China's - Orient Aviation

NOVEMBER 2007CONTENTSO R I E N T A V I AT I O N V O L U M E 1 5 , I S S U E 0 2COVER STORY14 A380 in businessSingapore Airlines enteredthe history books withthe first commercialflight of the A380Also:15 Queen of the skies16 Suite success for SIA20 A380 boss a man of extremes24 A380’s humble beginnings30 ‘Green giant’s’ hush-hush arrivalin SydneyENVIRONMENTCARGO UPDATE42 Smaller is beautiful for JAL Cargo32 Air New Zealand to test bio-jet fuel inB747-40032 Europe refuses to move on emissionstradingNEWS BACKGROUNDER36 Lifting of EU’s Garudaban under threatCOMMUTER AVIATION62 Twin Otter making a comebackEXECUTIVE INTERVIEW38 Air Astana president,Peter Foster6 ORIENT AVIATION NOVEMBER 2007

SPECIAL REPORTMAINTENANCE, REPAIR AND OVERHAUL46 LCCs adding spiceto MRO’s cake48 U.S. focus onChina MROs50 PMAs finding morefavour in Asia-Pacific51 Singapore’s Seletar to become aviation park52 STARCO doubles up in Shanghai54 Major investment in IndiaAIRCRAFT LEASING56 Lease rates at an all-time high58 Regulations put Mainland companies at adisadvantage in China’s growing leasing market60 Vietnam enters the leasing business61 Middle East spending spreeNEWS10 Pilot to blame for Garuda crash, says report10 Weather blamed for Phuket accident10 China ‘devoted’ to developing low-cost carriers10 Vietnam Airlines orders 10 A350 XWBs11 Hainan Airlines adds insurance to its portfolio12 Oasis fleet expansion plans to benefit from new investor12 Chao takes on dual role at China Airlines12 Customers assess Dreamliner delays36 Crash report could hinder Garuda’s chances of having EU ban lifted40 Pacific Airlines rebirth racing aheadREGULAR FEATURES3 Comment: Big test for A38048 Business Digest: Healthy PAX improvementAssociation of Asia Pacific Airlines SecretariatSuite 9.01, 9/F, Kompleks AntarabangsaJalan Sultan Ismail, 50250 Kuala Lumpur, MalaysiaTel: (603) 2145 5600 Fax: (603) 2145 2500E-mail: info@aapa.org.myDirector General: Andrew HerdmanCommercial Director: Beatrice LimTechnical Director: Martin Eran-TaskerPUBLISHED BYWILSON PRESS HK LTDGPO Box 11435 Hong KongTel: Editorial (852) 2865 1013Fax: Editorial (852) 2865 3966E-mail: orientav@netvigator.comWebsite: www.orientaviation.comChief ExecutiveBarry GrindrodE-mail: orientav@netvigator.comPublisherChristine McGeeE-mail: cmcgee@netvigator.comChief CorrespondentTom BallantyneTel: (612) 9638 6895Fax: (612) 9684 2776E-mail: tomball@orientaviation.comSpecial CorrespondentCharles AndersonTel: (852) 2809 2209E-mail: charlesanderson@orientaviation.comChinaSophie YuTel: (852) 2865 1013Japan & KoreaJulian RyallTel/Fax: (81) 45 663 2501Email: jmryall@orientaviation.comPhotographersRob Finlayson, Colin Parker, Andrew HuntDesign & ProductionWilson Press HK Ltd.Colour SeparationsTwinstar Graphic Arts Co.PrintingHop Sze Printing Company Ltd.ADVERTISINGSouth East Asia and PacificShirley HoTel: (852) 2865 1013Fax: (852) 2865 3966E-mail: shirley@orientaviation.comThe Americas / CanadaBarnes Media AssociatesRay BarnesTel: (1 434) 927 5122Fax: (1 434) 927 5101E-mail: barnesrv@suddenlink.netEurope & the Middle EastREM InternationalStephane de RémusatTel: (33 5) 34 27 01 30Fax: (33 5) 34 27 01 31E-mail: sremusat@aol.comNew Media & Circulation ManagerLeona Wong Wing LamTel: (852) 2865 1013Fax: (852) 2865 3966E-mail: leonawong@orientaviation.com© All rights reservedWilson Press HK Ltd., Hong Kong, 2007The views expressed in this magazine are not necessarilythose of the Association of Asia Pacific Airlines.NOVEMBER 2007 ORIENT AVIATION 7

REGIONAL ROUND-UPAviation chief Yanggives LCCs majorboost in ChinaChinese aviation delegates attendingChina’s five yearly political congressin Beijing in October provideda clear indication of their policy strategiesfor the industy “on its sidelines” of the17th Communist Party Congress.Aviation minister, Yang Yuanyuan,head of the Civil Aviation Administrationof China (CAAC), told reporters there wereno plans to amalgamate some or all of the“Big Three” carriers: Air China, ChinaEastern Airlnes and China SouthernAirlines.However, there are plans to build asecond airport south of Beijing, specificallyfor low-cost carriers. Yang said a sitehad been chosen for the complex and theCAAC was “devoted “ to developing lowcostairlines.Elsewhere at the gathering, Air China’schairman, Li Jiaxiang, said Air China hadno plans to order the A380 and added thatonly three Mainland airports can accommodatethe aircraft.Vietnam Airlines orders10 A350 XWBSSizzling Vietnam Airlines, whichhas one of the highest growth curvesin the Asia-Pacific, has signed aMemorandum of Understanding to acquire10 A350 XWB airplanes and 20 additionalA321s.Vietnam is predominantly an Airbus airline,but it has ordered four B787s with thepossibility of increasing the order to 16 ofthe airplanes. It is speculated that the adventof Qantas Airways in Vietnam, via its18% investment in low-cost carrier (LCC),Pacific Airways, and the planned joint venturebetween Vietnam’s Vinashin and theOpen Skies progressHainan Airlines, now China’s fourth largestcarrier, could have 250 aircraft in five yearsAirAsia group, might persuade the nationalflag carrier to launch its own LCC.Virgin Blue closerto flying to U.S.Virgin Blue has received a boost inits bid to begin trans-Pacific servicesfrom Australia to the U.S.West Coast with the news that Australia andthe U.S. are committed to reaching an OpenSkies agreement by early 2008.Virgin Blue, which is majority-ownedby Toll Holdings Ltd, has announced itintends to launch V Australia on the route bylate next year. It has ordered six B777ER aircraftfor the new subsidiary airline.Separately, Virgin Blue will introducea premium economy section on itsAustralian domestic flights as part of itsstrategy to wrest more corporate travellersfrom Qantas.Hainan’s Chen Fengbranches into insuranceThe HNA Group, majority ownerof Hainan Airlines, is setting up aUS$65 million joint venture insurancecompany with Taiwanese insurancecompany, Shin Kong Financial HoldingCo.HNA group chairman, Chen Feng, toldreporters in Beijing last month the Mainlandgovernment had approved the 50/50 jointventure, which will start operations in mid-2008.He said the group’s airline passengersand airlines were potential customers for thenew company’s travel, airplane, passengerand airport equipment policies.Separately, the charismatic boss ofChina’s fourth largest aviation companysaid he will now proceed to put all thegroup’s airlines – Hainan Airlines, ChinaXinhau Airlines, Chang’an Airlines andShangxi Airlines into a new holding company,Grand China Air, based in Beijing,following the completion of discussionswith the Chinese regulatory authorities.The group’s carriers have a fleet of 130planes, which would be increased to 240-250 aircraft in five years, said Chen. Inmid-October, Hainan Airlines orderedeight A330-300s for service on its routes toBrussels and Budapest.Aviation will account for 70% of thegroup’s business, he told the South ChinaMorning Post, but he did not see his airlinesimmediately expanding its internationalnetwork. As well as its domestic services,Hainan flies to Hong Kong, Japan, Korea,Greater China and several Southeast Asiancities.CAL boss takes on dual roleThe Malaysian government has announced it will lift controlson at least four Malaysia-Singapore services, movingcloser to abolishing the exclusive rights of the MalaysiaAirlines (MAS) and Singapore Airlines (SIA) to fly betweenthe two countries.Malaysia said twice daily routes between Singapore and KualaLumpur, Kota Kinabalu, Kuching and Penang, are to be openfor bids from non-MAS and non-SIA airlines. At press time,Singapore had yet to announce if it agreed to the Malaysian governmentproposal.Ringo Chao (51), the president of Taiwan’s flag carrier,China Airlines (CAL), has added the chairman’s duties tohis portfolio after Phiip Wei resigned in October.Wei, 65, stepped down following an accident in Okinawa inAugust when a CAL B737-800 burst into flames. All passengers andcrew were safely evacuated from the aircraft. Initial investigationssuggest the fire was caused by maintenance error.Wei began his career with CAL in 1970 and under his leadershipthe airline invested millions of dollars in the last decade in an effortto establish the highest levels of operating safety.10 ORIENT AVIATION NOVEMBER 2007

Garuda pilot ‘ignored 15 GPWS alarms’At press time, Indonesian flagcarrier, Garuda Indonesia,said it would not commenton the National TransportSafety Commission reporton the fatal March 7 crash of one of the carrier’sB737 jets until it had fully studied thereport.The Indonesian safety investigationfound that the accident, which killed 21 of133 passengers and crew onboard whenthe aircraft crashed at Yogykarta Airport,was caused by the pilot ignoring 15 alarmsfrom the ground proximity warning systemand failing “to go around” as the aircraftapproached the runway at too high a speed.It also said the pilot had bypassed the copilot’srequest “to go around” and attempt asecond landing.Head of the transport safety commission,Tatang Kurniadi, said Garuda andother airlines had received a report fromhis organisation that outlined recommendedsystems to improve safety standards. Thereport, in a supplementary section, said theco-pilot may not have received sufficienttraining to cope with aircraft emergencies.Three Indonesian airlines have beeninvolved in recent fatal accidents. Twentysix months ago, a Mandala Airlines B737-200 crashed in Medan, killing 150 people.On January 1 this year, an Adam Air B737-400, carrying 102 passengers, dropped outof the sky over Indonesian waters. Therewere no survivors. Three months later, theGaruda accident occurred at Yogyakarta.Both the pilot and co-pilot survived thecrash and have been grounded, an airlinespokesman said (See Crash could effect liftingof EU ban on Garuda p. 36).Weather blamed for Phuket crashThailand’s National Transpor t Per manent Secretar y, ChaisawartKittipornpaiboon, said de-coding of the “black box” of the One-Two-Goairliner, which crashed at Phuket International Airport two months ago,revealed the fatal accident was caused by bad weather.As chairman of the investigation, Chaisawart said the recordings revealed the flightsuffered from wind shear. The preliminary conclusion indicates the captain tried to pullup the plane before landing. Ninety of the 130 passengers aboard the flight died after theaircraft landed, skidded off the runway and burst into flames.BUSINESS BRIEFS• CHINA Southern Airlines reported a 49% increase in net profitfor its third quarter, to September 30. The Guangzhou-based carriersaid China’s economic growth had boosted profits to 1.88 billionyuan (US$250.5 million) compared with 1.26 billion in thesame three months in 2006.• OASIS Hong Kong Airlines and AirAsia X have secured, orare seeking investors, for their expansion. Hong Kong-based fund,Value Partners, has invested US$30 milion in the Hong Kong longhaulbudget carrier at the same time as existing shareholders havetopped up the airline coffers with HK$200 million (US$25.81 million).All funds raised are for fleet expansion. AIRASIA X, a newlow-cost, long-haul airline, said it planned to raise US$80.3 millionwhen it puts 20% of the carrier up for sale. The Malaysia-based LCCwill launch operations with a Kuala Lumpur-Gold Coast (Australia)service, with seat prices starting at US$235 one way.• ALL Nippon Airways (ANA) has changed its methods used forcalculating aircraft depreciation, which has resulted in a chargeof Y66 billion (US$565 million) for the current fiscal year. ANAsaid the sale of its hotel group earlier this year, for Y130 billion,would offset the loss.• Steve Swift, from Australia’s Civil Aviation SafetyAuthority, received the annual Whittle Safety Award, at an internationalair safety conference in Seoul last month. Swift developed thediamond analytical model to better understand damage tolerance inaircraft and more accurately detect structural fatigue.NOVEMBER 2007 ORIENT AVIATION 11

REGIONAL ROUND-UPSHORTTAKESASAs>> The U.S. Department ofTransport has allocated two new U.S.-China flights: Delta Air Lines fromAtlanta to Shanghai and United Airlinesfrom San Francisco to Guangzhou.CARGO>> Taiwan-based carrier, EVAAir Cargo, has commenced twice-aweekservices from Taipei to HoustonGeorge Bush International Airport usinga B747-400 freighter.CODE - SHARES>> All NipponAirways and Asiana Airlines, ofwhich both operate twice-daily servicesbetween the airports of Haneda, Tokyoand Seoul’s Gimpo, have commencedcode-sharing on the route. SingaporeAirlines and United Airlines haveestablished a code-share on theSingapore-Los- Angeles-Las Vegas andSan Francisco-Las Vegas routes.FLEET>> Hong Kong ExpressAirways has taken delivery of its fourthB737- 800, which is now flying thecarrier’s routes to Jakarta and KualaLumpur and later this year to Yangon.Indonesia’s Mandala Airlines will spendUS$4 billion on 30 new Airbus planes asit expands from its domestic network intoregional services. Qantas Airways will buy12 72-seat Bombardier Q400 commuterairplanes, valued at US$356.5 million, withoptions for another 24 for the flag carrier’sregional subsidiary, Qantaslink.INFLIGHT>> Japan Airlines willintroduce a new class, premium economy,from December 1, starting with its Tokyo-London route. LSG Sky Chefs, the world’slargest airline caterer, has signed two jointventure agreements in China to form theYunnan Eastern Air Catering Co. Ltdin Kunming and the Gansu HNA LSG SkyChefs Co. Ltd in Lanzhou.LEASING>> AWAS has signed a fiveand half year sale and leaseback contractwith Jet Airways of India for two B737-800 aircraft. A Singapore-based, GeneralElectric supported trust, Altitude AircraftLeasing Trust, is planning an initial publicoffering to fund a fleet of five B737-800s,four A319-100s, three A320-200s, oneB747-400F and an MD11F, at a value ofUS$650 million.MROs>> Messier Services Asia hascompleted a S$10 million expansionof its facilities to repair and overhaulAirbus -330, -340 & -320 and Boeing -777 and -737NG gear systems and alsoestablish the infrastructure for MROwork on A380, A350 and B787 gears.ROUTES>> At press time, Hong KongbasedDragonair was expected tostart flying to Taichung, the third city itwill service in Taiwan, after Taipei andKaohsiung. Japan Airlines will begincharter services from Osaka, Tokyo andNagoya to Siem Reap this month andexpects to operate up to 400 flights tothe Cambodian city to March 31, 2008.JAL also has added a 12-seat first classcabin to its aircraft on its new daily servicebetween Haneda Tokyo and Hongqiao inShanghai. Thai low-cost carrier, Nok Air,will launch its twice daily Bangkok-Hanoiservice this month.B787 delays: customers ‘can cope’The six-month delay in thedelivery of Boeing’s 787Dreamliner has disappointedAsia-Pacific carriers, butmost of them said they couldcope with the jet’s late arrival.Launch customer, All Nippon Airways,scheduled to receive the first of 50 planesin May will have to wait until Novemberfor delivery – at the earliest. ANA spokesman,Shinichi Shinkawa, said the carrierwas not happy about the delay, but the airlineis “not overly concerned” because itcould keep flying the B767s that the B787would replace.Boeing is in talks with 15 customersabout re-scheduling deliveries. It wasunclear exactly how many planes would bedelayed and for how long, but the companyexpected to catch up to its original deliveryschedule by 2010.The delay has mostly been caused by12 ORIENT AVIATION NOVEMBER 2007All Nippon Airways: the launchcustomer for the B787 “not overlyconcerned” about the delayproblems in its supply chain – parts andsections of the B787 are being manufacturedin several countries around the world– that have complicated assembly of the firstplanes.Australia’s Qantas Airways is one of thebiggest customers for the B787. It has placed45 firm orders, is finalizing orders for 20more and has options and purchase rights foranother 50. The first 15 are to go to its lowcostsubsidiary, Jetstar.Qantas chief executive, Geoff Dixon,said he had received assurances fromBoeing that all 15 of the aircraft type, scheduledfor delivery between August 2008 andDecember 2009, would be delivered by2009.Airbus chief operating officer, customers,John Leahy, told Orient Aviation theEuropean manufacturer did not expect acompetitive advantage from the Boeingdelays. The A350 (Airbus’ planned equivalentof the B787) is not scheduled for deliveryto airlines until 2013.Some 48 airlines have ordered 710 B787ssince the airliner was launched in April2004. – Tom Ballantyne

COVER STORYPassengers on board the A380applaud as the plane arrives inSydney on its maiden commercialflight from SingaporeNEW ERA DAWNSAt 8.20am on October 25th, Capt. Robert Ting eased Singapore Airlines flight SQ380into the air, bound for Sydney and the history books. After 13 years of development andalmost two years of trials and tribulations, the A380 had, at last, entered into service.The A380’s first commercial flight, with 450 passengers and 35 crew on board, toucheddown seven hours later after a trouble-free flight.No plane has commanded so much attention since the very first Boeing 747 jumboentered service with Pan Am in 1969.In this 10-page report Orient Aviation covers the handover and delivery of the firstA380 and its entry into service with SIA. We look back at the development of thedouble-deck aircraft and highlight the challenges and problems it has faced.A380 quotes‘We are at the start of a new chapter in thehistory of commercial aviation … a newqueen of the skies for air travel’Chew Choon SengChief ExecutiveSingapore AirlinesHistory is made as the A380touches down in Sydney14 ORIENT AVIATION NOVEMBER 2007

