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COMMENT<br />

Time to crank up the PR machine<br />

When airline chiefs from around the world<br />

gathered in Vancouver, Canada last<br />

month for the annual general meeting<br />

of the International Air Transport<br />

Association (IATA) it became clear very<br />

quickly that one single issue would dominate debate: the<br />

environment.<br />

Today, the green challenge ranks close to safety – always<br />

the number one goal – on the industry’s priority list.<br />

It is apparent many airlines remain uncertain about where<br />

to go from here when it comes to addressing global warming,<br />

although they are aware the environmental public relations<br />

battle is being lost. The AGM debate, however, will have<br />

helped them focus on what is required.<br />

In essence, it is to fight for a globally based emissions<br />

trading scheme and to keep pumping out their message that<br />

airlines are good environmental citizens.<br />

The latter carriers can do on a daily basis. A chance to<br />

convince those who matter on the importance of the first<br />

issue will arise in September at the annual assembly of the<br />

International Civil <strong>Aviation</strong> Organization in Montreal. It is an<br />

opportunity that cannot be missed.<br />

Meanwhile, IATA is not easing up in other areas. The<br />

decision taken in Vancouver to extend the December 31, 2007<br />

deadline for the industry to achieve 100% e-ticketing by five<br />

months to May 31, 2008, was common sense. The industry has<br />

known for some time many carriers were not going to make it,<br />

particularly small operators.<br />

The “one-off” deferral is a good compromise, taking into<br />

account the interests of all airlines. Despite the delay, IATA’s<br />

“Simplifying the Business” programme remains on track to<br />

continue driving change and cost savings in the industry.<br />

Concerns about issues like the environment, security<br />

regulation implementation and costs, as well as user charges,<br />

continue to occupy the minds of airline management.<br />

Some of the industry’s darker clouds are lifting. IATA<br />

is now forecasting worldwide industry profits of $5 billion<br />

this year, more than 30% above a forecast it made in April.<br />

It expects income of $9.6 billion in 2008. But IATA director<br />

general, Giovanni Bisignani, said in terms of returns on the<br />

near $500 billion in revenue earned by airlines, this amounts<br />

to “peanuts”.<br />

Nevertheless, given the gloom of the past few years and<br />

coupled with the impressive continuing increases in traffic, it<br />

at least shows the industry is heading in the right direction.<br />

TOM BALLANTYNE<br />

Chief Correspondent<br />

The Association of Asia Pacific <strong>Airlines</strong>’ members and contact list<br />

