Monthly Archives: April 2008

Chinese pilots on STRIKE

When I read “strike in China”  this evening, I was wondering because “China” and “strike” in one phrase were unfamiliar to me. Furthermore, this is not a usual strike like in western countries, but a special one. The way some Chinese pilots want to express their resentment is even more unusual than a strike in China itself.

Many Chinese pilots are unhappy about their conditions of work. They say they have too many working hours and bad pay. Besides, several established airlines have contracts with the pilots which require huge amounts of money in the case of leaving the airline for a competitor. Thus, these pilots don’t profit from the current boom in Chinese aviation which faces a shortage of pilots. Now, they demand an adequate participation in the economic rise of China and the new found wealth.

But just going on strike like in western countries is not very common in China. Indeed, the pilots of China Eastern Airlines and Shanghai Air which went on strike came up with a couple of creative ideas. One day about 40 pilots of Shanghai Air called in sick and consequently flights had to be canceled and long delays occurred. Even more bizarre was what some pilots of China Eastern did: They departed regularly from Kunming but on half the distance to the destination airport they returned to the departure airport.

At first, China Eastern tried to justify the disruption as of technical reasons or bad weather. But passengers told the story differently and China Eastern eventually had to admit the pilots’ protest. Finally, China Eastern has been fined over $215,000  by the General Administration of Civil Aviation of China and in addition, China Eastern has been suspended some operating licenses. Now there are rumors that the pilots might indeed get a pay rise.


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Continental calls off merger with United

There won’t be a merger between Continental Airlines and United Airlines. Continental’s CEO Larry Kellner ruled out the deal with United because the risks would outweigh the chances. Furthermore, Continental considers quitting the Skyteam alliance. According to Kellner, Continental has several advantages over other airlines and does not want to put them at risk.

United Airlines considers now to merge with Star Alliance partner US Airways. Being in the same alliance, merging would be easier because both airlines already cooperate within Star Alliance.

Merging turns out to be the strategy with wich airlines want to face rising fuel prices. The severe increase in costs in addition to a weaker economy puts a lot of pressure on the airlines which also suffer from huge losses.

This development could push American Airlines, the current world’s largest airline, to rank 3, behind Northwest-Delta and United-US.

Though European airlines generally do better than American airlines in terms of profit at the moment, there have been some mergers in Europe, too. France’s Air France is now together with Dutch KLM Europe’s largest airline and German Air Berlin has taken over several smaller low-cost competitors and has expanded its operations from Europe-based low-cost air travel to international destinations in the Americas and in Asia.

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The most energy efficient place in America

New York City is a role model for energy efficiency. Its per capita energy use is much lower than in other parts of the US. Cities in general seem to be an eco-friendly place – at least for their hinterland and the environment. In this regard the global trend of urbanization – more than 50% of the earth’s total population live in cities – is to be appreciated. The cities’ energy efficiency has numerous reasons.

– the higher density of population in cities than in suburbs or rural areas leaves space for nature

– heating and cooling on a big scale, e.g. in apartment buildings and skyscrapers, is very efficient and less energy is lost through exterior walls because the area in contact with the outside per inhabitant is smaller than in detached houses in the countryside

– distances are shorter and can be covered by foot or by public transportation rather than by car as it is mostly the case in suburban or rural areas

All these effects appear even if there are no special efforts by the cities to become greener. But if some cities put effort in further increases of efficiency and environment-friendly technology, even further energy, emissions and money can be saved. For example, parts of the exterior of a skyscraper could be covered with ultra-thin solar panels. The influx of natural light could be used to reduce artificial light and the electricity bill. Water from the conduits could be used to cool the building in summer. Better insulation would help to reduce cooling costs in summer and heating costs in winter. There is a lot of potential for further efficiency increases and saving lots of money.

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The most precious resource II

Security of supply of food and energy is definitely the topic of our time. But even more important will be the security of the supply of water.

The United Nations estimates that the available water that is safe for drinking per capita will be one third less than today in 20 years.

This scarcity derives from a couple of reasons. Firstly, the world population rises and will need more water. This growth in population in addition to poor sanitary facilities results in bacteriological and industrial pollution. On the other hand more and more people who have reached a new level of wealth will demand for cleaner and unpolluted water. Unfortunately, a lot of water is lost by inefficient and overage infrastructure. Finally, global warming contributes to the drying-up of many parts of the earth and long-standing droughts will threaten many people in many countries. And this will affect both industrialized and third-world countries. Obviously, Africa is the candidate for severe water scarcity – the African Water Association reports that one third of the African population has no drinking water, but even some parts of the United States and Europe will face severe problems. Las Vegas is tapping the Colorado River in an amount that Las Vegas is at risk to run out off water in the future. Spain might suffer from droughts and possibly it will be host to the first desert in Europe. The Southeast of Spain is one of the driest regions in Europe. However, Spain has one of the lowest prices of water in Europe – in Germany the price is twice as high as in Spain, though Germany has plenty of water. Nevertheless, Spain’s tourism industry and agriculture exploit the scarce water for hundreds of golf courses and huge plantations with fruits for export. And saving water is no issue they bother, because the low price makes it affordable to waste large amounts of water in leaky water conduits.