The ‘queen of the skies’By TOM BALLANTYNEin Toulouse and Singapore andCHARLES ANDERSONIt’s been a long time coming withmany trials and tribulations alongthe way, but the first Airbus A380to enter commercial service withSingapore Airlines (SIA), is nowplying its first route between Singapore andSydney.SIA chief executive, Chew Choon Seng,on accepting delivery of the first of 19 A380sit has on order in Toulouse eight days earlier,described the double-deck jet as “the start ofa new chapter in the history of commercialaviation ... a new queen of the skies for airtravel.”But Chew did not ignore the A380’sconsiderable birth pains and the fact it was18 months behind the original schedule. “Wewere inconvenienced. I would be less thancandid if I said we were not unhappy aboutthe situation ... [but] the A380 is well worththe wait,” said the chief executive whoseairline also has five A380 options.With close to a one year head start onits competitors – the next customer, QantasAirways, will receive its first A380 in Augustnext year – SIA unveiled a ground-breakinginflight product (see next page). The carrierhas 471 seats in three classes with the emphasison comfort rather than gimmicks.But while the eyes of the world were onthe launch of the A380, the Airbus problemsrefused to go away. As champagne corkspopped in Toulouse, Singapore and Sydney,the question of whether Airbus couldcontinue delivering A380s on time wasnever far away.And the European manufacturers’president and chief executive, Tom Enders,refused to comment on alleged insidertrading by Airbus and EADS (the Airbusparent company) executives immediatelyprior to the production delays but he did notside-step the delay issue.The first delivery milestone is part of afour-year recovery programme, said Enders.The big challenge of ramping up production– 13 aircraft next year, 25 in 2009 and 45 in2010 – lay ahead.“Nothing is guaranteed in life but … weOn the steps of the A380 in Toulouse from left: Sir John Rose, CEO, Rolls-Royce;Arnaud Lagardère, EADS shareholder; Louis Gallois, CEO, EADS; Chew ChoonSeng, CEO Singapore Airlines and Tom Enders, Airbus president and CEOhave every reason to believe at this point,with all the lessons we have learnt, all thenew processes and tools we are going toapply, that we can make it,” said Enders.The major delays were caused by thecomplexity of fitting 530 kms of electricalwiring in the aircraft. Airbus currently has1,000 workers from its Hamburg operationin Toulouse working with their Frenchcounterparts, virtually building each planeby hand.Ironically, the delays appear to havehad some benefits. “This plane has donemore test flying and more tryouts at variousairports than any other new aircraft I haveexperienced in the past 30 years,” said SIAchief Chew.Airbus chief operating officer customers,John Leahy, echoed the sentiment, sayingthe delay was a two-edged sword. “Onewas obviously delivering the aircraft toA380 quotes‘Immediately, youforget you are in alarge aircraft. Youhandle it like asmall aircraft, itslike riding a bicycle’Jacques Rosaychief test pilotSingapore, to Qantas and everyone up totwo years later than we thought,” he said.“We used the extra time we had due tothe production ramp-up difficulties to makesure the systems were more mature thanthey otherwise might have been with a newaircraft.”“It’s like the old saying: better late thannever. It would be better if you were neverlate, but this is a very complex industry andBoeing knows that too.”“It was a challenge. We knew it was achallenge and we have apologised to ourcustomers for the delays, but now we arefinally delivering. The future of aviation ishere today,” he said.Airbus chief Enders told Orient Aviationearlier in the month: “We know that manypotential customers are waiting to see howthis aircraft will behave in public beforedeciding [whether to order it]. When I seehow excited the public is about the planeI know other carriers will be put undermuch pressure from their passengers to alsooperate the A380.”Enders, calls the A380 the “Gentle GreenGiant” because of its environmental benefits:lower noise and emissions.“The A380 is not a luxury, it’s a necessity.That’s why increasing A380 production tomeet demand remains our biggest challengefor the next few years. Airlines need theA380, and they need it fast,” said Enders inToulouse.NOVEMBER 2007 ORIENT AVIATION 15

COVER STORYSuite success for SIAThe impact of SingaporeA i rl i nes’ A 380 c abi ninnovation will likely rippleacross the industry, writesTom BallantyneIt has avoided gimmicks first touted whenthe plane was first marketed and opted formore luxury, privacy, comfort and leg roomdepending on which of the three classes onetravels.The jewel in the cabin crown isundoubtedly the carrier’s new SingaporeAirline Suites, which chief executive, ChewChoon Seng, said were “beyond First Class”.The suites were designed by leading Frenchluxury yacht designer, Jean-Jacques Coste.There are 12 suites, two of which canbe converted into rooms with a double bed.The airline is charging a 25% premium overits normal first class product. A round ticketbetween Singapore and Sydney will costabout US$6,819.The suites are enclosed with screens thatcan be pulled down and have sliding doors togive total privacy when required.The concept is the result of five yearswork, said Sim Kim Chui, senior vicepresidentproduct development. “It wasdriven by customers’ needs. They told usthey wanted privacy and a proper bed. Thisis the result,” he said.There are 60 seats in business class.Although similar seats have been installedin the carrier’s Boeing B777-300ER fleet,the A380 has a slight variation. The seatis wider at 84 centimetres (34 inches) andcan be converted into a full-flat bed. Other‘First class customers told usthey wanted privacy and aproper bed’Sim Kim ChuiSenior Vice-President,Product DevelopmentSingapore Airlinesfeatures include a 39-centimetre (15.4-inch)LCD screen fully equipped with USB portsand in-seat power.The 399-seat economy class has seatsoffering greater comfort and leg roomthrough improved seat design and the use ofnew, lighter and thinner materials. These alsohave an in-seat power supply.Sim Kim Chui said the product team hadlooked at between 40 and 50 different designconcepts. “We spent a lot of time talking toour customers. That helped us to short listthe ideas,” he said.Just how good SIA’s new product is willbe better judged when compared to rivalssuch as Qantas and Emirates when their firstplanes enter service later next year. Sourcesat Airbus indicate most A380 customershave gone down the same road as SIA, butwith variations in the concept.Chew isn’t worried about the competition.“Being first off the block has its advantagesand disadvantages in that all our competitorsnow know what we have had under wrapsall this time. But given the reality ofdevelopment time, certification and so on,... it will not be possible for them to do muchabout it in the time they have available,” hesaid.“So in terms of price competitivenessfor the premium products on this aircraftwe are not overly concerned. In the maincabin (economy) it will be good oldcompetition.”SIA will progressively remove the 14B747s still in its fleet in the next four yearsas it takes delivery of more A380s. Some ofthem will be converted into freighters.The A380 has arrived at a good timefor SIA. The carrier is now boasting loadfactors of 81% as air traffic continues tosurge. The number of passengers it carriedin September, the latest month for whichfigures are available, rose 5.9% over thesame month last year to 1.54 million.However, challenges remain. As the newplane was readied for its first commercialflight, jet fuel prices soared to new recordhighs of more than US$95 a barrel.Privacy and double bedsin the First Class SuitesWider seats in Business Class16 ORIENT AVIATION NOVEMBER 2007

COVER STORYSIA sets the barhigh for the A380Singapore Airlines contributed significantly to the A380’s design specifications. “Inparticular, we helped define the targets for payload and range and for improvementsin unit operating costs over what for the last 30 years has been the largest commercialaircraft available,” said SIA chief executive, Chew Choon Seng.“SIA also helped set targets for fuel efficiency and thus reduction in emissions and forreduction of noise generated during take-off and landing. The standards we demanded werethe most stringent required by airports located near heavily populated areas.”The airline prepared meticulously for the A380’s entry into service. Every aspect ofthe aircraft’s operations – engineering, catering, cargo, baggage loading and unloading,passenger embarkation and disembarkation, flying operations together with customerservice on board – has been redesigned to accommodate the extra passenger capacity,while maintaining operating efficiency.• Chew disclosed for the first time where its A380s will fly following the inaugural dailyservice to Sydney. SIA will take delivery of two more A380s early next year and those willoperate daily services to London, meaning there will be A380 operations along the lengthof the traditional Kangaroo Route between Australia and Europe.The fourth aircraft will arrive in April and from May begin daily services to Tokyo. The fifthand sixth aircraft will fly daily on the Singapore-Hong-Kong-San Francisco route.Singapore Changi International Airport’s new Terminal 3Changi: ready and waitingThere was never any doubt that Singapore Changi International Airport wouldbe well prepared for the first Singapore Airlines A380 commercial flight lastmonth on its inaugural service to Sydney.The Civil Aviation Authority of Singapore’s (CAAS) airport planning division beganmaking preparation for the double-deck jet in the late 1990s. “The team, comprisingsome 10 technical staff representing different fields of expertise, worked closely withother airport counterparts, such as those in apron control and management, airfieldlighting, ground handlers, airlines, pilots and the aircraft manufacturer, in preparingChangi to receive the A380,” said Koh Ming Sue, deputy director for engineering andreal estate development of the CAAS, which operates the facility.“CAAS has followed the original timeline for the A380’s entry into service. ChangiAirport has been A380-ready since November 2005 [when the A380 first visitedSingapore].”The airport’s new US$1.2 billion Terminal 3 will open on January 9. It will extendthe capacity of Changi airport by 22 million passengers a year to 70 million.Terminal 3 will add another 28 aerobridges, eight of them designed to handle theA380. Changi will have 19 gates in its three terminals A380 capable, including havingdirect aerobridge access to both decks of the aircraft.Capt. Robert Ting, SIA’s chief A380pilot: no shortage of applicants forA380 pilot trainingCapt. Tingmakes historyCaptain Robert Ting, chiefA380 pilot for SingaporeAirlines, became part ofaviation history on October25 when he piloted the firstcommercial A380 flight between Singaporeand Sydney, writes Tom Ballantyne.Eight days earlier he had flown the planeon its delivery flight between Toulouse andSingapore.The 56-year-old pilot, who has beenflying for 36 years and has 15,000 hours inhis flying log, described the experience as“a great honour. I feel I have been blessedby God”.Ting joined SIA in 1971 and is licensedto fly eight different types of aircraft. He hasspent 21 years as an instructor and 14 yearsas a management pilot.Capt. Ting said flying the behemothwas no different to flying any other bigcommercial jet. “Although it is biggerand heavier ... the aeroplane’s response isfantastic. It is very agile,” he said.Capt. Ting said SIA had 40 pilots qualifiedto fly the A380 or under training in Toulouse.They are using one of the Airbus A380 testaircraft for conversion training.When the airline’s second A380 arrivesearly next year, it will be utilized to help withthe training programme. SIA also has its ownA380 simulator in Singapore.He said there was no shortage of applicantswithin the airline to fly the A380.18 ORIENT AVIATION NOVEMBER 2007

COVER STORYEXTREME MOVEFromsingle-aisleto the A380Heinen literally has one of the biggest, and probably the toughest jobs, in AirbusBy Charles AndersonTh e m a n o n w h o s e b r o a dshoulders the A380 programmenow rests is Mario Heinen.Formerly head of Airbus’ssingle-aisle programme, hesucceeded Charles Champion * as head ofthe programme after Champion, who had runthe show since 2001, was one of a number ofexecutives replaced in the production delayfall-out.“It was a big, new experience to swap fromone extreme to the other almost overnight,”said Heinen who moved from a programmethat produces some 400 relatively simpleaircraft a year to one which, even at its peak,will turn out many fewer, but considerablymore complex machines.“It was very hard work at the beginning toget a grip on all the loose ends. But we had astrong team, which we pulled together fromother areas. Ultimately, we managed to setup the right battle plan to bring this undercontrol,” he said.At the root of the delays was the designand fitting of electrical harness systems. Thecomplexity of their installation, already liableto be altered after testing, increased throughvariations in the customisation programmesrequired by airlines keen to steal a marketlead on rivals with ambitious cabin designs.A lack of coordination between Airbusteams in Hamburg and Toulouse was alsoa factor.That is no longer a problem, saidHeinen. “From my perspective there areno distinctions any more, not betweennations or between functions. We areworking in a concurrent way. One of thebest demonstrations of this is that engineersare placed right at the docks of the aircraftrather than in special buildings. That is nowtheir daily life,” he said.The programme revamp came beforethe implementation of Airbus’s Power8restructuring plan, which reduces overheadsby job cuts and outsourcing, while alsotargeting structural inefficiencies.‘The challenges are to makesure this ramp-up is fullysupported by the supply chain’Mario HeinenExecutive Vice-PresidentA380 ProgrammeExperience gleaned from the A380became par t of the bigger picture.“Power8 comes out of the lessons learnedand understandings [gained] from theweaknesses of Airbus as specifically seenon the A380. But they were launched in alarger, broader sense,” said Heinen.As for the delivery programme, theconfidence is there that full productioncapability will be reached by 2010. “Withevery milestone we pass, it gets stronger,”he said. “The challenges are to make sureSIA planes on the production linethis ramp-up is fully supported by the supplychain.”Suppliers big and small were affectedby the delays – Rolls-Royce suspendedmanufacturing of its A380 engine, theTrent 900, for 12 months. Now companiesare gearing up with guidance from a groupset up by Airbus to deliver the quantitiesneeded to produce 45 aircraft a year.“When we announced the delays, it meanta lot of suppliers had to slow down extremely.Some, most prominently Rolls-Royce, eveninterrupted activities for a period. They haveall resumed again,” said Heinen.Production now won’t include the cargoversion. It was put on hold after FedEx andUPS cancelled their orders, citing the delaysas the main factor in their decisions. Airbusstill sees the freighter as a viable proposition.But it won’t be revived for deliveries until2015 at the earliest, if the demand is there.“Everything has been properly conservedand we will be ready and prepared to rampit up, but coincidentally it was a good thing.We could focus on the passenger programmeto make sure it was running flawlessly,” saidHeinen.The delays also gave test teams andmarketing men more opportunities to takea development aircraft – one with a fulla commercial cabin – around the world,ironing out any final kinks and showingthe public what they were missing. Routeproving for the Engine Alliance GP720020 ORIENT AVIATION NOVEMBER 2007

COVER STORYengine is under way.“ We h ave f low nsomething like another1,000 f light hours sincetype certification, hourswhich were purely orientedon getting [the A380’s]maturity really stabilised,”said Heinen. “This givesus, and more importantlyour customers, confidencethat now they can see it andknow we are really ready forentry into service.”The giant jumbo haslanded in Singapore, HongKong, Sydney, Japan,Taiwan, Thailand, Indiaand Vietnam in the last sixmonths where airline executives, uncertainwhether to buy, have been duly wooed. Itwas slated to go to Beijing, Shanghai andGuangzhou in late October, bringing airportsvisited worldwide close to 60. Next up is aU.S. trip where major airlines looking toreplace older B747s are the target.“This aircraft is a fantastic thing,” saidHeinen. “It has an emotional footprint foreverybody who touches it or flies in it.”‘[The A380] is thebest aircraft we haveever done’Richard CarcailletA380 director, ProductMarketingRichard Carcaillet, A380director, product marketing,is one of that group. Hejoined the programme in1996, four years before itslaunch and has been with itever since.He sees the early team’sbrainchild becoming anaviation icon. “I’m one ofthe old warriors, but now,that’s it. We’ve arrivedand the aircraft is going toenter commercial service,”he said.“Within the next two tothree years, you will seeA380s not only at hubsin major cities, but flyingpoint-to-point, big points mind you. That’sthe role of the aircraft.“When it was just a notion, it was niceto discuss its capabilities, its economics,what you can do with the cabin product andso on. But to fly on it is something entirelydifferent.”“The most positive point is that by somemargin, irrespective of the industrial side,but in terms of aircraft development andmeeting our targets, this is the best aircraftwe have ever done,” he said.• Charles Champion is now executivevice-president, customer services atAirbus.A380 order bookAirbus has firm orders and commitmentsfor 189 A380s. Of these 66 have beenordered by Asian carriers.Orders: Air France (12), China SouthernAirlines (5), Emirates Airline (47), EtihadAirways (4), ILFC (10), Kingfisher Airlines(5), Korean Air (5), Lufthansa GermanAirlines (15), Malaysia Airlines (6), QantasAirways (20), Qatar Airways (5), SingaporeAirlines (19), Thai Airways International (6),Virgin Atlantic Airways (6).Total: 165Commitments: British Airways (12),Emirates Airline (8) Grupo Marsans (4)Total: 24TIMELINE – The making of the A3801993: A3XX integrated team formed1993: Joint study with Boeing begins. It ends in 19951996: Large aircraft division formed and work on designsfor as yet unnamed aircraft begins1998: All major dimensions finalisedJuly 2000:Dec 2000:March 2001:July 2001:June 2002:Aug 2002:Aug 2003:March 2003:April 2004:April 2004:May 2004:July 2004:Jan 2005:First Letter of Intent received from Emirates AirlineAirbus board approves programme launchSearch for equipment vendors gets under waySingapore Airlines makes firm order for 10 A380sand becomes launch customerProduction programme officially starts with cuttingof first metal at NantesFirst metal for wings cuts at FiltonFuselage assembly starts at Saint NazaireFirst run for Trent 900, Rolls-Royce’s A380 engineFirst wing and fuselage deliveriesEngine Alliance completes initial testing ofGP7200 engineFinal assembly line officially inauguratedProduction ramp-up beginsFirst aircraft takes a bow at A380 “reveal”March 2005:April 2005:May 2005:June 2005:June 2005:Nov 2005:Jan 2006:Feb 2006:March 2006:July 2006:Sept 2006:Oct 2006:Oct 2006:Dec 2006:March 2007:April 2007:Oct 2007:First six-vehicle convoy arrives in Toulouse withmajor aircraft sections on boardFirst A380 moves to flight test centreFirst flight at ToulouseA380 appears at Paris Air ShowFirst delivery delays announcedA380’s first visit to the Asia-Pacific begins withtouchdown in SingaporeA380 lands in Columbia for hot and high testingAircraft flies to northern Canada for testing inextreme coldMaiden flight of SIA’s first A380Second delivery delays announcedFirst passenger flightFinal delivery delays announcedTechnical route proving beginsCertification completedFirst touch down in the U.S.Cabin furnishing for SIA beginsDelivery to SIA and entry into service22 ORIENT AVIATION NOVEMBER 2007

COVER STORYFrom a desk, two chairs anda telephone ... to a ‘cathedral’Airbus vice-president productpolicy, Philippe Jarry (right),reflects on the humblebeginnings of what was tobecome the A380By Charles AndersonPhilippe Jarry knows better thanmost how far Airbus, and theA380, has come in the yearstaken for an idea on a drawingboard to become a reality inthe skies.Singapore Airlines’ first giant jumbo, thefirst A380 to go into commercial service, isthe product of a mammoth cooperativeexercise linking six industrial sites acrossEurope, brought together in a 125,000 sq.metre final assembly hall built on a 230hectare greenfield site in Toulouse.Former Airbus chief executive, NoëlForgeard, described it as a “cathedral”.The sheer size and scale of the buildingcurrently equipped with four giant assemblybays, but capable of taking eight, is simplybreathtaking.It’s in keeping with the scale of today’sAirbus. Despite recent dramas, the companyitself is a giant in its own right, now closeto par with Boeing on orders and deliveries.But it hasn’t always been that way. Elevenyears ago, when Jarry joined the small teamcharged with assessing the developmentneeds of what was then the A3XX, hissurroundings were more modest. “We wereall located in a small building at the end of therunway,” he said. “The grass around it wasnot cut. It was awful. I just had a desk, twochairs, a telephone, no secretary and emptycupboards.” Airbus sales and deliveries wereless than half its main U.S. rival’s that year.Jarry had moved from head of marketingat Airbus to become vice-president, marketdevelopment, at the company’s newly-formedlarge aircraft division, led by engineeringexecutive, Jurgen Thomas. Their job wasto find out what airlines wanted and howfeasible such a project actually was.Airbus, in fact, had started considering itsown giant passenger aircraft in the late 1980sas the company grew from its roots as a losecollaboration of European manufacturersinto a cohesive entity.An unlikely cooperative study with fiercerivals Boeing into the market potential of anaircraft significantly larger than the B747 inthe mid-Nineties ended in agreement thatthere was need for such an aircraft. Wherethe two companies differed was on demand.Boeing felt there was not a big enough marketfor both manufacturers to compete and theywithdrew their interest.Airbus had a full product range on itsbooks – but with one exception, it felt … thebig plane. It took up the challenge.“Above the A340 was the B747, thequeen of the sky,” said Thomas. “Why notsomething bigger and better than the 747?This is how the story started.”John Leahy, now chief operatingofficer, customers, joined Airbus in 1985.“It wasn’t until[the company]had built up themarket positionand a full lineof inter-relatedproducts withthe fly-by-wiretechnology– and developeda st rongm a rket base– that we hadA380 quotesthe wherewithal and the market acceptanceto actually challenge the 747,” he said.Jean Pierson, Airbus chief executive atthe time A3XX studies were put on a warfooting, was also convinced the gap neededfilling. “The main idea was to have at least acomprehensive product line, with somethingto answer each segment of the market,” hesaid. “This was our thinking, a vision wehad to go with.”The aircraft, as yet unnamed, quicklytook shape. By 1998, wingspan, fuselageand other major dimensions of a 550-seater,double-deck airplane capable of fittinginto the 80 metre box required by mostairports had been frozen. Meanwhile, Jarrywas talking to airlines around the world, aprecursor to the many focus groups that wereto follow through which final requirementswere ironed out.“Two wanted a combi. Other airlinesdidn’t want to hear about a combi. Somewanted a freighter variant. Some wanteda passenger variant with extreme range.Everyone wanted to have his own variantfirst,” he said.T he ai rcraf t t hat emerged is atechnological marvel. It makes extensiveuse of carbon composites and advancedmetallic materials. It includes weight-savinghydraulic systems, superior separation offlight control systems, laser beam weldingrather than rivets in some areas, re-designedair generation methods and enough realestate over two decks to please any carrierlooking to produce a high-end product.“These things didn’t come overnight. It‘I am convinced that 550 seats isthe biggest aircraft you should doin a conventional configuration.Something bigger doesn’t makesense from the laws of pure physics’Jurgen ThomasFormer Senior Vice-PresidentLarge Aircraft Division24 ORIENT AVIATION NOVEMBER 2007

