China Airlines - Orient Aviation

Vol. 15 No. 08 June 2008 

GOLDEN 

HARVEST 

Record profits highlight 

boss Mineo Yamamoto’s 

transformation of ANA 

FALL-OUT: 

Will the Asia-Pacific 

suffer from the knock-on 

effects of the economic 

downturn in the US? 

War of words 

splits carriers 

in Malaysia 

More problems 

for Bangkok’s 

Suvarnabhumi airport 

Aviation leaders 

unite and commit 

to cleaner skies 

SPECIAL REPORT: Information Technology

comment 

The region holds its breath 

In the past, when U.S. stock markets plunged and 

recession set in there was an inevitability about what 

followed, espoused in that old adage: when the U.S. 

sneezes, the rest of the world catches a cold. 

If the U.S. is not already in recession, it is as close 

as it can be without being there. Most of its airlines have only 

just emerged from bankruptcy, but they are in a perilous state 

once again. 

Huge losses were recorded on their balance sheets in the 

first quarter of this year. Planes are being grounded as eroding 

consumer confidence sees customers tighten their belts and stay 

on the ground. Desperate operators are looking at mergers to 

rationalize operations. 

Analysts say Europe is showing signs of the U.S. pattern 

as banks report huge losses and a credit squeeze tightens. 

Global air traffic, which has been growing strongly for several 

years, began to slide in December. The latest figures from the 

International Air Transport Association, for March, show the 

trend continuing. 

So let us hope the experts quoted in our main story in this 

issue (Fall-out P.16) are correct. Their opinion is there is now 

a disconnect between the U.S. economy and the economies 

of the Asia-Pacific and that our region is capable of surviving 

any spill-over from a severe economic slowdown in the U.S. 

and Europe. 

As IATA chief economist, Brian Pearce, puts it, much of the 

extraordinary growth in China, India and elsewhere in the Asia- 

Pacific is not closely linked to the economic coat tails of the 

U.S. It has been domestically generated and should continue, 

maintaining the underlying demand for air travel. 

Nevertheless, one way or another there is bound to be some 

knock-on effects from the U.S.’s economic woes. Long-haul 

travel between the Asia-Pacific and the rest of the world may 

be impacted as big corporate firms reduce their travel budgets. 

There are some signs of a dip in consumer confidence in Korea 

and Japan and that is a threat to the region. 

There is also the issue of over-capacity, with large numbers 

of new aircraft arriving in the Asia-Pacific at a time traffic 

is slowing. This situation means more competition, pricing 

pressures and dipping yields. To cap it all record fuel prices 

are showing no sign of easing. At press time they had reached 

$126 a barrel. 

While there will be continuing growth in Asia-Pacific 

markets, it is undoubtedly a time for caution and for 

airline managers to keep a very close watch on economic 

developments. ■ 

TOM BALLANTYNE 

Chief Correspondent 

The Association of Asia Pacific Airlines’ members and contact list 

Air New Zealand 

Chief Executive, Mr Rob Fyfe 

VP Public Affairs and Group Communications, 

Mr Mike Tod 

Tel: (64 9) 336 2770 Fax: (64 9) 336 2759 

All Nippon Airways 

President and CEO, Mr Mineo Yamamoto 

Dep. Director, Public Relations, Mr Kaz Iwakata 

Tel: (81 3) 6735 1111 

Fax: (81 3) 6735 1115 

Asiana Airlines 

Vice Chairman & CEO, 

Mr. C.B. Park 

Managing Director, PR, Mr Hong Lae Kim 

Tel: (822) 2669 5300 Fax: (822) 2669 3111 

Cathay Pacific Airways 

Chief Executive Officer, Mr Tony Tyler 

Corporate Communications General Manager, 

Mr Dane Cheng 

Tel: (852) 2747 8868 Fax: (852) 2810 6563 

China Airlines 

Chairman & President, Mr Ringo Chao 

VP, Corp Comms & Customer Relations, 

Mr. Bruce Chen 

Tel: (8862) 2514 5750 Fax: (8862) 2514 5754 

Dragonair 

Chief Executive Officer, Mr Kenny Tang 

Head of Corp. Communications 

Ms May Lam-Kobayashi 

Tel: (852) 3193 3193 Fax: (852) 3193 3194 

EVA Air 

Chairman, Mr Steve Lin 

Executive VP, Group Public Relations, 

Mr K. W. Nieh 

Tel: (8862) 2500 1122 Fax: (8862) 2500 1523 

Garuda Indonesia 

President & CEO, Mr Emirsyah Satar 

VP Corporate Communications, Mr Pujobroto 

Tel: (6221) 231 2612 

Fax: (6221) 381 1486 

Japan Airlines 

President, Mr Haruka Nishimatsu 

Executive Officer, Public Relations, 

Mr Toshinari Oshima 

Tel: (813) 5460 3109 Fax: (813) 5460 5910 

Korean Air 

Chairman and CEO, Mr Yang Ho Cho 

Managing VP, Corporate Communications, 

Mr Nam Il Park 

Tel: (822) 2656 7065 Fax: (822) 2656 7288/89 

Malaysia Airlines 

Managing Director, Mr Idris Jala 

Gen Mgr, Int’l Affairs, Mr Germal Singh Khera 

Tel: (603) 2165 5137 

Fax: (603) 2161 0558 

Philippine Airlines 

President, Mr Jaime Bautista 

VP Corporate Communications, 

Mr Rolando Estabilio 

Tel: (632) 817 1234 Fax: (632) 817 8689 

Qantas Airways 

Managing Director and CEO, Mr Geoff Dixon 

Head of Corporate Communications, 

Ms Belinda de Rome 

Tel: (612) 9691 4773 Fax: (612) 9691 4187 

Royal Brunei Airlines 

Chairman, Pengiran Dato Hj Abu Bakar Ismail 

CEO, Mr Ray Sayer 

Tel: (673 2) 229 799 

Fax: (673 2) 221 230 

Singapore Airlines 

Chief Executive Officer, 

Mr Chew Choon Seng 

VP Public Affairs, Mr Stephen Forshaw 

Tel: (65) 6541 5880 Fax: (65) 6545 6083 

Thai Airways International 

President, Flying Officer Apinan Sumanaseni 

Director, Corporate Communications 

M.L. Ajcharaporn Na Songkhla 

Tel: (662) 513 3364 Fax: (662) 545 3891 

Vietnam Airlines 

President & CEO, Mr Pham Ngoc Minh 

Dep Director, Corp Affairs, 

Mr Nguyen Huy Hieu 

Tel: (84-4) 873 0928 Fax: (84-4) 872 1161 

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june 2008 

CONTENTS 

O 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 8 

COVER STORY 

30 GOLDEN 

HARVEST 

In three years, president and chief 

executive, Mineo Yamamoto’s 

transformation of ANA has culminated 

in record profits. Along the way he has 

upgraded the inflight product, taken cargo 

to a new level and introduced IT innovation 

MAIN STORY 

16 FALL-OUT: Will Asia-Pacific airlines 

suffer knock-on effects from the U. S. 

economic downturn? 

AIRPORTS 

23 More protests expected as Bangkok’s 

Suvarnabhumi Airport granted fast 

track expansion 

NEWS BACKGROUNDER 

22 War of words. MAS and AirAsia no 

longer ‘flying together’ 

40 Airbus called 

to account 

again about 

latest A380 

delay 

COMMUTER AVIATION 

26 Korean Air prepares to launch new 

carrier 

ENVIRONMENT 

36 Aviation leaders 

unite as never 

before 

38 US Air Force 

chief a man on a 

‘green’ mission 

ORIENT AVIATION june 2008

SPECIAL REPORT 

Information Technology 

42 IT spending soars 

44 When is an LCC not an 

LCC? 

46 Trying to come to grips 

with lost baggage 

48 Electronic flight bags the way ahead 

NEWS 

10 Cross strait flights to hit China Airlines’ Hong Kong route 

10 China unveils jumbo jet company 

10 New airport for Taipei 

10 LCC terminals open in China 

10 China Southern, Air France/KLM in cargo joint venture 

11 Record profit for Singapore Airlines 

11 China Eastern seeks international loans 

11 JAL exceeds income forecast 

12 China Southern benefits from stronger yuan 

12 Jet fuel tops 40% of THAI’s operating costs 

51 Busy times ahead – preview of IATA’s annual meeting 

REGULAR FEATURES 

3 Comment: The region holds its breath 

49 ARINC’s new arrival 

management system 

proves timely 

50 Hi-tech experience for 

ANA passengers at 

Haneda 

52 Business Digest: Capacity growth hits Vietnam Airlines 

Association of Asia Pacific Airlines Secretariat 

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Website: www.orientaviation.com 

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Barry Grindrod 

E-mail: orientav@netvigator.com 

Publisher 

Christine McGee 

E-mail: cmcgee@netvigator.com 

Chief Correspondent 

Tom Ballantyne 

Tel: (612) 9638 6895 

Fax: (612) 9684 2776 

E-mail: tomball@orientaviation.com 

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Charles Anderson 

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Suite 9.01, 9/F, Kompleks Antarabangsa 

Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia 

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The views expressed in this magazine are not necessarily 

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june 2008 ORIENT AVIATION

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egional round-up 

Cross strait flights to hit 

CAL’s Hong Kong route 

Taiwan flag carrier, China Airlines’ 

(CAL), Taiwan-Hong Kong network 

would be reduced by up to 20% if, as 

expected, weekend direct flights to China are 

introduced on July 4, said the airline. 

The 90-minute cross strait chartered 

flights would compare at present with a 

journey of up to half day, via either Hong 

Kong or Macau, for Taiwanese travellers to 

the Mainland. CAL’s general manager in 

Hong Kong, Michael Wu, told the South 

China Morning Post: “Its pretty obvious 

people would prefer to travel directly to the 

Mainland instead of spending half a day 

transiting in Hong Kong.” 

Wu said CAL planned to re-deploy some 

of its A330-300s to the chartered services, 

which are expected to operate to Beijing, 

Shanghai, Guangzhou and Xiamen from 

Taiwan’s Taipei, Taichung and Kaohsiung. 

CAL, which flies 270,000 passengers 

between Hong Kong and Taiwan each month, 

is one of five airlines providing 3,000 flights 

monthly from Hong Kong to Taiwan’s three 

major cities. 

Separately, both CAL and Cathay Pacific 

Airways have said relaxing the direct cross 

strait flight ban would bring long-term 

benefits to the route, as the market would 

become bigger. 

China unveils 

jumbo jet company 

In May, Mainland China aviation regulators 

officially unveiled the company 

which they hope will produce the 

nation’s own jumbo jets. The Commercial 

Aircraft Corp. of China based in Shanghai, 

has been set the task of designing a large 

China Southern sets date for cargo joint venture 

China Southern Airlines (CSA) chairman, Liu Shaoyong, said at its annual 

results media conference in Guangzhou that the airline would launch a joint 

venture cargo airline with Air France/KLM by year-end. 

However, he said, the partners had not decided if the so far un-named cargo carrier 

would be based in Guangzhou or in Shenzhen, on the Hong Kong border. 

The European carrier has long courted CSA in the hope the cargo airline would come 

to fruition. 

Jade Cargo, a joint venture cargo carrier majority-owned by Shenzhen Airlines and 

Lufthansa, has been operating from Shenzhen since 2007. ■ 

commercial jet airliner and provided with 

start-up capital of US$2.72 billion. 

Among the shareholders are the 

Assets Supervision and Administration 

Commission (32%), AVIC I and the builder 

of the ARJ21 commuter jet, AVIC II. 

At the media launch, company chairman, 

Zhang Qingwei, was encouraged by vicepremier 

Zhang Dejiang, to “let China’s large 

plane fly into the sky at an early date”. 

But analysts continue to insist it will be 

at least a decade before China can produce 

the jumbo jet of its dreams. 

Air Deccan founder 

to set up cargo airline 

Indian low-cost carrier pioneer, Capt. G. 

R. Gopinath, has set up a cargo carrier 

following the sale of his airline company, 

Deccan Aviation, to the Kingfisher 

Airlines’ parent company, the UB Group. 

Deccan Cargo, which its owner has 

initially equipped with nine leased A310s, 

provided by his own investment funds, will 

be run by former Federal Express executive, 

Jude Fonseka, from a network of bases 

across India. 

Gopinath started his domestic airline, 

Bangalore-based Air Deccan, in 2003. 

He defied naysayers who said India’s overregulated 

market would defeat him and 

quickly established a niche – and a brand 

– for his airline with his low-fare promotions 

and ebullient leadership. 

But as Indian aviation was deregulated 

intense competition from other airline startups, 

with deeper pockets than Air Deccan, 

forced it into the red and resulted in the sale 

of the LCC. ■ 

AIRPORTS 

LCC terminals in China 

Two Chinese cities, Zhengzhou and Xiamen, have followed the 

lead of Malaysia and Singapore by providing separate terminal 

facilities for budget carriers. 

Zhengzhou airport in Henan has converted an unused airport hall 

into a low-cost carrier (LCC) terminal, which now provides services for 

its first customer, Shanghai-based LCC, Spring Airlines. 

In coastal Fujian, Xiamen’s city fathers are upgrading a former cargo 

terminal to a dedicated LCC facility for domestic and international 

budget airlines, which analysts see as a good investment once cross 

strait flights between China and Taiwan are approved. 

Taipei plans new airport 

Taiwan’s new president, Ma Ying-jeou, is committed 

to rebuilding Taoyaun International Airport and 

establishing a satellite town around the upgraded 

facility, which is much closer to Taipei than the present 

international airport. 

Ma said the US$40 million project, which will include 

a new terminal, another runway and ground handling and 

maintenance centres, will be serviced by a new satellite 

town of hotels, shopping centres, exhibition facilities and 

residential precincts. ■ 

10 ORIENT AVIATION june 2008

usiness round-up 

JAL beats 

income forecast 

Japan Airlines (JAL) reported a better 

than expected profit of Y16.9 billion 

(US$164 million) for the 12 months 

to March 31, after the group doubled its 

forecast weeks before announcing its annual 

results. 

JAL said the profit, up from a predicted 

Y7 billion for the 12 months, was based on 

healthy business traffic, an effective costcutting 

programme as well as the absorption 

of a US$110 million fine for pleading guilty 

to participating in an air cargo price cartel 

in the U.S. 

The airline said it would continue its cost 

rationalisation strategy and sharpen its focus 

on premium strategies intended to attract 

greater international business traffic to the 

carrier. It forecast a 44% increase in operating 

costs due to rising jet fuel prices and 

capacity constraints for the coming year. 

JAL’s revenue increased by Y25.1 

billion to Y1.827 billion, with international 

passenger revenue up 4% to Y754.3 

billion. Operating costs for the 12 months 

were reduced by Y138.5 billion to Y2.140 

billion. 

Record profits, but a 

challenging 2008 - SIA 

The Singapore Airlines Group 

announced higher than predicted 

earnings for its final quarter and 

reported a group operating profit of S$2.125 

billion (US$1.36 billion) for the full fiscal 

year. 

The aviation group, made up of 

Singapore Airlines, SIA Cargo, SATS, SIA 

Engineering and SilkAir, said annual group 

CEA seeks international loans 

China Eastern Airlines 

(CEA) is in negotiations 

to raise up to 15 

billion yuan (US$2.145 billion) 

as part of an ambitious plan 

believed to include a re-submission 

of the Singapore Airlines 

(SIA)/Temasek offer to buy 

24.8% in the struggling carrier. 

CEA, which is the weakest 

of the “big three” Mainland 

airlines, had hoped to have SIA 

as an investor from this year, 

but the Singapore offer was 

operating profit improved by 61.6% for the 

12 months to March 31, but the coming year 

would be “more challenging” for airlines. 

The company said Singapore Airlines 

(SIA) recorded a 60.1% rise in operating 

profit, to S$1.644 billion and SIA Cargo 

turned around a loss of S$32 million last 

year to an operating profit of S$132 million 

for the latest 12 months. 

Net profit for the fourth quarter to March 

31 was S$528 million (US$387 million) 

compared with S$671 million 12 months 

earlier - when results included the sale 

China Eastern Airlines: pilot protests cost 

airline dear 

scuppered by minority shareholders who were promised a higher price per share by Air 

China investors. CEA said the funds would be largely used to pay for new aircraft. 

CEA’s problems are not just about cash. In April, 18 CEA pilots turned back on 

domestic flights from Kunming to Dali and Xinxiang in an organised protest about 

salaries and conditions, with another 78 CEA pilots reported to have resigned since the 

incidents. Hundreds of passengers were inconvenienced by the industrial action. 

The Civil Aviation Administration of China subsequently fined CEA 1.5 million 

yuan (US$214,500) and withdrew the routes from the carrier. The Shanghai airline 

has calculated the suspension of the lucrative services will reduce income by up to 400 

million yuan this year. ■ 

of a Singapore central business district 

property. 

“The group benefited from a strong business 

environment for the year,” said SIA. 

“However, the current turmoil in global 

financial markets has clouded the outlook 

for discretionary air travel. 

“In addition, jet fuel prices, in step with 

crude oil prices, look set to stay well above 

US$100 a barrel this year. The combination 

of a global economic slowdown and record 

high fuel prices will make this a more 

challenging year for airlines.” 

june 2008 ORIENT AVIATION 11

usiness round-up 

China Southern benefits 

from stronger yuan 

China Southern Airlines (CSA), 

the Mainland’s largest carrier, has 

reported a net profit of 1.85 billion 

yuan (US$264.5 million) for the 2007 year. 

Revenue increased by 18% to 55.87 billion 

yuan, benefiting from an appreciation 

in the national currency. However, the 

airline missed its profit forecast, a result 

it attributed to rising jet fuel prices and 

increased international competition. 

CSA also announced its majority-owned 

subsidiary, Xiamen Airlines, would buy 20 

B737s from Boeing, which are scheduled for 

delivery from the second quarter of 2014 to 

October 2015. 

