Being motivated

It’s been a while since I updated my blog for the last time. This is mainly due to my busy summer schedule which in large measure involved travelling and religiously watching NFL. But that doesn’t mean that my constantly thinking brain hasn’t created any interesting opinion to post it here. Oh well, nothing like that – I even dare to say, I have more to put here than ever before. Although, at this time, I would like to concentrate only on one particular subject or actually, my recent turning point in the way of how I’ve started perceiving my lovely airline, Ryanair.

Those who know me, or are familiar with my complaints and strong opinion about the aforementioned airline’s business model, had a chance to learn how much I hate this LCC. But perhaps, I should slightly change my perception of it especially if I forget about my personal experience on board flight FR666 or FR2157 or..... well, the number of disappointments served by Ryanair is simply too long.

 But in all fairness, there is something that has undoubtedly grabbed my attention.  After listening to the airline’s CEO Micheal O’Leary’s speech at CANSO Global ATM Summit in August where he brought up an interesting point of how quickly the aviation sector will walk away from a typical hub-based model to point-to-point flying. So that will have an irreversible impact on many airlines specifically on national flag carriers which still base their operation on large hubs.

Point-to-point, hmm; I think this is how I like to fly – avoid long queues, irritating security questions (if you fly across the USA) lost baggage and of course “ I missed my connection plane, only because the first one didn’t arrive on time”  . Indeed, that makes a lot of sense.

It costs passengers less to fly non-stop. The argument for hub-and-spoke is that low fares are more important to passengers than scheduled or nonstop routes. However the total cost of carrying passengers from their point of origin to their point of destination is lower when passengers fly nonstop than when they have to change planes at a hub.

Industry research shows that a hub-and-spoke structure requiring two flights for every destination incurs 2% higher aircraft handling and landing fees than nonstop service to the same destinations. Likewise passenger connection costs for a two-flight routing are around 8% higher than direct routing.

But, I’m sure the growth of point-to-point service does not mean that hubs will disappear. It simply means that passengers will have more convenient schedule choices and more opportunities to fly nonstop.

Bottom line;  Well done Mr O’Leary 

Boring!

Since the conflict between Israel and Gaza started,  I have purposely stayed away from any conversations related to that particular situation, or if someone prefers - subject, as I have my really controversial opinion about it and it does not necessarily go hand in hand with the trend! Although, I decided to perhaps be more myself and in a brief statement, share my deep thoughts.

So my philosophy about the whole situation is very simple - Israel would have never attacked Gaza if the terrorist organisation so-called Hamas which is based in Gaza territory, did not fire countless rockets towards Israeli’s cities. Of course, the majority of people have been blaming Israel for the humanitarian crisis, damage and more importantly casualties on the Gaza side. But that could have easily been avoided weeks ago if there had been more corporation, support and willingness from people of Gaza to help Israeli secret service, to allocate Hamas tunnels where the illegal weapons have been transported from Egypt to Gaza state and further, spread through country.

Bottom line; before anyone entirely blames Israel, should have a quick look at the situation from a few different angles or at least watch the FOX News! 

playing chess with a pigeon - I mean Putin!

This week has not finished yet, but it has already brought some interesting news from the political and business fields. Whilst everyone is keeping eye on the situation in Gaza – the European Union under the enormous pressure from the Netherlands, decided to make radical changes in EU-Russian relations. To be frank, I was shocked to hear the number of sanctions that was implemented by the EU! Of course I knew, after the tragedy where so many innocent people were killed (mostly Dutch residents) in eastern Ukraine - something will be done to stop Russia from supporting the rebels. However, even having no specific expectations from the EU, the news about the sanctions has literally raised my eyebrows!  On that day, once again my theory that says “there is nothing that is not humanly possible” was confirmed in Brussels!

Unsurprisingly, my mind had two completely different reflections on that issue!