COVER STORYwas over years,” said Thomas. “Each hada different process of validation. First,was it technically reliable? Then, whatwas the cost situation, what was airlineacceptance, what was reparability?”And, on a more basic level: “Is suchan aircraft feasible? Are the airports ashowstopper, or the certification? Is suchan aircraft controllable?”With some, if not all, questionsanswered and only six Letters of Intentreceived, Forgeard went to the Airbusboard in December 2000 and was givenapproval to launch an official programmetwo months later.It was a tight business. Just before thatstage was reached, new take-off noiselimits at London’s Heathrow Airporthad caused hurried changes in enginedesigns and to elements of the A380’saerodynamics.Rapid expansion of productionfacilities followed, culminating in theofficial inauguration of its home, theJean Luc Lagardiere complex, in 2004.Equipment vendors were chosen in anintense exercise running from March 2001to mid-2002. Engine makers Rolls-Royceand the General Electric-Pratt & WhitneyEngine Alliance came on board. And themassive sub-assembly process at sites runby Airbus and related companies acrossEurope got under way.Hamburg was tasked with assemblingforward and aft fuselage sections, a majorcomponent assembly hall was opened therein 2003 and a finishing and delivery facilitywas installed.Giant wing pairs, 845 sq. metres in mass,were to be made in Broughton, Wales; thehorizontal tail plane and belly faringassembled in Getafe and Puerto Real inSpain; the centre wing box was assigned toNantes and extended fuselage assembly wentto Saint Nazaire.Then a mammoth transport system wasput in place to carry the massive parts byA huge section of the A380 fuselagebeing loaded onto a barge at Pauillacbarge on river and canal, by sea in a purposebuilt cargo ship with a 120-metre long,20-metre wide hold. Finally they were totrundle through the French countryside in agiant night-time road convoy to Toulouse.By that time Airbus had taken a cabinmock-up on a hush-hush tour of majorworld cities including Tokyo, Hong Kongand Singapore. Some 1,200 frequent flyersprovided by interested airlines gave theirinput, nine international design teams had asay and, after further surveys, final decisionswere made on the shape and width of thefuselage’s cross section.“It was a crucial decision, because onceyou have decided, that’s it. You are stuckwith it for the life of the aircraft,” saidRichard Carcaillet, A380 director, productmarketing.Then, the airlines began to bite. SingaporeAirlines signed up as launch customer,followed in the Asia-Pacific by QantasAirways, Korean Air, Malaysia Airlines,Thai Airways International, ChinaSouthern Airlines and, later, KingfisherAirways of India. Emirates dwarfedthem all, with 41 orders and two leaseagreements, followed this year by anotherfour orders and eight commitments.Production officially started in June2002. The ramp up came two years laterand, as the giant jumbo began to cometogether, behind the scenes exhaustivetesting of airframe, systems, components,engines, just about everything involvedwith the aircraft got under way.Then, in January 2005, to the pop ofchampagne corks and applause from 5,000VIPs and guests, the A380 showed itself tothe world at the “reveal” when the first testaircraft was rolled out of the final assemblyline building and into public view.It took to the skies for the first timefour months later, creating barely awhisper from its four Rolls-Royce Trentengines as it rose majestically from thetarmac in Toulouse. The test crew took itwith aplomb. “The handling is like riding abicycle. It is very easy to fly,” said chief testpilot, Jacques Rosay.Next came a fly pass at Le Bourget duringthe Paris Air Show at the same time as therigorous test flight campaign involving fiveaircraft moved into full swing, takingthe A380 around the world for photoopportunities in major cities and airportcompatibility tests and to hot and high teststations in Columbia and Ethiopia, as well asthe extreme cold of northern Canada.Its first stop in Asia was in Singaporein late 2005, before going on to Australiaand Malaysia. The first SIA aircraft tookits maiden flight in March 2006 and, with abreak-neck but satisfactory test programmecompleted, type certification came throughlast December.And now the world’s first commercial A380is off the drawing board, out of the assemblyhanger and into service with SIA.A380 quotes‘All parts of the A380 are made indifferent places. The big challengewas to put them altogether in oneplace. Everything is big, even theproblems.’Daniel BoutonnetSenior A380 Transportation Manager‘If I get depressed by the wholedevelopment process and things havegone wrong, I go out and see the aircraftand say to myself ‘bloody hell, how did wemanage that?’Frank OgilvieFormer A380 Design Director26 ORIENT AVIATION NOVEMBER 2007

COVER STORYIN BRIEF• The second of the A380’s engine types togo into service, the Engine Alliance GP7200,was due to complete route proving at the endof October before type certification nextmonth. The Rolls-Royce Trent 900 completedthat process last December.Eight of the 11 A380 customers havechosen Rolls-Royce engines, but the EngineAlliance, a joint venture between GeneralElectric and Pratt & Whitney, has the biggestcustomer, Emirates Airline.• THE final hurdle in Airbus’s fightto gain acceptance by the world’s majorairports came in July when the EuropeanAviation Safety Agency (EASA) and theFederal Aviation Administration (FAA) gaveclearance for it to operate on runways witha width of 45 metres – the standard width atmost facilities worldwide.The aircraft, designed to fit into an80 metre by 80 metre box as required bymost airports, will have visited close to 60airports by the end of the year. Airbus saysA380 quotes‘Every 30 years there is a sea change in thisindustry: propellers to pistons, pistons toturboprops, turboprops to jets, jets to jumbo jetsand jumbo jets to super jumbos’John LeahyChief Operating OfficerCustomersmore than 70 will be able to take the superjumbo by 2011.• AIRBUS broke with its normal practiceby assembling the A380 in one place, eventhough its components are manufacturedelsewhere and interior furnishing iscompleted in Hamburg. Each A380 positiontakes up one hectare and with four of thoserequired, it made sense to opt for a single sitewith enough land available.• AIRBUS usually relies on its five-strongfleet of Belugas, converted A300-600s withaccess for cargo through a giant, expandednose, to transport components between itsEuropean assembly sites. The A380’s wingand fuselage systems proved too big for thatmethod and the company commissioned theroll-on, roll-off Ville De Bordeaux fromNanjing in China.The giant cargo ship has 6,720 sq. metresof hold space and plies between Mostyn nearBroughton, Hamburg, Saint-Nazaire andCadiz, delivering its final load to Pauillac atthe mouth of the River Garonne, northwest ofBordeaux. From there barge and road convoyare used for the journey to Toulouse. 28 ORIENT AVIATION NOVEMBER 2007

COVER STORY‘Green giant’s’ hush-hush arrivalThe A380’s arrival in Sydneyfrom Singapore last month onits first commercial service wasa major plus for the aviationindustry’s ‘green’ lobby. TOMBALLANTYNE reports.Environmental issues such asnoise and emissions have beena controversial part of life forthe Sydney InternationalAirport for decades. It wasfor this reason that the arrival of the A380in Sydney could not come soon enough forJulieanne Alroe, general manager assetplanning and services for Sydney AirportCorporation Ltd (SACL).“Clearly, the environmental aspects ofaircraft is just profound for us ... it is muchquieter [than other planes] and that is agenuine bonus for us,” she said.The airport is only 20 minutes awayfrom Sydney’s city centre. It has a cap of 80movements an hour.“For an airport that has a cap on itsrunway movements, an aircraft that bringsin more passengers than other aircraft, albeitin its first generation not as many as weexpected, with significantly reduced noiseand emissions, is good news. It means fewer,quieter flights are needed to move the sameamount of passengers,” said Alroe.But passenger numbers will not be as highas originally expected. When the airportbegan preparing for the A380, Airbus hadinitially designed the aircraft for 550passengers in a three-class configuration.As it happens, carriers like SIA, QantasAirways and Emirates Airline have all optedfor less than 500.“That’s not to say in the future differentairlines won’t have different configurationsthat will allow the capacity benefit of thataircraft to be fully realized,” said Alroe.With A380 flights now underway, Sydneydoesn’t expect any dramas. With a singledaily SIA service, it will be months beforeA380 frequency builds up.“We are expecting Qantas to go intoservice in the second half of next year,although they still have to advise us of thedate. Qantas will be followed by Emirates,”said Alroe.The airport has prepared for what itconsiders the demand will be until the endof the decade.Planning for the big jet began in 2002 andconstruction on upgrades to cope with its sizeand weight started in 2004. Sydney Airport,which handles 31 million passengers a year,has invested around US$90 million, withanother $27 million to be spent in the nexttwo years, to complete terminal upgrades.Runways and taxiways have beenimproved and three new three-dooraerobridges – one to the upper deck and twoto the lower deck – have been built to providefaster passenger boarding on the A380. Bynext year Sydney will have six contact andthree layover gates upgraded for the newplane, although they can all be utilised byother aircraft.In the terminal departure level, check-inbaggage handling systems are more thancapable of handling the expected load in theshort-term and with a gradual ramp up of theaircraft’s services.“We have plans to increase baggageA380 quotessystems and other facilities that will pick upthe slack by the time we get a critical massof the aircraft operating. The departure levelis not an issue,” said Alroe. “On arrivals, wehave plans to build some additional baggagecarousels. The only difference to the ones wehave now is making them longer to handlethe additional luggage from more passengers.Again, that was an existing programme thatwas tweaked to cater for the higher level.”Ironically, the two-year delay in the jet’sdelivery eased some of the pressure. It allowedsome work to be delayed slightly. Everythinghas gone smoothly, according to Alroe.It has been a complex engineering taskto undertake the extensive construction. Toensure normal operations could continuewithout interruption all construction workhad to be performed during the airport’scurfew hours (11pm to 5am).The major airfield works includedwidening of pavement shoulders to runwaysand several taxiways. A major taxiway had tobe relocated to cater for the A380’s additionalwingspan.‘People say it must be very complex. No, it is not. Whenyou aggregate more people together, you don’t have to bea rocket scientist to understand that fuel consumption pernautical mile will be lower’Philippe JarrySenior Vice-Present Product Policy and Former Vice-PresidentMarketing and Development30 ORIENT AVIATION NOVEMBER 2007

ENVIRONMENTBy Tom BallantyneAir New Zealand (AirNZ)has f ir med up plans toconduct a serious test nextyear using environmentallyfriendly bio-jet fuel in oneof its Boeing B747-400s. It has signeda Memorandum of Understanding withBoeing and Rolls-Royce to conduct at leastone demonstration flight in the second halfof 2008.And in Sydney, trans-Tasman neighbour,Qantas Airways, has launched a carbonoffset programme, joining several other biginternational operators, including CathayPacific Airways, as the industry continuesto contribute to “greener” skies.Qantas went further. When it announcedthe scheme it organized a “Fly CarbonNeutral Day” – held on September 19 –when it paid to offset the equivalent ofaround 40,000 tonnes of greenhouse gassesassociated with some 950 flights it operatedon that day.The money is being used to plant andmaintain around 90,000 eucalyptus treesacross Australia.The New Zealand carrier’s bio-jet fueltest was foreshadowed by Orient Aviationin September when it reported Air NZ waslooking at a bio-fuel made from algae,By Tom BallantyneAs the 36th Assembly of theInternational Civil AviationOrganization (ICAO) drewto a close in September,hundreds of government andairline delegates from around the world weresure about one thing: a storm is brewing overEuropean plans to unilaterally introduce anaviation emissions trading scheme in 2012.What’s more it will lead to multi-milliondollar legal action.At the assembly the 27-nation EuropeanUnion (EU) refused to back away fromits emissions scheme, which will seeinternational carriers having to pay forgreenhouse gases they emit on all flightsto Europe.That, said Andrew Herdman, directorgeneral of the Association of Asia PacificAirlines (AAPA), was “not constructive” andhe called for more international cooperationon the issue.He was not alone. International AirAir New Zealand signs MoU with Boeing, Rolls-RoyceBio-jet fuel tests toQantas aiming to save two million tonnes by 2011 with its newproduced by local company, AquaflowBionomic Corporation.Air NZ chief executive, Rob Fyfe, saidthe test flight “ is another step in our plan tolead the globe in development of the mostenvironmentally responsible airline”.Boeing is in discussions with fuel sourceproviders around the world to identifypotential bio-fuels, which are available insuitable quantities for laboratory and jetengine performance testing and are compliantwith stringent aviation requirements.“Our near-term goal in this pioneeringeffort is to identify sustainable alternativebio-jet fuel sources for the planes that areflying today,” said Craig Saddler, president ofBoeing Australia and South Pacific region.“A significant first step is identifyingprogressive fuel sources that will providebetter economic and environmentalperformance for air carriers, without anychange to aircraft engines or the aviationfuel infrastructure.”It is hoped the Air NZ bio-jet fueldemonstration flight will highlight thesuitability of environmentally progressiveEurope refuses to budgeTr a n s p o r t A s s o c i a t i o n(IATA) director general,Giovanni Bisignani, describedit as “d isappoi nt i ng a ndirresponsible”. It was “contraryto the will of every other countryin the world and contrary tointernational law”, declaredJames C. May, president andthis lying down. In Montreal,EU transport commissioner,Jacques Barrot, said whileICAO has done much for airtransport safety “its record onaircraft emissions is simply notgood enough ... we must makemore and quicker progress totackle the urgent problem ofchief executive of the Air ‘Unilateral action climate change”.Transport Association (ATA),which represents 90% of U.S.airlines.And if that wasn’t enough,ICAO itself passed a resolutionopposing the EU plan, a movethat effectively amounted to acensure against a significantbloc of its own members.by the EU wouldinevitably leadto protractedinternationaldisputes’Andrew HerdmanDirector GeneralAAPAThen, in a statement issuedby the EU at the end of theAssembly, Luis Fonseca deAlmeida, head of Portugal’scivil aviation authority, said:“We strongly believe it wouldbe best if the internationalcommunity could reach aneffective mechanism on tacklingThe Europeans were taking none of aviation emissions.” He accused ICAO of32 ORIENT AVIATION NOVEMBER 2007

start next yearcarbon offset programmefuel solutions (bio-jet fuels) that differ fromtraditional bio-fuel development. Biojetfuels can potentially be blended withtraditional kerosene fuel (Jet-A) to reducedependency on petroleum-based fuels.Next year’s flight will use a bio-jet fuelblended with kerosene. An announcementon the source and mix will be made closerto the time of the flight.The B747 being used for the flight willbe powered by four Rolls-Royce RB211-524s engines. Only one engine will use thederived fuel, with the remaining enginesdriven by kerosene.Jim Sheard, senior vice-presidentairlines for Rolls-Royce, said: “We havebeen investing in research devoted toenvironmental improvement for many years.As an industry, we’ve already succeededin driving down fuel burn by 70% on apassenger per kilometre basis since thedawn of the jet age.”Under the new carbon offset programme,passengers of Qantas and its low-costsubsidiary Jetstar can elect to offset theirshare of flight emissions by making a smallcontribution that will go towards approvedabatement programmes, which may includeenergy efficiency measures, generationof renewable energy and tree plantingprojects.“We have undertaken a full life cycleassessment of all operations, calculatingthe emissions associated with carrying apassenger from one point to another. Anonline calculator assesses data about theflight sector and automatically advisescustomers of their emissions and the cost ofoffsetting them,” said Qantas chief executive,Geoff Dixon.‘Another step in our plan tolead the globe in developmentof the most environmentallyresponsible airline’Rob FyfeChief ExecutiveAir New ZealandThe airline has also committed tooffsetting emissions for all staff travellingon business as well as those generated by thegroup’s ground transport vehicles.Dixon said Qantas was focused onachieving a carbon dioxide savings target ofmore than two million tonnes by June 2011through a range of initiatives.on emissions tradingabdicating the leadership role given to it inthe Kyoto agreement on cutting greenhousegas emissions.Critics, including the U.S. and China, aswell as groups such as the AAPA and IATA,remain incensed at the European action.They believe Europe has no right toforce airlines using European air spaceto participate in that region’s emissionscaps programme. They prefer a voluntaryagreement among nations.W h ile t he ICAO assembly – t heorganization is a division of the UnitedNations – did set up a new group composedof senior government officials to work onformulating an aggressive action plan onaviation and climate change, it failed to reachany consensus on the controversial issue ofemissions trading schemes.It issued a statement saying it recognisedthe potent ial benef its ofemissions trading, but decidedthe inclusion of internationalaviation in such schemesshould be subject to “mutualag r e e ment a mongst t herespective governments”. Eventhat turned out to be far fromunanimous.The organization’s Europeanmembers all reserved theirposition and the EU reiterated itintended to include internationalairlines within the EU emissionst rading scheme, wit h orwithout the consent of non-EUgovernments.W hat has par ticularlyangered airlines across the world, includingthose in the Asia-Pacific, is that they willnot only be forced to pay for emissionsover European airspace, but all those gasesemitted from their point of origin outsideEurope.AAPA’s Herdman saidthere needs to be furtherdiscussion on the use ofadditional e c o n o m i cm e a s u r e s , i nclud i nge m i s s i o n s trading.“We need to workcooperatively towardscommon goals. Far fromsetting a good example,such unilateral action by theEU would inevitably leadto protracted internationaldisputes and is certainlynot constructive.“International climatechange initiatives mustaddress the aspirationsof developing nations andprinciples of equity. This is the fundamental‘Europe’s unilateralapproach toemissions trading ...is disappointing andirresponsible’Giovanni BisignaniDirector GeneralIATAcont. on page 36 >NOVEMBER 2007 ORIENT AVIATION 33

