This carrier model is grounded for good

Saudi's Kayala Airline announced last week that it is suspending all flights due to financial concerns amid the global economic downturn. The carrier offers first and business class-only services to Riyadh, Jeddah and Dubai, among other destinations, but will cease operations on April 1.

Kayala Airline becomes the fourth high-profile business class-only carrier to flop into administration within the last 15 months. In May last year Silverjet collapsed leaving travellers stranded in Dubai, London and New York, after Eos Airlines was grounded in April 2008 and Maxjet hit the skids in December 2007.

The Saudi carrier, however, collapsed under very different economic circumstances to its one-time competitors. The go-to excuse for bosses at Silverjet, Eos and Maxjet was that the soaring price of fuel made it impossible to turn a profit. The carriers insisted there were plenty of passengers clamouring for the first class experience, but the cost of powering a luxuriously appointed plane from A to B had become prohibitive at $147 crude.

Now that peak oil is a distant memory, Kayala has admitted that mounting costs coupled with a decrease in demand have meant the airline is no longer commercially viable. There simply aren't enough passengers prepared to pay a premium for tickets, even if that does guarantee hot towels and an onboard chef.

The airline business is a low-margin one, and a risky one. And any carrier that does not spread its revenue sources is brutally exposed to variances in the market - it simply doesn't have the option to take passengers from outside its own narrow sector of the market.

Kayala, for example, operated a fleet of Airbus 319 aircraft designed to carry up to 140 passengers, but modified to accommodate just 44 passengers. How do you tweak that model? It's not as if you can just nail a few more seats to the fuselage when the market turns against you.

The inflexibility of the business class-only model has proved its downfall. If it can't stay in the air when times are good, and it can't stay in the air when times are bad, then the model itself is surely due for decommissioning.
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Last week I wrote about the ‘right skilling' of employees at Sorouh Real Estate, which is retraining engineers as customer support staff in order to avoid layoffs. As might be expected, the Abu Dhabi-based firm is just one of many to take this approach - word reaches that more than one Mideast airline is assigning trained pilots to desk jobs around the company while they wait their turn to fly.

This means the airline doesn't lose the small fortune it costs to train a pilot, and the pilot learns new skills as well as keeping busy. Let's just hope that, for safety's sake, the scheme doesn't work the other way around as well.
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It's not just English Premier League football clubs who come to Dubai to soak up the sunshine. Rumours abound that the former boss of Northern Rock, the recently nationalised UK bank, has been holidaying in the emirate.

And Adam Applegarth should have no problem paying his bill - it was revealed earlier in the month that the bank was forced to pay its disgraced former chief exec more than $1.1m last year in pay and pension top-ups following his departure, after he failed to find another job.

I hope he enjoyed his break.

Andrew White is the editor of Arabian Business English.

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READERS' COMMENTS

Trolley dollies don't need newskilling
Posted by Peter, Singapore, Singapore on Tuesday 17 March 2009 at 05:00 UAE time


Putting pilots in desk jobs is a great idea (the Germans thought of it first!) so they can be both retained and retrained. But let's hope airlines draw the line there and don't try to newskill their flight attendants. Those denizens of the skies are so adept at multitasking they could teach us all a lesson. They can pour gin, smile, serve unruly children (yes, in business class!), deal with inebriates, console the tired and sick, clean the heads with a tight smile and still thank you for flying so-and-so airline as you deplane. Now, let's see what newskilling can be done for the sidelined drivers.

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