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usiness round-upHigh speed trainseating into profitsof China’s carriersPrice wars and competition fromhigh speed trains contributed toChinese carriers posting lossesfor three consecutive months atthe turn of the year.Statistics released by theCivil Aviation Administrationof China (CAAC) and reportedin the China Business Newsshowed that Mainland airlinescollectively lost one billion yuan(US$160.3 million) in January.Passenger demand atall three of China’s majorcarriers, Air China, ChinaSouthern Airlines (CSA)and China Eastern Airlines(CEA) slumped year-on-yearin January. Air China’s revenuepassenger kilometres (RPKs)decreased 1.5% while RPKs forCEA and CSA fell 2% and 1%respectively.The figures were partlydistorted by the Lunar New Yearholiday, which fell in Januarylast year, when travel demand ishigh. Now the holiday period isover carriers are slashing faresby as much as 92% on someroutes.In response to the growingimpact of high speed rail,Mainland carriers are cuttingshort-haul routes and increasinglong-haul services. Air China,for example, launched Beijing-Geneva and Chengdu-Frankfurtflights last month. ■Good news for Qantas Int’l, JetstarThe Qantas Group’s after-tax, half-year profit toDecember 31, was up 164% to A$111 million(US$107.7 million). But, most significantly, thelosses of under pressure Qantas International,which in the year ended June 30, 2012 hadballooned to more than $400 million after tax,were reduced to $91 million, a 65% improvementon the comparable six months a year earlier.“By closing down loss-making routes,retiring aircraft and consolidating maintenancetasks we have taken significant costspermanently out of that business,” said Qantaschief executive, Alan Joyce.All other segments of the group’s business– domestic, budget arm Jetstar and the QantasSIA Group net profit up 6%The Singapore Airlines (SIA)Group recorded a third quarternet profit of S$143 million(US$115.4 million), up 6% yearon-year.However, an operatingprofit of S$131 million was 17%lower for the quarter endingDecember 31.Sales of aircraft, spares andengines helped boost profits,but cargo operations onceagain performed poorly. Grouprevenue fell 0.4% to S$15 millionmainly from lower cargo revenuedue to depressed yields (down3.5%) and poorer loads (down10%).For the nine months toDecember 31, the SIA Groupposted a net profit of S$311million, a year-on-year declineof 17%. Operating profit was 6%down to S$273 million. Revenueimproved 3% to S$11.4 billion.A company statement saidthe outlook for internationalJetstar:its budgetairlines ingrowth stagefrequent flyer division - reported solid results.Jetstar’s pre-tax profit decline of 13% to A$128million was a reflection of conditions in Australia’sdomestic market and start-up investments inJetstar Japan and Jetstar Hong Kong, said Joyce.“Jetstar’s revenues increased 12% as itpositioned itself for a new phase of growth. JetstarJapan commenced domestic operations in Julyand has made a strong start with over 600,000passengers carried in its first six months.“Singapore-based Jetstar Asia continued togrow, with an improvement in profitability, whilethe performance of Vietnam-based Jetstar Pacificwas also improving after an ownership restructureand fleet renewal programme.” ■Singapore Airlines:internationalpassenger marketremains challengingpassenger travel continued tobe “challenging” while the cargomarket remained “depressed”. ■In brief …* Cathay Pacific Airways will launch a fifth dailyreturn flight between Hong Kong and LondonHeathrow from June 27 increasing the numberof weekly flights to 35.* Garuda Indonesia will introduce six weeklyB777-300 flights between Jakarta and London(Gatwick) in the fourth quarter of the year.* Aircraft manufacturer Pratt & Whitney(P&W) broke ground on a new productionfacility at Singapore’s Seletar Aerospace Parkon January 31. The factory will manufacturefan blades and high pressure turbine disks forP&W’s PurePower Geared Turbofan engines.The 16,000 sq metre plant will border thecompany’s component repair facility.* United Airlines will expand its non-stopservice between Hong Kong and Guamto four times a week from next month.* Jeffrey N. Shane has been appointedgeneral counsel for the InternationalAir Transport Association, based inMontreal. ■ / ORIENT AVIATION / march 2013

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greener skies 2013EC chief hintsat ETS flexibilityBut if ICAO drags its feet EC may turn to WTO,risking trade war, says DelbekeTOM BALLANTYNEreportsThe European Commission (EC) may have ‘stoppedthe clock’ on its controversial emissions tradingscheme for aviation, but another timepiece is rapidlyticking towards the deadline for the InternationalCivil Aviation Organization (ICAO) to find a globalsolution for aviation’s environmental impacts. When160 industry delegates met in Hong Kong last monthfor Orient Aviation’s 5 thGreener Skies aviation andenvironment conference,one of the EC’s most seniorofficials held out hope forsuccess, but hinted it woulduse a bigger stick if nosolution was found.The EuropeanCommission doesnot necessarilyrequire a finalagreement ona global emissions tradingscheme (ETS) for aviation atthe crucial International CivilAviation Organization (ICAO)Assembly next September toprevent it re-starting the clock onits controversial ETS. That wasthe clear indication from the EC’sdirector general Directorate General Climate Action, JosDelbeke, when he spoke at the 5 th Greener Skies conferencelate last month.What was important, he explained, was to “agree wherewe are going in the long term and I would hope very muchthat we are able to make an in-principle decision, whichimplies a decision on the core elements and a timeframe forimplementation”.That was the good news. At the same time Delbeke,who is Belgium’s representative on the ICAO high levelcommittee that is trying to work out a solution to take tothe Assembly, issued a clear warning that if a way forwardwas not found the EC would be more than happy to take theissue to the World Trade Organization (WTO), the forumfor settling trade disputes.“I am afraid these discussions mightshift away from ICAO to other arenassuch as the WTO and that would not be ahelpful development. But we are willing togo that way if there is no other solution,”he said.We have great hopesas we always had thatICAO is going to delivera solution, but it may notbe able to deliver thatsolution on its ownJos DelbekeDirector GeneralDirectorate General Climate Action,European CommissionBrussels suspended the ETS – at least forinternational airlines - late last year in the face of worldwidecondemnation, but has vowed to re-introduce it if ICAOfails to come up with a global alternative.Indeed, on the very day Delbeke was speaking theEuropean Parliament Environment Committee votedto support the “stop the clock” move. It still requires theendorsement of a full parliamentary session in April, but hasso much support that it is unlikely to be overturned.Delbeke was speaking at Greener Skies 2013 just10 / ORIENT AVIATION / march 2013