ENVIRONMENTNEWSchallenge we face in moving towards abroader post-Kyoto policy consensus,” hesaid.Herdman said the Asia-Pacific is hometo two thirds of the world’s population,representing 26% of global GDP and aviationwas widely recognised as a key contributor tosuccessful economic and social development,helping to raise living standards and alleviatepoverty.“Asia - Pacif ic airlines take theirenvironmental responsibilities very seriouslyand we are committed to playing an activerole in developing effective policies toaddress these important issues,” he said.Bisignani was similarly blunt. “Europe’sunilateral approach to emissions tradingconfuses taking leadership with takingcash.“It is disappointing and irresponsible.Regional schemes will have, at best, limitedimpact on the environment. And theirunilateral application to foreign airlines is aclear breach of the Chicago Convention. Theresulting trade and legal battles will distractgovernments from making real progress.”ATA’s May said European states hadindicated their intent to unilaterally imposesuch measures on the airlines from othercountries contrary to the will of everyother country in the world and contrary tointernational law.“If they persist there will, no doubt, be alegal battle. It is our hope that this one area ofdisagreement will not detract from the broadagreement obtained on all other aspects ofICAO’s comprehensive plan,” ATA said.ICAO’s new Group on InternationalAviation and Climate Change has beentasked to formulate an “implementationframework” consisting of strategies andmeasures that its member states can use toachieve emissions reductions. It will identifyfuel efficiency goals and means of measuringprogress.Options to be considered includevoluntary measures, technological advancesin both aircraft and ground-based equipment,more efficient operational measures,improvements in air traffic management,positive economic incentives and marketbasedmeasures.‘ICAO’s record is simply notgood enough’Jacques BarrotTransport CommissionerEuropean Union>>>>>>>>>>>>>>>>>>>Lifting of EU’s Garudaban threatenedBy Tom BallantyneGa r u d aI n d o n e s i asuffered asetback in itscampaign tohave an European Union(EU) ban on the carrier flyingto Europe reversed after anofficial report blamed thecrash of a Gar uda B737-400 on cockpit error. Theairliner, flying from Jakartato Jogyakarta on March 7,crashed landed at the city’sairport and burst into flames,killing 21 passengers and crew.The pilot and co-pilot wereamong the 112 survivors.The Indonesian National TransportSafety Commission said in its report,released in October, that the aircraft’s pilotignored a ground proximity warning systemthat had sounded 15 times as he approachedthe runway at almost twice the recommendedlanding speed. The investigators said thepilot should have initiated “a go around”and made a second landing approach. Theyalso said he had ignored calls by the co-pilotto “go around”.In September, the international flagcarrier’s president, Emirsyah Satyr, said thecarrier had its sights set on the EU ban onGaruda flights being lifted, especially as theairline was seriously considering reinstatingthe Jakarta-Schiphol service. Earlier thisyear, the EU imposed a blanket ban onall Indonesian airlines flying into Europefollowing three recent fatal air crashes byIndonesian airlines. Garuda argued that itshould not have been included in the blanketban despite the March crash. At the same,the airline was undergoing the InternationalAir Transport Association (IATA) globallyrecognised operational safety audit (IOSA).At press time, an IATA spokesman said:“Garuda is still not on the IOSA Registry atthis point in time.”Satar also disclosed a major f leetmodernization by thecarrier. It is looking atbuying 25 B737-800s nextyear and hopes to have10 B787 Dreamliners inoperation by 2011.In August, it reporteda net profit of US$15.9million for the first sixmonths of the year, endedJune 30.The result comparedto a $38.8 million loss inthe same period in 2006.Garuda had forecast amodest profit of around $5million this year – the firstpositive result in four years– but Satar is confident theairline will exceed this.Gar uda had planned to ret urn toAmsterdam – it stopped flying the route in2004 for financial reasons – when the shockEC flight ban was imposed, apparently theresult of several air accidents in Indonesiain the past two years.A n Indonesian gover nment teamtravelled to Brussels in September to speakto EC officials about the ban. Anothermeeting between an Indonesian delegationand EC officials took place in Montrealin late September on the sidelines of theInternational Civil Aviation Organization(ICAO) general assembly.During the meeting Indonesia clarifieddetails of aviation safety documentsrequested by the Europeans and presentedthe country’s plan to achieve a zero accidentssafety rate as well as a new policy for localairlines’ safety compliance ratings.One route that soon will be re-opened isDenpasar-Nagoya, closed down two yearsago when Japanese traffic dropped offfollowing a number of terrorist bombingsin Bali. Garuda plans to revive the flights inJune next year using A330s.The airline believes there is also bigpotential for cargo business on the route. Italso flies from Denpasar to Osaka and fromJakarta to Tokyo via Denpasar.‘The EC has no moregrounds for barring us’Emirsyah SatarPresidentGaruda Indonesia>>>>>>>>>>>>>>36 ORIENT AVIATION NOVEMBER 2007

EXECUTIVE INTERVIEWAir Astana blowing hotAstana, the capital of the CentralAsian nation of Kazakhstan, isone of the coldest capital citieson earth, with temperaturesplunging to - 40C. But the airlinethat bears its name, Air Astana,is running hot and plans steadyexpansion into Asia. TOMBALLANTYNE spoke to itspresident, Peter Foster, a formerexecutive with Cathay PacificAirways, Philippine Airlines andRoyal Brunei Airlines.Any airline that has more thandoubled its passenger andcargo revenue and its profits,in six months, must be doingsomething right. And pointedout Air Astana president, Peter Foster, ithad been achieved without any increase inairfares.Just five years old, Air Astana, 51%-owned by the Kazakhhstan governmentand 49% by Britain’s BAE SYSTEMS, isone of the industry’s quiet success stories.Launched in 2002 with three aircraft, it nowhas a fleet of 18 planes, operating a networkacross Central Asia and linking the regionwith Asia, Europe and the Middle East.“The airline became profitable in yeartwo. Its profitability has grown every yearsince,” Foster told Orient Aviation.After reporting income of US$32 millionon revenue of $375 million last year, Fosterexpects the carrier to increase its revenueto $589 million in 2007. The target is wellwithin reach.In the six months to June 30, passengerand cargo revenue rose 56% and 115%respectively. Profit increased 69%. Withavailable seat kilometres (ASKs) growing44% to 3.1 billion, passenger numbers couldrise close to 50% to more than two millionby the end of the year.“Our goal is to establish ourselves as theprincipal airline within our region. We seeCentral Asia and the CIS [Commonwealthof Independent States, the former Russianrepublics] as our home market,” said thechief executive.“We carry a lot of traffic between Asiaand Moscow and do a lot of business from‘Our goal is to establishourselves as the principleairline within our region’Peter FosterPresidentAir AstanaEurope to other parts of Central Asia. But weare not interested at this point in moving into,for example, the Bangkok-Europe market.“Our growth this year alone - 44% interms of capacity - is as much as any airlinecan sustain.”The airline has 13 inter nationaldestinations. Apart from Moscow, its busiestroute, it flies to Dubai, Delhi, Istanbul andAntalya in Turkey, and to Amsterdam,Frankfurt, Hanover, London and Milan.Asian destinations are Bangkok (once aweek), Seoul (twice weekly) and Beijing(six times a week).Air Astana’s fleet, which has an averageage of six years, consists of two B767-300s,four B757-200s, five A320-200s, one A321-100, one A321-200 and five Fokker 50s. Twomore A320s will arrive in March, an A319 inApril and a B757 in May.The plan is to increase the fleet to 34aircraft by 2014. Foster is expected toannounce an order for more new aircraftthis month. These are likely to be six moreA320s and three widebody jets, either A350sor B787s, with options on eight aircraft.Despite its success life has not been easyfor the airline. “The difficulty has beenestablishing a western airline on westernprinciples within a civil aviation systemset up on Soviet principles. That has beena challenge, but because we have high levelsupport, the adaptation has taken place,”said Foster.Domestically, Air Astana has littlecompetition. Internationally, it’s a differentgame. “To Seoul we compete with Asiana,to Germany it is Lufthansa, to Beijing itis China Southern Airlines, to MoscowTransaero and to Turkey it is TurkishAirlines,” said Foster.“On every one of our routes, with theexception of Germany, we are out-carryingthe competition and have the biggest shareof the market.”Load factors are climbing. At 68% in2006, they reached 76% in the first halfof 2007, climbing to 78% in July, thehighest ever recorded by the airline. Routeexpansion, particularly in Asia, is on theagenda. Services to Bangkok, Seoul andBeijing will become daily by 2009.Foster also has new destinations in mind.“We are looking at developing at least oneother point in Southeast Asia by 2008-09,”he said. It could be Kuala Lumpur, one reasonbeing Air Astana’s close ties with MalaysiaAirlines. Hong Kong is also a possibility.He would dearly love to add Japan to thelist, but faces the problem, as faced by allairlines, of slot availability.Foster readily admits that Kazakhstanisn’t the first place to trip off the tongue whenone thinks about tourist destinations. “It’smore a place for special interest travellers.But there is plenty of potential,” he said.Career trackBetween 1982 and 1999 PeterFoster worked in several managementpositions at Cathay Pacific in Asia,Australia and Europe. He left to headup the rehabilitation team at PhilippineAirlines. He was chief executive ofRoyal Brunei Airlines from 2002 to2005 when he joined Air Astana.38 ORIENT AVIATION NOVEMBER 2007

NEWSPacific Airlines’ re-birth racing aheadWork on bringing Vietnam’s Pacific Airlinesinto the Qantas Airways’ low-cost Jetstarfold is racing ahead with plans to increase thecarrier’s fleet from three to 10 by the end of nextyear, Pacific Airlines’ general director, LuongHoai Nam, has told local media.He was speaking during Qantas chief executive Geoff Dixon’sfirst visit to Vietnam since the Australian carrier signed a deal whichwill eventually give it a 30% holding in Pacific Airlines.The local carrier is expected to be rebranded as Jetstar Vietnamand was scheduled to begin operating six weekly flights from Ho ChiMinh City to Singapore by the end of October. It will share operationson the route with Singapore-based Jetstar Asia.Next year, the carrier intends to add flights from Ho Chi MinhCity to Siem Reap and Kuala Lumpur. Destinations planned laterinclude Hong Kong, Seoul and Beijing, as well as cities in Australiaand France, where there are large Vietnamese communities.At the same time, the airline’s domestic network is beingstrengthened by increasing frequency on existing routes and addingnew routes. “Ours is not simply a financial investment, but rather along-term commitment,” said Dixon. “We are supporting PacificAirlines in organising and effectively administrating activities as aPacific Airlines: long-termsupport from Qantas Airwayslow-cost airline. We’re also closely working with them to developnew routes.”In early 2008 Pacific Airlines will send 16 young Vietnamesestudents to Australia to participate in a two-year pilot training course.Pacific Airlines and Jetstar will cooperate on air ticket distributionfrom the first quarter of 2008.To cope with the expansion seven new aircraft – a mix of B737-400s and A320s – will be acquired next year. An order for more newaircraft is expected in the same timeframe. Operated by Jetstar, it isbelieved Pacific Airlines will eventually have an all A320 fleet.Tom Ballantyne40 ORIENT AVIATION NOVEMBER 2007

CARGO UPDATEBy Charles AndersonJapan Airlines is bringing smaller,fuel-efficient aircraft into its cargofleet for use on new routes close tohome as it shakes off a dependency onB747s and expands its freight businessin the region.The carrier is adding four B767ERFs toenable it to launch extra freighter services toNorth and Southeast Asia and, in particular,to medium size cities in China. Demandis increasing thanks to the rapid growthof logistics between the Mainland andJapan as Japanese companies increase theiractivities there and the country’s economyshows sustained growth.At the same time, JAL is replacing ageingB747-200Fs with B747-400 conversions forservice to major Asian cities and to NorthAmerica and Europe, increasing tonnageand cutting out the need for a refuelling stopin Anchorage.The plan is to develop bothfrequency and network, usinga combination of large andmedium-sized aircraft, saidYuji Fujita, vice-president,cargo planning and marketing.Particular attention is beinggiven to markets where cargodemand is growing beyondpassenger aircraf t bellycapacity. And that meansChina and Southeast Asia.JAL is eager to expand itsnetwork within Asia and Japanby taking maximum advantageof the B767Fs, he said. China inparticular has many mediumsizecargo centres that stand tobenefit from a link with Japan.Cargo makes up only 12% of total revenueat JAL, which is struggling to return toprofitability under a five-year restructuringplan.Many B747s are being phased out of thepassenger fleet as part of the plan. But thecargo business is slowly improving – freightrevenue rose 5.5% in 2006 – but is beinghampered by rising fuel costs, hence theneed to cull some of the JAL jumbos.The third B767ERF was due to arrive latelast month, when a new service to Vietnamvia Bangkok was to be launched. Shanghai,Dalian, Qingdao and Tianjin in China, HongKong and Jakarta are already receiving B767flights, which sometimes stop over at Kansaiand Chubu after leaving Narita. B747s have42 ORIENT AVIATION NOVEMBER 2007Smaller is beautifulfor JAL CargoB767ERFs replacing B747 Classicsbeen phased out on some Southeast Asianroutes. They remain on big city services,meaning the scale of demand in each marketcan be met.“The B767 is an excellent aircraft forsmaller stations where there is considerabledemand,” said Fujita.As part of JAL’s Asian freight expansion,a dedicated cargo service to Manila wasadded last year, as were late-night flightsto Shanghai, taking advantage of KansaiJAL Cargo: expanding its network in Asiaairport’s round-the-clock operations.JAL’s push into China was aided by anagreement last year between the Japaneseand Chinese governments covering routeexpansions. Belly space also increasedthanks to a boost in passenger services.The carrier code-shares with ChinaCargo Airlines on the Shanghai route andwith China Southern Airlines to and fromGuangzhou.There are no immediate signs of a firmerpartnership.“We are always looking into otherpossible joint ventures, but currently nothingis in the pipeline,” said Fujita.Most intra-Asia and transpacific freightis made up of exports from Japan, such assemiconductors, digital appliances, flatscreentelevisions and automobile parts.Goods coming inwards, either bound forJapan or for transshipment to North America,include finished electrical home appliances,clothing and perishable goods. Asian routescurrently generate 40% of JAL’s freightrevenue.Transpacific flights were increased latelast year, as were flights to Hong Kong.Demand to Europe softened, althoughdirect flights to Amsterdamwere due to be increased latelast month.Overall JAL, which standsat 13th in the global freighttonne kilometre list (FTK)when express operators areexcluded, r uns dedicatedf reighter ser vices to 21destinations in 13 countries.Moves into the logisticsbusiness, express deliveriesand domestic night flights areall under consideration.Its current freighter fleetconsists of seven B747-200sand five B747-400s, two ofwhich are new freighters andthree conversions.The entire -200 fleet will be phased outby 2009 and replaced by up to five moreconversions. The airline also holds fouroptions on those. Its final B767 is due fordelivery in 2009.Meanwhile, rival All Nippon Airways(ANA), which has added four B767ERFs toits fleet for regional use, is to make Okinawaits hub for Asian air cargo from 2009, a movethat will result in Naha International Airportswitching to 24-hour operations.The carrier said it would move 420,000tonnes of cargo a year through Okinawa,bringing freight from Japan for onwardshipment. Currently, the airport handles2,400 tonnes. Talks about development areunder way.

FEATURECountdownAn inside look at a first-of-model’s frenetic delivery schedule; it’s pressure,it’s stressful, but Cathay Pacific is over the moon with its first B777-300ERBy Barry Grindrodin SeattleBoeing Commercial AirplaneGroup’s senior sales director,Chris Morgan, was smilingfrom ear to ear. For the firsttime in weeks, in fact months,the pressure was off ... until the next deliverythat is.Indeed, it was celebrations all roundamong Cathay executives, led by chiefexecutive Tony Tyler, and VIPs and mediaguests as Cathay’s first of 23 B777-300ERsheaded out of Seattle on the 13-hour journeyback to Hong Kong.The plane had taken off, albeit a little laterthan planned, and was operating flawlessly.The customer was happy. The manufacturerwas happy.But wind the clock back to earlier in theday and Chris Morgan’s blood pressure hadbeen rising fast. As the official party packedtheir bags in their Seattle hotels and preparedto leave for the formal delivery ceremony, itwas a very different story on board Cathayaircraft B-KPA.As the countdown to zero hour neared anearly morning phone call from the deliverycentre at Paine Field just outside Seattlerevealed the scene on board the aircraftresembled “a combat zone”. “There weresome seat issues,” said Morgan. “We allknow how uncomfortable it can be whenboarding a plane, can you imagine whatit would be like for a full shift of peopleworking on the seats in the aisles and tryingto beat deadline?“The guys did a fantastic job and thething is they do it time and time again as weprepare for the delivery flights. It’s par forthe course, particularly for a carrier’s ‘firstof model.”Imagine. Cathay started talking withBoeing about what was to become theB777-300ER back in 1990 – 17 years ago!The first B777 model, the B777-200, was onthe drawing board at the time and Cathay hadBoeing Commercial Airplane Group president, Scott Carson (left) and thecompany vice-president sales, Larry Dickenson, (right) present CathayPacific CEO, Tony Tyler, with a model of the B777-300ER at a celebratorydelivery dinner in Seattleidentified that they would eventually need abigger plane with more range.And when negotiations started in earnestfor the US$250 million aircraft about fouryears ago the Hong Kong-based globalBoeing senior sales director, ChrisMorgan: ‘the guys did a fantastic jobin the hours before the handover ofthe plane’carrier already had earmarked the B777-300ER for its ultra long-haul non-stop routessuch as Hong Kong-New York.The all-important contract was naileddown two years ago and that, said Morgan,was when the pressure really started tobuild.“To start with, we identify a month todeliver [the ordered aircraft] and then startto narrow that time period down. It’s likethe birth of a child. The doctor gives youa certain date but this can vary by a fewdays through circumstances beyond yourcontrol,” said Morgan.The ‘gestation’ period, f rom thebeginning of the assembly line to handovertakes eight to 10 months. This includes themonumental task of putting together aboutthree million parts from 900 suppliers in 17countries and fitting about 500 kms of wiringon board.Before that process starts the aircraft hasto be configured, a long and arduous task. Anew model like Cathay’s B777-300ER couldinvolve new installations from the “front of44 ORIENT AVIATION NOVEMBER 2007