Air China reports 

147% profit rise in Q1 

Beijing-based Air China has 

announced a 147% profit increase 

for its first quarter, to March 31, 

based on a 4% increase in the yuan and 

strong passenger demand. Net income was 

1.04 billion yuan (US$148.9 million) for 

the three months, with analysts predicting 

the full-year profit for the airline could 

be as high as 29%, as spectators, tourists 

and participants gather in Beijing for the 

Olympic Games in August. 

The carrier said average passenger 

capacity had increased to 77.1%, with 8.3 

million travellers flying on Air China in the 

reported three months. 

Jet fuel tops 40% of 

THAI’s operating costs 

Thai Airways International’s 

(THAI) first quarter profit was 

almost halved, to 2.22 billion baht 

(US$68.71 million), from 4.23 billion baht a 

year earlier, the carrier said in May. 

THAI said foreign exchange charges 

were incurred when some loans were 

transferred to baht and a 40% increase in 

fuel costs had produced the 48% profit drop 

over the same months a year ago. 

The carrier, which has ordered the 

A380, announced a foreign exchange gain 

of 1.47 billion baht in the 2007 first quarter 

compared with a 664.2 billion baht loss 

for the same period this year. THAI said it 

would need to produce savings, including 

a possible review of its fleet purchases, as 

its jet fuel was now averaging above 40% 

of operating costs at the carrier. 

Taiwan carriers’ 

record Q1 losses 

Both China Airlines (CAL) and 

EVA Air blamed hefty first 

quarter losses of NT$2.97 billion 

(US$98 million) and NT$2.29 billion 

respectively on rising jet fuel prices. Both 

carriers said operating costs from fuel had 

risen from between 38% to 40% in the final 

three months of last year to 46% for the 

three months to March 31. CAL said it has 

increased its fuel hedging to 70% of total 

fuel needs for the second quarter. 

All Nippon Airways results: Cover story, 

Golden Harvest. Page 30. ■ 

shorttakes 

AIRPORTS>> Australia’s Queensland 

government will sell its equity in Cairns, 

Mackay and Brisbane airports to raise 

funds for hospital investment in the northern 

Australian state. Kunming International 

Airport is in the market for up to US$400 

million from foreign investors to fund expansion 

plans and become China’s fourth largest 

airport after Beijing, Shanghai and 

Guangzhou. 

ATM>> A China Eastern Airlines (CEA) 

B737-700, equipped with Jeppesen’s 

new Required Navigation Performa (RNP) 

system successfully completed a trial of 

the new technology at China’s Lijiang 

Airport. CEA, Jeppesen, Boeing and the 

Civil Aviation Administration of China 

(CAAC) are working together to expand air 

routes across China. 

CARGO>> Cathay Pacific Airways 

plans to add a three-times-a-week service 

between Hong Kong and Houston and 

Miami from September 2. Hong Kong Air 

Cargo Terminals (HACTL) will build three 

new canopies to provide all weather protection 

for clients’ cargo, at a cost of $2.7 

million. Completion is scheduled for mid- 

2009. 

CODE-SHARES>> Thai Airways 

International and Royal Brunei Airlines 

will code-share on the Bangkok to Bandar 

Seri Begawan route. 

ENGINES>> SilkAir, based in Singapore, 

has ordered IAE V2500 Select engines for 

up to 20 of its A320s. 

FLEET>> Asiana Airlines, based in 

Seoul, has finalised an order for two B777- 

200ERs, with the option of converting the 

order to the B777-300ER if required. Biman 

Bangladesh Airlines has ordered four 

B777-300ERs and four B787-8 Dreamliners 

with purchase rights for eight aircraft: four 

B777s and four B787s. Dragonair has 

leased two new A320-200s from CIT, with 

deliveries scheduled for 2009 & 2010. 

MRO>> Qantas Airways has awarded 

Lufthansa Technik AG a 10-year contract 

to service its GE and CFM56-7 engines for 

its B737, B767, B747 and A330 airliners, 

in a deal that requires Lufthansa Technik to 

buy a 50% interest in Qantas’s MRO company, 

Jet Turbine Services in Melbourne. 

Overhaul and repair of the engines will be 

shared between the Australian facility and 

Lufthansa Technik’s Hamburg plant. 

ROUTES>> AirAsia X will launch a 

six-times-a-week service between Kuala 

Lumpur and Perth, Australia in November, its 

third route after Queensland and Hangzhou, 

since its launch in late 2007. Hong Kong 

Express has added Kagoshima to its first 

Japanese route - Okinawa – from its Hong 

Kong base. Singapore Airlines (SIA) 

started its daily, 100-seat, all-business class 

flights between Singapore and New York, 

with a re-configured A340-500, on May 

15. SIA will use one of its A380 aircraft on 

services between Singapore and Beijing 

during the Olympic Games this August. 

Viva Macau will double its flights between 

the Asian gambling enclave and Tokyo to 

four-times-a-week, to Jakarta to five-timesa-week 

and to Sydney to four-times-a-week, 

all from July. It also plans to launch a twice 

a week charter service, subject to government 

approval, between Macau and 

Okinawa. ■ 


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main STORY 

FALL-OUT 

Will Asia-Pacific airlines suffer from the knock-on effects of 

the U. S. economic downturn as North American airlines deal with 

the double blow of escalating jet fuel prices and negative cash flows? 

Tom Ballantyne reports. 

The good news is that most airline 

industry experts believe 

Asia-Pacific economies are 

strong enough to withstand 

the worst of the fall-out from 

America’s economic woes. The region’s 

airlines will continue to experience air traffic 

growth, it is predicted. 

The bad news is that while Tokyo, 

Singapore or Sydney may be a long way 

from the U.S., there will almost certainly 

be a slowdown in the region’s industry 

and other factors, including the potential 

for over-capacity, may threaten yields and 

profitability as the confidence crisis reaches 

beyond the shores of North America. 

That is the prognosis for the region’s 

operators as they emerge from a surprisingly 

bumper period of profitability. In 2007, 

despite a tough competitive environment 

and soaring fuel prices, the region’s major 

carriers were in the money. 

Now, they are bracing themselves “for 

some turbulence in the remainder of the 

year”, according to Andrew Herdman, 

director general of the Association of Asia 

Pacific Airlines (AAPA). 

Last year, the 17 AAPA member carriers 

reported combined revenue of US$103 billion, 

11% higher than the previous year , and 

announced US$5.2 billion in profits. But as 

global markets reel under the impact of U.S. 

economic woes and consumer confidence 


takes a battering, there is growing industry 

uncertainty about the reach and depth a U.S. 

recession will have on other markets around 

the world. 

“Clearly, the U.S. economy is weakening 

and it’s already evident that is effecting 

demand in the U.S. domestic market ... 

the question is to what extent it is going to 

spread to other parts of the world, including 

the Asia-Pacific,” Herdman told Orient 

Aviation. 

“The IMF (International Monetary Fund) 

has revised its forecasts for global growth 

downwards, but in Asia that means you 

are simply going from low double-digit to 

around 9% or 10% for countries like China, 

and perhaps 1% to 1.5% slower growth in 

other countries. 

“How big an impact is that going to have? 

I think it means we will still see growth in 

travel demand, but it is not going to be as 

good as what we’ve seen.” 

There is a footnote. Herdman warned 

other factors, including the additional capacity 

planned to arrive in the region this year, 

pose a threat. With slower growth and more 

seats, load factors, which peaked at around 

77% last year, could start to decline. 

“If load factors come down a little that 

changes the complexion of the pricing 

environment. Couple that with oil prices 

pushing $126 a barrel and it is a toxic 

combination from the point of view of 

airlines this year. So carriers are bracing 

themselves for turbulence in the year ahead,” 

said Herdman. 

The contention the Asia-Pacific can 

weather the U.S. economic storm better than 

other regions receives support in a report 

released by Standard & Poor’s in May. Titled 

“Asian Resilience Amid Global Turbulence” 

it was prepared by the company’s chief 

economist for the Asia-Pacific, Dr. Subir 

Gokarn. 

“Strong regional drivers will help insulate 

the Asia-Pacific from the adverse impact of 

a moderate U.S. recession,” he said. While 

growth in the region would slow down, 

it would nevertheless remain positive, he 

added. 

“The ability of the region’s economies to 

insulate themselves against a U.S. recession 

is enhanced by their ability to exploit the 

opportunities in the region through greater 

economic integration ... Asia does have the 

ability to continue to grow quite strongly 

even when the rest of the global economy 

finds itself in some trouble,” he said. 

The worsening U.S. situation is taking 

‘A lot of the growth that we 

have seen, certainly in places 

like China and India, is not so 

much linked to the coat tails 

of the U.S.’ 

Brian Pearce 

Chief Economist 

IATA 

its toll on global airline profitability. The 

International Air Transport Association 

(IATA) is revising the industry’s profit forecast 

for the third time, its chief economist, 

Brian Pearce, told Orient Aviation. 

The new forecast will be announced at 

IATA’s annual general meeting in Istanbul 

on June 2. Originally forecasting $7.6 billion 

in combined profits this year, IATA lowered 

this to $5 billion in December last year and 

to $4.5 billion in March. 

But there remains some doubt that the 

record fuel prices of $126 a barrel of crude 

(a barrel of jet fuel neared $150 last month) 

would allow airlines to make any profit at 

all. 

Asked if there would still be some 

income, Pearce said: “Since that March 

forecast oil prices have gone even higher 

and the economic situation has, if anything, 

deteriorated even further ... Who knows? 

We’ll have a close look at the numbers.” 

Last year, the world’s airlines paid $156 

‘Asia-Pacific airlines are 

bracing themselves for 

some turbulence in the 

remainder of the year’ 

Andrew Herdman 

Director General 

AAPA 

‘Chaotic conditions in the U.S. 

won’t necessarily translate to 

Europe and the Asia-Pacific’ 

Geoff Dixon 



billion for their fuel (an average of $86 a 

barrel), which was 32% of operating costs. 

AAPA airlines paid $27 billion, representing 

almost 30% of their costs. 

“Right now, at today’s oil prices, it must 

be 40% of operating costs,” said Herdman. 

“So it has to be passed on to the customers 

and that is another factor in a weakening 

economy where people are looking to make 

economies in terms of expenditure. If prices 

are going up, it will probably undermine 

demand,” he said. 

His concern comes despite a relatively 

good start to 2008 for Asia-Pacific operators. 

In March, according to the AAPA, its 

members carried 12.7 million international 

passengers, up 3.9% on the same month in 

2007, keeping average passenger load factors 

unchanged at 78.5%. 

Nevertheless, Herdman said the outlook 

for the remainder of the year “is decidedly 

less optimistic, given clear evidence of 

a slowing global economy coupled with 

cripplingly high fuel prices. The doubling 

of the oil price compared to a year ago has 

already triggered the collapse of several 

carriers around the world and even wellcapitalised 

and well-run airlines are bracing 

themselves for further turbulence in the 

months ahead”. 

The casualties have mostly been in 

the U.S., where Aloha Airlines, Frontier 

Airlines, Champion Air, ATA Airlines, 


main STORY 

Oasis Hong Kong Airlines: a recent casualty 

Skybus Airlines and all-business class 

carrier, Eos Airlines, were among the airlines 

to stop operating. 

In Asia, two operators, Indonesia’s 

Adam Air and Oasis Hong Kong Airlines 

also ceased business. Massive losses 

amounting to hundreds of millions of dollars 

among U.S. majors in the first quarter of 

this year have also sparked moves towards 

what are being tagged “shotgun mergers” 

between such legacy operators as American, 

Continental, United, Southwest Airlines 

and US Air. 

The latest statistics from IATA, released 

last month, confirmed a sharp downward 

trend in global air traffic growth that began 

last December is continuing. On the surface, 

the latest figures, for March, looked good, 

with international passenger demand 

increasing 5.8% and load factors at 77.7%. 

But the devil was in the detail. IATA 

pointed out the result was “skewed” by 

the Easter holiday period, which in 2007 

was in April, but in March this year. When 

adjusted to take into account artificially high 

utilisation over the Easter period, the March 

load factor was 76.1%. 

While still high, this is 1.7 percentage 

points lower than the 77.8% recorded for 

the same month in 2007. This fall indicated 

reduced demand occurred faster than 

airlines could cut capacity. Adjusting for 

this distortion, real traffic growth in March 

was only 4%. 

“Traffic only tells a part of the story,” said 

IATA director general, Giovanni Bisignani. 

“Astronomical oil prices are hitting hard. 

And the buffer of an expanding economy 

has disappeared. The fortunes of the industry 

have taken a major turn for the worse.” 

He said a slowdown in Asia-Pacific 

carrier traffic to 4.3% is significant (this 

figure is different from the AAPA March statistic 

because IATA’s numbers include many 

non-AAPA airlines) because the region’s 

economies were expected to immunise them 

from the U.S.’s problems. 

Even in the Middle East, where carriers 

saw a double-digit increase of 15.4%, reflecting 

the expanding economies in that region, 

this was a “significant downward step” from 

the 20.4% in growth recorded in 2007. 

“In the face of such dramatic shifts in the 

global economy, consolidation is critical,” 

said Bisignani. “The proposed consolidation 

in the U.S. is good news. But it makes 

no sense that consolidation is limited to 

domestic partners. This is a global industry 

that needs to be run like a global business.” 

A mixed picture is emerging in Asia- 

Pacific aviation markets. For example, 

despite the gloomy landscape, Qantas chief 

executive, Geoff Dixon, said the airline 

is sticking to it’s profit guidance that the 

airline’s pre-tax profits in the current year 

(ending June 30) will be at least 40% higher 

than last year’s US$933.8 million. Local 

rivals Virgin Blue and Air New Zealand have 

both signalled forecast downgrades. 

Dixon thinks the impact on the industry 

of U.S. problems is not uniform and “chaotic 

conditions in the U.S. won’t necessarily 

translate to Europe and the Asia-Pacific”, 

although he does expect more airlines to fall 

by the wayside. 

He also believed fuel prices will start to 

fall within about six months. 

“There is one thing this industry has 

shown in recent times and that is it comes to 

‘Strong regional drivers 

will help insulate the Asia- 

Pacific from the adverse 

impact of a moderate U.S. 

recession’ 

Dr Subir Gokarn 

Chief Economist, Asia-Pacific 

Standard & Poor’s 

its own equilibrium at some stage or another 

... the industry is more robust that it was seven 

or eight years ago and even governmentowned 

airlines have been forced to get their 

house in order,” said the Qantas chief. 

“People are going to continue to travel. 

Now that there’s an economic problem, 

people are still out there trying to get new 

business.” 

Malaysia Airlines chief executive, Idris 

Jala, has disclosed the carrier is not ignoring 

the possibility of consolidation and has 

given some thought to a merger with another 

airline. 

He said MAS would look at potential 

partners worldwide, but stressed the carrier 

was merely considering opportunities. No 

talks are underway with potential partners. 

Idris believes the industry does face a serious 

over-capacity issue. 

While business confidence in major 

industrial economies such as Japan and Korea 

is showing signs of weakening, it appears to 

be holding up strongly elsewhere, including 

China, Southeast Asia and Australia. 

China’s major airlines – Air China, 

China Southern Airlines and China Eastern 

Airlines - are all back in profit, reporting 

double-digit rises in passenger numbers and 

an 11.9% growth in the country’s economy 

through 2007. 

Air China reported a 30.37% rise in net 

profit last year to US$555.7 million. China 

Eastern had a net profit of $83.9 million in 

2007, compared with a loss of $428.2 million 

in 2006. China Southern saw income rise 

from $29.9 million in 2006 to $264.9 million 

last year. However, much of the income was 

generated by foreign exchange gains as the 

yuan strengthened against a weakening 

U.S. dollar. 

In the low-cost carrier sector (LCC), the 

chief executive of Singapore-based Tiger 

Airways, Tony Davis, sees a silver lining in 

the economic gloom. 

Speaking at a May airline distribution 

conference in Kuala Lumpur, he suggested 

passengers will “downturn” in a recession, 

opting to fly on budget airlines as they tighten 

their belts. 

“Generally, well-run, efficient, low-cost 

carriers weather these storms better than full 

service carriers. If the U.S. sneezes, Asia 

won’t catch a cold,” he said. 

Nevertheless, budget operators are 

feeling the pinch. Speaking at the same 

event, AirAsia group chief executive, 

Tony Fernandes, said he has put a brake on 

expansion. 


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main STORY 

Elsewhere, there is also a belief that 

booming economic regions such as Asia and 

the Middle East will escape the worst of the 

fall-out. In Dubai, the chairman and chief 

executive of the Emirates Airline group, 

Sheikh Ahmad Bin Saeed Al Maktoum, said 

his airline would continue to achieve strong 

passenger and revenue growth in the current 

financial year despite the challenges of rising 

fuel prices and economic slowdown in some 

parts of the world. 

“We do not anticipate a drop in the number 

of passengers ... a slowdown may be happening 

in places like the U.S., but we do not see 

this trend here,” he said. 

“Emirates is fortunate to be located in 

Dubai in the middle of the East-West route 

and the threat of a global economic downturn 

will be offset by the economic boom in the 

Middle East.” 

What is the likely scenario for the Asia- 

Pacific’s aviation markets? IATA’s Pearce 

explained the region had experienced four 

years of the strongest global economic growth 

in 30 years. 

“Up to 2007 the industry was benefiting 

from exceptionally strong growth and 

therefore exceptionally strong travel growth 

and revenues. The tough period ahead of us is 

because that seems to be dropping away while 

fuel prices are rocketing,” said Pearce. 

“The economic cycle seems to have 

changed quite abruptly because of the 

bursting of the housing bubble in the U.S., 

sub-prime markets and all the problems the 

banks have faced.” 

In the U.S., consumer confidence has 

declined to levels not seen since the early 

1990s. “The question for the rest of the 

world is: what are the knock-on effects of the 

confidence crisis?” he said. 

