Malaysia Airlines - Orient Aviation
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COMMENT<br />
Time to crank up the PR machine<br />
When airline chiefs from around the world<br />
gathered in Vancouver, Canada last<br />
month for the annual general meeting<br />
of the International Air Transport<br />
Association (IATA) it became clear very<br />
quickly that one single issue would dominate debate: the<br />
environment.<br />
Today, the green challenge ranks close to safety – always<br />
the number one goal – on the industry’s priority list.<br />
It is apparent many airlines remain uncertain about where<br />
to go from here when it comes to addressing global warming,<br />
although they are aware the environmental public relations<br />
battle is being lost. The AGM debate, however, will have<br />
helped them focus on what is required.<br />
In essence, it is to fight for a globally based emissions<br />
trading scheme and to keep pumping out their message that<br />
airlines are good environmental citizens.<br />
The latter carriers can do on a daily basis. A chance to<br />
convince those who matter on the importance of the first<br />
issue will arise in September at the annual assembly of the<br />
International Civil <strong>Aviation</strong> Organization in Montreal. It is an<br />
opportunity that cannot be missed.<br />
Meanwhile, IATA is not easing up in other areas. The<br />
decision taken in Vancouver to extend the December 31, 2007<br />
deadline for the industry to achieve 100% e-ticketing by five<br />
months to May 31, 2008, was common sense. The industry has<br />
known for some time many carriers were not going to make it,<br />
particularly small operators.<br />
The “one-off” deferral is a good compromise, taking into<br />
account the interests of all airlines. Despite the delay, IATA’s<br />
“Simplifying the Business” programme remains on track to<br />
continue driving change and cost savings in the industry.<br />
Concerns about issues like the environment, security<br />
regulation implementation and costs, as well as user charges,<br />
continue to occupy the minds of airline management.<br />
Some of the industry’s darker clouds are lifting. IATA<br />
is now forecasting worldwide industry profits of $5 billion<br />
this year, more than 30% above a forecast it made in April.<br />
It expects income of $9.6 billion in 2008. But IATA director<br />
general, Giovanni Bisignani, said in terms of returns on the<br />
near $500 billion in revenue earned by airlines, this amounts<br />
to “peanuts”.<br />
Nevertheless, given the gloom of the past few years and<br />
coupled with the impressive continuing increases in traffic, it<br />
at least shows the industry is heading in the right direction.<br />
TOM BALLANTYNE<br />
Chief Correspondent<br />
The Association of Asia Pacific <strong>Airlines</strong>’ members and contact list<br />
Air New Zealand<br />
Chief Executive, Mr Rob Fyfe<br />
VP Public Affairs and Group Communications,<br />
Mr Mike Tod<br />
Tel: (64 9) 336 2770 Fax: (64 9) 336 2759<br />
All Nippon Airways<br />
President and CEO, Mr Mineo Yamamoto<br />
Dep. Director, Public Relations, Mr Kaz Iwakata<br />
Tel: (81 3) 6735 1111<br />
Fax: (81 3) 6735 1115<br />
Asiana <strong>Airlines</strong><br />
President & Chief Executive,<br />
Mr Park Chan-bup<br />
Managing Director, PR, Mr Hong Lae Kim<br />
Tel: (822) 758 8161 Fax: (822) 758 8008<br />
Cathay Pacific Airways<br />
Chief Executive Officer, Mr Philip Chen<br />
Corporate Communications General Manager,<br />
Mr Dane Cheng<br />
Tel: (852) 2747 8868 Fax: (852) 2810 6563<br />
China <strong>Airlines</strong><br />
President, Mr Ringo Chao<br />
VP, Corp Comms, Mr Johnson Sun<br />
Tel: (8862) 2514 5750<br />
Fax: (8862) 2514 5754<br />
Dragonair<br />
Chief Executive Officer, Mr Kenny Tang<br />
General Manager, Corp. Communications<br />
Mrs Laura Crampton<br />
Tel: (852) 3193 3193 Fax: (852) 3193 3194<br />
EVA Air<br />
Chairman, Mr Steve Lin<br />
Executive VP, Group Public Relations,<br />
Mr K. W. Nieh<br />
Tel: (8862) 2500 1122 Fax: (8862) 2500 1523<br />
Garuda Indonesia<br />
President & CEO, Mr Emirsyah Satar<br />
VP Corporate Communications, Mr Pujobroto<br />
Tel: (6221) 231 2612<br />
Fax: (6221) 381 1486<br />
Japan <strong>Airlines</strong><br />
President, Mr Haruka Nishimatsu<br />
Director, International Public Relations,<br />
Mr Geoffrey Tudor<br />
Tel: (813) 5460 3109 Fax: (813) 5460 5910<br />
Korean Air<br />
Chairman and CEO, Mr Yang Ho Cho<br />
Managing VP, Corporate Communications,<br />
Mr Nam Il Park<br />
Tel: (822) 2656 7065 Fax: (822) 2656 7288/89<br />
<strong>Malaysia</strong> <strong>Airlines</strong><br />
Managing Director, Idris Jala<br />
Gen Mgr, Int’l Affairs, Germal Singh Khera<br />
Tel: (603) 2165 5137<br />
Fax: (603) 2161 0558<br />
Philippine <strong>Airlines</strong><br />
President, Mr Jaime Bautista<br />
VP Corporate Communications,<br />
Mr Rolando Estabilio<br />
Tel: (632) 817 1234 Fax: (632) 817 8689<br />
Qantas Airways<br />
Managing Director and CEO, Mr Geoff Dixon<br />
Head of Corporate Communications,<br />
Belinda de Rome<br />
Tel: (612) 9691 4773 Fax: (612) 9691 4187<br />
Royal Brunei <strong>Airlines</strong><br />
Chairman, Pengiran Dato Hamid Yassin<br />
Acting CEO, Pengiran Yusof Jeludin<br />
Tel: (673 2) 229 799<br />
Fax: (673 2) 221 230<br />
Singapore <strong>Airlines</strong><br />
Chief Executive Officer,<br />
Mr Chew Choon Seng<br />
VP Public Affairs, Mr Stephen Forshaw<br />
Tel: (65) 6541 5880 Fax: (65) 6545 6083<br />
Thai Airways International<br />
President, Flying Officer Apinan Sumanaseni<br />
Director, PR,<br />
Mrs Sunathee Isvarphornchai<br />
Tel: (662) 513 3364 Fax: (662) 545 3891<br />
Vietnam <strong>Airlines</strong><br />
Chair. and President & CEO, Mr Nguyen Sy Hung<br />
Dep Director, Corp Affairs,<br />
Mr Nguyen Huy Hieu<br />
Tel: (84-4) 873 0928 Fax: (84-4) 872 1161<br />
JULY/AUGUST 2007 ORIENT AVIATION 3
JULY/AUGUST 2007<br />
CONTENTS<br />
O R I E N T A V I AT I O N V O L U M E 1 4 , I S S U E 0 9<br />
COVER STORY<br />
24 Jala works his magic<br />
<strong>Malaysia</strong> <strong>Airlines</strong>’ boss Idris<br />
Jala brings the good times back<br />
MAIN STORY<br />
10 The Everest challenge: aviation<br />
moves towards liberalisation,<br />
but it’s tough going<br />
ENVIRONMENT<br />
16 Bisignani targets pollution-free<br />
industry<br />
AIR TRAFFIC MANAGEMENT<br />
18 Qantas tests groundbreaking system<br />
CARGO UPDATE<br />
20 Asiana has big plans for growth<br />
FOCUS ON INDIA<br />
28 Merged giant looks for share sale<br />
29 Air traffic management may go private<br />
NEWS BACKGROUNDER<br />
30 Boeing prepares for Dreamliner’s<br />
debut<br />
COMMUTER AVIATION<br />
38 Nepali carrier scales new heights<br />
39 Seaplanes make splash in Phuket<br />
4 ORIENT AVIATION JULY/AUGUST 2007
SPECIAL REPORT<br />
AVIATION SECURITY<br />
PUBLISHED BY<br />
WILSON PRESS HK LTD<br />
GPO Box 11435 Hong Kong<br />
Tel: Editorial (852) 2865 1013<br />
Fax: Editorial (852) 2865 3966<br />
E-mail: orientav@netvigator.com<br />
Website: www.orientaviation.com<br />
Chief Executive<br />
Barry Grindrod<br />
E-mail: orientav@netvigator.com<br />
Publisher<br />
Christine McGee<br />
E-mail: cmcgee@netvigator.com<br />
32 Cargo carriers caught out by costly clampdown<br />
34 New hand luggage rules add to confusion<br />
36 Biometrics are bad news for bad guys<br />
NEWS<br />
6 Hong Kong <strong>Airlines</strong> signs MoU for 51 aircraft<br />
6 Boeing forecast puts Asia on top<br />
6 China could open local skies<br />
6 Korean Air, ANA plan low cost carriers<br />
7 Jetstar on expansion drive<br />
8 Asia features big in Paris sales boom<br />
8 Garuda back in the black<br />
8 Kingfisher buys into Air Deccan<br />
8 Record profit at SALE<br />
REGULAR FEATURES<br />
3 Comment: time to crank up the PR machine<br />
40 Business Digest: Vietnam leads RPK charge<br />
Association of Asia Pacific <strong>Airlines</strong> Secretariat<br />
Suite 9.01, 9/F, Kompleks Antarabangsa<br />
Jalan Sultan Ismail, 50250 Kuala Lumpur, <strong>Malaysia</strong><br />
Tel: (603) 2145 5600 Fax: (603) 2145 2500<br />
E-mail: info@aapa.org.my<br />
Director General: Andrew Herdman<br />
Commercial Director: Beatrice Lim<br />
Technical Director: Martin Eran-Tasker<br />
Chief Correspondent<br />
Tom Ballantyne<br />
Tel: (612) 9638 6895<br />
Fax: (612) 9684 2776<br />
E-mail: tomball@orientaviation.com<br />
Special Correspondent<br />
Charles Anderson<br />
Tel: (852) 2809 2209<br />
E-mail: charlesanderson@orientaviation.com<br />
China<br />
Sophie Yu<br />
Tel: (852) 2865 1013<br />
Japan & Korea<br />
Julian Ryall<br />
Tel/Fax: (81) 45 663 2501<br />
Email: jmryall@orientaviation.com<br />
Photographers<br />
Rob Finlayson, Colin Parker, Andrew Hunt<br />
Design & Production<br />
Wilson Press HK Ltd.<br />
Colour Separations<br />
Twinstar Graphic Arts Co.<br />
Printing<br />
Hop Sze Printing Company Ltd.<br />
ADVERTISING<br />
South East Asia and Pacific<br />
Shirley Ho<br />
Tel: (852) 2865 1013<br />
Fax: (852) 2865 3966<br />
E-mail: shirley@orientaviation.com<br />
The Americas / Canada<br />
Barnes Media Associates<br />
Ray Barnes<br />
Tel: (1 434) 927 5122<br />
Fax: (1 434) 927 5101<br />
E-mail: barnesrv@suddenlink.net<br />
Europe & the Middle East<br />
REM International<br />
Stephane de Rémusat<br />
Tel: (33 5) 34 27 01 30<br />
Fax: (33 5) 34 27 01 31<br />
E-mail: sremusat@aol.com<br />
New Media & Circulation Manager<br />
Leona Wong Wing Lam<br />
Tel: (852) 2865 1013<br />
Fax: (852) 2865 3966<br />
E-mail: leonawong@orientaviation.com<br />
© All rights reserved<br />
Wilson Press HK Ltd., Hong Kong, 2007<br />
The views expressed in this magazine are not necessarily<br />
those of the Association of Asia Pacific <strong>Airlines</strong>.<br />
JULY/AUGUST 2007 ORIENT AVIATION 5
REGIONAL ROUND-UP<br />
Hong Kong <strong>Airlines</strong><br />
signs MoU for 51 jets<br />
Hong Kong <strong>Airlines</strong> which began<br />
life in 2001 as CR Airways with<br />
two Bombardier CRJs, signed a<br />
Memorandum of Understanding (MoU) for<br />
51 Airbus widebody and narrowbody aircraft<br />
in late June. The carrier currently operates<br />
five B737-800s.<br />
The ‘shopping list’ is for 30 A320s, 20<br />
A330s and one Airbus Corporate Jet.<br />
Two years ago, the airline changed<br />
its name after Mainland carrier, Hainan<br />
<strong>Airlines</strong>, took a 45% stake in the airline and<br />
put its own management team in place.<br />
Airline chairman, Ren Wei Dong, said<br />
the A330s would be used to establish longhaul<br />
routes.<br />
Asia biggest market,<br />
forecasts Boeing<br />
In a 2007 Current Market Outlook,<br />
released in London last month, Boeing<br />
said there will be a US$2.8 trillion<br />
market for airliners in the next 20 years and<br />
the largest market will be in the Asia-Pacific.<br />
The new airliners will accommodate<br />
forecasted 5% annual passenger traffic<br />
growth and a 6.1% increase in cargo traffic.<br />
The report said the market value translates<br />
into 28,600 new commercial airplanes<br />
with the “largest market projected to be the<br />
Asia-Pacific with 36% of the $2.8 trillion”.<br />
North America will comprise 26% of<br />
delivery dollars, followed by Europe, Russia<br />
and the Commonwealth of Independent<br />
States (CIS) with 25% and Latin America, the<br />
Middle East and Africa taking up the remaining<br />
13%, said Boeing. The largest market<br />
will be in single aisle airplanes (17,650), followed<br />
by twin aisle airliners (6,290), regional<br />
jets (3,700) and aircraft larger than 400 seats<br />
(960), according to its forecast.<br />
China could open<br />
up local skies<br />
A<br />
senior<br />
Chinese aviation regulator,<br />
Yang Guoqing, has told the China<br />
Securities Journal that all airports<br />
could be open to all operators from 2010,<br />
when the 11th five-year plan concludes. He<br />
said the reforms could make the eight largest<br />
airports in China, including Shanghai<br />
and Beijing, available to all domestic carriers.<br />
At present these airports have only<br />
been available to major government airlines,<br />
which has stymied the growth of private airlines<br />
in China.<br />
China interested<br />
in Airbus plants<br />
China <strong>Aviation</strong> Industry Corp<br />
(Avic I) president, Lin Zuoming,<br />
said his company is bidding to<br />
invest or buy all six European Airbus factories<br />
up for auction as well as to develop<br />
mid-size jets with Canadian manufacturer,<br />
Bombardier.<br />
Airbus is auctioning plants in France,<br />
Germany and England that it said would<br />
save the company US$2.68 billion. The<br />
Bombardier joint venture requires a $400<br />
million investment from the Chinese manufacturer<br />
in Bombardier’s C Series aircraft.<br />
In turn, the Canadian manufacturer will<br />
invest $100 million in Avic I’s new regional<br />
jet, the ARJ21.<br />
LOW-COST CARRIERS<br />
Korean Air to<br />
launch LCC<br />
Following the completion of a feasibility<br />
study, Korean Air (KAL)<br />
will set up a low-cost carrier (LCC)<br />
in the next three years, the carrier’s parent<br />
company, the Hanjin Group, said in June.<br />
The new airline will fly on targeted domestic<br />
routes as well as short and mediumhaul<br />
international services, using its fleet of<br />
B737s, the president of KAL’s passenger services<br />
division, Young-Ho Kim, said.<br />
Korean Air’s decision to launch an LCC<br />
was “also a display of its will that it shall no<br />
longer remain indifferent to the invasion of<br />
LCCs from China and Southeast Asia into<br />
the Korean market,” Kim said.<br />
“The Korean flag carrier has asserted<br />
many times that dump selling and unreliable<br />
tourism packages centred around LCCs<br />
causing market disturbance and customer<br />
inconvenience must be stopped. Korean<br />
Air’s strategy is to differentiate its new LCC<br />
venture with its experience, world class<br />
maintenance skills and fleet efficiency,” he<br />
added.<br />
6 ORIENT AVIATION JULY/AUGUST 2007<br />
Budget carrier<br />
to fend off China<br />
All Nippon Airways (ANA) said it<br />
also may launch an LCC to fend<br />
off competition from a growing<br />
number of Chinese airlines. ANA president,<br />
Mineo Yamamoto, said in June the possibility<br />
of increased industry deregulation and<br />
the additional slots to become available at<br />
Tokyo’s Narita and Haneda airports by 2009<br />
gave ANA the impetus to plan an LCC.<br />
“If Chinese carriers start cut-price airlines<br />
then that is going to be a threat,” he<br />
Korean Air: planning to launch<br />
a low-cost carrier<br />
told Reuters news agency in Tokyo. “We are<br />
looking at the need for a budget airline so we<br />
can compete with other Asian airlines. And<br />
if we feel it is necessary then we want to do<br />
that,” Yamamoto said. The airline could be<br />
based overseas, in a country with lower costs<br />
than Japan and would be a separate brand<br />
from ANA, he added.<br />
Separately, ANA and Korea’s Asiana<br />
<strong>Airlines</strong> have announced they will each<br />
spend US$12 million buying shares in each<br />
other’s airline as part of a new strategic alliance.<br />
The airlines, both members of the Star<br />
Alliance, will also develop co-operation in
SHORTTAKES<br />
AIRLINES>> Chongqing <strong>Airlines</strong>,<br />
a new carrier which is 60% owned by<br />
China Southern <strong>Airlines</strong>, has received<br />
approval to begin flying from the nation’s<br />
regulatory authorities with an initial fleet<br />
of three A320s. HNA Group subsidiary,<br />
Lucky Air, is launching its own subsidiary,<br />
West China <strong>Airlines</strong>, in Chongqing with<br />
three B737-300s.<br />
AIRPORTS>> Copenhagen Airport<br />
has sold its 20% equity in Hainan<br />
Island’s Meilan Airport for a reported<br />
$ 69.75 million. Singapore Changi<br />
Airport’s Terminal 3 will open next<br />
January and is projected to handle 22<br />
million passengers a year, bringing the<br />
total forecast to use Changi Airport to<br />
70 million a year.<br />
CODE -SHARES>> Japan <strong>Airlines</strong><br />
and Jetstar have commenced code-sharing<br />
on the Osaka-Brisbane-Sydney route.<br />
MRO>> Ameco Beijing and Air China<br />
have completed a centralised component<br />
subcontract agreement whereby Ameco<br />
will repair component parts for Air China.<br />
SIA Engineering Co Ltd is to buy 100%<br />
of Brisbane-headquartered Aircraft<br />
Maintenance Services Australia Pty<br />
Ltd (AMSA), a line maintenance company<br />
established in 1992. SR Technics and Air<br />
India have signed an agreement to service<br />
the CFMI engines and CTCP APUs for the<br />
Air India Express fleet of B737-800s.<br />
LEASING>> AWAS and private equity<br />
group, Terra Firma, have completed the<br />
takeover of Pegasus <strong>Aviation</strong> Finance<br />
Company, bringing the combined aircraft<br />
owned by the enlarged group to 223,<br />
valued at $5.5 billion.<br />
ROUTES>> AirAsia will begin daily<br />
services to Shenzhen – a city of 12 million<br />
across the China border from Hong Kong<br />
and a gateway to southern China – from<br />
both Bangkok and Kuala Lumpur in midmonth.<br />
Cathay Pacific Airways will<br />
double its services to New York and San<br />
Francisco, operating twice daily nonstop<br />
flights from the U.S. Dragonair<br />
has increased its Hong Kong to Busan,<br />
Chongqing and Xian services to daily for<br />
the summer peak as well as doubling<br />
its services to Fuzhou in China to 14 a<br />
week. The airline will also provide several<br />
charter services from Hong Kong to five<br />
Japanese cities during July-August.<br />
United <strong>Airlines</strong> resumed its daily nonstop<br />
service between Taipei and San<br />
Francisco in June for the summer.<br />
TRAINING>> Emirates <strong>Airlines</strong> has<br />
ordered one CAE 7000 series B737-<br />
300ER full-flight simulator (FFS) and<br />
Hainan <strong>Airlines</strong> has signed a contract<br />
for a CAE 7000 series EB145 FFS and<br />
a suite of CAE Simfinity training devices.<br />
Thales has won a $20 million contract<br />
from Sichuan <strong>Airlines</strong> to supply and<br />
support training equipment – two D-<br />
Level FSSs and one classroom-based<br />
Thales Formation Systems Trainer.<br />
the areas of sales, marketing and airport services.<br />
(See The ‘Everest Challenge’ p.10)<br />
Jetstar on<br />
expansion drive<br />
Qantas-controlled LCC, Jetstar, said<br />
it is planning a large aircraft order,<br />
possibly with Airbus, and is looking<br />
to buy minority stakes in Asian carriers<br />
as it expands across the region. Jetstar chief<br />
executive, Alan Joyce, said: “We are talking<br />
to Airbus at the moment for a long-term<br />
big order.”<br />
Joyce added that Jetstar parent, Qantas<br />
Airways, was considering investing in airlines<br />
in the Philippines, Indonesia and<br />
Thailand and that Jetstar in particular was<br />
looking at possible markets in Taiwan, South<br />
Korea and Southern Europe. In June, Jetstar<br />
increased its flights to Bali, Indonesia, to<br />
double-daily services.<br />
Oasis and Viva Macau<br />
spread their wings<br />
Low-cost carriers Oasis <strong>Airlines</strong><br />
and Viva Macau, based in Hong<br />
Kong and Macau respectively, have<br />
expanded their networks to include North<br />
America and Australia as well as several<br />
Southeast Asian cities.<br />
Oasis, which flies daily to London<br />
Gatwick from Hong Kong, began a six<br />
times a week service to Vancouver on June<br />
28 using three former All Nippon Airways<br />
B747-400s. At Viva Macau, the new chief<br />
executive, Con Korfiatas, said the LCC will<br />
start a three times a week service to Sydney<br />
in mid-August and is planning routes from<br />
Macau to Tokyo, Osaka, Pusan, Manila<br />
Clark, Phuket and Ho Chi Minh City.<br />
Former Viva Macau CEO, Andrew<br />
Pyne, resigned from the airline to set up<br />
an LCC, yet to be named, in Moscow. Pyne<br />
remains a shareholder and an advisor.<br />
Nok Air<br />
goes shopping<br />
Thai LCC, Nok Air, has announced it<br />
has become the world’s first “shoppers’<br />
