Sunday 20 January 2019

Space beckons as global aviation has another busy year

Ryanair was affected by strikes after recognising unions for the first time while Aer Lingus and parent group IAG expanded and Flybe hit turbulence.

Tough at the top: Ryanair CEO Michael O’Leary endured a challenging year. Photo: PA
Tough at the top: Ryanair CEO Michael O’Leary endured a challenging year. Photo: PA
John Mulligan

John Mulligan

There's never a quiet day, let alone a quiet year, in the aviation industry and 2018 proved to be no exception.

Takeovers, collapses, crashes and more all kept the sector in the headlines during the year.

The final frontier: A view from the edge of space is seen from Virgin Galactic’s manned space tourism rocket plane SpaceShipTwo.
The final frontier: A view from the edge of space is seen from Virgin Galactic’s manned space tourism rocket plane SpaceShipTwo.

Both at home and abroad, Ryanair continued to make the headlines.

It entered 2018 trying to thrash out a recognition agreement with Irish trade union Fórsa. Those talks, which came after the airline decided to recognise unions in December 2017, dragged on for months.

The airline faced strike action by pilots and cabin crew around Europe as it tried to seal collective labour agreements with unions.

In early August, about a quarter of Ryanair's 350 or so pilots based in Ireland took part in industrial action, while some picketed the airline's head office. Veteran industrial relations negotiator Kieran Mulvey was hauled in to bash heads together, resulting in an agreement between the two sides being reached near the end of August.

Departure: Stephen Kavanagh announced that he is to step down as the CEO of Aer Lingus
Departure: Stephen Kavanagh announced that he is to step down as the CEO of Aer Lingus

Ryanair, meanwhile, initially barred media from its annual general meeting in September and took the unusual step of holding it at a hotel outside Drogheda. It has previously held it at its headquarters near Dublin Airport, or at a hotel at Dublin Airport.

The Irish Independent, having anticipated that the airline might try to bar media, had secured a proxy vote in advance of the decision by the airline. Two other news outlets - the 'Financial Times' and RTÉ - also managed to legitimately gain access to the meeting, at which point Ryanair threw in the towel and permitted all journalists waiting outside the hotel to attend the meeting.

During the meeting, Aberdeen Standard Investments, which at the time held Ryanair shares worth about €150m, told the airline's board that while it had voted for the re-election of billionaire chairman David Bonderman at the AGM, it wouldn't do so next year if no succession plan was in place. The UK's The Local Authority Pension Fund Forum, whose members advise £230bn (€255bn) of UK pensions, subsequently said it will seek the removal of Mr Bonderman, and the publication of succession plans for CEO Michael O'Leary at the airline's next AGM.

After last September's AGM, Mr O'Leary held a wide-ranging discussion with the press.

Cathay Pacific commenced direct flights from Dublin to Hong Kong.
Cathay Pacific commenced direct flights from Dublin to Hong Kong.

"I have no idea when I'll have had enough," he said when asked when he'll leave the airline.

"I like this company. I like working for this company. I don't do it for the pay I get. But as long as it remains interesting and fun and challenging, I see no reason not to continue to try to lead it and lead it forward positively."

Meanwhile, Aer Lingus continued to expand its route network under IAG, its owner since 2015.

It inaugurated new services to Seattle and Philadelphia during the year, and unveiled new transatlantic services for 2019 to St Paul-Minneapolis and Montreal. Aer Lingus CEO Stephen Kavanagh said that the airline had also considered new routes to Vancouver and cities such as Denver.

Asia matters: Japanese-owned lessor Orix completed its acquisition of a 30pc stake in Irish-based lessor Avolon, which is headed by Dómhnal Slattery.
Asia matters: Japanese-owned lessor Orix completed its acquisition of a 30pc stake in Irish-based lessor Avolon, which is headed by Dómhnal Slattery.

The airline plans to expand its transatlantic fleet to 30 aircraft in the next five years from the current 17. That will include the arrival of 14 Airbus A321LR jets that it will use to serve new routes to the US. It will also boost its A330 fleet to 16 from 13 in 2017.

Mr Kavanagh also announced that he's leaving the CEO role at Aer Lingus, but will remain as a non-executive director on the airline's board. His successor is British Airways executive Sean Doyle.

Aer Lingus will also unveil a brand refresh early in 2019, as well as new uniforms for staff.

The Irish Independent revealed in November that the airline paid a €200m dividend to its UK-based holding firm in 2017 as it generated record profits that year.

It was the first time a dividend has been paid out by the airline since it was acquired by IAG in 2015. IAG also owns British Airways, Spanish airlines Iberia and Vueling, and low-cost carrier Level.