Air New Zealand<br />

Chief Executive, Mr Rob Fyfe<br />

VP Public Affairs and Group Communications,<br />

Mr Mike Tod<br />

Tel: (64 9) 336 2770 Fax: (64 9) 336 2759<br />

All Nippon Airways<br />

President and CEO, Mr Mineo Yamamoto<br />

Dep. Director, Public Relations, Mr Kaz Iwakata<br />

Tel: (81 3) 6735 1111<br />

Fax: (81 3) 6735 1115<br />

Asiana <strong>Airlines</strong><br />

President & Chief Executive,<br />

Mr Park Chan-bup<br />

Managing Director, PR, Mr Hong Lae Kim<br />

Tel: (822) 758 8161 Fax: (822) 758 8008<br />

Cathay Pacific Airways<br />

Chief Executive Officer, Mr Philip Chen<br />

Corporate Communications General Manager,<br />

Mr Dane Cheng<br />

Tel: (852) 2747 8868 Fax: (852) 2810 6563<br />

China <strong>Airlines</strong><br />

President, Mr Ringo Chao<br />

VP, Corp Comms, Mr Johnson Sun<br />

Tel: (8862) 2514 5750<br />

Fax: (8862) 2514 5754<br />

Dragonair<br />

Chief Executive Officer, Mr Kenny Tang<br />

General Manager, Corp. Communications<br />

Mrs Laura Crampton<br />

Tel: (852) 3193 3193 Fax: (852) 3193 3194<br />

EVA Air<br />

Chairman, Mr Steve Lin<br />

Executive VP, Group Public Relations,<br />

Mr K. W. Nieh<br />

Tel: (8862) 2500 1122 Fax: (8862) 2500 1523<br />

Garuda Indonesia<br />

President & CEO, Mr Emirsyah Satar<br />

VP Corporate Communications, Mr Pujobroto<br />

Tel: (6221) 231 2612<br />

Fax: (6221) 381 1486<br />

Japan <strong>Airlines</strong><br />

President, Mr Haruka Nishimatsu<br />

Director, International Public Relations,<br />

Mr Geoffrey Tudor<br />

Tel: (813) 5460 3109 Fax: (813) 5460 5910<br />

Korean Air<br />

Chairman and CEO, Mr Yang Ho Cho<br />

Managing VP, Corporate Communications,<br />

Mr Nam Il Park<br />

Tel: (822) 2656 7065 Fax: (822) 2656 7288/89<br />

<strong>Malaysia</strong> <strong>Airlines</strong><br />

Managing Director, Idris Jala<br />

Gen Mgr, Int’l Affairs, Germal Singh Khera<br />

Tel: (603) 2165 5137<br />

Fax: (603) 2161 0558<br />

Philippine <strong>Airlines</strong><br />

President, Mr Jaime Bautista<br />

VP Corporate Communications,<br />

Mr Rolando Estabilio<br />

Tel: (632) 817 1234 Fax: (632) 817 8689<br />

Qantas Airways<br />

Managing Director and CEO, Mr Geoff Dixon<br />

Head of Corporate Communications,<br />

Belinda de Rome<br />

Tel: (612) 9691 4773 Fax: (612) 9691 4187<br />

Royal Brunei <strong>Airlines</strong><br />

Chairman, Pengiran Dato Hamid Yassin<br />

Acting CEO, Pengiran Yusof Jeludin<br />

Tel: (673 2) 229 799<br />

Fax: (673 2) 221 230<br />

Singapore <strong>Airlines</strong><br />

Chief Executive Officer,<br />

Mr Chew Choon Seng<br />

VP Public Affairs, Mr Stephen Forshaw<br />

Tel: (65) 6541 5880 Fax: (65) 6545 6083<br />

Thai Airways International<br />

President, Flying Officer Apinan Sumanaseni<br />

Director, PR,<br />

Mrs Sunathee Isvarphornchai<br />

Tel: (662) 513 3364 Fax: (662) 545 3891<br />

Vietnam <strong>Airlines</strong><br />

Chair. and President & CEO, Mr Nguyen Sy Hung<br />

Dep Director, Corp Affairs,<br />

Mr Nguyen Huy Hieu<br />

Tel: (84-4) 873 0928 Fax: (84-4) 872 1161<br />

JULY/AUGUST 2007 ORIENT AVIATION 3


JULY/AUGUST 2007<br />

CONTENTS<br />

O R I E N T A V I AT I O N V O L U M E 1 4 , I S S U E 0 9<br />

COVER STORY<br />

24 Jala works his magic<br />

<strong>Malaysia</strong> <strong>Airlines</strong>’ boss Idris<br />

Jala brings the good times back<br />

MAIN STORY<br />

10 The Everest challenge: aviation<br />

moves towards liberalisation,<br />

but it’s tough going<br />

ENVIRONMENT<br />

16 Bisignani targets pollution-free<br />

industry<br />

AIR TRAFFIC MANAGEMENT<br />

18 Qantas tests groundbreaking system<br />

CARGO UPDATE<br />

20 Asiana has big plans for growth<br />

FOCUS ON INDIA<br />

28 Merged giant looks for share sale<br />

29 Air traffic management may go private<br />

NEWS BACKGROUNDER<br />

30 Boeing prepares for Dreamliner’s<br />

debut<br />

COMMUTER AVIATION<br />

38 Nepali carrier scales new heights<br />

39 Seaplanes make splash in Phuket<br />

4 ORIENT AVIATION JULY/AUGUST 2007


SPECIAL REPORT<br />

AVIATION SECURITY<br />

PUBLISHED BY<br />

WILSON PRESS HK LTD<br />

GPO Box 11435 Hong Kong<br />

Tel: Editorial (852) 2865 1013<br />

Fax: Editorial (852) 2865 3966<br />

E-mail: orientav@netvigator.com<br />

Website: www.orientaviation.com<br />

Chief Executive<br />

Barry Grindrod<br />

E-mail: orientav@netvigator.com<br />

Publisher<br />

Christine McGee<br />

E-mail: cmcgee@netvigator.com<br />

32 Cargo carriers caught out by costly clampdown<br />

34 New hand luggage rules add to confusion<br />

36 Biometrics are bad news for bad guys<br />

NEWS<br />

6 Hong Kong <strong>Airlines</strong> signs MoU for 51 aircraft<br />

6 Boeing forecast puts Asia on top<br />

6 China could open local skies<br />

6 Korean Air, ANA plan low cost carriers<br />

7 Jetstar on expansion drive<br />

8 Asia features big in Paris sales boom<br />

8 Garuda back in the black<br />

8 Kingfisher buys into Air Deccan<br />

8 Record profit at SALE<br />

REGULAR FEATURES<br />

3 Comment: time to crank up the PR machine<br />

40 Business Digest: Vietnam leads RPK charge<br />

Association of Asia Pacific <strong>Airlines</strong> Secretariat<br />

Suite 9.01, 9/F, Kompleks Antarabangsa<br />

Jalan Sultan Ismail, 50250 Kuala Lumpur, <strong>Malaysia</strong><br />

Tel: (603) 2145 5600 Fax: (603) 2145 2500<br />

E-mail: info@aapa.org.my<br />

Director General: Andrew Herdman<br />

Commercial Director: Beatrice Lim<br />

Technical Director: Martin Eran-Tasker<br />

Chief Correspondent<br />

Tom Ballantyne<br />

Tel: (612) 9638 6895<br />

Fax: (612) 9684 2776<br />

E-mail: tomball@orientaviation.com<br />

Special Correspondent<br />

Charles Anderson<br />

Tel: (852) 2809 2209<br />

E-mail: charlesanderson@orientaviation.com<br />

China<br />

Sophie Yu<br />

Tel: (852) 2865 1013<br />

Japan & Korea<br />

Julian Ryall<br />

Tel/Fax: (81) 45 663 2501<br />

Email: jmryall@orientaviation.com<br />

Photographers<br />

Rob Finlayson, Colin Parker, Andrew Hunt<br />

Design & Production<br />

Wilson Press HK Ltd.<br />

Colour Separations<br />

Twinstar Graphic Arts Co.<br />

Printing<br />

Hop Sze Printing Company Ltd.<br />

ADVERTISING<br />

South East Asia and Pacific<br />

Shirley Ho<br />

Tel: (852) 2865 1013<br />

Fax: (852) 2865 3966<br />

E-mail: shirley@orientaviation.com<br />

The Americas / Canada<br />

Barnes Media Associates<br />

Ray Barnes<br />

Tel: (1 434) 927 5122<br />

Fax: (1 434) 927 5101<br />

E-mail: barnesrv@suddenlink.net<br />

Europe & the Middle East<br />

REM International<br />

Stephane de Rémusat<br />

Tel: (33 5) 34 27 01 30<br />

Fax: (33 5) 34 27 01 31<br />

E-mail: sremusat@aol.com<br />

New Media & Circulation Manager<br />

Leona Wong Wing Lam<br />

Tel: (852) 2865 1013<br />

Fax: (852) 2865 3966<br />

E-mail: leonawong@orientaviation.com<br />

© All rights reserved<br />

Wilson Press HK Ltd., Hong Kong, 2007<br />

The views expressed in this magazine are not necessarily<br />

those of the Association of Asia Pacific <strong>Airlines</strong>.<br />

JULY/AUGUST 2007 ORIENT AVIATION 5


REGIONAL ROUND-UP<br />

Hong Kong <strong>Airlines</strong><br />

signs MoU for 51 jets<br />

Hong Kong <strong>Airlines</strong> which began<br />

life in 2001 as CR Airways with<br />

two Bombardier CRJs, signed a<br />

Memorandum of Understanding (MoU) for<br />

51 Airbus widebody and narrowbody aircraft<br />

in late June. The carrier currently operates<br />

five B737-800s.<br />

The ‘shopping list’ is for 30 A320s, 20<br />

A330s and one Airbus Corporate Jet.<br />

Two years ago, the airline changed<br />

its name after Mainland carrier, Hainan<br />

<strong>Airlines</strong>, took a 45% stake in the airline and<br />

put its own management team in place.<br />

Airline chairman, Ren Wei Dong, said<br />

the A330s would be used to establish longhaul<br />

routes.<br />

Asia biggest market,<br />

forecasts Boeing<br />

In a 2007 Current Market Outlook,<br />

released in London last month, Boeing<br />

said there will be a US$2.8 trillion<br />

market for airliners in the next 20 years and<br />

the largest market will be in the Asia-Pacific.<br />

The new airliners will accommodate<br />

forecasted 5% annual passenger traffic<br />

growth and a 6.1% increase in cargo traffic.<br />

The report said the market value translates<br />

into 28,600 new commercial airplanes<br />

with the “largest market projected to be the<br />

Asia-Pacific with 36% of the $2.8 trillion”.<br />

North America will comprise 26% of<br />

delivery dollars, followed by Europe, Russia<br />

and the Commonwealth of Independent<br />

States (CIS) with 25% and Latin America, the<br />

Middle East and Africa taking up the remaining<br />

13%, said Boeing. The largest market<br />

will be in single aisle airplanes (17,650), followed<br />

by twin aisle airliners (6,290), regional<br />

jets (3,700) and aircraft larger than 400 seats<br />

(960), according to its forecast.<br />

China could open<br />

up local skies<br />

A<br />

senior<br />

Chinese aviation regulator,<br />

Yang Guoqing, has told the China<br />

Securities Journal that all airports<br />

could be open to all operators from 2010,<br />

when the 11th five-year plan concludes. He<br />

said the reforms could make the eight largest<br />

airports in China, including Shanghai<br />

and Beijing, available to all domestic carriers.<br />

At present these airports have only<br />

been available to major government airlines,<br />

which has stymied the growth of private airlines<br />

in China.<br />

China interested<br />

in Airbus plants<br />

China <strong>Aviation</strong> Industry Corp<br />

(Avic I) president, Lin Zuoming,<br />

said his company is bidding to<br />

invest or buy all six European Airbus factories<br />

up for auction as well as to develop<br />

mid-size jets with Canadian manufacturer,<br />

Bombardier.<br />

Airbus is auctioning plants in France,<br />

Germany and England that it said would<br />

save the company US$2.68 billion. The<br />

Bombardier joint venture requires a $400<br />

million investment from the Chinese manufacturer<br />

in Bombardier’s C Series aircraft.<br />

In turn, the Canadian manufacturer will<br />

invest $100 million in Avic I’s new regional<br />

jet, the ARJ21.<br />

LOW-COST CARRIERS<br />

Korean Air to<br />

launch LCC<br />

Following the completion of a feasibility<br />

study, Korean Air (KAL)<br />

will set up a low-cost carrier (LCC)<br />

in the next three years, the carrier’s parent<br />

company, the Hanjin Group, said in June.<br />

The new airline will fly on targeted domestic<br />

routes as well as short and mediumhaul<br />

international services, using its fleet of<br />

B737s, the president of KAL’s passenger services<br />

division, Young-Ho Kim, said.<br />

Korean Air’s decision to launch an LCC<br />

was “also a display of its will that it shall no<br />

longer remain indifferent to the invasion of<br />

LCCs from China and Southeast Asia into<br />

the Korean market,” Kim said.<br />

“The Korean flag carrier has asserted<br />

many times that dump selling and unreliable<br />

tourism packages centred around LCCs<br />

causing market disturbance and customer<br />

inconvenience must be stopped. Korean<br />

Air’s strategy is to differentiate its new LCC<br />

venture with its experience, world class<br />

maintenance skills and fleet efficiency,” he<br />

added.<br />

6 ORIENT AVIATION JULY/AUGUST 2007<br />

Budget carrier<br />

to fend off China<br />

All Nippon Airways (ANA) said it<br />

also may launch an LCC to fend<br />

off competition from a growing<br />

number of Chinese airlines. ANA president,<br />

Mineo Yamamoto, said in June the possibility<br />

of increased industry deregulation and<br />

the additional slots to become available at<br />

Tokyo’s Narita and Haneda airports by 2009<br />

gave ANA the impetus to plan an LCC.<br />

“If Chinese carriers start cut-price airlines<br />