moments after a stern warning from China that no matterwhat happened at ICAO, or whatever the EC did in terms ofits ETS, Beijing would refuse to participate.That message was delivered at the conference by WeiZhen Zhong, secretary general of the Chinese Air TransportAssociation (CATA) (see separate story). The U.S. alsohas made it illegal for its carriers to participate and othercountries, including India, are threatening similar action.It became clear during the conference that ICAO’s highlevel group is already navigating heavy weather in its effortsto find an acceptable path to a global solution. It has heldonly two meetings and won’t convene again until the end ofthis month, just six months before the ICAO Assembly.Delbeke said there had been “good discussions, butprogress is still far too slow compared with where we willhave to land at the ICAO Assembly at the end of this year”.Paul Steele, executive director of the Air TransportAction Group (ATAG), which represents the airline industryat ICAO, agreed progress was slow.He said the whole issue continued to be “mired inpolitics” and discussion and negotiation would go onthrough the year and possibly beyond. It was a delicatebalancing act between the EU and ICAO, added Steele.Much depended on how much progress the 192 ICAOmember countries could make to satisfy the EU and avoidthe ETS “snapping back” at the end of the year.“My read is the EU might be willing to accept a fewthings that three or four years ago it wasn’t. If there wasan agreement on a global approach where growth beyond2020 was going to be covered to a large extent, they wouldprobably find that palatable,” he said.In his keynote address to the conference, InternationalAir Transport Association (IATA) director general andCEO, Tony Tyler, said Europe’s decision to stop the clockon its ETS presented a “tremendous opportunity” because itdefused a potential trade war and avoided the fragmentationof the industry’s global strategy for reducing emissions.“International tensions had been building in oppositionto the EU’s extra-territorial approach to includinginternational aviation in its ETS. Stopping the clock allowedgovernments to focus their attention on finding a global wayforward through the processes of the ICAO,’ said Tyler.“Work is going on in earnest to prepare such a solution.This is all positive. But we should not be lulled into thinkingthat a global deal will be easy.”Cathay Pacific Airways chief executive, John Slosar,also acknowledged the move by the EU to stop the clockas positive. “It’s no secret most of the aviation communitywere not supportive of their proposed unilateral schemebecause amongst its many flaws it moved the world towardsa patchwork of uncoordinated, potentially over-lappingregulations that would ultimately lead to inefficiency andprobably produce more harm than good,” he said.“But that risk is behind us now and we must as anindustry focus on making positive progress. An industrysolution must surely start with the industry itself.”ICAO is exploring three options involving market-basedmeasures (MBMs) for a global scheme: carbon offsetting,carbon offsetting with a revenue generating component anda full, global ETS.In parallel to this, if states were unable to agree to asingle mechanism that everyone could apply, ICAO waslooking at how a framework - a rule book for states - couldbe developed if individual countries wanted to introducetheir own MBM.“It’s too early to back any particular horse,” said Steele.But he believed a straightforward offsetting mechanismwhere people bought credits to cover their growth post-2020would be the simplest and quickest way to do it.Tyler also said offsetting appeared to be the simplest toimplement. “But, for any of the options, the devil will be inthe details of implementation,” he said.“We will be vigorous in reminding governments thataviation is a very competitive industry. Last year, theindustry generated a net profit margin of just 1%. So it iscritical that governments agree to a system that preserves faircompetition.“With razor thin margins, the consequences of evena small skewing of the competitive playing field could besevere.”Executive panel (from left): managing director environment and aviation policies. Boeing Commercial Airplanes, Julie Felgar;president Engine Alliance, Mary Ellen Jones; vice-president environmental affairs, Airbus, Andrea Debbane; director general andCEO IATA, Tony Tyler; chief executive, Cathay Pacific Airways, John Slosarmarch 2013 / ORIENT AVIATION / 11