Pearce believed there will be an impact on 

Europe, but considered the Asia-Pacific was 

in a different situation. 

“A lot of the growth that we have seen, 

certainly in places like China and India, is 

not so much linked to the coat tails of the 

U.S. There has been a big investment boom 

and there’s been liberalization of economies,” 

he said. 

“A lot of expansion is domestically 

generated. So there has been underlying 

demand for travel. Are the economies [of 

Asia] exposed to the U.S. slow down? The 

U.S. is still an important export market so 

some companies will be exposed. But it 

appears there is still a lot of growth potential 

there because of regional investment and the 

opening up of new markets that have taken 

‘Generally, well-run efficient 

low-cost carriers weather 

these storms better than full 

service carriers’ 

Tony Davis 


Tiger Airways 

place, which should support air travel.” 

A worry that high yield corporate travel 

could begin to slow as big companies reduce 

travel has yet to materialize, although it 

remains a threat if economic conditions 

worsen. 

“Corporate travel seems to be holding 

up extremely well and that is a reminder the 

economies are still in good shape in Asia,” 

said Herdman. “Having said that, if you look 

at the troubles afflicting the financial services 

industry, who are big customers of corporate 

travel, they are talking about job losses. 

“That’s a global business and some of 

the big centres in Asia are plugged into that 

global financial services network. We know 

from previous experience these people fly a 

lot, but when they need to tighten their belts 

they do so. They don’t stop flying, but they 

downgrade. That could mean some weakness 

in business travel. But we are not seeing it 

right now in Asia.” 

Pearce agreed, and warned front-end 

traffic on long-haul routes between Asia and 

Massive losses 

amounting to hundreds 

of millions of dollars 

among U.S. majors in the 

first quarter of this year 

have also sparked moves 

towards what are being 

tagged “shotgun mergers” 

Europe and Asia and North America could 

be affected. 

“There has been a lot of M & A [merger 

and acquisition] activity and direct investment 

and outsourcing, with many businesses 

in North America and Europe outsourcing 

to Asia. So there has been a lot of travel,” 

he said. 

“Much of that travel between long-haul 

markets could be hit, but I’d say travel within 

Asia is much more insulated than in past 

cycles. 

“I suspect the domestic markets of China 

and India and perhaps even Australia, being 

supported by the commodity boom from 

China, are going to be more driven by the 

capacity of the businesses in those markets. 

“On the longer haul routes, for those 

businesses investing in the region or export 

business, there clearly will be some knock-on 

effect from the weakness in the U.S.” 

Along with the credit crunch and oil 

prices, one other key element poses a serious 

threat to airline financial viability. The 

downturn in demand is coinciding with an 

increase in aircraft deliveries - from 1,041 

new aircraft in 2007 to an expected 1,231 this 

year. More than a third of those are headed 

for the Asia-Pacific. 

While some deliveries will be offset by 

retiring less fuel efficient aircraft, real yields 

(adjusted for inflation and the U.S. dollar) are 

expected to decline 4.1% this year, compared 

to a 3.2% drop in 2007, according to IATA. 

Herdman said high oil prices encourage 

the retirement of older aircraft, which are 

much less fuel efficient. 

“You might have been able to operate an 

old aircraft at $90 a barrel, but at $120 it’s 

simply uneconomic. We are seeing signs of 

people retiring first generation B747-200s. 

Airlines are planning to do this in Asia and we 

are seeing some carriers reducing utilization 

or even grounding these old aircraft and 

other types as well. It’s just pure economics,” 

he said. 

What does seem certain is the threat of 

a spill over from the U.S. will not be shortlived. 

“I believe the U.S. recession will be 

longer than expected because the banking 

system is in such a mess it is going to take a 

long time to repair it,” said Pearce. 

“That’s a longer period during which there 

could be effects. 

“But I think the Asia-Pacific region has 

got so much internal strength at the moment 

that while there will be some slowdown, 

it seems likely to remain a strong growing 

region.” ■ 


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news backgrounder 

The gloves are off 

There’s nothing new about fare 

wars in the airline business. But 

when Malaysia Airlines last month 

hit the market with 1.3 million 

free tickets – excluding taxes – it 

sparked a major turf war with local 

low-cost carrier AirAsia, 

reports TOM BALLANTYNE. 

Ex a c t ly t wo ye a r s a go 

Malaysia Airlines (MAS) 

ch ief exe cut ive, Id r is 

Jala, and his low-cost carrier 

counterpart, AirAsia 

chief executive, Tony 

Fernandes, were phot 

og r a phed shaking 

hands, broad grins on 

their faces, celebrating a 

government-ordered deal 

that would see them cease 

damaging competition and 

work together for the good 

of the country’s aviation 

industry. “Flying together” 

declared local newspapers. 

How times have changed. 

When Jala announced last 

month he was putting 1.3 

million “zero-fare” domestic 

seats up for grabs – tickets 

had to be booked by May 19 for 

travel between June 10 and December 

14 - Fernandes was not amused and 

accused MAS of “unfairly” venturing into 

his budget business. 

“MAS and AirAsia will go to war and 

the only beneficiary will be Singapore 

Airlines,” he declared. 

Jala, having brought MAS back from 

the brink of bankruptcy to record profits 

in two years, is unrepentant. According to 

sources he will soon extend the zero fare 

offer to destinations outside Malaysia, to 

ports within Asean (Association of South 

East Asian Nations). Fernandes’ criticism, 

he said, is unwarranted. 

“Our ‘Everyday Low Fares’, launched 

to offer zero fares to all domestic destinations, 

is meant to create new demand and 

to encourage people who are not planning 

to travel to do so. The new product is also 

aimed at boosting domestic tourism and 

countering inflation,” said the MAS boss 

in a statement. 

MAS was making money from seats that 

otherwise would go unsold. “On average, 

domestic MAS flights are only 70% full. 

So the remaining 30% would not have 

been sold anyway. By offering zero-fare for 

these seats it’s giving us some incremental 

revenue,” said Jala. “It’s profitable in the 

sense that rather than letting them go empty, 

we have some revenue for them. 

“AirAsia has always said they have 

created new demands from low fares and 

War of words: MAS and AirAsia bosses, 

Idris Jala ( left) and Tony Fernandes 

no longer “flying together” 

I entirely agree with them. When we come 

out to do this, we are also creating new 

demand.” 

Fernandes claims the move means MAS 

is now competing directly with his LCC 

model, but at the same time he is not allowed 

to compete against the national airline. This 

is a reference to the fact that while AirAsia 

and other LCCs were cleared for the first 

time earlier this year to operate limited 

flights on the previously MAS-Singapore 

Airlines monopolised Kuala Lumpur 

to Singapore route, AirAsia hasn’t yet 

been given permission to fly from other 

Malaysian cities to Singapore. 

“The first thing they should do is to 

allow us to fly more flights to Singapore,” 

said Fernandes. He said MAS should work 

together with AirAsia instead of competing 

and accused the full service airline 

of “surrendering” to Singapore Airlines 

(SIA). “Our two airlines are dedicated to 

turn KLIA [Kuala Lumpur International 

Airport] into a major Asian hub again. 

MAS should join us in this mission,” said 

Fernandes. 

Jala’s rejoinder is that AirAsia should 

take advantage of the several open skies 

agreements Malaysia has with the U.S., 

the United Arab Emirates, New Zealand, 

Taiwan and Scandinavian countries. 

“AirAsia is free to fly to any of these 

destinations. Malaysia has also liberalized 

agreements with countries 

such as China, the 

Maldives, Britain and 

Germany. AirAsia is 

also free to fly to these 

destinations,” he added. 

Apart from the verbal 

attack, Fernandes isn’t 

taking the fare attack lying 

down. He countered the 

MAS campaign with two 

new initiatives: AirAsia 

will pay the difference to 

any of his passengers if they 

can find any MAS airfare 

that is lower than the cheapest 

offered by AirAsia and what 

he called a “sub-zero fare” 

campaign, details of which were yet to 

be announced. 

Fernandes said he was “very flattered” 

by MAS’ initiative because it was a copy 

of what AirAsia had been doing. “This is 

the 10th time that MAS has copied us. I 

guess imitation is the best form of flattery,” 

he said. 

And he boasted that AirAsia has “newer 

aircraft, better and hot food – although 

passengers have to buy meals on board 

– better seats which are more spacious and 

we definitely have better crew ... we also 

have more frequency to local destinations 

and more point-to-point routes.” 

Besides, said Fernandes, AirAsia had 

started selling hot roti canai (a popular 

Malaysian flatbread) on board flights and 

would introduce chicken rice and satay 

soon. Over to you Mr Jala! ■ 


AIRPORTS 

By Tom Ballantyne 

After less than two years 

of operations, Bangkok’s 

troubled Suvarnabhumi 

International Airport is 

approaching capacity. Now, 

despite ongoing anti-airport demonstrations 

by local protest groups, the Thai government 

has decided to bite the bullet and fast track 

expansion. 

The US$2.3 billion second phase development 

will increase Suvarnabhumi’s airport 

capacity from 45 million passengers a year 

to 60 million by 2013. 

Work on a $114 million third runway will 

begin this year, as well as construction of 

a $190 million domestic terminal that will 

eventually allow the closure of the city’s 

original airport at Don Muang. The old airport 

re-opened for domestic flights in March 

last year after cracks appeared in taxiways at 

Suvarnabhumi limiting its capacity. 

The decision to expand, originally put 

on hold last year as a government budgetary 

measure, was taken at a meeting between 

Thai transport minister, Santi Prompat, and 

senior officials of the Airports Authority 

of Thailand (AoT) and the country’s Civil 

Aviation Department in late April. 

The decision is almost certain to add to 

the protests from local residents who have 

been complaining about noise from the new 

airport and campaigning for compensation 

since it opened. 

The government has promised to 

compensate residents suffering most by 

building new houses and helping to relocate 

them to quieter neighbourhoods. Other 

residents are waiting for their homes to be 

soundproofed. 

As recently as April the Bangkok Post 

reported police had arrested two villagers for 

endangering air traffic after they allegedly 

sent lighted paper lanterns into the night sky 

near the airport. 

In January, residents also released more 

than 100 balloons around the airport, causing 

flights to be delayed for two hours. The AoT 

had to pay around $500,000 in compensation 

to airlines affected by the delay. 

More protests expected as … 

Suvarnabhumi 

granted fast 

track expansion 

The first plane lands at Bangkok’s Suvarnabhumi International Airport two 

years ago. It has already reached capacity 

Resident protests and cracked taxiways 

are not the only issues to have plagued the 

airport. Since its opening it has suffered 

operational problems and other construction 

flaws, complaints about poor sanitation and 

corruption scandals involving procurement 

of equipment for the airport and contracts 

written for its construction. 

The expansion plan involves 10 projects. 

Apart from a third runway and a domestic 

terminal, to be built separately from the 

existing international terminal, other facilities 

planned include an automated people 

mover, a new car park and a noise pollution 

reduction scheme. 

The decision to build a separate 

domestic terminal at Suvarnabhumi – it 

will be completed by 2010 – removes any 

lingering doubts Don Muang will remain in 

operation. There has been a fierce debate in 

Thailand about the second airport’s future. 

Airlines want a single airport handling 

both international and domestic traffic 

while some sections of the government 

argued Don Muang should remain open 

to give the city two airports and relieve 

pressure on Suvarnabhumi. 

A transport ministry source was quoted 

in local media as saying the government “has 

a clear single airport policy” and that Don 

Muang will be used only for such operations 

as charter flights and air shows. 

No date has been set to move domestic 

flights back to Suvarnabhumi, but this is 

expected to occur when the new domestic 

terminal opens. ■ 

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COMMUTER AVIATION 

KAL to launch LCC 

South Korean flag carrier, Korean offices in Pusan and Jeju as well as Gimpo 

Air, said it would launch its airport, near Seoul, are 100% Internet booking, 

free seating divided into three zones and 

low-cost carrier (LCC), Air 

Korea, with a B737-800 service staff and crew who will “multi-task”. 

between Seoul and the 

tourist island, Jeju, in July. 

Chief executive of the airline, 

Jae Kun Kim, said the LCC, which 

was first announced in January, had 

received its scheduled air transportation 

business licence and had applied 

for its Air Operator’s Certificate. 

Air Korea plans to launch the 

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with the addition of two B737-800s 

this year and two A300-600s in 2009, Korean Air: to launch LCC by the end of July 

bringing the fleet to five airliners 12 

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“Air Korea is not your average low-cost 

The chief executive said the airline would carrier. It is focussed on short-haul routes 

have 120 staff by year-end. 

with simple, but sophisticated services at 

Features of Air Korea, which has opened affordable prices,” said Kim. 

Air Korea will face domestic competition 

from low-cost operator, Tiger Airways, 

which has announced plans to launch a 

Korean joint venture LCC, Incheon Tiger 

Airways, by December. 

Tiger Aviation, the parent company 

of Singapore-based LCC, Tiger 

Airways, formed the joint venture 

LCC with the city of Incheon, home of 

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At a press conference announcing 

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five A320s. 

Korea’s first LCC, Jeju Air, was launched 

in 2006 using five Bombardier Q400s. 

Earlier this year, it ordered five 737-800s to 

boost its network. ■ 

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ILS OrientAv half pg 2color.indd 1 

26 ORIENT AVIATION june 2008 

12/20/07 4:54:10 PM

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COVER STORY 

ALASTAIR CARTHEW 

reports from Tokyo 

Photos: YASUO SASAMURA 

rob finlayson 

GOLDEN 

HARVEST 

Record profits highlight boss 

Mineo Yamamoto’s transformation of ANA 

Mineo Yamamoto, All 

Nippon Air ways’ 

amiable president 

and chief executive, 

thinks four years as 

head of one of the world’s top airlines is 

about right. “It’s like going to university,” 

he said. 

But three years into his term, he is not 

ready to make more time to return to his 

passion for scuba diving in Okinawa, off 

the southern tip of Japan - he wants to use 

his remaining time at the top to realize 

some high goals and to “sow the seeds” of 

a legacy that will be long lasting. 

With an eye to future growth of ANA, 

Yamamoto refers to the imperative of not 

only staying ahead of the main competition 

— in ANA’s case the recently troubled, but 

recovering, Japan Airlines — but to also 

leave a positive legacy for the younger 

generation to carry on ANA’s remarkable 

turnaround and growth of recent years, in 

which he has been deeply involved first as 

a member of the senior management team 

and then as president and CEO. 

“ I think four years [as president and 

CEO] at ANA is about right,” he told Orient 

Aviation during an interview at ANA’s 

Tokyo headquarters. But with an eye to 

the future of the company he has served 

for 38 years he added: “These things are 

never set in stone, however. For the next 

generation I would like to plant the seeds 

to see them ripen and grow. The question 

now is how much seed can I plant for the 

new generation?” 

This year Yamamoto is confronting a 

future laden with both negatives and positives, 

but he is confident of ANA’s ability 

to meet these issues head on. 

One immediate challenge, pledged by 

Yamamoto when he took over the helm 

in 2005, was to make ANA the number 

one airline in Asia in quality, customer 

satisfaction and value creation. 

The benchmark competitors in the 

region are Singapore Airlines and Cathay 

Pacific Airways. 

However, here is a surprise. Virgin 

Atlantic Airway’s flamboyant billionaire 

founder, Sir Richard Branson, inspires 

Yamamoto as “ always being one step ahead 


of the rest. We have tried to learn from 

him”. He said Sir Richard’s readiness to 

differentiate Virgin Atlantic from the rest 

of the world was something from which 

ANA could learn. 

So while Yamamoto may be a trifle 

disappointed that ANA has not yet achieved 

the number one position in the Asia-Pacific 

“our management vision has not changed. 

We can see the backs of our competitors 

although we haven’t caught up yet.” In this 

regard Yamamoto has instituted two key 

initiatives to lift ANA into the top spot. 

In April, he created a new products 

and services division that reports directly 

to the ANA board. Previously, it was part 

of sales and marketing. “We realized 

that in terms of products and services 

the existing structure was not enough to 

allow us to reach number one. We want to 

leap forward as fast as we can so we have 

given the signal to develop new products 

and services in areas like seats, food and 

inflight entertainment,” he said. 

For example, ANA, through a new 

strategic alliance with fellow Star Alliance 

member, Asiana Airlines of South Korea, 

is exchanging cabin crew so that both can 

develop new customer services practices 

and learn from each other. It also has a 

cargo alliance with Asiana. 

The second initiative is the opening of 

a business development office, Corporate 

Affairs Asia, in Hong Kong. The aim is 

to build a stronger Asian network into the 

ANA route structure, in particular to track 

threats and defend ANA’s territory from 

new competitors such as low-cost carriers. 

The airline will, as Yamamoto ominously 

put it, “tackle them”. 

Part of the remit of Corporate Affairs 

Asia is to explore the possibility of starting 

a new low-cost carrier in the region. 

ANA Group airlines already have what 

Yamamoto calls a “low-cost base” carrier 

in Air Next. Flying on local domestic 

routes out of Fukuoka with five B737-500s 

leased from its parent, Air Next provides 

full ANA services with a low-budget base. 

The distinction between low-cost carrier 

and low-cost base carrier is important to 

ANA, which introduced Air Next to service 

low-profit routes where ANA’s higher cost 

base could not produce profitable returns. 

In this regard, ANA does not operate a 

true low-cost carrier. The airline wants to 

increase Air Next’s fleet. 

Defending its domestic base remains 

a high priority for the carrier. ANA has 

All Nippon Airways: launch customer for the B787, but the planes will be 

delivered 18 months late 

invested heavily in new technology at 

Tokyo Haneda and 50 other Japanese 

airports to give customers a seamless 

experience (See IT Special Report P.50). 

SKiP, a pre-check-in reservation system 

via cell phones and computer, has been 

rolled out around the country. 

