LIFE AFTER SQ006 - Orient Aviation

VOL. 8 NO. 5 MARCH 2001MAGAZINE OF THE ASSOCIATION OF ASIA PACIFIC AIRLINESLIFEAFTERSQ006Global goalsstill on trackBest of buddiesat SIAExecutive interview:BA’s Eddington putsaccent on success‘I suppose the truth of ourvulnerability and mortality hit us.It was a devastating experience’– Dr Cheong Choong Kong,SIA deputy chairman and chief executivespeaking about the crash of SQ006Country focus: JapanJAL chief Kaneko’s toughlove pays dividendsSPECIAL REPORT: Commuter and business jet aviation in the Asia-Pacific

SIA deputy chairman and chief executivespeaking abou the crash of SQ006VOL. 8 NO. 5 MARCH 2001C O V E R S T O R YLIFEAFTERSQ006 Page 18SIA chieflooks tothe futureMAGAZINE OF THE ASSOCIATION OF ASIA PACIFIC AIRLINESExecutive interview:BA’s Eddington putsaccent on successCountry focus: JapanJAL chief Kaneko’s toughlove pays dividendsVOL. 8 NO. 5 MARCH 2001LIFEAFTERSQ006Global goalsstill on trackBest of buddiesat SIA‘I suppose the truth of ourvulnerability and mortality hit us.It was a devastating experience’– Dr Cheong Choong Kong,SPECIAL REPORT: Commuter and business jet aviation in the Asia-PacificN E W STHAI for the Thais, says new government 12Ansett sale? Forget it, say bosses 12China passengers accuse JAL of bias 13Executive clear-out at Qantas 15Airlines face big rise in fees at Sydney Airport 27Cathay Pacific first airline to buy into inflight e-mail company 30Business digest 48E X E C U T I V E I N T E R V I E W SRod Eddington makes his mark at British Airways 24Isao Kaneko’s quick thinking pays at Japan Airlines 34C O U N T R Y F O C U S : J A P A NRestructuring earns dividends for Japan Airlines 34Japan Air System to upgrade fleet 36New president for All Nippon Airways 37Tokyo’s regional hub status under threat 38S P E C I A L R E P O R TCOMMUTER AND BUSINESS JET AVIATIONChina to lead regional jet boom 41Hainan Airlines for airline joint venture with Hong Kong? 42Malaysia Airlines markets plane “fit for a king” 44Jet Asia flies biz jet flag in Macau 46C O M M E N TTurbulence by Tom Ballantyne 54I N F L I G H T A S I A g o e s e l e c t r o n i cThe region’s new electronic inflight magazine dedicated to onboardservices and technology. Check out www.orientaviation.com for the bestinformed news, trends and features on our industry.PublisherWilson Press LtdGPO Box 11435 Hong KongTel: Editorial (852) 2893 3676Fax: Editorial (852) 2892 2846E-mail: orienta@asiaonline.netWeb Site: www.orientaviation.comPublisher and Managing EditorBarry GrindrodJoint PublisherChristine McGeeChief CorrespondentTom BallantyneTel: (612) 9638 6895Fax: (612) 9684 2776Hong Kong & China:Jonathan Sharp, Wellington NgTel: (852) 2504 3995PhotographersAndrew Hunt (chief photographer),Rob Finlayson, Hiro MuraiDesign & ProductionÜ Design + ProductionColour SeparationsTwinstar Graphic Arts Co.PrintingLammar OffsetPrinting Company LtdDistributed byWilson Press LtdAdvertisingHead Office:Wilson Press LtdChristine McGeeTel: (852) 2893 3676Fax: (852) 2892 2846E-mail: cmcgee@netvigator.comSouth East AsiaTankayhui MediaTan Kay HuiTel: (65) 9790 6090Fax: (65) 299 2262E-mail: tkhmedia@singnet.com.sgThe Americas / Canada :Barnes Media AssociatesRay BarnesTel: (1 203) 372 7738Fax: (1 203) 372 8763E-mail: rvbarnes@snet.netEurope :REM InternationalStephane de RemusatTel: (33 5) 34 27 01 30Fax: (33 5) 34 27 01 31E-mail: sremusat@aol.comAssociation of Asia Pacific AirlinesSecretariatSuite 9.01, 9/F,Kompleks Antarabangsa,Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia.Director General: Richard StirlandCommercial Director: Carlos ChuaTechnical Director: Leroy KeithTel: (603) 245 5600Fax: (603) 245 7500Published 10 times a yearFebruary, March, April, May, June,July/August, September, October,November and December/January.© All rights reservedWilson Press Ltd, Hong Kong, 2001.The views expressed in thismagazine are not necessarilythose of the Association ofAsia Pacific Airlines.March 01 | Orient Aviation |

P U B L I S H E R ’ S L E T T E RSPECIAL BUDDIESSingapore Airlines (SIA), successful, financially sound and safe,thought it could never happen to them. It did. And as theirdeputy chairman and chief executive, Dr Cheong ChoongKong, told Orient Aviation, the events of the stormy night of October31 in Taipei when SQ006 crashed on take-off with the loss of 83 lives,“devastated and humbled” all who worked at the airline.But it did something more. It brought people together in griefin a quite extraordinary and positive way, a way that will surely benoted by the industry at large as a model in selflessness.Nine years ago SIA’s management devised a “buddy” programmeto assist the crisis management control centre at Changi airport. Thespecially trained buddies are responsible for helping the family andfriends of victims and survivors in the event of an accidentBut as Ruth Kelly, SIA’s vice-president customer affairs, whoheads the buddy programme, said: “What happened on the nightof the accident was incredible. We have a list of 385 trained buddiesin Singapore, but as the news [of the accident] was breakingpeople who were not registered as buddies turned up at the crisismanagement control centre at Changi airport in droves.“People arrived all through the night. Some got out of bed,others had just returned from duty travel. Some staff returned fromleave early just to be there. They wanted to help.”Buddies and non-buddies alike played their part. “I have neverseen so much motivation and enthusiasm as there was in that first48 to 72 hours,” said Kelly.Kelly says she would like to talk to other airlines to comparenotes, to see how SIA can improve its buddy programme. OrientAviation believes there are many airlines that would like to – andshould – talk to SIA.This was voluntary work at its best and its most demanding,where trained and untrained staff came together in the most tragicof circumstances to help others.Almost four months later the healing is continuing; the buddiesare continuing their work.Letters of thanks bulge from a file in SIA’s headquarters AirlineHouse. Much good has come from this adversity.BARRY GRINDRODPublisher/Managing EditorThe Association of Asia Pacific Airlines members and contact list:Air New ZealandManaging Director, Mr Gary ToomeyGeneral Manager GroupCommunications, Mr David BeatsonTel: (64 9) 336 2770 Fax: (64 9) 336 2759All Nippon AirwaysPresident and CEO, Mr Kichisaburo NomuraDirector, Public Relations, Mr Koji OhnoTel: (81 3) 5756 5675 Fax: (81 3) 5756 5679Ansett AustraliaGeneral Manager International,Mr Andrew MillerManager Group Public Affairs,Ms Heather JeffereyTel: (61 3) 9623 3540 Fax: (61 3) 9623 2887Asiana AirlinesPresident & chief executive, Mr Park Chan-bupManaging Director, PR, Mr Hong Lae KimTel: (822) 758 8161 Fax: (822) 758 8008Cathay Pacific AirwaysChief Executive Officer, Mr David TurnbullCorporate Communications General Manager,Mr Alan WongTel: (852) 2747 8868 Fax: (852) 2810 6563China AirlinesPresident, Ms Christine Tsung Tsai-yiDirector, Public Relations, Mr Scott ShihTel: (8862) 2514 5750 Fax: (8862) 2514 5754DragonairChief Executive Officer, Mr Stanley HuiCorporate Communication Manager,Ms Laura CramptonTel: (852) 3193 3193 Fax: (852) 3193 3194EVA AirPresident, Mr Frank HsuDeputy Senior Vice President, Mr K. W. NiehTel: (8862) 8500 2585 Fax: (8862) 2501 7599Garuda IndonesiaPresident, Mr AbdulganiVP Corporate Affairs, Mr PujobrotoTel: (6221) 380 0592 Fax: (6221) 368 031Japan AirlinesPresident, Mr Isao KanekoDirector, Public Relations, Mr Geoffrey TudorTel: (813) 5460 3109 Fax: (813) 5460 5910Korean AirPresident and CEO, Mr Shim Yi TaekVP Public Relations, Mr Seung Jae NohTel: (822) 656 7092 Fax: (822) 656 7288/89Malaysia AirlinesChairman, Azizan Zainal AbidinHead of Industry Affairs,Ms R. Nordiana Zainal ShahTel: (603) 2165 5154 Fax: (603) 2163 3178Philippine AirlinesChairman, Mr Lucio TanVP Corporate Communications,Mr Rolando EstabilioTel: (632) 817 1234 Fax: (632) 817 8689Qantas AirwaysManaging Director and CEO, Mr Geoff DixonGroup general manager public affairs, MichaelSharpTel: (612) 9691 3760 Fax: (612) 9691 4187Royal Brunei AirlinesChairman, Dato Paduka Awang Haji AliminBin Haji Abdul WahabTel: (673 2) 343 368 Fax: (673 2) 343 335Singapore AirlinesDeputy Chairman and CEO,Dr Cheong Choong KongVP Public Affairs, Mr Rick ClementsTel: (65) 541 4030 Fax: (65) 545 6083Thai Airways InternationalPresident, Mr Bhisit KuslasayanonDirector, PR, Mrs Sunathee IsvarphornchaiTel: (662) 513 3364 Fax: (662) 545 3891Vietnam AirlinesPresident and CEO, Nguyen Xuan HienDep Director, Corp Affairs, Nguyen Huy HieuTel: (84-4) 873 0928 Fax: (84-4) 827 2291March 01 | Orient Aviation |

d i a r yFORBIDDEN LOVE: The Philippines Immigration chief, AndreaDomingo, fined tiny Continental Micronesia Airlines with50,000 Pesos (US$1025) for smuggling a mistress of theformer Philippines president, Joseph Estrada into the countryin late February. Domingo said the Guam-based airline sneakedLaarni Enriquez into Manila by using only part of her name,granting her unaccounted passenger status and assisting her inbypassing immigration procedures.Well known in her native Philippines, Enriquez was spottedleaving Manila International Airport – wearing a hood – in thecompany of an aide to Antonio Gana. Gana is an Estrada aide anduntil his recent dismissal was general manager of Manila InternationalAirport. A Gana assistant, Jake Acuna, is to be chargedwith human smuggling, said the immigration boss.Enriquez fled the Philippines to the US on January 11, via HongKong, to avoid being subpoenaed to testify against her lover inhis impeachment hearings in the same month. Philippines justiceminister, Hernani Perez, said the grounded Enriquez as well asother Estrada mistresses would be included in the criminal caseto be filed against the deposed Philippines leader.PERSPECTIVECHALLENGE: At last Malaysia Airlines(MAS) has a new managing director, governmentappointee, Dato Mohamad Nor BinMohamad Yusof, an advisor in the nationalfinance ministry. At the same time, MAS announcedits new chairman, Azizan ZainalAbidin, who also is chairman of the national oilcompany, Petroliam Nasional Bhd. In January,the Malaysian Government bought the 29%of MAS held by mercurial Malaysian entrepreneurand the carrier’s former chairman, Tan SriTajudin Ramli, bringing the nation’s equity inMAS to 59%. A few weeks earlier, the formerowner of Lauda Air, Niki Lauda, confirmed hehad been approached and had declined anoffer to head MAS.ORDERLY SUCCESSION: KichisaburoNomura (66), president of All Nippon Airways(ANA), will be chairman of ANA from April 1.His successor as president of Japan’s secondinternational carrier will be Yoji Ohashi (61), a37-year veteran of ANA. A law graduate likeNomura, Ohashi’s first major job at ANA wasas director of sales in 1988. From that springboardhe became senior director and generalmanager for the airline at Narita Airport from1993 to 1995 when he was appointed to runthe airline’s U.S. offices from New York. Hewas made an ANA managing director in 1997and is currently the airline’s senior executivevice-president.HANDOVER: Qantas Airways chief executiveand managing director, James Strong,formally handed over running of the Australianflag carrier, Qantas Airways, to his formerdeputy Geoff Dixon on March 5, but notbefore he presided over the 2001 FormulaOne (F1) Grand Prix motor race in Melbournea day earlier. Strong is an avid motorcyclingracing fan and has been particularly happy forQantas Airways to be a major sponsor of theJames Strong: racing aheadAustralian F1 – the first race each year on theannual competition’s 17 event internationalcalendar.Geoff Dixon’s team is chief financial officerPeter Gregg and seven executive general managers:John Borghetti (sales and distribution),Denis Adams (marketing), Paul Edwards (networkmanagement), Steve Mann (customerservices), David Forsyth (Aircraft Operations)Narendra Kumar (subsidiary businesses) andDavid Burden (technology and services). Inlate February, Qantas revealed a 22% declinein first half profits and announced it would cutits workforce by 5% (page 15). Meanwhile, itwas announced that Strong is to be the newchairman of Woolworths in Australia.TRANSFORMED: Across the Tasman Sea,AirNZ-Ansett Group chief executive, GaryToomey, announced his restructuring of thegroup into seven divisions, which also markedout the executives who have survived themerger of the two airlines. Still in the foldare Ansett managers Andrew Miller (CEO ofAnsett International and head of the newgroup’s sales and distribution division), andTrevor Jensen (operations). Other newdivision heads are Lesley Grant (customerservice), George Frazis (strategy, network andmarketing), Brendan Fitzgerald (world-wideairport services) and Kevin Turnbull (businessenhancement). Toomey is still looking for aboss to run the new ventures division of thegroup.SORRY: United Airlines (UAL), the world’slargest carrier, has apologised on behalf ofcabin crew on a February Hong Kong-Singaporeflight who failed to notice that one oftheir passengers had died during the flight.A witness to the events leading up the deathof the middle-aged US male passenger saidcabin crew failed to notice the condition ofthe 51-year-old passenger, who had died bythe time the aircraft had landed in Singapore,until he was pointed out to them bydisembarking travellers. A UAL spokesmanin Hong Kong offered his condolences to theman’s family, according to Hong Kong’s SouthChina Morning Post. The spokesman said thecabin crew had acted as quickly as possible tothe situation when made aware of it and thatthe flight attendants had followed local andairline regulations in doing so.PACIFIC TIES: As the only Democrat inPresident George Bush’s cabinet, the newhead of the U.S Department of Transportation,Norman Y. Mineta (69), could bringsome much-needed cultural understandingto US-Asia relations. Californian Mineta waschairman for eight years of the House AviationSubcommittee and was in charge of theNational Civil Aviation Review Commission– which set out the blueprint for overhaul ofthe Federal Aviation Administration. In the lastsix months of the Clinton presidency, he wasSecretary of Commerce.10 | Orient Aviation | March 01

N E W SRegional round-upTHAI “will stay”in the hands of theThais, says governmentPolitics, it appears, have won out in Thailand with the new government promising a U-turn on the proposed sale of a 10%stake in Thai Airways International (THAI) to aforeign carrier. “In my opinion Thai Airways doesn’tneed a foreign partner. We don’t need their technology,while on the marketing part, we have alreadyjoined the Star Alliance,” said the government’spermanent secretary for finance and THAI director,Somchainuk Engtrakul.The former government was planning to cut itsstake from 93% to 70% this year, issuing new sharesto domestic investors and selling 10% to a strategicairline investor. The move was first mooted threeyears ago, but has met with one delay after another.Lufthansa, Qantas Airways, Singapore Airlines, BritishAirways, United Airlines and Air France, havebeen among those to express interest, but morethan one has lost patience over time.Engtrakul’s comments followed an announcementby the newly appointed finance minister, SomkidJatusripitak, that shares of 59 state enterprisesundergoing privatisation will be offered to the Thaipublic instead of selling to foreign investors.THAI chairman, Srisook Chandrangsu, offered aslightly more optimistic view when he said recently:“On the plan to sell shares to a strategic partner, weare still keeping it ... but it is not necessary to sellshares only to an airline. Selling shares to anotherairline may not be positive for our share price.”The new Thai prime minister, Thaksin Shinawatra,was vague when asked about the plansfor THAI’s future. He said there would have to bea review to be sure the share diversification wasthe right move.Analysts have expressed disappointment thatany hope of THAI having a foreign airline investornow looks slim along with the chance of thecarrier improving its efficiency. It now seems thenegative influence of the military and governmentofficials who make up most of the THAI board, willcontinue.SIA orders B777sto replace A310-300sSingapore Airlines (SIA) has ordered 20 Boeing777-200 aircraft, 10 on firm order with 10 options ina deal valued at US$4 billion. The aircraft will replaceSIA’s fleet of 13 A310-300s.SIA previously ordered 61 B777s in 1995 aspart of a 77 jet order. The remaining 16 were forits leasing subsidiary Singapore Aircraft LeasingThai Airways International: the new government is unlikely to sell a 10% stake to a foreignairlineEnterprise (SALE).With the latest order, SIA will have 81 B777s inoperation, on order or on option. The planes willbe powered by Rolls-Royce 892 engines and will bedelivered between 2003 and 2009.Said SIA’s deputy chairman and chief executive,Dr Cheong Choong Kong: “In terms of capacity, theB777 is a larger aircraft than the A310 and thereforenot a direct replacement in terms of size, but itoffers us the flexibility to use the aircraft on boththe shorter-haul services currently operated by theA310, as well as the longer sectors.Meanwhile Rolls-Royce has announced thedevelopment of the latest two members of its Trentfamily, the 900 for the Airbus A380 family and the600 for the Boeing 747X and the Longer Range767-400ER jet. The UK Government is investing £250million (US$362.5 million) in the project. The Trent900 has been selected by Singapore Airlines, VirginAtlantic and International Lease Finance Corporationfor their A380s.Ansett sale to SIA?Forget it, say bossesAir New Zealand chief executive Gary Toomeyhas dismissed reports the airline will sell part ofwholly-owned subsidiary Ansett Australia to SingaporeAirlines to raise money for the purchase ofnew aircraft. “I don’t think there’s any credibility inwhat’s being said. We don’t have any knowledgeof it, so you can scratch it completely from ourperspective,” he said. SIA boss Dr Cheong ChoongKong also told Orient Aviation that there was notruth in the reports.In fact Toomey has set out his early goals forAnsett. He plans to upgrade the fleet, boost AnsettInternational’s services to high-yield destinations likeLos Angeles and Tokyo and deepen the company’srelationship with 25% shareholder SIA. An Ansettre-launch is expected later this year.Qantas makeschoice of enginesQantas Airways has made its decision on enginesfor 31 new jets to be delivered in the next 10years. General Electric will supply CF6-80E1 enginesfor seven Airbus A330-200s and six A330-300s andCF6-80C2 engines for six Boeing 747-400 Longer-Range aircraft. Rolls-Royce will supply Trent 900engines for 12 Airbus A380 twin-deck aircraft.... also tipped to takestake in PNG carrierThe Papua New Guinea Government (PNG) hasannounced that 49% of its ailing flag Air Niugini willbe available to foreign interests in a privatisationplan which should see the offshore stake sold byApril. Seven groups from PNG, Europe and NorthAmerica have lodged expressions of interests tobuy into the airline. They have not been namedbut it is known most involve non-airline investors.However, Qantas Airways has submitted an expressionof interest and is now regarded as favourite towin the stake.Hong Kong to breakDeadlock with U.S.?Hong Kong held informal talks with officials ofthe U.S. Department of Transportation in Februaryon a long-standing dispute about expanding cargoand passenger rights. The U.S. accuses Hong Kongof refusing to open its skies as other air authorities12 | Orient Aviation | March 01