then that is going to be a threat,” he<br />

Korean Air: planning to launch<br />

a low-cost carrier<br />

told Reuters news agency in Tokyo. “We are<br />

looking at the need for a budget airline so we<br />

can compete with other Asian airlines. And<br />

if we feel it is necessary then we want to do<br />

that,” Yamamoto said. The airline could be<br />

based overseas, in a country with lower costs<br />

than Japan and would be a separate brand<br />

from ANA, he added.<br />

Separately, ANA and Korea’s Asiana<br />

<strong>Airlines</strong> have announced they will each<br />

spend US$12 million buying shares in each<br />

other’s airline as part of a new strategic alliance.<br />

The airlines, both members of the Star<br />

Alliance, will also develop co-operation in


SHORTTAKES<br />

AIRLINES>> Chongqing <strong>Airlines</strong>,<br />

a new carrier which is 60% owned by<br />

China Southern <strong>Airlines</strong>, has received<br />

approval to begin flying from the nation’s<br />

regulatory authorities with an initial fleet<br />

of three A320s. HNA Group subsidiary,<br />

Lucky Air, is launching its own subsidiary,<br />

West China <strong>Airlines</strong>, in Chongqing with<br />

three B737-300s.<br />

AIRPORTS>> Copenhagen Airport<br />

has sold its 20% equity in Hainan<br />

Island’s Meilan Airport for a reported<br />

$ 69.75 million. Singapore Changi<br />

Airport’s Terminal 3 will open next<br />

January and is projected to handle 22<br />

million passengers a year, bringing the<br />

total forecast to use Changi Airport to<br />

70 million a year.<br />

CODE -SHARES>> Japan <strong>Airlines</strong><br />

and Jetstar have commenced code-sharing<br />

on the Osaka-Brisbane-Sydney route.<br />

MRO>> Ameco Beijing and Air China<br />

have completed a centralised component<br />

subcontract agreement whereby Ameco<br />

will repair component parts for Air China.<br />

SIA Engineering Co Ltd is to buy 100%<br />

of Brisbane-headquartered Aircraft<br />

Maintenance Services Australia Pty<br />

Ltd (AMSA), a line maintenance company<br />

established in 1992. SR Technics and Air<br />

India have signed an agreement to service<br />

the CFMI engines and CTCP APUs for the<br />

Air India Express fleet of B737-800s.<br />

LEASING>> AWAS and private equity<br />

group, Terra Firma, have completed the<br />

takeover of Pegasus <strong>Aviation</strong> Finance<br />

Company, bringing the combined aircraft<br />

owned by the enlarged group to 223,<br />

valued at $5.5 billion.<br />

ROUTES>> AirAsia will begin daily<br />

services to Shenzhen – a city of 12 million<br />

across the China border from Hong Kong<br />

and a gateway to southern China – from<br />

both Bangkok and Kuala Lumpur in midmonth.<br />

Cathay Pacific Airways will<br />

double its services to New York and San<br />

Francisco, operating twice daily nonstop<br />

flights from the U.S. Dragonair<br />

has increased its Hong Kong to Busan,<br />

Chongqing and Xian services to daily for<br />

the summer peak as well as doubling<br />

its services to Fuzhou in China to 14 a<br />

week. The airline will also provide several<br />

charter services from Hong Kong to five<br />

Japanese cities during July-August.<br />

United <strong>Airlines</strong> resumed its daily nonstop<br />

service between Taipei and San<br />

Francisco in June for the summer.<br />

TRAINING>> Emirates <strong>Airlines</strong> has<br />

ordered one CAE 7000 series B737-<br />

300ER full-flight simulator (FFS) and<br />

Hainan <strong>Airlines</strong> has signed a contract<br />

for a CAE 7000 series EB145 FFS and<br />

a suite of CAE Simfinity training devices.<br />

Thales has won a $20 million contract<br />

from Sichuan <strong>Airlines</strong> to supply and<br />

support training equipment – two D-<br />

Level FSSs and one classroom-based<br />

Thales Formation Systems Trainer.<br />

the areas of sales, marketing and airport services.<br />

(See The ‘Everest Challenge’ p.10)<br />

Jetstar on<br />

expansion drive<br />

Qantas-controlled LCC, Jetstar, said<br />

it is planning a large aircraft order,<br />

possibly with Airbus, and is looking<br />

to buy minority stakes in Asian carriers<br />

as it expands across the region. Jetstar chief<br />

executive, Alan Joyce, said: “We are talking<br />

to Airbus at the moment for a long-term<br />

big order.”<br />

Joyce added that Jetstar parent, Qantas<br />

Airways, was considering investing in airlines<br />

in the Philippines, Indonesia and<br />

Thailand and that Jetstar in particular was<br />

looking at possible markets in Taiwan, South<br />

Korea and Southern Europe. In June, Jetstar<br />

increased its flights to Bali, Indonesia, to<br />

double-daily services.<br />

Oasis and Viva Macau<br />

spread their wings<br />

Low-cost carriers Oasis <strong>Airlines</strong><br />

and Viva Macau, based in Hong<br />

Kong and Macau respectively, have<br />

expanded their networks to include North<br />

America and Australia as well as several<br />

Southeast Asian cities.<br />

Oasis, which flies daily to London<br />

Gatwick from Hong Kong, began a six<br />

times a week service to Vancouver on June<br />

28 using three former All Nippon Airways<br />

B747-400s. At Viva Macau, the new chief<br />

executive, Con Korfiatas, said the LCC will<br />

start a three times a week service to Sydney<br />

in mid-August and is planning routes from<br />

Macau to Tokyo, Osaka, Pusan, Manila<br />

Clark, Phuket and Ho Chi Minh City.<br />

Former Viva Macau CEO, Andrew<br />

Pyne, resigned from the airline to set up<br />

an LCC, yet to be named, in Moscow. Pyne<br />

remains a shareholder and an advisor.<br />

Nok Air<br />

goes shopping<br />

Thai LCC, Nok Air, has announced it<br />

has become the world’s first “shoppers’<br />

airline”, following the launch<br />

of its first international flight; daily services<br />

between Bangkok and Bangalore in India.<br />

Nok Air and The Mall Group, operators of<br />

the three most prestigious shopping malls in<br />

Bangkok, have done a deal which offers passengers<br />

flying the airline from Bangalore to<br />

Bangkok discounts of up to 50% if they shop<br />

at selected retail outlets in The Mall Group’s<br />

Emporium, Siam Paragon, and The Mall<br />

department stores in Bangkok.<br />

Thai AirAsia<br />

wants IPO<br />

Several senior executives of Thai<br />

AirAsia, who now hold 1% of the<br />

low-cost carrier, are planning to buy<br />

the 50% of the airline now owned by Shin<br />

Corp, one of the companies owned by<br />

former Thai prime minister, Shinawatra<br />

Thaksin. The airline’s chief executive,<br />

Tassapon Bijleveld, said if the purchase is<br />

completed, the remaining 49% of the airline<br />

would continue to be held by <strong>Malaysia</strong>’s<br />

AirAsia Bhd. He added the carrier was planning<br />

an IPO by 2010.<br />

Long-haul, tight fit<br />

AirAsiaX , the long- haul, lowcost<br />

carrier to be launched by the<br />

AirAsia Group in September, has<br />

ordered 15 A330-300s and announced the<br />

airplanes will have the largest configuration<br />

in the aircraft type’s history – 396 seats<br />

in the cabin – up to 36% larger than other<br />

A330-300 operators.<br />

JULY/AUGUST 2007 ORIENT AVIATION 7


BUSINESS ROUND-UP<br />

Garuda Indonesia<br />

moves into profit<br />

Indonesian flag carrier, Garuda<br />

Indonesia, reported a profit of 121 billion<br />

rupiah ($13.71 million) for the four<br />

months to April 30, compared with a loss<br />

of 279 billion rupiah in the same months<br />

in 2006. Garuda attributed the result to<br />

improved efficiency as well as an increase in<br />

load factor from an average 69% to 76%.<br />

SALE reports<br />

record profit<br />

In its first published results since it<br />

was taken over by the Bank of China<br />

last December, Singapore Aircraft<br />

Leasing Enterprise (SALE) has reported<br />

an after tax net profit of $70.5 million for the<br />

year to March 31, a 103% increase over the<br />

previous 12 months.<br />

SALE managing director and chief executive,<br />

Robert Martin, said: “With manufacture<br />

production slots sold out in the<br />

near term, demand for new leased aircraft<br />

is likely to outweigh supply for the foreseeable<br />

future. Much of this demand will be due<br />

to continued growth, especially in Asia. The<br />

replacement of aircraft will also become<br />

increasingly important in the coming years,<br />

particularly in North America.”<br />

SALE sold 17 airplanes in the 2006-07<br />

Garuda Indonesia:<br />

in profit<br />

year, and said increased income from feebased<br />

advisory and lease management services<br />

further enhanced profitability.<br />

Kingfisher buys<br />

26% of Air Deccan<br />

Aircraft sales boom in Paris<br />

The beginnings of a predicted shakeout<br />

in Indian aviation began in June<br />

with Kingfisher <strong>Airlines</strong>’ $121 million<br />

purchase of 26% of Deccan <strong>Aviation</strong>,<br />

the owners and operators of domestic lowcost<br />

carrier (LCC), Air Deccan. The combined<br />

carriers will be the second largest<br />

domestic airline operators, behind the<br />

newly-amalgamated Jet Airways and Air<br />

Sahara.<br />

It is expected that Kingfisher will<br />

increase its equity in Air Deccan as the airline<br />

has reported several quarters of losses<br />

due to declining yields.<br />

Cebu Pacific<br />

wants IPO<br />

Cebu Pacific, the leading budget<br />

carrier in the Philippines, has said<br />

it wants go to the market later this<br />

year with an initial public offering (IPO)<br />

planned to fund fleet expansion. Cebu<br />

Pacific president, Lance Gokongwei, said<br />

the airline had 14 ATR72-500s ordered – six<br />

confirmed orders plus eight options valued<br />

at $250 million – as part of a plan to double<br />

capacity at the 11-year-old carrier by 2013.<br />

Cebu, with its 20-city domestic network as<br />

well as seven regional destinations, said the<br />

number of passengers carried increased by<br />

50% in 2006 over 2005.<br />

MAS upgrades<br />

profit forecast<br />

Ma l ay s i a A i rl i ne s ( M A S )<br />

announced its full-year profit<br />

forecast would increase from 50<br />

million ringgit (US$17 million) to a target<br />

between 300 million ringgit and 700 million<br />

ringgit.<br />

MAS reported a profit of 132.7 million<br />

ringgit for the three months to March 31.<br />

(See Idris Jala profile p. 24)<br />

Asia was a prominent player in the aircraft sales boom,<br />

which took the Paris Air Show by storm last month.<br />

Indonesia’s Lion Air ordered 40 B737-900ERs to<br />

bring its combined order for the type to 100. Mandala<br />

<strong>Airlines</strong>, meanwhile, became the first Indonesian<br />

A320 customer with an order for 25 of the type.<br />

India’s Kingfisher <strong>Airlines</strong> ordered 15 A350s, 10 A330s, five<br />

A340s and 20 A320s and Jet Airways signed for 13 ATR-72 500s.<br />

Thai Airways International ordered eight A330-300s (these will be<br />

obtained through a leasing company), and Fly Asian Xpress, the proposed<br />

low-cost, long-haul subsidiary of LCC AirAsia, ordered 15<br />

A330-300s. Japan <strong>Airlines</strong> ordered 10 Embraer 170 regional jets.<br />

Two Asian carriers signed major Memorandums of<br />

Understanding (MoU) during the week. Singapore’s Tiger Airways,<br />

which operates nine A320s and has 11 more on order, signed an MoU<br />

for 30 A320s and 20 options.<br />

Hong Kong <strong>Airlines</strong>, which currently operates only five aircraft,<br />

signed an MoU for 51 Airbus jets, The ‘shopping list’ is for 30<br />

A320s, 20 A330s and one Airbus Corporate Jet.<br />

While it was a good week for Boeing, Airbus stole the show. As<br />

<strong>Orient</strong> <strong>Aviation</strong> went to press Airbus had announced firm orders for<br />

