CHARM OFFENSIVE - Orient Aviation

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its SkyTeam alliance while Lufthansa has saidit wants to keep the airline in Star.Recently, the Thai Government approveda new business plan for the airline. It set atarget to cut its debt-to-equity ratio to fivetimes, from the current 11 times, by the endof 2001.... Thai rivals busyexpanding networksPB Air, Thailand’s newest scheduled carrier,will launch long-haul international operationsto Sweden in October. Formerly a charterairline and owned by beer magnate, Piya Bhirombhakdi,PB Air is headed by two of THAI’shighly respected former executives, ChatrachaiBunya-ananta, who was president in the mid-1990s and Capt. Jothin Pamon-montri.The carrier has dry-leased an Airbus A340-200 from Austrian Airlines for 18 months.Looking to the future, PB Air has hopes ofexpanding its destinations in Europe and alsoof flying to the U.S.It’s a sign of the times in Thailand whereboth Bangkok Airways and Angel Air areexpanding their regional and domestic networks.Garuda launches no-frillscarrier to counter rivalsGaruda Indonesia has moved to counterthe threat of dozens of new low-cost domesticstart-ups by launching its own no-frills domesticoperation.Called Citilink, the carrier has a fleet offour Fokker F28 jets that Garuda owns and hadphased out of its fleet in May.Garuda’s executive vice-president commercial,Bachrul Hakim, told Orient Aviationthat Citilink is aimed at widening the airline’smarket presence.“The focus of our primary domestic operationis the top-end traveller, the high yieldbusiness flyers. We want to cater to the middle-to-lowmarket segment on specific routes.Our fares are around 30% lower than mainlineprices,” he said.Indonesia’s domestic market is still recoveringfrom the Asian financial crisis. Passengernumbers are growing, although they are not yetback to pre-crisis levels, said Hakim. “The newentrants are driving that growth. We saw this asan opportunity to increase our revenue.”Citilink is based on simplicity: no cateringon board, shorter ground-time, simple reservationprocesses, check-in and boarding. It is aticketless service, with reservations made on itswebsite on a round-the-clock basis.Hakim said the response to Citilink, launchedin July, had been so positive the airline was lookingat expanding the fleet and adding routes.Best foot forwardStep forward Zuji, the new online travelproject formerly known as Travel ExchangeAsia. Zuji, which comes from a Chinese wordmeaning footprint, is a joint venture of 11Asia-Pacific airlines. They are Singapore Airlines,Qantas Airways, Cathay Pacific Airways, AirNew Zealand, Ansett Australia, EVA Air, ChinaAirlines, Malaysia Airlines, Garuda Indonesia,Royal Brunei Airlines and SilkAir.When operational, Zuji will be the Asia-Pacific’s answer to Orbitz, an online travel sitestarted by five U.S. carriers in June, and Europe’sOpodo, which involves nine airlines, and will belaunched by the end of the year.The projects are seen as attempts by themajor carriers to boost online sales, meetthe budget carriers head-to-head on theweb and save on commissions paid to travelagents.In brief:THE INDIAN Government has denied reports that SingaporeAirlines (SIA) wanted a 49% share in Air India. Forty percent is onoffer and SIA, in partnership with Indian industrial group, Tata, arethe only bidders left. Foreign airlines can bid for a maximum of 26%.SIA has said it has not made a final offer for Air India.AS PART OF its route restructuring, Philippine Airlines (PAL) will flyto three additional cities in the Asia-Pacific. In October, it will restorea direct link between Manila and Melbourne that will be an extensionof its three-times-a week Sydney service. Also in the last quarter, PALwill resume flights to Bangkok and Shanghai. PAL has cut frequenciesbetween Manila and Saudi Arabia from six to three times a week. Theservices will be restored when economic conditions improve.HONG KONG-BASED regional carrier, Dragonair, is to boost itsall-cargo services to Europe, the Middle East and China in Septemberfollowing the delivery of a B747-300 freighter. The new Dragonairownedplane will join a wet-leased B747-200 freighter from Atlas Air.Flights from Hong Kong to Dubai, Manchester and Amsterdam willincrease from three to five times a week. The Shanghai operationwill add a second weekly service.Garuda Indonesia: launched a no-frills domestic carrier, CitilinkSeptember 2001 | Orient Aviation | 13