in the region have done, while Hong Kong wantscabotage rights in the U.S. American carriers regardthis argument as specious as Hong Kong, with nohinterland of its own, cannot offer comparablerights.For Inchon, nowread IncheonIncheon International Airport, as the newairport on South Korea’s west coast has decidedto be called, will open on March 29, the airport ‘sauthorities announced barely two months aheadof the long-awaited opening date. The great day,a Thursday, was chosen because it falls in the firstweek of summer operations and Thursday usuallyhas the lowest weekday traffic.Also the weather near the airport on that dayhas been mostly mild for the past 20 years. What theworld has long known as Inchon has been revisedto Incheon to comply with a new system of Englishlanguage spelling of Korean words introduced bythe government last year.Authorities hope that confusion over theairport’s name will be the least of the problemsexperienced by the airport they are calling “TheWinged City”. High construction costs and the lackof a rail link to downtown Seoul 50 kilometresaway (at least until 2005) are among issues that maydampen the high hopes held out for one of the biggestinfrastructure projects in Korea’s history.Wrong part onAnsett jetThere were red faces again at Ansett Australiawhen it emerged one of its Boeing 767-300s flewbetween Australia and Hong Kong with a wingleading edge slat designed for 767-200s. After theerror was discovered in Melbourne the aircrafthad the right part fitted overnight and returned toservice the following day. Earlier Ansett had twoof its 767s grounded when cracks were found inthe horizontal stabilisers. In addition the carrier’sschedules were disrupted just before Christmas afterthe airline realised that mandatory inspections hadnot been carried out for up to 18 months.Chinese travellersAccuse JAL of biasMore than 90 Chinese aboard a Japan Airlines(JAL) Beijing-Tokyo flight which was diverted toOsaka due to a snowstorm in Tokyo have threatenedto sue JAL for being forced to spend 16 hoursat Osaka airport while passengers of other nationalitieswere accommodated at a hotel.JAL’s Beijing office said the company had beenbarred by Japanese authorities from allowing Chinesenationals, who were bound for destinationsoutside Japan, to leave the airport. Official Chinesemedia said the passengers were demandingUS$86,000 each in damages, saying the airline hadoffered only ‘small sandwiches” and nothing todrink, leaving them in a hall with no seats.CRJ-200s for YunnanYunnan Airlines has bought six 50-seat BombardierCRJ200 regional jets in a deal valued at anestimated US$138 million. The profitable Kunming,China-based carrier will take delivery of the aircraftbetween October this year and December 2002.Afghan airline groundedAfghanistan’s national airline, Ariana Airlines,has been forced to halt domestic operations afterbeing subject to United Nations sanctions. Airlinedeputy head, Qari Rehmatullah, said the governmentcould not afford to buy fuel. In November1999 the United Nations banned all internationaltravel by Ariana and in January fresh sanctions madeIN BRIEFAir New Zealand is to replace its ageing Metroliners and Bandeiranteswith 16 new Raytheon Beech 1900D aircraft to serve its smaller provincialports. The 19-seater aircraft will be introduced over an 18-month periodstarting in May.Rising demand has led Cathay Pacific Airways to add nine flights aweek to its Hong Kong – Indonesia schedule from February 26, from 19weekly flights. Last year the carrier’s revenue rose 30% increase betweenthe two countries.CARGOUnited Parcel Service (UPS) reporting record revenue and earningsfor 2000, said package delivery daily volume for Asia-Pacific rose nearly5% in the fourth quarter, with China registering more than 40% volumegrowth. UPS expects to begin flying directly to China in April after beingchosen by the U.S. Department of Transportation as the fourth Americanair carrier granted direct operating rights to China.China Eastern Airlines said it plans a fourth weekly cargo service betweenShanghai and New York at the end of 2001 or early next year.APPOINTMENTSJed Hart, manager corporate safety for BHP, has been appointedchairman of the Aviation Safety Foundation Australia (ASFA). He succeedsDon Kendell, founder of regional carrier Kendell Airlines. Dr RobLee, formerly director of Australia’s Bureau of Air Safety Investigation(BASI) before it was integrated into the Australian Transportation SafetyBureau, and Carol Durkin, past president of the Australian Women’s PilotsAssociation, also joined the board.oneworld – Maunu von Lueders has been appointed vice-presidentsales of the oneworld global alliance. He was previously vice-presidentalliances and international relations with Finnair.Dragonair – Hong Kong-based Dragonair has appointed Gerard terBruggen as manager cargo sales and services in Europe.March 01 | Orient Aviation | 13

N E W Sit virtually impossible for the airline to maintain itsfive passenger aircraft. The decision on domesticflights will mean 400 staff will be laid off.In brief:The SIA Engineering Company (SIAEC) brokeground for its third maintenance hangar. To costS$25 million (US$14.25 million) including the landcost, the hangar will be in service by July next year.It will increase SIAEC’s airframe maintenance andoverhaul capacity by 15%.Impulse Airlines executive chairman, GerryMcGowan, said he plans an initial public offeringfor the carrier next year. Impulse began jet servicelast year after seven years of turboprop operations.In February Impulse added three Boeing 717s to itsexisting five.Dragonair has ordered an Airbus A330/A340flight simulator from Canada’s CAE. It will join anA320 simulator in use at the Hong Kong-basedairline’s training centre at Chek Lap Kok airport.Taikoo Aviation Technologies, a subsidiary ofCathay Pacific Airways, has acquired a 10% stakein U.S-based Tenzing Communications, the airline’sinflight Internet partner. Cathay is to launch inflightWeb access and e-mail throughout its fleet in thethird quarter of this year.Aerospan.com has entered into an e-marketplacecollaboration with Singapore TechnologiesAerospace (ST Aero), the first e-marketplace collaborationand live integration of its type withinthe industry. Under the agreement, the privatemarketplace of ST Aero, JuzClickSource, which isthe e-procurement platform for its buyers, has beenseamlessly connected with the Aerospan globale-marketplace. This offers all users with more opportunitiesto drive efficiencies and enhances bothe-marketplaces’ abilities to reach suppliers andbuyers worldwide.Philippines domestic carrier, Cebu Pacific,and U.S. major Northwest Airlines have signed afrequent flyer programme agreement. NorthwestWorldPerks members will earn points on five-yearoldCebu Pacific’s flights in the Philippines.Japan Airlines (JAL) will be the launch customerfor the Boeing-managed Global Airline InventoryNetwork (GAIN). Boeing will manage JAL’s supplychain for roughly 70,000 expendable airframe spareparts used in the airline’s fleet of Boeing aircraft.The first phase of GAIN will be implemented atJAL in April.Air New Zealand (AirNZ) has introduced threecode-share flights a week with Singapore Airlines(SIA) between Singapore and Zurich. AirNZ codeshareswith SIA on Singapore-Auckland, Singapore-Christchurch, Singapore-London, Singapore-Bangkokand Singapore-Manchester (via Amsterdam)routes. SIA also code-shares on selected AirNZdomestic services.Qantas Airways has announced a code-shareagreement with Italian flag carrier Alitalia, effectiveMarch. Alitalia, which recently halted services toAustralia, will code-share on four Qantas servicesweekly between Australia and Rome via Bangkok.Australian Air Express, a joint venture companyowned by Qantas Airways and Australia Post, hasextended long-term leases on three BAe 146QTfreighters from BAE SYSTEMS. The aircraft – twoseries 300 units – and a series 100 jet operate overnightcargo services throughout eastern Australia,carrying general freight, perishables and mail.Cathay Pacific Airways will launch a new fourtimes-a-weeknon-stop service between HongKong and Delhi on March 26. The decision cameshortly after the conclusion of air traffic rights talksin which it was agreed to increase seat capacitybetween India and Hong Kong.China Eastern Airlines plans to take delivery of three AirbusA320s and lease four A319s this year as part of a plan to expandits fleet to 100 airliners over five years.China Southern Airlines is contemplating leasing a number ofregional jets with 50 seats or less. ING Barings said in a researchreport that China Southern planned to add 10 regional jets, withfive to be added this year and the rest next year. The report saidthe airline would use the aircraft to raise the company’s profile inthe feeder market for flights of less than 500 kilometres.The Civil Aviation Administration of China (CAAC) has loweredthe upper limit of permitted airfare increases from 20% to 14%as a result of lower jet fuel prices. The CAAC last October alloweddomestic airlines to raise fares by up to 20% to help offset high fuelprices. Most Chinese airlines raised fares by 15% in December.14 | Orient Aviation | March 01

n e w sBUSINESS ROUND-UPExecutive clear-out at QFAs its profit levels dipped for the firsttime in nearly six years, Australia’sQANTAS AIRWAYS moved to improvecompetitiveness, including a clear-outof executive and middle management ranks,big staff cuts and a network rationalisation.The action came as chief executive designateGeoff Dixon prepared to take over fromJames Strong, who has led the airline since1993. At his final press conference Strongannounced a 22% drop in first half after-taxprofits to US$139.9 million.While it continues to be one of the bestperforming airlines in the Asia-Pacific, Qantashas been unable to fully counter the multipleimpacts of increased domestic competition,rising fuel prices, the weakening of the Australiandollar and increased airport chargesacross its network. Revenue did rise 13.1% to$2.65 billion in the six months to December 31,but yields on its mainline routes deterioratedas a result of competition with new no-frillscarriers Impulse and Virgin Blue. And eventhough an aggressive fuel price hedgingstrategy generated savings of $135.2 million,the carrier’s fuel costs still increased by $62million.Dixon said staff would be trimmed by5% overall, with 220, or 25% of executiveand middle management positions, leavingwithin two weeks. Another 1,250 non-operationalpersonnel will exit the airline in thenext six months, mainly through attrition andvoluntary redundancy.Some poor performing internationalroutes, the first being all services to China andCanada, will be dumped. Suspensions will beannounced shortly. The aircraft, B767-300s,will be redeployed on Australian domesticroutes, lifting capacity by 11%.Dixon said there was little to indicate tradingconditions would improve in the secondhalf of the year. The past 12 months had seenthe environment, in Australia and overseas,change dramatically as a result of competitionfrom lower cost airlines, government-sponsoredpolicy changes and higher costs.“We have three major competitors in thedomestic market with the start-up of Impulseand Virgin, and Ansett being absorbed intothe foreign-owned grouping of Air New Zealandand Singapore Airlines,” said Dixon.“We must improve our productivity peremployee to better match our major competitorsand bring our domestic airline costs closerto the two new domestic airlines.”The action represented a negative side ofthe rapid liberalisation of the aviation industryby governments in Australia, he added.Ansett sinksAirNZ’s profit hopesAfter a gloomy 2000 during which it wasbattered by Qantas Airways in the Australiandomestic market, Ansett Australia lossesvirtually put paid to any profitability at theAIR NEW ZEALAND ANSETT GROUP mighthave hoped for in its first six months as acombined company.Ansett Australia’s poor performance sank AirNew Zealand’s profit hopesAfter-tax income plummeted 97% toUS$8.8 million in the half year to December31, hit by the Ansett woes, fuel costs rising72.9% and a plunging New Zealand dollar.The airline group had a pre-tax operatingloss of $14.9 million, down 126% on the sameperiod in 1999.While revenue rose 147% to $1.5 billionany comparison with sales in the equivalentsix months is meaningless; this was thefirst time the financials of Air New Zealandand Ansett have been on the same balancesheet.Air NZ chairman Sir Selwyn Cushingwould not itemise Ansett’s specific contributionto the drop in income, but he and newchief executive, Gary Toomey, left no doubtthe contribution was significant. Sir Selwyneven conceded Air NZ may have paid toomuch last June to acquire the 50% of Ansett itdid not already own. But he said the purchaseof Ansett was “absolutely necessary” to thefuture strategic growth of Air NZ.Sir Selwyn said this has been “one of themost challenging periods faced by Air NewZealand and Ansett”, with trading performanceimpacted by:• fuel prices at 10-year highs.• New Zealand and Australian dollars atall-time lows against the U.S. dollar.• increased competition in Australia withthe arrival of two new low-cost airlines(Impulse and Virgin Blue) and big capacityincreases on Australian main trunk,trans-Tasman and Pacific routes by majorcompetitors.• a new Australian tax system that had impactedon consumer spending patterns.• drop in domestic demand caused by theSydney 2000 Olympics which outstrippedgains from international Olympic traffic.The integration of Ansett and Air NZ hadprogressed at a slower pace than anticipated,with projected savings from the union failingto meet expectations, he said. Sir Selwynsaid based on current trading and marketconditions, the outlook for the second half“is uncertain”. There is potential for furtherdeterioration in operating results in theshort-term”.PHILIPPINE AIRLINES (PAL) has reportedan unaudited net third quarter loss endingDecember 31 of 539.7 million pesos (US$10.5million), more than three times its deficit in thesame period of 1999. The flag carrier blamedincreased fuel costs during a traditionally leanperiod. PAL said it registered a net income of299.25 million pesos (US$5.8 million) in thenine months ended December 31, comparedwith a loss of 121.64 million pesos (US$2.4million) in the same period a year earlier.High fuel costs took their toll on THAI AIR-WAYS INTERNATIONAL’S (THAI) first quarterresults. THAI’s operating profit was 1.76 billionbaht (US$40.5 million), down 60.2% on 4.42billion baht recorded in the same period lastyear. Fuel and oil costs were 3,166 millionbaht higher and foreign exchange losses were1,506 million baht compared to 6,849 millionbaht in 1999.March 01 | Orient Aviation | 15

c o v e r s t o r yAt Singapore Airlines (SIA) they did not think it would everhappen to them. But when SQ006 crashed in a rain storm as ittried to take-off from a wrong runway in Taipei last Octoberthe unthinkable did happen. Four months on the hurt is stillthere, but SIA remains committed to its global goals. Deputychairman and chief executive Dr Cheong Choong Kong spokeexclusively to Orient Aviation about the accident, its effectson the company and the airline’s futureDevastating,By Barry Grindrodand Tom BallantyneHumblingThese were just two words used bySingapore Airline’s (SIA) deputychairman and chief executive, DrCheong Choong Kong, to describe his feelingsafter the crash of SQ006 on take-off fromTaipei’s Chiang Kai-shek Airport on October31 last year.The pilots of the Los Angeles boundB747-400 tried to lift off from a runway closedfor repairs during a rain storm. Eighty threepassengers and crew died.In his first interview about the accident,Dr Cheong said while the trauma had passed,the pain was deep-rooted.“It has been a humbling experience. Therewere times when some of us felt we werewinning in every field of competition. Wewere doing very well in every respect, winningawards ... and then this [the accident]suddenly happened.“I suppose the truth of our vulnerabilityand mortality hit us. As I said, it was adevastating experience.”But it was an experience Dr Cheong andhis senior executives faced head on.He was in Auckland for an Air NewZealand board meeting when he heard aboutthe accident. In a matter of hours he wasin Taipei facing the anguished friends andrelatives of those on board SQ006, all donein the glare of the media spotlight.It was a pattern he was to repeat in thedays to come. Not an easy task for anyone.“You have to tell yourself it is a necessaryresponsibility and duty,” said Dr Cheong.“However, some of my colleagues were underfar greater pressure. They had to bear the fullbrunt of anger and grief for weeks on end.”More than 100 of SIA’s voluntary team ofSIA deputy chairman and chief executive, Dr Cheong Choong Kong:the truth of our vulnerability and mortality hit ustrained “buddies”, staff from all departmentswithin SIA, were on the first flight to Taipeiout of Singapore early on the day after thelate night crash to help friends and relativesof passengers and crew on SQ006 (page 22).Within a couple of days over 300 buddieswere involved on the ground along withmanagement staff.Dr Cheong paid tribute to the buddies,who are trained to respond to a variety of18 | Orient Aviation | March 01

crises ranging from accidents and hijackingsto long delays. “It demonstrates that it paysto be prepared although you can never befully prepared. You can always find thingsthat did not work as well as they should havedone,” he said.“One of the important lessons we learntwas how important communication is in thefirst few hours after an accident. No matterhow great the pressure is on us we haveto resist stating anything other than whatis fact.”Dr Cheong described the crash of SQ006as the low point of his 27-year career withSIA, 17 of which have been spent as the headof the airline. He joined two years after itsformation in 1972 and has helped it growinto one of the most respected and profitableairlines in the world from its base in the islandstate of just four million people.SIA’s inflight service is a yardstick by whichother airlines are judged. Awards have beenmany. And, most importantly, it has been asafe airline.Add all these factors together and perhapsit explains why SIA was inundated with letters,faxes, e-mails and phone calls of support afterSQ006 crashed.Dr Cheong said there was a small fall inpassenger numbers from and through Taipeifor a time after the accident, but no significantdecline elsewhere.While SQ006 will occupy the minds ofSIA for a long time to come, the issues of theday have to be dealt with, said Dr Cheong.These include, for example, addressing steepaviation fuel price increases and the softeningof some markets in the region.At the time of the accident SIA was ona high. Earlier in the year a US$971 millioninvestment bought the airline group 49%of Britain’s Virgin Atlantic Airways. AnotherUS$140 million increased its holding in AirNew Zealand (AirNZ), now the Air NewZealand Ansett Group, to 25%, which givesSIA a powerful say in Ansett Australia, nowwholly-owned by AirNZ.A new first class cabin that leapfroggedall the opposition was bedded down, alongwith the introduction of other inflightentertainment innovations to keep it aheadSingapore Airlines: messages of support from travellers following the accidentShortcomings at Taipeicrash airportAviation authorities in Taiwaninvestigating the crash of a SingaporeAirlines B747-400 in which 83 people werekilled have said some facilities at Taipei’s ChiangKai-shek (CKS) were faulty.The Los Angeles-bound aircraft, with179 passengers and crew on board, slammedinto construction equipment and burst intoflames in a storm as it attempted to take offfrom a runway closed for repairs on October31 last year.“The CKS airport is old. It has been in usesince 1979. Some of the lighting systems, signsand marks were not up to the latest standardsof the International Civil Aviation Organisation(ICAO),” said Dr Kay Yong, the managingdirector of the Aviation Safety Council, whichis leading the investigation.Taiwan is not a member of ICAO, but hadpledged to observe the organisation’s standardsand regulations.The February 24 interim report was a presentationof facts. A final report, in December,will identify the cause of the crash.The three pilots survived the crash. Theytold the investigators they had been briefedbefore the flight that a parallel runway wasclosed for maintenance work, but had mistakenit for the assigned runway.Air traffic control was unable to spotthe mistake because the airport did not haveground radar to monitor the movement of thejet. Visibility was very poor on the night.Dr Yong said the closed runway had notbeen blocked off because it was being usedby taxi-ing planes.The investigator said one guiding lightthat could have helped direct the aircraft tothe correct runway was not working andanother was too dim. The lights were at thepoint where the pilots turned on to the wrongrunway. There also was a line painted on theroute leading to the closed runway, but noneto the correct runway.Singapore Airlines, which has said itwill take full responsibility for the accidentand pay compensation to the injured andfamilies of those killed, said it would wait forthe completion of the investigation beforecommenting.in the customer service race.Then came the headline grabbing US$8.6billion order for Airbus Industrie’s superjumbo, the 555-seat A380; firm orders for 10and options on another 15. SIA will be the firstcarrier to operate the Very Large Aircraft whenit comes into service in 2006.A few days later SIA announced a US$1.3billion deal with Boeing for six B747-400freighters, with options for another nine.Only four days before the Taipei accidentthe good news was still coming. SIA’s financialreport for the six months ending September30 announced SIA Group pre-tax profit rose89.3% on the same period in 1999, to S$1.4billion (US$793.8 million). Operating profitwas up S$206 million to S$739 million. Theairline’s pre-tax profit climbed 88% to S$1.21billion. Operating profit rose 52% to S$569million on revenue of S$4.62 billion.In recent weeks business as usual has includedanother new aircraft deal. In February,SIA ordered 20 Boeing 777-200s, 10 on firmorder with 10 options in a transaction valuedat US$4 billion on list prices applicable at timesof delivery. The aircraft will replace SIA’s fleetof 13 A310-300s.And the carrier is looking to add to itsMarch 01 | Orient Aviation | 19