SKiP enables customers to bypass 

check-in and go directly to security using 

a bar-code on either a cell phone, a credit/ 

mileage card or a small paper coupon. 

By 2010, when the number of slots at its 

Haneda domestic airport hub increases 

from 300,000 to 350,000 per year, ANA 

will begin phasing out redundant check-in 

counters and installing more X-ray security 

machines. “We want to make boarding as 

easy as getting on the bullet train,” said 

Yamamoto. 

ANA and JAL share the domestic 

Japanese market 50-50 in ASKs, but ANA 

has around 53% of the passenger share. 

Haneda, at present a domestic airport, will 

take international flights when a fourth 

runway opens in 2010. 

With 65.2 million passengers annually, 

ANA to explore the 

possibility of starting 

a new low-cost carrier 

in the region 

Haneda is the world’s fourth busiest airport. 

ANA’s ultra modern, high technology 

Terminal 2 hub is a crucial part of the 

airline’s growth. 

Underpinning ANA’s capability to 

continue innovation and growth is its 

profitability in an increasingly competitive 

Japanese aviation environment (See 

separate story P.34). Not only are new 

players, such as low-cost carriers, entering 

the market, but JAL, which went through 

a painful merger with Japan Air System 

[JAS] and some controversial management 

changes, is now recovering. 

But costs remain a major issue. “We 

have cut costs where we can, but this is 

not enough. We have raised domestic 

fares and introduced a fuel surcharge for 

international fares. We also do other things 

like flying our planes at more efficient 

speeds and have introduced lighter seats on 

board, all aimed at reducing the fuel bill,” 

said Yamamoto. 

ANA also washes its engines with 

water. “We started doing this three or 

four years ago to remove carbon deposits 

that impair engine efficiency,” added the 

president. “The savings are surprisingly big 

and washing with water couldn’t be more 

environmentally friendly.” 

Taking a longer term view, ANA 

believes the best way to reduce the fuel bill 

is to employ smaller, more efficient aircraft. 


COVER STORY 

“By the end of the next medium-term plan, 

in 2011, half our fleet will be more efficient 

aircraft,” said Yamamoto. 

I n ef fect it means the 50 B787 

Dreamliner aircraft ANA will acquire from 

Boeing in an epoch-breaking order will 

be gradually employed on the best routes 

and the B777 will replace the existing 

B747-400s. 

Yamamoto confirmed that ANA has 

ordered 15 and taken options on 10 of 

Mitsubishi Heavy Industries (MHI) 

planned MRJ-90 aircraft, the second 

all-Japanese made aircraft ever to be 

produced. 

To be the launch customer for the new 

aircraft is an act of faith that Yamamoto 

is happy to talk about, although he added 

a typically polite, but blunt, proviso: “We 

have high expectations of the fuel efficiency 

and reliability of the MRJ, but unless MHI 

delivers in these areas they will not be able 

to sell this aircraft.” The MRJ is expected 

to enter service in 2013. 

And what about the B787? As the launch 

customer ANA built its medium-term 

plan from 2008-2011 around the on-time 

delivery of the aircraft. In fact, the first 

aircraft was due for delivery in May, 2008 

and ANA had intended to fly it to Beijing 

during the Olympic Games. Now plans 

have been put back to late next year because 

of Boeing delivery delays. 

Yamamoto is publicly polite about the 

delays: “It is a really regrettable situation. It 

ANA president and chief executive, 

Mineo Yamamoto: airline made 

major gains during his leadership 

affects our mid-term plan. We are working 

with Boeing to get a 120% final delivery 

schedule.” 

The first B787s are now due sometime 

between July and September next year, 

although Yamamoto wryly observed: 

“That is what we are being told.” Clearly 

the delays rankle the ANA management, 

but in typical pragmatic style they are 

getting on with further fleet changes in 

the meantime. These include replacing 

All Nippon Airways Cargo is increasing its fleet and developing a new 

freight IT structure 

the B747-400 service into Paris this year 

and on the Frankfurt route next year with 

B777-300ERs. 

Like all major carriers ANA is targeting 

more destinations in China, but Yamamoto 

emphasized this is a slow and steady 

strategy to avoid what he calls the “ China 

risk”, a slowdown in the Chinese economy 

caused by a global recession driven by the 

U.S. ANA flies to 10 Chinese coastal cities, 

but it plans to delve deeper into the interior 

to some of the larger cities. 

Destinations are being targeted to the 

other surging powers, India and Russia. 

ANA already flies an all-business class 

B737-300ER to Mumbai in India. This is 

one route where the carrier would have 

liked to up gauge to a B787. It is examining 

other Indian routes and the possibility of 

Moscow but, at this stage, is not planning 

to fly to the Middle East. 

There is good reason for Yamamoto’s 

cautious approach to f leet and route 

expansion. He pointed out it was only three 

years ago the international business of 

ANA returned “to the black”. To achieve 

this, unprofitable routes like Sydney, 

Kuala Lumpur, Myanmar and Jakarta were 

dropped. “With the high cost of fuel, if we 

try to roll out new international routes too 

quickly we will fall back into the red,” said 

Yamamoto. 

With a wary eye on a regrouped JAL, 

Yamamoto believes ANA remains ahead 

in reining in its costs, but emphasizes the 

need to plan ahead. 

“JAL have just got to the point now 

where we were on costs two years ago. 

But in a year or two when they are fully 

recovered we must be at the next stage,” he 

said. The focus on products and services 

will drive much of this competitive edge 

for ANA. 

There is a “there but by the grace of God 

go I” attitude about ANA when talking 

about JAL and its recent troubles. “We have 

to keep humble, keep our heads down and 

not be boastful or vain. This is not a time to 

beat our chests,” said the president. 

“Open skies is before us so keep your 

head down and be humble. That is my 

refrain to the company.” 

JAL recently announced US$1.48 billion 

deferred share issue to raise funds for more 

aircraft by mid-2011. 

ANA’s cargo strategy is focused on its 

new Okinawa freight facility, to open next 

winter. Two hours south of the current 

Kansai cargo hub, Okinawa will enable 


COVER STORY 

ANA to fly to key cities like Seoul, Beijing, 

Shanghai, Hong Kong, Hanoi and Taipei 

within four hours. Even Bangkok is only 

four and a half hours from Okinawa. 

On July 1, ANA will operate the world’s 

first B767-300BCF [Boeing Converted 

Freighter]. By 2011, ANA expects to be 

operating four widebody aircraft and 10 

B767 freighters including BCFs. 

Meanwhile, the airline has entered 

a strategic cargo alliance with Asiana. 

Yamamoto conceded his personal attempt 

to establish a cargo alliance with Star 

Alliance had so far not advanced as he 

would have liked, so the Asiana partnership 

is one way of expanding the cargo 

business. 

“We are aiming for businesses with high 

yield. Japanese manufacturers are very 

demanding so our service must be good,” 

he said. Target markets for goods such as 

semi conductors are intra-Asia and from 

Asia to North America in the first instance, 

with Eastern Europe and Central/South 

America being eyed for the future. 

A new freight oriented IT infrastructure 

is being developed internally for use with a 

new express delivery service, All Express 

(Allex). ANA will be marketing Allex on 

the side of its B767-300BCF freighters. 

Referring to the current debate about 

aviation’s contribution to climate change 

and the industry’s efforts to mitigate its 

impact, Yamamoto said ANA was working 

with authorities to enable it to fly over 

the large Yokota U.S. military air base in 

Japan. 

ANA flights from western Japan to 

Haneda must skirt around the base for 

security reasons. Direct flights would 

reduce fuel burn. ANA also supports reafforestation 

and coral farming initiatives 

in Japan. 

Mineo Yamamoto is a man in charge, 

comfortable with where his airline is, but 

conscious of finishing the job he set out to 

do in 2005. Perhaps his philosophy could 

be summed up by his company’s mission 

statement. He says he wanted to give 

ANA’s staff and customers “dreams and 

experiences”. 

Meanwhile his dream of more scuba 

diving in Okinawa will have to wait a little 

bit longer. ■ 

ANA FLEET 

B747-400s 19 

B777-300s 19 

B777-200s 23 

B767-300s 60 

B737-700s 24 

B737-500s 17 

A320s 31 

DHC-8-400s 5 

DHC-8-300s 14 

F50s 3 

Total 215 

On order: 

B787s 50 

B777-300s 5 

B767-300s 2 

B737-800s 12 

B737-700s 16 

MRJ-90s 10 

Total 95 

ANA’s fortunes change 

under Yamamoto 

ANA president and chief executive, Mineo 

Yamamoto, has presided over three years of 

profit at the airline. It began returning a dividend 

at the end of fiscal 2003 after a five-year 

hiatus. 

In April, ANA announced a record net profit of 64.1 billion 

yen (US$616.6 million) for the year ended March 31, a 96% 

year-on-year increase, primarily achieved by the sale of its hotel 

assets. Consolidated operating profit fell 8.5% year-on-year to 

84.3 billion yen, squeezed by the rising price of jet fuel and the 

accelerated depreciation of aircraft as ANA upgrades its fleet. 

It is Boeing’s launch customer for the B787 Dreamliner, 

which is now more than a year late. 

Consolidated airline revenue for ANA’s international 

operations was 311.5 billion yen, a 12% increase and passenger 

numbers increased 6% to 48 million; ASKs were up 6.3% to 

28.2 million kms and RPKs up 5.7% to 21.2 million kms. Load 

factors were steady at 75.3%, a 0.4 drop. 

Domestic travel was overall lower in fiscal 2007, but flexible 

discount fare and revenue management policies, coupled with a 

stronger push into the business market, meant revenue was up by 

2% to 739 billion yen compared to 726 billion yen in 2006. 

Passenger numbers were down 2% to 45.5 million, ASKs 

marginally up at 62.5 million kms, RPKs down 1.6% at 40 

million kms and the load factor was down 1.3% at 63.7%. 

In consolidated cargo revenue domestic return was flat at 

30.5 billion yen and freight was only marginally up at 463,000 

tonnes. However, international revenue was up 16% to 72 billion 

yen and freight up a whopping 20% at 333,000 tonnes from 

278,000 tonnes in 2006. The international freighter fleet was 

increased from four to six aircraft enabling ANA to increase 

its coverage of North America, China and Asia. 

ANA paid 30 billion yen more for fuel in 2006-2007 and 

expects this to increase approximately by an additional 35 

billion yen, year-on-year for the 2007-2008 year. A 22.1 billion 

yen increase in revenue is forecast for the coming year, based on 

a strengthened network and more responsive fare policy. 

Commenting on the result, Yamamoto said a 90 billion 

yen fuel bill was a major dampener on a good, but below 

expectations, profit. “It shows how much fuel has affected our 

profit. How do you go ahead and absorb that type of fuel bill?” 

he said. The US$2.8 billion sale of its profitable hotel business 

to concentrate on its core airlines businesses has given ANA a 

formidable war chest. ■ 


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Environment 

Leaders unite 

Any lingering doubts the aviation 

industry was not taking the 

environmental challenge seriously 

evaporated in Geneva when more than 

450 leaders from across the aviation 

spectrum attended the Air Transport 

Action Group’s (ATAG) third Aviation and 

Environmental Summit. 

Tom Ballantyne reports 

from Geneva 

They may be the fiercest of 

competitors in the commercial 

sales arena, but Boeing 

C om mercial A i r pla nes 

president and chief executive, 

Scott Carson, and Airbus president and chief 

executive, Tom Enders, were waving a flag 

of truce in Switzerland’s chilly spring air in 

April as industry leaders gathered for their 

biggest environmental summit to date. 

Fighting to sell big jets is one thing, but 

their joint message was that the combative 

action stops when it comes to ‘green’ 

issues. 

Carson and Enders weren’t the only rivals 

setting aside their differences. ATAG’s 3rd 

Aviation and Environment Summit turned 

into a breakthrough event, bringing together 

leaders of most of the world’s major airframe 

and engine manufacturers, airports and air 

traffic control organizations. It was, said 

ATAG executive director, Philippe Rochat, 

the first time the industry had united in this 

way. 

Philippe Rochat, executive director, 

ATAG: the first time the industry had 

united in this way 

Jointly, the industry is talking tough, 

calling on governments to play their part by 

pushing forward a global, workable emissions 

trading scheme, helping with research 

and development and being more proactive in 

reducing infrastructure blockages that result 

in unnecessary carbon emissions. 

During the summit industry leaders 

signed a declaration on climate change, 

which committed to carbon neutral growth 

and a totally sustainable industry. It outlined 

aviation’s concept of carbon neutral growth 

and reinforced its target of carbon-free 

flight, to be achieved through focusing on 

a four-pillar approach to climate change: 

investment in new technology, increasing 

operational efficiency, air traffic and airport 

infrastructure improvements and appropriate 

economic measures. 

Boeing and Airbus signed a separate 

agreement to work together to ensure global 

interoperability in air traffic management. 

They want to accelerate improvements to 

the world’s air transportation management 

system to increase efficiency and eliminate 

traffic congestion. 

One issue that seems to concern all 

industry leaders is the failure of aviation to 

get its message across to a wider public in the 

face of ongoing attacks from environmental 

lobbyists condemning aviation’s contribution 

to global warming. 

There was universal agreement the communications 

battle had to be stepped up to 

combat the poor image of the industry and its 

contribution to reducing climate damage. 

Here are some industry leaders’ views on environmental issues: 

Giovanni Bisignani, director general and chief executive of the 

International Air Transport Association (IATA). 

“Environmental responsibility is a core promise of the aviation industry, 

alongside safety and security. We have taken this responsibility seriously long 

before Kyoto with impressive results - a 

70% improvement in fuel efficiency over the 

last four decades. All the industry partners 

have a common goal - to keep aviation as a 

benchmark of environmental responsibility 

for others to follow. 

But governments must play their part if we 

are truly to succeed. They must invest more 

effectively in environmental technologies 

– from alternative fuels to radical dynamics. 

And they need to match our efforts at efficiency 

– such as implementing next generation traffic 

management systems globally.” 

Tom Enders, president and chief executive, Airbus. 

“Total emissions in aviation have to come down. But we are one 

of the industries that is not just starting to work on that, but has been 

working on it for many years. Not just because of global warming, 

but because of sheer efficiency, 

because it was economical to do 

so. Less fuel burn means less costs 

and obviously less emissions. 

“The focus for us must be 

on innovation and technology. 

We need a new age of 

experimentation in aviation. We 

as aircraft manufacturers need 

to concentrate our resources on 

achieving significant step changes 

and breakthroughs on the next 

generation of aircraft.” 


Mark King, president, civil aerospace, Rolls-Royce. 

“The aerospace industry is the solution not the problem ... in 

2002 Rolls-Royce signed up to the ACARE (The Advisory Council for 

Aeronautics Research in Europe) which targets reductions of 50% in CO 2 

and 80% in NOX by 2020, as well as a halving of noise. Technology streams 

will deliver these improvements as part of a 20-year vision technology 

programme from component to architecture level. 

“Rolls-Royce is not just a civil aerospace company. It has a marine 

division and an energy power division among other things and a lot of what 

gets invented in the aerospace division is moved into other sectors that are 

acknowledged as being more polluting than aeroplane engines. 

“The solution is in our hands and the aviation industry’s credentials 

make it a compelling solution provider.” 

Scott Donnelly, president and chief executive, GE Aviation. 

“GE Aviation investment in research and development was US$1.1 

billion in 2005, $1.2 billion in 2006 and $1.8 billion last year. We are not 

going to see a nickel of revenue out of that investment for perhaps a decade 

or more. Yet those are the kind of investments that have to be made if we are 

ever going to get close to the kind of goals we are talking about, achieving 

carbon neutral growth or ultimately a carbon-free industry. 

“Go back to the 1980s and look at where we are today and you see 

a very steady decline in fuel consumption. It is 20% better than before. 

There’s another generation of technology in the pipeline that will do that 

again. And this happened in a world where no one talked about the impact 

of global warming and emission trading schemes. 

Robert Aaronson, recently retired director general of Airports 

Council International (ACI). 

“Over 300 airports have signed up to the 

goals of this landmark industry document (the 

joint declaration), and airport authorities 

worldwide are already engaged in a broad 

spectrum of active programmes that address 

carbon emissions, noise and local air quality. 

For the airports community, environment 

has joined safety and security to form a 

triumvirate of top industry priorities.” 

Eric Bachelet, president and chief executive, CFMI. 

“In the last 40 years we have seen improvement of about 70% in fuel 

efficiency. The good news is as we look at what the potential of technology is 

in the short to medium-term … we can probably achieve 15% to 25% in fuel 

efficiency in the next five to 10 years through a number of developments. 

“Carbon free implies alternative fuels, but there is no instant fix. The use of 

hydrogen as a fuel is still far away. Biofuels are hugely complicated, involving 

a long and complicated process. There is no magical instant solution. 

“Developing technology to tackle environmental challenges will be intense 

and prolonged and it requires significant and stable long-term funding.” 

Alexander ter Kuile, secretary general of the Civil Air 

Navigation Services Organization (CANSO). 

“Airports and ANSPs can take the lead by setting mutually agreed 

and complimentary targets for environmental improvements, reducing 

emissions while increasing capacity and performance. The ability to 

optimize gate-to-gate operations is in our grasp if we can find ways to 

work together more effectively.” 

Scott Carson, president and chief 

executive, Boeing Commercial 

Airplanes. 

“Our industry’s environmental 

responsibility goes well beyond competitive 

issues. Like this industry’s approach to 

safety this is a global issue that beckons for 

global solutions not regional ones. 

“Our belief is that ICAO (International 

Civil Aviation Organization) should guide 

the development of a global emissions 

framework that includes all 190 ICAO member states. The challenge is to 

develop a framework that everyone can join, a framework that moves the 

industry forward and to do so with some sense of urgency. 

Frederico Curado, president and chief executive, Embraer. 

“In 2002, Embraer was the first manufacturer in the aeronautics industry 

to receive the ISO 14001 certification, attesting to the fact that the company 

has environmentally correct attitudes and practices, controls impact and 

is proactive in preventing pollution. 