One side of me which is mainly based on business feelings said the following things;

Gosh, Europe isn’t ready yet for such a drastic move toward Russia! Almost the entire EU pretty much depends on Russian gas,, and what is more, as the figure shows in some cases, gas pipes from Russian supply hundred per cent of gas to countries such as: Lithuania, Estonia, Finland and Latvia! Someone could say, yes, but these countries don’t have an impact on the European core – maybe that’s right but my sense tells me that this could be a good element of prolonged debate! But what about Austria where the number almost exceeds 60%, Poland 59%? Arguably, as it stands now, Europeans don’t feel the impact but that is about to change in a few months time! Eurpean countries do not depend on Russian gas in the summer, but they do refill their storage facilities with it then. But yet the $292 bilion’s worth trade market ( in 2013) comprises other areas where money flows between two economies. One of them is undoubtedly the financial sector. Only French banks lent Russia c.$49bln in 2013. Italy c.$29bln, Austria c.$21bln and so on. Aforementioned examples are only a drop in the ocean. Although, they are already alarming my vision about how the European economy, slowly bouncing back from the financial crisis, would adopt to new reality. In theory, the sanctions would explicitly worsen the stabilisation process! Luckily, that doesn’t translate to anything at the moment, as this is only my rhetorical assumption.  Having said that I meant to wrap up this part of my perception of how I see the situation from my business point, but I decided to briefly add additional sentences,  because while I’ve been writing this post, new information related this issue appeared online.

Apparently, Angela Merkel has been working behind the scenes directly with Vladimir Putin on a secret plan to broker a peaceful solution over the Ukraine. As a part of the deal Russia would compensate Ukraine with a billion dollar package for the historic rent it used to pay for stationing its fleets in the Crimea and at the port of Sevastopol on the Black sea. Until Crimea voted for independence in March, Russia paid rent to the Ukraine for the use of the port, vital to Russia’s access to the Mediterranean. Lastly, Ukraine would be offered a new long-term agreement with Russia’s Gazprom, the giant gas supplier, for future supplies and pricing. As it stands now, there is no deal in place, thus Ukraine’s gas supplies are running low and are likely to run out before the winter, spelling economic and social ruin for the country.

Angela – Ich liebe dich and I don’t care what others think

And of course there is part of me with more human elements that essentially supports the recent EU decision! Furthermore, I wish to see the EU putting almost enormous pressure on Putin so he would end up in a situation where people in Russia would demand for him to resign from the presidency! However, practically this is not going to happen anytime soon! Hence my support for Merkel’s secret plan, which involves negotiating new deals with Putin. Hypothetically speaking, in consequence of that talk, Europe together with Ukraine could get back on the right track and think about the upcoming “warm winter”!

Bottom line – if the EU has already started playing a taught game with the almighty gas supplier from far East, maybe it’s time to immediately invest in the fuel of the future which at the moment is shale gas! That would help Europe to reduce reliance on Russia! I know, eco-friendly supporters would burn me for that statement, but Hey! Oil-and-gas exports make up 70% of Russia’s $515 billion annual exports and 52% of the federal budget, according to America’s Energy Information Administration so if we have already joined the game, let’s make it even more interesting! No pain, no game! 

Let the Germans to take over Lot and bring the airline back on the European aviation map!

For quite some time, my Airline interest has particularly stopped at Warsaw International airport, mainly because the state-owned airline Lot which my mind has picked as the target, has its biggest and the only hub in Poland. I heard a lot about this carrier, whether it was positive news such as – and I quote” First European Airline to fly the Boeing 787 Dreamliner” or the negative. Sadly, the latter was more common to hear! Actually, this Airline has been struggling for many years showing negative annual results – although, occasionally we noticed a small plus on financial reports. But that was mainly due to selling its asset rather than income from a well prospering business. Thus, no one needs to be a medium to figure out that the Polish Government played an increasingly important role in supporting or by re-framing the word, helping this carrier to survive by almost bombarding Lot’s bank account with hundreds of thousands sacks of money! I truly believe this trend would have easily carried on if the EU commission didn’t decide to provide significant aid for the struggling company for the price of immediate reforms and wise restructuring its firm. Or to simplify, to make its operating cost more efficient and reduce the unit-cost! Oh, and of course, no more concession for international flights from any other Polish airports, except Warsaw as well as all other hubs outside the capital must be closed! In my humble opinion, this was a big favour for Lufthansa especially in Krakow where Lot since the deal was reached, can’t provide direct flights to/from Germany where as we know, there is a big Polish community. However, I don’t want to concentrate on that – arguably I feel there is a way more important field of interest.

 The Polish aviation market has been almost a gold mine for budget airlines since the country joined the European Union and allowed Poles to travel freely and more importantly, work abroad – which essentially means, earn money and afford to pay for an airline ticket.  EasyJet, Ryanair or Wizzair are the strongest LCC players in Polish market offering a high number of inbound and outbound connections to other EU states – the UK is firmly the top destination in the number of total flights.

