Category Archives: Aviation Economics

How About High Speed 2 Wheels?

Posted on by
1

For a long time, when asked about the need to reduce the environmental impact of aviation, my stock answer would be that transferring shorthaul flights on to high-speed rail services should be an obvious aim for governments. Yet, the more I have learnt about this governments high-speed two proposals, the more I have felt that it would be a very poor investment indeed, whether measured on economic or environmental grounds. Yes, having high-speed trains would shift some people from shorthaul flights onto less polluting rail services, but it has to be remembered that this big switch has already been largely made, especially on flights from London to Leeds, Liverpool and Durham Tees Valley, which no longer operate.

So if high-speed 2 is a bad investment, what would be a better investment? Obviously, any comparison between rail and air travel is about longer distance intercity journeys, whereas the vast majority of journeys take place within built-up environments, or are commutes between outlying towns and city centres. What if all the money collected from air passenger duty was actually put towards genuinely environmentally beneficial projects? Few things are better for the environment than high-quality off-road walking and cycling tracks, using existing historic transport corridors, especially disused railway lines. Yet, this can be done for a fraction of the cost of building new ones — the figure quoted by cycling charity Sustrans is that new cycle paths can be built for around £200,000 per mile, compared to the £155,000,000 per mile cost of high-speed 2.

Now, can these really be comparable, when high-speed 2 must surely carry far more people at much higher speeds? Yes, it might well do, but its entire business model is based on very ambitious estimates of user figures. Why put so many billions of pounds into such an inherently risky project? Whether high-speed 2 is viable or not (and we are certainly in the no camp), investing in better facilities for pedestrians and cyclists would still provide a much quicker win, both in terms of transport and human health.

A whole new high speed rail project for less than the cost of 500 metres of High Speed Two

Posted on by
3

Uzbekistan has just completed the first high speed rail project in central Asia. Yet, whilst rail industry buffs might get excited about high speed rail spreading to a new part of the world, the real interest to us is just how cheaply this project has been brought to fruition.

Now let’s not pretend that the geography or the economics in the UK is the same as Uzbekistan, where the population density is just under 160 per square mile. By comparison, the population density in the UK is just over 660 – and this figure rises still further in Midlands and south east England. Naturally, one would expect a lower cost base if there are less people in the way of the line, and labour costs are lower.

Some might say this project is perhaps more comparable to the recent Chiltern ‘mainline’ upgrade. Whereas some elements of the Tashkent – Samarkand line do involve new track, a lot of the project is an upgrade to existing track, yet it is still classed as a high speed line, with a top speed of  160mph and a journey time of just over two hours for the 214 mile route. This works out as an average of 99mph – somewhere inbetween the existing west coast route and the proposed new £17bn 110 mile High Speed 2 route (£155m per mile). It will also do what we think high speed trains should do – by offering an alternative to flying. Whereas people do actually fly between Tashkent and Samarkand, there are no scheduled flights between London and Birmingham, and flights between London and Manchester are already losing out to existing train services.

The Chiltern upgrade is not high speed, using standard definitions of 125mph+. But it is a significant improvement to a line which was essentially a commuter route previously. Now it connects London and Birmingham in 1 hour and 30 minutes – just 6 minutes slower than the regular Virgin trains service (we’ll keep quiet about the teething problems). The cost of the Chiltern project was £250m, whereas the cost of the Uzbekistan project was just $70m. Whichever way you look at it, the emphasis here is on project – NOT cost per mile (or third-mile in the case of the Uzbekistan project)!

We need Slowjet, not Fastjet

Posted on by
Reply

Plans by easyJet founder Sir Stelios to launch a new airline,  tentatively called Fastjet, a have not surprisingly drawn much derision from within the airline industry. At this stage, we do not know how serious he is, nor do we know exactly what form this airline will take, but we certainly do know that there is little appetite amongst consumers for yet another low-cost European airline.

Some speculators have suggested that this might be low-cost with a twist — for example by either buying BMI itself, or its Heathrow slots, and offering a low-cost service between traditional premium airports. Others think that Stelios might have a go at the low-cost long-haul, or even the low-cost premium long-haul market. Neither of these two options would be a challenge to the easyJet business model, whereas a new low-cost airline, even if using premium airports, would certainly be a direct challenge to easyJet, in a market that is already saturated and unsettled.

Who needs Fastjet? The name brings associations with the latest British Airways advert, which draws nostalgically on their operation of Concorde, and reminds us that the crowded European skies and congested, security obsessed airports are making air travel slower, not faster. So would Stelios’ new airline, in whatever form it takes, really speed the whole game up? We very much doubt it.

Two years ago, then easyJet boss Andrew Harrison came up with a much more interesting proposal, the easyJet eco-jet, which was the concept for a new aircraft to be delivered around 2020, which when combined with other changes to European air traffic control, could deliver emission savings of up to 50% per passenger mile travelled. This at the time had many revolutionary features, and whilst not technically a jet, as it would use to rear mounted propellers, it would represent a step change in the airline industry. Cruising speeds would be around 10 to 15% slower than the typical jet aircraft used by the low-cost airlines, enough to take advantage of the efficiency savings rear mounted propellers will offer, but not so much a difference as to put people off from using it.