405 aircraft, including several orders from leasing companies.<br />

A highlight for Airbus was the flurry of orders for its A350<br />

XWB (Extra Wide Body), the contender to Boeing’s record-breaking<br />

B787. With orders from Qatar Airways (80), India’s Kingfisher<br />

<strong>Airlines</strong> (15) and Libya’s Afriqiyah Airways (6), Airbus now has 127<br />

firm orders for the plane, although that is still well behind the 634<br />

orders that Boeing has for the B787.<br />

The Gulf region airlines were again among the big buyers.<br />

As well as ordering the A350s, Qatar ordered three more A380s,<br />

Emirates Airline purchased another eight A380s to add to its huge<br />

order of 45 already in place (two more A380s were also ordered by<br />

Air France), Etihad Airways from Abu Dhabi ordered five A330-<br />

200s, four A340-600s and three A330-200 freighters, with low-cost<br />

Gulf carrier, Jazeera Airways, ordering 30 A320s.<br />

Leasing companies were also among the big buyers. ILFC<br />

ordered 63 planes: 52 B787s, 10 B737s and one B777 freighter. The<br />

leasing arm of General Electric, GECAS, ordered 60 A320s from<br />

Airbus as well as six B777 freighters from Boeing. Other leasing<br />

companies placing orders included CIT with seven A350s and 25<br />

A320s and ALAFCO from the Middle East with 12 A350s and seven<br />

A320s. – Tom Ballantyne<br />

8 ORIENT AVIATION JULY/AUGUST 2007


MAIN STORY<br />

The<br />

‘EVEREST<br />

CHALLENGE’<br />

When the world’s airlines<br />

met in Vancouver last month,<br />

International Air Transport<br />

Association (IATA) director<br />

general Giovanni Bisignani said<br />

liberalisation was the aviation<br />

industry’s ‘Everest challenge’.<br />

The bilateral system belongs<br />

in a museum next to the paper<br />

airline ticket, he insisted. Is the<br />

push towards liberalization and<br />

airline consolidation speeding up<br />

or are the roadblocks to change<br />

still stalling progress? TOM<br />

BALLANTYNE spoke to airline<br />

chiefs, industry leaders and<br />

analysts to find the answer.<br />

As Singapore <strong>Airlines</strong> (SIA)<br />

chief executive, Chew Choon<br />

Seng, pondered a US$1<br />

billion investment in China<br />

Eastern <strong>Airlines</strong> (CEA)<br />

last month, he was well aware the planned<br />

stake – close to 20% – fell a long way short<br />

of bringing with it effective ownership and<br />

control. In today’s world, where the slow<br />

pace of air market liberalization and crossborder<br />

ownership limitations are restricting<br />

progress towards an open global market and<br />

much needed industry consolidation, there’s<br />

not much he can do about it.<br />

But Chew isn’t hanging around to wait<br />

for the big bang. In effect, he is moving<br />

strategically within the confines of today’s<br />

regulatory environment to prepare for a<br />

different future, when it eventually arrives.<br />

“China is a big growth market and a very<br />

important one for SIA,” he told <strong>Orient</strong><br />

<strong>Aviation</strong>.<br />

“If the conditions are right and everything<br />

else can be agreed, [the deal with CEA] will<br />

be a good starting point for us in preparation<br />

for eventual opening up of the skies.”<br />

Speaking in Vancouver, Canada, where<br />

he was attending the International Air<br />

Transport Association (IATA) annual<br />

general meeting, Chew said the reality of<br />

the current aviation environment, where all<br />

operations are governed by a web of bilateral<br />

agreements, meant SIA must rely on its own<br />

organic growth, or take ownership stakes<br />

in foreign carriers “which complement our<br />

strategy and our network and are consistent<br />

with our own operating philosophy and<br />

product positioning.”<br />

F o r S I A , t h i s m e a n t g r a b b i n g<br />

opportunities as they arose, he said. In the<br />

case of Shanghai-based CEA, Singapore<br />

10 ORIENT AVIATION JULY/AUGUST 2007


interests will have a 25% stake: 5.1% with<br />

Singapore government investment arm,<br />

Temasek, and the remainder<br />

with SIA.<br />

But future forays are hard<br />

to map out. “You might want<br />

to marry a beauty queen. It’s a<br />

nice ambition, but at the end of a<br />

Saturday night you look around<br />

the dance floor and see who is<br />

available,” said Chew.<br />

SIA isn’t the only player<br />

trawling the ballroom for<br />

potential partners. Nearly<br />

everyone <strong>Orient</strong> <strong>Aviation</strong><br />

spoke to agreed the coming<br />

months will likely see a flurry<br />

of activity involving equity<br />

investments by airlines in<br />

partner carriers similar to SIA’s<br />

move into CEA.<br />

Many analysts predict<br />

another of China’s big three,<br />

Guangzhou-based China Southern <strong>Airlines</strong><br />

(CSA), will follow suit with a share sale to<br />

a strategic partner sometime in the next 18<br />

to 24 months. Insiders name Dubai-based<br />

Emirates Airline, Korean Air and Air France<br />

as potential candidates.<br />

“I will go out on a limb and say I could<br />

possibly see deals being done anywhere,” said<br />

JPMorgan regional transport analyst, Peter<br />

Negline. “I wouldn’t rule anything in and I<br />

wouldn’t rule anything out. There are some<br />

governments more bent on liberalization<br />

than others and their carriers are well aware<br />

it is time to think about where they position<br />

themselves in the future.”<br />

T here h ave b e e n ot her sig n s<br />

consolidation and liberalization may be<br />

gathering momentum. Japan <strong>Airlines</strong> has<br />

now absorbed Japan Air Systems. The<br />

purchase of Dragonair by Cathay Pacific<br />

Airways and its cross-shareholding with<br />

Air China are bedded down.<br />

Rationalization in India is well underway<br />

with the merger of state-owned Air India and<br />

Indian, the takeover of Sahara <strong>Airlines</strong> by Jet<br />

Airways and Kingfisher <strong>Airlines</strong>’ move into<br />

Air Deccan.<br />

While these are essentially all ownership<br />

adjustments taking place within national<br />

boundaries, the impending cross-border<br />

SIA-CEA deal is not unique. In May,<br />

Japan’s All Nippon Airways (ANA) and<br />

Korea’s Asiana <strong>Airlines</strong> announced a crossshareholding<br />

arrangement that will see each<br />

invest $12 million in the other. While small,<br />

it could lead to bigger things.<br />

‘[The industry<br />

has] one foot in<br />

the 21st century<br />

and one foot in<br />

the 1940s’<br />

Chew Choon Seng<br />

Chief Executive<br />

Singapore <strong>Airlines</strong><br />

Garuda Indonesia is looking for a strategic<br />

equity partner. Qantas has purchased 30% of<br />

Vietnam’s Pacific <strong>Airlines</strong><br />

and Hanoi is currently<br />

moving to raise the foreign<br />

ownership limit there from<br />

the current 30% to 49%.<br />

There has also been<br />

a f lurry of activity on<br />

the liberalization front.<br />

The long-awaited open<br />

skies agreement between<br />

the U.S. and Europe has<br />

finally been signed, a<br />

move often cited as a spur<br />

to wider open skies deals<br />

elsewhere.<br />

The U.S. has signed<br />

a new agreement with<br />

C h i n a t h at w i l l see<br />

passenger flights more<br />

than double by 2012.<br />

China has also announced<br />

further liberalization of its domestic market<br />

and elsewhere the Association of South<br />

East Asian Nations (ASEAN) open skies<br />

agreement is due to start operating from<br />

December next year.<br />

Have the floodgates o p e n e d ? N o t<br />

q u i t e , according to most observers. “We<br />

compete in a modern world but we are living<br />

in a time capsule with 60-year-old rules,” said<br />

IATA director general, Giovanni Bisignani.<br />

“We are trying to climb<br />

Everest with equipment<br />

from 1944.<br />

“ T he U.S.- Eu rope<br />

agreement is a step in the<br />

right direction creating<br />

many new opportunities,<br />

but governments must<br />

understand that we have<br />

a modern business to run<br />

and we need the freedom<br />

to sell our products where<br />

markets exist and to merge<br />

or consolidate where it<br />

makes business sense. Let<br />

me be frank, liberalization<br />

is the only way forward.”<br />

IATA estimates the<br />

l i f t i ng of rest r ict ive<br />

agreements – there are still<br />

more than 300 bilaterals in<br />

place – would increase air<br />

traffic by 60%, create 24<br />

million jobs and add $490<br />

billion to global GDP.<br />

Impressive figures, but the industry is<br />

‘The key to further<br />

progressive<br />

liberalisation<br />

clearly lies in<br />

changing longestablished<br />

attitudes towards<br />

national interests’<br />

Andrew Herdman<br />

Director General<br />

AAPA<br />

not there yet.<br />

Damien Horth, transport analyst at global<br />

finance firm UBS, believes progress towards<br />

liberalization amounts to a crawl. “It is slow.<br />

It is really up to individual governments now<br />

to drive that forward,” he said. “There are<br />

pockets moving in the right direction and<br />

then a lot of resistance.”<br />

Another investment analyst, Vince Ng<br />

at KAF-Seagroatt and Campbell in Kuala<br />

Lumpur, is a little more optimistic. He sees<br />

increased competition, additional capacity,<br />

the entry of low cost carriers, rising operating<br />

costs, fuel prices, salaries and leasing rates<br />

all contributing to imminent liberalisation.<br />

“The most rational way for airlines to<br />

grow under such circumstances is through<br />

scale, either through merger and acquisitions<br />

or taking market share off airlines that have<br />

gone bust. Governments today recognise this<br />

and are now more willing to explore opening<br />

up their markets, albeit in stages,” he said.<br />

Ng argues that liberalization will drive<br />

competitiveness. “Protected markets always<br />

render their industries efficient,” he said.<br />

“With competition and consequential<br />

improvements in efficiencies, chances of<br />

survival through the tougher operating<br />

environment improve. Basic economics<br />

apply here: leave it to free market forces.<br />

Players will consolidate, inefficient operators<br />

will exit and the industry will ultimately be<br />

in balance.”<br />

Most observers believe<br />

the precursor to global open<br />

skies will be liberal aviation<br />

agreements between regional<br />

blocs, such as the U.S.-Europe<br />

deal. How quickly this will<br />

occur is the subject of debate.<br />

Hor t h suggest s t hat ,<br />

initially, individual countries<br />

could “dock into” open skies<br />

blocs. “If Singapore did an<br />

open skies agreement with the<br />

EU and then open skies with<br />

the U.S., you could end up with<br />

something. Others could join<br />

in later,” he said.<br />

But none of it is plain<br />

sailing. Negline, for instance,<br />

isn’t convinced the ASEAN<br />

open skies bloc will get off<br />

the ground as planned next<br />

year. “I think you will see<br />

that dissolve into a series of<br />

expanded bilateral agreements<br />

and maybe a couple of countries exempting<br />

themselves from it, with Indonesia probably<br />

JULY/AUGUST 2007 ORIENT AVIATION 11


MAIN STORY<br />

being the most notable,” he said. “But they<br />

will eventually come around. It is all a<br />

function of political developments. They<br />

can be complex and take time.”<br />

Negline sees this as part of a pattern. “I<br />

can definitely see potential for them [bloc<br />

deals] within the industry, but whether<br />

governments are ready to place their<br />

sovereign rights in the hands of a third<br />

party that they don’t fully control ... I’m not<br />

sure all the states in Asia would necessarily<br />

subscribe to that just yet.”<br />

Chris Tarry, head of UK-based transport<br />

strategy consultancy CTAIRA (Chris Tarry<br />

<strong>Aviation</strong> Industry Research and Analysis)<br />

said bloc deals seemed the straightforward<br />

way to go, but governments would worry<br />

whether their home carriers were strong<br />

enough not only to survive, but also to<br />

compete, especially in the much sought<br />

after Asian market.<br />

“Asia is about to become the world’s<br />

biggest market so there will be a lot of<br />

pressure from the U.S. and from Europe to<br />

get as much as possible into that market,”<br />

he said.<br />

Andrew Herdman, director general of the<br />

Association of Asia Pacific <strong>Airlines</strong> (AAPA),<br />

agreed the recent EU-U.S. agreement was a<br />

small step in the right direction. “But it was<br />

in many ways a missed opportunity given<br />

there was no movement at all on the question<br />

of ownership and control limits and domestic<br />

aviation markets effectively remain closed to<br />

foreign operators and investors,” he said.<br />

He views t he A PEC Mu lt ilateral<br />

Agreement on the Liberalisation of<br />

International Air Transport (MALIAT)<br />

concluded by Brunei, Chile, New Zealand,<br />

Singapore and the U.S. in 2001, as probably<br />

the most ambitious step towards true<br />

liberalisation involving multiple regions.<br />

Apart from the main ASEAN agreement<br />

due next year, other recent sub-regional<br />

initiatives include various open agreements<br />

among ASEAN sub regions, as well as<br />

separate ongoing discussions with China,<br />

Japan and Korea.<br />

“The key to further progressive<br />

liberalisation clearly lies in changing<br />

long-established attitudes towards<br />

national interests compared to the<br />

benefits of multilateral liberalisation,”<br />

said Herdman. “Realistically much<br />

of the debate still takes place within<br />

the context of bilateral negotiations.<br />

However, there is also scope for<br />

further regional or even supranational<br />

initiatives, through ICAO [International<br />

All Nippon Airways: cementing its<br />

relationship with Asiana <strong>Airlines</strong><br />

Civil <strong>Aviation</strong> Organization] for example.<br />

“A fully liberalised air transport<br />

environment would generate even wider<br />

social and economic benefits both regionally<br />

and globally, allow greater commercial<br />

freedom to airlines and pave the way for<br />

necessary industry consolidation, greater<br />

efficiencies and wider and better choices for<br />

the travelling public.”<br />

Abdul Wahab Teffaha, secretary general<br />

of the Arab Air Carriers Organization<br />

(AACO), is more bullish on the prospects<br />

for bloc agreements.<br />

Liberalization in the Arab world has<br />

picked up pace. There is now a multilateral<br />

agreement involving six countries, with six<br />

more having signed but not yet implemented<br />

the deal. One Arab nation, Morocco, already<br />

has an open skies agreement with the EU.<br />

“I believe quite a few countries in the<br />

Middle East would like to follow suit,”<br />

he said. “We are seeing a higher pace of<br />

liberalization in the region which I am sure<br />

is not going to be confined to the region.<br />

“There is so much networking happening<br />

between Europe and the Middle East and the<br />

Middle East and the Indian subcontinent as<br />

well as the Middle East and Asia that I<br />

believe these three regions are going to<br />

achieve some sort of a formula for an open<br />

market agreement on regional levels within<br />

the next five to seven years.”<br />

‘We are seeing a higher<br />

pace of liberalization<br />

in the region’<br />

Abdul Wahab Teffaha<br />

Secretary General<br />

Arab Air Carries Association<br />

SIA’s Chew is also optimistic about open<br />

skies agreements between economic blocs.<br />

“The first one we have seen is between the<br />

U.S. and EU,” he said. “Moves are afoot to<br />

open up the skies between Japan and various<br />

countries. I think the next big development,<br />

depending on political and economic<br />

developments in Asia, will be India and<br />

China and how that sets the tone for the rest<br />

of the world.”<br />

JP Morgan’s Negline also points to calls<br />

in Japan for liberalization, although he<br />

draws attention to the situation in North<br />

Asia where the Taiwan-China issue is one<br />

complex element in the equation. “But if<br />

there is liberalization in Japan and greater<br />

liberalization out of China and Korea as<br />

well, then one can only hope that the political<br />

forces for change on the China-Taiwan issue<br />

can be supported.”<br />

Everyone agrees the cross-border issue<br />

is the greatest stumbling block to rapid<br />

progress. While the U.S.-EU air treaty<br />

allows for open market entry by carriers<br />

from both sides, it has neatly sidestepped the<br />

foreign ownership issue. Negotiators from<br />

Washington and Brussels won’t talk about<br />

that again until some time next year.<br />

“The cross-border thing in the U.S. is<br />

stuck firmly on the resistance to any idea of<br />

cross-border ownership and until the U.S.<br />

subscribes to that it is going to be difficult<br />

to get any wholesale agreements<br />

elsewhere,” said Negline.<br />

The result, according to most<br />

analysts and airline industry chiefs,<br />

is a search by carriers to find ways<br />

around the rules as they did by using<br />

alliances to strengthen their global<br />

networks. One way was is to take<br />

a significant stake in a potential<br />

12 ORIENT AVIATION JULY/AUGUST 2007


MAIN STORY<br />

Open skies means price war<br />

Stand by for price wars on the <strong>Malaysia</strong>-<br />

Singapore peninsula when phase one<br />

of the Association of South East Asian<br />

Nations (ASEAN) open skies pact comes into<br />

effect in December 2008.<br />

The agreement, which in effect allows airlines<br />

from all ASEAN countries to operate when and<br />

how they want between capital cities of member<br />

states, will bring to an end more than 30 years<br />

of dominance by Singapore <strong>Airlines</strong> (SIA) and<br />

<strong>Malaysia</strong> <strong>Airlines</strong> (MAS) on the route between<br />

Singapore and Kuala Lumpur.<br />

The national flag carriers operate more than<br />

200 weekly flights and control some 85% of the<br />

traffic on the 30-minute hop, under a 34-yearold<br />

air services agreement between the two countries – last<br />

revised in 1980 – which does not allow for new players. The<br />

remaining traffic is carried by international airlines operating<br />

fifth freedom flights.<br />

Now, hungry low-cost carriers (LCCs) such as <strong>Malaysia</strong>’s<br />

AirAsia and Singapore’s Tiger Airways are queuing up to get in<br />

on the act. Round-trip tickets from the incumbents currently sell<br />

at US$294. AirAsia chief executive, Tony Fernandes, has already<br />

signalled he will offer fares as low as $60.<br />

With Tiger, partly owned by SIA, set to<br />

enter the route as soon as it can, MAS is<br />

also readying for battle. Chief executive, Idris<br />

Jala, says the carrier has been preparing for<br />

liberalization for some time. It is no coincidence<br />

that its three-year turnaround plan – designed<br />

to get it back into sustainable profitability after<br />

horrendous losses two years ago – will be<br />

completed before open skies arrive.<br />

“What I didn’t like was some people<br />

lobbying for an early liberalization. That’s like<br />

moving the goalposts while you’re playing a<br />

match,” said Idris. The impending arrival of<br />

LCCs on the route is also the reason why<br />

MAS launched its own budget airline, Firefly, he added. “I’d<br />

expect that post- December 2008, a lot of people will want<br />

to fly those routes and that’s why we have Firefly. That’s our<br />

tool to participate in that process.”<br />

Under the ASEAN agreement, air routes between capital<br />

cities of member countries will be liberalised first. This will<br />

gradually be expanded to other cities by 2015, making the<br />

entire region fully liberalised.<br />

MAS chief executive,<br />

Idris Jala: been preparing<br />

for liberalization for<br />

some time<br />

consolidation partner, as SIA has done, and<br />

then wait for the wind to change direction.<br />

Consolidation can take numerous forms,<br />

they point out, from outright purchase<br />

and merger, to cross-equity investment<br />

aimed at strengthening partnerships. “I see<br />

consolidation, or a series of these strategic<br />

deals, as being a fairly constant flow from<br />

now on,” said Negline.<br />

UBS’s Horth agreed. “I don’t think it will<br />

be big bang, but you will see more things like<br />

the SIA-CEA deal. Fully fledged mergers<br />

are a little more difficult because of national<br />

interest but if you want to take a 10-year<br />

view, anything is possible. If you had asked<br />

10 years ago, was Air France-KLM possible,<br />

most people would have said no.”<br />

Although Chew stresses he can’t speak<br />

for his two Star Alliance partners, ANA and<br />

Asiana, he sees their equity swap as more<br />

symbolic than substantive.<br />

“It serves to cement their relationship,<br />

even though that relationship of codesharing,<br />

lounge facility sharing, is already<br />

being done under the Star umbrella of<br />

partnership,” he said.<br />

“Perhaps they are positioning themselves<br />

for the day when all the barriers come<br />

down.”<br />

Legacy airlines are not alone in eyeing<br />

Jetstar: looking for partners<br />

forms of consolidation. The low-cost sector<br />

is also on the move. <strong>Malaysia</strong>’s AirAsia has<br />

already invested in carriers in Indonesia and<br />

Thailand to extend its brand and recently<br />

moved to take a stake in the Philippine<br />

operator Cebu Pacific. Sources say both<br />

parties wanted the deal, but it foundered<br />

on price.<br />

Jetstar is also sounding out potential<br />

partners. Now that its parent Qantas has<br />

taken a 30% stake in Vietnam’s Pacific<br />

<strong>Airlines</strong>, which is likely to become Jetstar<br />

Vietnam, Jetstar chief executive, Alan<br />

Joyce, has confirmed he is looking at taking<br />

minority stakes in other Asian airlines as<br />

part of an aggressive expansion plan. “We<br />

are talking to a number of different partners<br />

in Asia but there is nothing formal at the<br />

moment,” he said. Under discussion are<br />

investment in airlines in the Philippines,<br />

Indonesia and Thailand.<br />

O v e r a l l , t h e c o n s e n s u s i s t h a t<br />

consolidation will continue to gather pace<br />

within national boundaries, but until there<br />

is a breakthrough in terms of cross-border<br />

investment regulation, airlines will be forced<br />

to forge partnerships in whatever way they<br />

can. Both Chew and Bisignani see the<br />

greatest impediment to change as political.<br />

“There has been progress in some areas<br />

but it has not been quick enough,” said Chew.<br />

“We are a global industry yet we are the only<br />

one, when you compare us to others, where<br />

cross-border ownership and management<br />

control is not permitted. We have one foot in<br />

the 21st century and one foot in the 1940s.”<br />

It may be a mixed picture but Bisignani<br />

believes that after 40 years of nothing<br />

happening, there has been movement over<br />

recent years.<br />

“It is a step approach and we are moving<br />

in the right direction,” he said. “Let’s hope<br />

these steps can move a bit faster over the next<br />

few years.”<br />

14 ORIENT AVIATION JULY/AUGUST 2007


ENVIRONMENT<br />

As airlines worry about public support, IATA chief lays down a bold challenge<br />