c o v e r s t o r yglobal portfolio by bidding for a stake in AirIndia with Indian partner, Tata Industries.SIA bosses also are talking to otherairlines, although Dr Cheong will not namenames. He does not rule out at some futurestage buying into a Chinese airline. “Whynot?” he said confidently. SIA, through itssubsidiary, Singapore Air Terminal Services(SATS), has a ground handling and a cateringjoint venture in Beijing and its engineeringdivision has a joint venture in Xiamen.SIA is ambitious. It is already influentialon aviation’s world stage and it intends tobecome more so. It has the expertise andthe cash to do so. It has no debt and morethan US$1 billion cash-in-hand to help fulfilits goals.But this is not the time for the companyto be too upbeat, said Dr Cheong. The“humbling” experience of SQ006 has meantthat the company is looking at the lessonsit can learn from the experience. It is takingstock.But life, and SIA’s game plan, goes on.“I would hope that five years from nowwe would be clearly recognisable as a verylarge global group of airlines and airlinerelatedcompanies. I see Virgin, Ansett andAir New Zealand as just the beginning,” saidDr Cheong.“At the same time, while we will begrowing through our acquisitions and allianceswe will be very much focused on our organicgrowth by adding new destinations andincreasing frequencies.”Dr Cheong has just signed a new twoyearcontract as SIA’s chief executive that willcome into effect in June and take him throughto the age of 62 at the airline. “There will beno more contracts. I will then retire from SIAand look to do something different,” he said.Referring to his successor he said “people hadbeen identified”.Dr Cheong’s achievements in the past27 years have been considerable to say theleast.Born in Malaysia in 1941, he is quick toreject any suggestion SIA’s success is built onhis own business philosophy. “It is not myphilosophy, but the way the company doesthings,” he said. “It is more the culture ofwork. The culture of doing business withinthe company.”There are some constants in that, headded. “We stay with the basics of management,time-honoured basics. Take customers,for example. We think customer all the time.And competition; we believe in competition. Ibelieve much of our success is due to the waywe have been used to competing from theearliest times. That competition has honedmany of our skills.“We don’t go blindly for the latestmanagement fad. We are open to new waysof doing business and new ways of thinking,but it is this adherence to basics, of prudenceof financial management for example, whichmakes it work.”Other executives underscore the importanceof fundamentals. Example: awards area way of life for SIA. Staff still enjoy winningthem, but celebrations are short. Even if theycollect 95% of the vote, a post mortem is heldabout possible shortcomings that cost themthe remaining 5%.Another critical cog in the “globalcompany” strategy is there is no glass ceilingfor non-Singaporeans at SIA.Back in 1993, when many other Asiancarriers were moving to reduce expatriatenumbers and “nationalise” their staff, DrCheong was telling his senior executives SIAhad to search the world for the best, recruitthem and allow them to reach the highestranks, wherever they came from.It is an undertaking he has delivered on.“It’s not just us trying to be fashionable,” hesaid. “We recognised if we were to grow and ifwe are going to be number one, then we mustbe served by the best in the world.“Because you are competing with globalplayers, it is arrogant to think the best in theworld can only be found in tiny Singapore.So starting in the early 1990s we recruitedfresh university graduates in other parts ofthe world to work for us. It wasn’t a questionof finding the best and bringing them in aschief executive or senior vice-president, butbringing them in at the lowest executivelevel and letting them work their way up likeSingaporeans.”SIA has always been an internationalcompany. It operates internationally. But DrCheong believes globalisation means havingbusinesses based all over the world, not justflying there.He is more optimistic than ever that openskies and liberalisation are inevitable. “It’sa philosophy that should be espoused byany self-respecting airline. How else can yougrow? How else can you succeed in a marketSingapore Airlines will be the first airline in the world to put the A380 Very Large Aircraftinto service in 2006with your own skills and merits if you don’thave free competition?”He thinks there is nothing schizophrenicabout the two apparently diverse paths SIAis taking in its expansion quest; being a StarAlliance member on the one hand, yet settingup its own global stable of airline and airlinerelatedcompanies on the other.That may appear to be building analliance group within an alliance group, butnot so, according to Dr Cheong. SIA needsthe world as its market because it does nothave a substantial home market in which togrow, he said.“Why should we apologise for that?In this day and age just about every otherindustry has been, or is being, globalised. Lookat the banks and look at the Telcos. The airlineindustry is practically the last major bastion ofprotectionism,” he said.Some growth comes through alliances,but this is an artificial way, he suggested,20 | Orient Aviation | March 01

ecause part of the reason alliances came intobeing was to circumvent protectionist walls,the regulatory environment and ownershiplimits which place brakes on airline globalisation.“Now, alliances have a raison d’etre oftheir own and not just as a means of overcomingprotectionistic values. Being a memberof an alliance with the right partners has itsown merits. One example is the affiliation offrequent flyer programmes which strengthenyour product immensely and give you a bigmarketing edge over other airlines with lessextensive frequent flyer networks,” said DrCheong.“At the same time we want to be asuccessful large group of airlines and airlinerelatedcompanies for a slightly different setof reasons. Our growth rates out of Singaporehave been declining over the years and thereasons are not difficult to see.“It’s a small home market and when youreach a certain size, as we have, every additionalpoint of growth is harder to achieve.How many more frequencies can you add toLondon or Sydney? How many more newdestinations can you add to your networkwhen you are already flying to practically allthe major destinations of the world?“So if you can’t grow at a satisfactoryclip the traditional way, then we can growvicariously through our investments in smallerairlines which, because they are smaller, arecapable of higher rates of growth than we canachieve on our own. That is something quitedifferent from the rationale behind membershipof alliances.”Both are important as separate, but parallelgoals, he insisted. “Where they overlapis some of the airlines we have taken equitystakes in happen to belong to the same alliance.And it’s not difficult to see why becausethe airlines we are interested to invest in andthe airlines we would like to be our partnersin an alliance have the same characteristics.We look for the same criteria.”There have been suggestions SIA wants toultimately control the airlines it takes a stakein. Not so, said Dr Cheong,“We are not interested in a majoritystake, a majority meaning more than 50%.We would like the airline to retain its nationalcharacter because I think that would makeus more acceptable to the home market,which is important for pure commercial, if notideological, reasons.“Attaining the equity stake requires a lotof effort from the very top and making theequity partnership work also requires a lot ofeffort so unless the stake is significant it’s notAir India: SIA in a bid with Tata Industries for a stake in the Indian national carrierworth our while.”Dr Cheong insists SIA “would not forceitself” on its equity partners. “We would bevery happy to extend co-operation in anyarea, but it has to be with mutual consentand the effort must be to the mutual benefitof all parties.”He does not mind talking about givingassistance to Australia’s Ansett, now whollyowned by Air NZ. “We would be very happyto give it (assistance), to grow Ansett Internationalinto a truly major international airlinein time.“We have to recognise that right now ithas hardly started, but we want it to developinto a true competitor to Qantas,” he said.Having large amounts of cash on handallows SIA to maintain its lead in the costlyfield of Information Technology (IT) and IFE,central planks in its reputation now and inthe future.“It’s not just IT, which has been with usfor a long time. It’s more the technology associatedwith the Internet and all these newdevelopments which allow us to leapfrog thecompetition provided we have the will andthe willingness to spend,” said Dr Cheong.“This technology opens up a new greenfield and everybody is starting at the samelevel. We certainly have the will and we havethe financial resources to carry it through.We see tremendous opportunities and wewill harness this new technology for a lot ofthings, but in particular for customer servicingand to improve our sales.”What makes SIA a successful airline is alittle bit of everything, said Dr Cheong. “Youcan’t put your finger on one thing and say;‘hey, that’s it’. Whether it is the cabin crew,or the most modern fleet or the best inflightentertainment system, they are all part of theentire fabric.“There is no magic formula, although onecannot deny luck may play a role at times.”On a wet and windy night on October 31last year that luck ran out when SQ006 failedto take off. Today, however, confidence isreturning to SIA and the airline will build onthe lessons it has learned to achieve greaterglobal heights.SIA fleet: 91 and growingSIA has a fleet of 91 aircraft with an average age of five years and 11 months. It has65 jets on firm order and options for another 55.SIA has 36 B747-400s with three more on order and nine options. In addition, thefleet includes nine B747-400 freighters with eight on order.There are 13 B777-200s in service, with 37 on order and 26 options. It has five B777-300s with three others on order.It also has 13 Airbus A310-300s and 15 A340-300s.There are five A340-500s on order and five options. SIA will take delivery of 10 A380sfrom 2006 through 2011 and has 15 options on the new Very Large Aircraft.The airline’s route network, including flights of wholly-owned subsidiary, SilkAir,and freighter-only destinations, extends to 91 cities in 40 countries. Including code-shareservices, SIA serves 119 destinations in 41 countries. The carrier has 613 passenger flightsa week departing Singapore.March 01 | Orient Aviation | 21

c o v e r s t o r ySIA’s crisis ‘samaritans’ are ...The best of buddiesBy Barry GrindrodIn SingaporeSiddy Baharuddin, one of SingaporeAirlines (SIA) most experienced“buddies” – volunteers who assist intimes of crisis – says she has found herself anew “brother”.She met him in the worst possible circumstances,the day after SIA had its worst evercrisis: on the night of October 31 when LosAngeles-bound Flight SQ006 crashed trying totake off from Chiang Kai-shek airport in Taipei.Eighty three passengers and crew of the 179on board died. Many others were injured.The graphic television pictures of a burningplane shocked and horrified viewers. Nonemore so than the people of Singapore.But the accident brought out the best inone group of people, the SIA “buddies” whosejob it is to assist in caring for the relativesand friends of victims and assist survivors.It’s a tough job, physically and mentallydraining. But there are compensations forboth parties.Siddy’s new brother lost his mother inthe crash and the relationship illustrates thestrength of the SIA buddy system and theextraordinary compassion and caring of thebuddies themselves. The bonds formed inmany cases lead to very special and longstandingfriendships.Siddy, a senior SIA sales representative andone of the airline’s most experienced buddies,first saw “active service” in December, 1997,when SilkAir, a wholly owned subsidiary ofSIA, lost a B737 with 103 passengers and crewon board over Indonesia. It crashed into a riverin Palembang.“The two accidents were very different.There were no survivors in the SilkAir accidentand the crash site in Palembang was veryisolated. It was not easy for friends and relativesto visit. There were no faxes or phonesto use,” said Siddy.The hardest part of the job? Breaking badnews to the families, said Siddy. “With SQ006there were many different nationalities,different races, so choosing the right wordsto tell people their loved ones had perishedwas important.“At first in Taipei we did not have a preciseSiddy Baharuddin: “We have to letourselves be punching bags ... It is partof the anger process for the next of kin”list of passengers and their condition so wecould not tell people anything. It was verydifficult. We could not build up their hopes.“It is important in those very difficultcircumstances that we understand what thenext of kin were going through and allowthem to use us as a punching bag. This is partof the anger process, but as the day goes onthey begin to realise we are there to help andthey become very close to you. From a painfulexperience something beautiful develops andreal friendships emerge between the buddiesand relatives.”Ruth Kelly is SIA’s vice-president customeraffairs and heads the buddy programme.“What happened on the night of the accidentwas incredible. We have a list of 385 trainedbuddies in Singapore, but as the news wasbreaking people who were not registered asbuddies turned up at the crisis managementcontrol centre at Changi airport in droves. Itwas wonderful. People arrived all throughthe night. Some got out of bed, others hadjust returned from duty travel. Some staffreturned from leave early just to be there.They wanted to help. They had no idea whatthey would be doing because they were nottrained buddies. But they either helped withadmin, were runners for buddies or had thelanguage skills we needed in Taipei.”The initial group of more than 100 buddieswas on the first flight to Taipei at 6.30am.Within a couple of days, scores more back upbuddies flew to Taipei. “We had more than300 in Taipei, not all at once, because somewere relief buddies,” said Kelly. It’s estimateda buddy, on average, is mentally prepared forseven to 10 days for crisis support before he orshe needs to “recharge the batteries”.“I have never seen so much motivationand enthusiasm as there was in that first 48-72 hours after SQ006 crashed. How peoplemoulded and got on with the situation wasphenomenal,” she said.“What also has to be remembered issomeone has to cover for the buddies back inthe office, which means that staff throughoutthe network are playing their part in crisismanagement.”The buddy system was launched by“Shock treatment” is part of the buddy training programme when film clips and newspapercoverage of accidents are analysed and discussed22 | Orient Aviation | March 01

SIA management in 1992 to support itspermanent crisis management centre. It wasdecided that in the event of a major crisis likean accident or a hi-jacking a structure wasrequired where people would help the nextof kin of victims and provide back up supportfor them. Buddies could also be called uponwhen passengers suffered long delays caused,for example, by an air traffic control computershutdown, or onboard food poisoning.Today, SIA has 385 buddies in Singaporeand 268 based overseas. They are recruitedfrom throughout the airline and its subsidiarycompanies. The numbers received a hugeboost after the SQ006 accident. Another 170joined the ranks.Everyone throughout the SIA Group hasaccess to the buddy bulletin board that givesthe history of the programme, procedures,and how to join a list of buddies.Once a person volunteers and beforethey can be activated for any type of crisis,they have to graduate through a series oftraining courses. They are held over a threedayperiod that includes a great deal of roleplaying. During the courses it is decided if thevolunteer is comfortable with the role and hasthe potential to handle crisis situations. Newsclips of emergencies are used as “shock treatment’to test the would-be buddy.The key to being a good buddy, said Kelly,is to be a good listener. “They are not counsellors,but we equip them with basic counsellingskills,” she said.“We get help from a local counsellor.He will discuss grief, the process of grief,understanding anger and the stages ofanger. They will be taught basic skills inparaphrasing what relatives say, seekingclarification of what they are saying to enablethem to understand what is needed. Themore they listen and the more they learnabout the family, the more they can supportthat family.“But the buddies are also there to informthe people who are undergoing trauma whatis going on at the crisis management centre.Buddies pass on any requests the next of kinmay have to the centre.”Just as important as looking after therelatives and friends of victims is the need forthe buddies to look after themselves.“Buddies are given a lot of training onhow to manage their physical, emotionaland mental states,” said Kelly. Buddies alsokeep their eyes on other buddies, watchingfor signs of emotional wear and tear, and arealways ready to help when necessary.A bulging folder of thank you letters atSIA’s Airline House headquarters illustratesthe value of the work of the buddies. DuringMarch SIA will be holding a “buddy talktime”, a kind of final debriefing of the SQ006aftermath.“We still have buddies working withsurvivors and with relatives. We also havebuddies who are hiding their feelings awayand may need to talk,” said Kelly. “The talktime will allow us to look at where we are atnow, what improvements we can make to ourprogramme and for the buddies to share, in agroup or individually, their own feelings. “Itwill be a kind of closure on SQ006.”Said Siddy: “The buddy programme helpsto bring people together in the company.You cannot help but feel proud to belongto such an organisation that has so muchdynamism.”March 01 | Orient Aviation | 23

e x e c u t i v e i n t e r v i e wThe turnaround at British Airways (BA) since former CathayPacific Airways and Ansett Australia boss Rod Eddingtonbecame chief executive in May last year has been dramatic.Modestly, he refuses to take all the plaudits for BA’s improvedperformance and credits his predecessor, RobertAyling, with contributing to the success of recent months.But, Eddington told TOM BALLANTYNE in London, thereis still much hard work ahead.There were a few raised eyebrows inBritish Airways’ (BA) Waterside headquartersnear London’s Heathrow Airportwhen it was announced in April last yearthat an Australian was to take over one of thegreat British institutions.But many of those who knew Rod Eddingtonin his successful days as managingdirector of one of the most profitable and mostrespected airlines in the world, Cathay PacificAirways, and, latterly, executive chairman ofAnsett Australia, believed BA chairman, LordMarshall, had pulled off a master stroke.The sceptics might have said there wasnothing to lose, it could not get any worse atBA. His predecessor, Robert Ayling, had beensacked as the bottom line headed into thered. The carrier that calls itself “the world’sfavourite airline” was under investor siegeas it reeled from high fuel costs and expensesas well as tough competition from low-costEuropean rivals.In the last year of Ayling’s BA leadershipafter-tax profits had plummeted fromUS$833.3 million in 1997 to $677.3 million in1998 and $313.6 million in 1999. In May lastyear, a few days after Eddington had steppedinto his chief executive’s office for the firsttime, the carrier reported its first full year lossof $16.7 million.At the time shareholders were far fromhappy after earnings per share plummettedfrom around 77 cents in 1997 to minus 24 centsin the year to March 31, 2000.And the staff was unhappy, too. Ayling’smanagement style had not made many friendsamong BA’s employees. Eddington errs onthe side of gross understatement when hereflected on his early weeks at Waterside.“Morale [of the workforce] was bruised,”he said diplomatically. “But people were stillcommitted to the company. That as muchas anything has enabled BA to get throughthe last couple of years, because they haveobviously been difficult years.”“Eddo” the saviour? Well, it was not longbefore he knew his talents would be testedto the full – and more! The documentedfinancial woes were just the beginning. Hewas soon thrown into the complex and soonto-failnegotiations with Dutch flag carrierKLM about a proposed merger. And in June,Eddingtonputs accenton success...and it’s working; but no moreinvestment in Asia-Pacific carriersBA chief executive Rod Eddington: the Australian is comfortableat the helm of one of the great British institutions24 | Orient Aviation | March 01