the plane to the stabilizer”, said Morgan. InCathay’s case it included their new multimilliondollar, state-of-the-art three classupgrade and inflight entertainment suite.“This is a huge undertaking on the partof the suppliers, the purchaser and Boeingwhich has to integrate the process,” saidMorgan.Aircraft these days are designed oncomputer screens. “This is particularlychallenging because you have to transferthe plane from the computer to the realworld and there are always some surprises,”said Morgan.Seat complications are not uncommon.The manufacturer ideally likes to install theseats on board the new aircraft before thefuselage’s final body join. It makes it easy.But the seat manufacturers do not alwaysdeliver on schedule, which results in a timeconsuming task of dismantling rows of seatsto put them through the doors of the aircraftand then reassemble them inside.And so, after years in negotiation,planning and building, the final days tohandover arrive. Few people know about thefrenetic countdown and even fewer see it.Tanjer Gillard, Boeing’s senior operationsmanager for B777 pre-flight and delivery,experiences it all the time. “Always expectthe unexpected. In the last 10 days theenvironment was changing all the time onCathay’s 777,” he said. Seat issues and IFEcertification complicated matters.Final paperwork is prepared and submittedto the regulators for approval in this period.The U.S. Federal Aviation Administration(FAA) has an office at Paine Field to performfinal certification. “Just when you think youhave done everything and take the FAA to theplane, its possible they will find somethingunexpected, something simple. It can be verystressful,” said Gillard.Three days before handover the final testflights begin. The first Boeing productiontest flight, or B1 as the manufacturer calls it,involves Boeing test pilots taking to the airfor a final check. If corrections are required asecond flight, B2, will be made and so on.Thirty six hours before the handover,Boeing achieved a first with Cathay’s B777-300ER; three test flights, each two and a halfhours long, in one day. It started with a B2flight, followed by an FAA first-of-modelcertification flight. Finally, Cathay pilotsflew for a final customer check flight.“There were no squawks [issues] on anyof them. The FAA and Cathay gave us thethumbs up. That was fantastic,” said Morgan.Cathay Pacific’s director of engineering,Chris Gibbs, holds the keys to thenew B777-300ER aloftProduction manager Paul Hoeper said it wasthe first time in 20 years he had known threesuccessful delivery test flights in one day.“It certainly helped ease the pressure,but there was still a lot to do on the ground,”said Morgan.Three shifts a day – about 80 staff – hadbeen working on the new B777 after it rolledout of the factory. The shifts worked roundthe clock. Two days before delivery a fourthcrew was added to help meet the deliveryschedule. And those pesky seats again werecreating problems.A morning take-off to Hong Kong wasput back to an afternoon take-off, whichprovided an extra few hours shopping inSeattle for Cathay’s guests (smiles all round)and for Boeing engineers to complete theirwork on B-KPA.Before boarding the plane, 17 years afterwhat is now the realisation of the B777-300ER first described by Cathay, numberone of 23 of the aircraft type destined for theairline was handed to chief executive TonyTyler with the ceremonial presentation of theaircraft’s keys (they usually lock the cockpitdoor) and the traditional lion dance.Teamwork the keyWhat wasn’t known by the VIPs as theytoasted Cathay’s bright new acquisitionwas that the plane had only been ‘ticketed’,awarded its certificate of airworthiness bythe FAA, less than half an hour before theceremony.“That was our most rewarding momentafter all the hard work,” said Gillard.“We have a special working relationshipwith Cathay. They are very flexible, veryaccommodating and positive. We werepleased we got the job done for them ontime.”With the all-important transfer of title andfinal financial details completed, all that wasleft to do before departure for Hong Kongwas to hand three big boxes of paperwork –maintenance logs, flight manuals, operationsmanuals and the certificate of airworthiness– to Cathay’s director of engineering, ChrisGibbs.And so to history in the making: theB777-300ER taxied and took off to applauseboth on the plane and on the ground as theaircraft flew west across the Pacific.Thirteen hours later, when the planetouched down in Hong Kong Boeing’s fieldengineers were on hand. They had little to do– a temperature control valve in a crew restneeded some adjustment!Chris Morgan was a happy man. TonyTyler had been effusive all week about hisnew planes and his enthusiasm continuedunabated in Hong Kong. “These are superbaircraft that will form the back-bone of ourlong-haul fleet in the coming years,” he toldthe media.And as Orient Aviation went to pressChris Morgan and his team were preparingfor the delivery of B777-300ER number twoto Cathay! “It gets easier after the first-ofmodel,”he said. That must be a relief.Cathay Pacific’s director of engineering, Chris Gibbs, paid tribute to the “workingtogether” spirit of Boeing, Cathay and the vendors in Seattle. “It was a privilegeto be there for the delivery,” he said.Cathay has an on-site manager, John Dugaro, based in the city. Two weeks before adelivery 10 engineers travel from Hong Kong to carry out quality inspections. Much ofthis relates to seats and IFE, said Gibbs. As the countdown continues a flight operationsteam moves into Seattle with three or four test pilots who fly the plane anywhere betweenonce and several times before delivery. The Hong Kong Civil Aviation Departmentrepresentatives also need to certify the plane before it can return home.The financiers and lawyers are among the last to arrive to complete the legal andfinancial paperwork. Finally, a Cathay line engineer signs the plane’s log and the carrieragrees to accept the jet. “We left on the delivery date set months earlier,” said Gibbs.NOVEMBER 2007 ORIENT AVIATION 45

SPECIAL REPORTMaintenance,Repair and OverhaulLCCs adding spiceto MROs’ cakeCompetition keen as budget carriers continue to growThe boom in low-cost carriersin the Asia-Pacific in recentyears has been music to theears of the maintenance,repair and overhaul (MRO)companies. But as the region’s start-upsmove from the early developmental stageto fully-fledged, sophisticated operations,there is a tendency for them to re-evaluatetheir MRO requirements.That may mean bringing line maintenancein house, or splitting component and airframecontracts, as they re-think the need – oftengreater at the time of launch – to dependon one all-round provider, according toDavid Stewart, principal at UK consultantsAeroStrategy. It also means MRO providersmust go with the flow.For example, when Tony Fernandesannounced AirAsia’s heavy maintenancework was to be brought back from Singaporeto Malaysia, he wasn’t striking a patrioticpose. The low-cost carrier (LCC) pioneerwas doing what he always does: watchingthe bottom line.Transferring heavy airframe maintenancefrom Singapore Technologies Aerospace (STAero) to new MRO operator, Sepang AircraftEngineering (SAE), will save significantsums.The airline’s B737s and A320s will onlyneed towing to SAE’s newly built hangar atKuala Lumpur International Airport, insteadof being flown to the Lion City. The switchis likely to get underway towards the end ofthe year when SAE, formed by Malaysianentrepreneur Syed Budriz Putra, is due toopen for business.Fernandes’ action is in keeping with theLCC business philosophy of saving moneywherever possible. That’s certainly the caseat ST Aero. It signed a contract for A320‘You have a pretty competitivemarketplace out there. What ittakes to win in airframe heavymaintenance is not what ittakes to win in components’David StewartPrincipalAeroStrategy>>>>>>>>>>>>>>>>>>>component support with AirAsia earlierthis year and says it is continuing B737maintenance as stipulated under earlieragreements.“Work for AirAsia remains and we willabide by whatever the customer wishes forthe maintenance of its fleet,” said ST Aeropresident, Tay Kok Khiang. “AirAsia is avalued customer. Whatever suits them bestis what they should try out.”As the world’s largest heavy maintenanceprovider with an extensive customer base, theSingapore company is big enough to shrugoff any change of heart. “The possibility thatAirAsia might do some of its work at Sepangwould not have any material impact on us,”said Tay.ST Aero, however, is keen to keep lowcostoperators happy. Currently they provide10% of revenue, a figure the MRO hopes togrow to 20% in the near future. “The LCCmarket is certainly a major new area and webelieve it will grow. The business potentialcould be significant,” said Tay.The company, which can provide thefull airframe, engine, component andengineering package or just individual partsof it, counts Jetstar Asia, Indonesia’s LionAir and Pacific Airlines of Vietnam amongits other Asia-Pacific customers. It providescomponent support for a string of China’snew private airlines. Outside the region ithas recently signed U.S. start-up SkybusAirlines, which will operate up to 66 A320s,on a total support programme.Elsewhere, SIA Technologies handlesTiger Airways and Cebu Pacific; HongKong Aircraft Engineering Company(HAECO) has Oasis Hong Kong Airlineson its books and Viva Macau has signed onwith Guangzhou Aircraft Maintenance andEngineering Company (GAMECO). AirAsiaalso has work done at Garuda’s MROsubsidiary, GMF AeroAsia, in Jakarta.The addition of long-haul operationsmay lead to a re-think at Virgin Blue,which has eight B777s on order. Currentlyits B737 heavy maintenance is carried outby Air New Zealand Engineering Services,but that contract ends next year. “Our MROrequirements are constantly being reviewedin light of our changing and expanding fleet,”said a spokeswoman. Virgin Blue handlesits own line maintenance at a new facilityin Brisbane.Also in Australia, Qantas Airwayssubsidiary, Jetstar, maintains its A320s itselfand hands line maintenance of its A330-200sto Qantas Engineering. Heavy checks on46 ORIENT AVIATION NOVEMBER 2007

By Charles Andersonthose aircraft are carried out by Qantas andLufthansa Technik Philippines.Jetstar plans its own line maintenance andsupport for 15 B787s to go into service withJetstar International. No decision has beenmade on heavy maintenance requirementsfor the 85 B787s entering the Qantas group.AeroStrategy’s Stewart said carriers withlarge fleets might want to shop for heavymaintenance separately from components.Their greater need for heavy work makes thema more attractive target for MRO providersmeaning good deals are in the offing.“You have a pret t y competitivemarketplace out there. What it takes to winin airframe heavy maintenance is not what ittakes to win in components,” he said. “Theymight look at those separately because of theman hours generated with widebodies.”That will also play into the hands ofthe region’s MRO companies. “It makesAsian suppliers more competitive. You arenot likely to fly a widebody to Zurich withSR Technics if you have TAECO in Chinaavailable,” said Stewart.Location certainly plays a part whenLCCs look for MRO providers, but theydon’t necessarily have to be at the carrier’shome airport, as in AirAsia’s case. “Thecloser the better because you have less of aferry flight, but there’s no reason why it can’tbe between two and three hours, especiallyif the supplier’s location is on your networkanyway,” said Stewart.T hat is especially t he case fornarrowbodies, which require fewer manhours, therefore making cheaper labourrates less of an issue.HAECO this year signed up to run anMRO joint venture with Air Arabia, whichwill operate A320s out of Sharjah, giving theMiddle East’s first LCC just what a start-upneeds, full support right on its doorstep. Suchproximity also solves the thorny problem ofline maintenance provision, which mightotherwise cut into dispatch times.“There’s a debate as to whether LCCsshould do line maintenance because so manyconsider that core to aircraft availability,which in turn is core to the low-fare businessmodel – quick turnarounds and making sureplanes are dispatched reliably,” said Stewart.Low labour rates also make it a moreattractive proposition for carriers toconsider, while the AirStrategy consultantNeeds vary as LCCs grow“ Size matters with LCCs and fleets increase rapidly,” saidWalter Heerdt, senior vice-president, marketing and salesat Lufthansa Technik (pictured). “MRO requirements differfrom the strong, established network carriers with a variety ofaircraft types.“Our product is very important for a start-up. We help thecustomer get off the ground in terms of maintenance and support.”Staff are seconded to handle the introductory phase and train the carrier’spersonnel. Component and engine services are often part of the deal.Lufthansa has LCCs Air Deccan and Go Airlines of India and Japan’s SkymarkAirlines and Starflyer on its customer list. And its new Hyderabad MRO companywill handle the low-cost staples, the narrowbody A320 and B737.“If you are going to build a facility you have to be sure there’s enough demandaround,” said Heerdt. But he is keen to point out that the demands of legacy andlow-cost carriers are not much different once the latter are up and running.“Aircraft cost a lot of money and nobody can afford to keep an asset like that onthe ground,” said Heerdt. “From that point of view, the turnaround times, liabilityand quality – the requirements of both are identical.”notes the Asia-Pacific’s LCCs are keeneron maintaining their own spares inventorythan in the U.S. and Europe, buying them inand then getting someone to manage themon their behalf. “In the U.S. they want thoseassets off the balance sheet,” said Stewart.Companies supplying a full set of serviceshave to get so involved they almost becomea part of the airline.“The challenge for the Europeancompanies is to be close to your customerand yet still maintain economies of scale inthe inventory and so on,” he said.SR Technics is hoping to transferexperience gained in Europe with many LCCcustomers to carriers in the Asia-Pacific,working in partnership with them as fleetsgrow and consolidation sets in.In particular, it wants airlines to look atits ground-breaking agreement with EasyJetunder which it provides full support for thecarrier’s rapidly expanding A319 fleet. It willtotal 200 by 2010. SR Technics maintainsEasyJet’s older B737s.Through a concept worked out withAirbus’s help, it splits routine checks into‘Asia-Pacific’s LCCs arekeener on maintaining theirown spares inventory than inthe U.S. and Europe’>>>>>>>>>>>>>>>>>>>smaller equalised maintenance checks, or“E-checks” carried out overnight at its hubs.The result is that no aircraft is in the hangarfor prolonged maintenance for five years.“This can only be done if you have perfecttransparency of fleet data, engine monitoringand the respective tools. SR Technics has athand such as an e-customer portal. Theseallow optimal planning and outsourcing suchas line maintenance to third parties, with SRTechnics keeping overall responsibility forperformance and reliability,” said RobertoPace, senior vice-president, sales, for theAsia-Pacific.Cost factors can be different in the regionwhen compared to the mature North Americanand European markets, said Pace, with gainsfor LCCs through lower labour costs balancedby the expense of setting up maintenancepoints throughout their networks.“Most LCCs have a decentralised point topoint network, which means there are severalsmall hubs all needing a consigned stock fortheir components and certain maintenancecapabilities,” he said.“Much more emphasis is put on linemaintenance to resolve minor issues duringvery short turnaround times. For an airlineit can be quite expensive to set up all thesesmall hubs from scratch. An established,experienced [company] can providethese.”NOVEMBER 2007 ORIENT AVIATION 47

SPECIAL REPORTMaintenance, Repair and OverhaulU.S. focus on China MROsRace is on to complete major hangar projectsAmer ic a n c a r r ie r s w i l lincrease the outsourcing ofheavy maintenance to Asiaand in particular to the bigspecialists in China, saycompany chiefs. However, the growth inbusiness may be restricted by shortage ofcapacity, in the near term at least, as a numberof major hangar construction projects are inthe pipeline.Ameco Beijing is currently carrying outheavy checks for United Airlines’ full B777fleet, with up to 80 likely to be handled overfive years. It is actively seeking similar workfrom elsewhere, the company said.Hong Kong Aircraft Engineering Co(HAECO), meanwhile, was signed upearlier this year by Delta AirLines to take over work on aportion of its B767 fleet afterthe U.S. carrier scrappeda deal with an Air CanadaTechnical Services unit oncost grounds.Ameco, a joint venturebetween Air China andLufthansa Technik, is dueto commission the biggestaircraft maintenance hangarin Asia – capable of handlingsix widebodies and fournarrowbodies at the sametime – at Beijing CapitalAirport next March. It has permission tobuild another of the same size. Some 60% ofits current work involves Air China’s fleet.“Once we open the new hangar we candouble our capacity,” said executive director,Harry Seeger.“We see an increasing trend for [U.S.airlines] to look for cost-optimised suppliers.When you see a carrier with fleets of 50, 80or 100 aircraft going for long-term contracts,that’s very attractive for us.”The general agreement with United isopen-ended, meaning more aircraft maycome into the picture. But the deal on aircraftnumbers as such only runs to 2009 and theAmerican carrier, which emerged frombankruptcy protection last year, has notdrawn up plans for beyond that date.The arrangement has more significancethan the considerable amount of moneyinvolved. “United is our showcase,” he said.“They have brought us more and more work.We keep contact with a lot of other legacycarriers of a similar size. We cannot do asmuch as we would like this year becausethere is still a capacity issue.”A meco, which has t raditionallyconcentrated on Boeing aircraft, is now addingA340 capabilities to its list of services.Delta has hired HAECO to handle heavywork on 11 of its B767s, continuing a trendthat has seen the Hong Kong company carryout maintenance for Continental Airlines,Northwest Airlines and UPS.Eventually there will be work on moreAmeco Beijing: could handle up to 80heavy checks of United Airline’s B777fleet over five yearsthan 200 B757s and B767s up for grabs afterDelta pulled out of a five-year contract withACE Aviation Holdings’ maintenance unitin Vancouver three years early.“We are not in a position to meet Delta’scost expectations,” ACE chief executive,Chahram Bolouri, said in a statement at thattime. More than 700 of ACE’s 1,000 workerslost their jobs as Delta began drawing upnew contracts with HAECO and two U.S.providers.Charles Bremridge, HAECO’s chiefoperating officer, views this as part of agrowing trend. “The tendency to outsourceby U.S. carriers that we have seen over thepast three years still continues,” he said.“They see they can obtain savings in termsof costs, but keep or even exceed the qualitythey are used to receiving while gettingon-time delivery in a regular fashion.“A number of U.S. carriers have beenpleased to discover they can find this sortof alternative. Some of them are very big.They are still going through the process ofevaluating alternatives.”HAECO, however, is not rushing theprocess. It opened its second hangar latelast year and has plans for another. Itssister company, Taikoo (Xiamen) AircraftEngineering Co (TAECO), is currentlybuilding its sixth hangar.“We need to do a good job for them,rather than expand wildly and run the riskof messing things up,” said Bremridge. “It’sa business that hopefully will continue togrow. It’s one we are keento expand. At the moment,however, our capacity to takeon more business is relativelylimited. We are very full.”Joey Lo, commercialdirector at GuangzhouA i rcraf t Mai nt e n a nceEngineering Co (GAMECO),forecasts f u r ther workfrom American airlineswhen those coming out ofbankruptcy protection lookto upgrade their cabins.China’s MRO shops stand tobenefit. “That could bring inanother lock-in business,” he said.For now Lo sees traditional heavy work asa draw, despite capacity problems. “Foreigncarriers have more and more flights into China.It’s an obvious choice to dump aircraft in thecountry for heavy maintenance,” he said.China’s own growing fleets are takingup a lot of room and hangar expansions arenot keeping pace, said Lo. GAMECO hasplans for another alongside its new, 28,000sq. metre facility at Baiyun internationalairport, for which ground will be broken atthe end of the year.GAMECO has held fire for a whilebecause of the high cost of steel in the wakeof demand caused by the Beijing Olympics.“It takes time to invest in new hangars,”said Lo.48 ORIENT AVIATION NOVEMBER 2007

SPECIAL REPORTMaintenance, Repair and OverhaulIt’s more a drip, drip than a flood, butas the industry continues to drivedown costs, PMA providers areseeing growing acceptance in theAsia-Pacific of replacement partsthat undercut OEM prices.Industry leader, HEICO, says regionalsales are increasing by 17% a year andhopes a recent breakthrough deal withBritish Airways (BA) will be mirrored inthe region.Rival Wencor now has a workingpartnership up and running with GarudaIndonesia. And Pratt & Whitney (P&W)is set to announce a China customer for itsambitious CFM56-3 engine maintenanceprogramme under which its makes andsupplies parts normally sourced fromCFM manufacturers, Snecma and GeneralElectric.Frost & Sullivan analyst, DiogenisPapiomytis, author of a report on PMAmarket potential, says significant growth ispossible in Asia, which currently accountsfor some 15% of sales worldwide. Butregulatory issues need further attention.Aircraft imported already fitted withsuch components pose no problem. ButPMAs – the acronym stands for “partsmanufacturer approval” gained underFederal Aviation Administration (FAA)auspices – require individual clearance ifthey are fitted in the region.“At this point there is no clear policyby any state in the region ... PMAs arereviewed by the local aviation authoritieson a case by case basis, meaning it takeslonger for them to be certified. Thebureaucracy may be a restricting factorfor most airlines,” said Papiomytis.HEICO’s director for Asia, Joe DePaoli,doesn’t agree. That problem is not uniqueto the Asia-Pacific, he argued. “Even inthe U.S. most customers approve partson a case by case basis,” he said. “Yes,this process may take some time, but thebenefits greatly outweigh the associatedcost.”His company helps customers with thisand also works to find ways to fit PMAs intoan airline’s current spares system.The general message has been accepted,however. “The current obstacle to thegreater expansion of PMAs in the regionhas more to do with actual implementationthan philosophical mindset changes,” saidDePaoli.U.S.-based HEICO, which includesLufthansa among its shareholders, recently50 ORIENT AVIATION NOVEMBER 2007PMAs findingmore favourin Asia-Pacificsigned a deal with BA that involves extensiveuse of non-critical engine and aircraftcomponents by the carrier. The move couldlead to massive savings, said BA.Under the deal, HEICO will manage analternative parts programme on BA’s behalf.It will supply many of its own components,but will also find, audit and monitor othersfrom elsewhere.‘The current obstacle to thegreater expansion of PMAs inthe region has more to do withimplementation than philosophicalmindset changes’Joe DePaoliDirector for AsiaHEICO“It’s very comprehensive and couldbe an excellent way for customers in theAsia-Pacific – particularly those airlineswithout an existing programme – to gainthe benefits of PMAs in an expedited andorderly fashion,” said DePaoli.HEICO is either selling to, or is in closecontact with, most of the region’s majorairlines and DePaoli believes prospects inthe Asia-Pacific are good. The company hasan agreement with China Aviation SuppliesImport and Export Group Corporation(CASGC) to promote its parts in themainland market.P&W meanwhile will soon announcea “major”, but as yet unnamed, Chinesecarrier as a customer for its Global MaterialSolution (GMS) programme, which caused astir when it was launched last year. The giantengine maker offers to supply parts for theubiquitous CFM56-3 engine previouslyprovided by the OEM, the rival Snecma-GE partnership.Last year, P&W signed a 15-year jointventure with China Eastern Airlines foran engine overhaul facility in Shanghai,which will open in 2008 and concentrateon CFM56 repair.United Airlines is the launch customerfor the GMS programme, which will befully operational in a year and containsoptions for full-service agreements.British low-cost carrier, Jet2.com,which operates 30 B737s, has joined theprogramme.Matthew Bromberg, GMS vicepresident,sees a Chinese customerproviding the final piece of P&W’s initialstrategy of securing one customer each inNorth America, Europe and China, hometo 70% of the installed CFM56-3 enginebase and areas where initial regulatoryclearance can clear the way for othercustomers. There are 1,200 of the enginetype in operation in China alone.“When we launched the business therewere many sceptics who said you won’tbe able to find a good customer in Chinabecause of the reluctance [to accept] PMAsor alternative materials,” said Bromberg.“To the contrary. They study otherairlines around the world. They recognisethat if this is an accepted way to reducemaintenance costs, it’s a solution that mustbe evaluated.”P&W wants the same geographic spreadwith its first MRO customers and is talking