Target: zero emissions<br />

By Tom Ballantyne<br />

It’s a tall order, but one vital to the<br />

world’s airlines in their bid to win<br />

over a sceptical public and green<br />

lobby that believes they are among<br />

the world’s worst polluters. As<br />

airline chiefs were told at the annual general<br />

meeting of the International Air Transport<br />

Association (IATA) in Vancouver, the target<br />

must be a pollution-free industry.<br />

Carriers are currently preparing to launch<br />

a green offensive at the annual assembly of<br />

the International Civil <strong>Aviation</strong> Organization<br />

(ICAO) in September, vowing to defend their<br />

record whenever and wherever possible as<br />

fears grow they are losing the public relations<br />

battle.<br />

But they have also accepted the reality<br />

that rapid industry expansion will mean<br />

more environmental pressures over coming<br />

decades and that they must work even harder<br />

to find solutions.<br />

“A growing carbon footprint is no longer<br />

politically acceptable for any industry,”<br />

IATA director general, Giovanni Bisignani,<br />

told members.<br />

“Climate change will limit our future<br />

unless we change our approach from<br />

technical to strategic. Air transport must aim<br />

to become an industry that does not pollute.”<br />

That meant zero emissions, he said.<br />

Bisignani laid it on the line for aircraft<br />

and engine manufacturers as well as fuel<br />

producers.<br />

“The aerospace industry must build a<br />

zero emissions aircraft in the next 50 years.<br />

I challenge the U.S., Europe, Canada, China,<br />

Brazil, Russia and Japan to coordinate basic<br />

research on a zero emissions aircraft and then<br />

compete to develop products based on this<br />

research,” he said.<br />

Clean fuel was also critical. “Governments<br />

have cut alternative fuel funding while oil<br />

companies are busy counting the US$15<br />

billion in increased refinery margins that<br />

the airline industry is now paying,” said<br />

Bisignani.<br />

“The first target is to replace 10% of fuel<br />

with low-carbon alternatives in the next 10<br />

‘A growing carbon footprint<br />

is no longer politically<br />

acceptable for any industry’<br />

Giovanni Bisignani<br />

Director General<br />

IATA<br />

years. And the second is to begin developing<br />

a carbon-free fuel from renewable energy<br />

sources. It’s time for governments and<br />

the oil industry to make some serious<br />

investments.”<br />

Significantly, IATA is already working<br />

on “Project Green”, designed to help airlines<br />

implement green strategies across the<br />

business by introducing global best practice<br />

environmental management systems. “This<br />

will place environment alongside safety and<br />

security as a core promise to two billion<br />

airline passengers,” said Bisignani.<br />

While many airline executives expressed<br />

scepticism a pollutant-free industry is<br />

possible in the foreseeable future, there<br />

was little disagreement that carriers had to<br />

‘We have passed the stage of<br />

being in denial. We have been<br />

silent in our success and now<br />

we have a reputation crisis’<br />

Chew Choon Seng<br />

Chief Executive<br />

Singapore <strong>Airlines</strong><br />

act and raise the environmental issue to a<br />

priority level.<br />

Most accept that, one way or another,<br />

they will face inclusion in emission trading<br />

schemes.<br />

And, although airlines do not entirely<br />

support such schemes, they agree they are<br />

preferable to the haphazard imposition of<br />

carbon taxes.<br />

Much of the aviation environmental<br />

debate has centred on Europe over the past<br />

few years, but now Asian carriers are raising<br />

their profiles.<br />

Singapore <strong>Airlines</strong> chief executive,<br />

Chew Choon Seng, told the meeting: “We<br />

have passed the stage of being in denial ...<br />

we have been silent in our success and now<br />

we have a reputation crisis.”<br />

Chew and <strong>Malaysia</strong> <strong>Airlines</strong> chief<br />

executive, Idris Jala, warned there was<br />

a danger that, if Asian airlines did not<br />

participate fully in the environment debate,<br />

carriers could end up being forced into<br />

emissions trading schemes dictated from<br />

elsewhere.<br />

IATA is developing an industry plan<br />

for trading emission credits and wants any<br />

trading system to be global, to reflect the<br />

global nature of the industry.<br />

The topic will be a central theme of the<br />

ICAO assembly in Montreal in September.<br />

“The challenge is for ICAO and its 190<br />

member states to deliver a global emissions<br />

trading scheme that is fair, effective and<br />

available for all governments to use on<br />

a voluntary basis,” said Bisignani “The<br />

September ICAO assembly is an opportunity<br />

that cannot be missed.<br />

“The relevance of ICAO depends on its<br />

ability to deliver a global solution on this<br />

important issue.”<br />

Bisignani made no excuses for aiming<br />

high and talking about a pollution-free<br />

industry, despite the fact aviation has already<br />

improved fuel efficiency by 70% and will add<br />

25% to today’s figures by 2020 thanks to fleet<br />

modernization.<br />

“We can see potential building blocks<br />

for a carbon-free future ...a green industry<br />

is absolutely achievable,” he said.<br />

16 ORIENT AVIATION JULY/AUGUST 2007


AIR TRAFFIC MANAGEMENT<br />

BREAKTHROUGH<br />

Qantas tests groundbreaking landing system; major cost savings expected<br />

By Tom Ballantyne<br />

Air por ts and airlines are<br />

queuing up to acquire a new<br />

precision landing system<br />

recently i nt roduced i n<br />

Australia, which will help<br />

reduce the 12% inefficiencies in global air<br />

traffic management identified by the United<br />

Nations and slash the US$13.5 billion of<br />

wasted jet fuel every year.<br />

The system, developed by Honeywell<br />

and currently operated by Airservices<br />

Australia, is being pioneered by Qantas<br />

Airways.<br />

“We crossed the threshold with Qantas<br />

and it just opened up the floodgates,” said<br />

Keith MacPherson, manager of global<br />

navigation satellite systems (GNSS)<br />

for Airservices Australia, the country’s<br />

aviation regulator. The breakthrough<br />

involves use of a new precision landing<br />

system called GLS, or Global Positioning<br />

Satellite Landing System, that will<br />

dramatically change approach and<br />

departure infrastructure at airports over<br />

the next decade.<br />

Unveiled by Qantas, which has<br />

been using the system in flight tests for<br />

months, GLS will ultimately make the<br />

existing instrument landing system (ILS)<br />

redundant with huge environmental and<br />

operating cost benefits.<br />

“This is a new precision landing<br />

system using satellite technology to<br />

make landings more efficient, accurate and,<br />

ultimately, environmentally friendly,” said<br />

Qantas chief pilot, Captain Chris Manning,<br />

when unveiling details of GLS in Sydney<br />

where it first went into operation.<br />

Honeywell, which provided the groundbased<br />

augmentation system (GBAS)<br />

equipment needed to make a GLS work,<br />

and Airservices Australia, which installed<br />

and now operates it, are working together in<br />

a joint venture bidding for the contract for<br />

two systems for Mumbai and New Delhi<br />

airports in India.<br />

The two have already secured a deal<br />

to install GLS at Tianjin, south west of<br />

Beijing.<br />

“They want to put it in within the next 12<br />

to 18 months, get a feel for it and get the pilots<br />

to use it before they go to a fully operational<br />

system,” said MacPherson.<br />

“Right now we have 127 airports from<br />

Saudi Arabia right through to the Pacific<br />

islands working with us. Saudi Arabia is<br />

planning for 2009. After Mumbai and New<br />

Delhi, India has 34 more airports it wants to<br />

do. China has 134. Hong Kong is talking to<br />

‘We crossed the<br />

threshold with<br />

Qantas and it<br />

just opened up<br />

the floodgates’<br />

Keith MacPherson<br />

Airservices Australia<br />

us at the moment. <strong>Malaysia</strong> is putting five<br />

systems in by 2009 or 2010. The Philippines<br />

has one going in by 2010. So the ball is well<br />

and truly rolling.”<br />

Why the surge in enthusiasm? “GLS is a<br />

replacement for ILS which has been around<br />

for some 70 years,” said Manning. “It is a<br />

major breakthrough, a major change in what<br />

we do. This is the single biggest gain in the<br />

aviation industry to assist the environment,<br />

other than engine technology.<br />

“GLS provides more accurate and stable<br />

tracking information than conventional<br />

approach systems. It can be coupled to<br />

flexible, curved approach paths providing<br />

more fuel efficient and environmentally<br />

friendly flight paths to the runway.”<br />

Essentially, what GLS does is to allow<br />

aircraft to use global positioning system<br />

(GPS) satellite data for the first time during<br />

landing, something that was not possible<br />

previously because GPS raw data is accurate<br />

only to between 15 and 20 metres and does<br />

not meet the precision landing requirement<br />

of accuracy to at least three metres. The<br />

new GLS system can achieve accuracy to<br />

one metre using a GBAS.<br />

The benefits do not end there. Current<br />

ILS equipment costs around $1 million<br />

each and must be installed at each end of<br />

every runway.<br />

At an airport like Sydney, with three<br />

runways, that means it needs six ILS<br />

systems, which are also costly to maintain<br />

and must be calibrated regularly. A single<br />

GBAS costing some $900,000 can be used<br />

for all runways.<br />

It also provides data for up to 90<br />

approaches within a 23 nautical mile<br />

radius, meaning a single system can<br />

cover all landing approaches in a big city<br />

with a couple of major airports and several<br />

general aviation facilities.<br />

GLS allows for dramatically increased<br />

flexibility, including shorter approach<br />

paths. It also lets airlines manoeuvre more<br />

easily around noise sensitive areas.<br />

Qantas is no newcomer to this kind of<br />

role. In 2003 it was the first airline outside<br />

North America to use GPS capabilities. It<br />

took delivery of the world’s first GLSequipped<br />

aircraft, a B737-800, in May 2005.<br />

Last November it completed the world’s first<br />

GLS landing in revenue service.<br />

At present it operates five to 10 GLS<br />

flights a day and about a third of its B737<br />

fleet is now GLS equipped. The airline’s new<br />

B787s, which begin arriving next year, will<br />

all come with GLS, as will its A380s. The<br />

system is expected to be fully operational at<br />

Sydney by August or September next year<br />

and will then be rolled out at other major<br />

Australian airports.<br />

18 ORIENT AVIATION JULY/AUGUST 2007


CARGO UPDATE<br />

Asiana thinks big<br />

By Charles Anderson<br />

It’s tough sharing your home with the<br />

world’s largest air freight operator,<br />

but figures detailing Asiana<br />

<strong>Airlines</strong>’ recent performance show<br />

that while it is unlikely to ever<br />

overtake Korean Air (KAL), the country’s<br />

second carrier doesn’t plan to stay in big<br />

brother’s shadow for long.<br />

Its overall freight load factor (FLF) is<br />

a healthy 80%, topping the average 64.4%<br />

for the region’s carriers and is a few points<br />

above KAL, according to Association of Asia<br />

Pacific <strong>Airlines</strong> (AAPA) figures.<br />

The f ig ure is surprisingly good<br />

considering the capacity<br />

coming into the North Asian<br />

market. And a freight tonne<br />

kilometre (FTK) increase of<br />

19% last year was also the best<br />

in the region.<br />

The plan was to reach US$1<br />

billion in freight revenue this<br />

year, raise freight’s contribution<br />

to the carrier’s overall profit<br />

from 31% to 32% and to<br />

be among the top 10 cargo<br />

carriers in the International<br />

Air Transport Association’s<br />

FTK table by 2010, said an<br />

Asiana spokesman.<br />

KAL currently tops the<br />

IATA list after knocking<br />

Lufthansa German <strong>Airlines</strong> off its perch<br />

in 2004. Asiana is 20th in the table, a good<br />

position for a carrier that started full freight<br />

operations with a single B747 in 1994.<br />

The fleet has grown considerably since<br />

then and is about to expand again. Three<br />

B747 combis, being converted into full<br />

freighters by Israel Aerospace Industries’<br />

Bedek <strong>Aviation</strong> Group, are being added to<br />

eight existing B747Fs and one B767F this<br />

year as routes are expanded. Bellyhold cargo<br />

makes up some 43% of the 900,000 tonnes<br />

carried annually to 23 cities in 14 countries<br />

on 25 routes.<br />

India, the Middle East and Latin America<br />

have been earmarked as areas with promise<br />

to add to existing services to North America.<br />

Transpacific business remains the most<br />

important taking up 40% of Asiana’s freight<br />

totals, with intra-Asia 30% and Europe 20%.<br />

But it’s time to look elsewhere as well.<br />

“We are definitely considering expanding<br />

our routes to India in the future. In our mid<br />

and long-term strategy we plan to start<br />

service there with connections to China and<br />

Europe,” said the spokesman. But first will<br />

come a major boost in freighter services to<br />

main Chinese cities from Korea, which will<br />

see flights increased from three to 15 a week<br />

by the end of the year.<br />

After that there are plans to set up a hub in<br />

an as yet unnamed mainland city – research to<br />

establish the city is going on at present – and<br />

once fifth freedom rights are secured Asiana<br />

Asiana <strong>Airlines</strong>: bellyhold cargo accounts<br />

for 43% of total freight carried<br />

will to form a joint venture with a domestic<br />

operator.<br />

Korean Air already has an agreement in<br />

place with state logistics provider, Sinotrans,<br />

to form a Chinese freight operation, while<br />

Lufthansa Cargo, Singapore <strong>Airlines</strong>, China<br />

<strong>Airlines</strong> and EVA Air also have partnerships<br />

in place.<br />

A good portion of the China goods will<br />

be flown to Incheon airport in Seoul, through<br />

which Asiana transships 52% of its freight.<br />

This figure should grow along with the<br />

airport itself, which has ambitious plans<br />

for further expansion of its cargo facilities,<br />

especially in the transshipment area.<br />

But with the Korean won gaining in<br />

strength the dependence on shipping cargo<br />

for domestic companies such as Samsung<br />

and LG Electronics is causing some concern.<br />

“Their relative importance has increased. We<br />

are trying to lower this high reliance and<br />

we are looking for niche markets in order<br />

to accomplish a higher profit,” said the<br />

spokesman. “This should help us with our<br />

future balance of payments strategy.”<br />

Asiana is also moving away from a<br />

dependency on trunk and feeder routes.<br />

“That system doesn’t guarantee satisfactory<br />

results,” he said.<br />

Instead the carrier is developing roundthe-world<br />

flights and what it calls “absorption<br />

routes” – connecting a number of different<br />

places – which should attract more express<br />

cargo.<br />

Such tactics might also<br />

help solve the inbound cargo<br />

dilemma that all Asia-Pacific<br />

carriers face when aircraft head<br />

out of the region with heavy<br />

loads – IT products, electronics<br />

and textiles in Asiana’s case –<br />

but return virtually empty. So<br />

too could incentives being<br />

offered to global forwarders<br />

who hold the key to solving the<br />

problem, said the spokesman.<br />

Otherwise, Asiana tries to<br />

bring back specialist items<br />

such as cherries, tuna, flowers<br />

and seafood from Nor th<br />

America.<br />

Last year load factors to<br />

North America from Korea topped 85%<br />

and to Europe they edged above 80%<br />

thanks to delivery guarantees for specific<br />

cargo arranged in advance, said the carrier.<br />

Elsewhere, the picture wasn’t quite so healthy<br />

with services to China recording 62% and<br />

Japan 56%.<br />

Meanwhile, Asiana is looking to join<br />

regional and other alliances to help it beat<br />

the competition.<br />

Last year, it agreed to cargo code-sharing<br />

with Japan’s All Nippon Airways on all<br />

freight routes between the two countries,<br />

which added four major Japanese cities to<br />

its network.<br />

That cooperation will likely be<br />

strengthened by the equity swap between<br />

the two carriers announced in June.<br />

20 ORIENT AVIATION JULY/AUGUST 2007


COVER STORY<br />

The recovery of <strong>Malaysia</strong> <strong>Airlines</strong> from<br />

near bankruptcy to profitability in less than<br />

18 months is an object lesson in hope for<br />

struggling carriers. Idris Jala, the former<br />

oil industry executive who has become the<br />

Kuala Lumpur flag carrier’s white knight,<br />

explained to TOM BALLANTYNE how<br />

he has achieved the near impossible.<br />

Jala works<br />

his magic<br />

It may not be pretty, but <strong>Malaysia</strong><br />

<strong>Airlines</strong> (MAS) managing director<br />

Idris Jala’s style is damned effective.<br />

MAS was on the ropes after losing<br />

a record RM1.3 billion (US$377.9<br />

million) in 2005 when he was headhunted<br />

to perform miracles and turn the airline<br />

around.<br />

The former Shell oil executive took off<br />

the kid gloves and started to work hard and<br />

fast ... and a little dirty. In a bid to reduce<br />

costs dramatically and improve yields, he<br />

slashed jobs and cut routes. He exposed<br />

malpractices by introducing a ‘whistle<br />

blowers’ programme.<br />

Problem solving? “We stick people in<br />

a room and they stay there burning the<br />

midnight oil until it is solved,” said the<br />

48-year-old boss.<br />

And the result of this tough love? Some<br />

would say a miracle. In just 18 months MAS<br />

has been transformed from a basket case<br />

with record losses to an airline forecasting<br />

anything up to a RM 700 million profit this<br />

year.<br />

There are no simple answers about how to<br />

revive a struggling state-owned international<br />

airline. But Jala needed to find them.<br />

And he realised one thing very quickly:<br />

any hope of success hinged on two critical<br />

issues, reducing costs and increasing yields.<br />

To achieve the first Jala did the expected.<br />

He set out on a relentless drive to re-engineer<br />

the business, trim expenses across the board,<br />

increase productivity and rationalize the<br />

network.<br />

To tackle the second he did the unexpected.<br />

In an industry heavily reliant on sophisticated<br />

information technology systems to cope with<br />

every aspect of the business, he turned off<br />

MAS managing<br />

director, Idris Jala:<br />

has turned the airline<br />

around in 18 months<br />

24 ORIENT AVIATION JULY/AUGUST 2007


the computer that runs the carrier’s pricing<br />

structure and seat inventory and did it his<br />

way.<br />

Why? Because Jala had a theory the<br />

sophisticated network revenue management<br />

systems used by airlines to cope with the<br />

industry’s incredibly complex fare structure<br />

were perpetuating low yields.<br />

“There is probably no other industry<br />

anywhere in the world that has a pricing<br />

mechanism as complex as the airlines,” said<br />

Jala. “I come from the oil business and no<br />

way is it anywhere near as complex as the<br />

airlines’ [price structure]. If you have 118<br />

routes, as we do, there are something like<br />

2.5 million fare permutations and these are<br />

changing on a daily basis.”<br />

That is why, he explained, every<br />

airline today runs its pricing structure and<br />

seat inventory through sophisticated IT<br />

systems.<br />

Jala backed his judgement, forming<br />

a team whose job was to take the system<br />

off line and produce massive spreadsheets<br />

covering every route the carrier operated.<br />

They had to look at 2.5 million fares on a<br />

daily basis, compare them with competitors<br />

and manually adjust them to ensure they<br />

were competitive.<br />

“This was a massive and very detailed<br />

piece of work. I think the reason we are<br />

seeing increases in yield is not because we<br />

found a simple way to do it, but just by hard<br />

work,” said Jala.<br />

The proof was in the bottom line.<br />

When Jala took the helm, passenger<br />

yields were 22.6 sen (US cents 6.5)<br />

per revenue passenger kilometre<br />

(RPK). At the end of September<br />

last year they had risen to 25.3 sen<br />

per RPK. And by the end of the first<br />

quarter this year (March 31) they had<br />

reached 26.1 sen.<br />

“Yields have been our greatest<br />

improvement in the past 18 months.<br />

Every quarter they have risen with a<br />

total increase of 27% in yield. I think<br />

very few airlines can generate that<br />

kind of increase in such a short period<br />

of time. We think there is still scope<br />

for raising it further,” said Jala.<br />

But improving yields was only<br />

part of the solution. In 2005, MAS<br />

lost RM1.3 billion in just nine months<br />

(it had shortened its financial year<br />

because it was switching to a calendar<br />

fiscal year in 2006).<br />

“This company had a very, very<br />

tough time in 2005. We had a cash<br />

Blowing the whistle<br />

One innovation Jala introduced from his previous company would send<br />

shivers down many a spine, but the MAS boss makes no apologies – a<br />

whistle blower programme.<br />

As Jala explains, the idea is for the programme to provide a “confidential internal<br />

channel for employees to raise their concerns about malpractices, irregularities<br />

and negligence affecting MAS”.<br />

“[In the beginning] we had about 100 whistle blower cases. We have certainly<br />

unearthed a lot of cases of malpractice and we have issued warning letters to<br />

staff that were involved. We also had contracts that were renegotiated as a result<br />

of this,” said Jala.<br />

“The good news is that people now know there is an opportunity [to report<br />

complaints] other than through normal channels, that you can do it anonymously<br />

via the whistle blower policy. It is a very important deterrent to malpractices.<br />