British Airways: A dramatic reversal in fortunesfollowing the tragic crash of an Air FranceConcorde, BA grounded its own fleet of thesupersonic jets.Although Eddington will not commentpublicly about the Concorde issue with AirFrance because the investigation is ongoing,it is likely the BA Concorde fleet will be backin the air by spring.Eddington, who in March will take hisplace on the board of 25% BA-owned QantasAirways, is the consummate airline executive.He has fitted easily into his new surroundings.He says he enjoys the job tremendouslyand his Korean-born wife and two children are“very happy” with their new life in England.Any lingering suspicions about the newboss from Down Under have probably beendispelled by the hands-on, no nonsenseEddington style.“I have always regarded myself as anAustralian first and foremost, but I recognisethat I’m a gypsy,” he said.He lived in England for seven years in the1970s when he studied at Oxford Universityas a Rhodes scholar and then as a researchfellow. Later, when he joined Cathay Pacificat 29, he worked in Japan, South Korea andHong Kong before he moved to Melbourneto head Ansett in 1997.“If the acid test [on loyalties] is who do Ibarrack for when Australia plays England onthe cricket or the rugby field, it’s no contest,”said keen sportsman Eddington with a smile.“But although BA is a very British company insome ways, it is a global company in others.I think the days are gone when companieslike BA or Qantas Airways are run from avery narrow base by a very narrow group ofpeople, all from one country. You just can’t doit any more.“This airline business is one of the mostcosmopolitan of all industries so I don’t thinkit is strange there is an Australian at the helmof British Airways. I regard myself as part ofthe British Airways team,” he said.There is already evidence Eddington’s effortsat BA are paying off, although he refusedto take all the credit and pointed out the benefitsto the airline produced by measures takenby Ayling before he left the airline.Nevertheless, the turnaround since Eddingtontook over has been stunning. In thenine months to December 31, operating profitclimbed 111% to $668.2 million, with pre-taxprofits hitting $325.7 million. Yield rose 8.3%and, excluding a 46% rise in fuel costs andthe impact of exchange rate changes, unitcosts fell 3.1%.The results reflect a reduction of unprofitablecapacity and continued cost efficiencies,with smaller aircraft, higher frequencies and amore profitable mix of passengers all contributingto the better results.“These numbers are encouraging andreflect the continuing improvements in thebusiness. In a competitive marketplace theyshow we can continue to improve profitabilityby focusing on our core activities and the rightnetwork,” said Eddington.Major priorities have been fleet strategy,a re-appraisal of BA’s use of London’s secondairport at Gatwick and rationalisation of shorthaulEuropean operations, he added.BA’s short-haul business is fragmented.It includes BA’s own regional services, whollyowned subsidiaries like Brymon, CityFlyerand Deutsche BA, and franchises such asBASE Airlines, British Mediterranean, BritishRegional Airways and GB Airways. “The firstquestion is what belongs inside the tent andwhat doesn’t? We are in the process, in anintelligent way, of consolidating and integratingthe other parts of our short-haul network,”said the BA boss.A French subsidiary, Air Liberte, has beensold and BA’s no-frills operation, GO, is onthe auction block, expecting to be sold bythe end of the year. Two separate businessesat Gatwick – CityFlyer and EOG (EuropeanOperation Gatwick) – have been incorporatedunder one management structure.Branding will be an issue in the longerterm. “Whether or not we ultimately haveeverything under one brand, a BA brand, orwhether we will have two brands, a BA anda BA Regional or a BA Link or a BA Express,that’s an issue we will be addressing. It isnot something we are rushing into,” saidEddington.BA is radically reorganising its use ofGatwick, which has been a second hub, alongwith Heathrow. That will end. “Gatwick, goodairport though it may be, will never be a goodhub and spoke airport. It has only one runwayand two terminals, so it’s a split terminalairport. It just doesn’t lend itself to a hub andspoke operation,” argued Eddington.Over the next two to three years somelong-haul services will be brought back toHeathrow from Gatwick and some short-haulflights will go the other way. BA will continueto have a substantial presence at Gatwick,but primarily it will become a point-to-pointoperation.“There are places like New York, whichis a big market, and leisure destinations suchas the Caribbean, which will be able to justifya Gatwick operation. But operations like ourSouth American and African routes will comeback up the M25 motorway to Heath-row.”The third plank of BA’s revival plan is fleetstrategy. “When I arrived at BA there wasa strategy in place which had a number ofpieces to it. One was trying to make sure wehad the right sized aircraft on the right routesand this included a substantial commitment tothe Boeing B777.“The longer-range variants particularlyhave been extremely useful because BA has abig fleet of about 57 B747-400s, but there weresome long-haul routes where the B747-400was too big. The B777-200 has been extremelyuseful operating in parallel or in tandem withthe -400s.“BA had also made a major commitmentto the narrow bodied Airbus fleet, A319s andA320s, with some opportunities to acquireMarch 01 | Orient Aviation | 25

e x e c u t i v e i n t e r v i e wA321s later. That was an excellent decision.It’s a very popular aircraft with our customersand our crews and it means instead of operatingB767s on short-haul European routes, onroutes where that aircraft was too big, we’reable to operate a more appropriately sized aircraft.I think both those planks of the strategywere absolutely right.”But Eddington said there was no room inthe fleet for the Very Large Aircraft, the 550-seat A380 in the near future.One reason is that partner and oneworldalliance member Qantas Airways has ordered12 of the aircraft. “Qantas will be operatingthe A380s under our joint service agreement.We will be code-sharing. Qantas will operatethem from Sydney through Bangkok to theUK. There will be A380 capacity which we cantake advantage of. We are delighted Qantaswill be operating it, but BA has other prioritiesat the moment.”Eddington said he felt some frustrationover the failure of complex negotiations aimedat securing a BA-KLM merger, a plan ultimatelyfoiled by European Commission monopolyconcerns.“In the bilateral system, aeropolitical realitiesdrive a lot of things in this industry and oneof the things they do is make consolidationmuch more difficult because ownership andcontrol issues, which are fundamental to thebilateral process, often determine what youcan and can’t do. Are they frustrations? Yesthey are, but they are the realities you haveto live with.”He still believes European aviation willconsolidate. “That is inevitable and the reasonis the economic drivers are powerful.“The economic pressures to consolidate,particularly in tough times, are real. Theaviation industry is no different to any otherindustry. We have seen consolidation globallyin the car industry, the telecommunication industryand the banking industry. Internationalaviation is more fragmented in many waysthan any of them.”Eddington has a message for the Asia-Pacific airline industry; BA will not be investingin any more of the region’s carriers and, despiterumours, it will not be changing its 25% stakein Qantas.“Any investments we make will be inEuropean airlines as part of a consolidatingprocess in Europe. That will be our focus. Youwon’t see any investment by us in Asia,” hesaid.He denied conflicting reports that suggestedBA planned to either raise its Qantasstake or dump it altogether.” We have noplans to raise or trim the stake. It’s a significantinvestment, but not a dominant one.“We have an excellent relationship. Wethink the current relationship underpins thestrong links between the two carriers, the jointservice agreement between the UK and Australiaand our joint membership in oneworld.Yet it does not crowd Qantas managementin any shape or form. I think it is pitched justright.”‘I have seen a wideningof the gap between theCathay Pacifics and theSIAs on the one hand andsome of the other airlinesin Asia on the other. Inpart, that is a reflection ofthe quality of leadership’– EddingtonIn Asia, BA will focus on building relationshipswith partners through the oneworld alliance.“We will serve the key markets directly asBA on a non-stop basis wherever we can fromLondon Heathrow. But we will serve many ofthe smaller markets through our alliance relationshipswith Qantas and Cathay Pacific.”Eddington believes some of the region’sairlines fared far better than others throughthe 1997-98 economic crisis. “Every countryresponded differently. Airlines respondeddifferently and the strong airlines in Asia, thebest managed airlines like those of the qualityof Cathay Pacific and Singapore Airlines,have strengthened their relative positions as aresult of the quality of their management anddecision-making.”All Asian carriers benefitted substantiallyfrom the boom of the mid-1980s and mid-1990s, because “a rising tide lifts all ships”,he said.“But in the really tough times it is airlineswith the strong brands, with good managementteams, with a good product and witha strong customer base which really excel. Ihave seen a widening of the gap between theCathay Pacifics and the SIAs on the one handand some airlines in Asia on the other. In part,that is a reflection of the quality of leadership.People like David Turnbull and Philip Chen atCathay and Dr Cheong and Michael Tan at SIAare experienced people who run airlines oncommercial grounds.”Eddington is reluctant to comment publiclyon the problems of his former charge, Ansett,now wholly owned by Air New Zealand.However, he did observe that putting twoairlines together was “a challenge”.“Think of the difficulties Qantas had in theearly days merging with Australian Airlinesand look at the problems in British Airways,putting BOAC and BEA together all theseyears ago. But if everyone is focused on ityou can do it.“There is plenty of evidence to suggestthese things can be done and I have no doubtthat Gary Toomey and the team will be focusedon getting it done.”Eddington is looking forward to sittingon the Qantas board. “I think James Strong[Qantas chief executive] and his team havedone a terrific job, through the privatisationof the airline and beyond.“The BA relationship with Qantas is a verygood one and I am looking to reinforce that.It’s great to be involved again in an Australiancompany, although clearly the overwhelmingmajority of my time will be spent on mattersBA.“But sitting on the Qantas board wearinga BA hat, my primary focus obviously will beto do what I can to help Qantas continue togrow and strengthen. I’m also mindful of thequality of the links between BA and Qantas. Ibelieve they are important links for both carriers.I am going to help try and reinforce themif I can.”26 | Orient Aviation | March 01

n e w sAirlines face 79% rise in Sydney feesBy Tom BallantyneAustralia’s pricing watchdog, the Competitionand Consumer Commission(ACCC) has attracted criticism fromall sides with a draft ruling which wouldallow Sydney Airport to increase aeronauticalcharges an estimated 79% later this year.The body has been slammed by airlinesfor allowing such a big increase, by airportmanagement for trimming back its originaldemands and by government for the impactit may have on the potential sale price of theairport when it is privatised.The draft decision would allow theairport to raise its revenue from the currentUS$47 million a year to US$85 million perannum. The airport management had soughtpermission to lift revenue to US$109 millionannually.That proposal, made nearly a year ago,sparked an angry response from airlines,which instigated legal action. They havecontinued to fight the proposed increases,which they claim breaks a promise the airportmade that it would not attempt to recoupmoney spent on its costly improvementsfor the 2000 Olympic Games by raising usercharges.Airlines remain unhappy. They wantedincreases restricted to around 30%, farbelow the 130% sought by Sydney AirportsCorporation (SACL). In the event, the ACCChas opted to approve a figure midwaybetween the two demands.Warren Bennett, executive directorof the Board of Airline Representativesof Australia (BARA), which representsinternational carriers using the airport,expressed disappointment and said the draftdecision seems to contemplate a 79% increasein aeronautical charges.“The ACCC’s draft decision will have asignificant affect on the operating costs ofairlines. Ultimately these costs must passthrough to the air travelling public of Australia,”he said.The ACCC estimated its formula forincreases would add about US$1.06 to theprice of a return domestic ticket and around$5.30 to an international return flight.Parties were given less than a month torespond to the draft finding. Both BARA andthe SACL have made it clear they are rushingto prepare “strong” submissions to arguetheir respective cases.SACL said it sought increases inlanding charges and infrastructure usagecharges to better reflect the airlines’ useof the substantially upgraded facilities andservices.“Sydney Airport’s proposal to increaseaeronautical charges was designed to influenceairline behaviour, not affect passengerbehaviour,” said its chief executive Tony Stuart.“For airlines, the airport will remain oneof the most competitive in the world and theincrease in charges will not affect the capacityfor regional airlines to use Sydney Airport.”BARA’s Bennett suspects the rush tofinalise the new fees – final submissions aredue March 5 – is a result of political pressurefor a speedy decision in order to meet thegovernment’s timetable for privatisation ofthe airport. A draft report should have beendelivered by February 28 setting out the strategyand timing of the airport sale – expectedto be complete by the end of this year. It isexpected to involve a public float.Some government officials are privatelyconcerned the failure of the ACCC to approvemuch higher increases in aeronautical chargescould seriously affect the expected US$2.1billion asking price for Sydney Airport.Indeed, leading credit rating agency,Standard & Poor’s (S&P), promptly placedits A+ long-term and A-1 short-term ratingson SACL on a negative watch after the draftACCC announcement.S&P said the ACCC’s restriction was“likely to place some pressure on SACL’s totalrevenues and cash flows in the near term,which could weaken the company’s financialcoverage levels.”Sources from several airlines said theyare determined to mount a powerful fight toreduce the proposed fee rises.visit our web siteorientaviation.comincorporatingInflight AsiaIn addition to a selection of news, features and comment from Orient Aviation our web site provides:• real-time news updates to our published stories • breaking news throughout the industry• access to back issues• advertising details• and a feedback facility where the readers can have their sayAnd in the months to comeorientaviation.com will be adding a number of other functions to the siteMarch 01 | Orient Aviation | 27

i n f l i g h tClick, click ... Inflight AsiaInflight Asia has gone electronic. For the best in breakingnews, inflight service and cabin management trends andpeople moves in our industry go to Orient Aviation’s website orientaviation.com and click on Inflight Asia.A selection of the top stories also will be included eachmonth in Orient Aviation.Cathay takes 10%stake in TenzingBy Christine McGeeCathay Pacific Airways moved to theleading edge of electronic communicationsonboard with its decision totake a stake in the global inflight communicationscompany, Tenzing Communications.The Hong Kong-based internationalcarrier announced in mid-February its whollyowned technology investment company,Taikoo Aviation Technologies Limited, hadpaid US$10 million for 10% of the Seattlebasedcompany’s shares.Ian Riddell, the airline’s informationmanagement and e-business director said ina press statement: “The investment in TenzingCommunications is consistent with ourventuring programme, a key element of oure-business strategy.“It recognises that inflight connectivityfor air travellers will become an essential partof the service offered by leading airlines overthe coming decade. Cathay Pacific, throughTenzing, wishes to be at the forefront of thewave of new service offerings.”The same press statement said the US$10million investment was part of the secondround of funding raised by Tenzing Communications.The leading contributor to the firstround of investment – US$12 million – wasan international communications company,the Fremont Group. Other parties to the twosequences of investment were foundingindividuals of the company, TH Lee, RiversideManagement Group, JGL Investments, DeutscheBank and ITOCHU Corporation.Tenzing Communications is a companythat seeks to develop and provide inflightconnectivity solutions including inflight e-mail,terrestrial global roaming capabilities, extensiveWeb content and focused e-commerceand updated content.Last year, Cathay Pacific announced itwould invest HK$2 billion (US$256.5 million)in e-business products that have includedCathay Pacific information managementand e-business director, Ian Riddell: inflightconnectivity will become an essential partof airline serviceTenzing chief operating officer,Alan Pellegrini: Cathay’s investmentsignificant in more than financialterms; signals confidencea re-launch of its website, introductionof NotiFLY (informs passengers of flightchanges), development of a sophisticateddownloadable trip planner and upgradedonline booking and check-in systems.At the same time that Cathay Pacificannounced its e-business investment strategy,it conducted an onboard trial of Tenzing’sinflight e-mail system. Shortly afterwards,the airline decided it would install Tenzing’sinflight connectivity system across its fleet.Earlier this year the carrier announced itsdeadline for “deploying” – the third quarter ofthis year. Cathay Pacific said the e-fit makes itthe first airline in the world to commit to theintroduction of e-connectivity for passengersacross its entire fleet.In Singapore, SIA conducted separate trialson two inflight e-communications systems– Tenzing’s product and Honeywell’s system.Both models have yet to produce the technologyto offer real-time e-mail and websiteaccess, but developments in the field aremoving so fast that inflight access to e-mailand the Web are soon expected to match theterrestrial e-mail and Internet accessibility ofpassengers.Tenzing burst onto the inflight scene atthe 1999 World Airline Entertainment Association(WAEA) conference and exhibitionin Salt Lake City, Utah. It was an unknownquantity, but it instantly distinguished itselfwith its marketing pizzazz and accessibility– an experience unique among its competitorsat the time. At that 1999 WAEA conferenceand exhibition Tenzing’s early assault marketingteam said Cathay Pacific was a possiblecustomer for its system.Since then it seems to be love betweenthe Hong Kong carrier and the Seattle-basedcompany, with the parties apparently agreeingthat e-connectivity – from e-mail to theInternet to direct-to-cabin television entertainment– is the next big moneymaking thing.Said Tenzing’s chief operating officer,Alan Pellegrini, an ex-Rockwell Collins salesvice-president: “This investment from CathayPacific is significant in more than financialterms. As with our first round of funding, thisinvestment signals a high level of confidencein Tenzing and our services from airlines– industry leaders who understand ourbusiness and our target markets.”Having secured significant investmentfrom a prestigious stable of e-venture companies,including Cathay Pacific, the critical questionis: which passengers will pay for whate-connectivity services onboard?30 | Orient Aviation | March 01

i n f l i g h tGlobal catering equipment manufacturer and designer DeSter.ACS continued along its path of industry integrationwith its recent establishment of a primary partnershipwith an inflight consultancy and new strategic allianceswith two inflight equipment designers and manufacturers.CHRISTINE MCGEE reportsNew partnership and sales andsourcing agreements announced atthe industry’s annual European flightcatering conference continue equipmentcompany DeSter.ACS’s strategy of settingup a global “one stop shop” for its inflightcustomers.Speaking at the International Flight CateringAssociation (IFCA) exhibition in Barcelonain February, chief operating officer of DeSter.ACS, James Drayton, said his company, thewholly owned travel division of the DuniGroup, had entered into a operating andstrategic partnership with inflight conceptsagency, Performa.It also had signed sales and sourcingagreements with ceramics manufacturer,Wedgewood of England, and recently mergedcutlery and hollowware manufacturers,Groupe Guy Degrenne/Berndorf Inflight.The DeSter.ACS Performa “independent”partnership “will offer a complete platform forinflight services and product development”, astatement released at IFCA said.DeSter.ACS and Performa will combinetheir skills to offer an integrated package ofdesign, development and delivery of inflightservice to airlines.However, both companies stressed theirnew co-operation must not be seen as amerger of their interests. The functioning ofthe new partnership will be “independentfrom the day-to-day activities of Performa andDeSter.ACS” , the IFCA statement said.“It is an exciting and logical step for us tobe taking as it meets our ambition to be seenas a total solutions provider,” said Drayton.“It meets the needs for the market as we seemore and more carriers prepared to contractout to single source professional suppliers.”Performa• Global leader in inflight service design & delivery• Aviation specialistOne stopglobal shopmoves closerDeSter.ACS chief operating officerJames Drayton: “More and morecontractors prepared to contract out tosingle source professional suppliers”“Performa is the market leader indesigning inflight service and to combine ourskills with the recognised position and skills ofDeSter.ACS is a perfect match to provide sucha comprehensive service,” said Keith Bates,Performa’s president.Performa was set up in Australia andnow operates globally, with Bates primarilybased in Hong Kong. Its most recent inflightre-launch was the re-branding and servicedelivery transformation of British carrier, BritishMidland, into the hip bmi.Better halves of a new whole...• Public company with global resources & staff• International customer base of airlines• World-beating industry experienceDeSter.ACS• World leader inflight design concepts• Travel business focus• Recognised supplier of total solutions• International manufacturer of inflightequipment• Acknowledged global industryexperienceThe company is also well known forits role in developing Ansett International’saward-winning inflight service when theinternational arm of the Australian domesticcarrier was launched seven years ago.Stockholm-based international “table”concept and equipment manufacturer, Duni,bought DeSter.ACS last year. In the last 14months, DeSter.ACS has consolidated itsproduction and marketing into a new operationscentre and headquarters in Belgium andmanagement, sales and production centres inHolland, Sweden, Thailand and the U.S. It alsohas sales offices in several other countries; themost recent being the opening of a regionalrepresentative office in Beijing, China.DeSter.ACS also chose IFCA to unveil itsnew sales, marketing and sourcing partnershipswith manufacturers Wedgewood ofEngland and Groupe Guy Degrenne BerndorfInflight. Drayton said DeSter.ACS will assumecharge of worldwide sales of Wedgewoodof England products to airline customerswhile the ceramics manufacturer will takeon total sourcing for all DeSter.ACS ceramicsworldwide.The Guy Degrenne/Berndorf partnership– the Degreene group bought 70% ofBerndorf in 2000 – with DeSter.ACS has anevolutionary element in its operations. DeSter.ACS will be, as with Wedgewood, the worldsalesman for the cutlery and hollowwaremanufacturer and Guy Degreene/BerndorfInflight becoming the Duni subsidiary’s soleinflight flatware and metal accessories supplier.However, the metalware manufacturer,which produces most of its products in theAsia-Pacific region, will continue to supply aselected group of its own clients under thenew partnership. As well, existing contractssigned by all parties will be honoured untilthey lapse.32 | Orient Aviation | March 01