We’ve been through the low-cost revolution, and there is little that Stelios is likely to be able to deliver to develop this further, certainly in terms of European flights. We are still crying out for further developments in the environment revolution. Some people say that the term environmentally friendly flights is an oxymoron, but we have always begged to differ. Now is as good a time as any to bring forward the slow jet.

New York flights tax has been cut, but the imbalance still exists.

Posted on by
Reply

It looks like Continental Airlines have been successful in their lobbying over the extortionate taxes charged on their New York flights from Belfast International Airport. Yet, when looked at from any other perspective, this is a very strange intervention from the chancellor. Why pick out this one route, and why offer only partial devolution of air passenger duty to the Northern Ireland assembly?

Surely other regional airports, particularly in Edinburgh and Glasgow, which also have long haul flights, and are under a devolved government, will now start asking for exemptions. Should long haul flights be the top priority, considering that APD is still marketed as an environmental tax, and that these are the flights which cause the highest levels of pollution?

For us, the biggest imbalance still exists on domestic flights, and this is at its greatest in Northern Ireland, where alternative train services are not available. Just how important are New York flights from the Belfast economy? Surely the most important link is with London – yes these flights are taxed in both directions, even if at a lower rate. Business users can still absorb the cost. A family of four considering flights to Spain or flights to Exeter for a holiday in Devon are going to think twice about being taxed twice for the domestic holiday. This is what really shoots the British tourist economy in the foot.

Aberdeen flights – is Eastern’s gain also Flybe’s gain?

Posted on by
Reply

News article – new Southampton to Aberdeen flights with Eastern

So Eastern are increasing their Aberdeen flights from Southampton up to a thrice-daily service. Every time this happens, we are left wondering ‘when will Flybe step in and offer competition on this route’?

This must be an eternal problem for Eastern’s managers, when their business model is based on operating thin routes which other airlines won’t touch as they won’t be able to fill their aircraft. Eastern have never positioned themselves as a low cost operator – and we don’t think they should. Flights from Southampton to Aberdeen are a relatively niche route, but there is also plenty of potential demand for leisure users, especially if reasonable prices combined with the convenience of using Southampton Airports compact terminal can attract people away from Gatwick or Heathrow flights.

Yet Flybe have been able to operate as a hybrid service offering both good value fares and a wide range of routes which are appealing to the business user, especially on UK domestic flights. So, the moment Eastern show that they are filling enough seats each day for Flybe to also be able to operate the route, it is surely just a matter of time before Flybe step in, especially as they are well established at both airports.

So who do you prefer to fly with – Eastern or Flybe?

Will Ryanair use the new Berlin Airport?

Posted on by
Reply

Still wondering how Michael O’Leary is going to respond to the new Berlin Airport.

Will he accept a rise in charges, or will he try and operate from the old SXF terminal.

It is quite unprecedented for a city to effectively shut 3 airports to build one new one (Boris take note?). The closest alternative will be Leipzig ‘Berlin South’ – LEJ. A mere 176km away – a stretch even for the Ryanair boss’ imagination!

Is this the beginning of the end for bmibaby?

Posted on by
Reply

Following on from yesterday’s news that Lufthansa can’t find a suitable buyer for bmi, we’ve had confirmation today that jobs are going to be axed, and that routes will be curtailed at Birmingham, Manchester and Cardiff.

So, is it wise for bmibaby to concentrate their efforts on one large base at East Midlands airports. They say that they want to concentrate on ‘growth routes’, but with growth comes competition, and Ryanair are already very well established at Castle Donnington. Right now, can bmibaby really push themselves as the ones who offer a ‘more pleasant’ experience over Ryanair’s cut-throat service, or will customers continue to vote with their wallets and choose the airline which gives them the cheapest fees? When going after business passengers, it is much easier to play on offering services which take people closer to where they want to go, but is this so important for the leisure passenger – especially when East Midlands airport itself is playing a hybrid game of serving the three cities of Nottingham, Leicester and Derby, and also trying to poach passengers from Birmingham, without being directly adjacent to any of these cities.

Easyjet might be out of the way at East Midlands, but there will have been obvious reasons why they made a commercial decision to pull out. Baby reducing their presence at Manchester leaves room for Jet 2 or Easyjet to add more services, whereas Ryanair and Flybe will swoon over any signs of weakness at Birmingham, and leave tiny with very little opportunity to come back in once the economy starts growing again. As for Cardiff? Not exactly Ryanair’s favourite airport a few years ago, but if baby reduce their presence there, Cardiff airport operators will have many more reasons to do a deal with Ryanair.

This scenario could easily see bmibaby exposed as a one-airport operator within a few months, with very few other places to go to. It would then be only a matter of time before Ryanair came in and made a pincer movement to finally kill off baby for good.