The airline industry is a popular news topic, appearing on two fronts this past week. The decision on a new runway for London got people talking about airfreight, while in the US, an investigation was announced by the Department of Justice into alleged collusion.
New Runway Plans
Last week, a UK Government commission selected Heathrow as the preferred location for a new runway to be built in London. Following the publishing of the report, UK Prime Minister, David Cameron, confirmed that a final decision would be made by the end of the year.
The plans for Heathrow, already the busiest passenger airport in Europe and third busiest in the world, appear to have beaten competition from London Gatwick and a proposal for a brand new airport in the Thames estuary.
While it appears that the debate will rage on until the final decision is made at the end of the year, business leaders and UK organisations have welcomed the decision. With Heathrow currently operating at 98 per cent capacity, many think that this is directly impacting business and freight.
‘Importance of air freight’
The freight industry believes that additional runway capacity at Heathrow is required in order to service new markets in Asia, South America and the Indian sub-continent.
The Chief Executive of the UK’s Freight Transport Association (FTA), David Wells, stated that, “80% of freight is carried in the holds of scheduled passenger aircraft using Heathrow Airport.”
“Whereas passengers could be persuaded to use a different airport, the diminution of Heathrow as an international air cargo hub favours neither the country nor the economy,” Wells concluded.
The commission report highlighted future exports for the UK as a reason for their decision. The report stated, “By 2030 advanced manufacturing industries such as pharmaceuticals or chemicals, whose components and products are predominately moved by air, are expected to be among the top five UK export markets by their share of value.”
Sir Howard Davies, Chairman of the Airports Commission, who compiled the report, went on to say that the Heathrow option provided the “greatest benefits for business passengers, freight operators and the wider economy”.
While it remains to be seen if the UK Government will go along with the Commission recommendation, it does appear that business might benefit from a new runway at Heathrow.
Over in US, the industry is in the news for less positive reasons, with the Department of Justice (DoJ) announcing a new investigation into alleged collusion between some of America’s biggest airlines.
United Airlines, Delta Air Lines, American Airlines and Southwest Airlines have all confirmed that they are part of the investigation, which will focus on whether the airlines have been coordinating to keep tickets available at a steady number, artificially increasing demand and driving up prices.
The four airlines account for 85 per cent of the domestic routes across America, partly due to two high-profile mergers in the past year. The investigation also comes at a time when airlines are posting huge profits due to the falling oil prices.
However, many commentators believe that the investigation will not produce outcomes that will be of benefit to consumers. For one, it is hard to prove that airlines are actually colluding to keep availability low, as with better technology, information on both capacity and pricing can be found easily and immediately.
There is also an argument to say that it would be just as effective to let markets sort out collusive behaviour on their own. There are other ways to ‘collude’ beyond pricing, but ultimately, if inefficiencies appear in the market, new competitors will emerge or consumers will look elsewhere to satisfy their needs.
Whatever the final outcome of the investigation, it looks as though there will be greater scrutiny on the airlines in the coming months. While it may not lower prices in time for the busy summer holiday period, there is a chance it may push the airlines to be more transparent and act in a favourable way for consumers.
Do you live near Heathrow or commute through there regularly? What do you make of the decision for a third runway? Do you think the DoJ investigation will make any impact? Let Procurious know what you think.
While you think about that summer sunshine, have a read through the headlines from the procurement and supply chain world this week.
BP agrees to $18.7 Billion payout for deadly 2010 oil spill
- BP agreed on Thursday to pay $18.7 billion for damages caused by its oil rig explosion in the Gulf of Mexico in 2010, an accident that resulted in the deaths of 11 people and the largest marine oil spill in history.
- The settlement covers lawsuits filed by parties including the U.S. government, five U.S. states that were affected by the spill, and several hundred local government organisations. It also includes a civil penalty of $5.5 billion under the U.S. Clean Water Act.
- The settlement, which comes in addition to the hefty sums that BP has already had to pay in legal and clean-up fees over the last few years, will be paid over 18 years and is expected to end the majority of BP’s litigation wars over the accident, though the company still faces shareholder lawsuits and some outstanding costs from a 2012 class action settlement.
- With this new settlement, BP’s total bill for the spill climbs to $53.8 billion—a number that exceeds the company’s profits in the last three years.
- Carl-Henric Svanberg, BP’s chairman, said in a statement that the agreement offers “a path to closure” for BP and the Gulf. “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise,” he said.
Read more on Slate.com
Fast fashion retail market trends and opportunities 2015-2019 shared in new research report
- The report titled “Fast Fashion Retail Market: Trends and Opportunities (2015-2019)” analyzes the potential opportunities, challenges, demand drivers and significant trends representing fast fashion industry in the world.
- The report gives valuable insight into various types of brands of fast fashion such as ZARA, H&M, Uniqlo and GAP. It profiles and analyzes the leading five companies operating in this industry with an overview of their business and finance structure along with a brief discussion of their future business strategies.
- The report also studies the growth pattern in the fast fashion retail market and the latest trends concerning fast fashion. Further, the report analyzes the current market size and project future market size of the overall fast fashion retail business for the years to come.
The complete report is available to download here
From trash to treasure: Adidas designs shoes made of ocean garbage
- German sportswear brand Adidas has joined forces with Parley for the Oceans, an organisation formed in 2013 dedicated to undertaking projects to protect and conserve the Earth’s oceans.
- To raise awareness about ocean pollution, Adidas has designed a prototype pair of sneakers with an upper made entirely from recycled ocean waste and illegal deep-sea gillnets.
- These gillnets were retrieved by Parley for the Oceans partner Sea Shepherd, which spent 110 days tracking an illegal poaching vessel, finally catching it off the coast of West Africa.
- “We are incredibly excited to join Parley for the Oceans as they bring the cause of the oceans to the attention of the United Nations,” said Adidas’ Eric Liedtke. “Adidas has long been a leader in sustainability, but this partnership allows us to tap into new areas and create innovative materials and products for our athletes. We invite everyone to join us on this journey to clean up the oceans.”
Read more at CNET
Supply chain workers urge Walmart to act on supplier standards
- Walmart must do more to improve supply chain transparency and hold its suppliers accountable, according to a study from the Food Chain Workers Alliance. The report includes research on 11 different food-related industries in the retail giant’s supply chain, as well as on the corporation’s impact on local farmers.
- The alliance said the retailer should do more to hold suppliers accountable to labour and environmental standards. The report, Walmart at the Crossroads: the Environmental and Labor Impact of Its Food Supply Chain, calls on the company to enforce its existing labour and environmental standards and fulfil its goals for local food purchases.
- The report also contains a raft of recommendations for the supply chain. It said Walmart should improve its supply chain transparency by requiring suppliers to identify the names and addresses of all factories, farms, fishing vessels, or other entities that contribute to the product being purchased before a supplier contract is awarded. This information should be made public, the organisation which represents workers in the food supply chain said.
- The study also called for an independent, third party body to monitor and verify supplier compliance with Walmart’s labour and environmental standards. Suppliers should have long-term contracts and be paid fairly, and should pay workers fairly.
Read more at Supply Management