COUNTRY FOCUSBY TOM BALLANTYNEJAPANTackling the oddsRivals co-operate to overcome economic hardshipsLife has not been easy for Japan’s airlineindustry during the last decade. Twodownturns, one following the Gulf Warin the early 1990s, the other Asia’s most dramaticeconomic recession later in the decade,battered the nation’s confidence. Coupledwith high labour costs, volatile fuel pricesand an economy struggling to emerge fromstagnation, airline profits have been all butnon-existent.Coping with tough market conditions is achallenge at the best of times and, as the restof Asia knows all too well, that experience hasnot been confined to Japan in the nineties.But Japan Airlines, All Nippon Airwaysand Japan Air System have had their attemptsto restructure and rationalise made more difficultby other issues. These include breakingdown traditional employment practices, copingwith unprecedented levels of internationalcompetition, integrating domestic deregulationand managing demand on ever-presentslot constraints at the country’s primary airporthubs; facilities charging the world’s highestaeronautical fees.Now, just as traffic growth has broughtprofit back to the balance sheets, the indicatorssuggest more dark economic clouds aregathering over the Land of the Rising Sun.In February, a revision downwards ofJapan’s latest economic growth figures raisedthe spectre that the world’s second-largesteconomy is back in recession at a time whenglobal growth is faltering. Simultaneously, theU.S. economy is slowing, a fact, if it persists,that would impact severely on Japan.Such difficulties are nothing new toJapan’s airline majors. Their patient shareholdershave stoically accepted a lack ofreturns on investment for years. They must berelieved there is clear evidence carriers havemade significant progress in implementingrestructure and rationalisation, introducingnew efficiencies and innovative planning;all planned to dramatically change JapaneseCongestion at Tokyo’s airports a majorproblem for airlinesairline operations.Bitter rivals in the air have put theirdifferences aside to co-operate on the groundwith joint maintenance and informationtechnology ventures designed to save money.The carriers have even come together tomarket a united shuttle service on the mainlineTokyo-Osaka route in an attempt to competebetter with high speed train services.All the airlines welcomed the deregulationof the nineties that resulted in more competitivepricing, freedom to adjust networks andpermission to eliminate loss-making domesticservices on routes that were formerly forcedto operate for reasons of community service.Deregulation also allowed new entrantsto take to the air although slot restrictions atTokyo’s domestic Haneda Airport have madelife difficult for the newcomers to compete adequatelyagainst incumbents. There are signsat least one, Air Do, is struggling to survive.The big operators, despite their achievementsof the last five years still face mammothchallenges. Managements know they mustcontinue a relentless drive to force down costsand further improve productivity if they are toearn “true” profits.They know much of their future dependson Japan’s ability to resolve its airport problems,particularly at Tokyo and Osaka, whereenvironmental issues and years of bitter debatehave slowed the pace of expansion andfrustrated airline managements world-wide.As neighbouring South Korea prepares toopen its new multi-billion dollar hub at Inchonin April and with several other expensive newfacilities operating around Asia, Japan needsa new Tokyo airport or, at least, much greaterexpansion at the existing airports. The needis great and the need is urgent.The country’s airline and aviationauthorities must also find a solution to thelong-running dispute with the U.S. over airrights, essential in formulating policies whichwill accommodate the global industry’sinevitable march towards liberalisation andopen skies. Japanese economic health is oneof the key pistons in the engine driving Asia-Pacific aviation.The travel patterns of the country’s businessand leisure travellers impact significantlyon the bottom lines of airlines elsewhere.Whether or not its carriers succeed in theirongoing drive to cement real and consistentprofitability into operations in the face ofthe major challenges confronting them, andwhether the airports issue can be satisfactorilyresolved, will undoubtedly be criticalto the well being of the industry across theregion.IN THIS REPORTPage 34: JAL president Kaneko leadsdramatic turnaroundPage 37: All Nippon revises profitsupwardsPage 38: Airports under pressurePage 39: Call for reform for accidentand safety investigationsMarch 01 | Orient Aviation | 33

c o u n t r yf o c u sJAL was in bad shape when a new president was appointed in 1998.Hard decisions had to be made, but they have paid dividends — literallyKANEKO’STOUGH LOVEThe 1990s were turbulent times for flagcarrier Japan Airlines (JAL), but sinceIsao Kaneko became its president inJune 1998 there has been a dramatic transformationat Japan’s largest operator.He immediately read the riot act. Speedydecision-making was required, dithering wasout, he demanded. He chopped the number ofboard members in half to make it easier.The job was a big one. Kaneko inheritedan airline in disarray. It called for a no-nonsenseleader who could make tough decisions.In the seven years prior to Kaneko’s arrival JALaccumulated losses of US$334 million, withdebts and over-evaluations of associated hotelsand resorts accounting for another $560million. Shareholders received no dividendsfor six years.In 2001, they will be handed their thirdpay out in a row with JAL expecting net profitsof US$273.5 million for the year ending March31, on total consolidated revenues of around$14.4 billion. This represents a 1.9% return onincome, roughly in line with a consistent 2%being targeted by Kaneko.Getting there has not been easy, althoughshareholders, on the day he took over, approveda US$894 million debt write-off, thelargest against capital reserves in Japanesecorporate history. It allowed the new presidentto start with a clean sheet.The 62-year-old airline chief has takenfull advantage of that starting over, pushingthrough reforms and restructuring to thepoint where JAL is firmly back in the black.“Our aim is to have stable growth. Wewant consistent profitability, somethingwhich has been lacking in the past,” Kanekotold Orient Aviation.Question marks may hang over economicconditions, but the groundwork for a betterfuture has been laid. Unit costs have beenslashed by 38% since 1990, unit labour costsare down 48% and costs per ATK are 63 yen,compared with around 91 yen in 1990.Japan Airlines president Isao Kaneko: “We have finally caught up. We can now becompetitive with the major American and European airlines as far as cost is concerned”These gains reflect well on the bottomline. JAL’s mid-term operating income for thesix months to September 30, 2000 was thesecond highest the airline had recorded; up88.4% to US$484.6 million on a 7.7% increasein revenue to US$5.5 billion.“We have finally caught up. We can nowbe competitive with the major American andEuropean airlines as far as cost is concerned.Our labour efficiency, our productivity, is muchhigher than other major carriers in the world,”said Kaneko.Given local airport charges three timeshigher than the world average, present fueltaxes and traditional labour norms, it is nomean achievement. With the board halvedfrom 30 to 15 members for faster decisionmaking,his blueprint concentrates on thecore air transport business and centralisationof services, resources and use of aircraft formaximum efficiency.Divisions have been established tomaximise effectiveness and independentbusinesses such as trading and hotel managementare being hived off to realise their trueeconomic value.JAL is much leaner and meaner today.In 1998, manpower was 36,000. By the endof this year the workforce will have beenreduced by 3,500. Another 700 will depart in2002. Cabin crew today are hired on a contract-basedsystem rather than the previous“for life” employment.Perhaps most important is the fine tuningof airline operations; a reorganisation intothree groups:34 | Orient Aviation | March 01

• JAL itself operating domestic trunk routesand international intercontinental routesusing large aircraft such as the BoeingB777 and B747.• JALways handling low yield internationalresort routes, with flights to holiday destinationssuch as Guam and Hawaii.• JAL Express (JEX), Japan Transocean (JTA)and J-Air taking over all regional domesticroutes more suitable for smaller aircraft.JEX, based at Osaka’s Itami airport, willincrease its fleet to six B737-400s in Marchand will eventually take over all domesticB737 and B767 flying. While it is not in thecurrent plan, neither Kaneko or JEX presidentToshio Yoshido are ruling out the possibility ofshort-haul international services.“The establishment of JAL Express isaimed at having it operate smaller aircraft so ifthere are any suitable short-haul internationalroutes for JEX to fly that is a possibility,” saidKaneko.JAL’s cockpit crew pay structure is basedon large aircraft operation. JEX, with operatingcosts around 20% lower than JAL, allowscompetitive operations on lower demandregional routes.“Cockpit crew costs are much lower. Werecruit directly. We have our own pay scale,which is lower than the JAL scale. JEX cabinattendants have to clean the cabin betweenflights. Cockpit crew include Japanese andnon-Japanese pilots,” said JEX boss Yoshido.Maintenance support is provided by JALand JTA. The end result is a no-frills, economicoperation.JAL’s own fleet is being rationalised.Seven types – too many for an airline with150 jets – will be reduced to five. Its MD-11swill be sold by 2004 and the DC-10s retired by2005-06. When all the B737s join the JEX fleet,JAL’s aircraft types will be reduced to four andthen three if the B767s go the same way.New types to be considered includethe Airbus A380 or the Boeing B747 stretch.Kaneko said the A340 and A330 are also possibilitiesfor JAL.There has been major restructuring in thefinance and accounting divisions. There are 70of the 88 group companies working in the JALfinance centre. There are 46 companies in thegroup accounting centre.Several catering companies in the JALGroup are also being consolidated.Self-supporting independent businesseswithin JAL face a different future. JAL is nolonger interested in owning hotels, saidKaneko. “JAL Hotels is now a managementcompany with some 53 properties worldwide.It’s management expertise and the linksJapan Express (JEX): to take over JAL’s domestic B737 and B767 routesA man of words – and actionWithin weeks of becoming JALpresident Isao Kaneko told OrientAviation “speedier management”was the way ahead for the airline, hesaid. Quick thinking was the name of thegame with equally quick decision-makingneeded from board level down.Kaneko promptly put his words intoaction. The board, for example, was halvedto 15 members.The son of a railwayman, Kanekostudied politics and law at Tokyo Universitywhere he was a talented basketball coach.At one time he had ambitions to become ajournalist. He eventually opted for a moresecure career path in the national airline.Those who know him well say he hasa great ability to manage people. He ishands-on and direct.His business philosophy is revealing.Kaneko quotes leading Japanese statesmanMasaharu Gotoda, whose pronouncementsinclude “don’t hesitate to accept responsibility... be prepared to stretch beyond yourlimits” and “once a decision has been taken,follow it without hesitation”.He also quotes GE chief Jack Welchextensively. Control your destiny, or somebodyelse will; face reality as it is, not as itwas or you wish it to be; be candid witheveryone; don’t manage, lead; changeyourself before you have to; and, if youdon’t have a competitive advantage, don’tcompete.At JAL, Kaneko insists on transparency.“We are accountable to the public,our shareholders, our customers and ouremployees. As a public transport company,we must be open in our actions.”These are no hollow promises. As chairmanof JAL’s Flight Safety Board Kaneko,who often attends crew meetings andpays regular visits to the shop floor, hasinstructed the airline’s safety record bepublished daily on the Internet. “If there hasbeen any irregularity in flight operations,people can read what happened,” said thepresident.with JAL are an attractive package for hotelowners. It’s good business and there are plansto float it on the Tokyo Stock Exchange, possiblyby 2003-04,” he said.JAL Trading, a general trading subsidiaryoriginally set up as a procurer of goods for theairline, also is capable of standing on its owntwo feet, added Kaneko. With a diversifiedportfolio of business interests, ranging fromaircraft acquisition to wines and spirits importation,it is earmarked for flotation this year.JAL Infotech, the carrier’s informationtechnology (IT) subsidiary, has formed apartnership with IBM. It will develop its ownbusiness activities as well as providing JALwith IT support.The national carrier plans to continueco-operating with local rivals in cost-savingareas.For example, Japan’s three major airlinesstarted a joint shuttle service between Tokyoand Osaka. They are going to establish acommon airline web site (Kokunaisen.com)in the spring.Kaneko said the carriers had an agreementto share spare parts for the B777.“We also can develop common self check-inmachines at airports, something we are doingat the moment with Japan Air System,”he said.March 01 | Orient Aviation | 35

c o u n t r yf o c u sIn 1999, although leisure traffic increased,the critical business passenger sector declined.But from February 2000 executive travel beganto grow again, raising yields.“Our revenue from international passengersgrew approximately 8%. Traffic forthe domestic portion is stable and cargobusiness has been very good through 2000,”said Kaneko.“But recently the slowdown in theAmerican economy, which also influences theAsian economy, has caused a small decreasein cargo traffic between Japan and the U.S.and Asia and the U.S. I am a little concerned,but I am sure the U.S. economy will make asoft landing.“Of course the airline business can behit by cyclical economic conditions so maybefor one year we may have to face some difficulty.But as a trend for five, 10 or 20 yearswe can expect very healthy growth for airtraffic demand in passenger and cargo, bothinternational and domestic.“For 2001 we expect 2% growth indomestic passengers, 3% for internationaltravellers and 5% or 6% for internationalcargo. As an average, we can expect goodgrowth for two decades. So we have to beprepared for the short term depression ordifficulty, but look to long-term averagegrowth,” he said.Kaneko is confident JAL’s profit record isgoing to be far better in the next ten yearsthan it has been in the past ten. “Not very big,two digit growth, but average stable profitcan be achieved,” he said.JAL continues to play a “wait-and-see”game on the airline alliance front. “Up to nowwe have preferred to steer an independentcourse, making alliances with partner airlineson a bilateral basis where we can see benefitsfor both partners and customers. We talk tothe executives of oneworld member carriers,but we are not in a hurry to make a decision tojoin any particular alliance,” said Kaneko.“We have partnerships with carriersbelonging to other alliances like Air France, amember of Skyteam, and THAI and Air NewZealand in the Star Alliance. Last year, weforged a cargo partnership with NorthwestAirlines. There is no hurry, no pressure andwe continue to weigh the pros and cons ofjoining a global alliance.”Kaneko is well aware of the challengesahead, including airport issues, liberalisationand inevitably increasing competition. But allin all, he said, JAL is in a much stronger positionthan it was three years ago. “It’s beenvery tough, but I am happy with the waythings are turning out,”he said.Japan Air System: being wooed by the major manufacturersJAS eyes new jetsJapan’s third major domestic carrier, JapanAir System (JAS), is reviewing a fleetmodernisation plan that could see its ageingfleet of A300s replaced over the next fiveyears. Company sources confirm the carrieris in discussion with both Boeing and AirbusIndustrie over potential replacement jets.JAS, in which major flag carrier JapanAirlines (JAL) has an 8% stake, is, like its localrivals, also making money. Profits last yearmore than doubled to US$9.7 million from$4.6 million in 1999, with sales increasing 5.8%to $3.3 billion.With a fleet of 90 jets, more than a thirdunder lease, it has 36 A300s. They are primarilyused for domestic flights, although four A300-600s operate international services.Airbus is apparently proposing a newlighter version of its A330-500 aircraft, withBoeing pushing the B767-300ER.Airbus plans to develop a version of theA330-500 capable of flying as far as 7,000 nauticalmiles, aimed at European airlines flyingtrans-Atlantic routes or from Eastern Europeto Asia. The jet, which Airbus will build only ifdemand justifies commercial production, maynow have a version aimed at regional carriers,particularly in Asia.The modified plane, suitable for JASneeds, would have a range of about 4,350nautical miles, ideal for airlines seeking anaircraft for purely regional operations.JAS is mainly a domestic operator, but itdoes operate international services to Seouland Hong Kong, as well as Xian and Kunmingin mainland China.JAS and China Southern Airlines alsooperate code-share services between Osakaand Guangzhou, with each operator flyingthree times weekly.Other overseas destinations are servedthrough code-share arrangements, flights toAmsterdam with KLM on the Dutch operator’saircraft and to Seattle, San Francisco, LosAngeles and New York on Northwest Airlinesservices. Continental Airlines code-shares onthe same US-Japan flights.JAS has been looking to rationalise itsoperations through extensive code-sharingand joint ventures in Japan and elsewhere.It is a partner in the joint Tokyo-Osaka shuttleservice which also involves JAL and AllNippon Airways. From last September, JALand JAS combined selected airport servicesfor domestic and international flights. JALprovides baggage handling, cargo, ramp andairplane cleaning services for JAS flights atKansai International Airport.Both carriers also will combine check-inservices in the near future, with passengersable to check in from kiosks located at nearbytrain stations in Tokyo, Sapporo, Fukuoka andHakata, as well as at the Yokohama City AirTerminal.Other JAS cost reduction exercises includeoutsourcing. For example, it has signed a10-year $150 million agreement with Pratt &Whitney for a fleet management programmeof the JT8D-200 engines on its fleet of MD-80aircraft.36 | Orient Aviation | March 01

