CHARM OFFENSIVE - Orient Aviation

N E W SRegional round-upSafety ratingdowngrade a majorblow for Korean carriersAt press time the U.S. Federal AviationAdministration (FAA) haddecided to downgrade South Korea’ssafety rating. The FAA’s action is a move againstthe South Korean Government for the lackof oversight of its two international carriers,Korean Air (KAL) and Asiana Airlines, but thedecision will have considerable impact on theairlines.The downgrade, from Category 1 to Category2, will prevent the carriers from expandingtheir services in the U.S. and could resultin the termination of alliance and code-shareagreements. A Reuters report said it could costthe two carriers, which have recently reportedheavy losses for the first six months of theyear (see page 14), 230 billion won (US$184million).The decision follows a regular FAA inspectionin May that found a lack of objectivity inthe country’s air crash investigations, unskilledtechnical staff and problems with flight operationrules and screening of pilots. The SouthKorean Government has said it has startedtraining extra aviation safety staff and wouldpropose revised aviation safety laws.Asiana Airlines, which flies to four U.S.cities, is particularly peeved at the downgradebecause, unlike accident-prone Korean Air, ithas been accident free. The carrier believes thedamage to its image and bans on additionalservices could cost it 80 billion won annually.Its code-share with American Airlines has beenterminated.KAL flies to nine U.S. cities and said thedowngrade will cost it 150 billion won a year.KAL hopes to renew code-share flights withits SkyTeam alliance partner, Delta Air Lines.They were cancelled after a KAL cargo planecrashed in Shanghai in 1999. This will not happennow nor will services to Guam and Saipanresume. Those services were suspended after aKAL B747 crashed in Guam in 1997 killing 228passengers and crew.In the last couple of years KAL has spent200 billion won on improving safety initiativesand recruited outside experts to assist in upgradingits programmes. A Delta spokesmantold the Asian Wall Street Journal they were“very pleased with the progress Korean [Air]has made”.Some have said there could be politicalAsiana Airlines: Accident free record but will suffer heavy financial losses following the U.S.Federal Aviation Administration’s decision to downgrade South Korea’s safety ratingimplications involved in the decision. Relationsbetween Seoul and Washington have deterioratedsince George W. Bush took office.Cathay could face morecompetition in Hong KongOne outcome of the Cathay Pacific Airwayspilots’ industrial dispute is that Hong Kong’sone-airline, one-route policy could be dismantledearlier than planned, increasing competitionfor the carrier out of its home base.Although rules already have been relaxed,Financial Secretary, Antony Leung Kam-chung,said the Hong Kong Government would considerupping the pace of change in view ofthe pilots’ dispute with Cathay over pay andconditions.Cathay and its regional rival, Dragonair,have been competing on cargo routes since lastyear. Further changes to policy in March meantthat the two airlines could compete on someroutes in Taiwan and mainland China.At press time the Hong Kong AircrewOfficers Association (HKAOA) was askingCathay pilots to vote to step up industrial actionagainst the airline. Union president, NigelDemery, said legal action against pilots sackedduring the dispute was “imminent”.In mid-August, Cathay’s director of corporatedevelopment, Tony Tyler, describedthe pilots’ action as “no more than a minornuisance”. He said contingency plans were inplace to keep passengers and freight movingand to deal with any future eventualities.Thailand now agrees tooverseas investment in THAIThailand’s prime minister, Thaksin Shinawatra,has been scathing about his nationalairline, Thai Airways International (THAI). Andrecently the carrier, once an inflight servicepioneer, was docked a star by global airline ratingagency Skytrax Research. It was relegatedto three stars alongside the likes of EthiopianAirlines and Air Zimbabwe. Only 18 monthsago it shared five stars with its rivals CathayPacific Airways and Singapore Airlines.THAI has said it will push ahead with its oftdelayedpartial privatisation in November, butanalysts warned the airline will have to improveits management and its image. The governmentis looking to reduce its stake in THAI from 93%to around 70% and finance minister SomkidJatusripitak, says there may be more than 10%available for a strategic overseas investor. Theprime minister had previously ruled out foreigninvestment in the airline.While there is no dispute that standardshave slipped in recent times at THAI, it stillhas a great deal of consumer support. For thisreason, analysts believe there will be a numberof airlines interested in bidding for a stake inthe carrier. Indeed, before the Asian financialcrisis struck three years ago Lufthansa, QantasAirways, Singapore Airlines and Air France hadbeen among THAI’s declared suitors.Much has happened since then althoughAir France has said it would like THAI to join12 | Orient Aviation | September 2001