“We were also the first manufacturer to develop a 100% biofuel powered 

aircraft, the Ipanema (a crop dusting aircraft which operates using ethenol). 

It brings 90% reduction in carbon emissions. 

“In October 2007, Embraer created the Environmental Strategies and 

Technologies Office. The aim is to develop specific environmental policies 

and to support Embraer’s business units as they establish strategies to reduce 

the environmental impact of its manufactured products and its production 

processes. 

“We are working closely with engine makers to optimize integration of 

plane and engine and with bio-fuel companies and engine manufacturers 

with a view to conducting trials on Embraer aircraft, probably next year. 

We have a lot of experience with ethanol, but are looking at other, second 

generation biofuels based on such things as algae, sugar cane, castor oil 

and babaco (a locally grown ground nut).” 

Steve Ridolfi, president, regional aircraft, Bombardier. 

“One in three commercial flights worldwide are regional aircraft. We 

want to see regional operations continue to grow, but know it will only occur 

in a landscape of environmental sustainability. For us its imperative. 

“How can we accelerate airline environmental efficiency? Network 

design, technology optimization and new design are key factors. Airline 

networks were designed at $20 a barrel. Today’s networks will have to be 

redesigned at $100 a barrel. Some of the hub and spoke networks that we 

have, especially short-haul, are relatively inefficient. 

“So as we are developing those new airline networks we have to work 

hand-in-hand with air traffic infrastructure, re-inventing networks to 

improve fuel burn, optimize routes and hence carbon emissions.” 

Stephen Finger, president, Pratt & Whitney 

“At Pratt we are now able to put forward what we believe is another step 

change. It’s called the geared turbofan. The geared turbofan engine will set 

new standards in environmental performance and operating value for the 

next generation of commercial aircraft. 

“We have been working on it for more than 20 years and have tested 

every possible configuration... 

“Later this year, Pratt and Airbus will partner on flight testing the 

engine using an A340 flying test bed. The performance of the engine targets 

double-digit improvements in fuel burn, environmental emissions, engine 

noise and operating costs.” ■ 


Environment 

Man on a mission 

USAF Secretary Michael Wynne wants 

air force fleet to be certified to use bio-fuels by 2012 


U.S. Air Force Secretary, 

Michael Wynne, says that, 

in effect, he runs the world’s 

biggest airline. He has an 

annual budget of around $110 

billion, thousands of aircraft and a staff 

of around 370,000 personnel worldwide 

and faces some of the same challenges as 

his commercial counterparts. 

“I buy about $4 billion worth of fuel 

each year and each time a barrel of crude 

goes up by $10 it costs me somewhere 

between $670 million and $680 million 

extra,” he told the Air Transport 

Action group’s (ATAG) Aviation and 

Environment Summit in Geneva. 

It’s one of the reasons why Wynne 

has set a goal for the air force fleet to 

be certified to use bio-fuels by 2012. 

He also wants to see refining plants set 

up that will produce alternative fuel for 

commercial airlines. 

By 2016, he would like 50% of all air 

force fuel to be a synthetic blend. None 

of this is a pipedream. In August last 

year, the U.S. air force certified a Boeing 

B52 to fly on synthetic fuel. Then, in 

December an air force C17 transporter 

– it uses the same engines as the Boeing 

B757 – made a trans-continental flight 

across the U.S. using synthetic fuel. 

“The technology is coming from the 

commercial world. The fuel I used to 

fly coast-to-coast was purchased and 

delivered by the Shell Oil company out 

of Malaysia,” said Wynne. “So their 

technology is driving our investment 

and our testing and this is going to 

continue. Because it’s going to be a commercially 

driven process, that should be 

available to the rest of the world. 

“I want to do this to create an opportunity 

for domestic sources of [bio-fuel] supply. We 

are testing that outcome to see if it will work. 

I believe this could be one in a long line of 

essentially military-led mega projects that 


often lead to civil and commercial sector 

innovation.” 

Wynne, who spent 23 years working 

with General Dynamics in various senior 

positions before becoming air force secretary 

in 2005, said he feels the same influences in 

the price of operations as airlines. 

‘I buy about $4 billion worth of fuel 

each year and each time a barrel 

of crude goes up by $10 it costs me 

somewhere between $670 million and 

$680 million extra’ 

Michael Wynne 

Secretary, U.S. Air Force 

“I want to use the market power we have 

to influence developments and incentivize 

private sector innovation. I want to assist in 

overcoming some of the start-up costs [of 

synthetic fuel production] and then allow 

it to essentially flow into the commercial 

sector,” he added. 

Wynne said the air force doesn’t want to 

get into the business of producing fuel. “We 

are not going into the energy business. We 

hope to be customers,” he said. 

Recognizing that setting up full-scale 

refineries to produce alternative fuel is a 

risky business, the air force is moving 

to help out. “We are seeking, through 

legislation, the ability to do a long-term 

purchase [of bio-fuel], a contract that 

would allow the bankers of the world to 

provide the money to construct facilities. 

It’s about a five or six year construction 

project,” said Wynne. 

“We think refineries can be done 

and we have land that we are making 

available for companies that want to take 

this on. We have to tell the market place 

that we are ready, willing and able to 

essentially engage in partnership.” 

The air force is not working alone. 

Stephen Finger, president and chief 

executive of engine-maker Pratt & 

Whitney, said Wynne is playing a 

crucial role in pushing bio-fuel research 

forward. 

“The Department of the Air Force 

and engine-makers are working 

hand-in-hand evaluating all the fuel 

characteristics in the laboratory and 

in the sub-scale rigs [engine test rigs], 

and other components for material 

compatibility,” said Finger. 

“Work is going on in parallel so the 

flight demonstrations are not just a one 

shot [exercise]. A lot of work is going 

on behind the scenes. This is coming 

together to show that it not only works, 

but there is future potential here.” 

Beyond fuels, Wynne is looking at 

broad carbon usage. Air base commanders 

everywhere have been ordered to make 

energy a consideration to reduce demand. 

The USAF has called in experts from airlines 

to advise on stripping flights to lighten loads 

and has begun setting up solar farms for 

energy supply. ■


Association of Asia Pacific 

Airlines (AAPA) director 

general, Andrew Herdman, 

wasn’t holding back when he 

learned the UK government 

proposes to revise its existing air passenger 

duty (APD), call it an aviation duty (AD) and 

make airlines pay hundreds of millions of 

dollars more in charges, all in the name of 

the environment. 

“No amount of intellectual contortion 

can disguise the fact that the existing UK 

APD and the proposed UK AD are primarily 

tax raising measures, with only lip service 

being paid to the purported environmental 

objectives,” said Herdman. 

He wasn’t alone in his indignation. 

Calling on Britain to abandon the proposed 

duty, International Air Transport Association 

(IATA) director general, Giovanni Bisignani, 

described it as nothing more than “a blunt 

revenue instrument”. 

The existing air passenger duty, under 

which airlines pay a fee for each passenger, 

had already been doubled last year. It 

amounts to US$3.9 billion annually. 

The new aviation duty, applying to each 

aircraft rather than each passenger, would 

begin in November next year and earn 

$4.9 billion. Worse, by 2011-12 this would 

increase to $6.8 billion. 

First introduced in 1994, in 2007 the then 

Chancellor of the Exchequer and now Prime 

Minister, Gordon Brown increased the air 

passenger duty to as much as £80 (US$156.8) 

for business and first class long-haul flights, 

describing the move as an environmental 

measure. He said the transport sector 

accounted for 30% of all carbon emissions 

in the UK with a fifth from aviation. 

Airlines have consistently argued there 

is no evidence any of the money is used for 

environmental purposes. 

“None of these funds are being directed 

towards measures to benefit the environment,” 

said Herdman. “In fact, the current 

funds raised by the APD are already more 

than sufficient to offset UK aviation’s carbon 

emissions four times over. The proposed AD 

would increase the tax burden ... even before 

planned increases in future years, all with no 

additional environmental benefit.” 

He said the UK government also seemed 

intent on maintaining the duty after the 

planned inclusion of aviation in the comprehensive 

EU (European Union) Emissions 

Trading Scheme (ETS) in 2012. 

AAPA hits out 

at UK Govt’s 

‘environmental tax’ 

“Such a stance runs counter to the 

publicly stated position of the European 

Commission, that once a comprehensive 

EU ETS scheme is in place, member states 

should repeal existing aviation or passenger 

taxes based on environmental grounds,” said 

Herdman. 

He argued the duty is discriminatory 

because it has a bigger impact on airlines 

‘None of these [air passenger 

duty] funds are being directed 

towards measures to benefit 

the environment’ 

Andrew Herdman 

Director General 

AAPA 

based in countries furthest from the UK, 

such as the Asia-Pacific. It also raises a 

number of difficult legal issues by virtue of 

its extra-territorial nature, in clear breach of 

the Chicago Convention and international 

bilateral air service agreements, whilst doing 

nothing to further the achievement of the 

stated environmental objectives, he added. 

“The UK Government should stop 

pretending their policy is aimed primarily at 

achieving environmental objectives and recognise 

that it is essentially a misguided tax on 

air travel. Rather than impose arbitrary and 

punitive taxes, we urge governments to work 

towards reaching agreement within the ICAO 

(International Civil Aviation Organization) 

framework on a globally harmonised ETS,” 

said Herdman. 

Bisignani, who has written to UK 

Chancellor Alistair Darling protesting the 

proposal, said it failed to satisfy the basic 

principles advanced by the government to 

justify it. “The proposal is incompatible 

with U.K. obligations under international 

law. It will not improve environmental 

performance. 

“It ignores that air transport completely 

covers its environmental costs. It will lead 

to serious discriminatory economic impacts 

and market distortions. It will result in double 

taxation and reduce the UK’s competitive 

stance. It is neither simple, nor transparent, 

nor coherent. 

“In short, as an approach, it could not be 

more wrong. The government should focus 

on other industries that, unlike aviation, are 

not contributing their fair share,” he said. 

“I want to know where the money will go 

... padding the U.K. budget at the expense 

of holidaymakers, business travellers or 

exporters is not sound environmental policy. 

Instead of inventing new taxes with convoluted 

calculation methods, governments 

must support investment in basic ‘green’ 

technology research, assist air navigation 

service providers to straighten out routes and 

allow airlines to operate as fuel efficiently 

as possible.” 

Herdman said the aviation industry is 

committed to making heavy investments 

that are expected to deliver a further 25% 

improvement in fuel efficiency by 2020. 

Meanwhile, under the Kyoto Protocol, 

to which the UK is a signatory, ICAO has 

been given responsibility for developing 

comprehensive policies to address the environmental 

impact of international aviation, 

including the fuel efficiency goal. ■ 


news backgrounder 

Called to account … again 

Airbus chief Enders explains the A380’s fourth delay 

Just one day after Airbus announced 

the latest production delays in its 

A380 programme, more than 100 

aviation writers from around the 

world gathered in Toulouse for the 

European manufacturer’s annual 

technical press briefing. The delays 

were top of the agenda for discussion 

and Airbus chief executive, Tom 

Enders, did not sidestep the issues. 

TOM BALLANTYNE reports 

from Toulouse. 

Airbus executives 

began 

a n u r g e n t 

r o u n d o f 

t al ks with 

A380 customers last month 

to work out a revised delivery 

programme for their 

planes following the latest 

announcement of production 

delays – the fourth since 

2006. 

However, it remained 

unclear what impact it 

will have on Asia-Pacific 

customers such as Singapore 

Airlines (SIA) and Qantas 

Airways. 

While Airbus announced 

it would deliver 12 planes in 

2008 instead of 13, 21 planes 

in 2009 instead of 25 and between 30 and 

40 in 2010 instead of the planned 45, Airbus 

chief executive, Tom Enders, couldn’t give 

specific details for individual customers. 

SIA, the only carrier operating the plane, 

has taken delivery of four of the A380s it 

has ordered. The fifth aircraft is expected to 

be delivered in early July, said the airline’s 

spokesman, Stephen Forshaw. 

“Beyond these aircraft, the changes 

in production schedules will potentially 

have some impact; the details of which we 

will need to understand from Airbus,” he 

added. 

Qantas, which has 20 A380s on order, is 

confident it will receive its first aircraft on 

schedule in August, on track for the October 


launch of its first A380 service between 

Melbourne and Los Angeles. 

Two more are due to be delivered by 

December. However, Qantas executive 

general manager, John Borghetti, was reportedly 

given a guarantee during an inspection 

of the airline’s first plane in Hamburg in 

early May that the first three aircraft would 

be delivered by December. The remaining 

16 Qantas A380s will almost certainly be 

delivered late. 

For other Asian customers, such 

as Malaysia Airlines, Thai Airways 

Singapore Airlines, the only carrier operating the A380, has four 

of the aircraft in service 

International, Korean Air and China 

Southern, the picture is less clear. Deliveries 

to these carriers are after 2010. According to 

Enders, the “average” delay will be around 

three months although some deliveries may 

be up to four months late. 

The biggest A380 customer, Dubai-based 

Emirates Airline, has said in a statement 

it was in talks with Airbus to see if it will 

receive its A380s on time in the next 12 

months. With 58 on order, Emirates expects 

delivery of five before the end of March next 

year. “We have no specific dates or details at 

this time,” it said. 

In the midst of all this uncertainty – and 

a renewed surge of bad press for Airbus 

– Enders wasn’t making any excuses. 

Twenty-four hours after the official delay 

announcement he faced media at the annual 

Airbus technical press briefing in Toulouse 

and declared: “We are not talking about a 

catastrophic scenario ... we are not back to 

square one, to summer 2006, clearly not. 

“We are in the production process, we 

have hit challenges we have to cope with in 

the next weeks and months. We cannot go 

for the full rate increase we had scheduled 

originally, so we had to inform customers 

and the markets.” 

Indeed, the new delays are not as bad as 

in 2006, which resulted in 

the first aircraft being two 

years late. 

The Airbus plan to cope 

with the wiring problems that 

created the hold-up involves 

two separate production 

schedules, or waves as 

Airbus calls them. In the first, 

through 2008, each aircraft is 

being hand-built, with specialists 

wiring the aircraft. 

The second schedule, from 

2009, will see the production 

line ramp-up switched to an 

automated process. 

So what went wrong? 

“In brief, the steep ramp-up 

planned in 2006 is not fully 

achievable. Most of the 

A380s scheduled for delivery 

this year are in flight-test or 

going through the delivery process. One of 

those deliveries will be delayed to 2009,” 

said Enders. 

“Subsequently, four of next year’s 

deliveries will move into 2010. Details 

about the new plan and the further ramp-up 

and delivery slots in 2010 and the following 

years will be discussed with customers in the 

coming weeks. 

“It’s frustratingly simple. To design, 

validate and implement a bespoke wiring 

solution for 13 aircraft as advanced and 

as large as the A380 is an enormous task. 

Slipping that final Wave 1 delivery obviously 

has a knock-on effect on the initial phase of 

Wave 2, which was already under pressure 

given the scale of work required to introduce

the new design and manufacturing 

processes for the standardised 

production ramp-up. 

“Overall we needed more time 

and resources than expected and 

although we initially thought 

this could be resolved through 

i n c r e a s e d m a n p owe r a n d 

outsourcing, we have been hit 

by an industry-wide shortage of 

skilled labour, making it impossible 

to complete the work to the 

standards required.” 

Enders said accepting Airbus 

would miss the ramp-up targets 

was a difficult decision given 

the knock-on effect on 2009 

deliveries, the workload faced by 

employees, the company’s reputation and the 

customers affected “who have already shown 

a huge amount of patience and are rightly 

disappointed by the delays”. 

But Enders said the A380 was a long-term 

investment and “if it takes us a bit more time 

at the beginning to ensure we deliver the best 

quality and the best performance, then that’s 

what we have to do”. 

Airbus has 17 A380s in various stages of production 

He will not say when Airbus will meet 

its goal of delivering four A380s a month, a 

pace it had hoped to achieve in 2010. Neither 

will he comment on the possible financial 

implications. 

“The results of this review do not, at this 

stage, cover the financial impact. The extent 

of the additional costs will be influenced by 

the actual production and delivery scenario,” 

said Enders. 

Airbus has 196 firm orders 

and commitments for the A380 

from 17 customers. “We’ve 

already delivered four A380s to 

Singapore [Airlines] and they are 

very happy with the performance 

of the aircraft,” said the Airbus 

chief. 

“It’s flying on long routes 

and has been operating well in 

service for six months so we can 

draw very positive results from 

this. There are 17 A380 aircraft 

at various stages of production. 

Most of the aircraft we are going 

to deliver in 2008 have flown, 

been flight-tested and are in cabin 

furnishing, in final delivery status. 

His final words: “We are making good 

progress. It is a four-year recovery programme. 

We regret the additional delay but 

we are not back to square one. We can assure 

you that we are bringing all the resources 

and focus to bear to make further progress 

and ramp up the (production) rates as soon 

as possible.” ■ 

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special report 

Information 

Technology 

IT spending soars 

Airlines and airports continue to look to technology 

to meet their growing challenges 

When David Jones, 

executive vice-president, 

commercial 

a t I n f o r m a t i o n 

Te c h n olog y ( I T ) 

major Amadeus, closed the company’s 

annual Horizons IT conference in Bangkok 

in April he said the need for innovation 

is the single unifying challenge to the 

industry. The next few years would require 

airlines to make difficult IT decisions in 

the face of competing pressures and trends, 

he added. 

Airports and other aviation industry 

sectors too are increasing their IT spend 

as they strive to combat multiple issues 

confronting their operations, from complex 

new security measures to soaring fuel costs 

and chronic congestion in some parts of 

the system. 

Global aviation spending on IT rose from 

$21.9 billion in 2001 to $28.4 billion in 2006. 

It is now more than $30 billion annually and 

rising at around 5% per year. 