As ANA names a new president ...Profit forecast raisedWith profits driving upwards, AllNippon Airways (ANA) is movingto consolidate gains by acceleratingreforms in year three of its five-yearcorporate plan.The carrier has raised its full year profitforecast after it reported healthy first halfincome on the back of rising demand withhigher fares offsetting costly fuel.In the six months to September 30 thegroup earned US$272.6 million, the first timeit has reported first half earnings. For the fullyear ending March 31, ANA has boosted itsnet income estimate to $170.9 million froman earlier prediction of $111.1 million andsuggested international services will moveinto profit next year for the first time since itbegan operating offshore in 1986.The optimistic outlook comes despitecontinued high fuel prices and in part reflectssome astute increases in fuel price hedgingcontracts. Some 40% of the carrier’s fuelneeds were protected against price volatilityin the second half compared with only 10%in the first half.“Since embarking upon the [five-year]plan in 1999 the ANA Group has trimmedinvestment and reduced fixed costs, acceleratingconcentration of resources and therebuilding of its air transport network withthe objective of enhancing value to customersand shareholders,” said outgoing presidentKichisaburo Nomura, who will become ANAchairman on April 1.He will be succeeded as president byYoji Ohashi, a 37-year ANA veteran, who iscurrently senior executive vice-president.Like its major rival JAL, ANA is drivingrecovery with a host of improvements acrossits corporate and operational structure. “ANAmanagement has strengthened its commitmentto a network aligned according tomarket demand with a focus on profitability,efficiency and deepened co-operation withStar Alliance partners,” said Nomura.With a fleet of 142 jets carrying 43.2 millionpassengers annually to 62 destinations in13 countries, ANA is determined to underpinits revival without being too ambitious. Fleetplans are cautious. While three Boeing B747sand four B767s are to be retired no new planeswill arrive until 2004, when delivery of sixB777-300s will begin. The -300 series is a newlonger range version of the B777.While continuing to monitor marketdemands, ANA plans to use them on long-haulroutes to Europe and the U.S.In domestic operations ANA will allocateresources to higher demand routes, exemplifiedby an increase in services from Tokyoto Osaka’s Itami Airport. Routes with lowdemand are being adjusted or dropped.The freedom to suspend services is aresult of Japan’s domestic deregulation.While increasing flights to Osaka, FukuokaANA president Kichisaburo Nomurawill become chairman on April 1 and besucceeded by Yoji Ohashi, currentlyANA’s senior executive vice-presidentand Okayama, ANA is decreasing frequencyto Hakodate and Nagoya and dumpingHaneda-Memanbetsu, Nagoya-Aomori andSapporo-Okinawa services.A similar tough approach is being takenon international routes, with ANA flightsfrom Kansai to Denpasar, Indonesia, and fromFukuoka to Dalian and Qingdai, in China, beingsuspended.There will be a number of other domesticand international network changes over thenext few months to streamline routes and liftprofitability. Nomura said ANA will inauguratea service to Ho Chi Minh City, Vietnam, fromTokyo and increase frequencies on the Tokyo-San Francisco route.The airline’s network out of KansaiInternational Airport will be reorganised withresources concentrated on Asian and resortdestinations with Air Japan, ANA’s new lowcostsubsidiary. It will begin with flights toGuam in addition to Seoul.Air Japan began operations in January thisyear using a 216-seat Boeing B767-300ER onthe Osaka Kansai-Seoul route.“Newly permitted international charterflights out of Haneda airport will furnish ANAwith a raft of business opportunities. By takingadvantage of the unprecedented flexibilityafforded by this scheme, flights to Guam willbe operated with plans for service to Honoluluduring peak periods while operations to Seouland Cheju are under consideration,” said thepresident.“By gradually transferring selected shortand medium-haul routes currently operatedby ANA to Air Japan and by re-organisingANA’s international route network at ourNarita and Kansai hubs, we will be able toimprove network efficiency, profitability andconnectivity,” said Nomura.Now operating only from Osaka, afterthe opening of Tokyo Narita’s second runwayin 2002, ANA hopes to expand its operationswith flights from Tokyo to a number of destinationsin the Asia-Pacific.Co-operation with the Star Alliance willcontinue to be strengthened by expandingcode-shares on routes to Canada and Mexico.The carrier has recently announced codeshareswith Thai Airways International on theTokyo-Bangkok route and with South Korea’sAsiana Airlines between Seoul and Osaka.At home, ANA has enlisted in cost-cuttingco-operative ventures with rivals JAL and JAS,including a joint Internet travel site, combinedmaintenance on specific aircraft types and theTokyo-Osaka shuttle. The shuttle has 35 flightsa day, of which ANA operates 15.In January, ANA announced it wouldutilise an independent Internet portal, Jet-A.com, to procure jet fuel from the secondquarter of 2001. The portal is a move by theworld’s oil and aviation industries to improvethe use of Internet technology. It is designed tooptimise the jet fuel supply chain by digitising,integrating and standardising the procurementprocess.While it has a long way to go before it cantruly rival JAL on international routes, ANA isfinally beginning to leverage some power offits massive domestic base. With more stablefinancial returns its next corporate plan willlikely lift the stakes and point towards furthersignificant growth.March 01 | Orient Aviation | 37

c o u n t r y f o c u sJAMMED!Congestion puts Japan’s regional hub status under threatJapan’s great airport debate is set tointensify amid growing doubt plannedexpansion measures will bring relief toTokyo’s desperately congested runways orease concern that the country’s status as aregional aviation hub is under threat.Flashpoints are emerging over future U.S.airline access to the New Tokyo InternationalAirport at Narita and the internationalisationof the city’s domestic Haneda terminal.At the same time, construction of asecond runway at Osaka’s main gateway,Kansai, appears set to be delayed becauseof funding doubts, while there are calls fora wider, rational debate on national airportplanning.Narita’s long-awaited second runway isscheduled to open in May 2002, but sources atJapan’s major airlines said they are preparingto fight tooth and nail to prevent significantadditional capacity being granted to Americanoperators, which hold a third of Narita slots.They also are pushing to prevent wideruse of Haneda – recently opened to internationalcharter services and corporate flightsthrough the night – for offshore flights. Japanesecarriers want another runway built atHaneda, but they insist all additional capacityshould be reserved for domestic operations.Meanwhile, intense lobbying continuesover another sore point among airlines, thehigh aeronautical fees – three times the worldaverage – charged at Japanese airports.Overall, there is growing demand that thegovernment formulate a broad, nationwideairports plan. As reported in Orient Aviationin February, Japan Airlines (JAL) president,Isao Kaneko, who chairs the Scheduled AirlinesAssociation of Japan (SAAJ), has calledfor a “grand design” to replace the presentpiecemeal approach to airport expansion.Many airport decisions are mired in politicaldebate, which has led to the construction ofseveral expensive, but under-utilised facilitiesat regional centres. Decisions have often beentaken, then overturned, and then reversed.Osaka is a prime example. When the biginternational facility was built on a man-madeisland in Osaka Bay, off Kansai, the existingairport at Itami was supposed to have closed.It remains open and is busier than ever.Now, a third airport is being built in thesame area, at Kobe. At the same time, the governmentis undertaking a review of a projectto build a second runway at Kansai, apparentlyover concerns the high cost will burdenthe Kansai International Airport Company(KIAC) with too much debt. KIAC is strugglingfinancially after losing money for four straightyears and traffic volume through Kansaihas been lower than anticipated. When thesecond runway was approved in 1996, KIACThe take-off queue at Haneda Airport outside Tokyoprojected 150,000 arrivals and departures infiscal 2000. The Transport Ministry estimatesthe number was around 120,000.While Osaka has its own planning problems,the future of Tokyo’s airports remainsat the heart of Japan’s aviation problems.The country’s airlines have been upset foryears over the high access U.S. carriers haveto Narita. With up to 40 countries queued upfor slots, JAL’s Kaneko believes allocation ofadditional capacity when the second runwayopens next year should be heavily weightedaway from the U.S. He points out that at thehub facility of most nations local operatorshave up to 50% of slots. At Narita, Japaneseairlines have only 38%. Kaneko wants thatshare increased, with most of the remaindergoing to countries other than the U.S.The problem for Japan’s air authorities isthat sort of approach could likely spark a furiousrow with Washington at a time delicatenegotiations will be continuing about a newJapan-U.S. air accord.In reality, the second Narita runway doesnot solve many of the airport’s problems. It isshort, only 2,180 metres (7,500 ft), so it cannotbe used for long-haul jumbo jets. However,U.S. carriers will undoubtedly want slots forsmaller planes to operate onward flights fromTokyo to other Asian ports.Haneda presents another challenge.While JAL, All Nippon Airways and Japan AirSystem welcome the decision to open theairport between 11pm and 6am for internationalcharter flights – services to leisuredestinations such as Hawaii and Guam – theyare adamantly opposed to a wider internationalisationof the airport.That also will cause some diplomatic angstfor aviation officials. South Korean president,Kim Dae-jung, has asked Japan to move quicklyto allow scheduled international services; hewants clearance for shuttle flights betweenSeoul and Haneda as a means of relievingcongesting on the Seoul-Narita route.Japanese airlines argue Haneda is fully utiliseddomestically and that for the foreseeablefuture they will need any additional capacityfor domestic expansion.The SAAJ view is apart from Narita’s secondrunway, another runway is required atHaneda and a third airport must be planned. Itwants a full-scale debate involving professionals,not only to look at the airport expansionbut also to look at ways to solve the desperateneed for fast transport links between Narita,Haneda and any third facility, and on to Tokyocity. If Japan is to maintain its position as aprimary Asia-Pacific airline gateway, againsttough competition it has to move quickly toresolve these issues.If it fails, congestion at Tokyo will simplydeteriorate into the point of gridlock.38 | Orient Aviation | March 01

Near-miss planes just 10 metres apartpreliminary investigation into the near miss of two JapanA Airlines (JAL) planes over Yaizu, 176 kilometres from Tokyo,in January, has revealed that a trainee air traffic controller and asupervisor working with him had incorrectly identified the aircraft.The jets, carrying a total of 677 passengers and crew passed within10 metres of each other.Allegedly the B747-400, Flight JL907, was ordered to descendby the controller who had mixed up the flight numbers. Whenthe Traffic Alert and Collision Avoidance System (TCAS) alarmsounded the captain made an emergency dive. Forty two peopleof the 427 on board suffered injuries ranging from bone fracturesto scalding. No one was injured on the second aircraft, a DC-10carrying 250 people.The incident was officially declared an accident by the JapanCivil Aviation Bureau of the Ministry of Land, Infrastructre andTransportation.JAL and All Nippon Airways are introducing an advancedversion of TCAS as a result of the near miss. The police havesaid they will determine whether the controllers bear criminalresponsibility after comparing the account given by CaptainMakoto Watanabe, the 41-year-old pilot of the B747, with recordsof the communications he had with the controllers.Blame and punishmentand Flight JL907A Special Correspondent in Tokyoanalyses aircraft accident culture inJapan and the disturbing role the policeplay in it.In the afternoon of January 31, two JapanAirlines (JAL) aircraft were involved in anear miss incident over Yaizu, 176 kilometres(110 miles) south-west of Tokyo. One ofthe aircraft, domestic B747-400 flight JL907 enroute to Okinawa with 427 people on board,made an emergency dive resulting in injuriesto 42 passengers and cabin attendants.Captain Makoto Watanabe promptlyturned his aircraft back to Tokyo’s HanedaAirport. The other aircraft, JAL DC-10 flightJL958 from Pusan to Tokyo with 250 on board,landed without problems at Narita Airport.In early media reports, the Japanese policewere quoted as saying they would investigatethe case to find who was responsible with aview to arresting and punishing them. UnderJapan’s laws airline accidents involving injuryor death are automatically investigatedunder the criminal code in much the sameway as road traffic accidents. Participantsare investigated as if they are involved in apotential crime for “professional negligenceresulting in injuries”. Such attitudes are deeplyrooted in Japanese society.In the case of JL 907 the police were alreadyat work. A three-man squad, notebooksat the ready, was waiting when the B747Japan Airlines: captain of near miss plane grilled by the police in the cockpit immediatelyafter he landed his aircraftlanded. They boarded, entered the cockpitand for one hour questioned the pilots, interruptingtheir post flight checks. Injuredpassengers were still on the aircraft and thepolice intervention prevented the captainand co-pilot from performing their basic andmandatory duty of making official reports onthe near miss.Witnesses said the investigators seemedto take the position that the cockpit of theB747-400 was the scene of a crime and the occupantspossible, if not probable, suspects.Later that evening the captains of the twoflights said, on union advice, that they wouldsubmit their reports to police only throughattorneys. They later gave briefings in full tocompany personnel.These events demonstrate that in Japan,the police play a dominant – some say dominating– role from the very beginning whereaccidents are concerned, taking a stance whichdiscourages openness in those involved in theincident, impedes the resolution of the technicalenquiry and jeopardises future preventionof an incident or accident.The president of the 5,400 strong JapanFederation of Flight Crew Unions and an AllNippon Airways captain, Kazuhiro Kawamoto,said by their haste in seeking to apportionblame or liability, the Haneda police actioncontravened the basic spirit of the InternationalCivil Aviation Organisation (ICAO)March 01 | Orient Aviation | 39

c o u n t r y f o c u sconvention regarding accidents, which is tofind the cause and establish remedies.Society’s goal in Japan is torn betweenfinding out what went wrong, so that it canbe put right in future, and finding someoneto blame and then punish. With the fear ofarrest, trial and detention looming over anyinvestigation there is a natural reluctance onthe part of those involved to comply voluntarilywith a situation that is rigged against them.Hardly surprising when the participants in anaccident case are often treated from the beginningnot as witnesses, but as perpetrators ofa crime – in Japanese, “kagaisha”.Fear of the blame and punishment processcolours attitudes to safety in a disturbing andfundamental way, leading to over-restrictivepractices and excessive limits on operations,which in turn prevent the expansion of servicesand affect the convenience of travellersand shippers.In the “accident culture” in Japan, the firstelements to arise are:• Who is guilty?• Whose fault is it?• Who do we punish?This is in marked contrast to the situationin the United States. The National TransportationSafety Board (NTSB) would investigate anear miss, but a police investigation wouldnever be initiated, unless the NTSB reportuncovered criminal activity.In the case of an aircraft accident in Japan,who is responsible for investigating the case,the Aircraft Accident Investigation Committee,the police or the media?Japan’s Aircraft Accident InvestigationCommittee (AAIC) was established in 1973.It falls under the jurisdiction of the JapanCivil Aviation Bureau, the aviation divisionof the Ministry of Land, Infrastructure andTransportation (MLIF), a newly formed megaministryincorporating the former Ministry ofTransport. It is not independent, as is the NTSB.This puts the impartiality of the AAIC intoquestion. Air traffic control, which is involvedin this near miss case, is also an MLIF-controlledfunction.The AAIC’s role is two-fold. First to determinethe cause and to recommend correction,second to prevent future accidents, save livesand reduce damage and injury.In the case of the police, finding the causecomes first too, but their final goal is to findout who is responsible, then prosecute andpunish.The media focus, apart from initiallyreporting the circumstances of the accident,is to pinpoint blame and call on punishmentof those responsible. To this end they harassand pursue persons involved in the case longbefore responsibility has been established,playing the roles of prosecutor and judge.Often the level of media attention istantamount to persecution and places greatstress on its innocent victims.When air accidents are investigated inJapan, a tacit agreement exists between thepolice and the AAIC. The police have firstpriority to access the accident site or securethe evidence. This includes custody of thecockpit voice recorder and the “black box”or flight recorder. The police ask the AAIC toanalyse these. From the AAIC report the policedetermine the cause of the accident. Duringthe period of the report investigation andcompilation other parties involved are notexpected to make public comments, exceptfor statements of regret or apology.‘The media focus ...is to pinpoint blameand call on punishmentof those responsible.To this end theyharass and pursuepersons involved inthe case long beforeresponsibility hasbeen established’As part of the punishment culture, peopleinvolved in an accident often take responsibilitybefore the official judgement or report ofa case. The most usual form is resignation ofsenior executives.Sometimes the response is more drasticand final. In 1985, during the police investigationinto a JAL B747 accident when 520 peopledied, a Ministry of Transport chief technicalinspector committed suicide, driven to thisdesperate act by incessant grilling by policefrom rural Gumma Prefecture, where the accidentoccurred.The aircraft in question had been in a tailhitaccident seven years before. A Boeing teamhad repaired the aircraft and the inspector hadsigned off on the repair. Part of the repair ofthe lower half of the rear pressure bulkheadwas inadequate, but visually undetectable.The weakened bulkhead ruptured in flight,severing hydraulic lines and damaging thevertical stabiliser, thus leading to the subsequentcrash. The police interrogators put theblame on him.There is a strong sense of taking responsibilityin Japanese society, which expects thosewho have disturbed the harmony or order ofthings to follow custom, apologise and takethe appropriate expiatory measure.In the near miss case, nobody is suggestingthat changing the accident investigationsystem in Japan will do away with the needfor anyone to take final responsibility as theculture demands. Instead, the call is for achange in procedure, to prevent scenes like thecockpit grilling of Captain Watanabe and hisfellow crew and the disruption of a meaningful,expert investigation.Japanese airlines share a common interestin co-operating with civil accident investigations,but would prefer the police waiteduntil the civil investigation is over, instead ofrushing to judgement.Although the role of the AAIC is to findout what happened and then to recommendcorrective action, its report findings often leadthe technically challenged police to the identityof people responsible for the accident.The crash of a China Airlines plane atNagoya in 1994 illustrates how bizarre thiscan become. After a lengthy investigationthe AAIC concluded faulty procedures by thecockpit crew led to the accident. WhereuponNagoya’s ‘finest’ recommended criminal prosecutionof the captain and co-pilot, who wereboth dead!In other industrial societies the processingof accidents involves what we might call the“insurance culture”.In these countries the cost of human errorin an accident is covered by an insurancepolicy. No punishment will be enforced onindividuals unless the investigation resultsindicate wilful misconduct or gross negligence.The other message here is that accidents areto be learned from, so they can be preventedin future.Until relatively recently there was no insuranceculture in Japan. That seems strangewhen you consider in the 17th century therewas already a very healthy and sophisticatedfutures market system in place for handlingrice. But there was no concept of insurance.When things went wrong, events weretreated according to the culture of blame andpunishment.Today, the punishment culture still prevails.With all the talk of globalisation andadoption of international standards, Japan’slaw enforcement authorities should adapt toan accident culture that focuses on remedialinstead of punitive action and enter the 21stcentury rather than continue to apply thestandards of the feudal past.40 | Orient Aviation | March 01

Commuter & Business Aviationin the Asia PacificS p e c i a l R e p o r tChina to leadregional jet boomNot too long ago analysts were almostunanimous in their belief that an Asianregional commuter jet was a BoeingB737, an Airbus A320 or somethingeven larger. Now, Asian operatorsare discovering the new breed ofsmall jets and transforming the faceof regional operations, reports TOMBALLANTYNE.Barry Eccleston, executive vicepresidentbusiness development atFairchild Dornier is convinced the regionaljet worm has turned in the Asia-Pacific.The region is on the verge of a big boom insmall jet sales and it will be spearheaded byan emerging Chinese market, he said.Speaking during February’s AustralianInternational Air Show at Avalon, nearMelbourne, Eccleston said China is now oneof the strongest markets in the world for thenew generation of regional jets and airlinersunder 110 seats.Fairchild Dornier forecasts show morethan 700 aircraft – jets and turboprops – inthat size range will ordered by airlines in Chinaand western Pacific Rim nations. Of that total,more than half will be jets in the 50 to 110seat category.“The market for regional jets in Chinais largely untapped, but the requirement isgrowing rapidly. Air carriers in China, like thoseelsewhere, are discovering the new smallerjets make good economic sense for the waythe market is changing,” said Eccleston.It sounds like a brave prediction givenpast frustrations about the pace of airlinedevelopment in China and the generallydismal outcome of previous attempts to sellBarry Eccleston, executive vice-presidentbusiness development at FairchildDornier: China market “untapped”small regional jets like the Fokker into theregional market.But times have changed, he said, andtoday’s jet suppliers – Bombardier andEmbraer as well as Fairchild Dornier – can learnlessons from the Fokker experience.There is plenty of evidence to suggest heis right. After trailing behind Europe and NorthAmerica in the regional small jet stakes, Asiais suddenly catching on.Hainan Airlines became the first airlinein China to operate new generation regionaljets with an order for 19 of Fairchild Dornier’s32-seat 328JET in August 1999. The first wasdelivered in November that year and deliveriesare now complete. But Hainan has sinceturned a series of options into firm orders,taking its total buy to 40.Eccleston is sure there are more ordersto come from other airlines, in China andelsewhere. He believes Australia, India andJapan will also be drivers behind growth inregional jet orders.While Eccleston will not comment publicly,he and his rivals are well aware of strongreports that India’s Jet Airways is unhappywith its fleet of ATR turboprops and is keento replace them with jets.There are even bigger fish to fry; severalof the regional jet makers made it clear theyare talking to Qantas about possible replacementsin its large regional fleet.In the meantime, most of the manufacturersare having some success. Canada’sBombardier has sold its Canadair CRJ-200regional jet to Shandong Airlines in China, JapanAirlines-owned regional J-Air and KendellAirlines in Australia.Based at the capital of ShandongProvince, Jinan, 500 kilometres south ofBeijing, Shandong Airlines last year acquiredfive CRJ200 jets as part of a major expansionprogramme and has since leased anotherfive.Embraer has been successful in Australiaon the turboprop front and has high hopesfor its new 70-seat ERJ 170 jet. Its family ofjets include the 98-seat ERJ 190-100 and the108-passenger ERJ 190-200.Currently 11 Australian regional operatorsfly Embraer turboprop aircraft including AirNorth regional, Flight West Airlines, SkippersAviation and Network Aviation. The companyis aiming to achieve a 50% share in theregional commercial jet market.“Australia is a very important marketfor Embraer. It is one of the most importantcountries in the Asia-Pacific region in termsof its economy and quality of air transportoperators and personnel. Its geography isalso conducive to a solid regional commercialaviation industry,” said Luiz Fuchs, the planemaker’schief representative and managingdirector for the Asia-Pacific.March 01 | Orient Aviation | 41