airline”, following the launch<br />
of its first international flight; daily services<br />
between Bangkok and Bangalore in India.<br />
Nok Air and The Mall Group, operators of<br />
the three most prestigious shopping malls in<br />
Bangkok, have done a deal which offers passengers<br />
flying the airline from Bangalore to<br />
Bangkok discounts of up to 50% if they shop<br />
at selected retail outlets in The Mall Group’s<br />
Emporium, Siam Paragon, and The Mall<br />
department stores in Bangkok.<br />
Thai AirAsia<br />
wants IPO<br />
Several senior executives of Thai<br />
AirAsia, who now hold 1% of the<br />
low-cost carrier, are planning to buy<br />
the 50% of the airline now owned by Shin<br />
Corp, one of the companies owned by<br />
former Thai prime minister, Shinawatra<br />
Thaksin. The airline’s chief executive,<br />
Tassapon Bijleveld, said if the purchase is<br />
completed, the remaining 49% of the airline<br />
would continue to be held by <strong>Malaysia</strong>’s<br />
AirAsia Bhd. He added the carrier was planning<br />
an IPO by 2010.<br />
Long-haul, tight fit<br />
AirAsiaX , the long- haul, lowcost<br />
carrier to be launched by the<br />
AirAsia Group in September, has<br />
ordered 15 A330-300s and announced the<br />
airplanes will have the largest configuration<br />
in the aircraft type’s history – 396 seats<br />
in the cabin – up to 36% larger than other<br />
A330-300 operators.<br />
JULY/AUGUST 2007 ORIENT AVIATION 7
BUSINESS ROUND-UP<br />
Garuda Indonesia<br />
moves into profit<br />
Indonesian flag carrier, Garuda<br />
Indonesia, reported a profit of 121 billion<br />
rupiah ($13.71 million) for the four<br />
months to April 30, compared with a loss<br />
of 279 billion rupiah in the same months<br />
in 2006. Garuda attributed the result to<br />
improved efficiency as well as an increase in<br />
load factor from an average 69% to 76%.<br />
SALE reports<br />
record profit<br />
In its first published results since it<br />
was taken over by the Bank of China<br />
last December, Singapore Aircraft<br />
Leasing Enterprise (SALE) has reported<br />
an after tax net profit of $70.5 million for the<br />
year to March 31, a 103% increase over the<br />
previous 12 months.<br />
SALE managing director and chief executive,<br />
Robert Martin, said: “With manufacture<br />
production slots sold out in the<br />
near term, demand for new leased aircraft<br />
is likely to outweigh supply for the foreseeable<br />
future. Much of this demand will be due<br />
to continued growth, especially in Asia. The<br />
replacement of aircraft will also become<br />
increasingly important in the coming years,<br />
particularly in North America.”<br />
SALE sold 17 airplanes in the 2006-07<br />
Garuda Indonesia:<br />
in profit<br />
year, and said increased income from feebased<br />
advisory and lease management services<br />
further enhanced profitability.<br />
Kingfisher buys<br />
26% of Air Deccan<br />
Aircraft sales boom in Paris<br />
The beginnings of a predicted shakeout<br />
in Indian aviation began in June<br />
with Kingfisher <strong>Airlines</strong>’ $121 million<br />
purchase of 26% of Deccan <strong>Aviation</strong>,<br />
the owners and operators of domestic lowcost<br />
carrier (LCC), Air Deccan. The combined<br />
carriers will be the second largest<br />
domestic airline operators, behind the<br />
newly-amalgamated Jet Airways and Air<br />
Sahara.<br />
It is expected that Kingfisher will<br />
increase its equity in Air Deccan as the airline<br />
has reported several quarters of losses<br />
due to declining yields.<br />
Cebu Pacific<br />
wants IPO<br />
Cebu Pacific, the leading budget<br />
carrier in the Philippines, has said<br />
it wants go to the market later this<br />
year with an initial public offering (IPO)<br />
planned to fund fleet expansion. Cebu<br />
Pacific president, Lance Gokongwei, said<br />
the airline had 14 ATR72-500s ordered – six<br />
confirmed orders plus eight options valued<br />
at $250 million – as part of a plan to double<br />
capacity at the 11-year-old carrier by 2013.<br />
Cebu, with its 20-city domestic network as<br />
well as seven regional destinations, said the<br />
number of passengers carried increased by<br />
50% in 2006 over 2005.<br />
MAS upgrades<br />
profit forecast<br />
Ma l ay s i a A i rl i ne s ( M A S )<br />
announced its full-year profit<br />
forecast would increase from 50<br />
million ringgit (US$17 million) to a target<br />
between 300 million ringgit and 700 million<br />
ringgit.<br />
MAS reported a profit of 132.7 million<br />
ringgit for the three months to March 31.<br />
(See Idris Jala profile p. 24)<br />
Asia was a prominent player in the aircraft sales boom,<br />
which took the Paris Air Show by storm last month.<br />
Indonesia’s Lion Air ordered 40 B737-900ERs to<br />
bring its combined order for the type to 100. Mandala<br />
<strong>Airlines</strong>, meanwhile, became the first Indonesian<br />
A320 customer with an order for 25 of the type.<br />
India’s Kingfisher <strong>Airlines</strong> ordered 15 A350s, 10 A330s, five<br />
A340s and 20 A320s and Jet Airways signed for 13 ATR-72 500s.<br />
Thai Airways International ordered eight A330-300s (these will be<br />
obtained through a leasing company), and Fly Asian Xpress, the proposed<br />
low-cost, long-haul subsidiary of LCC AirAsia, ordered 15<br />
A330-300s. Japan <strong>Airlines</strong> ordered 10 Embraer 170 regional jets.<br />
Two Asian carriers signed major Memorandums of<br />
Understanding (MoU) during the week. Singapore’s Tiger Airways,<br />
which operates nine A320s and has 11 more on order, signed an MoU<br />
for 30 A320s and 20 options.<br />
Hong Kong <strong>Airlines</strong>, which currently operates only five aircraft,<br />
signed an MoU for 51 Airbus jets, The ‘shopping list’ is for 30<br />
A320s, 20 A330s and one Airbus Corporate Jet.<br />
While it was a good week for Boeing, Airbus stole the show. As<br />
<strong>Orient</strong> <strong>Aviation</strong> went to press Airbus had announced firm orders for<br />
405 aircraft, including several orders from leasing companies.<br />
A highlight for Airbus was the flurry of orders for its A350<br />
XWB (Extra Wide Body), the contender to Boeing’s record-breaking<br />
B787. With orders from Qatar Airways (80), India’s Kingfisher<br />
<strong>Airlines</strong> (15) and Libya’s Afriqiyah Airways (6), Airbus now has 127<br />
firm orders for the plane, although that is still well behind the 634<br />
orders that Boeing has for the B787.<br />
The Gulf region airlines were again among the big buyers.<br />
As well as ordering the A350s, Qatar ordered three more A380s,<br />
Emirates Airline purchased another eight A380s to add to its huge<br />
order of 45 already in place (two more A380s were also ordered by<br />
Air France), Etihad Airways from Abu Dhabi ordered five A330-<br />
200s, four A340-600s and three A330-200 freighters, with low-cost<br />
Gulf carrier, Jazeera Airways, ordering 30 A320s.<br />
Leasing companies were also among the big buyers. ILFC<br />
ordered 63 planes: 52 B787s, 10 B737s and one B777 freighter. The<br />
leasing arm of General Electric, GECAS, ordered 60 A320s from<br />
Airbus as well as six B777 freighters from Boeing. Other leasing<br />
companies placing orders included CIT with seven A350s and 25<br />
A320s and ALAFCO from the Middle East with 12 A350s and seven<br />
A320s. – Tom Ballantyne<br />
8 ORIENT AVIATION JULY/AUGUST 2007
MAIN STORY<br />
The<br />
‘EVEREST<br />
CHALLENGE’<br />
When the world’s airlines<br />
met in Vancouver last month,<br />
International Air Transport<br />
Association (IATA) director<br />
general Giovanni Bisignani said<br />
liberalisation was the aviation<br />
industry’s ‘Everest challenge’.<br />
The bilateral system belongs<br />
in a museum next to the paper<br />
airline ticket, he insisted. Is the<br />
push towards liberalization and<br />
airline consolidation speeding up<br />
or are the roadblocks to change<br />
still stalling progress? TOM<br />
BALLANTYNE spoke to airline<br />
chiefs, industry leaders and<br />
analysts to find the answer.<br />
As Singapore <strong>Airlines</strong> (SIA)<br />
chief executive, Chew Choon<br />
Seng, pondered a US$1<br />
billion investment in China<br />
Eastern <strong>Airlines</strong> (CEA)<br />
last month, he was well aware the planned<br />
stake – close to 20% – fell a long way short<br />
of bringing with it effective ownership and<br />
control. In today’s world, where the slow<br />
pace of air market liberalization and crossborder<br />
ownership limitations are restricting<br />
progress towards an open global market and<br />
much needed industry consolidation, there’s<br />
not much he can do about it.<br />
But Chew isn’t hanging around to wait<br />
for the big bang. In effect, he is moving<br />
strategically within the confines of today’s<br />
regulatory environment to prepare for a<br />
different future, when it eventually arrives.<br />
“China is a big growth market and a very<br />
important one for SIA,” he told <strong>Orient</strong><br />
<strong>Aviation</strong>.<br />
“If the conditions are right and everything<br />
else can be agreed, [the deal with CEA] will<br />
be a good starting point for us in preparation<br />
for eventual opening up of the skies.”<br />
Speaking in Vancouver, Canada, where<br />
he was attending the International Air<br />
Transport Association (IATA) annual<br />
general meeting, Chew said the reality of<br />
the current aviation environment, where all<br />
operations are governed by a web of bilateral<br />
agreements, meant SIA must rely on its own<br />
organic growth, or take ownership stakes<br />
in foreign carriers “which complement our<br />
strategy and our network and are consistent<br />
with our own operating philosophy and<br />
product positioning.”<br />
F o r S I A , t h i s m e a n t g r a b b i n g<br />
opportunities as they arose, he said. In the<br />
case of Shanghai-based CEA, Singapore<br />
10 ORIENT AVIATION JULY/AUGUST 2007
interests will have a 25% stake: 5.1% with<br />
Singapore government investment arm,<br />
Temasek, and the remainder<br />
with SIA.<br />
But future forays are hard<br />
to map out. “You might want<br />
to marry a beauty queen. It’s a<br />
nice ambition, but at the end of a<br />
Saturday night you look around<br />
the dance floor and see who is<br />
available,” said Chew.<br />
SIA isn’t the only player<br />
trawling the ballroom for<br />
potential partners. Nearly<br />
everyone <strong>Orient</strong> <strong>Aviation</strong><br />
spoke to agreed the coming<br />
months will likely see a flurry<br />
of activity involving equity<br />
investments by airlines in<br />
partner carriers similar to SIA’s<br />
move into CEA.<br />
Many analysts predict<br />
another of China’s big three,<br />
Guangzhou-based China Southern <strong>Airlines</strong><br />
(CSA), will follow suit with a share sale to<br />
a strategic partner sometime in the next 18<br />
to 24 months. Insiders name Dubai-based<br />
Emirates Airline, Korean Air and Air France<br />
as potential candidates.<br />
“I will go out on a limb and say I could<br />
possibly see deals being done anywhere,” said<br />
JPMorgan regional transport analyst, Peter<br />
Negline. “I wouldn’t rule anything in and I<br />
wouldn’t rule anything out. There are some<br />
governments more bent on liberalization<br />
than others and their carriers are well aware<br />
it is time to think about where they position<br />
themselves in the future.”<br />
T here h ave b e e n ot her sig n s<br />
consolidation and liberalization may be<br />
gathering momentum. Japan <strong>Airlines</strong> has<br />
now absorbed Japan Air Systems. The<br />
purchase of Dragonair by Cathay Pacific<br />
Airways and its cross-shareholding with<br />
Air China are bedded down.<br />
Rationalization in India is well underway<br />
with the merger of state-owned Air India and<br />
Indian, the takeover of Sahara <strong>Airlines</strong> by Jet<br />
Airways and Kingfisher <strong>Airlines</strong>’ move into<br />
Air Deccan.<br />
While these are essentially all ownership<br />
adjustments taking place within national<br />
boundaries, the impending cross-border<br />
SIA-CEA deal is not unique. In May,<br />
Japan’s All Nippon Airways (ANA) and<br />
Korea’s Asiana <strong>Airlines</strong> announced a crossshareholding<br />
arrangement that will see each<br />
invest $12 million in the other. While small,<br />
it could lead to bigger things.<br />
‘[The industry<br />
has] one foot in<br />
the 21st century<br />
and one foot in<br />
the 1940s’<br />
Chew Choon Seng<br />
Chief Executive<br />
Singapore <strong>Airlines</strong><br />
Garuda Indonesia is looking for a strategic<br />
equity partner. Qantas has purchased 30% of<br />
Vietnam’s Pacific <strong>Airlines</strong><br />
and Hanoi is currently<br />
moving to raise the foreign<br />
ownership limit there from<br />
the current 30% to 49%.<br />
There has also been<br />
a f lurry of activity on<br />
the liberalization front.<br />
The long-awaited open<br />
skies agreement between<br />
the U.S. and Europe has<br />
finally been signed, a<br />
move often cited as a spur<br />
to wider open skies deals<br />
elsewhere.<br />
The U.S. has signed<br />
a new agreement with<br />
C h i n a t h at w i l l see<br />
passenger flights more<br />
than double by 2012.<br />
China has also announced<br />
further liberalization of its domestic market<br />
and elsewhere the Association of South<br />
East Asian Nations (ASEAN) open skies<br />
agreement is due to start operating from<br />
December next year.<br />
Have the floodgates o p e n e d ? N o t<br />
q u i t e , according to most observers. “We<br />
compete in a modern world but we are living<br />
in a time capsule with 60-year-old rules,” said<br />
IATA director general, Giovanni Bisignani.<br />
“We are trying to climb<br />
Everest with equipment<br />
from 1944.<br />
“ T he U.S.- Eu rope<br />
agreement is a step in the<br />
right direction creating<br />
many new opportunities,<br />
but governments must<br />
understand that we have<br />
a modern business to run<br />
and we need the freedom<br />
to sell our products where<br />
markets exist and to merge<br />
or consolidate where it<br />
makes business sense. Let<br />
me be frank, liberalization<br />
is the only way forward.”<br />
IATA estimates the<br />
l i f t i ng of rest r ict ive<br />
agreements – there are still<br />
more than 300 bilaterals in<br />
place – would increase air<br />
traffic by 60%, create 24<br />
million jobs and add $490<br />
billion to global GDP.<br />
Impressive figures, but the industry is<br />
‘The key to further<br />
progressive<br />
liberalisation<br />
clearly lies in<br />
changing longestablished<br />
attitudes towards<br />
national interests’<br />
Andrew Herdman<br />
Director General<br />
AAPA<br />
not there yet.<br />
Damien Horth, transport analyst at global<br />
finance firm UBS, believes progress towards<br />
liberalization amounts to a crawl. “It is slow.<br />
It is really up to individual governments now<br />
to drive that forward,” he said. “There are<br />
pockets moving in the right direction and<br />
then a lot of resistance.”<br />
Another investment analyst, Vince Ng<br />
at KAF-Seagroatt and Campbell in Kuala<br />
Lumpur, is a little more optimistic. He sees<br />
increased competition, additional capacity,<br />
the entry of low cost carriers, rising operating<br />
costs, fuel prices, salaries and leasing rates<br />
all contributing to imminent liberalisation.<br />
“The most rational way for airlines to<br />
grow under such circumstances is through<br />
scale, either through merger and acquisitions<br />
or taking market share off airlines that have<br />
gone bust. Governments today recognise this<br />
and are now more willing to explore opening<br />
up their markets, albeit in stages,” he said.<br />
Ng argues that liberalization will drive<br />
competitiveness. “Protected markets always<br />
render their industries efficient,” he said.<br />
“With competition and consequential<br />
improvements in efficiencies, chances of<br />
survival through the tougher operating<br />
environment improve. Basic economics<br />
apply here: leave it to free market forces.<br />
Players will consolidate, inefficient operators<br />
will exit and the industry will ultimately be<br />
in balance.”<br />
Most observers believe<br />
the precursor to global open<br />
skies will be liberal aviation<br />
agreements between regional<br />
blocs, such as the U.S.-Europe<br />
deal. How quickly this will<br />
occur is the subject of debate.<br />
Hor t h suggest s t hat ,<br />
initially, individual countries<br />
could “dock into” open skies<br />
blocs. “If Singapore did an<br />
open skies agreement with the<br />
EU and then open skies with<br />
the U.S., you could end up with<br />
something. Others could join<br />
in later,” he said.<br />
But none of it is plain<br />
sailing. Negline, for instance,<br />
isn’t convinced the ASEAN<br />
open skies bloc will get off<br />
the ground as planned next<br />
year. “I think you will see<br />
that dissolve into a series of<br />
expanded bilateral agreements<br />
and maybe a couple of countries exempting<br />
themselves from it, with Indonesia probably<br />
JULY/AUGUST 2007 ORIENT AVIATION 11
MAIN STORY<br />
being the most notable,” he said. “But they<br />
will eventually come around. It is all a<br />
function of political developments. They<br />
can be complex and take time.”<br />
Negline sees this as part of a pattern. “I<br />
can definitely see potential for them [bloc<br />
deals] within the industry, but whether<br />
governments are ready to place their<br />
sovereign rights in the hands of a third<br />
party that they don’t fully control ... I’m not<br />
sure all the states in Asia would necessarily<br />
subscribe to that just yet.”<br />
Chris Tarry, head of UK-based transport<br />
strategy consultancy CTAIRA (Chris Tarry<br />
<strong>Aviation</strong> Industry Research and Analysis)<br />
said bloc deals seemed the straightforward<br />
way to go, but governments would worry<br />
whether their home carriers were strong<br />
enough not only to survive, but also to<br />
compete, especially in the much sought<br />
after Asian market.<br />
“Asia is about to become the world’s<br />
biggest market so there will be a lot of<br />
pressure from the U.S. and from Europe to<br />
get as much as possible into that market,”<br />
he said.<br />
Andrew Herdman, director general of the<br />
Association of Asia Pacific <strong>Airlines</strong> (AAPA),<br />
agreed the recent EU-U.S. agreement was a<br />
small step in the right direction. “But it was<br />
in many ways a missed opportunity given<br />
there was no movement at all on the question<br />
of ownership and control limits and domestic<br />
aviation markets effectively remain closed to<br />
foreign operators and investors,” he said.<br />
He views t he A PEC Mu lt ilateral<br />
Agreement on the Liberalisation of<br />
International Air Transport (MALIAT)<br />
concluded by Brunei, Chile, New Zealand,<br />
Singapore and the U.S. in 2001, as probably<br />
the most ambitious step towards true<br />
liberalisation involving multiple regions.<br />
Apart from the main ASEAN agreement<br />
due next year, other recent sub-regional<br />
initiatives include various open agreements<br />
among ASEAN sub regions, as well as<br />
separate ongoing discussions with China,<br />
Japan and Korea.<br />
“The key to further progressive<br />
liberalisation clearly lies in changing<br />
long-established attitudes towards<br />
national interests compared to the<br />
benefits of multilateral liberalisation,”<br />
said Herdman. “Realistically much<br />
of the debate still takes place within<br />
the context of bilateral negotiations.<br />
However, there is also scope for<br />
further regional or even supranational<br />
initiatives, through ICAO [International<br />
All Nippon Airways: cementing its<br />
relationship with Asiana <strong>Airlines</strong><br />
Civil <strong>Aviation</strong> Organization] for example.<br />
“A fully liberalised air transport<br />
environment would generate even wider<br />
social and economic benefits both regionally<br />
and globally, allow greater commercial<br />