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cover storyStarringroleThai Airways International’s (THAI)new president, Sorajak Kasemsuvan,is a film buff. A former secretary general ofthe Thai Film Federation, he once hadaspirations to be a movie director.Today, the former head of the state-controlledmedia company, MCOT, and ex-cultureminister, has his own starring role at THAI.But will he win over the critics?By BARRY GRINDRODin BangkokFifty-eight-year-old Sorajak Kasemsuvan isTHAI’s sixth president in the last 12 years (seeseparate story). He is a very different character tohis predecessor, Piyasvasti Amranand, who wasousted for “communication issues” with the board.A former energy minister, Piyasvasti was a heroto many of his staff. His determination to stand up toan interfering board of directors made up of politicalheavyweights from Thailand’s finance ministry and seniormilitary officers, and his crusade to rid the carrier ofcronyism earned him widespread respect within the airlineand the industry at large.But, in the end, his employers branded the formergovernment minister a villain and once again wielded itsbloodied axe.Quiet and unassuming, Sorajak, who is a formerculture minister in the Thai government, is far fromconfrontational. He is supportive of his board saying “theonly interference is natural interference”.“[The government] has representatives on the board andthey might have a direction they want us to follow. But thisis not affecting what we are doing commercially,” he said.The president admitted, however, that the airline didhave problems he needed to solve. Raising low morale is apriority, said Sorajak.Ironically, this was created by “drastic” cost-cutting,according to Sorajak. This, in turn, led to an eroding of theairline’s Thai spirit, what the president calls “Thai-ness”, afall in service standards and drop in morale.He is looking to redress the situation in the current18 / ORIENT AVIATION / march 2013

When you are continuallycost-cutting and staff are notgetting pay rises,it’s bound to affect moraleSorajak KasemsuvanPresidentThai Airways Internationalfinancial year. “When you are continually cost-cutting andstaff are not getting pay rises, it’s bound to affect morale. It’sonly human nature,” said Sorajak.He said some of the measures taken to slash costs underthe leadership of Piyasvasti would be reversed. The morethan 5,000 members of the THAI flight crews would beamongst the first to benefit.Sorajak said the Thai smile had been a trademark ofTHAI service in the past, but in more recent times the smilehad slipped. He wanted to see it return to the faces of thoseon the front line, on board its aircraft, as well as boostingother aspects of “Thai-ness”, including “the best food in thesky” and the promotion of Thai products and fabrics.He wants visitors to the country to start their Thaiexperience as soon as they step on board. “We need tobuild the Thailand brand as it will be our competitiveedge,” he said.The airline is pulling out all the stops to re-brand itselfstarting with its biggest investment – the fleet.THAI is replacing 75 of its 100-aircraft fleet and hasanother 37 planes on order. It was Airbus’ ninth customerfor the A380 and has four of its order of six aircraft inservice. Seventeen planes will be delivered during 2013 andnew seats installed throughout the fleet during the year.More orders are to come. Sorajak said long range jetswere on the THAI radar. “We are waiting to see what theAirbus and Boeing next generation aircraft will bring,”he said.Sorajak also has named 2013 as THAI Digital Yearwhen the airline will be given a major technology upgrade.There will be a particular focus on promoting online ticketsales as the airline looks to increase revenue.Direct sales account for about 9% of THAI’s revenue.By improving online services, it is hoped to push this figureto beyond 15%.Routes and frequencies have been cut in recent yearsand only one new route – Sapporo, Japan - was opened lastyear. No new destinations are planned for 2013 although itssubsidiary regional carrier, THAI Smile, may launch routesbefore the end of the year.However, the Tourism Authority of Thailand wasconducting feasibility studies, which could lead to THAIeventually introducing new destinations. Sorajak said themain targets were China, India and Russia. Russian visitorshave been increasing at 20% a year. “Two years ago, therewere 800,000 Russian visitors to Thailand. Last year thatfigure had risen to 1.2 million,” said Sorajak.THAI has not had it easy in recent years. It has been hitby a series of crises beyond its control which had a dramaticaffect on its bottom line. There were politically inspiredairport closures followed by riots in Bangkok that hit theworld headlines. Tourism slumped.No sooner had the airline recovered from those eventsthan serious flooding dealt another blow to the capital cityand THAI’s balance sheet.Although last year had its ups and downs, THAIis expected to announce a profit of US$202 million for2012, following a net loss of $335 million the previousyear. Sorajak said he refused to take credit for the 2012performance, but believes THAI will top the $200 millionprofit in the current year.march 2013 / ORIENT AVIATION / 19

cover storyTHAI Smile: looking to addmore regional routesHe wants to seethe carrier increase itscompetitiveness in one of the world’s most competitivehubs. His predecessor, Piyasvasti, believed this would beachieved by reducing the government’s 51% shareholdingto a minority 49%.Sorajak said there are no plans for this move. Hewants to consolidate the airline’s position by increasingits partnerships with its fellow Star Alliance membersas well as striking up agreements with carriers outsidethe grouping.THAI is also expanding the role of its subsidiary,THAI Smile, which was launched in July last year.Described as a “lite” carrier which fits somewhere betweena low-cost airline and a full service carrier, Smile has fiveA320s in service.It currently servesseven domestic routesand one regional (Macau). It willadd Mandalay, Myanmar, to itsnetwork this month.The Smile fleet will compriseof 11 A320s by 2016 with routes added to neighbouringAssociation of South East Asian Nations (ASEAN)destinations. It will put particular focus on southern China.THAI also holds a majority 37% shareholding inlow-cost carrier Nok Air which, said Sorajak, “is makingmoney”.Sorajak was first offered the THAI president’s job in2005. “I declined the offer. I felt I wasn’t ready for it,” he said.