In the Asia-Pacific the picture is even 

brighter. A February survey of 1,500 chief 

information officers (across all industries) 

by U.S. research firm, Gartner, revealed 

worldwide IT budgets were expected to 

increase by an average 3.3% this year, but 

in the Asia-Pacific that figure is predicted 

to be 8.3%. 

“In this region we are fortunate that 

even with [high] fuel prices and some 

of the economic changes globally, the 

Asia-Pacific is leading the way with airport 

infrastructure investment,” said Randy 

Pizzi, vice-president and managing director 

of ARINC’s Asia-Pacific division. 

“Airlines too are, for the most part, still 

quite healthy. Our sector of the business, 

which focuses on the airport IT side, has 

been very robust.” 

Airports are clearly diving into the IT 

‘Delays at security, check-in 

and baggage collection are 

all touch points that frustrate 

the travelling public. They are 

now at the top of the airport IT 

agenda’ 

Catherine Mayer 

Vice-President, Airport Services 

SITA 

shopping basket to help them cope with 

unprecedented growth. According to Pizzi 

there is a rush on common-use self-service 

kiosks (CUSS). In May, ARINC completed 

installation of 500 new kiosks at Singapore 

Changi International Airport. 

Global spending on IT 

by aviation rose from 

US$21.9 billion in 2001 to 

$28.4 billion in 2006. 

It is now more than $30 

billion and rising 

at around 5% annually 

The use of CUSS is increasing rapidly. 

In Japan, for instance, passenger utilization 

of self-service check-in is more than 50%. 

“It provides passenger self-sufficiency, the 

kind of technology that allows airlines and 

airports to allocate their resources more 

effectively,” said Pizzi. 

Airports and airlines are heading 

towards achieving what passengers want, 

a smooth, hassle-free travel experience, 

said Norbert Muller, chief executive of 

Lufthansa Systems Asia-Pacific. 

“In some areas we are already there. 

There’s self check-in, baggage deposit and 

priority queues in security. But to get it all 

done you need everyone to work together. 

You need the airport authorities on board 

and you need IT providers on board. There’s 

a real difference between off-the-shelf and 

a solution where you have full back-up and 

ongoing support and individual designing 

for a specific airline or airport,” he said. 

It’s hardly surprising emphasis is being 

placed on passenger processing. The latest 

survey of IT trends among the world’s top 

200 airport operators from technology major 

SITA and Airports Council International 

(ACI), found tackling congestion and meeting 

security demands are the main drivers 

behind IT investment. 

Airports are embracing new technology 

in order to use their existing airport capacity 

more efficiently. In the next two years, 

airports plan to make significant changes, 

particularly in the area of passenger selfservice 

and shared-use systems to meet 

the twin demands of phenomenal growth 

in passenger traffic and stricter security 

regulations. 

Catherine Mayer, SITA vice-president, 

airport services, said: “Delays at security, 

check-in and baggage collection are all 

touch points that frustrate the travelling 

public. They are now at the top of the airport 



IT agenda when it comes to investing in 

new technologies such as self-service 

kiosks, remote passenger check-in, fast bag 

drop-off and biometrics.” 

Pizzi agreed and said off-airport checkin 

is a growing trend. “With passenger 

growth increasing airports and airlines are 

trying to move passenger processing off the 

airport,” he said. 

Already in operation at some sites in 

Asia, the system is being expanded. Hong 

Kong is one example where passengers can 

check in at the airport rail express station 

in the city. ARINC is working with the 

airport to open up more remote check-in 

sites, such as at ferry terminals, including 

Mainland China. 

It is also planning to bring hotels into 

the picture. In the U.S., ARINC has a tie-up 

with Disney, providing baggage check-in at 

50 Disney hotels across the country. “We 

see that as a key here in Asia and we are 

actively talking to a lot of hotels and airport 

authorities about that. We are looking at 

convention centres, hotels and other places 

where we can put that infrastructure in,” 

said Pizzi. 

For airlines, much of the IT focus is on 

value-added products and solutions that 

make their business more cost-effective, 

such as fuel saving programmes, flight 

planning and electronic flight bags. 

Said Lufthansa Systems’ Muller: 

“Everybody is buying new planes. It’s more 

complex to make decisions for 100 aircraft 

compared to 20. We are seeing an increasing 

need for solutions to help airlines be more 

profitable, to make the right decisions in a 

complex environment which is driven by 

growth, but also by alliances, cost pressures 

and the need for fuel efficiency.” 

Planning the most optimal airline schedule 

is a growing challenge, he added. “With 

the projected increase in air traffic volume, 

constructing good quality schedules is 

essential for an airline to operate profitably 

and effectively. For airlines embarking on 

expanding their network, the scheduling 

aspect is of great importance given the 

huge amount of investments and risks 

involved. When several airlines cooperate, 

such as in an alliance, the coordination of 

schedules is one of the most important steps 

towards harmonized and more profitable 

operations,” said Muller. 

‘With passenger growth 

increasing airports and 

airlines are trying to move 

passenger processing off the 

airport’ 

Randy Pizzi 

Vice-President and Managing Director, 

Asia-Pacific 

ARINC 

Pizzi said ARINC believes it is critical 

for major carriers to carry on with what 

he calls “the platform strategy”, linking 

business areas together in integrated IT 

platforms to minimize hassles. Airlines also 

need specialized products for their special 

needs, such as fuel optimization. 

Speaking at the Amadeus Horizons 

conference, Cathay Pacific Airways chief 

information officer, Ed Nicol, said the 

main focus has to be on bringing the airline 

industry up to par with other industries. 

“We have fallen behind in many facets. 

We have got good departmental applications, 

but in terms of joining up the silos and 

in terms of having modern office systems 

and modern architecture there’s quite a long 

way to go,” said Nicol. 

“One of our key drivers at Cathay Pacific 

is flexibility. We never know what the 

business is going to want. We never know 

where the business world is going to go 

so we need to have a platform which can 

respond quickly and speedily to the various 

demands. 

“Legacy systems are extremely bad 

at doing this. Moving away [from those 

systems provides] much more flexibility and 

adaptability and the possibility to combine 

information and service in new ways to 

provide added value for the customers.” 

What is evident is that despite current 

market conditions there is little sign that 

airports, airlines and other industry sectors 

are cutting back on their IT budgets. 

Indeed, quite the opposite is happening. 

They see the technology as a major part of 

the answer. ■ 

In Japan passenger utilization of self-service check-in is more than 50%. 




When global airline 

IT provider, Sabre 

Airline Solutions, 

commissioned a study 

to analyse the development 

of the low-cost carrier (LCC) sector it had 

a sneaking suspicion it might come up with 

some surprising conclusions. It was right. 

The so-called LCC sector is shrinking and 

some self-tagged budget carriers have even 

become full-service network operators. 

The global study, released in May, looked 

at 540 airlines, 123 of them “self-nominated” 

LCCs. A good number of them could be 

accused of false advertising. 

Of the 123, the analysis found, only 41% 

remained true to their pure LCC business 

model. Some 52%, it concluded, had moved 

towards a hybrid business model and 7% 

demonstrated characteristics that would place 

them within the more traditional network 

business model. 

The study showed that 59% have 

broken commonly assumed LCC operating 

parameters such as sticking to a point-to-point 

network, flying single aircraft types, offering 

simple fares using direct distribution, usually 

through the Internet and having no interline or 

code-share agreements. Passenger numbers 

for last year show these hybrid airlines carried 

65% of all passengers in the broader LCC 

segment. 

In fact, the low-cost sector, according to 

Sabre, is passing into a new era. For many 

industry observers, who have found it 

increasingly difficult to define if an airline is 

an LCC, the results are hardly a surprise. In the 

Asia-Pacific, one prime example is Australia’s 

Virgin Blue, which now describes itself as 

a “New World” carrier, chasing corporate 

travellers as well as budget flyers and launching 

onto international routes. 

Gordon Locke, Sabre’s vice-president 

for airline marketing and strategy, said 

there has been a lot of speculation about the 

evolution of the LCC model, but until now no 

quantifiable research existed to show how these 

airlines were changing their businesses to stay 

competitive. 

“The LCC market is one of the most 

competitive in the airline industry and this has 

spurred many pure LCCs to explore ways of 

evolving their businesses to remain competitive 

and sustainable. For many, this has meant 

adopting some full-service carrier business 

practices to help grow their passenger base 

and expand their market reach, although they 

have often added their own twist on how these 

business practices are implemented,” he said. 

When is an LCC 

not an LCC? 

When it’s a hybrid. And there are lots of them 

Virgin Blue: now a hybrid carrier 

Others have also noticed the trend. “Not 

everyone who is selling themselves as 

low-cost is really low-cost,” said Norbert 

Muller, chief executive of Lufthansa Systems 

Asia-Pacific. “There are some airlines with a 

business model that operate in a simplified 

way ... but they still have a need for IT and 

they are more and more having a need to 

differentiate. Once you get into chasing 

business travellers you need to provide certain 

nice things like priority check-in to keep the 

customer happy.” 

Randy Pizzi, vice-president and managing 

director of ARINC’s Asia-Pacific division, 

pointed out that economic impacts along with 

high fuel prices are resulting in some LCCs 

starting to struggle. 

While ARINC focuses more on major 

airlines and airports it is trying to make its 

technology more scalable to get away from 

legacy systems and provide cost-effective 

solutions to sectors such as budget airlines 

upgrading IT and adjusting their models. 

The Sabre study showed that full-service 

carrier attributes being introduced by LCCs 

include: international routes, global distribution 

systems (GDS), code-share agreements, 

connecting services, multiple fares available 

at any time, advanced ticketing procedures, 

‘[LCCs] that introduce more 

than three full-service 

characteristics should be 

considered a hybrid carrier’ 

Gordon Locke 

Vice-President, 

Airline Marketing and Strategy 

Sabre Airline Solutions 

multiple aircraft types, multiple classes of 

service, interline agreements and long-haul 

destinations. 

“Airlines that introduce more than three 

of these full-service characteristics should 

be considered a hybrid carrier because each 

attribute adds a level of complexity and cost 

to the operating model that is inconsistent 

with the fundamental principles used to define 

low-cost carriers,” said Locke. 

Based on that, within the Asia-Pacific, 

low-cost airlines that should be considered 

hybrid include Virgin Blue, Lion Air and 

AirAsia. Globally, the trend is just as strong 

with industry leaders such as Southwest, 

Frontier Airlines, Jet Blue, West Jet, Air Tran, 

bmi Baby and Flybaboo falling into this new 

category. 

“Many of these airlines have evolved 

into hybrid carriers to make a play for the 

highly lucrative business traveller, who has a 

completely different set of needs and shopping 

behaviours from the leisure traveller that LCCs 

have traditionally targeted,” said Locke. 

“That’s why some have introduced GDS 

distribution, multiple products, new classes of 

service and interline agreements. They’ve also 

invested in sophisticated revenue management 

tools and techniques that help them maximise 

the revenue generated by every seat on every 

aircraft, every day of the year. 

“In comparison, pure LCC airlines don’t 

use these tools. They stay true to the LCC 

model – a simple, no-frills offering using 

discounted airfares to appeal to a single travel 

segment, in this case, the price-conscious 

leisure traveller.” 

According to the study, it appears the larger 

an LCC gets the more complexity it adds. ■ 




When global airline 

IT provider, Sabre 

Airline Solutions, 

commissioned a study 

to analyse the development 

of the low-cost carrier (LCC) sector it had 

a sneaking suspicion it might come up with 

some surprising conclusions. It was right. 

The so-called LCC sector is shrinking and 

some self-tagged budget carriers have even 

become full-service network operators. 

The global study, released in May, looked 

at 540 airlines, 123 of them “self-nominated” 

LCCs. A good number of them could be 

accused of false advertising. 

Of the 123, the analysis found, only 41% 

remained true to their pure LCC business 

model. Some 52%, it concluded, had moved 

towards a hybrid business model and 7% 

demonstrated characteristics that would place 

them within the more traditional network 

business model. 

The study showed that 59% have 

broken commonly assumed LCC operating 

parameters such as sticking to a point-to-point 

network, flying single aircraft types, offering 

simple fares using direct distribution, usually 

through the Internet and having no interline or 

code-share agreements. Passenger numbers 

for last year show these hybrid airlines carried 

65% of all passengers in the broader LCC 

segment. 

In fact, the low-cost sector, according to 

Sabre, is passing into a new era. For many 

industry observers, who have found it 

increasingly difficult to define if an airline is 

an LCC, the results are hardly a surprise. In the 

Asia-Pacific, one prime example is Australia’s 

Virgin Blue, which now describes itself as 

a “New World” carrier, chasing corporate 

travellers as well as budget flyers and launching 

onto international routes. 

Gordon Locke, Sabre’s vice-president 

for airline marketing and strategy, said 

there has been a lot of speculation about the 

evolution of the LCC model, but until now no 

quantifiable research existed to show how these 

airlines were changing their businesses to stay 

competitive. 

“The LCC market is one of the most 

competitive in the airline industry and this has 

spurred many pure LCCs to explore ways of 

evolving their businesses to remain competitive 

and sustainable. For many, this has meant 

adopting some full-service carrier business 

practices to help grow their passenger base 

and expand their market reach, although they 

have often added their own twist on how these 

business practices are implemented,” he said. 

When is an LCC 

not an LCC? 

When it’s a hybrid. And there are lots of them 

Virgin Blue: now a hybrid carrier 

Others have also noticed the trend. “Not 

everyone who is selling themselves as 

low-cost is really low-cost,” said Norbert 

Muller, chief executive of Lufthansa Systems 

Asia-Pacific. “There are some airlines with a 

business model that operate in a simplified 

way ... but they still have a need for IT and 

they are more and more having a need to 

differentiate. Once you get into chasing 

business travellers you need to provide certain 

nice things like priority check-in to keep the 

customer happy.” 



pointed out that economic impacts along with 

high fuel prices are resulting in some LCCs 

starting to struggle. 

While ARINC focuses more on major 

airlines and airports it is trying to make its 

technology more scalable to get away from 

legacy systems and provide cost-effective 

solutions to sectors such as budget airlines 

upgrading IT and adjusting their models. 

The Sabre study showed that full-service 

carrier attributes being introduced by LCCs 

include: international routes, global distribution 

systems (GDS), code-share agreements, 

connecting services, multiple fares available 

at any time, advanced ticketing procedures, 

‘[LCCs] that introduce more 

than three full-service 

characteristics should be 

considered a hybrid carrier’ 

Gordon Locke 

Vice-President, 

Airline Marketing and Strategy 

Sabre Airline Solutions 

multiple aircraft types, multiple classes of 

service, interline agreements and long-haul 

destinations. 

“Airlines that introduce more than three 

of these full-service characteristics should 

be considered a hybrid carrier because each 

attribute adds a level of complexity and cost 

to the operating model that is inconsistent 

with the fundamental principles used to define 

low-cost carriers,” said Locke. 

Based on that, within the Asia-Pacific, 

low-cost airlines that should be considered 

hybrid include Virgin Blue, Lion Air and 

AirAsia. Globally, the trend is just as strong 

with industry leaders such as Southwest, 

Frontier Airlines, Jet Blue, West Jet, Air Tran, 

bmi Baby and Flybaboo falling into this new 

category. 

“Many of these airlines have evolved 

into hybrid carriers to make a play for the 

highly lucrative business traveller, who has a 

completely different set of needs and shopping 

behaviours from the leisure traveller that LCCs 

have traditionally targeted,” said Locke. 

“That’s why some have introduced GDS 

distribution, multiple products, new classes of 

service and interline agreements. They’ve also 

invested in sophisticated revenue management 

tools and techniques that help them maximise 

the revenue generated by every seat on every 

aircraft, every day of the year. 

“In comparison, pure LCC airlines don’t 

use these tools. They stay true to the LCC 

model – a simple, no-frills offering using 

discounted airfares to appeal to a single travel 

segment, in this case, the price-conscious 

leisure traveller.” 

According to the study, it appears the larger 

an LCC gets the more complexity it adds. ■ 




LEFT LUGGAGE 

Airline industry trying to come to grips with growing baggage problems 

It was ironic that a new report on 

airline passenger baggage was 

released just days after the chaotic 

opening of Heathrow’s new Terminal 

5, where problems with the baggage 

handling system caused massive 

disruption of flights, including dozens 

of cancellations and the loss of tens 

of thousands of bags. But London’s 

experience is hardly unique. 

The air transport industry 

handles around 2.25 billion 

p i e c e s o f 

checked baggage 

ever y 

year, according to Francesco 

Violante, chief executive of 

information technology (IT) 

provider SITA. 

“For more than 98% of 

them, it’s a perfect journey 

every time, from check-in to 

the arrival carousel. For the 

majority of the few mishandled 

bags, they get reunited 

with their owners within 48 

hours. Only a tiny fraction 

– barely one bag for every two 

thousand passengers – fails to 

show up at all,” he said. 

The problem, according 

to Violante, is that while 

98% is a good success rate 

for a process as complex as 

baggage management, it’s 

just not good enough. 

“Unfortunately, with growing passenger 

traffic and increased airport congestion, 

success rates aren’t going to improve unless 

active steps are taken by airlines and airports 

to improve recovery rates. Instead, they seem 

certain to worsen, creating extra costs for 

airlines and big customer service issues,” 

he said. 

The numbers are horrendous. Globally, 

18.86 bags per thousand passengers, or 

42.4 million bags, were mishandled last 

year. While that means 80 bags a minute 

are mishandled worldwide, 24 hours a day, 


seven days a week, the number of bags which 

don’t ever show up – being either lost or 

stolen – is far smaller, just 0.57 per thousand 

passengers, or 3% of the total number 

mishandled. 

Nonetheless, the cost to the industry, at an 

average of US$90 per mishandled bag, came 

to a worrying US$3.8 billion last year, a sum 

the industry can ill afford to lose. 