freedom to airlines and pave the way for<br />
necessary industry consolidation, greater<br />
efficiencies and wider and better choices for<br />
the travelling public.”<br />
Abdul Wahab Teffaha, secretary general<br />
of the Arab Air Carriers Organization<br />
(AACO), is more bullish on the prospects<br />
for bloc agreements.<br />
Liberalization in the Arab world has<br />
picked up pace. There is now a multilateral<br />
agreement involving six countries, with six<br />
more having signed but not yet implemented<br />
the deal. One Arab nation, Morocco, already<br />
has an open skies agreement with the EU.<br />
“I believe quite a few countries in the<br />
Middle East would like to follow suit,”<br />
he said. “We are seeing a higher pace of<br />
liberalization in the region which I am sure<br />
is not going to be confined to the region.<br />
“There is so much networking happening<br />
between Europe and the Middle East and the<br />
Middle East and the Indian subcontinent as<br />
well as the Middle East and Asia that I<br />
believe these three regions are going to<br />
achieve some sort of a formula for an open<br />
market agreement on regional levels within<br />
the next five to seven years.”<br />
‘We are seeing a higher<br />
pace of liberalization<br />
in the region’<br />
Abdul Wahab Teffaha<br />
Secretary General<br />
Arab Air Carries Association<br />
SIA’s Chew is also optimistic about open<br />
skies agreements between economic blocs.<br />
“The first one we have seen is between the<br />
U.S. and EU,” he said. “Moves are afoot to<br />
open up the skies between Japan and various<br />
countries. I think the next big development,<br />
depending on political and economic<br />
developments in Asia, will be India and<br />
China and how that sets the tone for the rest<br />
of the world.”<br />
JP Morgan’s Negline also points to calls<br />
in Japan for liberalization, although he<br />
draws attention to the situation in North<br />
Asia where the Taiwan-China issue is one<br />
complex element in the equation. “But if<br />
there is liberalization in Japan and greater<br />
liberalization out of China and Korea as<br />
well, then one can only hope that the political<br />
forces for change on the China-Taiwan issue<br />
can be supported.”<br />
Everyone agrees the cross-border issue<br />
is the greatest stumbling block to rapid<br />
progress. While the U.S.-EU air treaty<br />
allows for open market entry by carriers<br />
from both sides, it has neatly sidestepped the<br />
foreign ownership issue. Negotiators from<br />
Washington and Brussels won’t talk about<br />
that again until some time next year.<br />
“The cross-border thing in the U.S. is<br />
stuck firmly on the resistance to any idea of<br />
cross-border ownership and until the U.S.<br />
subscribes to that it is going to be difficult<br />
to get any wholesale agreements<br />
elsewhere,” said Negline.<br />
The result, according to most<br />
analysts and airline industry chiefs,<br />
is a search by carriers to find ways<br />
around the rules as they did by using<br />
alliances to strengthen their global<br />
networks. One way was is to take<br />
a significant stake in a potential<br />
12 ORIENT AVIATION JULY/AUGUST 2007
MAIN STORY<br />
Open skies means price war<br />
Stand by for price wars on the <strong>Malaysia</strong>-<br />
Singapore peninsula when phase one<br />
of the Association of South East Asian<br />
Nations (ASEAN) open skies pact comes into<br />
effect in December 2008.<br />
The agreement, which in effect allows airlines<br />
from all ASEAN countries to operate when and<br />
how they want between capital cities of member<br />
states, will bring to an end more than 30 years<br />
of dominance by Singapore <strong>Airlines</strong> (SIA) and<br />
<strong>Malaysia</strong> <strong>Airlines</strong> (MAS) on the route between<br />
Singapore and Kuala Lumpur.<br />
The national flag carriers operate more than<br />
200 weekly flights and control some 85% of the<br />
traffic on the 30-minute hop, under a 34-yearold<br />
air services agreement between the two countries – last<br />
revised in 1980 – which does not allow for new players. The<br />
remaining traffic is carried by international airlines operating<br />
fifth freedom flights.<br />
Now, hungry low-cost carriers (LCCs) such as <strong>Malaysia</strong>’s<br />
AirAsia and Singapore’s Tiger Airways are queuing up to get in<br />
on the act. Round-trip tickets from the incumbents currently sell<br />
at US$294. AirAsia chief executive, Tony Fernandes, has already<br />
signalled he will offer fares as low as $60.<br />
With Tiger, partly owned by SIA, set to<br />
enter the route as soon as it can, MAS is<br />
also readying for battle. Chief executive, Idris<br />
Jala, says the carrier has been preparing for<br />
liberalization for some time. It is no coincidence<br />
that its three-year turnaround plan – designed<br />
to get it back into sustainable profitability after<br />
horrendous losses two years ago – will be<br />
completed before open skies arrive.<br />
“What I didn’t like was some people<br />
lobbying for an early liberalization. That’s like<br />
moving the goalposts while you’re playing a<br />
match,” said Idris. The impending arrival of<br />
LCCs on the route is also the reason why<br />
MAS launched its own budget airline, Firefly, he added. “I’d<br />
expect that post- December 2008, a lot of people will want<br />
to fly those routes and that’s why we have Firefly. That’s our<br />
tool to participate in that process.”<br />
Under the ASEAN agreement, air routes between capital<br />
cities of member countries will be liberalised first. This will<br />
gradually be expanded to other cities by 2015, making the<br />
entire region fully liberalised.<br />
MAS chief executive,<br />
Idris Jala: been preparing<br />
for liberalization for<br />
some time<br />
consolidation partner, as SIA has done, and<br />
then wait for the wind to change direction.<br />
Consolidation can take numerous forms,<br />
they point out, from outright purchase<br />
and merger, to cross-equity investment<br />
aimed at strengthening partnerships. “I see<br />
consolidation, or a series of these strategic<br />
deals, as being a fairly constant flow from<br />
now on,” said Negline.<br />
UBS’s Horth agreed. “I don’t think it will<br />
be big bang, but you will see more things like<br />
the SIA-CEA deal. Fully fledged mergers<br />
are a little more difficult because of national<br />
interest but if you want to take a 10-year<br />
view, anything is possible. If you had asked<br />
10 years ago, was Air France-KLM possible,<br />
most people would have said no.”<br />
Although Chew stresses he can’t speak<br />
for his two Star Alliance partners, ANA and<br />
Asiana, he sees their equity swap as more<br />
symbolic than substantive.<br />
“It serves to cement their relationship,<br />
even though that relationship of codesharing,<br />
lounge facility sharing, is already<br />
being done under the Star umbrella of<br />
partnership,” he said.<br />
“Perhaps they are positioning themselves<br />
for the day when all the barriers come<br />
down.”<br />
Legacy airlines are not alone in eyeing<br />
Jetstar: looking for partners<br />
forms of consolidation. The low-cost sector<br />
is also on the move. <strong>Malaysia</strong>’s AirAsia has<br />
already invested in carriers in Indonesia and<br />
Thailand to extend its brand and recently<br />
moved to take a stake in the Philippine<br />
operator Cebu Pacific. Sources say both<br />
parties wanted the deal, but it foundered<br />
on price.<br />
Jetstar is also sounding out potential<br />
partners. Now that its parent Qantas has<br />
taken a 30% stake in Vietnam’s Pacific<br />
<strong>Airlines</strong>, which is likely to become Jetstar<br />
Vietnam, Jetstar chief executive, Alan<br />
Joyce, has confirmed he is looking at taking<br />
minority stakes in other Asian airlines as<br />
part of an aggressive expansion plan. “We<br />
are talking to a number of different partners<br />
in Asia but there is nothing formal at the<br />
moment,” he said. Under discussion are<br />
investment in airlines in the Philippines,<br />
Indonesia and Thailand.<br />
O v e r a l l , t h e c o n s e n s u s i s t h a t<br />
consolidation will continue to gather pace<br />
within national boundaries, but until there<br />
is a breakthrough in terms of cross-border<br />
investment regulation, airlines will be forced<br />
to forge partnerships in whatever way they<br />
can. Both Chew and Bisignani see the<br />
greatest impediment to change as political.<br />
“There has been progress in some areas<br />
but it has not been quick enough,” said Chew.<br />
“We are a global industry yet we are the only<br />
one, when you compare us to others, where<br />
cross-border ownership and management<br />
control is not permitted. We have one foot in<br />
the 21st century and one foot in the 1940s.”<br />
It may be a mixed picture but Bisignani<br />
believes that after 40 years of nothing<br />
happening, there has been movement over<br />
recent years.<br />
“It is a step approach and we are moving<br />
in the right direction,” he said. “Let’s hope<br />
these steps can move a bit faster over the next<br />
few years.”<br />
14 ORIENT AVIATION JULY/AUGUST 2007
ENVIRONMENT<br />
As airlines worry about public support, IATA chief lays down a bold challenge<br />
Target: zero emissions<br />
By Tom Ballantyne<br />
It’s a tall order, but one vital to the<br />
world’s airlines in their bid to win<br />
over a sceptical public and green<br />
lobby that believes they are among<br />
the world’s worst polluters. As<br />
airline chiefs were told at the annual general<br />
meeting of the International Air Transport<br />
Association (IATA) in Vancouver, the target<br />
must be a pollution-free industry.<br />
Carriers are currently preparing to launch<br />
a green offensive at the annual assembly of<br />
the International Civil <strong>Aviation</strong> Organization<br />
(ICAO) in September, vowing to defend their<br />
record whenever and wherever possible as<br />
fears grow they are losing the public relations<br />
battle.<br />
But they have also accepted the reality<br />
that rapid industry expansion will mean<br />
more environmental pressures over coming<br />
decades and that they must work even harder<br />
to find solutions.<br />
“A growing carbon footprint is no longer<br />
politically acceptable for any industry,”<br />
IATA director general, Giovanni Bisignani,<br />
told members.<br />
“Climate change will limit our future<br />
unless we change our approach from<br />
technical to strategic. Air transport must aim<br />
to become an industry that does not pollute.”<br />
That meant zero emissions, he said.<br />
Bisignani laid it on the line for aircraft<br />
and engine manufacturers as well as fuel<br />
producers.<br />
“The aerospace industry must build a<br />
zero emissions aircraft in the next 50 years.<br />
I challenge the U.S., Europe, Canada, China,<br />
Brazil, Russia and Japan to coordinate basic<br />
research on a zero emissions aircraft and then<br />
compete to develop products based on this<br />
research,” he said.<br />
Clean fuel was also critical. “Governments<br />
have cut alternative fuel funding while oil<br />
companies are busy counting the US$15<br />
billion in increased refinery margins that<br />
the airline industry is now paying,” said<br />
Bisignani.<br />
“The first target is to replace 10% of fuel<br />
with low-carbon alternatives in the next 10<br />
‘A growing carbon footprint<br />
is no longer politically<br />
acceptable for any industry’<br />
Giovanni Bisignani<br />
Director General<br />
IATA<br />
years. And the second is to begin developing<br />
a carbon-free fuel from renewable energy<br />
sources. It’s time for governments and<br />
the oil industry to make some serious<br />
investments.”<br />
Significantly, IATA is already working<br />
on “Project Green”, designed to help airlines<br />
implement green strategies across the<br />
business by introducing global best practice<br />
environmental management systems. “This<br />
will place environment alongside safety and<br />
security as a core promise to two billion<br />
airline passengers,” said Bisignani.<br />
While many airline executives expressed<br />
scepticism a pollutant-free industry is<br />
possible in the foreseeable future, there<br />
was little disagreement that carriers had to<br />
‘We have passed the stage of<br />
being in denial. We have been<br />
silent in our success and now<br />
we have a reputation crisis’<br />
Chew Choon Seng<br />
Chief Executive<br />
Singapore <strong>Airlines</strong><br />
act and raise the environmental issue to a<br />
priority level.<br />
Most accept that, one way or another,<br />
they will face inclusion in emission trading<br />
schemes.<br />
And, although airlines do not entirely<br />
support such schemes, they agree they are<br />
preferable to the haphazard imposition of<br />
carbon taxes.<br />
Much of the aviation environmental<br />
debate has centred on Europe over the past<br />
few years, but now Asian carriers are raising<br />
their profiles.<br />
Singapore <strong>Airlines</strong> chief executive,<br />
Chew Choon Seng, told the meeting: “We<br />
have passed the stage of being in denial ...<br />
we have been silent in our success and now<br />
we have a reputation crisis.”<br />
Chew and <strong>Malaysia</strong> <strong>Airlines</strong> chief<br />
executive, Idris Jala, warned there was<br />
a danger that, if Asian airlines did not<br />
participate fully in the environment debate,<br />
carriers could end up being forced into<br />
emissions trading schemes dictated from<br />
elsewhere.<br />
IATA is developing an industry plan<br />
for trading emission credits and wants any<br />
trading system to be global, to reflect the<br />
global nature of the industry.<br />
The topic will be a central theme of the<br />
ICAO assembly in Montreal in September.<br />
“The challenge is for ICAO and its 190<br />
member states to deliver a global emissions<br />
trading scheme that is fair, effective and<br />
available for all governments to use on<br />
a voluntary basis,” said Bisignani “The<br />
September ICAO assembly is an opportunity<br />
that cannot be missed.<br />
“The relevance of ICAO depends on its<br />
ability to deliver a global solution on this<br />
important issue.”<br />
Bisignani made no excuses for aiming<br />
high and talking about a pollution-free<br />
industry, despite the fact aviation has already<br />
improved fuel efficiency by 70% and will add<br />
25% to today’s figures by 2020 thanks to fleet<br />
modernization.<br />
“We can see potential building blocks<br />
for a carbon-free future ...a green industry<br />
is absolutely achievable,” he said.<br />
16 ORIENT AVIATION JULY/AUGUST 2007
AIR TRAFFIC MANAGEMENT<br />
BREAKTHROUGH<br />
Qantas tests groundbreaking landing system; major cost savings expected<br />
By Tom Ballantyne<br />
Air por ts and airlines are<br />
queuing up to acquire a new<br />
precision landing system<br />
recently i nt roduced i n<br />
Australia, which will help<br />
reduce the 12% inefficiencies in global air<br />
traffic management identified by the United<br />
Nations and slash the US$13.5 billion of<br />
wasted jet fuel every year.<br />
The system, developed by Honeywell<br />
and currently operated by Airservices<br />
Australia, is being pioneered by Qantas<br />
Airways.<br />
“We crossed the threshold with Qantas<br />
and it just opened up the floodgates,” said<br />
Keith MacPherson, manager of global<br />
navigation satellite systems (GNSS)<br />
for Airservices Australia, the country’s<br />
aviation regulator. The breakthrough<br />
involves use of a new precision landing<br />
system called GLS, or Global Positioning<br />
Satellite Landing System, that will<br />
dramatically change approach and<br />
departure infrastructure at airports over<br />
the next decade.<br />
Unveiled by Qantas, which has<br />
been using the system in flight tests for<br />
months, GLS will ultimately make the<br />
existing instrument landing system (ILS)<br />
redundant with huge environmental and<br />
operating cost benefits.<br />
“This is a new precision landing<br />
system using satellite technology to<br />
make landings more efficient, accurate and,<br />
ultimately, environmentally friendly,” said<br />
Qantas chief pilot, Captain Chris Manning,<br />
when unveiling details of GLS in Sydney<br />
where it first went into operation.<br />
Honeywell, which provided the groundbased<br />
augmentation system (GBAS)<br />
equipment needed to make a GLS work,<br />
and Airservices Australia, which installed<br />
and now operates it, are working together in<br />
a joint venture bidding for the contract for<br />
two systems for Mumbai and New Delhi<br />
airports in India.<br />
The two have already secured a deal<br />
to install GLS at Tianjin, south west of<br />
Beijing.<br />
“They want to put it in within the next 12<br />
to 18 months, get a feel for it and get the pilots<br />
to use it before they go to a fully operational<br />
system,” said MacPherson.<br />
“Right now we have 127 airports from<br />
Saudi Arabia right through to the Pacific<br />
islands working with us. Saudi Arabia is<br />
planning for 2009. After Mumbai and New<br />
Delhi, India has 34 more airports it wants to<br />
do. China has 134. Hong Kong is talking to<br />
‘We crossed the<br />
threshold with<br />
Qantas and it<br />
just opened up<br />
the floodgates’<br />
Keith MacPherson<br />
Airservices Australia<br />
us at the moment. <strong>Malaysia</strong> is putting five<br />
systems in by 2009 or 2010. The Philippines<br />
has one going in by 2010. So the ball is well<br />
and truly rolling.”<br />
Why the surge in enthusiasm? “GLS is a<br />
replacement for ILS which has been around<br />
for some 70 years,” said Manning. “It is a<br />
major breakthrough, a major change in what<br />
we do. This is the single biggest gain in the<br />
aviation industry to assist the environment,<br />
other than engine technology.<br />
“GLS provides more accurate and stable<br />
tracking information than conventional<br />
approach systems. It can be coupled to<br />
flexible, curved approach paths providing<br />
more fuel efficient and environmentally<br />
friendly flight paths to the runway.”<br />
Essentially, what GLS does is to allow<br />
aircraft to use global positioning system<br />
(GPS) satellite data for the first time during<br />
landing, something that was not possible<br />
previously because GPS raw data is accurate<br />
only to between 15 and 20 metres and does<br />
not meet the precision landing requirement<br />
of accuracy to at least three metres. The<br />
new GLS system can achieve accuracy to<br />
one metre using a GBAS.<br />
The benefits do not end there. Current<br />
ILS equipment costs around $1 million<br />
each and must be installed at each end of<br />
every runway.<br />
At an airport like Sydney, with three<br />
runways, that means it needs six ILS<br />
systems, which are also costly to maintain<br />
and must be calibrated regularly. A single<br />
GBAS costing some $900,000 can be used<br />
for all runways.<br />
It also provides data for up to 90<br />
approaches within a 23 nautical mile<br />
radius, meaning a single system can<br />
cover all landing approaches in a big city<br />
with a couple of major airports and several<br />
general aviation facilities.<br />
GLS allows for dramatically increased<br />
flexibility, including shorter approach<br />
paths. It also lets airlines manoeuvre more<br />
easily around noise sensitive areas.<br />
Qantas is no newcomer to this kind of<br />
role. In 2003 it was the first airline outside<br />
North America to use GPS capabilities. It<br />
took delivery of the world’s first GLSequipped<br />
aircraft, a B737-800, in May 2005.<br />
Last November it completed the world’s first<br />
GLS landing in revenue service.<br />
At present it operates five to 10 GLS<br />
flights a day and about a third of its B737<br />
fleet is now GLS equipped. The airline’s new<br />
B787s, which begin arriving next year, will<br />
all come with GLS, as will its A380s. The<br />
system is expected to be fully operational at<br />
Sydney by August or September next year<br />
