(From Left to Right) Carter Stewart, Tim Clark, Ben Bettel, Bob Lange (Airbus)

I was honoured to be on the opening day media panel of Hamburg Aircraft Interiors, and humbled to be in the prescene of some industry greats whom I admire.   In particular were Bob Lange (Head of Aircraft Interiors- Airbus) and Tim Clarke (CEO of Emirates).    I enjoyed sharing the stage with these gentlemen, but also confess that I walked away richer from the discussion, insights, and questions that these jouneryman aviation experts shared.

Unfortunately, Reza Soltanian (Regent Aerospace)  was  not able to make the conference due to the ongoing travel chaos, and was trapped in the States.    

The theme of the Panel was “Preparing for the Upturn” and the key question for all of us is- if we can see a bit of recovery coming what do we think that airlines and suppliers will be keen to focus on, and more importantly spend money on.

From my perspective there are really several key themes, which as associated to the future passenger trends that we have identified in our people-centred design and scenario planning research:

- Harmonising Fleet LOPAs and Experience among the alliances- so that you can offer a truly seamless product.

- The Up and Coming Passenger: Digital Natives take to the skies.  What will their needs and wants be and can we as in indsustry address them? 

- The Rapidly Ageing Population and Air Travel:   How will the largest segment of the human population in history over the age of 65 impact air travel?    http://bit.ly/b8zWVb

- The “Supersize Passenger”:  How can the industry meet the coming challenges from growing obesity rates and a general increase in passenger height?  http://bit.ly/bHQCHk

- What about ultra long haul air travel?   http://bit.ly/bQL7W4

Bob Lange received a number of questions regarding the new LH Airbus deliver that is happening tommorow, and also about his collaboration with Tim and The Emirates Team over the years to deliver their new product.

Tim Clark was asked a number of questions about the upturn and product sustainability.   While he was keen to point out that he was not there to promote Emirates he was wanting to make the point that while load factors are incrasing steadily, there is still a fine balance between the premium cabins while at the same time focusing on the “main deck” product (Y).   

It seemed that the question that the press was most interested in was the idea of premium economy, where is it’s brand position in the eye of the customer and what is the future of the F cabin.   One of the points I would have loved to have spoken on was the new F offering from British Airways.  Their labour relations and ash cloud issues aside, their new offering is truly interesting and breaks the mold for herrigbone configurations in a number of key ways- including more shoulder width during the recline.    I am really impressed by this collaboration between B/E Aerospace ( http://bit.ly/cgiX4t ) Tangerine ( http://bit.ly/c4Y0gV ), and British Aiways.

For my own experience and perspective I think that F is not quite dead yet, and all the other panelist stopped short of really addressing the issue of F (short of Tim who did mention the new showers in the A380).

For my part I spoke briefly about what people like Air New Zealand and Altitude Interiors are doing with the new Skycouch product, and how this product could be seen to be further blurring the difference between the economy and premium economy cabins.   http://bit.ly/dBcyOh

Another innovation product that is on show here this year is the Molton Labe Designs “sliding seat”, which I am very keen to go see in person.    Effectively the prototype allows the carrier to temporarily widen the aisle by “sliding” the aisle seats in on themselves.    A very interesting proposition, and feed quite nicely into the issues of accomodating both an aging traveller, as well as even the “supersize” traveller.   It truly interests me from an innovation perspective.

That brings me to anothe point that Tim made in the discussion.   While I maintained that these mega-trends were coming- he was keen to point out that carriers are often the drivers of these innovations.   I do have to concende that Emirates has driven some great things in their time, and it is a perfectly fair comment!   Bob then pointed out that you only have to look at the growth of #HAM10 over the last few years to see that there is a lot of innovation out there.

In talking before the discussion with Bob Lange from Airbus, I was telling him that I was about to sample the new AF A380 product i a months time.  He said in that if I have an opportunity in particular Y LOPA, the seat is 1.5 inches wider than the average seat.    He indicated that some people may dismiss this, but was keen to point out that “next time I am in a seat, try taking your laptop or a book and placing it between you and the armrest.”    I look forward to experiencing this for myself shortly.

Overall, it was a great experience and I will post some picstures from the show over the next few days.    I hope that by doing so, I can share as much of the show experience with those of you who were not able to make it- or are just interested in what we do.

Executive Summary

• There will be wave of additional industry consolidation in Europe over the next year
• Pension Underfunding is playing a key issue in failed merger talks from BA/Iberia to even BA/Qantas.  While it is talked about as “valuation issues”, one of the largest is pensions and benefits
• While the EU Competition Commission is not likely to have changed its view on EI/FR, another suitor could put together a new bit Irish and EU regulatory backing
• Failed startup carriers like Silverjet and Eos may have been underfunded, but they avoided some of the legacy cost issues now plaguing the industry.
• BA needs to gain approval for its Merger with American Airlines- which we support fully.  That union is becoming even more important as the economic climates- and cargo and passenger numbers fall
• There are parallel lessons for the airline and auto industry when it comes to organized labour.

To say that Aer Lingus has been on defense as of late is an understatement.   I am personally impressed by both the airlines management and Irish Governments handling of the Ryanair bids, with the exception of the golden parachute for senior execs, that was later retracted.   Today there is even rumour of fresh takeover talks from the Merrion Stockbrokers team.  

 No potental takeover bid can be successful until the potential suitor has  an answer for what will happen with under-funded pensions and long-term labour contracts.  Until this happens nearly all  airline merger talks will end in tears.

In the case of Aer Lingus, the Irish State should not be left holding the bag for the debts, Alitalia style. Nor should the good people of Ireland need to face up to what US Authorities did with United Airlines in 2005, where the Federal Pension Guaranty Corp took over the airlines pensions for an exchange in a stake in the new United Airlines. 

There are some also some new harsh realities out there that airline labour needs to face up to.   No where is this more true than at Air France where pilots routinely appear to strike due to minute changes in retirement dates and work rules.

This is a now all too recurring theme in the airline sector, as earlier this week BA was said to have been valued below fellow oneworld partner Iberia.   One of the key reasons for this financial faux-pas is that BA owes its pension fund a good deal of cash and is not current with contributions.   While Walsh is out there claiming the any deal that does not value BA above Iberia is “not acceptable” to BA shareholders- why are those same shareholders not demanding answers on the pension underfunding?

 I am no fan of these pension obligations, and were I a shareholder I would be asking management some serious questions about how they are going to solve this pension shortfall, or ultimately it is not the shareholder, but rather the EU taxpayers that will start footing the bill.

 One of the reasons that we as consumers should be sad to see some airlines like Silverjet, Eos, and Sterling go is that that they knew the secret: don’t create a labour contract or pension plan that you cannot afford.  Instead, be good to your employees, and create an innovative, agile, and fun environment in which to work.  We feel that Virgin may well have the right balance here at the moment.  In addition, American Airlines has managed to create through shared-sacrifice a stronger relationship with its organized labour, at the cost of ousting of their former CEO (Bob Crandall) in order to regain credibility.     

This bring me back to a key point that I plan to continue supporting which is the AA/BA anti-trust application should be given fast track approval by the EU Competition Commission, as they currently are in a position to make a merger work.   They have the cash, the teams, and will be able to get concessions to harmonise workforce rules.  These are going to be keys to long-term viability.   Other truly viable applications should also be given the same treatment.   Ryanair and their bid were unrealistic and bad for EU consumers. 

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