IAG directly received a €125m dividend from Aer Lingus's UK-based holding company in 2017, accounts for the entities showed.

IAG also took a stake in troubled low-cost Scandinavian carrier Norwegian in 2018, which sent shares in the embattled carrier soaring.

But IAG CEO Willie Walsh warned in August that if the airline group had not succeeded in acquiring Norwegian by August 2019, then it would be selling its stake.

IAG's low-cost airline Level and Ryanair's Austria-based Laudamotion went head-to-head in Vienna, as competition continues to intensify across Europe. Ryanair has pledged to double the Laudamotion fleet to 18 Airbus jets for summer 2019.

The year also saw continued fallout in the sector, with higher year-on-year fuel costs and fare wars playing their part in sinking some carriers.

Among those that failed in 2018 were Primera Air, Cobalt Airlines, Small Planet Airlines and Next Jet.

Struggling UK carrier Flybe put itself up for sale. Earlier in the year, talks that would have seen Stobart Group buy Flybe, were terminated. Stobart, whose Stobart Air unit operates the Aer Lingus Regional service, is again in the mix to buy Flybe, along with EasyJet and Virgin Atlantic.

Some brands also vanished. Dublin-based CityJet inked a deal with Aer Lingus to operate a service between Dublin and London City Airport. That meant the end of the CityJet livery on scheduled services.

Icelandic low-cost carrier Wow Air, whose founder is Skuli Mogensen, hit turbulence and announced that it had entered talks with Icelandair, which planned to buy the carrier that was established in 2011. But the deal collapsed and Indigo Partners, the US private-equity vehicle headed by aviation veteran Bill Franke and co-founded by Ryanair chairman David Bonderman, stepped into the breach.

Indigo plans to invest in Wow, but the airline also announced that it was culling its fleet, reducing it from 20 jets to 11, and axing 111 jobs after what it said was a "challenging year".

Further afield, Argentina-based low-cost carrier Flybondi made its inaugural flight.

The fledgling airline is backed by aviation luminaries including former Ryanair chief operating officer Michael Cawley. Its CEO and co-founder Julian Cook is taking advantage of the newly-deregulated market in Argentina, and the airline has so far carried more than 600,000 passengers and has an 8pc market share.

Another former senior Ryanair executive, ex-chief financial officer Howard Millar, set about co-founding Sirius Aircraft Leasing Fund.

It intended to raise between $250m and $300m (€220m and €264m) via a stock market flotation in London, which would have been matched with debt, giving the vehicle the ability to buy between 20 and 25 single-aisle, second-hand jets. Sirius hoped to have $1.5bn (€1.3bn) in funds within the next three years.

But after first postponing the flotation until early December, it was then put on the back-burner until early in 2019 after a tumultuous time for stock markets. Mr Millar, who is still a non-executive director with Ryanair, has established Sirius with aviation executives Ed Coughlan and Ed Hansom.

The trio worked together at aviation management and finance firm Stellwagen until last year. That firm later took legal action against the executives in an effort to prevent them from allegedly planning to use "highly confidential material", to compete with Stellwagen.

The three executives have denied Stellwagen's claims.

Back at home, Dublin Airport's passenger numbers for 2018 exceeded 30 million - a new record for the gateway.

It's been boosted by the airport's position as a hub for transatlantic travel, as well as and a continually improving economy at home.

In 2018, it saw new routes to Hong Kong and Beijing launched - its first-ever services to Asia, while other new markets are also opening. Canadian carrier WestJet will fly direct from Calgary to Dublin next summer, while American Airlines will inaugurate a service between Dallas and the Irish capital.

The DAA also progressed plans for its third runway at Dublin Airport, which is slated to be operational by 2021. Construction has already begun.

Shannon Airport - which operates independently - expects to have handled 1.8 million passengers in 2018, which would represent a small increase on the 2017 figure.

On the aircraft-leasing front, Japanese-owned lessor Orix completed its acquisition of a 30pc stake in Dublin-headquartered Avolon, which was co-founded and is headed by Dómhnal Slattery, for $2.2bn. Avolon is controlled by Bohai Capital, a subsidiary of troubled Chinese conglomerate HNA. The remaining 70pc of Avolon is now also reportedly up for sale.

And the final frontier of air travel came closer to opening up to the paying public, or at least the very wealthy paying public.

In December, Virgin Galactic, founded by Richard Branson, completed its first mission to the edge of space, with a "million-dollar view", according to one of the pilots of the VSS Unity vehicle.

"This will open a whole new era of space travel," said Mr Branson.

Irish Independent

Also in Business