s p e c i a l r e p o r tBy Jonathan SharpChinese carrier Hainan Airlines, whichboasts U.S. financier George Soros asa key shareholder, has approachedHelicopters Hong Kong Ltd (HeliHongKong)about possible joint ventures including thesetting up of a Hong Kong-based regionaloperator. This is according to Andrew Tse,chief executive of HeliHongKong, a sistercompany of Macau-based East Asia AirlinesLtd, which operates helicopters plyingbetween Macau and Hong Kong.Tse sees an opportunity for a regionalairline providing feeder services to the HongKong hub from under-served points in southChina and several southeast Asian centres.“Hainan Airlines has been quite aggressivein the regional airline business. They have afleet of Fairchild Dornier 328JETs and theywere wondering whether it would be possibleto operate in and out of Hong Kong usingthese Dornier jets,” Tse told Orient Aviation.Tse said that instead of applying to HongKong aviation authorities for an air operator’scertificate (AOC) he commissioned a studyfrom Trinity Aviation Ltd to see if the ideacould fly.Trinity concluded the current service to 22cities in south and central China from HongKong was inadequate with the aircraft onthe routes being too large and the frequenciestoo few.“Many of these cities are being servedonly by an airline from China, therebyallowing the opportunity for a Hong Kongairline to operate the route,” the study said.“This study shows such an airline wouldbe commercially viable within a system witha breakeven load factor for the operation ofaround 50%.” It added outbound traffic fromChina was increasing at a high rate and wasexpected to grow. There will therefore be acontinual need for services to points in Chinaaway from the main hubs.Under such conditions it would be reasonableto expect the regulatory authoritiesin both Hong Kong and China to approvesuch an operation as envisaged in the study.It highlighted the case of Shantou, in southChina, which was served by one airline (ChinaSouthern Airlines) although annual trafficwas over 100,000 seats sold. Tse said he sawHong Kong International Airport as the majorairport for southern China in future. “Unlikeplaces in North America or in Europe, there isno feeder service in Hong Kong so I believethere is a need for such a service.” Tse said Trinityhad not studied feeder service opportunitiesoutside China. “Obviously I believe thereHainan seeksHong Kong venturewith 328JETChief executive of Helicopters Hong Kong,Andrew Tse: looking for a positive air rightsresponse from Hong Kong authoritiesis a market in the Southeast Asian area. So weare still doing some studies now.”As possibilities, he cited smaller citiesin Malaysia and points in Vietnam andCambodia. Tse said he had sent a copy of hisproposals to the Hong Kong civil aviationauthorities.“What is important is not the hardwareof setting up an airline, it’s not the capital orthe expertise. What is important is whetherthis airline can secure scheduled rights fromthe Hong Kong authorities.”He said he was waiting for a meeting withthe Hong Kong authorities to clarify whethera regional airline could obtain the necessaryrights. At present just six AOCs have beenissued in Hong Kong.“If the answer is positive then the nextstep is whether we should go ahead and raisemoney to form a new airline. If the answer isno, then forget it. It’s as simple as that,” saidTse. He acknowledged frankly that he sawno great financial rewards in such a regionalairline. “Setting up a regional airline operatingout of Hong Kong is very, very costly.”He said the “big boys” such as HongKong-based carriers Dragonair and CathayPacific Airways were not considering a smallairline using 50-seaters because of the capitalcost and the small investment return.“It’s not a pot of gold. But personally I dosee an opportunity for this kind of regionalairline linking south China and SoutheastAsia to Hong Kong as a hub, as some sortof a feeder airline to the big boys. I do seea need as far as the consumer is concerned.Now whether there is a business case, I don’tknow.”Tse said he had not received any furtherfeedback from Hainan Airlines, which he saidmight have approached Hong Kong authoritiesindependently about obtaining rights tofly to the territory.China’s Hainan Airlines may enter into a ground breaking deal with Hong Kong operator42 | Orient Aviation | March 01

s p e c i a l r e p o r tBusiness jets were once regarded as rich boys toys,expensive play things for the rich and famous, or themultinational corporation with a billion dollar travelbudget. No longer. The case for private corporatetransport is strengthening and Asia is a prime targetfor the bizjet salesmen. TOM BALLANTYNE reports.MAS markets itsking-sized BBJOn the home page of Malaysia Airlines(MAS) World Wide Web site there isa product called Mastar. Click on itand you are transported to another world, theopportunity to travel in millionaire splendouraboard your own jet.Mastar is the airline’s Boeing B737-700Business Jet, or BBJ, touted as southeast Asia’sfirst VIP private commercial jet and availablefor charter complete with luxuries akin to afive-star hotel, seats for only 16 passengersand a state room with a double bed.The Malaysian flag carrier states pointedlythat it is “fit for a king, or fit for business”. Oneof more than 70 customers who have nowordered the BBJ from the Seattle planemaker,MAS may be leading the field in a market oncebelieved to be declining, but now apparentlyon the cusp of a boom.Boeing believes other major internationalairlines may follow suit with their own fleetsof big business jets and rival Airbus is alsooffering a corporate version of its A319.According to one Boeing executive a recentstudy reveals using corporate jets for businesstravel can work out cheaper than buyingexecutives first or business class tickets onscheduled commercial flights.The message is getting through. A Swissbasedexecutive jet operator, PrivatAir, plansto base a BBJ in Asia before the end of theyear. It has not yet decided on a location,but insiders suggest it is likely to be eitherSingapore or Hong Kong.In February, Canada’s Bombardier disclosedit had clinched a US$100 million dealwith China’s Shandong Airlines for four Challenger604 widebody business jets. The firstwill be delivered in March 2002 and they willbe used for Shandong’s new global charterbusiness operations.With a range of 4,077 nautical miles,the Challenger is proving popular amongbusiness and government customers alike. ItThe Boeing Business Jetis authorised for civil operation in 40 countriesand also has military certification in Malaysia,the Philippines, China and South Korea.Ironically, while names like Lear andGulfstream have epitomised the image ofcorporate jets in the past, it is the new modelssuch as Boeing’s BBJ and Airbus’ CorporateJetliner (ACJ) which appear to have sparkeda renewed boom in VIP flying.Virtually all the world’s major planemakers,large and small, have business jetversions of their popular commercial aircrafton offer. Boeing is not confining its ambitionsto today’s BBJ. It has already launched astretched BBJ 2 and is talking about a BBJ 3,which would be based on the B757 airliner.Also on the drawing board is a corporateversion of the B717.Fairchild Dornier offers the Envoy 3 (12seats and 2000 nm range) and the Envoy 7 (16passengers and 4,150 nm, available from 2003)and potential customers can also look at thepopular 328JET as a corporate shuttle.As well as the Challenger, Bombardierhas corporate versions of its Global Expressaircraft. The Japan Civil Aviation Bureau (JCAB)ordered one in November and then opted totake a second in February. Bombardier hopesto announce up to four more business jet salesin the region in the near future.The Canada-headquartered manufacturerhas settled on Hong Kong as its Asia-Pacificheadquarters for business aircraft sales andalso has set up an office in Beijing, with a partsdistribution centre in Singapore to cover theentire region.The Asia-Pacific has never been as activein the business jet arena as North America andEurope, but the pundits are predicting this willchange rapidly over the next decade, as companieslook for ways to bring higher efficiencyto their business in a global marketplace.The 2000 National Business Aviation Associationconvention in New Orleans heard forecastsfrom avionics manufacturer Honeywellthat 6,800 business aircraft worth $90 billionwill be delivered between 2001 and 2011.For the first time, the industry believesthese aircraft are being regarded as legitimatebusiness tools rather than executive toys.Until now, most of the growth has been inthe U.S. and Europe – some 80% of corporatejets operate in these areas. A primary part ofthat business is fractional ownership whereindividuals or companiess can buy a sharein a jet. While such schemes are available44 | Orient Aviation | March 01

in the Asia-Pacific they have not been sosuccessful because of the wide spread of theregion. But information technology such asthe Internet is now being used to reach morebusinesses to demonstrate corporate jet travelis accessible.MAS’s Mastar is an example and otherswill likely follow. There were arounda dozen business jets, an unprecedentednumber, on show at February’s AustralianInternational Air Show near Melbourne. All20 major manufacturers of business jets werethere, an increase of 15% on the last show in1999. They were pushing hard to convincecompanies of the cost-savings and efficienciesthey can deliver.That 15% appears to be reflected in regionalbusiness jet activity. ExecuJet Australia,a leading operator of executive aircraft, isintroducing a fourth aircraft into the fleetfollowing an increase of 15% in jet chartersand enquiry levels during 2000.“Our market is not only current users ofbusiness aircraft, but many who previouslymight not have considered using corporatejets as an alternative to scheduled airlineservices,” said Ian Vanderbeek, managingdirector of ExecuJet.“Business jet operators can fly when theywant, be guaranteed of travelling, enjoy accessto a much larger number of airfields andvisit many more locations than scheduledairlines.They can also achieve substantial costsavings by visiting multiple destinations inless time than they would using scheduledservices, thus reducing the requirement forovernight accommodation.”The arrival of big corporate jets such asthe BBJ and the ACJ have also changed themap of business jet travel, catering for longhaultranscontinental flights. Boeing’s ownchief, Phil Condit, uses a BBJ extensively onhis world travels.All the planemakers point out the returnon investment – anything up to US$40 millionand beyond – cannot be counted simply incash. The flexibility offered in executive jettravel relieves much of the stress of scheduledair travel and puts executives in a better frameof mind to do business.Peter V. Agur, Jr., president of The VanAllenGroup in the U.S., a Georgia- basedcompany, cited a recent study which showedthe use of business aircraft can increase thetime available by at least 4%. “That doesn’tsound like much until you realise that 4% canadd two weeks to your company’s businesscalendar, add another mover and shaker toyour top marketing and management teamand take your wasted hours, week in andweek out, and make them some of yourbest,” he said.Successfully convincing potential customersin the Asia-Pacific to accept sucharguments is precisely what the business jetmakers hope to do to boost sales of theirhigh-flying corporate offerings across theregion.CRJ-200 ‘sim’ boost for AnsettAnsett Australia is aiming to cash inon the boom in regional jet aircraftsales, writes Tom Ballantyne. Thecarrier has begun operating an US$8.6 millionBombardier CRJ 200 regional jet simulator, theonly one in the southern hemisphere, at itsMelbourne base.One of only 12 in the world, Ansett expectsto reap big rewards, an estimated $2.7million annually in export earnings. Initially, itwill mainly be used to train pilots for Australianregional and Ansett subsidiary Kendell Airlines,which is purchasing 12 new BombardierCRJ200 50-seater jets. It also has options on 12CRJ700 70-seater aircraft.When the bulk of Kendell CRJ pilot trainingis completed, Ansett will be pushing hard towin contracts from around Asia.Trevor Jensen, head of operations atAirNZ-Ansett, said the new simulator wasprimarily procured to serve Australia and tocontinue establishing Ansett as the leadingprovider of training for pilots who fly regionalaircraft outside the country’s capital cities.“Financially, our costs are minimised by nothaving to send pilots overseas to train and thenew simulators will be a major revenue earnerin the training it provides for pilots from otherairlines around the world.“Talks are continuing with Bombardier totrain foreign pilots in Melbourne. We are alsoTrevor Jensen, head of operationsat AirNZ-Ansett: Ansett pushinghard to win Asian contracts forits new CRJ-200 simulatortalking to numerous other companies andairlines. Pilots from Vietnam and Kenya haverecently used the centre, plus airlines fromSouth Africa, Japan and China have expressedstrong interest in training time on the newCRJ,” said Jensen.While Ansett’s simulator centre near Melbourne’sTullamarine airport is well equippedwith big jet capability – including BoeingB767, B737 and Airbus A320 simulators – it isdeveloping into an attractive option for carriersrequiring regional aircraft simulator training.As well as the CRJ equipment, it also hasSaab 340 and Metroliner simulators.The new CRJ simulator represents thelatest state-of-the-art aviation technology andallows pilots to perform under a wide rangeof different conditions, some of which theywould not be able to do if they were trainingin actual aircraft.It took 18 months to build after years ofdevelopment by Flight Safety Internationalbased in Oklahoma.George Savvides, Ansett’s flight simulationand business manager, said it was hopedBombardier would assist in redirecting trainingcustomers to Melbourne. Most existing CRJsimulators are in the U.S. and for Asian airlines,sending pilots to Melbourne is an attractivealterative.Savvides said Air China and China Northwest,which have used the carrier’s Bae 146simulator, Xiamen Airlines (B737) and ShandongAirlines (Saab 340) are among Ansett’sChina clients.Having already programmed simulators toreplicate a large number of Chinese airports thetraining centre can now adapt the programmesfor the new CRJ facility.Operating 24 hours a day, seven daysa week, Ansett’s simulator centre conductsabout 20,000 hours of training each year, halfof it used by pilots from overseas.March 01 | Orient Aviation | 45

s p e c i a l r e p o r tBy Jonathan Sharpin Macauwe blow this, with the resourceswe have, then shame on us.” So“If says Captain Ronald Pettit, aviation managerof Jet Asia Ltd, the Macau-based corporateaviation company operating two CanadairChallenger airplanes from the territory’s fiveyear-oldairport.The resources the ebullient Virginia-bornPettit talks about include the deep pockets ofStanley Ho, chairman of Jet Asia, but betterknown as head of Sociedade de Turismo e Diversoesde Macau (STDM), holder of the territory’sexclusive gambling franchise.Jet Asia manages one of the Challengerson behalf of STDM – Ho and his entourage areapparently frequent flyers – but both aircraft areavailable for world-wide charter services.The pocket-sized former Portuguese colonyof Macau, a gambling mecca and a drowsymini-version of nearby Hong Kong, might seeman unlikely home for an executive jet operatorwhen others in larger and more dynamic financialcentres in the region have failed to take offor fallen by the wayside.But Pettit says Jet Asia is already “viable”and aims to add a third aircraft this year. The goalis to acquire a managed airplane, meaning onethat is bought by a client and run by Jet Asia.“Our focus for our third airplane is for somebodyelse to buy it,” he said.Although Jet Asia declines to give detailsof its finances, Pettit said business had shown“phenomenal” growth in 2000, albeit from alow base.Jet Asia has had both Challengers flyingcharters simultaneously several times in recentmonths, a situation the company would like tosee more often.“But we are realistic, we are in a nascentmarket here. We are birthing corporate aviationin Asia.”Jet Asia started operations on May 1, 1998.Its Bombardier-made Challengers are fitted with10 seats, with one aircraft that can be configuredto accommodate 12 passengers.Justifying the choice of this size of cabinclasscorporate jet, Pettit said Asian customersprefer larger aircraft to accommodate familymembers, bodyguards and even nannies.The company’s reach extends far beyondAsia, with substantial business flying to Europeand the United States. Jet Asia’s marketing focusis on business from Fortune 500 companies,although the company has also counted Hollywoodcelebrities and a former U.S. presidentamong its customers.Why the focus on such companies? “Be-China a majordraw for Macau’sJet Asia clients‘We are birthing corporate aviation in Asia’Jet Asia: customers have included a U.S. president and Hollywood film starscause they do business in China. China is theelephant in the neighbourhood. Like the U.S.economy it drags the whole world along withit,” said Pettit.Since Portugal handed back the territory toChina in December 1999, Jet Asia has found thatobtaining mainland permission for permits tofly to Chinese destinations has become noticeablyeasier.“Because Macau was a Portuguese colony,Beijing treated us as a west European entity. Itwas in fact easier for a U.S.-registered airplaneto get a permit than it was for us.”Now that Macau is back in the embraceof the motherland, the approval rating hasimproved.Officially China requires notice of 15 workingdays for granting a permit to land in thecountry. “That would kill us. We couldn’t operate,”said Pettit.Thankfully, lead times for securing permitsare in practice much briefer, although not asshort as Jet Asia and others would like.Pettit noted the United States, Europe andSingapore required a mere two-hour noticeperiod, whereas elsewhere took days.But even though Singapore is liberal, flyingthere entails crossing the airspace of Vietnamor the Philippines, and both those countriesrequired several days’ notice.Pettit would like China to open officeshandling corporate aviation in every country toallow expedited procedures, ideally to reducenotice periods to a few hours.“We would like corporate flights to betreated almost like ambulance flights,” he said.Added Yeet Jones, Jet Asia’s manageroperations: “We know it can be done becauseBeijing will process anybody’s ambulance flightsin four hours.”Asia’s fees for permits, landing and othercharges are sky-high compared with elsewhere,Pettit noted, with for example Tokyo and Beijingcharging in the region of US$10,000. Seoul alsocharges $10,000, “and if you land on Sundaysit is $12,000”.By contrast fees for a Paris to Madrid flightwould probably be less than $2,000.But Jet Asia regards lead times for acquiringpermits, not the high fees, as the prime impedimentto business.Another constraint: a reluctance of rich, butconservative Asian chief executives to indulge inhigh-cost corporate aviation. “It’s not a questionof money,” said Pettit. “There’s plenty of moneyhere.”46 | Orient Aviation | March 01

By Jonathan SharpThe scheduled arrival in March of aGulfstream IV at Metrojet Ltd marks animportant step – but by no means thelast – for the Hong Kong company as it positionsitself to take advantage of what it seesas major opportunities for business aviation.Mark Turner, managing director of MetrojetLtd and Heliservices (HK) Ltd, said Metrojetwill operate the 11-seat Gulfstream for theU.S. manufacturer, but with the aim of sellingit in the next 15 months. He thinks he canfind a Hong Kong buyer. “That’s not to say wehave somebody in line waiting to buy it.” Aswell as managing the jet, Metrojet is qualifiedto perform maintenance on it and will put itout to charter at about US$6,000 an hour.Established in 1995 as part of the KadoorieGroup, Metrojet has been flying aHawker 700 that it bought as a means toacquire an Air Operator’s Certificate and toset up a flight operations department so asto establish credibility as an aviation managementcompany.“But our Hawker is not the aircraft tointroduce to the local market because it istoo small. When you introduce an aircraft to apotential client you want one that has all theleading-edge technology and the bells andwhistles as well as the comfort and room thatthey have grown accustomed to.”Metrojet’s next step, to reorganize thecompany to bring greater efficiencies, isimminent, Turner said. “We are trying to bea bit more efficient because we think we areat the start of some really good opportunitiesfor business aviation.”He said Hong Kong regulatory authoritieshad previously not provided a welcomingenvironment for business aviation. This waspartly because of space constraints at the oldKai Tak airport. This had meant there was agood chance a private plane would have todrop off passengers in Hong Kong and thenfly somewhere else to wait for the returnleg because there was no room to park atKai Tak.Those constraints disappeared with the1998 opening of the new Hong Kong InternationalAirport at Chek Lap Kok, includingan extensive Business Aviation Centre withMetrojet as a shareholder. However, as otherregional operators agree, constraints persistin neighbouring mainland China in the formof restricted access and high cost.But attitudes are changing. “The importantthing with regard to regulatory authorities,whether we are talking about Hong Kongor the mainland, is that there has been aNew airportopens the wayfor MetrojetMark Turner, managing director of MetrojetLtd and Heliservices (HK) Ltd: some reallygood opportunitiesfor business aviationsignificant adjustment in attitudes towardsbusiness aviation,” said Turner.“On the mainland they recognise that(business aviation) is a means of bringingpeople into the country that can contributeto the development of the country and it’s intheir best interest to facilitate this.”Turner said Hong Kong’s problem wasthat Beijing still treated it as a foreign countryfor aviation purposes, despite the 1997handover of sovereignty by Britain.He said it costs Metrojet over US$8,000in fees and ground service charges to fly theHawker to Beijing. “For my competitor, whois based in Beijing, for him to fly around andinto Beijing costs him $26. No zeros.”When that operator flew to Hong Konghe paid just the same fees to land in the territoryas Metrojet. The upshot was the Beijingoperator can fly to Hong Kong empty, pick uppassengers for Beijing, return them to HongKong and fly home empty at lower cost thanMetrojet just flying Hong Kong-Beijing-HongKong.“So the playing field is not level. As aHong Kong company we are offended bythe fact that we are treated exactly like U.S.,British, Australian or any other entities. Weare an SAR (Special Administrative Regionof China), but we don’t get any credit or recognition.”To add insult to injury, the Beijingoperator can fly any route he chooses in themainland whereas Metrojet must fly designatedroutes sometimes hundreds of mileslonger. These are the hurdles that we have toget over for this really to prosper in the waywe know it can.”To help overcome these and other hurdles,Turner has been a prime mover in theformation of the Asian Business Aviation Association(ABAA), which met in June last yearin Hong Kong and at the Zhuhai air show inmainland China in November.Development of the ABAA is “probablythe most important thing that operators cando for themselves,” said Turner. “We’ve got alot of momentum,” he said, plus support fromfellow professional bodies.Metrojet: operating an 11-seat Gulfstream jet for the U.S. manufacturerMarch 01 | Orient Aviation | 47