to “multiple providers” in the region andelsewhere. Bromberg is also working toconvince lessors that the programme willsuit their needs on the performance level,that intervals between shop visits will beacceptable and that they can retain the abilityto move engines around the world and stillget them repaired.There will likely to be more to comefrom P&W on the PMA front. “We willgo beyond the CFM56-3,” said Bromberg.“We are setting up the infrastructure andthe supply base. This is our first entry intothis area. We think it’s a valuable offering tothe industry.”PMA components manufactured byWencor are now being used by ChinaMROs and the business is growing, althoughattitudes on the Mainland are still veryconservative, according to Lorenzo Han,director of the company’s Singapore office.Southeast Asia is another matter.Regulatory authorities in Indonesia areopen to the proposition as is Malaysia,while Singapore allows “very individual”application. Wencor’s biggest partnershipin Asia is with Garuda’s GMF AeroAsiacompany, based at GMF’s maintenancefacility at Soekarno-Hatta internationalairport near Jakarta. It also supplies partsfor domestic operator, Merpati Nusantara.“Progress over the past two years hasbeen great, because of the competitionbetween airlines and the need to drive downcosts,” said Han. “PMAs can still be a stickypoint for many airlines, but we continue tolet them know there’s a lot of cost savingsinvolved that don’t affect the safety of theaircraft.“Our parts are proven with regularcustomers such as Japan Airlines. To thisday, there has been no fault [found] in anyof them.”China Eastern Airlines: signed a 15year joint venture with P&W for anengine overhaul facilityST Aero is one of 30 aerospace companiesalready based at Seletar AirportSingapore’s Seletar tobecome aviation parkWork is under way onan ambitious plan toturn Seletar airportin Singapore into anaerospace park withMRO operations at its core, helping cementthe Lion City’s position as Asia’s leadingmaintenance centre.Currently Singapore attracts 25% of theregion’s MRO business, employing morethan 17,000 people and bringing in S$6.32billion (US$4.27 billion) in revenue a year.The aim is to further harness an average12% increase recorded over each of the last15 years through a three-phase developmentat Seletar.Key to its success is the expansion of theold runway to better handle narrowbodies andbusiness aircraft. Widebodies will still need togo to Changi where a third runway currentlybeing built will increase access there.At present, A320s and B737s cannot landor take off with full fuel tanks from Seletar’s1,200 metre runway, meaning they must stopoff to fill up elsewhere on outward journeys – adisincentive in particular for time-conscious,low-cost carriers whose narrowbodies are amain target for businesses there. It will beexpanded to 1,800 metresby 2009 allowingSeletar to handle fullyladen narrowbodies,including the B757.Three developmentphases will see thepark grow by 140hectares in the next• Singapore attracts 25% of theregion’s MRO business• MRO companies employ morethan 17,000 people• and earn S$6.32 billion (US$4.27billion) in revenue a year.eight years by which time the region’s fleetis expected to have doubled. Facilities willincorporate MRO, design and manufacturingof aircraft systems and components, businessand general aviation activities and a trainingcampus, said a spokesman for Jurong TownCorporation (JTC) which is handlingplanning and development.The airport terminal building, roadsand general infrastructure are also beingupgraded, as are the runway apron,taxiways, power network and air trafficcontrol system.Currently some 30 aerospace companies,led by Singapore Technologies Aerospace(ST Aero) and Hawker Pacific, are based inhangars, barracks and bungalows at Seletar,Singapore’s first international airport thatlater became a military base.They will be offered space in a newcommercial building to be completed by theend of 2009.The development is good news forST Aero’s subsidiary, ST Engineering,which opened its third hangar, capableof handling one B757, at Seletar this yearand broke ground on another, which willbe able to take two B757s when completednext year.It will continueheavy maintenancewo r k a t C h a n g i , a swill SIA Technologies.ST Aero now has eightw i d e b o d y a n d 11narrowbody bays inSingapore.NOVEMBER 2007 ORIENT AVIATION 51

SPECIAL REPORTMaintenance, Repair and OverhaulSTARCO doubles up in ShanghaiNew hangar a move to build overseas businessBy Charles Andersonin ShanghaiShanghai Technologies AerospaceCompany (STARCO) has begunbuilding a new maintenancehangar at Pudong to operatein tandem with its facilities atHongqiao as part of the company’s long-termplan to work from both of the city’s airportsand win significant heavy maintenancecontracts from overseas customers.The joint venture between China EasternAirlines (CEA) and Singapore TechnologiesAerospace (ST Aero) began business inJanuary 2005 as the maintenance providerfor the Chinese airline. Major work hasbeen completed on more than 150 aircraftsince then at the two hangars at Hongqiao,inherited from CEA’s old maintenancedivision. Some 75% of those came fromthe carrier’s own fleet and those of itssubsidiaries, keeping work in China thatwas previously sent overseas.But now the needs of the joint venturepartner have been nailed down, thecomplexion of the business is changing, with50% of revenue in the first six months of theyear resulting from third party contracts.And that, according to ST Aero president,Tay Kok Khiang, is what the companyblueprint demands. “From the very firstday, while most people were looking to setup MRO [operations] in China to serve theChinese market, our intention was to set upan MRO to serve the international market,”he told Orient Aviation.The idea is to include STARCO in STAero’s extensive global network, whichincludes two centres in Singapore, two in theU.S. and one in Panama as well as taskingthe company with meeting all CEA’s heavymaintenance needs.The addition of a Pudong hangar wasalso part of the plan, easing restrictions oncapacity brought about by CEA’s demands.“This will give us sufficient scale to meetthe objective of serving a much broadercustomer base, be a more sizeable MRO andgain economy of scale,” said Tay.Heavy maintenance will be at the core ofthe business, although light checks will beprovided if needed for individual customers.STARCO can currently handle threewidebodies and one narrowbody at Hongqiaowhere heavy maintenance capabilities runthrough the full Airbus family and Boeing’sB737s and B747s, plus McDonnell Douglasmodels. The Pudong hangar, which is costingsome 280 million remnimbi (US$37 million)to build, will be capable of accommodatingtwo widebodies and three narrowbodieswhen it opens in mid-2009. It also will be‘From the very first day,[STARCO’s] intention was toset up an MRO to serve theinternational market’Tay Kok KhiangPresidentST Aero>>>>>>>>>>>>>>>>>>>tooled for A380s and B767s.Currently STARCO has Airbus, GECAS,Air India, Pacific Airlines, Jet Airways anda leading, unnamed European airline on itscustomer list. But it is ST Aero’s position as theworld’s largest heavy maintenance providerand its moves into providing full support inall areas that should pay dividends.“Our customers, many of them globalairlines, fly all over the world,” said Tay.“In that context we are pretty confident weshould be able to bring in more work to theChinese joint venture.” But the current 50-50split is not set in stone. “Take a full year, itcould change again,” said Tay.STARCO also provides componentsupport for five of China’s six low-costcarriers and heavy work has been carried outfor Shenzhen Airlines and Spring Airlines.“Chinese airlines are equally important tous,” said Tay. “When we do components forthem, it’s very convenient for them to give usthe airframe as well.”Further expansion is possible in Shanghaiif demand is there, or elsewhere in China. “Tous, it doesn’t really matter. The main thingis to find the right place where we can servecustomers’ expectations,” said Tay.STARCO can take advantage of China’slow-cost base, but only in some areas. Thecompany’s new hangar will cost 50% morethan a similar one built in Singapore andsome 70% to 80% more than in the U.S. “InChina the labour cost is low, but the overheadcost is high,” he said.Tay acknowledges the joint venture istaking a different tack from Ameco Beijingand Guangzhou Aircraft MaintenanceEngineering Company (GAMECO), theMRO partnerships that handle Air China andChina Southern Airlines’ fleets. Both takeon less external work and, although each isexpanding, they are not quite so forthrightabout their third party ambitions.“Different companies operate on differentbases,” said Tay. “China Eastern is a majorairline in China. ST Aero is a global MRO. Sothe world might be interested to see what wedo differently from other people.”ST Aero may expand supportservices for the CFM family of enginesbeyond Singapore, where all work iscurrently done, to another base withinthe region.The company increased itscapabilities last year from theCFM56-3 to the -7 and added the -5this March. “We will have the wholeCFM family, the biggest installedengine base in the world, in the nextcouple of years,” he said.52 ORIENT AVIATION NOVEMBER 2007

SPECIAL REPORTMaintenance, Repair and OverhaulBig MRO investment in IndiaBoeing and Lufthansa Technikh ave m a de sig n i f ic a nti nve st ment s i n I nd ia’sgrowing MRO industry bysetting up partnerships in thecountry. Boeing is joining with Air Indiato invest US$185 million in a joint venturefacility in Mumbai, while Lufthansa hasteamed with the GMR Group to form acompany based in Hyderabad.Boeing’s move is an add-on to the dealunder which Air India will buy 68 of itsaircraft, including 27 B787 Dreamliners.The joint venture will offer third party workon B777s and B787s, with the U.S. companysupplying airframe expertise.Air India is including the MRO operationas one of its five new strategic business unitsafter its merger with Indian (formerly IndianAirlines). A partner for engine work wasbeing sought at press time.Lufthansa Technik, which already hasdeals with Jet Airways, Air Deccan andKingfisher Airways, is planning to open itsfacility by early 2009. The target will be thecountry’s growing narrowbody fleet withAir India: New MRO venture withBoeing will form one of the carrier’sfive new business unitsbase maintenance for A320s and B737s asthe main offering.The German company, the first foreignMRO operator to set up in India, is a75% partner. It was attracted by the largenumber of orders for aircraft for domesticand regional use.“There are 100 aircraft coming to themarket in the next 12 months alone,” saidThomas Stüger, chief executive, product andservices. “We are looking at the new kids onthe block, not just the traditional ones. Thereare a lot of good concepts, but they definitelyneed maintenance.”Elsewhere in Asia, Lufthansa TechnikPhilippines has added a new hangar forlight base maintenance checks. LufthansaTechnik Shenzhen plans to double itscapacity after expanding its support servicesfor airframe related components. MalaysiaAirfoil Services, a joint venture with MTUAero Engines specialising in the repair ofengine blades, has opened a new factory inKuala Lumpur to double its output.Pilot shortagemeans moreheavy check slotsChina’s MROs are trying to workaround the complexities of airlineoperations in a country whereaircraft may be grounded towards the endof the year due to a shortage of pilots.According to Joey Lo, commercialdirector at Guangzhou Aircraft MaintenanceEngineering Co (GAMECO), it works likethis: thanks to heavy demand for flightsduring China’s expanding holiday season– it’s up to 12 weeks a year now – pilots arerunning out of hours.And as heavy maintenance is out of thequestion at times when aircraft are mostneeded, carriers are keen to book themin when pilots have used up their quotas,forcing aircraft to be idle because no oneelse is available to fly them.“Because of that, we are having toreshuffle our timetable to handle domesticand international customers,” he said. But,often the capacity isn’t there. “We are sobusy and every airline has its own agenda,”said Lo.Ameco eyesconversion businessAmeco Beijing is looking into B747passenger freighter conversions,dependent on hangar capacitybeing available, said executive director,Harry Seeger. Lead customers would be itsjoint venture partner, Air China, which wantsto convert aircraft in its fleet.GAMECO has performed its first A300-600 passenger to freighter conversion forparent company, China Southern Airlines.Five more are to follow under a deal with B/EAerospace of Florida, which developed theengineering and certification package and ismanufacturing the structural components.Boeing has said its new MRO facility inShanghai, jointly established with ShanghaiAirlines, will provide B767 conversionswithin three years. Singapore TechnologiesAerospace (ST Aero) marked the conversionof the 50th MD-11 for various Boeingcustomers in September. Thirty have goneto UPS.Mega hangars for A380sWhile SIA Engineering Co(SIAEC) is putting the finishingtouches to its A380 hangar, dueto be operational early next year, EmiratesAirline already has a facility in place thatcan house 18 of the giant jumbos.One can go into each of the eight hangarsat the huge new Emirates Engineering Centre,nine in dedicated parking bays outside andone in the engine run-up facility. Emirateshas ordered 55 A380s.www.orientaviation.com54 ORIENT AVIATION NOVEMBER 2007

SPECIAL REPORTAircraftLeasingLease rates atan all time highFew aircraft available on the marketTalk to aircraft lessors thesedays and you won’t be able tomiss the merry glint in theireyes. Business is booming …and if only they could get theirhands on more jets it would be even better.Late model, single-aisle B737s and A320sare almost unobtainable. So are popularwidebodies as airlines hang on to theirexisting fleets because of delivery delays ofthe new generation A380 and B787 aircraft.As one North American-based leasingsalesman put it: “Rates we are getting onextensions and new leases, even for usedaircraft, are probably the highest they haveever been.”For instance, he pointed out, an A320leased new for around US$330,000 a monthsix years ago is today, as a used aircraft,being leased for around $370,000. “If youwanted to start a low-cost carrier (LCC) now,it is hard to see how you could do it with theprice of aircraft today,” he said.According to industry insiders rapidglobal traffic growth, a faster than expectedexpansion of LCC operations and anincreased propensity for airlines to leaserather than buy, coupled with delivery delaysin Seattle and Toulouse, are combining to putthe squeeze on aircraft availability.The proportion of the global airline fleetthat is leased has grown from 17% in 1990 to30% last year. It is expected to rise to 40% ormore in the next decade.Much of the predicted demand will bedriven by the growth of the budget airlinesector, particularly in the Asia-Pacific, wheremore and more start-ups are looking forB737s or A320s to launch their operations.Indeed, Randy Tinseth, vice-presidentmarketing for Boeing, told Orient Aviationin October the planemaker has significantlyWORLD WIDE COMMERCIAL TRANSPORT AIRCRAFT AVAILABILITY Source: AirfaxJet Aircraft Available: 507(including A330, BAC1-11, B707, B777, CRJ, ERJ, F28, F70/F100 and 328Jet)increased its forecast of global demandfor single-aisle aircraft in the next twodecades because earlier market forecastshad underestimated the pace of budgetoperations.Not only are lessors moving to addressdemand by placing massive multi-billionorders for new aircraft, the health of thesector is attracting the attention of wealthyinvestors, particularly banks, striving to buyexisting lessors or create new companies. Inthe past 12 months this has included:• Australia’s Macquarie Bank’s purchaseof GATX Corporation for $150 million andthe setting up of Macquarie Aircraft LeasingServices.• Bank of China (BOC) buying SingaporeAircraft Leasing Enterprise (SALE)• A new joint venture, SkyWorks CapitalNote: DC-9 includes MD80 aircraft, DC-10 includes MD 11 aircraftAsia, which involves Cathay Pacific Airwaysowner, Swire Pacific, Air China and U.S.financial consultants, SkyWorks Capital.The joint venture will include leasing in itsportfolio.• Dragon Aviation, another new aircraftoperating lease joint venture made up ofChina Aviation Supplies Import & ExportGroup Corporation (CASGC), Europe’sAerCap and Calyon Airfinance, which willtarget China.• In September, the Asia-focussed StandardChartered Bank agreed to buy Irish-basedlessor, Pembroke.• China plans to change regulations toencourage the development of local leasingcompanies. Several Mainland banks haveapplied to start leasing companies (seeseparate story).56 ORIENT AVIATION NOVEMBER 2007

By Tom Ballantyne• In the Middle East, cash-rich groupssuch as Dubai Aerospace Enterprise (DAE)are increasing investment in aircraft leasingbusinesses.While the statistics show 507 jet aircraftavailable for lease in October, including121 B737s and 28 A320s, the figures aremisleading.Nearly all the Boeing and Airbus aircraftare older, uneconomic models and are notwhat airlines want. Next Generation B737sand new A320 family types are virtuallyunobtainable.On the widebody side, there were noA330s or B777s and only two A300s and 22B747s (mostly again older models) available.Comparisons between October 2006 and lastmonth shows that even the number of olderplanes available has been declining. Year onyear, the number of B737s dropped from 131to 121, A300s from 18 to two, B767s from27 to 7 (many B767s are being converted tofreighters) and B747s from 33 to 22.The widebody crunch is the result ofthe delivery delays. Firstly, carriers suchas Singapore Airlines had to find capacityto fill the gap caused by the 18 month delayof the A380.Now, airlines awaiting B787 deliveries,scheduled to begin in May next year withJapan’s All Nippon Airways, will have tomake similar adjustments after Boeing’sannouncement last month that the firstaircraft will be six months late.Industry insiders said this B787 delaywill have a big impact on lessors because itwill increase widebody lease rates as carriersscramble to find seats.Operators that had timed the return ofleased aircraft to coincide with B787 arrivalswill have to negotiate extensions on leases,a costly process.There is another problem. Lessors don’tlike their planes “out of sequence”. They arenormally returned after a “C” check, but ifan airline wants a six-month lease extensionlessors are likely to insist the airline take an18 month extension, which would be whenthe next “C” check is due. If an airline isforced to do this it will have two choices:attempt to sub-lease the aircraft for the extra12 months, or go to Boeing and demand somesort of compensation for the extra money it iscosting to find aircraft because of the B787delivery delays.In the aircraft leasing market, it is allabout supply and demand. With fiercecompetition for every suitable jet that comeson the market, lessors can look forward tomore good times.ACG move to cash in on narrowbody boomThe money men at t heheadquarters of major aircraftlessor, Aviation CapitalGroup (ACG), in NewportBeach, California, have beenbusy signing cheques; down payments onUS$5.8 billion worth of new planes on orderfrom Boeing and Airbus to add to the 230jets it has out on lease or under managementworldwide.ACG will need them, according toexecutive vice-president global marketing,Richard Cherney. With demand for leasedaircraft – particularly single-aisle jets– currently far outstripping supply, hedoesn’t see any signs the situation is aboutto change.“We will not see any reduction in thedemand for aircraft from either us or otherlessors. We are at a point in the cycle where theavailability of aircraft and the backlog, bothfrom manufacturers and operating lessorspoints of view, is almost unprecedented.Since this is a cyclical industry at some pointthere will be a rebalancing of that supply anddemand, but at the moment I am not seeingany movement towards that whatsoever,”Cherney told Orient Aviation.The demand is also keeping lease rates ata healthy level. “Lease rates are influencedby two factors, the currentinterest rate environmentand the mismatch betweensupply and demand. There’sabsolutely no question thatwith demand exceedingsupply to the extent that itis, rates are robust,” saidCherney.ACG has been quickfootedin preparing to copewith the expected marketpressure to have aircraftavailable in the next fewyears.In April, it ordered 15Next Generation B737s andfive B787s worth some $1.6billion, as well as 20 A320family jets – 14 A320s, four‘We have sold outall our aircraftthrough 2008’Richard CherneyExecutive Vice-President,Global MarketingACG>>>>>>>>>>>>A319s and two A321s – worth around $1.5billion. In September, it signed on for 15more B737NGs valued at $934 million andan additional 25 from Airbus – 15 A320s,six A319s and four A321s – worth about$1.8 billion.“We now have around 230 planes in ourportfolio and under management and we haveanother 107 airplanes on order (this year’sorders plus others ordered earlier). It hasbeen a remarkable growth storyif you look at where we were fiveyears ago,” said Cherney.“We have sold out all ouraircraft through 2008 at thispoint and, in fact, even on neworders we are now into the thirdquarter of 2009.”A lot of the single aislegrowth is being driven by theemergence of budget airlinesin places like Eastern Europeand Asia, he said. ACG is thethird largest foreign lessor ofaircraft into China, after ILFCand GECAS.“In particular I wouldidentify China and India wherethere has been only a smallamount of the market tapped forflying. Now, you are seeing China growingwith the advent of non-state owned airlines,”said Cherney.“T hey a re keepi ng up w it h t heinfrastructure much more in China,compared with India, where there are certaininfrastructural challenges to growth. To us,China is a major growth area and we arehopeful of adding more aircraft there beforetoo long.”NOVEMBER 2007 ORIENT AVIATION 57