and will then be rolled out at other major<br />
Australian airports.<br />
18 ORIENT AVIATION JULY/AUGUST 2007
CARGO UPDATE<br />
Asiana thinks big<br />
By Charles Anderson<br />
It’s tough sharing your home with the<br />
world’s largest air freight operator,<br />
but figures detailing Asiana<br />
<strong>Airlines</strong>’ recent performance show<br />
that while it is unlikely to ever<br />
overtake Korean Air (KAL), the country’s<br />
second carrier doesn’t plan to stay in big<br />
brother’s shadow for long.<br />
Its overall freight load factor (FLF) is<br />
a healthy 80%, topping the average 64.4%<br />
for the region’s carriers and is a few points<br />
above KAL, according to Association of Asia<br />
Pacific <strong>Airlines</strong> (AAPA) figures.<br />
The f ig ure is surprisingly good<br />
considering the capacity<br />
coming into the North Asian<br />
market. And a freight tonne<br />
kilometre (FTK) increase of<br />
19% last year was also the best<br />
in the region.<br />
The plan was to reach US$1<br />
billion in freight revenue this<br />
year, raise freight’s contribution<br />
to the carrier’s overall profit<br />
from 31% to 32% and to<br />
be among the top 10 cargo<br />
carriers in the International<br />
Air Transport Association’s<br />
FTK table by 2010, said an<br />
Asiana spokesman.<br />
KAL currently tops the<br />
IATA list after knocking<br />
Lufthansa German <strong>Airlines</strong> off its perch<br />
in 2004. Asiana is 20th in the table, a good<br />
position for a carrier that started full freight<br />
operations with a single B747 in 1994.<br />
The fleet has grown considerably since<br />
then and is about to expand again. Three<br />
B747 combis, being converted into full<br />
freighters by Israel Aerospace Industries’<br />
Bedek <strong>Aviation</strong> Group, are being added to<br />
eight existing B747Fs and one B767F this<br />
year as routes are expanded. Bellyhold cargo<br />
makes up some 43% of the 900,000 tonnes<br />
carried annually to 23 cities in 14 countries<br />
on 25 routes.<br />
India, the Middle East and Latin America<br />
have been earmarked as areas with promise<br />
to add to existing services to North America.<br />
Transpacific business remains the most<br />
important taking up 40% of Asiana’s freight<br />
totals, with intra-Asia 30% and Europe 20%.<br />
But it’s time to look elsewhere as well.<br />
“We are definitely considering expanding<br />
our routes to India in the future. In our mid<br />
and long-term strategy we plan to start<br />
service there with connections to China and<br />
Europe,” said the spokesman. But first will<br />
come a major boost in freighter services to<br />
main Chinese cities from Korea, which will<br />
see flights increased from three to 15 a week<br />
by the end of the year.<br />
After that there are plans to set up a hub in<br />
an as yet unnamed mainland city – research to<br />
establish the city is going on at present – and<br />
once fifth freedom rights are secured Asiana<br />
Asiana <strong>Airlines</strong>: bellyhold cargo accounts<br />
for 43% of total freight carried<br />
will to form a joint venture with a domestic<br />
operator.<br />
Korean Air already has an agreement in<br />
place with state logistics provider, Sinotrans,<br />
to form a Chinese freight operation, while<br />
Lufthansa Cargo, Singapore <strong>Airlines</strong>, China<br />
<strong>Airlines</strong> and EVA Air also have partnerships<br />
in place.<br />
A good portion of the China goods will<br />
be flown to Incheon airport in Seoul, through<br />
which Asiana transships 52% of its freight.<br />
This figure should grow along with the<br />
airport itself, which has ambitious plans<br />
for further expansion of its cargo facilities,<br />
especially in the transshipment area.<br />
But with the Korean won gaining in<br />
strength the dependence on shipping cargo<br />
for domestic companies such as Samsung<br />
and LG Electronics is causing some concern.<br />
“Their relative importance has increased. We<br />
are trying to lower this high reliance and<br />
we are looking for niche markets in order<br />
to accomplish a higher profit,” said the<br />
spokesman. “This should help us with our<br />
future balance of payments strategy.”<br />
Asiana is also moving away from a<br />
dependency on trunk and feeder routes.<br />
“That system doesn’t guarantee satisfactory<br />
results,” he said.<br />
Instead the carrier is developing roundthe-world<br />
flights and what it calls “absorption<br />
routes” – connecting a number of different<br />
places – which should attract more express<br />
cargo.<br />
Such tactics might also<br />
help solve the inbound cargo<br />
dilemma that all Asia-Pacific<br />
carriers face when aircraft head<br />
out of the region with heavy<br />
loads – IT products, electronics<br />
and textiles in Asiana’s case –<br />
but return virtually empty. So<br />
too could incentives being<br />
offered to global forwarders<br />
who hold the key to solving the<br />
problem, said the spokesman.<br />
Otherwise, Asiana tries to<br />
bring back specialist items<br />
such as cherries, tuna, flowers<br />
and seafood from Nor th<br />
America.<br />
Last year load factors to<br />
North America from Korea topped 85%<br />
and to Europe they edged above 80%<br />
thanks to delivery guarantees for specific<br />
cargo arranged in advance, said the carrier.<br />
Elsewhere, the picture wasn’t quite so healthy<br />
with services to China recording 62% and<br />
Japan 56%.<br />
Meanwhile, Asiana is looking to join<br />
regional and other alliances to help it beat<br />
the competition.<br />
Last year, it agreed to cargo code-sharing<br />
with Japan’s All Nippon Airways on all<br />
freight routes between the two countries,<br />
which added four major Japanese cities to<br />
its network.<br />
That cooperation will likely be<br />
strengthened by the equity swap between<br />
the two carriers announced in June.<br />
20 ORIENT AVIATION JULY/AUGUST 2007
COVER STORY<br />
The recovery of <strong>Malaysia</strong> <strong>Airlines</strong> from<br />
near bankruptcy to profitability in less than<br />
18 months is an object lesson in hope for<br />
struggling carriers. Idris Jala, the former<br />
oil industry executive who has become the<br />
Kuala Lumpur flag carrier’s white knight,<br />
explained to TOM BALLANTYNE how<br />
he has achieved the near impossible.<br />
Jala works<br />
his magic<br />
It may not be pretty, but <strong>Malaysia</strong><br />
<strong>Airlines</strong> (MAS) managing director<br />
Idris Jala’s style is damned effective.<br />
MAS was on the ropes after losing<br />
a record RM1.3 billion (US$377.9<br />
million) in 2005 when he was headhunted<br />
to perform miracles and turn the airline<br />
around.<br />
The former Shell oil executive took off<br />
the kid gloves and started to work hard and<br />
fast ... and a little dirty. In a bid to reduce<br />
costs dramatically and improve yields, he<br />
slashed jobs and cut routes. He exposed<br />
malpractices by introducing a ‘whistle<br />
blowers’ programme.<br />
Problem solving? “We stick people in<br />
a room and they stay there burning the<br />
midnight oil until it is solved,” said the<br />
48-year-old boss.<br />
And the result of this tough love? Some<br />
would say a miracle. In just 18 months MAS<br />
has been transformed from a basket case<br />
with record losses to an airline forecasting<br />
anything up to a RM 700 million profit this<br />
year.<br />
There are no simple answers about how to<br />
revive a struggling state-owned international<br />
airline. But Jala needed to find them.<br />
And he realised one thing very quickly:<br />
any hope of success hinged on two critical<br />
issues, reducing costs and increasing yields.<br />
To achieve the first Jala did the expected.<br />
He set out on a relentless drive to re-engineer<br />
the business, trim expenses across the board,<br />
increase productivity and rationalize the<br />
network.<br />
To tackle the second he did the unexpected.<br />
In an industry heavily reliant on sophisticated<br />
information technology systems to cope with<br />
every aspect of the business, he turned off<br />
MAS managing<br />
director, Idris Jala:<br />
has turned the airline<br />
around in 18 months<br />
24 ORIENT AVIATION JULY/AUGUST 2007
the computer that runs the carrier’s pricing<br />
structure and seat inventory and did it his<br />
way.<br />
Why? Because Jala had a theory the<br />
sophisticated network revenue management<br />
systems used by airlines to cope with the<br />
industry’s incredibly complex fare structure<br />
were perpetuating low yields.<br />
“There is probably no other industry<br />
anywhere in the world that has a pricing<br />
mechanism as complex as the airlines,” said<br />
Jala. “I come from the oil business and no<br />
way is it anywhere near as complex as the<br />
airlines’ [price structure]. If you have 118<br />
routes, as we do, there are something like<br />
2.5 million fare permutations and these are<br />
changing on a daily basis.”<br />
That is why, he explained, every<br />
airline today runs its pricing structure and<br />
seat inventory through sophisticated IT<br />
systems.<br />
Jala backed his judgement, forming<br />
a team whose job was to take the system<br />
off line and produce massive spreadsheets<br />
covering every route the carrier operated.<br />
They had to look at 2.5 million fares on a<br />
daily basis, compare them with competitors<br />
and manually adjust them to ensure they<br />
were competitive.<br />
“This was a massive and very detailed<br />
piece of work. I think the reason we are<br />
seeing increases in yield is not because we<br />
found a simple way to do it, but just by hard<br />
work,” said Jala.<br />
The proof was in the bottom line.<br />
When Jala took the helm, passenger<br />
yields were 22.6 sen (US cents 6.5)<br />
per revenue passenger kilometre<br />
(RPK). At the end of September<br />
last year they had risen to 25.3 sen<br />
per RPK. And by the end of the first<br />
quarter this year (March 31) they had<br />
reached 26.1 sen.<br />
“Yields have been our greatest<br />
improvement in the past 18 months.<br />
Every quarter they have risen with a<br />
total increase of 27% in yield. I think<br />
very few airlines can generate that<br />
kind of increase in such a short period<br />
of time. We think there is still scope<br />
for raising it further,” said Jala.<br />
But improving yields was only<br />
part of the solution. In 2005, MAS<br />
lost RM1.3 billion in just nine months<br />
(it had shortened its financial year<br />
because it was switching to a calendar<br />
fiscal year in 2006).<br />
“This company had a very, very<br />
tough time in 2005. We had a cash<br />
Blowing the whistle<br />
One innovation Jala introduced from his previous company would send<br />
shivers down many a spine, but the MAS boss makes no apologies – a<br />
whistle blower programme.<br />
As Jala explains, the idea is for the programme to provide a “confidential internal<br />
channel for employees to raise their concerns about malpractices, irregularities<br />
and negligence affecting MAS”.<br />
“[In the beginning] we had about 100 whistle blower cases. We have certainly<br />
unearthed a lot of cases of malpractice and we have issued warning letters to<br />
staff that were involved. We also had contracts that were renegotiated as a result<br />
of this,” said Jala.<br />
“The good news is that people now know there is an opportunity [to report<br />
complaints] other than through normal channels, that you can do it anonymously<br />
via the whistle blower policy. It is a very important deterrent to malpractices.<br />
“When I first joined there were a lot of poison pen letters. We had them almost<br />
every day for the first three months. We don’t have them today. And there is less<br />
rumour circulating, although you can never remove that entirely.”<br />
crisis. We felt if we didn’t change the way<br />
we ran the business we would run out of<br />
cash and go bankrupt. It was not a funny<br />
matter,” he said.<br />
By February last year, just three months<br />
after taking control, Jala had drawn up<br />
a business plan aimed at reversing the<br />
carrier’s financial performance to the tune<br />
of RM1.1 billion by the end of the year. “That<br />
comprised RM710 million from revenue<br />
and yield improvement and another RM370<br />
MASKargo: record profits last year<br />
million from cost reduction, to reduce the<br />
loss to [an estimated] RM620 million,” said<br />
the chief executive.<br />
“At the time people didn’t believe we<br />
could swing this in a year because the share<br />
price fell and languished at two ringgit 60<br />
sen (76 US cents) for six months. But we<br />
relentlessly monitored our profit and loss (P<br />
& L) performance. In fact, we monitored the<br />
P & L and the cash flow on a daily basis and<br />
there are not many companies that do that.”<br />
In the end, despite rising fuel<br />
prices and higher aircraft leasing<br />
costs, Jala’s plan exceeded all<br />
expectations. The estimated loss<br />
of RM620 million loss was slashed<br />
further to RM136 million. Today, the<br />
share price is around six ringgit.<br />
MAS beat all its quarterly and<br />
full year targets. This, said Jala,<br />
was down to yield improvement, a<br />
RM973 million increase in revenue<br />
and a RM665 million reduction in<br />
costs. In the year prior to his arrival,<br />
MAS’s costs had ballooned 50%.<br />
By the end of the third quarter<br />
last year MAS had moved into<br />
the black recording a net profit of<br />
RM240 million to September 30.<br />
And the profits have continued to<br />
flow onto the balance sheet. There<br />
was income of RM121 million in<br />
the fourth quarter, which reduced<br />
the loss for the full year to RM133.8<br />
million. The good times continued<br />
this year with a first quarter profit of<br />
RM133 million.<br />
JULY/AUGUST 2007 ORIENT AVIATION 25
COVER STORY<br />
MAS puts big focus on fuel hedging<br />
Like most airlines, <strong>Malaysia</strong> <strong>Airlines</strong> is keeping a close<br />
watch on fuel consumption. Little wonder. Its fuel bill<br />
rose 25.1% last year to US$1.5 billion.<br />
Keeping it in check is a big focus at the airline and last month<br />
Jala announced the carrier has now hedged 61% of its 2007 fuel<br />
needs at an assumed price of US$60 a barrel of crude oil to protect<br />
itself from volatile jet fuel prices. The company has also hedged<br />
18% of its needs for 2008.<br />
Indeed, MAS has gone as far as bringing in outside advice<br />
to assist it gauge its hedging requirements. In May, it contracted<br />
U.S.-based SunGuard’s Kiodex to better help it manage earnings<br />
volatility caused by changes in fuel prices.<br />
Kiodex provides consumers of energy, such as airlines, with<br />
a business process to help manage energy-price risk, design<br />
financial strategies and comply with best practice financial<br />
reporting and accounting policies.<br />
Longer term the airline is also moving speedily to upgrade its<br />
fleet with more fuel-efficient jets.<br />
It operates a fleet of 79 jets: 11 B747-400s, 17 B777-200s, 11<br />
A330-300s, three A330-200s and 37 B737-400s. Jala has already<br />
placed requests with Boeing and Airbus for proposals on 55 new<br />
narrow-body jets that will allow it to phase out its B737-400<br />
fleet by 2014. While he won’t discuss details of wide-body<br />
requirements, Jala told <strong>Orient</strong> <strong>Aviation</strong> MAS will be ready to<br />
make an announcement within two months.<br />
“We want to have fewer types of aircraft to reduce maintenance<br />
and pilot costs. And we want to own some aircraft, not lease all<br />
of them. Leasing gives you flexibility to change while owned<br />
aircraft can be deployed on the core network,” said the managing<br />
director.<br />
MAS is currently negotiating sale and lease back on 18 of<br />
its aircraft. “It is very tricky. We wouldn’t have done it last year<br />
[because lease rates were high], but this is the right time. It will<br />
help us contain increases,” added Jala.<br />
Jala is now confident MAS can achieve<br />
what he terms a “stretched target” of between<br />
RM300 million and RM700 million in net<br />
profit this year.<br />
So what was wrong with MAS in the<br />
first place? “When I came to this job<br />
on December 1, 2005, we had a quick<br />
prognosis of the problems and we identified<br />
four key areas. The first was low yield, the<br />
second an inefficient network, the third low<br />
productivity as a result of too many staff and,<br />
fourthly, poor control over costs,” said Jala.<br />
“Many airlines that are losing money have<br />
these same problems.”<br />
Jala moved quickly cutting routes that<br />
were “bleeding cash”, particularly direct<br />
services from secondary <strong>Malaysia</strong>n centres<br />
to overseas destinations.<br />
He needed to build feeder traffic into<br />
major MAS trunk routes and not being a<br />
member of an alliance, realised this would<br />
have to be done through individual bilateral<br />
agreements with other carriers.<br />
With the need for speed in mind, he told<br />
potential partners deals had to be finalised<br />
within three months.<br />
Today, the result is an array of code-share<br />
pacts that are already paying dividends.<br />
MAS has signed agreements with South<br />
African Airways, Gulf Air, Alitalia, KLM,<br />
Russia’s Transaero <strong>Airlines</strong> and Virgin Blue<br />
in Australia, all adding weight to the carrier’s<br />
hub and spoke network.<br />
Jala said discussions were now underway<br />
with two more airlines, one in India and one<br />
in China, for similar agreements. “If you don’t<br />
<strong>Malaysia</strong> <strong>Airlines</strong>: could order as many as<br />
110 new aircraft to replace an ageing fleet<br />
have the feeder traffic into your main trunk<br />
routes it is difficult to get the load factor on<br />
trunk routes and the right yield,” he said.<br />
Looking to the future, the airline has<br />
completed a full analysis of how its network<br />
should look by 2011 and the type of aircraft<br />
it will require. Aircraft manufacturers have<br />
been asked to put forward a proposal for 55<br />
narrowbody jets. A decision on requirements<br />
for widebody aircraft will be made in the next<br />
two months.<br />
The staff issue was “a very painful<br />
process, but we had to act quickly”, said Jala.<br />
In 2006, staff numbers were reduced from<br />
22,700 to 19,700. Between 600 and 700 more<br />
jobs will go this year through retirement and<br />
natural attrition.<br />
The airline is also focussing on<br />
parameters like on-time performance and<br />
customer service.<br />
MAS has widened its customer reach. In<br />
January, it broke away from the traditional<br />
approach of selling tickets only through<br />
travel agents who had signed an agreement<br />
with the airline. “Now any IATA approved<br />
and registered travel agent can sell our<br />
tickets. That’s what is called opening up the<br />
store front,” said Jala.<br />
The chief executive is looking for more<br />
income from his various divisions, such as<br />
cargo and maintenance, repair and overhaul<br />
(MRO). “We want more third party work<br />
for our MRO division. When I arrived at<br />
MAS third party revenue was about RM100<br />
million. Last year, we more than doubled<br />
that figure to RM220 million. This year we<br />
are challenging our team to deliver revenue<br />
of RM300 million with the same number<br />
of people, or perhaps less because of the<br />
manpower reduction. We are on track to<br />
achieve that target,” he said.<br />
In June, MAS established a new<br />
26 ORIENT AVIATION JULY/AUGUST 2007
engineering subsidiary, <strong>Malaysia</strong> Aerospace<br />
Engineering.<br />
“We are still working on how cargo can<br />
become more profitable. However, last year<br />
our freight division made a record profit [it<br />
exceeded its RM150 million target], much of<br />
that coming from belly business rather than<br />
freighters. The challenge for our cargo folks<br />
is to make sure we make money, or at least<br />
break even, from the freighter business rather<br />