“At the time I thought I would not have the chance again.”Seven years on he has been given a second chance.Ironically, Sorajak will retire in less than two years whenhe reaches 60 years of age. He has little time to make hispresence felt. But given the record of the THAI president’soffice, that could be a blessing in disguise. ■Roll call of THAI’s fallen chiefsThe 21st century has proved something of agraveyard for THAI presidents. There have beensix during the first 13 years.2000: a popular 30-year veteran at THAI, BhisitKuslayanon, was appointed president in Octoberfollowing the retirement of Thamnoon Wanglee. Bhisitlasted less than a year before being sacked by the country’sthen prime minister and now disgraced exile, ThaksinShinawatra, who went on record that year to say that “THAIsucks”.Bhisit endured a tumultuous few months in charge,including a bomb blast on a B737 at Don Muang airportin Bangkok, which killed one person and injured seven.Sources said at the time that Bhisit’s downfall was politics.They claimed he was not a political player inan airline 51% owned by Thailand’s financeministry.2002: Kanok Abhiradee, who had noprevious airline experience, was named asBhisit’s successor in May. He was creditedwith demanding transparency at an airlinenot noted for its openness, often invitingthe press to purchasing meetings. He wasawarded Orient Aviation’s Person of theYear in 2004 for “re-envigorating theairline during a period of serious crisisfor the airline industry”.But less than a year later, followingPiyasvasti Amranand: surprisinglyousted by the board last yeara slump in profits, caused not least by the fall-off in trafficfollowing the devastating tsunami that hit Phuket inDecember, 2004, he was suspended by the board. Threemonths later he was out of a job.2006: a career pilot, Capt. Apinan Sumanaseni, wasappointed president in May. He resigned two and a halfyears later citing disagreements with the board and healthreasons.2009: In June, a former Thai minister of energy,Piyasvasti Amranand, was named president. And he left noone in any doubt what he was about. In an interview withOrient Aviation six months into the job he said: “In the lastfive years we have seen major intervention by the boardof directors at Thai Airways. So much so that the airline’smanagement stopped managing.”After consulting previous presidents,Piyasvasti attempted to protect himselfagainst the whims and fancies of theboard by taking three months to thrashout an employment contract that wouldallow him the flexibility and freedom toachieve his goals. Once again, the THAIboard called time on their president andhe left the company in June last year.2012: Sorajak Kasemsuvan succeededPiyasvasti in October. With less than twoyears to go before retirement, who would beton him lasting that long. ■20 / ORIENT AVIATION / march 2013

news backgrounderBoom or bustin IndonesiaTOM BALLANTYNE reportsIndonesia is experiencingdouble-digit passengergrowth, but it didn’t stoplocal carrier, Batavia Air,from going bankrupt. Whilemajor carriers flourish,others are likely to end upon the scrap heap.When AirAsiagroup chiefexecutive, TonyFernandes,announcedplans to buy into Indonesianbudget operator, Batavia Air, inmid-2012, industry observerssaw it as a move to expand hissoutheast Asian empire followingthe Malaysian low-costleader’s move toJakarta. ByOctober, theUS$80 milliondeal was off.Now we know why.Due diligence disclosed Bataviawas struggling, both financiallyand operationally, despite flyingin one of the region’s fastestgrowing markets.Indonesian transport ministrydata shows there are 22 activelocal commercial airlines, notincluding cargo and chartercarriers operating in the country.Analysts said it is becomingincreasingly difficult for smallerairlines, without sufficientfinancial backing, to survive.Batavia is a case in point. OnJanuary 31, it ceased operationsafter being declared bankrupt bythe Central Jakarta CommercialCourt following the review of apetition by International LeaseFinance Corporation (ILFC).Batavia had failed to pay ILFC$4.68 million for two leasedA330s.Last month, trusteesappointed to deal with thecompany disclosed it had debtof more than $123.58 million.It couldn’t pay employees orbusiness partners.Batavia also owes moneyto state-owned airportoperator Angkasa Pura, oiland gas company Pertaminaand maintenance, repair,and overhaul (MRO) firm,GMFAeroAsia, the maintenanceBatavia Air: will not bethe last Indonesian airline togo bankruptarm of Garuda Indonesia.The airline, it has emerged,was the victim of marketpressures in a country wheredomestic air traffic has beengrowing at up to 15% annually inrecent years.The Indonesia National AirCarriers Association (INACA)said around 70 million scheduledpassengers travelled domesticallylast year. It is projected this figurewill reach 100 million passengersin 2015 and 180 million by 2021.Today, Lion Air has just underhalf of Indonesia’s market share,Garuda about 25%, SriwijayaAir around 12% and MerpatiNusantara 3%. Batavia, with afleet of 34 aircraft, had 11%.Shukor Yusof, Singaporebasedaviation analyst atStandard & Poor’s said:“Competition has intensifiedand the weak will be weededout. Smaller players will findit increasingly difficult to staysolvent.”Batavia found out thehard way. A number of factorscombined to bring about itsdownfall. Firstly, it had leasedaircraft to fly Indonesianpilgrims during the lucrative Hajseason, but it failedto win a contract to do so fromIndonesia’s religious affairsministry.In the meantime, it wasbeing forced to sell tickets ondomestic flights at a loss. As aformer commercial director atthe airline, Sukirno Sukarna, toldlocal media: “The main problemwas that competition was tootough.“Batavia’s fleet is old, it couldnot sell tickets at the top-endprice limit set by the government.Other airlines have newer planesand can set their prices higher.”Although Batavia had loadfactors as high as 80%, it wasunable to cover costs. It soldtickets at prices far below breakeven,added Sukarna. Last year,with revenue of $434 million, itlost $32 million.Garuda and its domesticbudget arm CitiLink, Lion,Mandala (part-owned by TigerAirways), Sriwijiya and AirAsiaIndonesia are all in the process ofrapidly expanding their capacityin Indonesia, intensifying thebattle to fill seats. The prospectsfor Batavia to turn its situationaround were bleak.Last month, the number ofdomestic seats in the marketwas 18%, or more than onemillion seats higher than in thesame month last year. In just fiveyears, the Indonesian domesticseat market has almost doubled,growing from 3.5 million seats inFebruary 2008 to 6.8 million lastmonth.The growth is dominatedby budget operators.John Grant, executivevice-presidentof OAG, saidlow-cost carriers had becomean increasingly importantcontributor to domestic capacitygrowth.The country’s majoroperators have committed to thedelivery of around 200 aircraft inthe next three years.Batavia is unlikely to be thelast casualty. Said Toto Nursatyo,chief commercial officer atSriwijaya Air: “This currentenvironment basically allowsbigger airlines to get bigger,while smaller airlines will gobust.” ■march 2013 / ORIENT AVIATION / 21

