There was a story in the petro chemical industry earlier this year that we here noticed but only mentioned in passing in the depths of the daily news, now though it is worth drawing attention once again to OXEA. On 1st April 2013 prices of essential chemicals to the aviation sector will increase by about 40%
The significance of this is that it will lead to an increase in the price of aviation turbine oils, coatings, tyres and more which airlines, manufacturers and MROs use day in day out. Look out also for aircraft and engine manufacturing cost increases as this sector uses huge amounts of coatings for products from fuel tanks to turbine blades.
One reason for the price increases is the rising price of base products sourced from the APAC region such as palm kernel oil. Another problem is pressure that hurricane Sandy put on the oil production industry in the US following shutdowns.
This problem is two-fold and is a highlight to what is going on across the board that we all need to watch out for:
1) Aviation is in this instance suffering because demand for palm kernel oil has fallen as healthcare and cosmetic industries look to new and better base products. Much the same as aviation’s refining problems, we are simply too small to matter when compared against other sectors.
2) In more general terms: Production costs in Asia are rising very fast indeed due to salary increases and this is putting pressure on production costs on all things. Will the C919 be able to undercut Airbus and Boeing as advertised? Only with government help in the future that is certain. The cheap life is ending and it is obvious that production of certain goods will move from China to India.
Also on April 1st Norwegian is launching flights from London Gatwick airport in the UK with 145 non-stop flights per week to 21 destinations. In doing so Norwegian is taking on British Airways, Easyjet, Monarch and indirectly Ryanair. It will be most interesting to see if Norwegian Air Shuttle can win in this market where its name is not yet an established one and where many British people might be deterred from booking due to the name of the airline. From what we hear Norwegian needs to blitz the UK with advertising to inform the public that they are not going to Scandinavia if they get on a Norwegian aircraft (you will be surprised how important this is).
Four Norwegian aircraft will be based at Gatwick with operations in Malaga, Las Palmas and Alicante in Spain.