than relying on belly business to make the<br />
lion’s share of profits,” said Jala. The airline<br />
has six freighters, four B747-200s and two<br />
B747-400s.<br />
Last month, Shahari Sulaiman was<br />
appointed the new managing director of<br />
MASkargo.<br />
In recent months MAS has established<br />
a low-cost carrier, Firefly. It operates to<br />
six destinations: four domestic and two<br />
international (Koh Samui and Phuket in<br />
Thailand), with just two Fokker F50 aircraft.<br />
“By end of this year we will be ready<br />
to declare what we want to do with Firefly,<br />
but based on the start-up experience I have<br />
confidence that we will grow this business.”<br />
The airline is also to set up a new<br />
subsidiary, MASWings, to operate rural<br />
air services in <strong>Malaysia</strong> from October (see<br />
separate story).<br />
And the battle against costs is continuing.<br />
“We are looking for ways to structurally<br />
reduce costs. Many of the costs we took out<br />
last year were what I call low hanging fruit.<br />
The big numbers will have to be dealt with<br />
Firefly: low-cost carrier recently launched by MAS<br />
structurally, which means addressing the<br />
way we manage the business,” he said.<br />
Jala insists on constant communication<br />
with staff. He holds quarterly “engagement<br />
sessions” with employees – the carrier has 47<br />
unions. He also issues regular reports on tape<br />
to all staff on the progress of his business<br />
rescue plan.<br />
When it comes to problem solving, Jala<br />
uses an analogy with a popular Eagles song.<br />
“We stick people in a room to find a solution.<br />
It’s like a line from the song Hotel California:<br />
you can check out any time you want, but you<br />
can never leave. They stay there burning the<br />
midnight oil until the problem is solved,”<br />
he said.<br />
Jala has a relatively simple philosophy<br />
for the future of MAS: “We will be quite<br />
prudent in our growth. Most of our new<br />
aircraft will be for replacement. If the<br />
industry grows at 6%, we will grow at 6%.<br />
We won’t pretend we can grow at 40% or<br />
60%,” he said.<br />
Jala does worry, however, about airlines<br />
that throw capacity into the market. “Business<br />
is all about supply and demand. If you put in<br />
excess capacity, margins will come down.<br />
We will not be like that. We do not want to<br />
conquer the world at MAS. We want to hold<br />
our place under the sun and make sure it is<br />
profitable for ourselves,” he said.<br />
Jala is not one to rest on his laurels,<br />
or dream about what most airlines would<br />
consider out of reach. “The impossible first<br />
paradox ambition for MAS would be to<br />
operate a five star airline with LCC costs. If<br />
you can do that, it would be fantastic. That’s<br />
why I want to go down the path of continuing<br />
to reduce our costs while improving our<br />
customer proposition.”<br />
Country routes fly back to MAS<br />
<strong>Malaysia</strong> <strong>Airlines</strong> (MAS) was only too happy to<br />
hand over its loss-making rural air services<br />
to AirAsia-linked Fly Asian Xpress (FAX)<br />
late last year. Now, just six months later, it<br />
has opted to take them back following talks<br />
between the two airlines and the <strong>Malaysia</strong>n government.<br />
The move comes after months of complaints from rural air<br />
travellers about poor service from FAX. The carrier’s chief executive,<br />
Azmi Razali, blamed the need for an extensive overhaul of its fleet<br />
of seven Fokker 50s for reduced services.<br />
MAS chief executive, Idris Jala, agreed to resume the rural flights<br />
by October 1 as long as the government agreed to subsidise the<br />
loss-making routes as it had with FAX and that the aircraft, which<br />
MAS handed to FAX to start the services and will now return to the<br />
flag carrier, were operational.<br />
FAX took over the routes under a government-imposed<br />
rationalization of domestic air services, which required a carrier<br />
to serve outlying areas as a public service.<br />
There is another good reason why Jala wants to add the rural<br />
services to MAS’s network.<br />
“When we looked at the rural air service we could see it was<br />
important that they must be interlined. LCCs don’t have interline<br />
capability so it has been a major problem selling tickets on some of<br />
the routes,” said Idris.<br />
Contrary to some early reports, he said the rural services would<br />
not be operated by MAS’s new LCC subsidiary Firefly, even though<br />
it also flies Fokker F50s.<br />
“I don’t want to dilute the business model we have at Firefly,” said<br />
the MAS boss. “It is an airline that will stand on its own, will compete<br />
and will make money. I don’t want to sacrifice that objective.<br />
“Instead, we have created a separate subsidiary company,<br />
MASWings, which will start with a clean sheet.”<br />
Meanwhile, Jala is taking note of AirAsia’s plans to launch new<br />
long-haul subsidiary, AirAsia Express. “I think the jury is still out<br />
on long-haul, low-cost,” he said. “There is only one real experiment<br />
in operation today and that is Oasis out of HK. If you look at yields<br />
they will show that the shorter the route, the higher the yield and the<br />
longer the route, the lower the yield.”<br />
JULY/AUGUST 2007 ORIENT AVIATION 27
INDIA<br />
With a new livery in hand<br />
and legal formalities<br />
nearing completion,<br />
the new Air India,<br />
wh ich br i ngs t he<br />
country’s two state-owned carriers Air India<br />
and Indian under one roof, is set to fly as a<br />
single unit for the first time this month.<br />
And within 18 months up to 20% of its<br />
shares will be sold to the public, chairman<br />
and managing director, Vasudevan<br />
Thulasidas, has told <strong>Orient</strong> <strong>Aviation</strong>.<br />
Speaking in Vancouver, where he was<br />
attending the International Air Transport<br />
Association’s (IATA) annual general meeting<br />
last month, Thulasidas expressed confidence<br />
the merged airline would “unleash hidden<br />
energies” and present opportunities for<br />
significant network expansion.<br />
The merger had progressed with little<br />
difficulty, he said. “Maybe it has taken a<br />
little longer than we would like. There have<br />
been some problems with some of the unions,<br />
but not about merging. They wanted certain<br />
things to be attended to before the merger,<br />
such as some wages revision.<br />
“The greatest challenge will be integrating<br />
the people, the different cultures of the two<br />
airlines. But at the end of the day I expect the<br />
integration process will go through.<br />
“There will be some difficulties here and<br />
there, but the sense I get talking to unions for<br />
the past year is they are all largely in support<br />
of the merger because they feel now that it<br />
is very good for the two airlines, for their<br />
survival.”<br />
Thulasidas explained while the corporate<br />
merger was complete, full integration of<br />
manpower, fleet, network and schedules<br />
would take from 18 months to two years.<br />
The company will operate several<br />
strategic business units. Air India’s existing<br />
low cost carrier, Air India Express, will<br />
continue on domestic and regional routes,<br />
a new Air India Cargo has been set up and<br />
there will be ground handling, as well as<br />
maintenance, repair and overhaul (MRO)<br />
divisions.<br />
He also responded to criticism from<br />
some analysts that the merger would fail to<br />
produce major benefits because there would<br />
be no job losses.<br />
“Our object with the merger was not to<br />
rationalize manpower, but to drive benefits<br />
out of the synergy in combining a domestic<br />
network with an international network,” said<br />
Thulasidas. “The complementary nature of<br />
the merger comes out of that synergy. As<br />
far as manpower is concerned, being the<br />
Newly merged<br />
Air India to sell<br />
shares to public<br />
The carrier’s chairman and chief executive,<br />
Vasudevan Thulasidas, tells TOM BALLANTYNE<br />
why the merger with Indian makes sense<br />
‘The greatest challenge will<br />
be integrating the people, the<br />
different cultures of the two<br />
airlines’<br />
Vasudevan Thulasidas<br />
Chairman and chief executive<br />
Air India<br />
sort of companies we were, public sector<br />
companies, the reduction of manpower or<br />
compulsory retirement is not something<br />
that we could hope to do.<br />
“But we have been able to achieve quite<br />
a bit of reduction by other means<br />
such as natural attrition.<br />
We also had a voluntary<br />
retirement scheme. With the<br />
two together we were able to<br />
reduce Air India’s manpower<br />
by more t h a n 3,0 0 0.<br />
Simultaneously we increased<br />
the fleet size, almost doubling<br />
it, so effective reduction is<br />
much more than that. We are<br />
adding a large number of new aircraft and we<br />
plan to keep the manpower under check.”<br />
Between them, Air India and Indian have<br />
111 aircraft on order – 68 and 43 respectively<br />
– for delivery through to 2011. The joint<br />
entity will receive its first B777-200LR<br />
this month, opening the way for non-stop<br />
services to New York. The merged carrier is<br />
also looking at new services to South Africa,<br />
Australia and China.<br />
Overall, Thulasidas, who is also<br />
chairman of the Federation of Indian<br />
<strong>Airlines</strong>, welcomed the current consolidation<br />
occurring in the country’s aviation industry,<br />
including the takeover of Sahara <strong>Airlines</strong> by<br />
Jet Airways and the purchase of a major stake<br />
in Air Deccan by Kingfisher <strong>Airlines</strong>.<br />
“In India a lot of airlines came into the<br />
market and there was a lot of competition,<br />
with a lot of money being lost by most<br />
airlines. That’s not very desirable. Ultimately<br />
the passenger is not going to benefit from<br />
this,” he said.<br />
“If there is consolidation and you are able<br />
to make better use of this new energy that has<br />
been unleashed, but in a more controlled or<br />
directed fashion, then it is better for all, for<br />
the airlines, passengers, the government and<br />
the country as whole. What is happening is<br />
good.”<br />
Next<br />
<strong>Orient</strong> <strong>Aviation</strong> India<br />
October 2007<br />
28 ORIENT AVIATION JULY/AUGUST 2007
AIR TRAFFIC MANAGEMENT<br />
As dramatic traffic growth outstrips the state-run systems ...<br />
India looks at private options<br />
By Tom Ballantyne<br />
Faced with the possibility<br />
that bullish projections of<br />
t raf f ic g row t h could be<br />
underestimated, India has<br />
asked overseas air navigation<br />
service providers (ANSPs) to help it decide<br />
whether to commercialise elements of its air<br />
traffic control (ATC) operations or leave the<br />
system in the government’s hands.<br />
The plea came from Raghu Menon,<br />
financial adviser to the Ministry of Civil<br />
<strong>Aviation</strong> and one of the country’s most senior<br />
civil servants, at a major air traffic control<br />
conference in Cochi in Southern India.<br />
He told the annual general meeting and<br />
chief executives’ conference of the Civil Air<br />
Navigation Services Organization (CANSO)<br />
that, while long-term forecasts saw Indian<br />
aviation growing at 8% annually to 2025<br />
against a world average of 4.8%, “these<br />
growth projections, impressive as they are,<br />
may have to be all thrown out of the window<br />
if India [is] to realise its true potential.”<br />
Menon, who has worked in government<br />
for 35 years and is a board member of the<br />
state-owned Airports Authority of India<br />
(AAI) which currently handles ATC<br />
operations, was part of the team which<br />
started the liberalization process.<br />
“We went into liberalization mode some<br />
time in 2002-03 and since then we have<br />
been witnessing an unprecedented growth<br />
in air traffic,” said Menon, who also sits on<br />
the board of the newly merged Air India and<br />
Indian.<br />
“Today domestic passenger traffic<br />
is seeing 40% growth and international<br />
traffic is growing at around 15%. Air<br />
transport services have moved away from<br />
public monopolies and today there is fierce<br />
competition in the skies.<br />
“The reality is that with a country of 1.1<br />
billion people, not even 2% to 3% travel by<br />
air. With the Indian economy growing at 8%<br />
and a middle class estimated at 300 million<br />
people, even if 10% of India’s population use<br />
aviation as their preferred means of transport<br />
within the next 15 to 20 years, then all the<br />
India is expecting a major increase in traffic,<br />
putting a strain on airport infrastructure<br />
current projections of growth would have to<br />
be revised.”<br />
Traffic increases provided tremendous<br />
opportunities, but it had also exposed<br />
infrastructure shortcomings, Menon said.<br />
“Airport services, including air navigation<br />
services, are fully stretched today. Upgrades<br />
in technology and requirements of trained<br />
personnel are inevitable. Conditions in<br />
the air and on the ground are hitting both<br />
‘Conditions in the air and on<br />
the ground are hitting both<br />
efficiency and costs’<br />
Raghu Menon<br />
Financial adviser, Ministry of Civil <strong>Aviation</strong><br />
efficiency and costs. These infrastructure<br />
constraints, unless quickly addressed and<br />
appropriately resolved, [could] become a<br />
major impediment to growth,” he warned.<br />
The investment required is huge. Working<br />
on the assumption that for every US dollar<br />
spent on aircraft purchases, 50 cents should<br />
be earmarked for airport infrastructure,<br />
some US$40 billion to $50 billion would be<br />
needed by 2020 to match orders worth $82<br />
billion, said Menon.<br />
A committee was being set up to<br />
formulate an air services master plan to cope<br />
with the expansion. One area of debate was<br />
whether to make air navigation a commercial<br />
proposition or whether it should continue in<br />
the public domain, he said.<br />
“Does commercialization reduce costs<br />
and does it tangibly enhance safety and<br />
efficiency?” asked Menon. “The common<br />
perception, whether right or wrong, is that<br />
commercialization is a synonym for profit<br />
and that everything is measured in terms of<br />
the bottom line. What is profitable is good<br />
and what is not is bad.<br />
“In such a scenario there is a perception<br />
that costs may actually rise steeply after<br />
commercialization, particularly in a country<br />
like India where a large number of airports<br />
are unviable due to inadequate traffic. If this<br />
happens the airlines would stop operating to<br />
such airports owing to unviable ANS [air<br />
navigation services] costs and many airports<br />
might have to close down ... but we want to<br />
enhance air connectivity, not limit it.”<br />
Menon invited CANSO members to<br />
advise the government on where to go next,<br />
stressing that India would consider changes<br />
carefully before implementing them.<br />
“The point is that financial pressures<br />
should not decide policies. It is also worth<br />
considering that despite privatization the<br />
delivery of ANS in a given air space still<br />
remains a national monopoly owing to the<br />
nature of the service,” he said.<br />
“Of course there are many ancillary<br />
services ... like communication that could be<br />
commercialized, but air space management<br />
is essentially a monopoly and will continue<br />
to be so.”<br />
JULY/AUGUST 2007 ORIENT AVIATION 29
NEWS BACKGROUNDER<br />
READY TO ROLL<br />
Boeing bet the future on its B787 Dreamliner and, as the aircraft makes<br />
its public debut this month, it looks certain the U.S. planemaker has hit<br />
the jackpot. TOM BALLANTYNE reports on a Seattle success story.<br />
As Boei ng’s f i r st B787<br />
Dreamliner officially rolls<br />
off the production line at the<br />
Everett plant north of Seattle<br />
this month and makes its<br />
public debut, management knows the jet is<br />
already a phenomenal success.<br />
The order book stood at 634 – and<br />
counting – as <strong>Orient</strong> <strong>Aviation</strong> went to press.<br />
Forty-five customers worldwide have already<br />
made the Dreamliner the world’s fastestselling<br />
commercial airplane ever.<br />
The B787 will begin flying next May<br />
with launch customer All Nippon Airways<br />
(ANA) of Japan.<br />
But anyone wanting to buy one today will<br />
have to wait until 2013 before it is delivered.<br />
That’s the same year Airbus’ rival A350<br />
XWB (Extra Wide-Body) is scheduled to<br />
enter commercial service.<br />
How times have changed. Little more than<br />
three years ago Boeing appeared in turmoil.<br />
Rival Airbus was flying high, its new A380<br />
super jumbo was tagged the breakthrough<br />
airliner of the future and its salesmen were<br />
winning the order book battle, overtaking<br />
Boeing for the first time in market share.<br />
Worse, a proposed new Boeing “Sonic<br />
Cruiser”, which would fly at speeds just<br />
under the sound barrier, had met with a<br />
sceptical reaction from customers. Then, in<br />
April 2004, Boeing launched the Dreamliner.<br />
It proved to be a master stroke.<br />
In retrospect, it was all about timing. The<br />
B787 was introduced in an age of desperate<br />
cost reduction as carriers fought intense<br />
competition, soaring fuel prices and rising<br />
costs in all areas of their business. They<br />
were also beginning to face pressure to<br />
reduce noise and lessen harmful emissions<br />
from their aircraft.<br />
More than half the orders<br />
have come from<br />
Asia-Pacific operators<br />
The B787 was the right jet at the right<br />
time, promising just what airliners wanted.<br />
According to Boeing, it has unmatched fuel<br />
efficiency, using 20% less fuel than today’s<br />
similar sized aircraft.<br />
It travels at a speed similar to today’s<br />
fastest widebodies – Mach 0.85 – and<br />
will carry up to 300 passengers more than<br />
15,000 kilometres (9,375 miles). The jet also<br />
produces 20% fewer CO 2 emissions and has<br />
a 60% smaller noise footprint on take-off and<br />
landing than other airplanes in its size and<br />
range category.<br />
Just as important, it offers more comfort<br />
for passengers as air traffic continues to<br />
boom.<br />
The cabin is pressurised to 6,000 feet<br />
(1,830 metres), rather than the normal 8,000<br />
feet (2,440 metres), making for a more<br />
comfortable environment. The cabin will<br />
also be less dry, keeping humidity at around<br />
15% compared to today’s levels, which can<br />
be as low as 2%. There is also sophisticated<br />
software designed to help the aircraft respond<br />
better to turbulence.<br />
More than half the orders – 302 – have<br />
come from Asia-Pacific operators. Apart<br />
from ANA, orders have been placed for<br />
60 aircraft by China to go to six different<br />
carriers, Qantas Airways is buying 45,<br />
Japan <strong>Airlines</strong> 30, Singapore <strong>Airlines</strong> 20,<br />
Korean Air 20, Jet Airways 10, Air New<br />
Zealand eight, Air Pacific five and Vietnam<br />
<strong>Airlines</strong> four.<br />
Several have taken options on dozens<br />
more, including Qantas which has a further<br />
70 in reserve.<br />
The first 10 of Qantas’ planes will go to<br />
low-cost subsidiary Jetstar International,<br />
which will become the first LCC to use the<br />
new plane.<br />
It is not only airlines that are being lured<br />
by the B787. In May, Hong Kong real estate<br />
30 ORIENT AVIATION JULY/AUGUST 2007
tycoon Joseph Lau ordered a VIP version,<br />
valued at $153 million at list price, from<br />
Boeing Business Jets – the seventh luxury<br />
VIP B787 to be snapped up.<br />
All this is adding to a Boeing recovery<br />
that doesn’t look like ending any time soon.<br />
The B787 was the star of the show when the<br />
company held its annual investor conference<br />
in late May in Chicago. Chief executive,<br />