Violante released the figures, contained 

in the fourth SITA annual Baggage Report 

at a recent Passenger Terminal Expo in 

Amsterdam. He is not the only industry 

executive alarmed at the lack of progress 

The mishandling of baggage is costing the airline industry 

US$3.8 billion a year 

in solving one of aviation’s perennial 

problems. 

Giovanni Bisignani, director general of 

the International Air Transport Association 

(IATA) said that with more than 2.2 billion 

bags in the system, the 2% mishandled is a 

problem that needs to be fixed. “IATA has 

developed a toolkit of 40 solutions designed 

to address the prime causes of baggage 

mishandling. And because every airport 

is different IATA Baggage Go Teams will 

visit targeted airports to spread best practice 

solutions matched to local needs,” he said. 

Figures from WorldTracer, SITA’s 

fully-automated system for tracing lost and 

mishandled passenger baggage used by 400 

airlines and ground handling companies, 

shows the major cause of baggage delay 

was in the mishandling of transfer baggage 

(49%) although this number has been falling 

steadily since 2005 when it was 61%. Other 

significant causes of delays include ticketing 

errors, security checks, failure to load and 

tagging errors. 

The Association of European Airlines 

(AEA) reported the number of mishandled 

bags rose from 13.7 per thousand passengers 

in 2004 to 16.6 per thousand in 2007 – an 

increase of some 1.8 million 

extra missing bags a year. 

In the U.S. the figures 

look somewhat different, 

mainly because the numbers 

don’t include passengers that 

connect over international 

gateways travelling into the 

country. Nonetheless, the 

rate of baggage complaints 

has been rising steadily, from 

3.84 mishandled bags per 

thousand passengers in 2002 

to 7.03 in 2007, a five-year 

increase of 83%. The report 

did not have statistics for the 

Asia-Pacific. 

Violante said it was 

important the industry moved 

towards a comprehensive, 

fully integrated global baggage 


that can direct, track and trace 

passenger baggage throughout the entire 

journey, from check-in to final delivery at 

the destination as with SITA’s Integrated 

Baggage Management Solution (IBMS). 

He believed the numbers of mishandled 

bags could be reduced by a combination 

of new initiatives, like IATA’s Baggage 

Improvement Programme (BIP) and SITA’s 

IBMS. 

“RFID (Radio Frequency Identification) 

also has a role to play and could save the 

industry as much as $700 million if it was 

fully implemented. Independent projects 

being developed by airlines, airports and

partnerships between the two will also help,” 

said Violante. 

“Even small improvements in the amount 

of baggage ending up at the right place at 

the right time could save the air transport 

industry hundreds of millions of dollars a 

year.” 

RFID has been much slower to take off 

than originally predicted, conceded Violante. 

“The first trials took place in Europe in 1991, 

but it was not until the IATA RFID standard 

for baggage was approved at the end of 2005 

that things really began to take off. Now 

the general consensus is the widespread 

adoption of RFID for baggage is no longer a 

question of ‘if’ but ‘when’,” he said. 

The technology is currently being trialled 

or adopted at major hubs such as Amsterdam, 

London and Paris in Europe; Atlanta, Denver 

and Los Angeles in the U.S. and Beijing, 

Hong Kong, Narita and six Korean airports 

in Asia. 

The baggage report cites Hong Kong 

International Airport (HKIA) as an early 

beneficiary of RFID. It has been using RFID 

tags since the end of 2004. In what is the 

largest RFID deployment in Asia, HKIA 

has seen bag-tag read success rates improve 

from around 85%-90% per cent to above 

95% and estimates cost savings at US$ 3.8 

million a year. 

“Using RFID tags for tracking and 

managing baggage has led to tremendous 

increases in productivity, as well as enhanced 

security and reduced costs,” said Eric Wong, 

general terminal manager, Airport Authority 

‘Even small improvements in 

the amount of baggage ending 

up at the right place at the 

right time could save the air 

transport industry hundreds 

of millions of dollars a year’ 

Francesco Violante, 


SITA 

Hong Kong. 

“We hope our successful implementation 

will be a catalyst for other airports in the 

region to test and adopt RFID. That way it 

becomes a truly global solution benefiting 

everyone – in particular passengers.” 

As increasing numbers of RFID tags 

are used by the industry, the price per tag 

will tumble. IDTechEx said it produced 25 

million RFID tags for airports and airlines in 

2006, at an average price of US$ 0.20 per tag, 

but forecasts this will reach 75 million tags 

this year, a billion in 2012 and two billion by 

2018. At the same time, the unit price is likely 

to drop from today’s 20 cents to 15 cents in 

2012 and five cents in 2018. 

The SITA report also suggested that in 

the coming years airlines will increasingly 

move towards encouraging passengers to 

carry fewer and lighter bags to improve 

delivery, save fuel and reduce environmental 

impact. 

This trend is underway with a few carriers, 

mainly budget airlines, who charge for 

checked baggage. Several major network 

airlines are now charging for a second 

checked bag. Excess baggage costs are also 

on the rise as airlines get tough on check-in 

luggage. 

“Mishandled baggage is a problem 

which isn’t going away any time soon,” said 

Violante. “Indeed, it’s likely to get worse 

before it gets better. IATA expects annual 

passenger numbers to reach 2.75 billion by 

2011 and even at today’s lost and mishandled 

baggage rates that implies well over 50 

million mishandled bags a year. 

“At many airports around the world, 

baggage handling is at saturation level with 

even the smallest glitches or unexpected 

peaks leading to major problems and the 

sorry spectacle of thousands of bags piled 

up around the airport. Now is the right time 

to act.” ■ 

Unisys major player at Beijing’s Terminal 3 

The world’s largest airport terminal, Beijing Capital 

International Airport’s (BCIA) new Terminal 3, may 

be up and running, but the work is not finished for 

technicians from Unisys Corporation who played 

a major role in its successful opening on March 

26. Unisys developed, integrated and is managing the core IT 

systems that will enable the facility to cope with the passenger rush 

during the Olympic Games in August. BCIA can handle 76 million 

passengers and 580,000 flights a year. More than 124 flights an 

hour are expected by 2015. 

The BCIA authorities awarded the Terminal 3 Master Systems 

Integration contract to Unisys in mid-2005. As the master systems 

integrator, Unisys was responsible for a number of key projects 

including: 

• The Ground Operation Information System (GOIS). Unisys 

designed, developed and implemented the GOIS that manages 

the flight information for the entire airport, covering Terminals 

1, 2 and 3. The system also enables airport officials to monitor if 

the airport is delivering the correct levels of service to airlines 

and passengers. 

• Integration Framework Design. Unisys designed the overall 

integration framework for the new Terminal 3 systems and 

successfully integrated more than 20 core operational systems 

prior to the terminal’s opening. 

• Migration Strategy. Unisys assisted in defining the overall 

strategy for the migration and production of the new IT systems 

prior to the progressive transfer of flights to Terminal 3. BCIA 

had mandated that the IT systems migration not impact current 

operations in Terminals 1 and 2. 

• Future Operational Model. Based on Unisys’ 3D Blueprinting 

approach and the company’s domain experience at other airports, 

such as Guangzhou Baiyun International Airport, Unisys 

recommended a new operational model for BCIA’s business and 

operational practices. It allows the airport to continually assess 

future changes in its operational processes now that Terminal 

3 is up and running. ■ 




EFBs: the way ahead 

China also looking to market electronic flight bags 

in partnership with ARINC 

Major suppliers of 

electronic flights bags 

(EFBs) are intensifying 

their efforts to 

clear the way for 

speedy certification of the cost-saving devices 

in the Asia-Pacific. The EFBs eliminate paper 

from the cockpit, reduce weight, save fuel and 

make flying more efficient and one company, 

ARINC, is working with Chinese partners to 

produce an EFB that will be marketed both in 

China and on global markets. 

According to one IT industry leader in 

the region, Norbert Muller, chief executive 

of Lufthansa Systems Asia-Pacific, airlines 

are queuing up to make their cockpits paper 

free. 

“What we have at the moment is strong 

demand in the form of requests. But we still 

have a bit of slack in decision-making which 

is because you have authorities involved in 

the approval process,” he said. 

There’s another issue. Airlines have to 

decide which of three solutions is right for 

them. EFBs come in three configurations. 

Class 1 is a portable unit; Class 2 is a semiportable 

unit, which has a mounting adapter 

or Class 3, a solution that is fully installed in 

the cockpit and becomes part of the aircraft’s 

avionics. 

When it is eventually delivered, the B787 

Dreamliner will come with Class 3 EFBs 

fitted as standard equipment. Until then 

the retrofitting of existing fleets entails a 

lengthy and pricy process of evaluation and 

certification, necessary whenever changes 

in avionics are implemented on an aircraft. 

It also has to be separately approved for each 

type of aircraft in the fleet. 

In the U.S., the Federal Aviation 

Administration (FAA), which many regional 

regulatory authorities follow when it comes 

to certification, has been trying to push 

more safeguarding processes into EFB 

programmes. At the same time, it is attempting 

to simplify the approval sequence to 

help airlines adopt the emerging technology 

speedily. 

Muller said Lufthansa Systems has been 

working with customers “helping them get 

operational approval”. ARINC has been on 

a similar mission. It has been collaborating 

with Cathay Pacific Airways for some time 

on an EFB solution for the airline. 

“On our project with Cathay, the airline, 

with ourselves, is talking to the Hong Kong 

CAD [Civil Aviation Department] to facilitate 

the whole process for adopting the technology 

in this region,” said Fei Huang, ARINCs 

programme manager, airline programmes. 



said Cathay is an example of a major carrier 

‘Strong demand in the form of 

requests, but a bit of slack in 

decision-making because you 

have authorities involved in 

the approval process’ 

Norbert Muller 


Lufthansa Systems Asia-Pacific 

that has refined its requirements over a period 

of time and is preparing to implement a broad 

programme. “They have been developing 

their requirements and we’ve been developing 

our products together. We are hopeful that 

it is going to merge into a pilot programme 

and an operational programme later this 

year,” he said. 

Pizzi thinks the EFB market is about to 

come into its own. “A lot of carriers have 

looked at buying and need to do an in-depth 

study to determine the right solution for 

them,” he said. “Class 3 has its advantages, 

but it also provides a hardware solution that is 

fixed and doesn’t lend itself easily to technology 

upgrades. It has standard functionalities, 

not customized. 

“Class 1 is usually on the lower end of 

functionality so our focus has been on Class 

2, which provides flexibility and customization. 

We have spent a lot of time and effort in 

developing some software applications and 

working with different hardware vendors to 

be able to work with carriers to come up with 

some customized solutions.” 

Pizzi is particularly excited about 

the China venture. ARINC is in a joint 

venture, ADARI, with China’s Aviation 

Data Communication Corporation (ADCC), 

administered by the Civil Aviation 

Administration of China (CAAC). It is the 

only firm authorized to deploy data link 

services to Chinese airlines. 

“We are providing them with the support 

to develop some solutions that we are customizing 

for the China market specifically for 

EFBs, which we believe are about to take 

off in China. We feel a customized solution 

developed together with our partner ADCC 

will be of benefit,” said Pizzi. 

The Lufthansa EFB, called Lido eFlight- 

Bag, can be used regardless of the hardware or 

aircraft model. It can run as a Class 1 solution 

on notebooks, be permanently installed in the 

cockpit as a Class 2 solution or integrated with 

a Class 3 onboard information solution. 

“Eliminating paper from the flight deck 

saves weight and reduces clutter. Paper 

documents such as aeronautical charts, 

fault reporting and operations manuals, 

minimum equipment lists and logbooks are 

fully digitized and are available at the pilots’ 

fingertips,” said Muller. 

“For an airline to have the ability to 

collate and share information across its entire 

organization, it requires a robust and dependable 

communications gateway. That gateway 

will need to have the ability to connect to an 

airline’s operations control centre and its 

maintenance division with its aircraft in the 

sky. The answer lies with EFBs.” ■ 


Airports across the Asia- 

Pacific are being approached 

by global communications, 

integration and engineering 

group ARINC with a brand 

new arrival management system that promises 

to bring their airline customers more efficient 

use of airspace and landing slots, reduced 

CO 2 emissions, decreased noise pollution 

and improved on-time performance. 

Sound too good to be true? U.S. major 

Delta Air Lines began using the system in 

August 2006 for flights into Atlanta, one of 

the world’s busiest airports. It estimates it 

has brought fuel savings of over US$20,000 

a day. 

Originally developed by the advanced 

engineering and sciences division of ITT 

Industries and Maryland-based ATH Group, 

the Attila arrival management system is 

being used by ARINC as the basis for its new 

AirPlan enRoute service under an exclusive 

agreement with ATH. 

“It’s a resource management product 

that we are releasing this year,” said ARINC 

senior product manager aviation and ground 

system solutions, Shanti John, from the company’s 

regional headquarters in Singapore. 

“There are interested parties throughout this 

region as well as in Europe and U.S. We will 

be talking to customers about it and hopefully 

there will be more opportunities in the near 

future.” 

Originally developed to optimize aircraft 

arrivals in real-time by analyzing factors 

affecting an airport’s inbound flow to calculate 

the best arrival time for each aircraft, the 

system uses an architecture that requires little 

change to the air traffic control (ATC) system 

and can be easily integrated into current ATC 

and airline operational control systems and 

procedures. 

It utilizes the airlines’ existing ACARS 

communications technology, requiring no 

new avionics, no software modifications and 

no changes to an airline’s IT infrastructure. 

ARINC’s new arrival 


proves timely 

ARINC: a long history of integrating 

air traffic management innovations 

ARINC has a long history of integrating 

air traffic management innovations with 

air/ground data link technology. During 

typical operations, incoming flights to a busy 

airport tend to arrive unevenly and have to 

be vectored on to long, time-consuming and 

costly approach patterns. 

The patented technology in the AirPlan 

enRoute system calculates improved arrival 

times - starting when aircraft are hours from 

landing - and sends recommended small 

changes to each aircraft’s projected time at 

the arrival fix to achieve overall system goals 

and save fuel. 

As a planning overlay that operates 

side-by-side with current ATC processes, 

it represents an evolutionary step in aircraft 

sequencing. The system considers all flights 

into an airport simultaneously and also takes 

into account airline objectives such as operating 

schedule, gate availability, connecting 

flights and crew legality when optimizing 

aircraft arrivals. 

When it began using the system Delta 

Air Lines said it expected the programme 

to bring savings of $6 million a year. “The 

Attila programme allows us to maximize our 

airspace efficiency, which is a technical way 

of saying our customers will experience fewer 

take-off delays from their originating city 

and less time sitting in a holding pattern on 

arrival in Atlanta,” said Joe Kolshak, Delta’s 

executive vice-president of operations. 

ARINC’s John said the focus would 

primarily be selling the system to airports. “I 

don’t see this as an application that is targeted 

for an airline initially. It could be, but I think 

more airports in the beginning, to get the 

aircraft in and out of the airport in the shortest 

time possible,” she said. 

John said the first customer for AirPlan 

enRoute is Dubai International Airport. “At 

Dubai it’s primarily the airport authority that 

is the customer and they are going to use it to 

manage resources like the gates, the stands 

and the baggage belts,” she said. 

“Of course it has the capability to be 

integrated into external applications like air 

traffic control and that capability is available, 

but it is not specifically being done in Dubai. 

The ultimate would be for the airport, ATC 

and airlines to use it. As a total collaborative 

decision-making type of application it brings 

maximum benefits to all parties involved.” ■ 

Amadeus’ e-ticketing success 

As the May 31 deadline for the airline industry’s 100% 

e-ticketing programme passed, Frederick Spagnou, vicepresident, 

airline business group of leading technology and 

distributions solutions provider Amadeus, announced: “We have 

enabled e-ticketing for 268 airlines and in 154 markets worldwide 

as well as putting in place more than 1,400 interlining agreements 

for airlines.” 

Interlining, which allows passengers to purchase a single e-ticket 

for the length of a journey with multiple, pre-designated airlines, was 

one of the major challenges of the e-ticket programme. 

Spagnou said as the number of interline implementations are 

growing at a pace of about 100 a month, Amadeus is helping low-cost 

carriers (LCCs) with interline electronic ticketing (IET). 

WestJet, Virgin Blue and Vueling have already contracted the 

Amadeus e-ticketing solution to prepare for their interlining agreements 

with full service carriers and their subsequent need for IET. 

“More than 91% of the tickets issued through our system are now 

electronic,” said Spagnou. ■ 




By Alastair Carthew 

in Tokyo 

Boarding All Nippon Airways 

(ANA) aircraft at its ultra 

modern Haneda Airport 

Terminal 2 has become a hitech 

experience for millions 

of Japanese travellers that removes much of 

the urgency and hassle of check-in. 

All you need is a cell phone or credit/ 

mileage card embedded with an IC-chip, 

or even a small piece of paper, and your 

journey from reservation to boarding the 

aircraft can be almost as simple as boarding 

a train. 

Around 40% of ANA’s customers who 

daily pass through Haneda, use ANA’s hightech 

SKiP pre-booking check-in system. 

By 2010, ANA anticipates the technology 

it uses at Haneda will enable it to remove a 

number of manned check-in counters at the 

airport as customers use 2D bar-code and 

IC-chip technology to speed up the check-in, 

security and boarding processes. It plans to 

add more security points as a result, to cut 

down further on waiting times. 

The process works like this. Customers 

with a confirmed reservation and an 

assigned seat go straight to security where 

they touch their phone, card or bar-coded 

paper briefly to a reader. They repeat 

the same process at the gate when they 

board. Seats are purchased via cell phone, 

computer, ANA reservations or travel agent 

before arriving at the airport. 

Similarly, customers buying and selecting 

a seat at the airport itself can use one of 

the 41 self-service units, receive their ticket 

notice, go through security and “touch and 

board”. Said Rob Henderson, manager, 

Hi-tech experience 

for ANA passengers 

at Haneda 

A cell phone is touched to a reader at 

Haneda Airport, a process repeated 

twice, at security and the airport gate 

public relations: “Every customer at Haneda 

must use a bar-code, or a mobile card with 

an IC-chip. No exceptions. 

