying to do with ' very' limited success ...? Finally is 'Pikey' fully appraised on the action with BMI , and has after full consideration made the comment? Seems to me too many people running around achieving VERY little, but shouting very loud. Suppose it's one way of getting noticed:8

Claim against Baby.....What does this say about MME? That it does not want to accept any of the risk when an airline starts operations? The financial risks are already heavily weighed in the airlines pocket when starting new routes without the airport wanting contracts of guaranteed income/passenger through put!
What signal does it send out to GSM or WIZ or infact any airline who is thinking of investing in MME?! Forget BMI the airport must know LHR is a goner!!
A successful airport shares the risks and then the profits!

confused
 

I am a little confused by the new Chief Exec's comments about targetting what appears to be charter flights from MME to the Med. Hasn't anyone told her that after this Summer there are effectively no charter flights to anywhere from MME as a result of the amalgamation of virtually all package holidays especially in the Western Med and Canaries to two companies. Already they are drawing up their programmes to avoid each other's accomodation. Next they will slice up areas of various resorts where they operate and then resorts will be allocated to one or other of the companies.
Any niche companies will have to piggyback on their flights with a resulting lack of competition and choice.
Supermarkets, airlines and any other company would be denied permission to operate in this way by the Monopolies Commision but this poxy Government as well as raising all taxes it can on flying , allowing Heathrow to expand with another runway despite all professional advice that it is unsafe and other options are better placed to expand air travel, allowed this duopoly in the package holiday market with the resulting loss of the life blood of Teesside Airport.

DTV bounces back
 

Today Coventry has 4 departures and Robon Hood 8 but DTV has a whopping 18 departures. Should we stop the doom and gloom?
b b

Paarmo
 

Paarmo,

Which two companies would that be then? Because I can think of several:

First Choice,
Thomas Cook/MyTravel,
Thomson/TUI,
XL
Direct Holidays.

The top four all have their own in-house airline and Direct Holidays in the past have always had enough clients to charter an aircraft to themselves, so I don't think you make a valid point here...there is still plenty of choice to get airlines in - just MME fail to do so.