special reportsocial mediaThe socialmedia revolutionTOM BALLANTYNE reportsToday, airlines across theAsia-Pacific are usingsocial networks to reachmillions of customers.And, say experts, the likesof Facebook and Twitterare going to play a ‘huge’role in their success in thefuture.Air New Zealand (AirNZ) chief executive,Christopher Luxon,says that when itcomes to the useof social media networks someairlines still don’t get it. Whatis more, if they fail to grasp theimportance of, say, Facebook orTwitter, they will miss out in a bigway, he added.“We’re the 45th largestairline in the world, but we arethe third biggest on social media.That’s where our customers are.They are sales channels in theirown right. If you are not thinkingabout that, then you have aproblem,” said Luxon.The Air NZ boss said some22 million Americans have NewZealand on their bucket list, butonly 165,000 visit the “Landof the Long White Cloud”annually. That, he added, is a lotof opportunity.“Where are thesecustomers? Who are they?What messages do they need tohear? What things interest themabout the destination? How dothey buy their tickets? Let’s getfocused about these people.If we can get even a smallproportion of them in all themarkets we go to, if we can beclever in our customer and saleschannel segmentation, we canbenefit a great deal,” said Luxon.“That to me is excitingbecause it’s within our circle ofcontrol. It’s nothing to do withfuel and economics or otheroperating factors.”Luxon is not alone inidentifying how crucialsocial networks, whichalso include Google,Wikipedia, Flickr,YouTube, InstaGram andAs social media strategies becomemore sophisticated, it is going toevolve into an important - if not the mostimportant - way for the industry to talkto its next generation of customersFrancesco ViolanteChief ExecutiveSITAothers, are becomingthe future of theairline business. Theyare no longer just amarketing tool.Mike Slone, globallead on user experience designat IT major, Amadeus, saidsocial media should be a keycomponent of any business.“You are missing out on ahuge acquisition channel and ahuge place to build relationshipswith customers [without socialmedia]. The risk of not being onsocial media is quite large. It issomething all airlines should beparticipating in,” he said.The statistics speak forthemselves. Last year, there weremore than 600 million socialnetwork users in theAsia-Pacific alone, anumber expected to soarto 854 million in 2014.They are only part of the2.9 billion mobile subscribers inthe region, 969 million in theAmericas and 741 million inEurope.Already, social media is beingused widely by airlines, includingfor the promotion of newroutes, special ticket price offers,advertising the introduction ofnew aircraft, inflight services orground facilities.They have also beenmobilised during crises, suchas when flights in Europe weregrounded following the eruptionof the Icelandic volcano and thesubsequent spread of ash. Withtheir call centres swamped byenquiries, airlines informedthe public of developmentslargely through Twitterand Facebook.Social networks havebecome critical in reactingto negative publicity. Onthe one hand, if somethinggoes wrong passengersare quick to spread the newsthrough social networks.On the other hand, airlinesare constantly monitoring thenetworks and can respondrapidly to complaints, offeringexplanations or apologiesto individuals and the22 / ORIENT AVIATION / march 2013

wider public.However, the real potentialof social media goes beyondthe airline to customercommunication channels. Slonesaid social media is undergoinga critical change that willtransform it from a marketing,advertising and informationchannel into a vital e-commercetool with the potential to boostprofitability of carriers.The key is social login, alsoknown as social sign-in, a formof single sign-on using existinglogin information from a socialnetworking service such asFacebook or Twitter to sign intoa third party website, such as anairline, in lieu of creating a newlogin account.That would be a gatewayto increasing social networkcommerce because it canbe used as a mechanism forboth authentication andauthorization, opening thedoor to the widespread sale ofairline tickets and other ancillaryservices through social media.“To me that’s the big shiftwith social media, where ITcompanies are getting muchmore involved,” said Slone.“Social media is shifting frombeing just a PR communicationstool to being much more of anintegrated piece of e-commerceand IT.[Our social media] conversations areintended to build trust andmore relationships and ultimatelyengender deeper loyalty“Essentially, social sign-incan make signing up for anairline account or creatingpurchase or pre-billing datamuch easier on the customer.“In the coming monthsand years you’re going to seea number, if not all airlines,adopt social sign-in of somesort, whether it’s throughFacebook, Twitter or othersocial networks.”A handful of airlines areselling tickets through Facebook– Delta in the U.S. was the firstand both Malaysia Airlines (MAS)and AirAsia have a Facebookbooking facility – but Slone saysit remains a basic booking.Most airlines are keepinga “watching brief” on the useof social networks for sellingproduct. “It hasn’t been adoptedso much because the featuresand functionalities built intothe booking engines withinFacebook aren’t making it anyeasier,” said Slone.Nicholas IonidesVice-President, Public AffairsSingapore Airlines“Right now it doesn’tnecessarily take away the hasslefactor for the customer or makeit any easier so they’re notnecessarily booking on Facebookas opposed to a normal websiteor mobile [phone].”That will change. Socialsign-in will become a standardon all websites, including airlines,because it will mean that witha single sign on a customer canmove from website to websitewithout having to repeatedly fillin a lot of personal information,including credit card details.The major benefits fromthe commercial use of thesesites is becoming increasinglyapparent. For example, atChristmas, movie and televisionpersonalities