N E W SBUSINESS round-upQantas results ‘aconsiderable achievement’After six successive years of record profits,Qantas Airways announced inAugust a 19.7% fall in net profit toA$415.4 million (US$220.2 million) for theyear to June 30. As the national airline hashad to contend with a price war in the domesticmarket, high fuel prices, a slowing inthe home and international economies anda weak Australian dollar, chairman MargaretJackson described the result as a “considerableachievement” and “a significant profitat a time when the global aviation industry isexperiencing unprecedented change and manyairlines around the world are reporting lossesor small profits”.Revenue for 2000-2001 was A$10.2 billion,an increase of 11.9% on the previous year.Revenue passenger kilometres rose 10%.Capacity grew 9.3%. The overall passenger seatfactor rose half a percentage point.Fuel prices took a heavy toll on costs. Expenditurerose 14.9%, mainly due to fuel andcapacity increases. Although hedging contractssaved Qantas A$406 million, its fuel costs rose54.1% to A$466.6 million. Cost per availableseat kilometre decreased by 1.3%The airline’s chief executive, Geoff Dixon,said the results for the 2002 financial yearwould remain under pressure.In May, Qantas eliminated one source ofcompetition in the domestic market by acquiringno-frills carrier, Impulse Airlines, and leasingits eight Boeing 717-200s and 13 Beech-craftaircraft.Cathay profits plungeCathay Pacific Airways’ financial accountshave been on a roller coaster ride in the lastcouple of years. In 1998, the airline made itsfirst loss. Last year, it posted record profits ofHK$5 billion (US$641 million). In the first sixmonths of the current financial year the pendulumswung yet again with profits plungingand a forecast of worse to come.Cathay announced it had made a net profitof HK$1.32 billion for the half year to June 30.This was a 39.4% drop on the HK$2.18 billionrecorded in the same period last year. Its turnoverfell 1.9% to HK$15.84 billion.Last year Cathay’s cargo division proveda shining light on the balance sheet, but in2001 slow growth in the U.S., Japan and otherAsian economies impacted both cargo andQantas chairman Margaret Jackson: a significant profit achieved under pressurepassenger traffic.The performance would have beenworse had it not been for an exceptional gainof HK$452 million from the disposal of theairline’s shares in network communicationservices company Equant, which was acquiredby France Telecom.Significantly, the affects of the Cathaypilots’ “limited industrial action”, which startedin early July and at press time was still ongoing,will be reflected in the second half of 2001’sfinancials.During the first six months of the yearpassenger traffic rose 2.3% to 5.9 million, butthis was put in the shade by an increase of8.6% in seat capacity. As a result passengerload factor fell 3.8 percentage points to 71.9%.Cathay took delivery of five new aircraft in theperiod under review.Cargo volume fell by 5.2% to 340,000tonnes. Cargo load factors and yields fellsharply, said the airline.With the exception of fuel prices, whichrepresented 18.8% of operating expenses, up1.1% on a year earlier, Cathay’s unit costs peravailable tonne kilometre fell by 1.6%.KAL to cut staffSouth Korea’s two international carriers,Korean Air (KAL) and Asiana Airlines sufferedheavy losses in the first six months of their financialyears. KAL’s net losses were 345.9 billionwon (US$276.7 million), 74% higher than thesame period last year. The airline’s operatingloss was 149.4 billion won. Passenger sales rose5.4% to 2.73 billion won, but cargo revenue,which accounts for 27% of its business, fell 5%to 744.1 billion won. KAL said a depreciation ofthe won, abnormally bad weather and a pilots’strike had contributed to the result.To cut costs KAL, which shed 1,600 jobs duringthe Asian financial downturn, will lay-off afurther 500 staff in coming months, accordingto the Chosun Ilbo newspaper.To raise cash, KAL also will sell off anumber of its 114 aircraft and put a freeze onnew orders.Asiana posted losses of 156.3 billion won(US$125 million) compared to a net profit of60.95 billion won a year earlier. Operatingprofit fell 75% to 26.42 billion won. Asiana’ssales rose 7.3% to 1.05 trillion won.The airline is to continue a company-wide10% cost reduction campaign, started in February,throughout the year. Asiana sold twoaircraft in May and in July issued asset-backedsecurities worth 350 billion won. The airlinesaid it would not cut its workforce.CAL holds its ownTaiwan’s China Airlines (CAL) made a slightincrease in pre-tax profit in its first six monthscompared to the same period in 2000. Its profitof NT$1.09 billion (US$31.5 million) was upfrom NT$1.07 billion last year. Passenger revenue,however, rose markedly to NT$21.5 billionfrom NT$18.1 billion in the same period in2000. Cargo revenue was down from NT$11.4billion last year to NT$10.7 billion in 2001. Currencyhedging and the sale of two B737-800shelped the bottom line, said CAL. (See CharmOffensive, page 28)14 | Orient Aviation | September 2001
Page 1 and 2: VOL. 8 NO. 10 SEPTEMBER 2001MAGAZIN
Page 3 and 4: P U B L I S H E R ’ S L E T T E R
Page 5: N E W SRegional round-upSafety rati
Page 9 and 10: m a i n s t o r yPEOPLE TRAFFICKERS
Page 11 and 12: m a i n s t o r ytors, has been awa
Page 13 and 14: n e w sBy Tom BallantyneThe convolu
Page 15 and 16: ing partner Emirates to pick-up Sri
Page 17 and 18: carrier’s inflight training centr
Page 19 and 20: i n f l i g h tBy Jonathan SharpGra
Page 21 and 22: S p e c i a l R e p o r tAIRPORTSTh
Page 23 and 24: s p e c i a l r e p o r tTIME FOR A
Page 25 and 26: New Zealand’s biggest airport,Auc
Page 27 and 28: By Tom BallantyneThe new owner of A
Page 29 and 30: Schiphol boost for KLIA?By Tom Ball
Page 31 and 32: a deterioration in FLF as the decli
Page 33 and 34: Monthly international PAX statistic
Page 35 and 36: AAPA monthly international statisti

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