SPECIAL REPORTAircraft Leasingput Mainlandcompanies at a disadvantagein China’s growing aircraftROADBLOCK:Regulationsleasing marketInterest in the aircraft leasingsector is high in China, but untilthere is tax reform and morechanges in the financial andregulatory environment the localindustry will struggle to competewith big Western players, sayexperts. TOM BALLANTYNEreports.In China, financing for aircraft leasesis no problem, according to leasingindustry experts. Neither is demand.After all, of the approximately 950Airbus and Boeing jets currentlyoperating in China, some 44%, or 418, arebeing flown on operating leases. And withChina forecast to add 2,300 more planes by2024, the aero-leasing market is expectedby that time to be worth at least US$108billion.The problem for local lessors right nowis that winning a serious slice of that pie isvirtually Mission Impossible. Some 90% ofthe commercial aircraft leased by Chineseairlines have come from the 31 foreigncompanies leasing jets into the country,including ILFC, GECAS and the AviationCapital Group.Why? The handful of specialist localfinancing companies operate at a distinctdisadvantage to overseas competitors,according to Steven Townend. He is deputymanaging director and chief commercialofficer of BOC Aviation (Bank of China),the former Singapore Aircraft LeasingEnterprise (SALE) bought by the bank inDecember last year for $965 million.“No China-based leasing company hastaken delivery of new aircraft from Airbusor Boeing,” said Townend. Indeed, nearly allthe aircraft handled by domestic firms areChinese-built planes.“Import duties are different for adomestic leasing company in China and thisis one of the keys to the competitive strength,to date, in foreign leasing companies. If youare a domestic lessor you could pay up to22% of the aircraft price up front. A foreignlessor is not subject to import duties because‘No China-based leasingcompany has taken deliveryof new aircraft from Airbus orBoeing’Steven TownendDeputy Managing Director and ChiefCommercial OfficerBOC Aviation>>>>>>>>>>>>>>>>>>>the airline is deemed the importer. It payspreferential 1% custom duty and import dutyof only 4%, which is payable in instalments,”he added.It doesn’t end there. Townend pointsto high corporate income tax in China – itwill be 25% from January 1 next year – andcompanies have to pay 5% business tax ongross turnover.“The competitors you are dealing with arepeople based in Dublin or Singapore, whereyou are paying 10% or 12% corporate income‘The big concern for internationallessors is that domestic leasingcompanies in China are willing todo business at lower lease rates …’John PluegerChief Operating OfficerILFC>>>>>>>>>>>>>>>>>>>>>tax. It immediately puts you at a competitivedisadvantage if you are trying to operate aleasing company in China,” said Townend.The roadblocks are almost endless.“Another important issue is how to deal withmoney transfers,” said Soeren Ferre, head ofEurope, Middle East, Africa and the Asia-Pacific region for AerCap Aviation Solutions,the European lessor that in October last yearbecame the first foreign company to forge ajoint venture leasing operation in China.“Sometimes you have to pay [money]outside your country to aircraft manufacturers,maintenance providers and the like. In China,it is not so easy to transfer foreign currencybecause you have to go through regulatoryprocesses. If you have to explain to someoneyou can’t pay them because it takes twomonths to get the right approvals, you mighthave some frustrated customers,” he said.And even though AerCap’s joint venture,Dragon Aviation Leasing, is based in Beijing,a separate company, AerDragon Aviationpartners, also had to be set up in Ireland “fortax reasons”.Financial leasing has existed in China fortwo decades, but has failed to take off in abig way. According to government statistics,at the end of 2006 there were 12 financialleasing firms with a combined net profit of$17.3 million. Their total assets were $1.9billion, with debts of $1.5 billion. Thesefigures are miniscule by global standardsand much of the leasing involves other itemssuch as shipping and machinery, rather thanaviation.This is beginning to change andbig leasing companies are watchingdevelopments closely. ILFC chief operatingofficer, John Plueger, said earlier this yearthat while China has not produced an aircraftleasing industry yet to compete withinternational players, the operatinglease market is moving into anotherstage. Domestic financial institutionsand leasing companies in China arestarting to source capital needed toacquire Western-built commercialaircraft to be leased to their homecountry carriers.58 ORIENT AVIATION NOVEMBER 2007

The net result for the ever-crowdedinternational operating leasing industry,particularly with the advent of private equitybackedlessors, is that the industry is facinggreater competition from grass-roots players.“And the big concern for international lessorsis that domestic leasing companies in Chinaare willing to do business at lower lease ratesthan international counterparts are offering,”said Plueger.However, borrowing at market ratesin China is likely to be a challenge for thecountry’s leasing companies, particularlygiven that many China bank branches havelimited or no experience in asset-basedlending. Much of Chinese bank lending inaircraft finance has been overseas or in themain cities of China.In essence, experts say the reason thereare no major domestic players in the aircraftleasing business in China are:• Regulatory issues• Tax issues• Management expertise• Financing• Aircraft import regulations and duties• Legal issuesTownend pointed out there are two mainregulatory authorities dealing with the settingup of a leasing company in China, effectivelythe banking regulator and the Ministry ofFinance. “One of the biggest issues is there isconfusion about who actually regulates what.For anyone trying to establish a company inChina, either a joint venture ora stand-alone entity, one of thebiggest challenges is to workout what the requirements areand which regulator to speakto,” he said.Yet another issue is theimpor t ation of ai rcraf t.Owning an aircraft in Chinais not only expensive froma tax perspective, it is alsocomplex. All aircraft importsare controlled by the NationalDevelopment and ReformCommission (NDRC) and theCivil Aviation Administrationof China (CAAC), and allpurchases must be donethrough the China AviationSupplies Corporation (CASC).The time it takes to movethrough this process restrictsthe ability of a Chineseleasing company to be trulycompetitive.Hainan Airlines: the first Chinese airline to enter the leasing businessSo far, companies looking to makeinroads into the market have chosen differentpaths. AerCap has taken the joint ventureroute. Dragon Aviation is 50% owned byChina Aviation Supplies Import & ExportGroup Corporation, 25% by AerCap and25% by Calyon Airfinance, a division ofFrance’s Credit Agricole corporate andinvestment bank.Ferre readily concedes it hasn’t been easyand negotiations on various aspects of thebusiness collapsed several times before itcame to fruition.“We are also acting as the main trainer.It is very difficult to find fully qualified staffin China. You have good marketing people,but they don’t have experience in leasing. ItChina’s top 10 lessorsIn August there were 950 Airbus and Boeing aircraft in servicewith airlines in China. Some 44% of those, or 418 planes,are on operating leases. There are 31 companies leasingaircraft to Chinese airlines. The top 10 leasing companiesin China are:LessorAircraftILFC 147GECAS 112Aviation Capital Group 20CIT Aerospace 20Pegasus Aviation 17BOC Aviation 12RBS Aviation Capital 12Aircastle 11Babcock & Brown 10Shenzhen Financial Leasing 8Source: Airclaims, August 2007Note: Airbus and Boeing aircraft onlyis very difficult to find good legal people withan operating lease mind. It is impossible tofind good technical people who can sell tothe market. It will take two or three yearsto fully train someone who can go into anairline and complete a deal from start tofinish,” said Ferre.BOC, realising the potential in leasing,took the external route by purchasing SALE.Already a leading provider of air finance inChina, BOC began looking at the leasingbusiness in January 2006.It concluded the environment wasn’tready for a domestic entity and there werelower costs and less risks in an overseasacquisition.What was critical, according to Townend,in the purchase of SALE wasthat BOC gained immediateentry into the global aircraftleasing market as well as amodern portfolio of aircraft,management expertise and aglobal customer, financing andsupplier base.“The AerCap approachis a different approach to thesame problem,” he added. “Butprobably both will end up in thesame place.”Despite these issues, thebeginnings of a Chinese leasingindustry is emerging, sparkedby a new law. Measures forthe Administration of FinanceLeasing Companies, whichtook effect in March, allowsfinancial institutions, for thefirst time, to hold stakes inleasing companies.In September, it was learnedat least five banks have applied toNOVEMBER 2007 ORIENT AVIATION 59

SPECIAL REPORTAircraft Leasingestablish their own leasing companies. Theyare the nation’s largest banks, the Industrialand Commercial Bank of China (ICBC),the Bank of Communications, MinshengBanking Corporation and China MerchantsBank. It is understood the Minsheng leasingventure will be in partnership with Airbus.The fifth bank, the China ConstructionBank, is teaming up with Bank of Americain a proposed leasing venture.On its website ICBC said its leasingcompany, registered in Tianjin, will focus onaviation, shipping and other big equipmentleasing “for global and domestic clients”. Itadded: “The financial leasing company is animportant move in ICBC’s path on growingas a universal financial player.”Banks are not the only companiesshowing interest. Hainan Airlines recentlypurchased a stake in an existing firm, theShenzhen Financial Leasing Company. It isthe first airline to enter the leasing industry.It will focus on serving China’s fast emerginglow-cost carrier (LCC) sector.More moves are underway that willeventually resolve some of the issuesdomestic leasing firms face. The Financialand Economic Committee of the NationalPeople’s Congress is working on newlegislation aimed at reforming taxation laws.Legal regulations are also being reviewed.“Certainly, from what we see, thegovernment is working on it. The bestguestimate of where we can truly see itbeing competitive, before you changeimport and taxation restrictions and someof the regulatory rules, is probably anothertwo to three years,” said Townend.One thing everyone agreed upon: Chinahas to become a signatory to the CapeTown Treaty before the local industrycan seriously take off. The Cape TownConvention on International Interests inMobile Equipment is an international treatyagreed in 2001, intended to standardizetransactions involving moveable property,particularly aircraft and aircraft engines.It creates international standards forregistration of ownership, leases andconditional sales, contracts and various legalremedies for default in financial agreements,including repossession and the effect of aparticular state’s bankruptcy laws.“It will help in a number of ways, butparticularly to enable domestic lessors toaccess international financing. If they arecompeting against an ILFC or a GECAS,who are able to access some of the U.S.market capital structures, to be able tocompete effectively against them they needto be able to do the same thing. If Chinabecomes a signatory to Cape Town that willhappen,” said Townend.John Duffy, head of transportation Asiafor Germany’s HSH NordBank, agreed. “Thesooner that is ratified by China the better.That would be a great boon for the industry.“We have seen in markets such as Indonesiacont. on next page >Vietnam enters leasing marketChina isn’t the only Socialist nation striving toencourage growth of a local lease financingindustry, writes Tom BallantyneThe Vietnamese government has approved plans by thecountry’s Bank for Investment and Development ofVietnam (BIDV) to establish Vietnam Aircraft LeasingCompany (VALC). The move is seen as a significantstep towards liberalising the airline industry, which hasbeen growing at double-digit rates for several years.The news comes as two new local airlines – VietJet and SaigonAirlines – attempt to gain permission to enter Vietnam’s domesticmarket, currently dominated by national flag carrier VietnamAirlines (VNA) and Pacific Airlines, which is 18% owned byAustralia’s Qantas Airways.The new leasing company will initially have five shareholders,all state enterprises. BIDV will hold 20% with Vietnam Airlines,Vietnam Oil and Gas Group (PetroVietnam) and VietnamShipbuilding Industry Group (Vinashin) each holding more than10%. Phong Phu Corp, a leading textile producer, is expected toacquire around 8%. The group will consider bringing in strategicpartners at a later date.Under its proposed development plan, VALC will have at leastUS$200 million in capital in its first phase from 2007-14, increasingto $1 billion by 2025. It will deal in various aircraft from commercialjets to helicopters and cargo aircraft. The company plans to provideother aviation services, including asset management, insurance,maintenance and financial lending.VALC said it was negotiating with Airbus, Boeing and othermanufacturers to purchase planes and that its first major clientVietnam Airlines: one of five shareholders inVietnam’s first aviation leasing companywill be Vietnam Airlines. “We also expect, once the company isprofitable, VALC will join the stock market and make other long-terminvestments. The plan is not too ambitious,” BIDV general director,Tran Bac Ha, told local media.If VietJet and Saigon receive the go-ahead they will increase thenumber of airlines in Vietnam to six. Apart from Vietnam Airlinesand Pacific Airlines, expected to be renamed Jetstar Vietnam, Vascoand Vietnam Airlines Express, both owned and operated by VietnamAirlines, are flying. Vasco, or Vietnam Air Services Company,operates as an air taxi and cargo airline.Vietnam has become a magnet for regional low-cost carriers.Apart from the Qantas move to invest in Pacific Airlines (the stakewill grow to 30% in the next two years) and incorporate it into theJetstar group, Malaysia’s AirAsia, which already flies to Vietnam,is looking to invest in a Vietnamese operation. Tiger Airways fromSingapore and Lion Air from Indonesia also fly there and Thailand’sNok Air will launch services to Vietnam this month.60 ORIENT AVIATION NOVEMBER 2007

that when it ratified [Cape Town] the costof debt to airlines in what were previouslymarkets where it was very difficult to getdeals away, has come right down. There is agreat deal more interest in those markets.”There is no shortage of interest fromglobal investors in placing money intoChinese leasing deals as long as they arebeing done through low tax regimes suchas Ireland.Duffy said the competition is intense.“We are at the point now where innovativetax lease products are being brought to Chinawhen once upon a time you simply couldn’tsee that being possible,” he said.“If you talk to Japanese tax equityinvestors they will tell you now, with nohesitation, they are open for business inChina. And indeed some of the leadingairlines there have already closed innovativetax leases.“What this means for the lessors, thebanks and the lawyers is that there is agreat deal of competition. I haven’t seencompetitive pressures in any market such asthey are in China right now.“Our bank opened its first branch inShanghai last year and last week we drewdown our first direct lending to an airlinethere. There is no offshore special purposecompany. It’s not a top three airline, but aregional airline and I’ve never seen termslike it. We have simply taken the decision todo it because strategically China is such animportant market for us.”Duffy said an interesting trend to watchin the next few years is to what extent theboundaries between banks and lessorsbecome blurred.“BOC has obviously purchased SALEand you have other banks looking to setup leasing businesses. One thing is sure ...unless we see a major liquidity crunch inChina or a major systemic breakdown, theoutlook for bankers, lessors and lawyers,particularly those outside China, is going toget more challenging in terms of winningbusiness,” he said.But the real catalyst, everyone agreed, willbe radical reform of the regulations that coveraircraft purchasing and leasing in China.‘We are at the point now whereinnovative tax lease productsare being brought to China.’John DuffyHead of Transportation, AsiaHSH NordBankMiddle Eastspending spreeStand by for a spending spree fromone of the world’s newest aircraftleasing companies. DAE Capital,the leasing division of DubaiAerospace Enterprise (DAE), ison the verge of a buying splurge that willeventually make it a major competitor toglobal players such as GE CommercialAviation Services (GECAS) and InternationalLease Finance Corporation (ILFC).Either this month or by early December,DAE Capital’s chief executive, RobertGenise, expects to sign a deal to acquire 30used aircraft, costing around $1.5 billion, tolaunch the business.At the same time, he is in discussionwith Boeing and Airbusabout a major order for newjets for delivery after 2010,part of a strategy that will seeDAE Capital’s fleet reach 125aircraft within five years.“Our business plan callsfor us to acquire a block ofaircraft immediately to jumpstart the business and haveabout $1.5 billion on the booksby year-end,” said Genise, aleasing industry veteran andformer chief executive ofBoullioun Aviation Servicesin the U.S, in a statement.“After that, we want tospend about $1 billion eachyear to expand the business.I expect we would have $5 billion in assetsand have annual revenues in excess of $500million a year at the end of 2011.”With the number of aircraft operatingin the Middle East growing at a staggering60% annually in the past decade, comparedto a global average of just 12%, it is hardlysurprising the oil-rich sheikhs of the Gulfhave decided aircraft leasing is a hot targetfor investment. Arab carriers have placedorders for $80 billion worth of jets in thelast three years, with $32 billion in ordersannounced at the Paris Air Show in June.DAE was set up last year by the Dubaigovernment and its ruling family as aninvestment vehicle to channel $15 billion into‘The global needsfor aircraft arestaggering’Robert GeniseChief ExecutiveDAE Capital>>>>>>>>>>>creating a global aerospace manufacturingand services corporation.It has six operational subsidiaries,including leasing, and has become activeglobally in investments in airports and otheraviation services and infrastructure.It failed earlier this year in its $1.8billion bid for New Zealand’s AucklandInternational airport.When DAE was launched its chairman,HH Sheikh Ahmed Bin Saeed Al Maktoum,president of Dubai’s Department of CivilAviation and chairman of the EmiratesGroup, said DAE would form strategicalliances with the leading aerospacecompanies as it steps up its bid to becomea significant presence in theindustry.“Within 10 years, DAEwill become an integralpart of the global aerospaceindustry,” he said.DAE Capital looks set toplay its part. The company’sfleet will eventually comprisearound 70% narrowbodyaircraft, such as the B737and A320 types, with theremainder widebody jetssuch as the A330 and A350or the B777 and B787.Genise said the B747-8 isbeing considered as part of afreighter fleet, with freighterconversion opportunities,probably involving B757s and B767s, alsopossibilities.DAE capital has no intention of confiningits activities to the Middle East.“The global needs for aircraft arestaggering. We will be doing businessglobally,” said Genise.He believed his company’s largest marketwill be Europe, followed by the Asia-Pacific.He puts the Middle East in third place and theAmericas fourth.Genise expected the 25% of aircraftownership currently held by commerciallessors will grow as airlines continue to lookfor alternative, more economical ways tofinance fleet expansion and replacement.NOVEMBER 2007 ORIENT AVIATION 61