B U s i n e s s D i g e s tRPK GROWTH RATESSET TO RECEDEIn November, members of the Association of Asia Pacific Airlines(AAPA) reported 8.5% and 8.2% growth in revenue passengerkilometres (RPK) and passengers carried (PAX), respectively.Capacity expanded 7.9%, resulting in a passenger load factor (PLF) of73.1%, up a marginal 0.4 of a percentage point year-on-year.Five airlines recorded more than 10% growth with GarudaIndonesia (GA) leading the group with 33.9%. The other four carrierswere China Airlines (CI – 21.9%), Vietnam Airlines (VN – 20.1%),Royal Brunei Airlines (BI – 13.7%) and Ansett Australia (AN – 12.7%).No airline reported negative RPK growth.PLF growth moderated further from October, with only fiveairlines recording improvements. Garuda Indonesia (8.5 percentagepoints) once again headed the list, followed by Japan Airlines (JL– 4.3 percentage points) and Royal Brunei Airlines (3.3 percentagepoints). On the other hand, seven airlines experienced a decline inload factor, ranging from 0.3 percentage points (China Airlines) to3.8 percentage points (Vietnam Airlines).Airlines with high load factors were Asiana Airlines (OZ – 77.3%),Japan Airlines (77%), Thai Airways International (TG – 76.6%) andSingapore Airlines (SQ – 76%). Seven other airlines reported PLFs inthe low 70s (%). Royal Brunei Airlines posted under 70%.Cargo ResultsIn the light of the U.S. economic slowdown, freight tonne kilometres(FTK) grew by only 5.8%, but this was better than October’sgrowth of 3.5%. Capacity expanded 8.2%, resulting in a reducedfreight load factor (FLF) of 1.6 percentage points to 70.2%.All but three airlines managed to register FTK growth. Experiencingstrong cargo growth in November were China Airlines(16.8%), Ansett Australia (16.2%) and Cathay Pacific Airways (CX– 11.2%). Of the three airlines showing a decrease in FTKs, JapanAirlines and Korean Air (KE) contracted less than 1%, while RoyalBrunei Airlines contracted 13.7%.Only Garuda (6.6 percentage points) and Korean Air (1.1percentage points) recorded improvements in FLF. The remainingairlines registered a decline with Royal Brunei Airlines (11.6percentage points), Vietnam Airlines (7.5 percentage points) andEVA Air (BR – 5.5 percentage points) recording the sharpest fall inload factors.Freight load factor (FLF) remained high for six airlines, exceedingthe 70% mark. Ansett Australia recorded 81.8%, followed by ChinaAirlines (81.2%), Asiana Airlines (79.2%), EVA Air (78.7%), CathayPacific Airways (75.4%) and Korean Air (74.7%). The others turnedin load factors below 70%.Results for the 12 monthsending November 30 2000The consolidated RPK figures and number of passengers carriedfor the 12-month period under review increased by 11.2% and 9.4%respectively. Seat capacity rose 8%, resulting in a 2.2 percentagepoint improvement in load factor to 75%.Growth in RPKs during the 12 months varied among member40RPK Growth by CarrierPercentage (Nov 00 vs Nov 99)30PAX Growth by CarrierPercentage (Nov 00 vs Nov 99)30202010100SQCX BR OZ TG KEJLANBI VN CI GA0CXSQTGOZKEBRBIJL CI AN VN GA48 | Orient Aviation | March 01

airlines, but none recorded negative growth. Figures ranged from1% at Ansett Australia to 60.6% for Garuda Indonesia. In additionto Garuda, double-digit growth was posted by Asiana Airlines(21%), Vietnam Airlines (17.4%), Cathay Pacific Airways (11.8%),China Airlines (11.8%) and Korean Air (11.3%).Two airlines posted a significant improvement in PLF – GarudaIndonesia (9.7 percentage points) and Cathay Pacific Airways (4.6percentage points). On the other hand, Ansett Australia and KoreanAir experienced a decline.All but two airlines recorded load factors in excess of 70%.Garuda Indonesia led the way with 79.7%. Nine other airlines filledmore than 70% of their capacity, with seven above 75% – AsianaAirlines (77.3%), Vietnam Airlines (76.9%), Singapore Airlines(76.5%), Cathay Pacific Airways (76%), China Airlines (75.8%), EVAAir (75.5%) and Thai Airways International (75.2%).Garuda Indonesia: increased passenger and freight load factorsin NovemberFTK Growth by CarrierPercentage (Nov 00 vs Nov 99)Cargo ResultsConsolidated FTKs of AAPA airlines rose 13.4% while capacityexpanded 12.8% for the 12-month period. This resulted in a 0.4percentage point increase in load factor to 70.9%.High FTK growth was recorded by China Airlines (25.9%),Vietnam Airlines (25.9%), Asiana Airlines (18.1%), Garuda Indonesia(16.9%), EVA Air (15.3%), Korean Air (13.9%) and Singapore Airlines(10.7%).The improvement in load factor was moderate. Only CathayPacific Airways (2.4 percentage points) and Vietnam Airlines (2.0percentage points) emerged significantly better. Four airlines,however, registered a decline in FLF.Taiwan-based carriers continued to record the highest loadfactors – China Airlines (83.7%) and EVA Air (80.4%) – with theKorean-based carriers, Korean Air and Asiana Airlines, coming20151050-5-10-15BIJL KE BR VN SQ TG OZ GA CX AN CIPassenger Load Factor Growth by CarrierPercentage Points Change (Nov 00 vs Nov 99)Freight Load Factor Growth by CarrierPercentage Points Change (Nov 00 vs Nov 99)108846402-40-2-8-4VN AN CX KE TG SQ CI BR OZ BI JL GA-12BIVN BR CI JL AN OZ SQ CX TG KE GAROLLS-ROYCE NEWS DIGEST“Rolls-Royce has won a $1 billion maintenance support contract fromAmerican Airlines for its fleet of RB211 engines.”March 01 | Orient Aviation | 49

B U s i n e s s D i g e s tPassenger Load Factor Growth by CarrierPercentage Points Change (Dec 99 - Nov 00 vs Dec 98 - Nov 99)1086420-2ANKE OZ BR SQ TG VN JL BI CI CX GAChina Airlines: recorded the highest FLF in the year to November30 FTK Growth by CarrierPercentage (Dec 99 - Nov 00 vs Dec 98 - Nov 99)next with a similar load factor of 76.7%. In contrast, three airlinesfrom Southeast Asia – Royal Brunei Airlines, Garuda Indonesia andVietnam Airlines – posted load factors below 50%.30SummaryThe crisis of 1997 was prefigured by a slowdown of passengertraffic, while cargo traffic did not decline until the financial crisisbegan to affect economic fundamentals and hence trade. This timearound economic weakness has been signalled by a slowdown incargo traffic, while passenger numbers remain relatively strong.However, airlines will inevitably find that RPK growth rates recedefrom the levels of 2000 as the U.S. economy has a widening impacton the Asia-Pacific region.More optimistically, a weaker traffic base may well be accompaniedby a weaker U.S. dollar and lower fuel prices, which wouldreduce costs at the same time that revenue falls.20100-10-15BIAN TG JL CX SQ KEBR GA OZ VN CIRPK Growth by CarrierPercentage (Dec 99 - Nov 00 vs Dec 98 - Nov 99)60.6%Freight Load Factor Growth by CarrierPercentage Points (Dec 99 - Nov 00 vs Dec 98 - Nov 99)254220015-210-4-65-80ANBI BR JL TG SQ KE CI CX VN OZ GA-10BIGA TG JL CI AN KE SQ OZ BR VN CX50 | Orient Aviation | March 01

Monthly international PAX statistics of AAPA membersMarch 01 | Orient Aviation | 51

B U s i n e s s D i g e s tMonthly international cargo statistics of AAPA members52 | Orient Aviation | March 01

AAPA monthly international statistics (MIS)*IN THOUSANDSRPK ASK PLF FTK FATK FLF RTK ATK PAX(000) (000) % (000) (000) % (000) (000) (000)1999to2000Nov-00 37,969,250 51,964,678 73.1 3,514,694 5,006,770 70.2 7,071,257 9,774,564 8,588Oct-00 39,332,153 52,675,508 74.7 3,574,009 5,039,458 70.9 7,267,403 9,870,068 8,787Sep-00 40,020,664 51,426,742 77.8 3,458,883 4,857,183 71.2 7,221,936 9,582,405 8,765Aug-00 42,659,534 53,139,437 80.3 3,334,257 4,840,488 68.9 7,342,838 9,731,361 9,410Jul-00 42,358,347 53,178,496 79.7 3,352,737 4,735,953 70.8 7,330,686 9,492,294 9,366Jun-00 38,462,047 50,721,560 75.8 3,205,060 4,554,317 70.4 6,825,239 9,220,322 8,539May-00 36,785,555 51,663,143 71.2 3,117,148 4,602,811 67.7 6,587,965 9,339,170 8,283Apr-00 39,588,941 52,408,645 75.5 3,206,711 4,696,924 68.3 6,844,787 9,505,943 8,656Mar-00 39,330,412 52,620,044 74.7 3,368,597 4,755,519 70.8 7,001,375 9,582,087 8,585Feb-00 35,223,148 47,901,122 73.5 2,818,197 4,172,994 67.5 6,111,261 8,570,603 8,084Jan-00 35,872,893 50,662,344 70.8 2,858,084 4,386,228 65.2 6,226,028 9,037,317 7,883Dec-99 34,612,362 50,110,454 69.1 3,325,734 4,746,309 70.1 6,573,078 9,338,728 7,947TOTAL 462,215,307 618,472,172 74.7 39,134,111 56,394,955 69.4 82,403,853 113,044,862 102,893RPK ASK PLF FTK FATK FLF RTK ATK PAX% % % % % % %1999to2000Nov-00 8.5 7.9 0.4 5.8 8.2 -1.6 6.9 8.0 8.2Oct-00 9.9 6.7 2.2 3.5 4.7 -0.8 6.5 5.6 9.7Sep-00 13.4 7.9 3.7 11.2 7.8 2.2 12.3 7.9 12.8Aug-00 7.4 5.8 1.2 11.1 7.0 2.5 9.3 6.4 5.8Jul-00 11.8 7.0 3.4 12.3 6.4 3.8 12.4 5.2 9.6Jun-00 14.7 9.2 3.7 12.4 12.1 0.2 14.4 10.6 11.6May-00 13.6 7.1 4.1 10.7 12.1 -0.8 12.9 9.5 11.2Apr-00 22.4 12.3 6.2 19.7 16.2 2.0 20.3 14.3 16.0Mar-00 13.9 11.4 1.7 16.6 14.9 1.0 15.0 13.0 9.9Feb-00 13.0 9.6 2.2 16.3 15.2 0.6 15.4 12.4 11.7Jan-00 3.7 4.0 -0.2 18.0 12.9 2.8 10.9 8.0 4.7Dec-99 1.6 3.0 -1.0 22.0 19.5 1.4 12.3 11.0 2.7RPK ASK PLF FTK FATK FLF RTK ATK PAX(000) (000) % (000) (000) % (000) (000) (000)CalendarYear2000 5 427,602,945 568,361,718 75.2 35,808,377 51,648,646 69.3 75,830,775 103,706,133 94,9461999 416,820,106 576,253,703 72.3 35,277,459 51,519,550 68.5 74,179,615 104,437,440 94,2421998 382,106,292 557,130,177 68.6 30,958,021 46,204,321 67.0 66,141,448 97,199,731 86,1981997 387,763,016 561,392,742 69.1 31,741,381 45,688,853 69.5 67,739,088 96,736,079 88,6961996 374,365,998 529,442,583 70.7 27,783,667 43,091,640 64.5 62,557,622 90,816,037 86,7031995 326,071,184 471,535,677 69.2 23,838,488 36,487,508 65.3 54,250,542 79,121,583 76,378RPK ASK PLF FTK FATK FLF RTK ATK PAX% % % % % % %CalendarYear2000 6 11.9 8.0 3.9 12.1 10.4 1.6 12.2 9.1 10.01999 9.1 3.4 5.7 14.0 11.5 2.4 12.2 7.4 9.31998 -1.5 -0.8 -0.7 -2.5 1.1 -3.6 -2.4 0.5 -2.81997 3.6 6.0 -2.5 14.2 6.0 8.2 8.3 6.5 2.31996 14.8 12.3 2.5 16.5 18.1 -1.6 15.3 14.8 13.5Note:1. The consolidation includes 16 participating airlines.2. Data for Jul 2000 - Nov 2000 are subject to revision as actual data for QF (Jul 2000 - Nov 2000), NH (Nov 2000) andPR (Nov 2000) are not available. Oct 2000 have been revised with the inclusion of AN Oct 2000 and NH Oct 2000.3. KA and NZ do not participate in this report.4. AN data from Jul 1998 onwards. VN data from Jan 1998 onwards.5. CY denotes Calender Year (January - December). Year 2000 to date - From Jan 2000 to Nov 2000.6. Year-on-year comparison: Jan - Nov 2000 v. Jan - Nov 1999.March 01 | Orient Aviation | 53

C o m m e n tThe news that the finances ofAustralasia’s new Air New ZealandAnsett Group have sunk close to thered ink line, largely because of a dreadfulperformance by Ansett Australia, shouldcome as a serious reminder that no one is immunefrom fiscal drama in this cyclical airlineindustry of ours.Putting the recent Asian economic recessionaside, not to mention rising fuel prices,no one in this region can afford to take theireye off the ball for one second.Losing concentration on the big pictureas well as the critical individual elements thatmake an airline successful is precisely whathappened at Ansett. There may have beenextenuating circumstances, but that is noexcuse. Staff at Ansett have undergone morethan four years of torture. They thought theirproblems were over when Rod Eddingtonarrived from Hong Kong to steady things andinstigate a restructure for the carrier.But he headed off to London before thejob was finished, leaving a void that tooknearly nine months to fill. Gary Toomey,former deputy chief executive and financialguru at Qantas, finally grabbed the tiller inJanuary, but before he arrived no one wasreally minding the ship.Loyal Australian staff finally discoveredin June their future lay in New Zealand hands(with more than a little influence from 25% AirNew Zealand stakeholder Singapore Airlines)and their worries turned to whether theirjobs would disappear across the Tasman asrationalisation measures continued.Worse still, 20 or 30 managers, manyof them after years of service, suddenlydisappeared as the executive restructure gotunderway. Little wonder morale plummeted.And maintenance slip-ups, virtually unheardof in a major airline did not help the cause.Boeing B767s had to be grounded during thebusy Christmas period and, later, a wrong partwas installed on a B767.Ansett is no slouch when it comes tocustomer service. Its international inflightservice is a regular award winner. Yet staffworried about their future might not be quiteas enthusiastic as they might otherwise be.The result? Ansett is being decimated byrival Qantas Airways and hit by Australiannewcomers Impulse and Virgin Blue. Itsmarket share has stagnated at the sametime as overall domestic traffic has risen 7%annually.Gary Toomey has to reverse that trendwhile combining two airline operations. It is amammoth task. And if he needs any reminderof what is ahead then he only has to thinkTortured Ansettcaught withits guard downof how long it took Qantas and domesticAustralian Airlines to join forces. That processwas traumatic and during this period Ansettthrashed Qantas in the market place, stealinga big lead in traffic share while Qantas mindswere on other things. The reverse has beenhappening over the past year. The point is noairline can afford to drop its guard.Air New Zealand Ansett is not the onlyAsia-Pacific airline flirting with trouble.Everyone knows Malaysia Airlines has deepfinancial problems. Yet at a time the airlineindustry is driving further and further downthe road towards truly commercial managementand privatised operations, Kuala Lumpurhas decided to place government bureaucratsat the head of its national flag carrier.Competent as they may be in their chosenfield, they are not airline people. And they donot have decades of experience in runningairlines which have to compete in the viciousworld of international aviation.Perhaps they will have the vision andpersistence to achieve a turnaround, as nonairlineexecutives like Robby Djohan andAbdulgani, both bankers, appear to have hadat Garuda Indonesia. But, on average, historytells us their chances are not good.British Airways shareholders did not haveany qualms or thoughts of nationalism, unlikesome countries in Asia, when it hit bad times.It looked around for the best and broughtin Australian Eddington. Nine months later,financial results have improved. SingaporeAirlines chief, Dr Cheong Choong Kong, hasTURBULENCEBy Tom Ballantynesaid there is no glass ceiling placed over non-Singaporeans aiming for the top of SIA. Anddespite the national pride inherent in beingeither a New Zealander or an Australian, AirNew Zealand brought in Australian Toomeyto turn its troubling financial tide.Meanwhile, the Thai Government isthreatening to do a U-turn and keep its nationalcarrier, Thai Airways International, firmlyin local hands after three years of preparingfor partial privatisation. Several internationalairlines have been patiently waiting in thewings to make bids. It smacks of ongoinggovernment interference and that usuallyworks to the detriment of the airline.For a start, such interference slows downthe decision-making process and stifles properforward planning. Incumbent managers (ashappened in the Ansett case) do not makedecisions on their merits because they do notknow what their new owner(s) want.The AirNZ Ansett figures indicate theunderlying message for the region’s airlinesis that this is no time to relax. Already thereis some evidence global economies, includingthe U.S., are slowing down, with Japan possiblyheading back into recession. If that happensother Asian nations will likely follow.The Middle East is more of a powder kegthan it has been since those dreadful days ofthe Gulf War and that does not bode well foran end to volatility in jet fuel prices. This is aperiod when airlines need strong leadershipby professional managers who are firmlyfocussed on their business.54 | Orient Aviation | March 01