travelling withBritish Airways to the Caribbeanposted photographs ofthemselves in holiday mode onsocial media sites.As a result, the airline’sholiday arm reported thatbookings to the Caribbeansoared 130%. For the samereason, the carrier also sawa record jump in bookingsto Hawaii, up 100% on theprevious year.So what are airlines doing?Consulting firm, Simpliflying,surveyed 29 global carriers activeon social media last year andfound that more than 75% ofthem invest more than 90 hoursa month on social media, with atleast four hours a day dedicatedto being online.Even though nearly halfweren’t sure about the return oninvestment in social media, theystill wanted to be part of it. Morethan 70% of airlines surveyedplanned to increase their socialmedia budgets this year.According to Simpliflying,that’s more than double thenumber of airlines wantingto grow their social mediaa year ago. Spending variesfor each airline, but 85% ofthose surveyed had allocatedmarketing funds – most said10% of their budget - tosocial media.Ilya Gutlin, Asia-PacificNok’s Facebook campaign raises hacklesWhen majority Thai Airways Internationalownedbudget operator, Nok Air, launcheda promotion to attract customers on itsFacebook page in January, chief executive,Patee Sarasin, received an unexpectedreaction.The campaign, offering participantsa free copy of the carrier’s 2013 calendarfeaturing photographs of scantily-dressedbikini girls posing in front of its aircraft,raised the hackles of government officialsand political groups.Culture ministry permanent secretary,Prisana Pongtatpitakkul, felt the calendarwas “inappropriate”.“The campaign focuses on thecountry’s bad reputation regardingsex services. The message beingsent out by the airline could alsobe misinterpreted as encouragingpassengers to sexually harass airhostesses,” said another complainant.Patee was unrepentant saying therewere so many viewers that the webpagecrashed. He insisted the calendar did notdamage the image of either his companyor Thailand because the models were notNok Air staff.Nok Air:calendar girls Facebookcampaign divided opinion“So far the campaign has receivedpositive feedback, increasing the numberof passengers,” said Patee.It may have been a small incident in theworld of aviation, but it highlighted the perilsof social media for airlines.march 2013 / ORIENT AVIATION / 23

special reportsocial mediaMobile technology on the marchA study released by IT provider Amadeus, in January,showed it is critical for airlines to keep up with the march ofmobile technology. Developed by consultants, Frost & Sullivan,it surveyed 1,531 business and leisure travellers in seven keyAsia-Pacific markets: Australia, China, India, Indonesia, Japan,Korea and Singapore.Among its findings:• Forty percent of business passengers and 25% of leisuretravellers now routinely use mobile devices for travel-relatedarrangements and bookings. This is expected to rise to about45% and more than 50% respectively, by 2030.• Smartphone and tablet usage is strong in Singapore, Koreaand Australia and growing rapidly in developing markets suchas China and Indonesia.• Usage of smartphones by business travellers in China, India,Indonesia and Korea is especially high.• Social media is changing the way people gather informationabout their travels.• Just under one third of passengers now use social mediawhen travelling, with Indian and Indonesian travellers beingparticularly avid users.• Sixty one percent of Indonesian passengers questioned saidthey frequently use social media during their trips, mainly toseek advice.president of IT andcommunications provider SITA,agreed airlines were startingto allocate specific budgets tosocial media. SITA enables MASto sell tickets and also check-inpassengers through Facebook.“That allows them to sharethe trip with their friends and beable to sit as close as they wantto their friends,” said Gutlin.“AirAsia is quite aggressiveon social media. It gives them anadvertising channel, a potentialsales channel and it does growrevenues.”He said ticketing throughsocial networks was not yetwidespread, but pointed out thatpassengers tended to convert tonew channels quite slowly. “In2005, demand for self-servicecheck in was muted. People werelooking to see who would useit. I believe we are at the samestage with social media,” saidGutlin.Said SITA chief executive,Francesco Violante: “Ourlatest IT Trends Survey showsthat 90% of airlines intend topromote their services usingsocial media in the next fewyears. Today, the immediacyof social media is drivingimprovements to customerservice. It can be provided ata lower cost than some otherchannels, such as call centres.“As social media strategiesmature and become moresophisticated, it is going toevolve into an important - if notthe most important - way forthe industry to talk to its nextgeneration of customers.”A straw poll of airlinesacross the Asia-Pacific clearlyshowed all were taking socialmedia seriously.They have a Facebook andTwitter presence and most havemade social networking a firmpart of their budgeting. Therewas, however, a large variance inthe number of staff dedicated tohandling it. There was also somedivergence of opinion in termsof how social media could bedeveloped into a money-makingelement of the business.Nicholas Ionides, SingaporeAirlines vice-president for publicaffairs, said the carrier’s socialmedia customer engagementwas spearheaded by headoffice under the public affairsdepartment. It was supportedby a global team, mainlyfrom PR and marketing roles,who worked closely with thecustomer affairs department,contact centres and otherrelevant departments.“This enables us to have24/7 coverage through oursocial media channels. It is notpossible to put a definitive figureon the number of people whoare involved in social mediaactivities, however, as all teammembers have other duties aswell,” said Ionides.Cathay Pacific Airways saidit used Facebook and Twitterdifferently, but aimed to achievethe same goal; increasing brandengagement and loyalty building.“Facebook is more forengagement on branding,campaigns and discussiongeneration to build bondingwith the community andwithin the community,” said aspokesperson.