“When I first joined there were a lot of poison pen letters. We had them almost<br />

every day for the first three months. We don’t have them today. And there is less<br />

rumour circulating, although you can never remove that entirely.”<br />

crisis. We felt if we didn’t change the way<br />

we ran the business we would run out of<br />

cash and go bankrupt. It was not a funny<br />

matter,” he said.<br />

By February last year, just three months<br />

after taking control, Jala had drawn up<br />

a business plan aimed at reversing the<br />

carrier’s financial performance to the tune<br />

of RM1.1 billion by the end of the year. “That<br />

comprised RM710 million from revenue<br />

and yield improvement and another RM370<br />

MASKargo: record profits last year<br />

million from cost reduction, to reduce the<br />

loss to [an estimated] RM620 million,” said<br />

the chief executive.<br />

“At the time people didn’t believe we<br />

could swing this in a year because the share<br />

price fell and languished at two ringgit 60<br />

sen (76 US cents) for six months. But we<br />

relentlessly monitored our profit and loss (P<br />

& L) performance. In fact, we monitored the<br />

P & L and the cash flow on a daily basis and<br />

there are not many companies that do that.”<br />

In the end, despite rising fuel<br />

prices and higher aircraft leasing<br />

costs, Jala’s plan exceeded all<br />

expectations. The estimated loss<br />

of RM620 million loss was slashed<br />

further to RM136 million. Today, the<br />

share price is around six ringgit.<br />

MAS beat all its quarterly and<br />

full year targets. This, said Jala,<br />

was down to yield improvement, a<br />

RM973 million increase in revenue<br />

and a RM665 million reduction in<br />

costs. In the year prior to his arrival,<br />

MAS’s costs had ballooned 50%.<br />

By the end of the third quarter<br />

last year MAS had moved into<br />

the black recording a net profit of<br />

RM240 million to September 30.<br />

And the profits have continued to<br />

flow onto the balance sheet. There<br />

was income of RM121 million in<br />

the fourth quarter, which reduced<br />

the loss for the full year to RM133.8<br />

million. The good times continued<br />

this year with a first quarter profit of<br />

RM133 million.<br />

JULY/AUGUST 2007 ORIENT AVIATION 25


COVER STORY<br />

MAS puts big focus on fuel hedging<br />

Like most airlines, <strong>Malaysia</strong> <strong>Airlines</strong> is keeping a close<br />

watch on fuel consumption. Little wonder. Its fuel bill<br />

rose 25.1% last year to US$1.5 billion.<br />

Keeping it in check is a big focus at the airline and last month<br />

Jala announced the carrier has now hedged 61% of its 2007 fuel<br />

needs at an assumed price of US$60 a barrel of crude oil to protect<br />

itself from volatile jet fuel prices. The company has also hedged<br />

18% of its needs for 2008.<br />

Indeed, MAS has gone as far as bringing in outside advice<br />

to assist it gauge its hedging requirements. In May, it contracted<br />

U.S.-based SunGuard’s Kiodex to better help it manage earnings<br />

volatility caused by changes in fuel prices.<br />

Kiodex provides consumers of energy, such as airlines, with<br />

a business process to help manage energy-price risk, design<br />

financial strategies and comply with best practice financial<br />

reporting and accounting policies.<br />

Longer term the airline is also moving speedily to upgrade its<br />

fleet with more fuel-efficient jets.<br />

It operates a fleet of 79 jets: 11 B747-400s, 17 B777-200s, 11<br />

A330-300s, three A330-200s and 37 B737-400s. Jala has already<br />

placed requests with Boeing and Airbus for proposals on 55 new<br />

narrow-body jets that will allow it to phase out its B737-400<br />

fleet by 2014. While he won’t discuss details of wide-body<br />

requirements, Jala told <strong>Orient</strong> <strong>Aviation</strong> MAS will be ready to<br />

make an announcement within two months.<br />

“We want to have fewer types of aircraft to reduce maintenance<br />

and pilot costs. And we want to own some aircraft, not lease all<br />

of them. Leasing gives you flexibility to change while owned<br />

aircraft can be deployed on the core network,” said the managing<br />

director.<br />

MAS is currently negotiating sale and lease back on 18 of<br />

its aircraft. “It is very tricky. We wouldn’t have done it last year<br />

[because lease rates were high], but this is the right time. It will<br />

help us contain increases,” added Jala.<br />

Jala is now confident MAS can achieve<br />

what he terms a “stretched target” of between<br />

RM300 million and RM700 million in net<br />

profit this year.<br />

So what was wrong with MAS in the<br />

first place? “When I came to this job<br />

on December 1, 2005, we had a quick<br />

prognosis of the problems and we identified<br />

four key areas. The first was low yield, the<br />

second an inefficient network, the third low<br />

productivity as a result of too many staff and,<br />

fourthly, poor control over costs,” said Jala.<br />

“Many airlines that are losing money have<br />

these same problems.”<br />

Jala moved quickly cutting routes that<br />

were “bleeding cash”, particularly direct<br />

services from secondary <strong>Malaysia</strong>n centres<br />

to overseas destinations.<br />

He needed to build feeder traffic into<br />

major MAS trunk routes and not being a<br />

member of an alliance, realised this would<br />

have to be done through individual bilateral<br />

agreements with other carriers.<br />

With the need for speed in mind, he told<br />

potential partners deals had to be finalised<br />

within three months.<br />

Today, the result is an array of code-share<br />

pacts that are already paying dividends.<br />

MAS has signed agreements with South<br />

African Airways, Gulf Air, Alitalia, KLM,<br />

Russia’s Transaero <strong>Airlines</strong> and Virgin Blue<br />

in Australia, all adding weight to the carrier’s<br />

hub and spoke network.<br />

Jala said discussions were now underway<br />

with two more airlines, one in India and one<br />

in China, for similar agreements. “If you don’t<br />

<strong>Malaysia</strong> <strong>Airlines</strong>: could order as many as<br />

110 new aircraft to replace an ageing fleet<br />

have the feeder traffic into your main trunk<br />

routes it is difficult to get the load factor on<br />

trunk routes and the right yield,” he said.<br />

Looking to the future, the airline has<br />

completed a full analysis of how its network<br />

should look by 2011 and the type of aircraft<br />

it will require. Aircraft manufacturers have<br />

been asked to put forward a proposal for 55<br />

narrowbody jets. A decision on requirements<br />

for widebody aircraft will be made in the next<br />

two months.<br />

The staff issue was “a very painful<br />

process, but we had to act quickly”, said Jala.<br />

In 2006, staff numbers were reduced from<br />

22,700 to 19,700. Between 600 and 700 more<br />

jobs will go this year through retirement and<br />

natural attrition.<br />

The airline is also focussing on<br />

parameters like on-time performance and<br />

customer service.<br />

MAS has widened its customer reach. In<br />

January, it broke away from the traditional<br />

approach of selling tickets only through<br />

travel agents who had signed an agreement<br />

with the airline. “Now any IATA approved<br />

and registered travel agent can sell our<br />

tickets. That’s what is called opening up the<br />

store front,” said Jala.<br />

The chief executive is looking for more<br />

income from his various divisions, such as<br />

cargo and maintenance, repair and overhaul<br />

(MRO). “We want more third party work<br />

for our MRO division. When I arrived at<br />

MAS third party revenue was about RM100<br />

million. Last year, we more than doubled<br />

that figure to RM220 million. This year we<br />

are challenging our team to deliver revenue<br />

of RM300 million with the same number<br />

of people, or perhaps less because of the<br />

manpower reduction. We are on track to<br />

achieve that target,” he said.<br />

In June, MAS established a new<br />

26 ORIENT AVIATION JULY/AUGUST 2007


engineering subsidiary, <strong>Malaysia</strong> Aerospace<br />

Engineering.<br />

“We are still working on how cargo can<br />

become more profitable. However, last year<br />

our freight division made a record profit [it<br />

exceeded its RM150 million target], much of<br />

that coming from belly business rather than<br />

freighters. The challenge for our cargo folks<br />

is to make sure we make money, or at least<br />

break even, from the freighter business rather<br />

than relying on belly business to make the<br />

lion’s share of profits,” said Jala. The airline<br />

has six freighters, four B747-200s and two<br />

B747-400s.<br />

Last month, Shahari Sulaiman was<br />

appointed the new managing director of<br />

MASkargo.<br />

In recent months MAS has established<br />

a low-cost carrier, Firefly. It operates to<br />

six destinations: four domestic and two<br />

international (Koh Samui and Phuket in<br />

Thailand), with just two Fokker F50 aircraft.<br />

“By end of this year we will be ready<br />

to declare what we want to do with Firefly,<br />

but based on the start-up experience I have<br />

confidence that we will grow this business.”<br />

The airline is also to set up a new<br />

subsidiary, MASWings, to operate rural<br />

air services in <strong>Malaysia</strong> from October (see<br />

separate story).<br />

And the battle against costs is continuing.<br />

“We are looking for ways to structurally<br />

reduce costs. Many of the costs we took out<br />

last year were what I call low hanging fruit.<br />

The big numbers will have to be dealt with<br />

Firefly: low-cost carrier recently launched by MAS<br />

structurally, which means addressing the<br />

way we manage the business,” he said.<br />

Jala insists on constant communication<br />

with staff. He holds quarterly “engagement<br />

sessions” with employees – the carrier has 47<br />

unions. He also issues regular reports on tape<br />

to all staff on the progress of his business<br />

rescue plan.<br />

When it comes to problem solving, Jala<br />

uses an analogy with a popular Eagles song.<br />

“We stick people in a room to find a solution.<br />

It’s like a line from the song Hotel California:<br />

you can check out any time you want, but you<br />

can never leave. They stay there burning the<br />

midnight oil until the problem is solved,”<br />

he said.<br />

Jala has a relatively simple philosophy<br />

for the future of MAS: “We will be quite<br />

prudent in our growth. Most of our new<br />

aircraft will be for replacement. If the<br />

industry grows at 6%, we will grow at 6%.<br />

We won’t pretend we can grow at 40% or<br />

60%,” he said.<br />

Jala does worry, however, about airlines<br />

that throw capacity into the market. “Business<br />

is all about supply and demand. If you put in<br />

excess capacity, margins will come down.<br />

We will not be like that. We do not want to<br />

conquer the world at MAS. We want to hold<br />

our place under the sun and make sure it is<br />

profitable for ourselves,” he said.<br />

Jala is not one to rest on his laurels,<br />

or dream about what most airlines would<br />

consider out of reach. “The impossible first<br />

paradox ambition for MAS would be to<br />

operate a five star airline with LCC costs. If<br />

you can do that, it would be fantastic. That’s<br />

why I want to go down the path of continuing<br />

to reduce our costs while improving our<br />

customer proposition.”<br />

Country routes fly back to MAS<br />

<strong>Malaysia</strong> <strong>Airlines</strong> (MAS) was only too happy to<br />