I have been watching how the aforementioned players have been successfully expanding their services across major and regional airports and from time to time ask myself, why can they, while Lot can’t?

Why is it so easy for them to open new routes, attract more passengers? I think there are too many whys in this part, so I am kind of willing to skip it.

My first theory about their success was – price! Second theory – flexibility to fly to random Polish airports (as I mentioned above, Lot due to EU restrictions, can’t provide international flights outside Warsaw Chopin airport)

Whilst the second option seems to be pretty right, I’m not so sure about the first one. Here is the explanation!

I decided to do my own quick market research for both Warsaw airports and compare ticket prices to the UK for Ryanair, Wizzair – both airlines offer direct connections. And for a contrast I checked Lufthansa flights – with one stop. The main reason why I chose the British destination is a high number of Polish immigrants already living in the UK.

Ryanair – all flights from Warsaw Modlin (regional airport – none Lot’s services to/from the airport)

Warsaw Modlin --> Manchester (02.08.14) ca. £152

Manchester --> Warsaw Modlin (09.08.14) ca. £174

Warsaw Modlin -->Liverpool (09.08.14) ca. £118

Liverpool -->Warsaw Modlin (09.08.14) ca. £174

Warsaw Modlin --> Glasgow Prestwick  (02.08.14) ca.£180

Glasgow Prestwick <-- Warsaw Modlin (09.08.14) ca.£142

Wizzair – all flights from Warsaw Chopin airport ( Lot main Hub)

Warsaw Chopin --> Liverpool (03.08.14) ca.£123

Liverpool  <-- Warsaw Chopin ( 10.08.14) ca.£100

Warsaw Chopin --> Glasgow International (01.08.14) ca.£179

Glasgow International <-- Warsaw Chopin ( 08.08.14) ca.£100

Luftansa, part of Star Alliance – all flights via Munich or Frankfurt

Warsaw Chopin --> Munich--> Manchester (02.08.14)

Manchester--> Munich --> Warsaw (09.08.14) Total price ca.£223

All of the above examples are showing that the price between Warsaw and the UK market isn’t as low as someone could think when they hear the name of one of the LCC. But what is more, even by going for a premium Airline which in my opinion is Lufthansa, it would be cheaper than for Wizzair or Ryanair  including the return flight)

So here is the question – Why can’t Lot open new routes to, for example; Manchester, Birmingham, Glasgow, Liverpool and bring on board many Polish, British customers who would definitely pay £150 or £180 for a flight with checked-in baggage, extra leg room, free snacks and Polish/English speaking crew? Maybe I’m too blind and I don’t see certain obstacles that for the Polish national carrier are too difficult to avoid or tackle? But, if for others those routes are prospering well, so what is stopping Lot adding new destinations to its list?

The only thought suggesting a hypothetical answer is: apparently nobody wears the trousers in Lot’s office, thus it’s only a matter of time before the airline will die!

Bottom line – Don’t wait too long with decisions making as without brave changes, you  gonna look like Death Valley waiting for a drop of rain

Summer trip

All of a sudden, warm summer has arrived in Europe and shockingly, as well as in my Island!

Without thinking too much, I decided to pack my little suitcase and travel down south – Dover. However, as I almost live in the heart of England, B’ham I couldn’t simply teleport myself to my destination point. Thus, I decided to check how much it would cost me to get there by using public transport, particularly a train!

As my laptop was already on, I simply typed www.nationalrail.com updated my journey details, and that is where my story starts;

A return trip for Monday 21^st of July – Outward 6:10, Return 16:45 for total price of £242!!! It took a while for my usually quite fast thinking brain to adopt the fact that this journey is going to be more expensive than some people earn on a weekly basis based on a national minimum wage in England!

As it stands now the minimum wage for people whose age is 21 or above, must be no less than £6.31 per hour. So realistically, If we assume that a person works a standard 40 hours per week in 2014, then the math is going to be;

Gross income per year  £13,124.80,weekly £252.40

It looks great doesn’t it? However, now it’s time for Mr Cameron to take his portion of money out of taxpayer’s pockets – hence, the math must carry on

Gross income per year, £13,124.80 - Taxable Income £3,124.80 – Tax £624.96 – NI £620.26

So that equates to £11,879.58 which weekly will be £228.45

Thus, as the math shows, a traveller with a minimum wage will have to work more than a week to afford a three hour and approx. 212 mile trip!