“For Twitter, it is more forinformation sharing, handlingcustomer enquiries within ashorter timeframe.”Cathay has a dedicatedsocial networking team at headoffice and in various overseasoffices. “Facebook and Twitterare some of the growingchannels that our customers arespending more time on and soare we,” said the spokesperson.Qantas Airways has a“small dedicated team” thatmanages the airline’s socialmedia presence across Twitter,Facebook, YouTube, LinkedIn andInstagram, said a spokesperson.“This includesrepresentatives from our keystakeholder groups; corporatecommunications, marketing,commercial, frequent flyer,customer care and online.With such a large number ofour customers expecting morefrom us online, social mediahas become an increasinglyimportant strategic focus atQantas,” she said.“We understand the valueof communicating via a rangeof mediums. Social mediaallows us to engage with arange of audiences and rapidlyshare information - news,images, audio, video, and othermultimedia content - withcustomers and media.“We use social media toCebu Pacific: its Facebookpage has more than 700,000users, its Twitter account morethan 400,000 followers and itsYouTube channel has had morethan one million views.24 / ORIENT AVIATION / march 2013

assist our customers wherewe can with general queries.If the issue is more serious, wethen triage these customersto our dedicated social mediacustomer care team or toreservations for assistance.”Said SIA’s Ionides: “Wesee an increasing number ofcustomers engaging with usthrough our Facebook page andTwitter, be it for assistance withtheir travel or to share feedbackwith us.“These conversations areintended to build trust and morerelationships and ultimatelyengender deeper loyalty.”Royal Brunei Airlines (RBA)recently announced a one-yearpartnership with SimpliFlyingto provide strategic consultingfor its customer engagement,marketing and social mediastrategy.“Our partnership is ameasure of our determination tobe at the ‘cutting edge’ of thistechnology.” said RBA’s deputychairman, Dermot Mannion.Thai Airways International(THAI) has set up its owndedicated social mediadepartment to meet demand.Last year, it organized a threedayairline social media strategytraining course in conjunctionwith the InternationalAirline Training Fund to helpimprove THAI’s social mediacommunication efficiency.Malaysia’s lowcostcarrier, AirAsia,is regarded as a leaderin the use of socialmedia. It has pushed theenvelope for driving keybusiness goals throughthe medium, handlingcustomer service throughAskAirAsia,launching newroutes throughChinese socialnetworks and drivingrevenue through significantsales on Facebook. It was thefirst carrier outside the U.S. tosign up a million followers.Another of the region’sbudget operators, Cebu Pacificin the Philippines, was namedthe second most “sociallydevoted brand” in the airlineindustry last November bySocialbakers, a social mediaanalytics company. Top of the listwas KLM Royal Dutch Airlines.“This recognition fuels ourdrive to further engage ourpassengers online, especiallywhen it comes to seat sales,enquiries, weather updates,product innovations and newroutes and destinations,”said Cebu’s vice-president formarketing and distributionCandice Iyog.Cebu Pacific’s Facebookpage has more than 700,000fans, its Twitter account hasmore than 400,000 followersand its YouTube channel has hadmore than one million views.Experts believe there isa need for dedicated socialmedia staff. “You need to havesomeone who has ownership ofsocial media. As social media hasmatured there’s a certain skillset needed to run and developprograms,” said Amadeus’Slone. “Typically, it’s becoming amore specialized group focusingThai Airways International:has set up its own dedicatedsocial media departmenton social media.”Gutlin agreed. “If you talkto the airlines that have doneit part-time usually it didn’twork out. You have got to havesomeone looking through socialmedia on a daily basis to seewhat passengers are sayingabout you,” he said.“If you have a negativemessage out there you cannotlet that message go. If you’vegot a positive message you needto amplify it.”Amadeus’ Slone said there isanother advantage. “The goodthing about social media is thateverything is digital. Because it isdigital almost everything can betracked,” he said.“Sophistications of analyticprograms aid and prove theworth of social media. Programscan be put in place to trackexactly how many customersyou are acquiring, how manycustomers are sharing yourcontent, how many customersare booking or coming toyour website because of socialmedia or social influence aspeople are sharing photos andinfluencing friends. All of thatcan be tracked in a way that,when done effectively, willshow that social media is a greatinvestment.” ■TweetsCebu Pacific Air@CebuPacificAirSssssssseat Sale! Welcomingthe Year of the Snake withour seat sale offer! Our latest#CEBseatsale is now up. :) pic.twitter.com/u8kHH26rCathay Pacific UK@cathaypacificUKWe have some exciting newsto share! We’re adding a 5thdaily flight between London#Heathrow & Hong Kong.Details here http://ow.ly/hsPX2Cathay Pacific UK@cathaypacificUKKung Hei Fat Choi! Have thefestivities inspired you to travelto the Far East? Check outour Chinese New Year Sale:http://bit.ly/a39qEVCathay Pacific@cathaypacificFlights to/from New York (JFK)and Vancouver (YVR) on 8th& 9th affected due to severesnowstorm.More details athttp://bit.ly/YcAc1PChinaSouthernNL@ChinaSouthernNLWelcome to the twitter channelof China Southern Airlines:Amsterdam, make sure to visit :facebook.com/csair.nlChina Southern Air@CSAIR_GLOBALChina Southern Airlines havemore than 400 airplanes andhave route from Guangzhou(HQ)to Europe, Korea & Japan,A m e ric a, S outheast A sia,Australia etc.Malaysia Airlines@MASThis is the official twitter ofMalaysia Airlines. We’re onlinefrom Monday to Friday, 10am- 5pm (GMT+8). Journeys aremade by the people you travelwith.Qantas Airways@QantasAirwaysThe official Qantas Twitterpage to share information & getfeedback. For customer serviceissues follow @QFcustomercare.We’re online from 9am–5pmAEST Mon–FriPhilippine Airlines@pr079Follow the OFFICIAL PhilippineAirlines twitter site at http://twitter.com/flyPALmarch 2013 / ORIENT AVIATION / 25