Jim McNerney, forecast revenue would<br />
rise from $65 billion to around $72 billion<br />
in 2008, underpinned by “sizzling” sales of<br />
its newest jet.<br />
He believed the orders would continue.<br />
“The U.S. and European legacy carriers have<br />
yet to order in any substantial quantities ... so<br />
we don’t see an immediate end to the cycle,”<br />
he told analysts.<br />
For airlines, the economics are one of<br />
the keys to the B787’s success. As much as<br />
50% of the primary structure – including the<br />
fuselage and wing – will be made of carbon<br />
fibre composite, making it less costly to<br />
maintain.<br />
There will also be 98 kilometres of wiring<br />
within the aircraft, far less than the 145<br />
Final assembly began on the first<br />
B787 in May at the Everett plant<br />
kilometres in a B767, again making it easier<br />
for airlines to maintain, as well as leaving<br />
more space to provide bigger overhead bins<br />
for passengers. In-flight entertainment<br />
systems are lighter and more simply wired.<br />
Production has been streamlined, with<br />
major components and the work of installing<br />
such elements as wiring and hydraulics<br />
performed by suppliers scattered around<br />
the world.<br />
Previously, this was all done in Seattle.<br />
It means when the components arrive, they<br />
can simply be “snapped together”, reducing<br />
production costs.<br />
As Boeing prepared to put the first aircraft<br />
on public display, it was still keeping the date<br />
of its first flight under wraps.<br />
Mike Bair, head of the B787 programme,<br />
said there would be about a one-month<br />
window for those flights, starting at the end<br />
of August.<br />
Boeing will deliver 112 aircraft during<br />
the first two years, with final assembly of<br />
each one taking an average three days. Bair<br />
confirmed the company was already working<br />
on plans to pick up the pace.<br />
“’It’s pretty clear that our initial<br />
thoughts about the market demand were too<br />
conservative,” he said. And that may be the<br />
understatement of the decade.<br />
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JULY/AUGUST 2007 ORIENT AVIATION 31
SPECIAL REPORT<br />
<strong>Aviation</strong><br />
Security<br />
U.S. cargo screening proposal on passenger planes will cost industry $3.6 billion over 10 years<br />
Costly, and for what?<br />
Cargo security measures,<br />
including those affecting<br />
Asia-Pacific airlines flying<br />
into the U.S., are under fire<br />
for complicating carriers’<br />
operations and, in some instances, tackling<br />
only one part of the process.<br />
“Regulations are creating increasingly<br />
complex and costly security environments<br />
that jeopardise cargo flows and too often<br />
feature measures that do little to improve<br />
security,” said Georgina Graham, global<br />
head of security at the International Air<br />
Transport Association (IATA).<br />
Of particular concern to IATA is a recent<br />
U.S. proposal for 100% screening of cargo<br />
on passenger flights within three years. It is<br />
a measure, says the association, which would<br />
cost the industry US$3.6 billion over 10 years<br />
and which concentrates on the wrong end of<br />
the supply chain.<br />
That proposition, put forward by<br />
Democrats in the U.S. House of Congress,<br />
encapsulates the complexities of cargo<br />
security policies.<br />
It targets belly cargo, which is seen as<br />
more of a threat than goods carried on full<br />
freighters, on the assumption that blowing<br />
up a passenger carrier has greater publicity<br />
value than an aircraft with a handful of<br />
crew.<br />
It deals with the process during its end<br />
stage where freight is in the hands of the<br />
carrier.<br />
And, although it has not found favour with<br />
the U.S. Transport Security Administration<br />
(TSA), which argues against its effectiveness,<br />
it would nevertheless apply to home and<br />
foreign carriers alike.<br />
The TSA has said the high cost of<br />
implementing the measure would require<br />
other security measures to be curtailed.<br />
What is more its actions since the events of<br />
9-11 have been sufficient to stem the threat<br />
to cargo, say officials.<br />
That will come as a relief to carriers from<br />
outside the U.S. because, in general, what the<br />
TSA says has a knock-on affect throughout<br />
‘The technology in use today<br />
was never designed for<br />
cargo, it is used for baggage.<br />
The really good stuff is in<br />
development and ... is five to<br />
eight years away’<br />
Jack Boisen<br />
Chairman<br />
The International Air Cargo Association<br />
>>>>>>>>>>>>>>>>>>><br />
the world.<br />
“Almost all regions are reacting to<br />
what the TSA is dictating to countries – if<br />
they want to export to the U.S., they must<br />
follow the requirements,” said Jack Boisen,<br />
chairman of The International Air Cargo<br />
Association (TIACA) and vice-president,<br />
cargo, with Continental <strong>Airlines</strong>.<br />
Boisen has detected a shift in attitude<br />
that may help outside carriers employing<br />
different practices and technologies.<br />
“The TSA has lost sight of some of the<br />
practices occurring overseas with a number<br />
of carriers.<br />
“Now, they are finally trying to rediscover<br />
what is going on elsewhere. There’s a real<br />
effort for the first time in five years to<br />
harmonise, or at least recognise, those<br />
practices,” he said.<br />
The TIACA chairman has sympathy for<br />
the region’s giant cargo carriers who do much<br />
of their business flying across the Pacific.<br />
“It’s difficult enough to persuade the shippers<br />
and the indirect carriers to get things started<br />
correctly for shipments and the integration<br />
process with the TSA, Customs and maybe<br />
Fish and Game [departments],” he said.<br />
“Then throw in new aspects of security<br />
and sometimes changing regulations, and the<br />
communications of those regulations, and it’s<br />
pretty dismal.”<br />
Boisen, whose airline carries belly freight<br />
to Newark from Bangkok, Hong Kong and<br />
Tokyo, said the Asia-Pacific has a good<br />
record when it comes to cargo security,<br />
although there are a couple of locations<br />
within the region from which Continental<br />
would not accept freight.<br />
“The processes [in the region] have<br />
quietly been very efficient for a number of<br />
years, partly because in some areas cargo is<br />
tendered early to carriers, often 24 hours in<br />
advance,” he said.<br />
“That allows good opportunities to<br />
process cargo by various means, whereas in<br />
other regions, and in the U.S., it is often at<br />
the last minute.<br />
“Part of the difference is also an earlier<br />
investment in technology in the Asia-<br />
Pacific and the realisation that the freight<br />
forwarder can process acceptable cargo<br />
screening. That’s just starting in the U.S.,”<br />
said Boisen.<br />
Technology has an obvious part to play,<br />
although as yet no one has come up with a<br />
way to X-ray all cargo in a freighter container<br />
without removing it first, a practice called<br />
‘break bulk’ which carriers say would be<br />
prohibitively complex and expensive.<br />
Sniffer dogs can be more effective. “In<br />
lots of cases they are better than man-made<br />
technical systems,” said Boisen.<br />
“They are very efficient and surprisingly<br />
accurate. But you need a lot of dogs.<br />
“The technology in use today was never<br />
designed for cargo, it was used for baggage.<br />
The really good stuff is in development and<br />
the ‘labs’ say it is five to eight years away.”<br />
Boisen, like many others in the industry,<br />
32 ORIENT AVIATION JULY/AUGUST 2007
By Charles Anderson<br />
wants the entire supply chain to be<br />
monitored, starting with “certified shipper”<br />
or “regulated agent” systems that ensure<br />
freight is clean from the start.<br />
“If no one does anything about what<br />
goes into the shipment until it comes to an<br />
airline dock and then, whoops, we suddenly<br />
need security, we can’t do this efficiently,”<br />
he said.<br />
“But if you start earlier and run<br />
security throughout the entire process,<br />
including forwarders and certified shipper<br />
programmes, you can develop a strong<br />
freight assessment programme.”<br />
Boisen is keen the i ndust r y does<br />
not become over reliant on technology.<br />
“Throughout it all, you throw in a little<br />
randomness, some random inspections,”<br />
he said.<br />
“We are developing processes that<br />
hopefully will deter some intelligent<br />
terrorism, but you have to keep changing<br />
them.<br />
“Even if you X-ray 100% of your freight,<br />
and you say that’s your security method, you<br />
are going to fail. Someone will find how to<br />
beat you.”<br />
British-based security consultant,<br />
Norman Shanks, who worked on systems put<br />
in place at Hong Kong International Airport<br />
during its development stage, doesn’t believe<br />
current technology is up to the job.<br />
“The big cargo X-ray systems can’t find<br />
the small amounts of explosives we are<br />
looking for.<br />
“They are great for contraband, but<br />
pretty hopeless when it comes to the terrorist<br />
threat,” he said.<br />
“The big difficulty remains that there is<br />
still no effective way of screening bulk cargo<br />
and, until that is resolved, the only option<br />
is break-bulk screening, which means<br />
everything is broken down into individual<br />
items which can go through existing X-ray<br />
systems.<br />
“There’s a number of trials going on using<br />
variations of automated technology that have<br />
explosive detection capabilities. These are<br />
not basic X-rays, but a smarter system.”<br />
For now, the industry will have to cope<br />
with what it has got. “What we have is too<br />
expensive and slow,” said Shanks. “The<br />
industry wants to be able to screen cargo<br />
while it is in the container and only deal with<br />
items suggested as a possible threat, rather<br />
than break everything down to suitcase size,<br />
and then X-ray it.”<br />
That means carriers must rely on security<br />
checks throughout the process. “Basically,<br />
you verify the shipper and audit the<br />
movement of the goods,” said Shanks.<br />
But he is worried a cosy relationship<br />
built up between the shipper and the<br />
airline or regulated agent might muddy the<br />
waters and recommends the employment<br />
of independent cargo validators, as is the<br />
practice in the UK but not, believes Shanks,<br />
in the Asia-Pacific.<br />
In any case, “known shippers” are not<br />
widespread in the region, although they<br />
make it easier for customers to get their<br />
goods airborne.<br />
Hong Kong has had a programme in place<br />
for some years. Singapore’s did not get off the<br />
Korean Air: screens all cargo loaded on to passenger<br />
aircraft bound for the U.S., except for exempted items<br />
ground and Korean Air, the Asia-Pacific and<br />
world’s largest cargo carrier, said it has only<br />
one “known shipper”, admittedly a big one,<br />
in Samsung Logitec, which was certified by<br />
the local civil aviation safety authority last<br />
December.<br />
Korean Air screens all cargo going on to<br />
passenger aircraft bound for the U.S., either<br />
using X-rays or open screening, except for<br />
items exempted by authorities there.<br />
It advises customers to use all-cargo<br />
flights for bulky freight that can’t, as yet,<br />
be X-rayed.<br />
Jack Boisen, meanwhile, believes the time<br />
is coming when belly and full freighter cargo<br />
will be treated much the same.<br />
“Today, professionals in the security field<br />
look at the threat as different for cargo going<br />
on a passenger carrier, compared to cargo on<br />
a cargo carrier,” he said.<br />
“That stems from the fact that those who<br />
carry out terrorist acts are looking more at<br />
the impact of a terrorist attack involving<br />
passengers than on a cargo plane.<br />
“There are two levels of security, but I<br />
think there will be a blending of that. As time<br />
goes on, they will narrow the differences as<br />
we add more processes.”<br />
TIACA is urging international carriers to<br />
get involved in TSA working groups where<br />
they can get their message across, while<br />
IATA has teamed up with the International<br />
Federation of Freight Forwarders to form<br />
a task force which will work out how to<br />
protect the supply chain while keeping the<br />
cargo flowing.<br />
IATA director general, Giovanni<br />
Bisignani, spelt out why the association<br />
believes harmonization has not yet been<br />
achieved at an IATA cargo symposium in<br />
Mexico City.<br />
“Firstly, regulators often don’t understand<br />
our industry and approach cargo security in<br />
the same way as checked baggage,” he said.<br />
“Secondly, most don’t understand how the<br />
supply chain works. They focus on security<br />
at the end of the chain, not throughout the<br />
process.<br />
“Thirdly, governments are not talking<br />
to each other so they don’t have mutual<br />
recognition of standards, controls and<br />
programmes. And definitions, requirements<br />
and enforcement are inconsistent.<br />
“Finally, governments are not using<br />
technology effectively, particularly screening<br />
technology.<br />
“They are quick to mandate expensive<br />
bulk X-ray equipment, but are not making full<br />
use of the potential for canine techniques. The<br />
result is a costly mess.”<br />
JULY/AUGUST 2007 ORIENT AVIATION 33
SPECIAL REPORT<br />
<strong>Aviation</strong> Security<br />
A liquid situation<br />
New restrictions: it’s one step forward and two steps back, says ACI<br />
It’s a common sight in major airports<br />
in the Asia-Pacific at present;<br />
confused passengers trying to<br />
work out t he<br />
new restrictions<br />
on liquids allowed in<br />
hand baggage and then<br />
wondering, if they are to<br />
transit elsewhere, whether<br />
the same rules will apply.<br />
No one is arguing about<br />
the reasoning behind a<br />
measure first introduced<br />
in the European Union<br />
after a threat by would-be<br />
terrorists who aimed to<br />
bring down a number of<br />
aircraft flying from the<br />
U.K. to the U.S. last year,<br />
using liquid explosives.<br />
Chaos at British airports,<br />
especially Heathrow and<br />
Gatwick, was quickly<br />
followed by decisions on<br />
common standards for hand<br />
baggage and for fluids and<br />
their containers taken on<br />
board by passengers.<br />
‘Effectiveness does<br />
not equate to being<br />
convenient. We<br />
know travellers<br />
are being<br />
inconvenienced<br />
worldwide’<br />
Georgina Graham<br />
Global Head of Security<br />
IATA<br />
>>>>>>>>>>>>><br />
The problem is that, as an International<br />
Civil <strong>Aviation</strong> Organisation (ICAO)<br />
recommendation, governments can adapt the<br />
latter measure as they see fit. And many have<br />
done just that, again underlining the need for<br />
harmonisation of security procedures in an<br />
increasingly complex environment.<br />
In general, all liquids under 100 millilitres<br />
are allowed on board, as long as they are<br />
presented altogether at security in a clear,<br />
sealed plastic bag.<br />
But in the Philippines you can’t take any<br />
liquid at all on either outbound or inbound<br />
flights. It’s the same in India and Pakistan,<br />
but on outbound flights only.<br />
Japan isn’t applying the rule to domestic<br />
flights, neither is China, but restrictions<br />
apply to Hong Kong, Taiwan and Macau<br />
flights as well as international services.<br />
Australia won’t allow duty free to enter<br />
the country unless it is delivered to a named<br />
34 ORIENT AVIATION JULY/AUGUST 2007<br />
passenger at the gate of the departure airport<br />
in a sealed bag with proof of purchase.<br />
No one else in the region appears to be<br />
so picky. Singapore allows<br />
t r a n sfer passengers to<br />
carry their Johnnie Walker<br />
with them but, wait for it,<br />
not if they are flying on to<br />
Australia, the U.S. which has<br />
different restrictions of its<br />
own, or if they are travelling<br />
on a Northwest <strong>Airlines</strong> or<br />
United <strong>Airlines</strong> flight.<br />
Taipei is showing more<br />
understanding than most by<br />
supplying a storage facility<br />
for those who don’t want<br />
to give up their expensive<br />
wines and spirits, so they can<br />
reclaim those goods on their<br />
return.<br />
British-based security<br />
expert Norman Shanks, who<br />
helped develop systems at<br />
Hong Kong International<br />
Airport, saw some of the<br />
confusion this<br />
has caused while transiting<br />
through Hong Kong recently.<br />
“Passengers were arriving<br />
with liquids, some of which<br />
were very expensive and had<br />
been bought at duty-free, only<br />
to have them removed because<br />
they were greater than the<br />
amount allowed. That’s a great<br />
argument for standardisation,<br />
so everyone knows what’s<br />
going on,” he said.<br />
“The people who take the<br />
brunt of this are the security<br />
staff who are trying to follow<br />
the procedures. The poor old<br />
passengers have no one else to<br />
vent their frustrations on.”<br />
His point was underscored<br />
in May by protests from passengers on<br />
board a United <strong>Airlines</strong> aircraft diverted<br />
to Brisbane from the U.S. because Sydney<br />
airport was closed.<br />
They could either stay on the aircraft for<br />
nine more hours until a new crew turned<br />
up, or lose their duty-free goods if they<br />
disembarked. Items would be confiscated<br />
when they went through security again<br />
before leaving for Sydney, they were told.<br />
United eventually defused the situation<br />
by labelling liquor bottles and keeping them<br />
in the aircraft hold.<br />
“The industry hasn’t got its act together<br />
on the regulatory side or the operations side,”<br />
said Shanks. “We are still getting people<br />
turning up with liquids.<br />
“The biggest problem is transfer baggage,<br />
particularly if you are coming from a point<br />
of origin where the measures haven’t been<br />
introduced and you are suddenly faced on<br />
transfer with an absolute ban.”<br />
At the International Air Transport<br />
Association (IATA), Georgina Graham,<br />
global head of security, accepts that such<br />
measures are necessary.<br />
“There is a need for efficient, effective<br />
and consistent measures that prevent items<br />
that could potentially be used as weapons<br />
from being brought on<br />
board aircraft,” she said.<br />
“This is especially<br />
critical for liquid-based<br />
explosive devices that<br />
can be broken down into<br />
component parts that<br />
appear to be harmless.<br />
“But effectiveness<br />
does not e qu at e t o<br />
being convenient. We<br />
k now t r avellers a re<br />
being inconvenienced<br />
worldwide.<br />
“Some states have<br />
developed their own<br />
separate responses to<br />
the threat posed by liquid<br />
based explosive devices.<br />
In some cases these<br />
differences cause substantial operational<br />
and customer service problems. This lack<br />
of international harmonization undermines<br />
‘The focus on liquids<br />
means we are taking<br />
our eyes off plastic<br />
explosives in carryon<br />
bags.’<br />
Norman Shanks<br />
Security Expert<br />
>>>>>>>>>>>>>
public confidence in the overall aviation<br />
security system and decreases overall<br />
security.”<br />
In extreme cases there is a cost to bear.<br />
“Certainly states may choose to develop<br />
responses inconsistent with ICAO,” said<br />
Graham.<br />
“But the consequence is the risk<br />
of isolating a nation’s economy and<br />
transportation system from the global air<br />
transportation system.”<br />
Airports Council International is also<br />
worried by the situation. “A real concern<br />
is the detrimental effect this increase in<br />
security checks is having on the passenger<br />
experience at airports,” it said at the time the<br />