Since I discovered how much my mind wants to learn or explore, I had only one option – check what it would look like, if I were looking for a similar trip somewhere in Continental Europe.

My first choice was pretty much evident – Germany and the Deutsche Bahn

Journey from Munich to Frankfurt on the same day and time as mentioned above which is also a comparable distance – approx. 243 miles! Ok, to be more precise – a bit further.

Total fare – 148,00 EUR!  Only because I like to stay classy - no matter what,  I won’t paraphrase what my mind said loudly seeing this price. The only question I’m dare to ask here, is why the heck I used the currency exchange calculator?  £117,16 – Huston we got a problem!!!

Psychologically, I had already reached the level of self-destruction. I almost felt like I’m on a suicide mission. Nevertheless, my research continues.

Amsterdam to Brussels – same story, £124.50

Paris to Lyon - £115.50 (288.39 miles)

...................

I shall unpack my suitcase and turn on the Discovery channel as I’m not going anywhere – Oh, and there is a documentary movie, how to travel in time – coincidence? 

Monday's thought

The debate about raising minimum wage in the USA is still on the go.  President Obama, has been desperately sharing his idea about the positive aspects of introducing the $10.10 per hour. Recently, his philosophy has been strongly supported by a new mixture of statistics, graphs, data, and etc showing how he believes that this new proposal would boost the economy.

What is more, he’s trying to encourage his supporters to not be afraid to challenge the elected local representatives with questions such as;  “So ask your senator, ask your representative in the House, do you support raising the federal minimum wage to $10.10 an hour. If they say yes, tell em good job. … If they say no, be polite, don’t just yell at them but say, ‘Why not?’

In theory, that looks like a great plan to utilize this proposal and tick another box on Obama’s “things to do” list. Just like he did after implementing Obama Care. However, maybe he should let the economy decide for itself what is best? Or perhaps, the recent data from Washington which is showing the highest number jobs added in the past two months (288,000) since April 2008, should make the president to hold on for a moment, and re-think the whole idea – that can be done with a Cuban cigar and a glass of whiskey.

Sometimes I can’t keep up with all the websites where each say something else – clearly this debate isn’t going to be over anytime soon!

In the meantime the German Parliament adopts minimum wage! Yes that is right. The German lawmakers approved the country’s FIRST national minimum wage, despite complaints from trade unions, pointing out too many loopholes in the act. After months of tough negotiations, the minimum wage equivalent to $11.61 has been approved. The reform is undoubtedly a victory for Chancellor Angela Merke and her allies.

So Mr Obama, I shall suggest that you pick up the phone and call Mrs Merkel for a little advice... Oh, damn it, I forgot that you already know everything – NSA is working 24/7 obviously.

Bottom line - practically, the US can’t have Angela Merkel on its board – but hey! There is a suggestion, Hillary Clinton. 

Additional point - C

 About 4 weeks ago I read a book about Globalization – I felt like this would be a great addition to ongoing Business news. The first chapter took me through ( in details ) the History of Globalization. A huge portion of details to be memorized thus, my brain decided to go on strike almost after 20 minutes, but before that happened, I managed to take a few notes. Which are;

Globalization comprises two components

  a)      Modernization – involves the upgrading of technologies and living standards that occur  as ideas, products and services

  b)    Westernization – Involves the emulation of lifestyle and behaviours of Western societies most notably those of North America and Western Europe.

Surely I accepted those two aforementioned points and quickly turned the page. Although, within a few seconds a thought came to me, to be more precise – I reminded myself of a quote which said “globalization is really another name of the dominant role of the United state” That quote was said by Henry Kissinger - the former US secretary of state. No surprise at all! 

There would not be anything special about it if, on the same day, I didn't watch news relating exactly to the developing topic.- Is China about to overtake US as the world's largest economy?( BBC, 2014) That headline appeared on the official BBC website making me think that the book is like a good story about something someone said or happened in the past. But what about the present day, not to mention the future!

So as it stands now, I kind of dare to add another point which in my humble opinion, should be written in bold;

   c)      China-zation – involves all the facts that take China ahead of the USA and following economies.

To conclude – we can’t only rely on books; we must pay attention to on-going news more than ever before, as the XXI century business, changes quicker than the British weather!

       Bottom line – don’t let your brain to become an old Museum