hand over its loss-making rural air services<br />

to AirAsia-linked Fly Asian Xpress (FAX)<br />

late last year. Now, just six months later, it<br />

has opted to take them back following talks<br />

between the two airlines and the <strong>Malaysia</strong>n government.<br />

The move comes after months of complaints from rural air<br />

travellers about poor service from FAX. The carrier’s chief executive,<br />

Azmi Razali, blamed the need for an extensive overhaul of its fleet<br />

of seven Fokker 50s for reduced services.<br />

MAS chief executive, Idris Jala, agreed to resume the rural flights<br />

by October 1 as long as the government agreed to subsidise the<br />

loss-making routes as it had with FAX and that the aircraft, which<br />

MAS handed to FAX to start the services and will now return to the<br />

flag carrier, were operational.<br />

FAX took over the routes under a government-imposed<br />

rationalization of domestic air services, which required a carrier<br />

to serve outlying areas as a public service.<br />

There is another good reason why Jala wants to add the rural<br />

services to MAS’s network.<br />

“When we looked at the rural air service we could see it was<br />

important that they must be interlined. LCCs don’t have interline<br />

capability so it has been a major problem selling tickets on some of<br />

the routes,” said Idris.<br />

Contrary to some early reports, he said the rural services would<br />

not be operated by MAS’s new LCC subsidiary Firefly, even though<br />

it also flies Fokker F50s.<br />

“I don’t want to dilute the business model we have at Firefly,” said<br />

the MAS boss. “It is an airline that will stand on its own, will compete<br />

and will make money. I don’t want to sacrifice that objective.<br />

“Instead, we have created a separate subsidiary company,<br />

MASWings, which will start with a clean sheet.”<br />

Meanwhile, Jala is taking note of AirAsia’s plans to launch new<br />

long-haul subsidiary, AirAsia Express. “I think the jury is still out<br />

on long-haul, low-cost,” he said. “There is only one real experiment<br />

in operation today and that is Oasis out of HK. If you look at yields<br />

they will show that the shorter the route, the higher the yield and the<br />

longer the route, the lower the yield.”<br />

JULY/AUGUST 2007 ORIENT AVIATION 27


INDIA<br />

With a new livery in hand<br />

and legal formalities<br />

nearing completion,<br />

the new Air India,<br />

wh ich br i ngs t he<br />

country’s two state-owned carriers Air India<br />

and Indian under one roof, is set to fly as a<br />

single unit for the first time this month.<br />

And within 18 months up to 20% of its<br />

shares will be sold to the public, chairman<br />

and managing director, Vasudevan<br />

Thulasidas, has told <strong>Orient</strong> <strong>Aviation</strong>.<br />

Speaking in Vancouver, where he was<br />

attending the International Air Transport<br />

Association’s (IATA) annual general meeting<br />

last month, Thulasidas expressed confidence<br />

the merged airline would “unleash hidden<br />

energies” and present opportunities for<br />

significant network expansion.<br />

The merger had progressed with little<br />

difficulty, he said. “Maybe it has taken a<br />

little longer than we would like. There have<br />

been some problems with some of the unions,<br />

but not about merging. They wanted certain<br />

things to be attended to before the merger,<br />

such as some wages revision.<br />

“The greatest challenge will be integrating<br />

the people, the different cultures of the two<br />

airlines. But at the end of the day I expect the<br />

integration process will go through.<br />

“There will be some difficulties here and<br />

there, but the sense I get talking to unions for<br />

the past year is they are all largely in support<br />

of the merger because they feel now that it<br />

is very good for the two airlines, for their<br />

survival.”<br />

Thulasidas explained while the corporate<br />

merger was complete, full integration of<br />

manpower, fleet, network and schedules<br />

would take from 18 months to two years.<br />

The company will operate several<br />

strategic business units. Air India’s existing<br />

low cost carrier, Air India Express, will<br />

continue on domestic and regional routes,<br />

a new Air India Cargo has been set up and<br />

there will be ground handling, as well as<br />

maintenance, repair and overhaul (MRO)<br />

divisions.<br />

He also responded to criticism from<br />

some analysts that the merger would fail to<br />

produce major benefits because there would<br />

be no job losses.<br />

“Our object with the merger was not to<br />

rationalize manpower, but to drive benefits<br />

out of the synergy in combining a domestic<br />

network with an international network,” said<br />

Thulasidas. “The complementary nature of<br />

the merger comes out of that synergy. As<br />

far as manpower is concerned, being the<br />

Newly merged<br />

Air India to sell<br />

shares to public<br />

The carrier’s chairman and chief executive,<br />

Vasudevan Thulasidas, tells TOM BALLANTYNE<br />

why the merger with Indian makes sense<br />

‘The greatest challenge will<br />

be integrating the people, the<br />

different cultures of the two<br />

airlines’<br />

Vasudevan Thulasidas<br />

Chairman and chief executive<br />

Air India<br />

sort of companies we were, public sector<br />

companies, the reduction of manpower or<br />

compulsory retirement is not something<br />

that we could hope to do.<br />

“But we have been able to achieve quite<br />

a bit of reduction by other means<br />

such as natural attrition.<br />

We also had a voluntary<br />

retirement scheme. With the<br />

two together we were able to<br />

reduce Air India’s manpower<br />

by more t h a n 3,0 0 0.<br />

Simultaneously we increased<br />

the fleet size, almost doubling<br />

it, so effective reduction is<br />

much more than that. We are<br />

adding a large number of new aircraft and we<br />

plan to keep the manpower under check.”<br />

Between them, Air India and Indian have<br />

111 aircraft on order – 68 and 43 respectively<br />

– for delivery through to 2011. The joint<br />

entity will receive its first B777-200LR<br />

this month, opening the way for non-stop<br />

services to New York. The merged carrier is<br />

also looking at new services to South Africa,<br />

Australia and China.<br />

Overall, Thulasidas, who is also<br />

chairman of the Federation of Indian<br />

<strong>Airlines</strong>, welcomed the current consolidation<br />

occurring in the country’s aviation industry,<br />

including the takeover of Sahara <strong>Airlines</strong> by<br />

Jet Airways and the purchase of a major stake<br />

in Air Deccan by Kingfisher <strong>Airlines</strong>.<br />

“In India a lot of airlines came into the<br />

market and there was a lot of competition,<br />

with a lot of money being lost by most<br />

airlines. That’s not very desirable. Ultimately<br />

the passenger is not going to benefit from<br />

this,” he said.<br />

“If there is consolidation and you are able<br />

to make better use of this new energy that has<br />

been unleashed, but in a more controlled or<br />

directed fashion, then it is better for all, for<br />

the airlines, passengers, the government and<br />

the country as whole. What is happening is<br />

good.”<br />

Next<br />

<strong>Orient</strong> <strong>Aviation</strong> India<br />

October 2007<br />

28 ORIENT AVIATION JULY/AUGUST 2007


AIR TRAFFIC MANAGEMENT<br />

As dramatic traffic growth outstrips the state-run systems ...<br />

India looks at private options<br />

By Tom Ballantyne<br />

Faced with the possibility<br />

that bullish projections of<br />

t raf f ic g row t h could be<br />

underestimated, India has<br />

asked overseas air navigation<br />

service providers (ANSPs) to help it decide<br />

whether to commercialise elements of its air<br />

traffic control (ATC) operations or leave the<br />

system in the government’s hands.<br />

The plea came from Raghu Menon,<br />

financial adviser to the Ministry of Civil<br />

<strong>Aviation</strong> and one of the country’s most senior<br />

civil servants, at a major air traffic control<br />

conference in Cochi in Southern India.<br />

He told the annual general meeting and<br />

chief executives’ conference of the Civil Air<br />

Navigation Services Organization (CANSO)<br />

that, while long-term forecasts saw Indian<br />

aviation growing at 8% annually to 2025<br />

against a world average of 4.8%, “these<br />

growth projections, impressive as they are,<br />

may have to be all thrown out of the window<br />

if India [is] to realise its true potential.”<br />

Menon, who has worked in government<br />

for 35 years and is a board member of the<br />

state-owned Airports Authority of India<br />

(AAI) which currently handles ATC<br />

operations, was part of the team which<br />

started the liberalization process.<br />

“We went into liberalization mode some<br />

time in 2002-03 and since then we have<br />

been witnessing an unprecedented growth<br />

in air traffic,” said Menon, who also sits on<br />

the board of the newly merged Air India and<br />

Indian.<br />

“Today domestic passenger traffic<br />

is seeing 40% growth and international<br />

traffic is growing at around 15%. Air<br />

transport services have moved away from<br />

public monopolies and today there is fierce<br />

competition in the skies.<br />

“The reality is that with a country of 1.1<br />

billion people, not even 2% to 3% travel by<br />

air. With the Indian economy growing at 8%<br />

and a middle class estimated at 300 million<br />

people, even if 10% of India’s population use<br />

aviation as their preferred means of transport<br />

within the next 15 to 20 years, then all the<br />

India is expecting a major increase in traffic,<br />

putting a strain on airport infrastructure<br />

current projections of growth would have to<br />

be revised.”<br />

Traffic increases provided tremendous<br />

opportunities, but it had also exposed<br />

infrastructure shortcomings, Menon said.<br />

“Airport services, including air navigation<br />

services, are fully stretched today. Upgrades<br />

in technology and requirements of trained<br />

personnel are inevitable. Conditions in<br />

the air and on the ground are hitting both<br />

‘Conditions in the air and on<br />

the ground are hitting both<br />

efficiency and costs’<br />

Raghu Menon<br />

Financial adviser, Ministry of Civil <strong>Aviation</strong><br />

efficiency and costs. These infrastructure<br />

constraints, unless quickly addressed and<br />

appropriately resolved, [could] become a<br />

major impediment to growth,” he warned.<br />

The investment required is huge. Working<br />

on the assumption that for every US dollar<br />

spent on aircraft purchases, 50 cents should<br />

be earmarked for airport infrastructure,<br />

some US$40 billion to $50 billion would be<br />

needed by 2020 to match orders worth $82<br />

billion, said Menon.<br />

A committee was being set up to<br />

formulate an air services master plan to cope<br />

with the expansion. One area of debate was<br />

whether to make air navigation a commercial<br />

proposition or whether it should continue in<br />

the public domain, he said.<br />

“Does commercialization reduce costs<br />

and does it tangibly enhance safety and<br />

efficiency?” asked Menon. “The common<br />

perception, whether right or wrong, is that<br />

commercialization is a synonym for profit<br />

and that everything is measured in terms of<br />

the bottom line. What is profitable is good<br />

and what is not is bad.<br />

“In such a scenario there is a perception<br />

that costs may actually rise steeply after<br />

commercialization, particularly in a country<br />

like India where a large number of airports<br />

are unviable due to inadequate traffic. If this<br />

happens the airlines would stop operating to<br />

such airports owing to unviable ANS [air<br />

navigation services] costs and many airports<br />

might have to close down ... but we want to<br />

enhance air connectivity, not limit it.”<br />

Menon invited CANSO members to<br />

advise the government on where to go next,<br />

stressing that India would consider changes<br />

carefully before implementing them.<br />

“The point is that financial pressures<br />

should not decide policies. It is also worth<br />

considering that despite privatization the<br />

delivery of ANS in a given air space still<br />

remains a national monopoly owing to the<br />

nature of the service,” he said.<br />

“Of course there are many ancillary<br />

services ... like communication that could be<br />

commercialized, but air space management<br />

is essentially a monopoly and will continue<br />

to be so.”<br />

JULY/AUGUST 2007 ORIENT AVIATION 29


NEWS BACKGROUNDER<br />

READY TO ROLL<br />

Boeing bet the future on its B787 Dreamliner and, as the aircraft makes<br />

its public debut this month, it looks certain the U.S. planemaker has hit<br />

the jackpot. TOM BALLANTYNE reports on a Seattle success story.<br />

As Boei ng’s f i r st B787<br />

Dreamliner officially rolls<br />

off the production line at the<br />

Everett plant north of Seattle<br />

this month and makes its<br />

public debut, management knows the jet is<br />

already a phenomenal success.<br />

The order book stood at 634 – and<br />

counting – as <strong>Orient</strong> <strong>Aviation</strong> went to press.<br />

Forty-five customers worldwide have already<br />

made the Dreamliner the world’s fastestselling<br />

commercial airplane ever.<br />

The B787 will begin flying next May<br />

with launch customer All Nippon Airways<br />

(ANA) of Japan.<br />

But anyone wanting to buy one today will<br />

have to wait until 2013 before it is delivered.<br />

That’s the same year Airbus’ rival A350<br />

XWB (Extra Wide-Body) is scheduled to<br />

enter commercial service.<br />

How times have changed. Little more than<br />

three years ago Boeing appeared in turmoil.<br />

Rival Airbus was flying high, its new A380<br />

super jumbo was tagged the breakthrough<br />

airliner of the future and its salesmen were<br />

winning the order book battle, overtaking<br />

Boeing for the first time in market share.<br />

Worse, a proposed new Boeing “Sonic<br />

Cruiser”, which would fly at speeds just<br />

under the sound barrier, had met with a<br />

sceptical reaction from customers. Then, in<br />

April 2004, Boeing launched the Dreamliner.<br />

It proved to be a master stroke.<br />

In retrospect, it was all about timing. The<br />

B787 was introduced in an age of desperate<br />

cost reduction as carriers fought intense<br />

competition, soaring fuel prices and rising<br />

costs in all areas of their business. They<br />

were also beginning to face pressure to<br />

reduce noise and lessen harmful emissions<br />

from their aircraft.<br />

More than half the orders<br />

have come from<br />

Asia-Pacific operators<br />

The B787 was the right jet at the right<br />

time, promising just what airliners wanted.<br />

According to Boeing, it has unmatched fuel<br />

efficiency, using 20% less fuel than today’s<br />

similar sized aircraft.<br />

It travels at a speed similar to today’s<br />

fastest widebodies – Mach 0.85 – and<br />

will carry up to 300 passengers more than<br />

15,000 kilometres (9,375 miles). The jet also<br />

produces 20% fewer CO 2 emissions and has<br />

a 60% smaller noise footprint on take-off and<br />

landing than other airplanes in its size and<br />

range category.<br />

Just as important, it offers more comfort<br />

for passengers as air traffic continues to<br />

boom.<br />

The cabin is pressurised to 6,000 feet<br />

(1,830 metres), rather than the normal 8,000<br />

feet (2,440 metres), making for a more<br />

comfortable environment. The cabin will<br />

also be less dry, keeping humidity at around<br />

15% compared to today’s levels, which can<br />

be as low as 2%. There is also sophisticated<br />

software designed to help the aircraft respond<br />

better to turbulence.<br />

More than half the orders – 302 – have<br />

come from Asia-Pacific operators. Apart<br />

from ANA, orders have been placed for<br />

60 aircraft by China to go to six different<br />

carriers, Qantas Airways is buying 45,<br />

Japan <strong>Airlines</strong> 30, Singapore <strong>Airlines</strong> 20,<br />

Korean Air 20, Jet Airways 10, Air New<br />

Zealand eight, Air Pacific five and Vietnam<br />

<strong>Airlines</strong> four.<br />

Several have taken options on dozens<br />

more, including Qantas which has a further<br />

70 in reserve.<br />

The first 10 of Qantas’ planes will go to<br />

low-cost subsidiary Jetstar International,<br />

which will become the first LCC to use the<br />

new plane.<br />

It is not only airlines that are being lured<br />

by the B787. In May, Hong Kong real estate<br />

30 ORIENT AVIATION JULY/AUGUST 2007


tycoon Joseph Lau ordered a VIP version,<br />

valued at $153 million at list price, from<br />

Boeing Business Jets – the seventh luxury<br />

VIP B787 to be snapped up.<br />

All this is adding to a Boeing recovery<br />

that doesn’t look like ending any time soon.<br />

The B787 was the star of the show when the<br />

company held its annual investor conference<br />

in late May in Chicago. Chief executive,<br />

Jim McNerney, forecast revenue would<br />

rise from $65 billion to around $72 billion<br />

in 2008, underpinned by “sizzling” sales of<br />

its newest jet.<br />

He believed the orders would continue.<br />

“The U.S. and European legacy carriers have<br />

yet to order in any substantial quantities ... so<br />

we don’t see an immediate end to the cycle,”<br />

he told analysts.<br />

For airlines, the economics are one of<br />

the keys to the B787’s success. As much as<br />

50% of the primary structure – including the<br />

fuselage and wing – will be made of carbon<br />

fibre composite, making it less costly to<br />

maintain.<br />

There will also be 98 kilometres of wiring<br />

within the aircraft, far less than the 145<br />

Final assembly began on the first<br />

B787 in May at the Everett plant<br />

kilometres in a B767, again making it easier<br />

for airlines to maintain, as well as leaving<br />

more space to provide bigger overhead bins<br />

for passengers. In-flight entertainment<br />

systems are lighter and more simply wired.<br />

Production has been streamlined, with<br />

major components and the work of installing<br />

such elements as wiring and hydraulics<br />

performed by suppliers scattered around<br />

the world.<br />

Previously, this was all done in Seattle.<br />

It means when the components arrive, they<br />

can simply be “snapped together”, reducing<br />

production costs.<br />

As Boeing prepared to put the first aircraft<br />

on public display, it was still keeping the date<br />

of its first flight under wraps.<br />

Mike Bair, head of the B787 programme,<br />

said there would be about a one-month<br />

window for those flights, starting at the end<br />

of August.<br />

Boeing will deliver 112 aircraft during<br />

the first two years, with final assembly of<br />

each one taking an average three days. Bair<br />

confirmed the company was already working<br />

on plans to pick up the pace.<br />

“’It’s pretty clear that our initial<br />

thoughts about the market demand were too<br />

conservative,” he said. And that may be the<br />

understatement of the decade.<br />

<br />

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RA0004Anytime_<strong>Orient</strong>Aug07.indd 1<br />