measures began to be introduced worldwide.<br />
“We need to regain some of the pleasure that<br />
used to be associated with flying that has<br />
now been replaced with queues and weary<br />
travellers.<br />
“For every step forward in customer<br />
convenience the industry makes – with self<br />
check-in and biometric border crossing for<br />
example – these new security provisions<br />
seem to take us two steps back.”<br />
All major airports in the Asia-Pacific<br />
appear to have introduced the measure, with<br />
the new Bangkok airport at Suvarnabhumi<br />
the latest to do so. Hong Kong and Singapore,<br />
which printed 1.5 million brochures on the<br />
new measures, both reported smooth<br />
implementation after deploying 100 extra<br />
staff each to help passengers through the<br />
process.<br />
Taipei at first required travellers to arrive<br />
three hours before departure, but scrapping<br />
that rule after the system settled in.<br />
Shanks believes measures like this can be<br />
as symbolic as they are practical.<br />
“They heighten awareness,” he said. “It’s<br />
a case of being seen to be doing something<br />
and to get the message across that, yes,<br />
A passenger is checked at security: she may, or may not, have to keep her<br />
shoes on.<br />
there’s a real problem here. We have to take<br />
these extreme measures to cope with it. But<br />
I’m not convinced.”<br />
He understands the need for rationalisation<br />
and uses the issues of laptop searches, where<br />
the target is hidden plastic explosives, and<br />
passengers’ shoes, brought in after Richard<br />
Reid tried to blow up a transatlantic aircraft<br />
using explosives hidden in his footwear.<br />
“Most places now ask for laptops to be<br />
taken out,” said Shanks. Such searches add<br />
to delays, and it’s the same with shoes.<br />
“Where you see long delays, it’s because<br />
people are holding up the screening line,<br />
taking them off or putting them on. It isn’t<br />
standard; it seems to be random,” he said.<br />
Shanks’s concern is that the industry is<br />
ignoring other threats while dealing with<br />
such specifics.<br />
“It’s similar to the immediate post<br />
9-11 time when we started to look for sharp<br />
objects,” he said.<br />
Singapore Changi International Airport:<br />
100 extra security staff<br />
“We were looking for scissors and nail<br />
clippers. If you had those you were suspect,<br />
never mind what else you were carrying.<br />
“The focus on liquids means we are<br />
taking our eyes off another long-term issue,<br />
plastic explosives in carry-on bags.<br />
“We have nothing in operation to address<br />
that. The technology is around, but it’s not<br />
deployed.<br />
“There’s a lot of plastic explosive around<br />
and it’s a lot easier to handle and mould than<br />
liquid explosives.”<br />
IATA wants aviation security to be risk<br />
based and globally harmonized and it feels<br />
it has made some progress.<br />
“For many years, the real challenge was<br />
educating industry and regulators about the<br />
basics of these concepts,” said Graham.<br />
“Now we find ourselves in a position where<br />
the definitions are understood and our focus<br />
is making the case for specific harmonization<br />
measures.”<br />
For instance, the association is now<br />
pushing for passenger name records to<br />
be sent just once to a government, using<br />
a single window, instead of the same data<br />
being transmitted more than once and in<br />
different forms.<br />
It wants changes to customs data formats<br />
to be consistent and it is keen that regulators<br />
recognise screening services performed by<br />
another competent regulator.<br />
“<strong>Aviation</strong>’s security resources are<br />
scarce,” said Graham, “and it makes little<br />
sense for regulators to redo the work of their<br />
counterparts when it has been done in a<br />
professional, complementary and compatible<br />
way.”<br />
JULY/AUGUST 2007 ORIENT AVIATION 35
SPECIAL REPORT<br />
<strong>Aviation</strong> Security<br />
As the biometric eye scans wider …<br />
It’s bad news<br />
for the bad guys<br />
Increasing use of biometrics, coupled<br />
with moves towards Internet or<br />
kiosk check-in, are strengthening<br />
the hand of security personnel,<br />
allowing them to not only better<br />
identify travellers, but also gain valuable<br />
clues about what they might be up to.<br />
Moves are under way to integrate security<br />
requirements into passenger processes<br />
as self-service becomes more common,<br />
allowing immigration staff to put biometric<br />
and other information taken from a machinereadable<br />
passport strip alongside check-in<br />
data and ticket purchase details. Then they<br />
can perform a kind of online profiling to<br />
track down anything suspicious.<br />
Matthew Finn, director, government and<br />
security solutions at SITA, the industry IT<br />
cooperative, explained the advantages.<br />
“From a security perspective, those who<br />
work in counter terrorism organisations<br />
within a national police force are very worried<br />
that some frequent travellers may appear to be<br />
clean when they are not,” he said.<br />
“Take the example of someone who<br />
has a biometric passport, is a member of a<br />
registered traveller programme and routinely<br />
flies out of Hong Kong. There is no issue with<br />
any of his data. No one is sensing any kind of<br />
risk as part of his profile. He is not on a watch<br />
list. But then, on one particular day, he has<br />
been compromised, or has been acting as a<br />
sleeper for a few years and is planning to get<br />
up to mischief.”<br />
Biographical data collected each time<br />
the man has travelled can be used to build<br />
up a picture and a risk assessment study<br />
begins. “Part of this process also provides<br />
the reservation data and it does tell a story,”<br />
said Finn. “They discover he booked at a<br />
travel agents where they previously had<br />
problems in the past.<br />
“That travel agent’s reference number<br />
will be in his reservation data, as will his<br />
credit card information. Maybe that card<br />
has been used in another environment that<br />
caused concern.”<br />
The passenger might still appear clean,<br />
but he either booked or checked in with<br />
someone seen to have a higher level of risk.<br />
“Linking all this data gives a real sense of<br />
who is travelling and what people are doing<br />
as part of the travel process,” said Finn.<br />
There is the risk, however, that security<br />
personnel will want to go too far. “There<br />
are privacy dimensions that have to be<br />
handled very carefully. Privacy advocates<br />
are concerned about political, medical and<br />
religious data,” said Finn.<br />
SITA, which operates information<br />
and security systems at airports, removes<br />
sensitive fields that are causing concern to<br />
bodies such as the European Parliament and<br />
converts the information into a format a<br />
government can use.<br />
Increasing industry reliance on selfservice,<br />
along with the International Air<br />
Transport Association’s (IATA) Simplifying<br />
Passenger Travel initiative, has put security<br />
aspects of information technology processes<br />
under the spotlight.<br />
‘We need to understand how to<br />
integrate security requirements<br />
into the passenger process’<br />
Matthew Finn<br />
Director, Govt & Security Solutions<br />
SITA<br />
>>>>>>>>>>>>>>>>>>><br />
Passport information can<br />
provide the trigger for<br />
security procedures<br />
“Everyone is moving into self-service,<br />
whether it be Internet or kiosk check-in,”<br />
said Finn. “We need to understand how to<br />
integrate security requirements into the<br />
passenger process.”<br />
Australia provides an example of how this<br />
can be done through its “advanced passenger<br />
processing system” which uses data from<br />
the machine-readable zone of a passport<br />
belonging to inbound travellers when they<br />
check in elsewhere.<br />
“That information is sent directly from<br />
the check-in environment to the Australian<br />
government, so they can verify your<br />
biographic details and make sure you aren’t<br />
on their watch list or haven’t been a previous<br />
visa overstayer,” said Finn.<br />
With some forecasts putting the majority<br />
of check-ins outside the airport environment<br />
within 10 years, there is an obvious need to<br />
ensure appropriate security systems are in<br />
place.<br />
SITA is keen on the use of a thumbprint,<br />
maybe originally stored in a passport, as a<br />
traveller makes his way through the airport<br />
processes. “Instead of data having to be<br />
provided to multiple entities at multiple<br />
times, when we bring security and selfservice<br />
together, the trigger comes when you<br />
put your fingerprint down,” said Finn.<br />
“A ll t he biog r aph ical d at a , t he<br />
documentary, f light and reservation<br />
information can be extracted, cleaned up,<br />
filtered and delivered.”<br />
Again, harmonization is needed. “There<br />
must be inter-operability and we can’t be<br />
looking at fragmentation when it comes to<br />
identity management. That’s the reason the<br />
machine-readable passport with biometric<br />
information stored in it is key, because that<br />
will bring us standardization,” said Finn.<br />
36 ORIENT AVIATION JULY/AUGUST 2007
SPECIAL REPORT<br />
Flagship show adds<br />
to its strengths<br />
Asian Aerospace International<br />
Expo and Congress 2007<br />
is now set to st age its<br />
pioneering move to AsiaWorld-Expo,<br />
its new location in Hong Kong, as<br />
the largest dedicated civil aerospace<br />
gathering on the international<br />
industry calendar.<br />
Reed Exhibitions’ f lagship<br />
aerospace industry event, which<br />
runs from September 3-6, will be<br />
an exclusive business-to-business<br />
showcase featuring more than<br />
500 exhibitors from more than<br />
AsiaWorld-Expo: the new home of Asian<br />
Aerospace<br />
20 countries, with 12 national pavilions. Some 400 delegates are expected to attend the<br />
congress’s opening executive sessions, which will feature speakers at ministerial and<br />
director-general level.<br />
Reed Exhibitions has brought together a number of complementary events under one<br />
umbrella through organic growth, acquisitions and commercial collaboration.<br />
The company followed its acquisition of the region’s leading air freight conference and<br />
exhibition, Air Freight Asia, at the start of the year with the acquisition of all six events of the<br />
aviation division of international events company, UKIP Media & Events, which organises<br />
events in the specialised markets of aircraft interiors, aerospace design and testing. Both Air<br />
Freight Asia and Aircraft Interiors Expo Asia will be integrated into Asian Aerospace.<br />
Another agreement, this time with Halldale Media Group, will see Reed Exhibitions<br />
collaborate in the staging of the Asia Pacific Airline Training Symposium (APATS), to be<br />
held alongside Asian Aerospace.<br />
Perfect platform for debate<br />
With Asia emerging as the world’s fastest-growing aviation market, the Congress<br />
will provide the perfect platform for topical discussion during three days of highlevel<br />
debate on issues central to the region’s expansion.<br />
The Congress is organised in partnership with Flight International.<br />
Congress themes over the three days will cover air transport strategy, air transport<br />
operations and aerospace technology. Aircraft Interiors Expo Asia, Air Freight Asia and<br />
APATS will include specialist conference programmes.<br />
Specialist master classes will be held to complement the main Congress themes, to include<br />
business aviation, aircraft finance, maintenance and East-West technology partnerships.<br />
Networking sessions and hosted opportunities to tour the Asian Aerospace exhibition<br />
will also be arranged to ensure delegates and speakers alike maximise their opportunities<br />
to do business in the Asia Pacific region.<br />
Kevin O’Toole, Flight’s head of strategy, said: “We have worked closely with a range of<br />
regional regulatory bodies, investors, airlines, airport operators, industry associations, and<br />
the technology and aerospace manufacturing communities to ensure our programmes reflect<br />
both the needs and ambitions of the aviation sector in the Asia-Pacific region.<br />
“All the conference programmes will be integrated with the Asian Aerospace exhibition<br />
and there will be a host of opportunities to network and do business with key decision<br />
makers.”<br />
Support for the event has come<br />
from a variety of public and private<br />
sector individuals and organisations<br />
in Hong Kong and China, including<br />
Invest Hong Kong, Hong Kong<br />
Civil <strong>Aviation</strong> Department, General<br />
Administration of Civil <strong>Aviation</strong> of<br />
China (CAAC), Commission of<br />
Science Technology and Industry<br />
(Costind) Media Centre, Airport<br />
Authority Hong Kong, Hong Kong<br />
Tourism Board and the Aerospace<br />
Forum Asia.<br />
T he U . S . D e par t ment of<br />
Commerce has also granted Trade<br />
Fair Certification to Reed Exhibitions<br />
Aerospace & Defence Group for<br />
Asian Aerospace.<br />
Cathay Pacific Airways, which<br />
has been named official carrier for the<br />
event, is offering exclusive airfares<br />
for visitors and travel companions in<br />
business and economy class.<br />
The offers are only available to<br />
pre-registered participants, who are<br />
given a booking code in the automated<br />
r e s p o n s e they w i l l r e c e i ve o n<br />
registering for the event, which can be<br />
done at www.asianaerospace.com<br />
For inquiries contact:<br />
Hong Kong Hotline:<br />
T: (852) 2965 1689<br />
E: hongkong_registration@<br />
asianaerospace.com<br />
China Hotline:<br />
T: (86) 10 6523 4092<br />
E: china_registration@<br />
asianaerospace.com<br />
International Hotline:<br />
T: (65) 6780 4646<br />
E: international_registration@<br />
asianaerospace.com<br />
A full conference programme is available at: www.flightglobal.com/asianaerospace<br />
Editorial supplied by Asian Aerospace International Expo and Congress<br />
JULY/AUGUST 2007 ORIENT AVIATION 37
COMMUTER AVIATION<br />
Yeti scaling new heights<br />
By Charles Anderson<br />
Eight years ago Yeti <strong>Airlines</strong><br />
began business operating just<br />
two Twin Otters, flying from<br />
Kathmandu to remote areas<br />
of Nepal. There was nothing<br />
special about another fledgling carrier<br />
arriving at the short take-off and landing<br />
(STOL) airports peppered around the<br />
mountainous country, apart perhaps from<br />
its name. Many small domestic operators<br />
have tried their luck over the last 10 years,<br />
with many failing to survive.<br />
Now Yeti has a 10-strong fleet, split<br />
evenly between Twin Otters<br />
and newly-acquired Jetstream<br />
41s, flying on trunk routes<br />
as well as to out-of-the-way<br />
destinations. It claims 55%<br />
to 60% of domestic market<br />
share and the carrier has just<br />
won permission to expand<br />
overseas.<br />
Executive director, Bijaya<br />
Shrestha, told local media Yeti<br />
could start flying on some of<br />
the routes designated by the<br />
government – Bangkok, Seoul,<br />
Sharjah, Lhasa and Butan<br />
– within a year. But general<br />
manager, Umesh Chandar Rai,<br />
was more circumspect when he<br />
talked to <strong>Orient</strong> <strong>Aviation</strong>.<br />
“The groundwork has started, but the<br />
project is in the preliminary stages and<br />
not much can be stated at the moment,” he<br />
said. Rai’s caution is understandable. Three<br />
Nepali airlines have launched international<br />
services in recent years, only to withdraw<br />
them and one other failed to begin within the<br />
stipulated timeframe.<br />
Yeti, however, is not planning to go<br />
it alone. The carrier is looking to form a<br />
joint venture with an overseas partner that<br />
can inject capital and expertise to make the<br />
expansion work, said Rai.<br />
Outside airlines are increasing services to<br />
Kathmandu, but Yeti was the only operator<br />
to respond to the Nepal government’s<br />
latest push to find an established domestic<br />
company – it must have been flying for five<br />
38 ORIENT AVIATION JULY/AUGUST 2007<br />
years – ready to join national carrier, Nepal<br />
<strong>Airlines</strong>, in offering overseas services run<br />
by Nepalis.<br />
Troubled Nepal <strong>Airlines</strong>, which dropped<br />
the “Royal” from its name after Nepal’s<br />
king lost his powers last year, is asking for<br />
approval from its government owners to<br />
modernise its fleet of two B757s and seven<br />
Twin Otters. Meanwhile, it is seeking to lease<br />
another B757 from August for its New Delhi,<br />
Bangkok, Kuala Lumpur, Dubai and Hong<br />
Kong services.<br />
While Yeti moves cautiously in that<br />
direction, it has been quicker off the mark in<br />
increasing domestic services after a shakeout<br />
Yeti <strong>Airlines</strong>: spending $1 million on safety and navigational<br />
upgrades for mountain flying<br />
in 2004, which saw a number of operators<br />
go under when the Maoist insurgency cut<br />
tourist arrivals that led to over-capacity on<br />
main routes. Yeti took the chance to fill the<br />
gap when the ensuing bankruptcies in turn<br />
led to a shortage of seats.<br />
“We were basically a STOL operator<br />
ferrying passengers and food stuffs into<br />
remote areas which had no access to<br />
roads,” said Rai. “But in 2004 we saw the<br />
opportunity to expand into the non-STOL<br />
market by moving to fill the void.<br />
“We acquired three Saab 340Bs on lease<br />
and quickly became a major player in this<br />
segment of the domestic market. Later it<br />
was felt the Jetstream 41 was more suited to<br />
these sectors – hot and high with short flight<br />
times.” Four were acquired last year and a<br />
fifth arrived in late April.<br />
“The strategy is to base our schedules<br />
on four Jetstream 41s and use the fifth as<br />
a backup to ensure delays due to technical<br />
snags or weather conditions are kept to a<br />
minimum,” said Rai<br />
Yeti has three main domestic rivals,<br />
including Nepal <strong>Airlines</strong>. Thanks to this<br />
and to ongoing instability, Rai doesn’t see<br />
further expansion in the near future.<br />
Meanwhile, Yeti has the dangers of flying<br />
in Nepal to contend with. It has lost two Twin<br />
Otters, one in 2004 and the other in 2006,<br />
resulting in a total of nine deaths, through<br />
crashes in remote areas. Now it is spending<br />
US$1 million installing up-todate<br />
navigational and safety<br />
avionics on its turboprops.<br />
“Previously it was considered<br />
unnecessary and economically<br />
unfeasible for Twin Otters to be<br />
equipped with such expensive and<br />
advanced avionics, but we think<br />
it is the answer to eliminating<br />
the risks inherent in flying in the<br />
mountains of Nepal,” said Rai,<br />
who pointed out Nepal’s four<br />
other Twin Otter operators have<br />
all suffered fatal accidents due to<br />
controlled flight into terrain.<br />
“STOL operations in these<br />
remote and mountainous<br />
areas do represent a challenge,<br />
especially as the support from<br />
air traffic controllers on the ground is almost<br />
negligible,” he said. “The Twin Otter is widely<br />
recognised as the best for such operations<br />
and maintenance of these aircraft has never<br />
been an issue. It is largely an operational<br />
challenge.”<br />
Yeti is owned and funded by brothers<br />
Lhakpa Sonam Sherpa and Ang Tshiring<br />
Sherpa. Rai said because of the difficulties<br />
inherent in running a publicly traded company<br />
in Nepal, it is likely to stay private.<br />
He doesn’t see that as a problem.<br />
“Important decisions are made after seeking<br />
opinions from the relevant people within<br />
the company,” he said. “This has helped in<br />
arriving at the right ones. Most other airlines<br />
in Nepal have been run by one individual,<br />
like a personal fiefdom.”