news backgrounderGDS failing tomeet airline needsStudy identifies major trendsthat are transforming travel distributionBy Tom BallantyneAnew studycommissioned bythe InternationalAir TransportAssociation (IATA)says airlines have “morphedinto retailers - true merchants ofthe skies”, but existing globaldistribution systems (GDS) arefailing to meet their needsbecause they don’t cater for thewide diversity of products offeredby individual airlines.“As merchants, airlines needsystems that can help them notjust distribute their flights, butmerchandise their products andvalue across the channels thatmake sense - online and offline,direct and indirect - at sensiblecosts,” said the report.“What airlines don’t wantare distribution channels thatpresent all airlines as equallysubstitutable commodities.Airlines want, and expect,their distribution partnersto offer passengers helpfulcontextual information tomake well-informed purchasedecisions, reducing the numberof reservations made basedprimarily or exclusively on price.”The independent studyidentifying major trends thatare transforming the traveldistribution landscape, TheFuture of Airline Distribution– A Look Ahead to 2017, waswritten by Henry H. Harteveldt,co-founder of AtmosphereResearch Group.“Airlines also wantcommerce platforms that cansupport extensive fare andproduct transparency, dynamicpricing, rich basic and ancillaryproduct merchandising andretailing, and the ability toreliably and securely process themassive volume of shoppingsessions. Importantly, airlinesare also eager to see newproviders enter the airlinedistribution/commerce space,”said the report.It comes as IATA movesahead with its New DistributionCapability (NDC) project, aimedat facilitating a new model fordistributing air travel products.Foundation standards for NDCwere adopted last Octoberat IATA’s Passenger ServicesConference. Pilot programmesare to be conducted this year.Eric Leopold, IATA’s directorpassenger, said NDC would allowanyone to distribute air travelproducts, including new entrantsand intermediaries. “NDC allowsairlines to manage retail oftheir products via indirect saleschannels (using travel agents) inthe same way as selling throughtheir own websites. This will helpclose the gap between direct andindirect channels,” he said.But he stressed NDC wasnot a system designed to bypassexisting global distributionsystems. “Quite the opposite.It gives GDS and travel agentsthe ability to access the sameproduct offers when airlinessell their products directly toconsumers via their websites,”said Leopold. NDC makes iteasier to compare air travelproducts and will lead toinnovation, he added.“Basically, airlines providelimited information about theproducts they sell and don’tknow anything about thecustomers who purchase theproduct until they check in fortheir flight.“This model was designed40 years ago, when IT resourceswere limited and the internet,PCs and mobile phones did notexist,” said Leopold.The Harteveldt study pointedout that travel is the largeste-commerce category, led byairline ticket sales. “In the U.S.,it’s estimated that business andleisure travellers will spend $85.7billion online for airline travel in2012,” said the report.It said the typical travelshopper visited 22 websites in“multiple shopping sessions”before booking a trip, but“travellers relying solely on thirdparty websites would not receiveall the information needed tomake a fully informed purchasedecision”.Eric Leopold, director, passenger,IATA: IATA’s New DistributionCapability will lead to innovationPassengers are more likelythan the general population toown smartphones and tabletdevices, with substantial growthexpected due to these devices’growing capabilities, said thestudy.By 2017, Atmosphereexpects 50% of online directbookings will be made on mobiledevices, with even more ancillarypurchases made throughmobiles, given the portabilityand ease of use of devices.Customers, meanwhile,believe “control is as importantin booking flights as in buying acup of coffee. Passengers mayaccept that airlines can’t be thefirst to offer customization toolslike buttons, sliders and othersimilar controls that make flightshopping easier,” but as theysee these tools deployed onother websites, “they will expectairlines to offer comparablefunctionality”.By 2017, according tothe study, what airlines call‘distribution’ will be replacedby a “focus on channel-based,value-creating commerce”.Atmosphere believes thisnew approach will be supportedby the emergence of “valuecreation hubs” (VCH), whichwill represent an evolutionary“pivot” from the current GDSapproach. ■26 / ORIENT AVIATION / march 2013

No.1 Asia-Pacific commercial aviation magazineOrient Aviation Special Reports 2013APRILORIENT AVIATION ASIA-PACIFIC &MIDDLE EAST AIRLINE &ENGINE FLEET UPDATEBONUS DISTRIBUTION:Chinese Aviation Manufacturers’ Annual Industry Summit,Beijing ChinaACI Asia Pacific Assembly, Phuket ThailandMAYMAINTENANCE,REPAIR & OVERHAUL (MRO)BONUS DISTRIBUTION:Civil Aviation Development Forum, Beijing ChinaJUNESECURITY: PROGRESS INSIMPLIFYING THE PASSENGEREXPERIENCE IN THE ASIA-PACIFIC?BONUS DISTRIBUTION:International Air Transport Association (IATA) AGM andWorld Airline Forum, Capetown South AfricaParis Air Show, FranceJEC Singapore, SingaporeJULY/AUGUSTTRAINING IN THE ASIA-PACIFIC:AN UPDATEBONUS DISTRIBUTION:TBCSEPTEMBERAVIATION TECHNOLOGY:AN UPDATEBONUS DISTRIBUTION:Aviation Expo China, Beijing ChinaOCTOBERMAINTENANCE, REPAIR &OVERHAUL IN GREATER CHINABONUS DISTRIBUTION:Seoul International Aerospace & Defence Exhibition, Seoul KoreaMRO Asia, SingaporeNOVEMBERASIA-PACIFIC AIRPORTS:SURGING GROWTHFUELS EXPANSIONBONUS DISTRIBUTION:Dubai Air Show, UAEAssociation of Asia-Pacific Airlines Assembly of Presidents, Hong KongDECEMBER/JANUARYORIENT AVIATIONYEAR IN REVIEWBONUS DISTRIBUTION:Orient Aviation Person of the Year dinner and awards, Hong KongBahrain International Airshow, BahrainSingapore Air Show, SingaporeAdvertising enquiries to Orient Aviation media group sales directors:The Americas / CanadaRay BarnesE-mail: barnesrv@gmail.comEurope & the Middle EastStephane de RémusatE-mail: rem-media@sfr.frAsia-Pacific (including China and the Indian subcontinent)Tan Kay HuiE-mail: tankayhui@tankayhuimedia.comorient aviation media group | ORIENT AVIATION • ORIENT AVIATION CHINA • ORIENT AVIATION INDIA • WWW.ORIENTAVIATION.COM

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