COMMUTER AVIATIONDurable Twin Ottermaking a comebackMalaysia Airlines will be among the buyersBy Charles AndersonThe DHC Twin Otter, for yearsthe mainstay of aviation in lessaccessible areas of the Asia-Pacific, is likely to return innumbers in an updated formnow production of the famous turboprop hasrestarted in Canada.Viking Air of Victoria, which boughtthe rights to it and six other De Havillandaircraft from Bombardier in 2005, hopesa good chunk of the 200-plus Twin OtterSeries 400s it plans to produce in the next10 years will find homes in the countries thatonce relied on the tough 19-seater to growtheir commuter routes.Malaysia Airlines has said it plans tobuy an unspecified number to replace thefive Twin Otters currently in service withits MAS Wings subsidiary in the west of thecountry. Indonesia, where Merpati Nusantarabegan building its business with Twin Otters40 years ago, is another key target. Merpatistill flies eight of them.Currently, Viking has 50 orders onits books, with first deliveries due in 18months and production slots reserved until2011. Assembly in the region is a long-termpossibility if demand holds up.Among the launch customers with fivefirm orders is Trans Maldivian Airways,which already operates 16 Twin Otteramphibians throughout low-lying atollresorts in the Indian Ocean. Its competitor,Maldivian Air Taxi, flies another 18 to22 depending on the season, making theMaldives the largest Twin Otter centre inthe world.Viking Air announced it was startingproduction last April, almost 19 years afterthe last of the current Twin Otters went intoservice. By that time Boeing had bought outthe De Havilland company, which it later soldto Bombardier.Viking spent 20 years manufacturingspare parts for the DHC line before movingOne of the five Twin Otters in the Malaysia Airlines fleetinto that area on its own account.“It took us more than a year to negotiatewith Bombardier to buy the type designrights. But we didn’t get into the businesswith the pure reason to go back intoproduction,” said Viking Air president andchief executive, David Curtis.The company was first prompted inthat direction by individual customerswho asked why it didn’t build new aircraftonce it had acquired the rights. Viking thencommissioned a comprehensive marketsurvey that pegged the Twin Otter as theone member of the old De Havilland family– including the single Otter and the Dash7 – still in sufficient demand to justify theinvestment.“The results came back unbelievablystrong,” said Curtis. “It’s still a nichemarket, but the indications were that from areplacement and retirement point of view we‘It’s still a niche market,but the indications were wecould expect to sell about 440aircraft over a 10-year period.’David CurtisPresident & chief executiveViking Aircould expect to sell about 440 aircraft over a10-year period.”An operators’ conference last yearattracted 120 delegates from 60 countries.“That was another real indication of interest.But we said, OK, if we are going to do it, weare going to need a certain number of orders;firm commitments, not Letters of Intent orhandshake deals,” he said.Wit h t hose secu red, i nvest mentpledged by Viking’s majority shareholder,Westerkirk Capital, and prospects lookinggood for financial help with research anddevelopment from a Canadian governmentfund, the company decided to go ahead.Curtis, however, thought a programme builtaround 200 sales was a safer bet.“There’s enough opportunities worldwidefrom tourism and in countries like Indonesia,where we are getting lots of inquiries. We arecomfortable with it,” he said.The keys to the Twin Otter’s resurgenceare the keenness among current operatorsto replace ageing aircraft, a lack of newersecond hand models on the market andrestrictions in countries like Indonesia onthe import of older aircraft for safety reasons.Plus the fact that no one is making an aircraftquite like it.“Our market study indicated that62 ORIENT AVIATION NOVEMBER 2007

operators currently using the airplane willmake up the initial demand, mainly for fleetrenewal,” said Curtis.“We are talking to Malaysia Airlines. TheTwin Otter is ideal for the short strips theyare going into after resuming their regionalairline.“The used market is unbelievably tight.Prices are increasing and I don’t know ifthere are more than one or two airplanes onthe market right now.“The age limit on ent r y into theIndonesian market is a barrier as well. Whilethe Twin Otter is perfect [for the country],you can’t bring a used one in.”The shortage of new aircraft was behindTrans Maldivian’s decision to buy new.“Finding light, well-maintained aircraft isnext to impossible and they often requiremajor refurbishing or rebuilding,” said theairline’s managing director, Bram Steller.Even so, demand wasn’t sufficient for aclean-sheet design for a new 19-seater. “Themarket just isn’t large enough to justify aU$100 million investment to develop anairplane specifically for it,” said Curtis.“The Twin Otter is recognised as a worldbrand and our investment is going to beconsiderably lower getting the programmegoing again.“Anyway, if you tried to certify the TwinOtter today, it wouldn’t end up being theTwin Otter.”With the original type certificate stillstanding, only amendments are needed froma regulatory standpoint to include updateson the aircraft.Higher output Pratt & Whitney enginesare being provided, composites will makean appearance on the doors and other noncriticalareas and there will be a completelymodernised cockpit. “It’s just natural. Thereare huge opportunities from a safety pointof view and from an avionics perspective,”said Curtis.Some new nuts and bolts also are neededfor an aircraft first designed in 1965. “Wehave about 140 individual engineeringchanges, some big like the cockpit, somesmall – pumps and valves and things thatwhich are just no longer available,” he said.“We are also trying to reduce the emptyweight to make the aircraft a bit moreappealing.”List price is US$3.2 million, withamphibious and ski landing gear extra.More than 800 Twin Otters were built in23 years of production. Nearly 350 are flownby commercial airlines today, with many‘More than 800 Twin Otters werebuilt in 23 years of production.Nearly 350 are flown bycommercial airlines today’others still in private hands or in militaryservice in countries such as Australia,Cambodia, India, Indonesia, New Zealandand the Philippines.Of the 60 to 70 carrying passengers orfreight in the Asia-Pacific, 16 are based inNepal, 12 in Indonesia, seven in Papua NewGuinea and two in the Solomon Islands.Airframes for the new aircraft will to bebuilt in British Columbia, with final assemblyand delivery carried out in Viking’s Calgaryfacility. Premises have been expanded, buteven so Curtis is concerned about meetingdemand. And that’s where Asia may comein if the company decides to increaseproduction beyond the present 18 a year.“My challenge is that the nearestproduction slot available is in 2011,” saidCurtis. “We have a relatively low-rateprogramme and we have sold so many it isNose to tail operations for Twin Otters in the MaldivesThe Maldives workhorsesbeing pushed out. To put it in a kind way,some of our customers have trouble planninga year out, let alone five.“We have been offered deals which areLetters of Intent to buy 100 airplanes, butthere’s no solid commitment. We don’t wantto play this game. We could say yes, we aregoing to double production to meet demand,but to be frank we need to walk before we canrun. We haven’t even built the first one yet.”Even so, offshore assembly is beingmooted at some stage, with Indonesia andChina mentioned. “It’s premature, but whenyou think about how we could increase theproduction rate, there’s no question that’swhere the opportunities are, depending onthe size of the market,” said Curtis.“We know, for instance, to get into Chinawe are going to have to do some portion ofthe final assembly there. We are open tothese [possibilities], but it would be least24 months away before we would study theoptions. If the demand is real and our orderbook is exceeding our production capacity,we are going to need to look at going outthere.”The five aircraft on order by Trans Maldivian Airways will be among theirown kind when they begin arriving at Male in the Maldives in 2009. At thepeak of the tourist season, the world’s largest concentration of Twin Otters,operated by Trans Maldivian and Maldivian Air Taxi, take off and land in a constantstream on four water runways at Male airport, taking passengers from internationalflights to their resort destinations. Forty can be flying on any given day.“They go in and out, in and out, from six in the morning to six at night,” saidBram Steller, managing director at Trans Maldivian. “It’s a daylight operation, butin those 12 hours not a minute is wasted. They are queuing up in the air, or on thewater, nose to tail, waiting for take off.”NOVEMBER 2007 ORIENT AVIATION 63

BUSINESS DIGEST: JULY STATISTICSAirline CodesRPK Growth by CarrierPassenger Load FactorGrowth by CarrierBIRoyal Brunei AirlinesMH Malaysia AirlinesBREVA AirNHAll Nippon Airways15%10CICXChina AirlinesCathay PacificOZPRAsiana AirlinesPhilippine Airlines10%5KAGADragonairGarudaQFSQQantas AirwaysSingapore Airlines5%0JLJapan AirlinesTGThai Airways Int’l0%-5KEKorean AirlinesVNVietnam AirlinesPercentage(Jul 07 vs Jul 06)Percentage Points Change(Jul 07 vs Jul 06)-5%-10Percentage(Aug 06-Jul 07 vs Aug 05-Jul06)Percentage Points Change(Aug 06-Jul 07 vs Aug 05-Jul06)-10%BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN-15BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VNHealthy PAX improvementCompiled and presented by KRIS LIM of the Research and StatisticsDepartment of the Association of Asia Pacific Airlines SecretariatEmail: krislim@aapa.org.myThe international revenue passengerkilometres (RPKs)of A s s o c i a t ion of A siaPacific Airlines (AAPA)members grew 4% in July ona capacity increase of 2.5%. This resultedin a 1.1 percentage point improvement inpassenger load factor (PLF) to 79.8%.International passenger numbers rose3.6% to 12.7 million.Ten AAPA carriers registered higherRPK growth rates in July compared withthe same month last year. Three carriersposted double-digit increases: KoreanAir (12.5%), All Nippon Airways (11.7%)and Philippine Airlines (11.7%). ThaiAirways International (9.4%), GarudaIndonesia (8.8%) and Asiana Airlines(7.1%) also experienced relatively strongRPK growth.Four A A PA car riers posted R PKdeclines: Japan Airlines (5.7%), RoyalBrunei Airlines (4.9%), EVA Air (2.1%)and Malaysia Airlines (0.4%).Continued capacity restraint allowedeight AAPA carriers to report improvementsin PLF in July. Garuda Indonesiaposted the largest increase of 9.5 percentagepoints, followed by Philippine Airlineswith a 5.6 percentage point improvement.RPK and ASK (In Billions)RPK and ASK (In Percentage)806040200RPK, ASK and PLF Growth Rates(Aug 06 vs Jul 07)121086420-2-4A S O N D2006ASRPK, ASK and PLF(Aug 06 vs Jul 07)RPKASKPLFRPKASKPLFONDJJF M A M20072006 vs. 2005 2007 vs. 2006FMAMJJJJ806040200121086420-2-4PLF (In Percentage)PLF (In Percentage Points)PLFs for seven carriers averaged above80%: EVA Airways (85.3%), CathayPacific/Dragonair (84.6%), PhilippineAirlines (82.8%), Gar uda Indonesia(82.6%), Singapore Airlines (82.1%),China Airlines (81.9%) and Thai AirwaysInternational (80.2%).FREIGHTAAPA international FTKs grew 4.4%in July, slightly below the 5% rate recordedin May and June.With capacity up 4% and keeping pacewith cargo demand, international freightload factor (FLF) was virtually unchangedat 66.8%.Eight carriers recorded FTK growth inthe month under review, led by All NipponAirways (41.8%), Thai Airways International(16.9%) and Korean Air (13%).Six carriers experienced FTK declines:Royal Brunei Airlines (21.2%), PhilippineAirlines (13.6%), EVA Air (9%), GarudaIndonesia (4.9%), Vietnam Airlines (3.9%)and Asiana Airlines (1.2%).FLF for a majority of carriers remainedlow in July. Only three carriers managedto report load factors above 70%: AsianaAirlines (80.1%), Korean Air (79.2%) andEVA Air (77%).64 ORIENT AVIATION NOVEMBER 2007

FTK Growth by CarrierFreight Load FactorGrowth by CarrierPAX Growth by Carrier50%40%30%20%10%0%-10%-20%-30%BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN1050-5-10-15BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN20%15%10%5%0%-5%-10%BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VNINTERNATIONAL PASSENGERTRAFFIC: JANUARY – JULYIn the first seven months, AAPA internationalRPKs grew 4.4%. Capacity rose1.9% year-on-year, boosting the PLF byalmost two percentage points to 77%. Thenumber of international passengers carriedrose 4.5% to reach 82.8 million.INTERNATIONAL FREIGHT:JANUARY – JULYRecent increases in demand boostedyear-to-date FTK growth to 2.8% for theAAPA members, following a poor firstquarter. Capacity growth remained a stepahead of demand at 4.3%, which resulted in aFLF of 65.6%, down 0.9 percentage points.AUGUSTPreliminary reports showed AAPAinternational passenger numbers grew4.9% year- on-year to 12.9 million inAugust. International passenger trafficin RPK terms was up 5.1% year-on-year.Capacity climbed 2.7%, which resultedin a 1.8 percentage point improvement inPLF to 79.6%. FTKs grew 5.3%. Capacityrose 5.2%, which resulted in a fractionalimprovement in FLF to 65.3%.FTK, FATK and Freight Load Factor(Aug 06 vs Jul 07)FTK and FATK (In Billions)806040200FTKFATKFLFA S O N D2006JF M A M2007JJ806040200FLF (In Percentage)FTK and FATK (In Percentage)1210FTK, FATK FLF Growth Rates(Aug 06 vs Jul 07)86420-2-4A S O N D J F M A M J2006 vs. 2005 2007 vs. 2006AUGUST TRAFFIC UPDATE – PRELIMINARYINTERNATIONAL SCHEDULED SERVICES OF AAPA MEMBER AIRLINESInternational Aug 2007 Aug 2006 % Change Jan-Aug 2007 Jan-Aug 2006 % ChangePassengers (000) 12,913 12,306 +4.9% 95,673 91,468 +4.6%RPK (mn.) 53,397 50,789 +5.1% 399,583 382,246 +4.5%ASK (mn.) 67,118 65,340 +2.7% 516,879 506,826 +2.0%PassengerLoad FactorFTKFATKFLF79.6% 77.8% +1.8pp 77.3% 75.4% +1.9ppFTK (mn.) 4,741 4,503 +5.3% 36,392 35,286 +3.1%FATK (mn.) 7,263 6,907 +5.2% 55,520 53,190 +4.4%FreightLoad Factor65.3% 65.2% +0.1pp 65.6% 66.3% -0.8ppJ121086420-2-4FLF (In Percentage Points)NOVEMBER 2007 ORIENT AVIATION 65

BUSINESS DIGESTAAPA MONTHLY INTERNATIONAL STATISTICSSummary of Consolidated Results (thousands)2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLFAug 06 12,306 50,789,484 65,339,978 77.73% 4,503,292 6,907,390 65.20% 9,283,081 13,098,610 70.87%Sep 06 11,218 47,174,361 63,014,588 74.86% 4,769,987 6,920,681 68.92% 9,117,981 12,734,101 71.60%Oct 06 11,691 48,230,014 63,908,449 75.47% 4,952,961 7,347,283 67.41% 9,507,263 13,382,021 71.05%Nov 06 11,592 47,261,577 62,605,192 75.49% 4,992,607 7,295,734 68.43% 9,457,841 13,201,605 71.64%Dec 06 12,249 51,247,685 66,389,040 77.19% 4,882,414 7,244,918 67.39% 9,713,140 13,517,039 71.86%Jan 07 11,866 51,076,008 65,860,619 77.55% 4,132,611 6,711,762 61.57% 8,955,393 12,932,534 69.25%Feb 07 11,118 45,320,731 59,503,448 76.16% 4,031,313 6,190,430 65.12% 8,323,462 11,811,172 70.47%Mar 07 12,229 51,424,434 65,521,777 78.48% 4,901,657 7,300,658 67.14% 9,759,257 13,500,251 72.29%Apr 07 11,653 48,042,482 63,202,080 76.01% 4,551,536 6,936,879 65.61% 9,092,094 12,899,457 70.48%May 07 11,320 46,812,218 64,796,022 72.25% 4,545,690 6,956,663 65.34% 8,977,434 13,073,577 68.67%Jun 07 11,839 49,917,129 63,735,887 78.32% 4,717,651 7,018,144 67.22% 9,432,295 13,059,382 72.23%Jul 07 12,735 53,592,670 67,141,941 79.82% 4,770,261 7,142,776 66.78% 9,822,041 13,536,754 72.56%TOTAL 141,816 590,888,793 771,019,021 76.64% 55,751,982 83,973,316 66.39% 111,441,282 156,746,503 71.10%2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLFAug 06 3.6% 2.9% 0.7% 1.7 6.2% 3.6% 1.6 4.6% 3.2% 0.9Sep 06 1.7% 1.6% 0.3% 1.0 6.2% 2.6% 2.3 2.8% 1.6% 0.8Oct 06 4.1% 4.1% 0.3% 2.8 3.0% 5.6% -1.7 3.7% 4.0% -0.3Nov 06 6.5% 5.2% 1.3% 2.8 7.1% 6.9% 0.1 6.4% 5.3% 0.7Dec 06 6.8% 6.5% 2.4% 3.0 5.3% 6.3% -0.6 6.0% 5.3% 0.5Jan 07 4.0% 4.0% 1.7% 1.7 0.9% 2.7% -1.1 2.7% 2.9% -0.1Feb 07 5.4% 4.4% 2.1% 1.6 4.6% 7.2% -1.6 4.5% 5.5% -0.6Mar 07 6.9% 7.9% 1.8% 4.5 -0.1% 3.4% -2.3 3.8% 3.5% 0.2Apr 07 3.5% 3.4% 1.3% 1.5 0.3% 3.1% -1.8 2.1% 2.7% -0.4May 07 4.1% 3.6% 1.5% 1.5 5.1% 5.2% -0.1 4.4% 3.8% 0.4Jun 07 4.3% 3.8% 2.2% 1.2 5.0% 4.6% 0.3 4.5% 4.0% 0.4Jul 07 3.6% 4.0% 2.5% 1.1 4.4% 4.0% 0.2 4.2% 3.6% 0.4GROWTH 4.5% 4.3% 1.5% 2.1 4.0% 4.6% -0.4 4.1% 3.8% 0.3Percentage or Percentage Point ChangeCY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF2002 116,252 491,401,221 659,537,957 74.51% 42,441,232 61,785,652 68.69% 88,851,456 122,017,587 72.82%2003 102,745 444,737,398 638,188,830 69.69% 44,380,471 66,115,813 67.13% 85,983,530 124,752,870 68.92%2004 126,253 526,778,872 721,326,742 73.03% 50,453,626 74,801,046 67.45% 100,064,108 141,770,437 70.58%2005 132,650 553,815,164 753,438,103 73.51% 52,281,340 78,999,903 66.18% 104,466,832 148,872,722 70.17%2006 138,218 576,159,450 762,743,533 75.54% 54,884,310 81,998,562 66.93% 109,113,927 153,524,419 71.07%2007 YTD 82,760 346,185,672 449,761,774 76.97% 31,650,720 48,257,311 65.59% 64,361,975 90,813,127 70.87%CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF2003 -11.6% -9.5% -3.2% -4.8 4.6% 7.0% -1.6 -3.2% 2.2% -3.92004 22.9% 18.4% 13.0% 3.3 13.7% 13.1% 0.3 16.4% 13.6% 1.72005 5.1% 5.1% 4.5% 0.5 3.6% 5.6% -1.3 4.4% 5.0% -0.42006 4.2% 4.0% 1.2% 2.0 5.0% 3.8% 0.8 4.4% 3.1% 0.92007 YTD 4.5% 4.4% 1.9% 1.9 2.8% 4.3% -0.9 3.8% 3.7% 0.0Note: 1. Data includes all 17 AAPA member airlines2. Figures for January to June 2007 restated. January to June 2006 adjusted for comparison.3. AAPA consolidated traffic figures include estimates for Air New Zealand and Qantas AirwaysPercentage or Percentage Point Change66 ORIENT AVIATION NOVEMBER 2007