“There are no more boarding passes with 

magnetic strips and we collect no paper from 

customers.” 

And what is more, nobody can get lost 

at Haneda. As everyone must now use the 

bar-code/IC system it enables ANA to track 

customers anywhere at the airport once they 

have touched the sensor at security, or even 

as they enter a lounge. 

And inside the lounge lies a heaven sent 

gift – silent mobile phone conversations that 

don’t disturb customers. ANA have installed 

two space-age “telephone” booths where 

cell phone conversations can be held at the 

loudest level without disturbing customers 

outside. 

The result: customers can board seamlessly 

up to 15 minutes before their flight 

departs and by tracking customers ANA 

has improved the management of no-shows, 

which benefits aircraft load and on-time 

departures. 

But amongst all this new high technology 

some old fashioned systems still survive. 

ANA has a policy of returning any supposed 

“dangerous goods” to the passenger 

once they have security clearance. Many 

people still forget to dispense with items 

such as small scissors, or even knives. 

No worries. All will be returned. All 

ANA does at Haneda is put the offending, 

but returnable item, into an “air shooter”, 

literally a tunnel of compressed air. It 

pushes the article, contained in a canister, 

at 50 metres per second down a shute to the 

respective gate where it can be retrieved by 

airline staff and retained until returned to 

the customer at the end of their journey. 

It is the ultimate in labour saving devices 

in an airport where technology is changing 

the face of airport check-in. ■ 

CAL takes ‘paperless airline’ initiative 

Taiwan’s China Airlines (CAL) has contracted the 

California-based InfoTrust Group to provide an 

end-to-end content management system to service its 

entire flight operations division as it bids to become 

a paperless airline. 

InfoTrust’s SkySuite will provide content authoring, management, 

publishing and delivery for all the carrier’s flight operations and 

company manuals. 

“We are making strategic moves to become a completely paperless 

airline,” said CAL’s flight operations manager Joseph Hsieh. “A 

first step was to select a content management solution provider with 

a proven track record to implement a complete system for managing 

our technical documents.” 

InfoTrust chief executive, Geoffrey Godet, said CAL is the sixth 

customer for the system in the Asia-Pacific, but the first to receive 

complete implementation and customer support from the company’s 

new aerospace office in Shanghai. 

The web-based content management system will serve as a 

single interface to publish and deliver all electronic documents to 

both ground-based information portals and in the cockpit, ensuring 

easy access to data, revision control, accuracy of data and timely 

distribution. 

“Our solution will not only enable China Airlines to meet its 

immediate publication management needs, but also serve as a 

foundation for its long-term, paperless flight operations objectives,” 

said Godet. ■ 


IATA AGM PREVIEW 

E-ticketing just the start 


Airline chiefs will celebrate 

the arrival of almost 100% e- 

ticketing when they gather in 

Istanbul in early June for the 

annual general meeting of 

the International Air Transport Association 

(IATA), a programme that will save billions 

of dollars in costs annually. The deadline was 

May 31 and, apart from a few small carriers, 

airlines are now paper ticket-free. 

However, the real battle is about to 

begin, according to sources within IATA. 

As successful as the e-ticketing project 

has been, airlines have now to formulate 

strategies to meet major challenges such as 

the environment, as well as launching an all 

out push to bring about developments they 

are demanding in terms of liberalization and 

true globalization of the industry. 

The Istanbul annual meeting is taking 

place at a pivotal period in airline history, 

said one senior IATA official. “The changes 

that are taking place are enormous and 

game-changing. We have seen U.S. – EU 

open skies arrive, the KLM-Air France 

merger and now the prospect of mergers in 

the U.S.,” said the official. “The velocity of 

change is increasing and we, as an industry, 

must prepare to take giant steps rather than 

baby steps.” 

IATA will continue to place strong focus 

on its Simplifying the Business (StB) programme, 

which has now entered its second 

phase. In the next few years it will bring 

developments such as paperless cargo and 

more streamlined passenger processing, both 

‘The changes that are 

taking place [in airline 

history] are enormous and 

game-changing’ 

IATA official 

at departure and arrival, to the industry. 

Even more significant, according to IATA 

officials, are the breakthroughs occurring on 

the liberalization front. The deal between 

Europe and the U.S. was long-awaited and a 

major step, airlines believe, towards global 

open skies. 

An open skies regime in Southeast Asia 

will begin to come into effect in the current 

year and other countries in the region, such 

as Australia, China and India, have been 

ramping up moves towards liberalization. 

Next on the agenda for the two big northern 

hemisphere continents are talks carriers 

hope will lead to some sort of agreement 

on cross-border ownership, long a major 

stumbling block to the industry becoming 

truly global. 

U.S. economic woes have badly damaged 

American airlines’ balance sheets it 

appears and these tough times have driven 

operators down a road that could lead to 

serious consolidation. And consolidation 

and rationalization is what IATA wants. 

There has been a belief within IATA and 

its members that there are simply too many 

airlines in the world. 

In Istanbul there will be serious discussions 

among the top echelons of the world’s 

airlines about the growing environmental 

challenge and its potential cost to the 

industry, as well as record high fuel prices 

and the role information technology could 

play in helping alleviate the impact. 

Global standardization of security rules 

– or the lack of it – will also be up for debate, 

as will the ramifications of U.S. economic 

woes and the slowing in air traffic demand 

in recent months. 

But the really serious talking will be 

about those landmark industry changes and 

how airlines can prepare themselves to meet 

the challenge. ■ 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


usiness digest: February statistics 

Airline Codes 

RPK Growth by Carrier 

Passenger Load Factor 

Growth by Carrier 

BI 

BR 

Royal Brunei Airlines 

EVA Air 

MH Malaysia Airlines 

NH All Nippon Airways 

20% 

6 

Red 

Green 

CI 

CX 

China Airlines 

Cathay Pacific 

OZ 

PR 

Asiana Airlines 

Philippine Airlines 

15% 

10% 

4 

Yellow 

2 

Blue 

KA 

Dragonair 

QF 


5% 

0 

GA 

Garuda 

SQ 

Singapore Airlines 

0% 

-2 

JL 

Japan Airlines 

TG 

Thai Airways Int’l 

-5% 

-4 

KE 

Korean Airlines 

VN 

Vietnam Airlines 

-10% 

-6 

Percentage 

(Feb 07 vs Feb 08) 

Percentage Points Change 

(Feb 07 vs Feb 08) 

-15% 

-8 

Percentage 

(Jan-Feb 07 vs Jan-Feb 08) 

Percentage Points Change 

(Jan-Feb 07 vs Jan-Feb 08) 

-20% 

BI BR CI CX GA JL KE MH NH OZ PR SQ TG VN 

-10 


Capacity growth hits VNA hard 

Report compiled by Kris Lim of the Research and Statistics Department of 

the Association of Asia Pacific Airlines (AAPA) Secretariat. 

Email: krislim@aapa.org.my 

AA PA i nter national passenger 

traffic grew 5.7% 

year-on-year in revenue 

passenger kilometre (RPK) 

terms in February. Capacity 

grew at the same rate, which resulted in 

an unchanged passenger load factor (PLF) 

of 76.2% compared to a year earlier. The 

number of international passengers carried 

by AAPA members rose 4.7% year-on-year 

to 11.6 million. 

For the first two months of the year, 

the upward trend of passenger demand 

continued with year-to-date international 

passenger numbers registering an increase 

of 4.6%, to 24 million. Year-to-date RPKs 

grew 5%, but the 4.2% growth in capacity 

meant the PLF improved only marginally 

to 77.5% for the two-month period. 

Eleven carriers, led by Vietnam Airlines 

(27.8%) in available seat kilometres 

terms, Cathay Pacific/Dragonair (15.7%) 

and Asiana Airlines (13.2%), increased 

capacity in February, with mixed results. 

While six of the carriers experienced 

improvements in PLF, demand failed to 

match supply growth for the remaining 

five. PLF for Vietnam Airlines fell eight 

percentage points to 67.1% despite RPK 

growth of 14.2%. China Airlines’ PLF fell 


RPK and ASK (In Billions) 

Blue Red Yellow line 

RPK, ASK and PLF Growth Rates 

RPK and ASK (In Percentage) 

80 

60 

40 

20 

0 

M A M J J A S O N D J 

2007 2008 

12 

10 

8 

6 

4 

2 

0 

-2 

-4 

M A 

Red 

RPK, ASK and PLF 

(Mar 07 to Feb 08) 

RPK 

ASK 

PLF 

M 

J 


J 

Blue 

A 

2007 2008 

S 

O 

Yellow 

N 

D 

RPK 

ASK 

PLF 

J 

F 

F 

80 

60 

40 

20 

0 

12 

10 

8 

6 

4 

2 

0 

-2 

-4 

PLF (In Percentage) 

PLF (In Percentage Points) 

four percentage points to 72.9% while Singapore 

Airlines’ load factor fell by almost 

three percentage points to 76.8%. 

PLFs remained high in February for 

Thai Airways International (81.3%), Philippine 

Airlines (78.3%), EVA Air (78.2%), 

Cathay Pacific/Dragonair (77.6%), Royal 

Brunei Airlines (76.9%) and Singapore 

Airlines (76.8%), but the load factors for 

eight other carriers were below 75%. 

FREIGHT 

AAPA international freight tonne kilometres 

(FTKs) rose 2.3% in February on 

flat capacity growth, boosting the average 

freight load factor (FLF) for the month to 

66.5%, a year-on-year improvement of 1.4 

percentage points. 

Year-to-date FTK growth was 3.5%, a 

slight improvement from the last quarter 

of 2007. Year-to-date capacity growth was 

just 0.5%, boosting the average FLF by 

almost two percentage points to 65.1%. 

Overall FLF improved 1.4 percentage 

points, the fifth rise in as many months. 

W h i l e t h e d e m a n d s i d e r e m a i n e d 

lacklustre, restraint in supply of capacity 

helped boost AAPA carriers’ load 

factors. All member carriers, with the 

exception of Garuda Indonesia, recorded

FTK Growth by Carrier 

Freight Load Factor 

Growth by Carrier 

PAX Growth by Carrier 

40% 

35% 

30% 

15 

Red 

12 

Yellow 

20% 

Green 

Blue 15% 

Red 

Yellow 

25% 

9 

20% 

15% 

6 

10% 

10% 

5% 

3 

5% 

0% 

0 

-5% 

-10% 

-3 

0% 

-15% 


-6 


-5% 


a rise in their FLFs. 

Despite recent improvements, FLFs for 

the majority of AAPA carriers remained 

low. Ten car riers, including Cathay 

Pacific/Dragonair, Japan Airlines and 

Singapore Airlines, filled less than 65% of 

their cargo capacities in February. 

Only Asiana Airlines (81.2%), Korean 

Air (78.8%), EVA Air (74.8%) and China 

Airlines (67.5%) consistently maintained 

high load factors. 

MARCH 

AAPA member airlines carried a total 

of 12.7 million international passengers in 

March, an increase of 3.9% over the same 

month in 2007. International passenger 

traffic, in RPK terms, grew 3.8% year-onyear, 

in line with capacity growth, keeping 

the average PLF unchanged at 78.5%. 

International freight traffic in March 

grew two percent in FTK terms. The FLF, 

however, improved 0.7 percentage points 

to 67.9% on marginal capacity growth of 

0.9%. 

To date, AAPA RPKs grew 4.6% while 

FTKs were up a modest 2.9%. 

Cathay Pacific and Dragonair are 

analysed as one carrier 

FTK, FATK and Freight Load Factor 


FTK and FATK (In Billions) 

80 

60 

40 

20 

0 


2007 2008 

Blue 

FTK 

FATK 

FLF 

Red 

Yellow line 

80 

60 

40 

20 

0 

F 

FLF (In Percentage) 

FTK and FATK (In Percentage) 

12 

10 

FTK, FATK FLF Growth Rates 


8 

6 

4 

2 

0 

-2 

-4 


2007 2008 

TRAFFIC UPDATE – PRELIMINARY 

International Scheduled Services of AAPA Member Airlines 

International Mar 2008 Mar 2007 % Change Jan-Mar 2008 Jan-Mar 2007 % Change 

Passengers (000) 12,711 12,229 + 3.9 % 36,741 35,213 + 4.3 % 

RPK (mn.) 53,383 51,424 + 3.8 % 154,596 147,821 + 4.6 % 

ASK (mn.) 67,996 65,522 + 3.8 % 198,647 190,886 + 4.1 % 

Passenger 

Load Factor 

Red 

Blue 

Yellow 

78.5 % 78.5 % + 0.0 pp 77.8 % 77.4 % + 0.4 pp 

FTK (mn.) 5,000 4,902 + 2.0 % 13,446 13,066 + 2.9 % 

FATK (mn.) 7,368 7,301 + 0.9 % 20,340 20,203 + 0.7 % 

Freight 

Load Factor 

67.9 % 67.1 % + 0.7 pp 66.1 % 64.7 % + 1.4 pp 

FTK 

FATK 

FLF 

F 

12 

10 

8 

6 

4 

2 

0 

-2 

-4 

FLF (In Percentage Points) 

We look forward to meeting you at our 3 rd annual 

Greener Skies conference in 2009 in Hong Kong. 

More news soon. 

Orient Aviation 

is available on 



usiness digest: February statistics 

AAPA MONTHLY INTERNATIONAL STATISTICS 

Summary of Consolidated Results (thousands) 

2007/8 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF 

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 12,675 53,172,259 66,749,056 79.66% 4,757,959 7,177,754 66.29% 9,770,334 13,480,531 72.48% 

Aug-07 12,803 53,006,332 66,655,633 79.52% 4,722,801 7,214,584 65.46% 9,718,817 13,522,923 71.87% 

Sep-07 11,759 49,718,108 64,421,436 77.18% 4,937,539 7,264,577 67.97% 9,637,731 13,352,736 72.18% 

Oct-07 12,076 49,913,774 65,500,996 76.20% 5,055,240 7,438,855 67.96% 9,771,759 13,626,654 71.71% 

Nov-07 12,052 49,220,413 64,295,463 76.55% 5,099,061 7,366,118 69.22% 9,749,476 13,439,407 72.54% 

Dec-07 12,625 52,851,484 68,229,862 77.46% 4,907,603 7,202,429 68.14% 9,893,357 13,787,492 71.76% 

Jan-08 12,385 53,296,281 67,737,356 78.68% 4,320,680 6,767,983 63.84% 9,348,236 13,164,886 71.01% 

Feb-08 11,644 47,916,928 62,913,691 76.16% 4,125,412 6,203,631 66.50% 8,649,316 12,138,881 71.25% 

TOTAL 145,061 605,291,842 783,759,259 77.23% 56,642,829 84,848,273 66.76% 113,800,103 159,046,177 71.55% 

2007/8 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF 

Mar-07 6.9% 7.9% 1.8% 4.5 -0.1% 3.4% -2.3 3.8% 3.5% 0.2 

Apr-07 3.5% 3.4% 1.3% 1.5 0.3% 3.1% -1.8 2.1% 2.7% -0.4 

May-07 4.1% 3.6% 1.5% 1.5 5.1% 5.2% -0.1 4.4% 3.8% 0.4 

Jun-07 4.3% 3.8% 2.2% 1.2 5.0% 4.6% 0.3 4.5% 4.0% 0.4 

Jul-07 3.1% 3.1% 1.9% 0.9 4.1% 4.6% -0.3 3.7% 3.2% 0.3 

Aug-07 4.0% 4.4% 2.0% 1.8 4.9% 4.4% 0.3 4.7% 3.2% 1.0 

Sep-07 4.8% 5.4% 2.2% 2.3 3.5% 5.0% -1.0 5.7% 4.9% 0.6 

Oct-07 3.3% 3.5% 2.5% 0.7 2.1% 1.2% 0.5 2.8% 1.8% 0.7 

Nov-07 4.0% 4.1% 2.7% 1.1 2.1% 1.0% 0.8 3.1% 1.8% 0.9 

Dec-07 3.1% 3.1% 2.8% 0.3 0.5% -0.6% 0.7 1.9% 2.0% -0.1 

Jan-08 4.4% 4.3% 2.8% 1.1 4.6% 0.8% 2.3 4.4% 1.8% 1.8 

Feb-08 4.7% 5.7% 5.7% -0.0 2.3% 0.2% 1.4 3.9% 2.8% 0.8 

GROWTH 4.2% 4.4% 2.4% 1.4 2.8% 2.7% 0.0 3.7% 2.9% 0.5 

Percentage or Percentage Point Change 

CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF 

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 144,015 600,475,372 778,472,278 77.14% 56,360,661 84,778,851 66.48% 113,081,406 158,486,116 71.35% 

2008 YTD 24,030 101,213,208 130,651,047 77.47% 8,446,093 12,971,614 65.11% 17,997,552 25,303,767 71.13% 

CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF 

2004 22.9% 18.4% 13.0% 3.3 13.7% 13.1% 0.3 16.4% 13.6% 1.7 

2005 5.1% 5.1% 4.5% 0.5 3.6% 5.6% -1.3 4.4% 5.0% -0.4 

2006 4.2% 4.0% 1.2% 2.0 5.0% 3.8% 0.8 4.4% 3.1% 0.9 

2007 4.2% 4.2% 2.1% 1.6 2.7% 3.4% -0.5 3.6% 3.2% 0.3 

2008 YTD 4.6% 5.0% 4.2% 0.6 3.5% 0.5% 1.8 4.2% 2.3% 1.3 

Note: 1. Data includes all 17 AAPA member airlines 

2. Figures for January to December 2007 restated. January to December 2006 adjusted for comparison. 

3. AAPA consolidated traffic figures include Air New Zealand and Qantas Airways 

Percentage or Percentage Point Change 


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