Pat James thought an easy life<br />
awaited him when he retired<br />
to the Thai holiday island<br />
of Phuket after 40 years in<br />
aviation, writes Charles<br />
A nderson . But now the American<br />
globetrotter is back in the business as<br />
managing director of start-up Destination<br />
Air Shuttle, Thailand’s only seaplane<br />
operation.<br />
Destination Air, which runs scheduled<br />
services from Phuket’s busy international<br />
airport to 12 points within 55-minutes flying<br />
time, started business in February.<br />
It currently operates two Cessna<br />
amphibians, but has plans to add two more<br />
within six months. Destination also is looking<br />
at an exchange programme with the world’s<br />
largest seaplane operator, Kenmore Air, on<br />
the U.S. West Coast, to bring extra aircraft in<br />
on an exchange basis, boosting each other’s<br />
fleets during their own low seasons.<br />
All this fits in with the fact that Destination<br />
Air is no Kodak-moment carrier. As James<br />
emphasised, this is not a “you call, we haul”<br />
charter operation for sightseers. Transfers<br />
from Thailand’s second busiest airport –<br />
Phuket handled 2.9 million passengers last<br />
year carried by 10 airlines – will be its core<br />
business.<br />
“We are running a transfer service, or<br />
interline feed, so to speak, with other airlines<br />
and the tour companies, the big boys with<br />
inbound tour customers. We will be a part<br />
of their package,” he said. “More than likely<br />
we will be booked six months in advance<br />
for all our flights which provide service to<br />
remote locations.”<br />
The carrier’s shortest route is 10 to 12<br />
minutes to Phi Phi Island. The longest<br />
flight, to Ranong on the Thai-Burma border<br />
for visa runs or a casino visit, takes just under<br />
Seaplanes making<br />
a splash in Phuket<br />
Destination Air Shuttle: fulfilling a need to<br />
service isolated Phuket destinations<br />
an hour. The average comes out at 20 to 25<br />
minutes and at present there are 12 flights a<br />
day, leaving at two-hour intervals.<br />
Phuket International Airport, is the<br />
only land-based destination. All others are<br />
waterbound.<br />
Pat James has logged 20,000 hours as<br />
a pilot but he leaves the flying to three<br />
expatriate seaplane pilots.<br />
James’ career started in the U.S. military<br />
in the 1960s and took him through Cessna<br />
dealerships in Texas, government contract<br />
work in South America and start-ups in the<br />
Pacific region where his core skills as an<br />
aviation asset manager stood him in good<br />
stead.<br />
Then came contact with a consortium of<br />
Thai investors from various fields after his<br />
supposed retirement to Phuket. “I was in the<br />
right place at the right time,” said James.<br />
The success of seaplane operations in<br />
the Maldives underlined the potential for a<br />
similar operation in Phuket. “The need is no<br />
different from the Maldives where you have<br />
a wide spread of resorts located on isolated<br />
islands and coastal areas with no kind of<br />
infrastructure,” said James.<br />
The process of setting up Destination<br />
Air was not simple. Aircraft were sourced<br />
in the U.S. requiring an investment of several<br />
million U.S. dollars, said James.<br />
Pilots were easy enough to find, but it<br />
took 18 months to sift through the paperwork<br />
required by the Thai government and gain the<br />
necessary approvals.<br />
“We’ve had a lot of false starts and ups and<br />
downs clearing the way. But we are definitely<br />
in it for the long term,” said James.<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
JULY/AUGUST 2007 ORIENT AVIATION 39
BUSINESS DIGEST: MARCH STATISTICS<br />
Airline Codes<br />
RPK Growth by Carrier<br />
Passenger Load Factor<br />
Growth by Carrier<br />
BI<br />
Royal Brunei <strong>Airlines</strong><br />
MH <strong>Malaysia</strong> <strong>Airlines</strong><br />
BR<br />
EVA Air<br />
NH<br />
All Nippon Airways<br />
25%<br />
15<br />
CI<br />
China <strong>Airlines</strong><br />
OZ<br />
Asiana <strong>Airlines</strong><br />
20%<br />
CX<br />
GA<br />
JL<br />
Cathay Pacific<br />
Garuda<br />
Japan <strong>Airlines</strong><br />
PR<br />
QF<br />
SQ<br />
Philippine <strong>Airlines</strong><br />
Qantas Airways<br />
Singapore <strong>Airlines</strong><br />
15%<br />
10%<br />
10<br />
5<br />
KE<br />
Korean <strong>Airlines</strong><br />
TG<br />
Thai Airways Int’l<br />
5%<br />
KA<br />
Dragonair<br />
VN<br />
Vietnam <strong>Airlines</strong><br />
0%<br />
0<br />
Percentage<br />
(Mar 07 vs Mar 06)<br />
Percentage Points Change<br />
(Mar 07 vs Mar 06)<br />
-5%<br />
Percentage<br />
(Apr 06-Mar 07 vs Apr 05-Mar 06)<br />
Percentage Points Change<br />
(Apr 06-Mar 07 vs Apr 05-Mar 06)<br />
-10%<br />
BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />
-5<br />
BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />
Vietnam leads RPK charge<br />
Compiled and presented by KRIS LIM of the Research and Statistics<br />
Department of the Association of Asia Pacific <strong>Airlines</strong> Secretariat<br />
March inter national<br />
p a s senge r t r a f f ic<br />
for Association of<br />
Asia Pacific <strong>Airlines</strong><br />
(A A PA) c a r r i e r s<br />
continued to be strong, with passenger<br />
numbers and revenue passenger kilometres<br />
(RPKs) growing by 6.2% and 7.1%<br />
respectively.<br />
The passenger load factor, at 75.2%,<br />
was 1.2 points higher compared with the<br />
same month last year.<br />
The majority of AAPA carriers saw the<br />
rate of passenger traffic growth strengthen<br />
in March.<br />
Carriers posting double-digit RPK<br />
growth were Vietnam <strong>Airlines</strong> (22.7%),<br />
Asiana <strong>Airlines</strong> (22.6%), Korean Air<br />
(17.1%), Thai Airways International<br />
(15.8%) and Philippine <strong>Airlines</strong> (13.7%).<br />
In addition to buoyant traffic, passenger<br />
load factors for most of the carriers also<br />
improved on slower capacity injection.<br />
Asiana <strong>Airlines</strong>’ passenger load factor<br />
gained 8.7 percentage points, to 77.5% in<br />
March.<br />
The carrier with the highest load factors<br />
for the month was Singapore <strong>Airlines</strong><br />
(82.4%), followed by Philippine <strong>Airlines</strong><br />
(81.1%), EVA Air (80.9%), Thai Airways<br />
RPK and ASK (In Percentage)<br />
RPK and ASK (In Billions)<br />
RPK, ASK and PLF Growth Rates<br />
(Apr 06 to Mar 07)<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
-4<br />
A<br />
M<br />
RPK, ASK and PLF<br />
(Apr 06 to Mar 07)<br />
RPK<br />
ASK<br />
PLF<br />
J<br />
J<br />
A<br />
2006<br />
S<br />
O<br />
F<br />
2007<br />
RPK<br />
ASK<br />
PLF<br />
0<br />
M<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
PLF (In Percentage Points)<br />
-4<br />
A M J J A S O N D J F M<br />
2006 vs. 2005 2007 vs. 2006<br />
N<br />
D<br />
J<br />
80<br />
60<br />
40<br />
20<br />
PLF (In Percentage)<br />
International (80.9%) and China <strong>Airlines</strong><br />
(80.2%).<br />
CARGO<br />
AAPA international cargo traffic<br />
recorded only 0.4% growth in freight<br />
tonne kilometres (FTK) in March. The<br />
FTK growth rate for the same month was<br />
the lowest since May 2006. An increase<br />
of 3.7% in freight capacity resulted in a<br />
2.2 percentage point decline in cargo load<br />
factor to 67.3%.<br />
T he m ajor it y of A A PA ca r r ie r s<br />
recorded declines in FTKs in March.<br />
The region’s large freight operators that<br />
posted declines included China <strong>Airlines</strong><br />
(8%), EVA Air (7.2%), Singapore <strong>Airlines</strong><br />
(5.7%) and Cathay Pacific Airways (1%).<br />
A number of carriers, on the other hand,<br />
were able to register FTK growth: All<br />
Nippon Airways (16.9%), Thai Airways<br />
International (13.6%), Korean Air (9.5%),<br />
Asiana <strong>Airlines</strong> (4.6%), <strong>Malaysia</strong> <strong>Airlines</strong><br />
(4.2%) and Japan <strong>Airlines</strong> (1.1%).<br />
Most carriers experienced declines<br />
in cargo load factors in the month under<br />
review, with only a handful of carriers<br />
registering cargo load factors in excess of<br />
70%: Asiana <strong>Airlines</strong> (83.4%), Korean Air<br />
(76.4%) and EVA Air (76%).<br />
40 ORIENT AVIATION JULY/AUGUST 2007
FTK Growth by Carrier<br />
Freight Load Factor<br />
Growth by Carrier<br />
PAX Growth by Carrier<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
-5%<br />
-10%<br />
-15%<br />
-20%<br />
-25%<br />
BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />
20<br />
15<br />
10<br />
5<br />
0<br />
-5<br />
-10<br />
BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
-5%<br />
BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />
INTERNATIONAL PASSENGER<br />
TRAFFIC: JANUARY-MARCH 2007<br />
The first quarter saw AAPA carriers<br />
record a total of 35.3 million international<br />
passengers, a year-on-year increase of<br />
4.8%. In RPK terms, traffic was up 4.7%<br />
on a capacity increase of 2.5%, which<br />
resulted in a 1.6 percentage point improvement<br />
in passenger load factor to 76.4%.<br />
CARGO: JANUARY-MARCH<br />
AAPA cargo traffic growth continued<br />
to grow at a modest pace in the first quarter<br />
of the year. In FTK terms, cargo traffic was<br />
up only 2%, while capacity grew 4.6%,<br />
which resulted in a 1.6 percentage point<br />
deterioration in cargo load to 64.7%.<br />
coupled with a 3.3% increase in capacity,<br />
dragged cargo load factors down 1.7 points<br />
to 65.8%.<br />
The first four months saw AAPA international<br />
passenger numbers reach 46.9<br />
million, an increase of 4.3% on the same<br />
period last year. Air cargo demand, however,<br />
has been disappointing, with FTK<br />
growth of less than 2% in the period.<br />
Email: krislim@aapa.org.my<br />
Cathay Pacific and Dragonair are<br />
analysed as one carrier<br />
FTK, FATK and Freight Load Factor<br />
(Apr 06 to Mar 07)<br />
Cargo is only growing modestly<br />
FTK, FATK FLF Growth Rates<br />
(Apr 06 to Mar 07)<br />
APRIL (PRELIMINARY)<br />
AAPA member airlines carried 11.6<br />
million international passengers in April,<br />
a year-on-year increase of 2.9%. International<br />
passenger traffic in RPK terms grew<br />
2.6% on a marginal capacity increase of<br />
0.7%, which resulted in a 1.4 percentage<br />
point improvement in passenger load<br />
factor to 75.9%. International freight traffic<br />
remained sluggish in April, registering<br />
an increase of only 0.7%. Weak demand,<br />
FTK and FATK (In Billions)<br />
F<br />
FTK<br />
FATK<br />
FLF<br />
M A M<br />
J J A<br />
2006<br />
S<br />
O<br />
N<br />
D<br />
80<br />
60<br />
40<br />
20<br />
0<br />
J F M<br />
2007<br />
FLF (In Percentage)<br />
FTK and FATK (In Percentage)<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
-4<br />
A<br />
M<br />
16<br />
14<br />
FTK<br />
FATK 12<br />
FLF<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
-4<br />
J J A S O N D J F M<br />
2006 vs. 2005 2007 vs. 2006<br />
FLF (In Percentage Points)<br />
<br />
<br />
<br />
JULY/AUGUST 2007 ORIENT AVIATION 41
BUSINESS DIGEST<br />
AAPA MONTHLY INTERNATIONAL STATISTICS<br />
Summary of Consolidated Results (thousands)<br />
2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />
Apr 06 11,254 46,456,619 62,377,396 74.48% 4,537,167 6,725,483 67.46% 8,904,257 12,561,764 70.88%<br />
May 06 10,869 45,198,805 63,863,230 70.77% 4,326,655 6,611,184 65.44% 8,600,377 12,594,833 68.28%<br />
Jun 06 11,354 48,072,155 62,337,374 77.12% 4,493,193 6,710,086 66.96% 9,027,147 12,562,568 71.86%<br />
Jul 06 12,293 51,556,113 65,500,277 78.71% 4,569,956 6,865,248 66.57% 9,425,084 13,065,776 72.14%<br />
Aug 06 12,306 50,789,484 65,339,978 77.73% 4,503,292 6,907,390 65.20% 9,283,081 13,098,610 70.87%<br />
Sep 06 11,218 47,174,361 63,014,588 74.86% 4,769,987 6,920,681 68.92% 9,117,981 12,734,101 71.60%<br />
Oct 06 11,691 48,230,014 63,908,449 75.47% 4,952,961 7,347,283 67.41% 9,507,263 13,382,021 71.05%<br />
Nov 06 11,592 47,261,577 62,605,192 75.49% 4,992,607 7,295,734 68.43% 9,457,841 13,201,605 71.64%<br />
Dec 06 12,249 51,247,685 66,389,040 77.19% 4,882,414 7,244,918 67.39% 9,713,140 13,517,039 71.86%<br />
Jan 07 11,897 51,264,667 66,016,857 77.65% 4,153,705 6,736,909 61.66% 8,987,690 12,980,908 69.24%<br />
Feb 07 11,160 45,557,018 59,691,338 76.32% 4,033,799 6,197,849 65.08% 8,345,541 11,840,561 70.48%<br />
Mar 07 12,257 51,598,161 68,602,988 75.21% 4,928,028 7,324,118 67.28% 9,786,884 13,551,384 72.22%<br />
TOTAL 140,140 584,406,659 769,646,707 75.93% 55,143,765 82,886,882 66.53% 110,156,288 155,091,171 71.03%<br />
2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />
Apr 06 6.2% 6.6% 2.5% 2.9 5.3% 3.1% 1.4 5.8% 3.2% 1.8<br />
May 06 4.0% 3.9% 1.5% 1.7 3.3% 2.2% 0.7 3.7% 2.3% 0.9<br />
Jun 06 3.1% 3.0% -0.6% 2.7 3.0% 2.6% 0.3 3.0% 1.5% 1.1<br />
Jul 06 2.5% 2.0% 0.2% 1.4 3.0% 2.1% 0.6 2.6% 2.1% 0.3<br />
Aug 06 3.6% 2.9% 0.7% 1.7 6.2% 3.6% 1.6 4.6% 3.2% 0.9<br />
Sep 06 1.7% 1.6% 0.3% 1.0 6.2% 2.6% 2.3 2.8% 1.6% 0.8<br />
Oct 06 4.1% 4.1% 0.3% 2.8 3.0% 5.6% -1.7 3.7% 4.0% -0.3<br />
Nov 06 6.5% 5.2% 1.3% 2.8 7.1% 6.9% 0.1 6.4% 5.3% 0.7<br />
Dec 06 6.8% 6.5% 2.4% 3.0 5.3% 6.3% -0.6 6.0% 5.3% 0.5<br />
Jan 07 3.2% 3.1% 0.7% 1.8 1.4% 3.1% -1.0 3.1% 3.3% -0.1<br />
Feb 07 5.0% 3.8% 1.3 % 1.8 4.6% 7.3% -1.7 4.8% 5.7% -0.6<br />
Mar 07 6.2% 7.1% 5.4% 1.2 0.4% 3.7% -2.2 4.1% 3.9% 0.1<br />
GROWTH 4.4% 4.1% 1.3% 2.1 4.1% 4.1% -0.0 4.2% 3.5% 0.5<br />
Percentage or Percentage Point Change<br />
CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />
2002 116,252 491,401,221 659,537,957 74.51% 42,441,232 61,785,652 68.69% 88,851,456 122,017,587 72.82%<br />
2003 102,745 444,737,398 638,188,830 69.69% 44,380,471 66,115,813 67.13% 85,983,530 124,752,870 68.92%<br />
2004 126,253 526,778,872 721,326,742 73.03% 50,453,626 74,801,046 67.45% 100,064,108 141,770,437 70.58%<br />
2005 132,650 553,815,164 753,438,103 73.51% 52,281,340 78,999,903 66.18% 104,466,832 148,872,722 70.17%<br />
2006 138,218 576,159,450 762,743,533 75.54% 54,884,310 81,998,562 66.93% 109,113,927 153,524,419 71.07%<br />
2007 YTD 35,314 148,419,846 194,311,183 76.38% 13,115,532 20,258,876 64.74% 27,120,115 38,372,853 70.68%<br />
CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />
2003 -11.6% -9.5% -3.2% -4.8 4.6% 7.0% -1.6 -3.2% 2.2% -3.9<br />
2004 22.9% 18.4% 13.0% 3.3 13.7% 13.1% 0.3 16.4% 13.6% 1.7<br />
2005 5.1% 5.1% 4.5% 0.5 3.6% 5.6% -1.3 4.4% 5.0% -0.4<br />
2006 4.2% 4.0% 1.2% 2.0 5.0% 3.8% 0.8 4.4% 3.1% 0.9<br />
2007 YTD 4.8% 4.7% 2.5% 1.6 2.0% 4.6% -1.6 4.0% 4.3% -0.2<br />
Note: 1. Data includes all 17 AAPA member airlines<br />
2. Figures for January to February 2007 restated<br />
3. AAPA consolidated traffic figures include estimates for Air New Zealand and Qantas Airways<br />
Percentage or Percentage Point Change<br />
42 ORIENT AVIATION JULY/AUGUST 2007