The part of the world which will suffer most is Asia. Especially China has significant problems. It is estimated that more than 90% of China’s water resources – be it lakes, rivers or reservoirs – are not suitable for drinking. This adds to China’s problem that it has about 21% of the Earth’s population but only 7% of its water supplies. This could turn out to harm China’s GDP growth and will require attention from the government to avoid chaotic circumstances in the case of a massive drought.

Some investors jump at the chance and invest in companies which are involved in the cleaning of water.

Experts of Germany’s Fraunhofer Institute warn that the competition for water is likely to turn out to be a significant crisis of the 21st century. As a consequence, water should be used as efficiently as possible and the natural water resources should be preserved.



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The most precious resource I

People worry about the soaring oil price. Well, oil is a very important resource; it is required for chemistry, energy, mobility and it fuels globalization. With oil supplies being limited, mankind will face serious problems in the future unless alternatives are available in an adequate amount. Disrupted oil supplies would force any country into a severe crisis – a deadly threat to the economy. Most things that surround you wouldn’t be there if there were no oil. Be it the keyboard or the heating.Once there was a time when mankind managed without oil. Of course, the living standard of that time cannot be compared with today’s, but this shows that we can survive without oil.But there is a resource that we depend on even more than on oil. And as far as I know, there is no market for it as it is for oil. However, it is a necessity for life and nobody could cut its consumption of it. Guessed what I’m talking about?       – Water. More precisely: Drinking water.

A disruption of drinking water supply for more than two days would be disastrous. Nobody can survive – depending on the temperature – two to ten days without water. This is obvious, but water supply doesn’t seem to be high on the agenda of most people. They are not aware of the importance of proper water supply. The more shocking it is that water reservoirs are exploited and polluted in large parts of the world without any serious consideration of the consequences. If the supply of water that is safe for drinking is insecure, the consequences can be dangerous. A disruption of water supply will result in uncontrollable violence. If wars are fought for oil, wars for water seem to be unavoidable. Imagine this: A river flows through two countries in a dry area and it is the lifeline for the people living there. The people living near the source decide to use the water for expanded irrigation instead of leaving it flow away. Or another possible incident, a government decides to reroute the river to pressurize the government of the other country. Would the people of this country have any other chance to survive than starting a war? They wouldn’t have a choice. Either die without water or fight for it.

As water is (besides oxygen) the most important nutrient for humans and the body loses water through sweating and respiration, a sufficient amount of clean water is the number one requirement for life.

Especially some countries in Asia struggle to provide safe drinking water and investors have realized that water could be their next big business. More about that tomorrow.




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Airfares on the rise

Delta Airlines’ CEO Richard Anderson plans to increase fares by 15 to 20 % and justifies this step by rapidly rising fuel prices. Delta Airlines, as well as most major US airlines, suffers from the massive increase in fuel prices and huge losses are the results.

Analysts suggest to reduce the airlines’ capacities to cut costs and increase efficiency by a higher passenger load factor. But the airlines are afraid of losing market share to competitors and size appears to be an advantage, because a good network helps to keep customers loyal, as they are more likely to stay with the airline or alliance from the departure to the arrival airport and as well on future trips. Airlines try to earn more money by charging extra-services, e.g. window seats, a second piece of luggage and fuel surcharges. Other airlines tell their pilots to slow down a bit which extends the total length of the flight only by a few minutes, but can save millions of dollars a year.

According to, fares of US domestic flights have been increased twelve times since the beginning of 2008. 

 In contrast to most US airlines, European airlines are currently better protected from the high oil prices because of the strong Euro and successful hedging. The major German carrier Lufthansa has managed to sustain earnings and expand its capacities in 2007 and is doing well in the first quarter of 2008.

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Airbus and Boeing in trouble – could a competitor jump at the chance?

Two major projects, two aircraft manufacturing giants and enormous delays. It will take a long time until Airbus can turn a profit on its super jumbo, if Airbus manages to break even. Boeing’s 787 Dreamliner seems to be both, a remarkable engineering achievement – as it is mostly made of carbon-fiber composites – and a commercial success. It got nearly 900 orders whereas Airbus has taken less than 200 orders for the A380. However, Boeing is facing the same problem as Airbus did, they can’t manage to deliver on time and they needed to delay the release of the Dreamliner several times. As a result, both Boeing and Airbus suffer from huge financial losses. Airbus also suffers from the weak dollar which makes the A380 even more expensive, because it is produced in the Euro zone.

It seems that Airbus and Boeing can afford these mistakes that occurred, because together they control the aircraft market and demand for airplanes is rising steadily. They both rely on China’s strong demand for aircrafts in the future and they are sure that both planes – the A380 and the 787 – will be a success, though they represent different estimates how air travel will develop. The A380 is made for linking hub airports around the globe and transporting a large number of passengers. Boeing estimates that future demand will be for non-stop connections, especially between minor airports that are more suitable for business travelers. Probably the market is big enough for both planes to succeed.

But one thing Airbus and Boeing should consider is that it is not for sure that the share of the market will remain as it is today. The airplane market of hope and growth will be China. It would really be surprising if there weren’t any Chinese companies which intend to tap into the need of their home country. The ACAC consortium presented the first passenger jet which was developed and will be produced by China. The ARJ21 might replace the established regional jets in China and the stretched version is likely to become a rival of Airbus’ A320 and Boeing’s 737.

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