4/13/07 10:30:16 AM<br />

JULY/AUGUST 2007 ORIENT AVIATION 31


SPECIAL REPORT<br />

<strong>Aviation</strong><br />

Security<br />

U.S. cargo screening proposal on passenger planes will cost industry $3.6 billion over 10 years<br />

Costly, and for what?<br />

Cargo security measures,<br />

including those affecting<br />

Asia-Pacific airlines flying<br />

into the U.S., are under fire<br />

for complicating carriers’<br />

operations and, in some instances, tackling<br />

only one part of the process.<br />

“Regulations are creating increasingly<br />

complex and costly security environments<br />

that jeopardise cargo flows and too often<br />

feature measures that do little to improve<br />

security,” said Georgina Graham, global<br />

head of security at the International Air<br />

Transport Association (IATA).<br />

Of particular concern to IATA is a recent<br />

U.S. proposal for 100% screening of cargo<br />

on passenger flights within three years. It is<br />

a measure, says the association, which would<br />

cost the industry US$3.6 billion over 10 years<br />

and which concentrates on the wrong end of<br />

the supply chain.<br />

That proposition, put forward by<br />

Democrats in the U.S. House of Congress,<br />

encapsulates the complexities of cargo<br />

security policies.<br />

It targets belly cargo, which is seen as<br />

more of a threat than goods carried on full<br />

freighters, on the assumption that blowing<br />

up a passenger carrier has greater publicity<br />

value than an aircraft with a handful of<br />

crew.<br />

It deals with the process during its end<br />

stage where freight is in the hands of the<br />

carrier.<br />

And, although it has not found favour with<br />

the U.S. Transport Security Administration<br />

(TSA), which argues against its effectiveness,<br />

it would nevertheless apply to home and<br />

foreign carriers alike.<br />

The TSA has said the high cost of<br />

implementing the measure would require<br />

other security measures to be curtailed.<br />

What is more its actions since the events of<br />

9-11 have been sufficient to stem the threat<br />

to cargo, say officials.<br />

That will come as a relief to carriers from<br />

outside the U.S. because, in general, what the<br />

TSA says has a knock-on affect throughout<br />

‘The technology in use today<br />

was never designed for<br />

cargo, it is used for baggage.<br />

The really good stuff is in<br />

development and ... is five to<br />

eight years away’<br />

Jack Boisen<br />

Chairman<br />

The International Air Cargo Association<br />

>>>>>>>>>>>>>>>>>>><br />

the world.<br />

“Almost all regions are reacting to<br />

what the TSA is dictating to countries – if<br />

they want to export to the U.S., they must<br />

follow the requirements,” said Jack Boisen,<br />

chairman of The International Air Cargo<br />

Association (TIACA) and vice-president,<br />

cargo, with Continental <strong>Airlines</strong>.<br />

Boisen has detected a shift in attitude<br />

that may help outside carriers employing<br />

different practices and technologies.<br />

“The TSA has lost sight of some of the<br />

practices occurring overseas with a number<br />

of carriers.<br />

“Now, they are finally trying to rediscover<br />

what is going on elsewhere. There’s a real<br />

effort for the first time in five years to<br />

harmonise, or at least recognise, those<br />

practices,” he said.<br />

The TIACA chairman has sympathy for<br />

the region’s giant cargo carriers who do much<br />

of their business flying across the Pacific.<br />

“It’s difficult enough to persuade the shippers<br />

and the indirect carriers to get things started<br />

correctly for shipments and the integration<br />

process with the TSA, Customs and maybe<br />

Fish and Game [departments],” he said.<br />

“Then throw in new aspects of security<br />

and sometimes changing regulations, and the<br />

communications of those regulations, and it’s<br />

pretty dismal.”<br />

Boisen, whose airline carries belly freight<br />

to Newark from Bangkok, Hong Kong and<br />

Tokyo, said the Asia-Pacific has a good<br />

record when it comes to cargo security,<br />

although there are a couple of locations<br />

within the region from which Continental<br />

would not accept freight.<br />

“The processes [in the region] have<br />

quietly been very efficient for a number of<br />

years, partly because in some areas cargo is<br />

tendered early to carriers, often 24 hours in<br />

advance,” he said.<br />

“That allows good opportunities to<br />

process cargo by various means, whereas in<br />

other regions, and in the U.S., it is often at<br />

the last minute.<br />

“Part of the difference is also an earlier<br />

investment in technology in the Asia-<br />

Pacific and the realisation that the freight<br />

forwarder can process acceptable cargo<br />

screening. That’s just starting in the U.S.,”<br />

said Boisen.<br />

Technology has an obvious part to play,<br />

although as yet no one has come up with a<br />

way to X-ray all cargo in a freighter container<br />

without removing it first, a practice called<br />

‘break bulk’ which carriers say would be<br />

prohibitively complex and expensive.<br />

Sniffer dogs can be more effective. “In<br />

lots of cases they are better than man-made<br />

technical systems,” said Boisen.<br />

“They are very efficient and surprisingly<br />

accurate. But you need a lot of dogs.<br />

“The technology in use today was never<br />

designed for cargo, it was used for baggage.<br />

The really good stuff is in development and<br />

the ‘labs’ say it is five to eight years away.”<br />

Boisen, like many others in the industry,<br />

32 ORIENT AVIATION JULY/AUGUST 2007


By Charles Anderson<br />

wants the entire supply chain to be<br />

monitored, starting with “certified shipper”<br />

or “regulated agent” systems that ensure<br />

freight is clean from the start.<br />

“If no one does anything about what<br />

goes into the shipment until it comes to an<br />

airline dock and then, whoops, we suddenly<br />

need security, we can’t do this efficiently,”<br />

he said.<br />

“But if you start earlier and run<br />

security throughout the entire process,<br />

including forwarders and certified shipper<br />

programmes, you can develop a strong<br />

freight assessment programme.”<br />

Boisen is keen the i ndust r y does<br />

not become over reliant on technology.<br />

“Throughout it all, you throw in a little<br />

randomness, some random inspections,”<br />

he said.<br />

“We are developing processes that<br />

hopefully will deter some intelligent<br />

terrorism, but you have to keep changing<br />

them.<br />

“Even if you X-ray 100% of your freight,<br />

and you say that’s your security method, you<br />

are going to fail. Someone will find how to<br />

beat you.”<br />

British-based security consultant,<br />

Norman Shanks, who worked on systems put<br />

in place at Hong Kong International Airport<br />

during its development stage, doesn’t believe<br />

current technology is up to the job.<br />

“The big cargo X-ray systems can’t find<br />

the small amounts of explosives we are<br />

looking for.<br />

“They are great for contraband, but<br />

pretty hopeless when it comes to the terrorist<br />

threat,” he said.<br />

“The big difficulty remains that there is<br />

still no effective way of screening bulk cargo<br />

and, until that is resolved, the only option<br />

is break-bulk screening, which means<br />

everything is broken down into individual<br />

items which can go through existing X-ray<br />

systems.<br />

“There’s a number of trials going on using<br />

variations of automated technology that have<br />

explosive detection capabilities. These are<br />

not basic X-rays, but a smarter system.”<br />

For now, the industry will have to cope<br />

with what it has got. “What we have is too<br />

expensive and slow,” said Shanks. “The<br />

industry wants to be able to screen cargo<br />

while it is in the container and only deal with<br />

items suggested as a possible threat, rather<br />

than break everything down to suitcase size,<br />

and then X-ray it.”<br />

That means carriers must rely on security<br />

checks throughout the process. “Basically,<br />

you verify the shipper and audit the<br />

movement of the goods,” said Shanks.<br />

But he is worried a cosy relationship<br />

built up between the shipper and the<br />

airline or regulated agent might muddy the<br />

waters and recommends the employment<br />

of independent cargo validators, as is the<br />

practice in the UK but not, believes Shanks,<br />

in the Asia-Pacific.<br />

In any case, “known shippers” are not<br />

widespread in the region, although they<br />

make it easier for customers to get their<br />

goods airborne.<br />

Hong Kong has had a programme in place<br />

for some years. Singapore’s did not get off the<br />

Korean Air: screens all cargo loaded on to passenger<br />

aircraft bound for the U.S., except for exempted items<br />

ground and Korean Air, the Asia-Pacific and<br />

world’s largest cargo carrier, said it has only<br />

one “known shipper”, admittedly a big one,<br />

in Samsung Logitec, which was certified by<br />

the local civil aviation safety authority last<br />

December.<br />

Korean Air screens all cargo going on to<br />

passenger aircraft bound for the U.S., either<br />

using X-rays or open screening, except for<br />

items exempted by authorities there.<br />

It advises customers to use all-cargo<br />

flights for bulky freight that can’t, as yet,<br />

be X-rayed.<br />

Jack Boisen, meanwhile, believes the time<br />

is coming when belly and full freighter cargo<br />

will be treated much the same.<br />

“Today, professionals in the security field<br />

look at the threat as different for cargo going<br />

on a passenger carrier, compared to cargo on<br />

a cargo carrier,” he said.<br />

“That stems from the fact that those who<br />

carry out terrorist acts are looking more at<br />

the impact of a terrorist attack involving<br />

passengers than on a cargo plane.<br />

“There are two levels of security, but I<br />

think there will be a blending of that. As time<br />

goes on, they will narrow the differences as<br />

we add more processes.”<br />

TIACA is urging international carriers to<br />

get involved in TSA working groups where<br />

they can get their message across, while<br />

IATA has teamed up with the International<br />

Federation of Freight Forwarders to form<br />

a task force which will work out how to<br />

protect the supply chain while keeping the<br />

cargo flowing.<br />

IATA director general, Giovanni<br />

Bisignani, spelt out why the association<br />

believes harmonization has not yet been<br />

achieved at an IATA cargo symposium in<br />

Mexico City.<br />

“Firstly, regulators often don’t understand<br />

our industry and approach cargo security in<br />

the same way as checked baggage,” he said.<br />

“Secondly, most don’t understand how the<br />

supply chain works. They focus on security<br />

at the end of the chain, not throughout the<br />

process.<br />

“Thirdly, governments are not talking<br />

to each other so they don’t have mutual<br />

recognition of standards, controls and<br />

programmes. And definitions, requirements<br />

and enforcement are inconsistent.<br />

“Finally, governments are not using<br />

technology effectively, particularly screening<br />

technology.<br />

“They are quick to mandate expensive<br />

bulk X-ray equipment, but are not making full<br />

use of the potential for canine techniques. The<br />

result is a costly mess.”<br />

JULY/AUGUST 2007 ORIENT AVIATION 33


SPECIAL REPORT<br />

<strong>Aviation</strong> Security<br />

A liquid situation<br />

New restrictions: it’s one step forward and two steps back, says ACI<br />

It’s a common sight in major airports<br />

in the Asia-Pacific at present;<br />

confused passengers trying to<br />

work out t he<br />

new restrictions<br />

on liquids allowed in<br />

hand baggage and then<br />

wondering, if they are to<br />

transit elsewhere, whether<br />

the same rules will apply.<br />

No one is arguing about<br />

the reasoning behind a<br />

measure first introduced<br />

in the European Union<br />

after a threat by would-be<br />

terrorists who aimed to<br />

bring down a number of<br />

aircraft flying from the<br />

U.K. to the U.S. last year,<br />

using liquid explosives.<br />

Chaos at British airports,<br />

especially Heathrow and<br />

Gatwick, was quickly<br />

followed by decisions on<br />

common standards for hand<br />

baggage and for fluids and<br />

their containers taken on<br />

board by passengers.<br />

‘Effectiveness does<br />

not equate to being<br />

convenient. We<br />

know travellers<br />

are being<br />

inconvenienced<br />

worldwide’<br />

Georgina Graham<br />

Global Head of Security<br />

IATA<br />

>>>>>>>>>>>>><br />

The problem is that, as an International<br />

Civil <strong>Aviation</strong> Organisation (ICAO)<br />

recommendation, governments can adapt the<br />

latter measure as they see fit. And many have<br />

done just that, again underlining the need for<br />

harmonisation of security procedures in an<br />

increasingly complex environment.<br />

In general, all liquids under 100 millilitres<br />

are allowed on board, as long as they are<br />

presented altogether at security in a clear,<br />

sealed plastic bag.<br />

But in the Philippines you can’t take any<br />

liquid at all on either outbound or inbound<br />

flights. It’s the same in India and Pakistan,<br />

but on outbound flights only.<br />

Japan isn’t applying the rule to domestic<br />

flights, neither is China, but restrictions<br />

apply to Hong Kong, Taiwan and Macau<br />

flights as well as international services.<br />

Australia won’t allow duty free to enter<br />

the country unless it is delivered to a named<br />

34 ORIENT AVIATION JULY/AUGUST 2007<br />

passenger at the gate of the departure airport<br />

in a sealed bag with proof of purchase.<br />

No one else in the region appears to be<br />

so picky. Singapore allows<br />

t r a n sfer passengers to<br />

carry their Johnnie Walker<br />

with them but, wait for it,<br />

not if they are flying on to<br />

Australia, the U.S. which has<br />

different restrictions of its<br />

own, or if they are travelling<br />

on a Northwest <strong>Airlines</strong> or<br />

United <strong>Airlines</strong> flight.<br />

Taipei is showing more<br />

understanding than most by<br />

supplying a storage facility<br />

for those who don’t want<br />

to give up their expensive<br />

wines and spirits, so they can<br />

reclaim those goods on their<br />

return.<br />

British-based security<br />

expert Norman Shanks, who<br />

helped develop systems at<br />

Hong Kong International<br />

Airport, saw some of the<br />

confusion this<br />

has caused while transiting<br />

through Hong Kong recently.<br />

“Passengers were arriving<br />

with liquids, some of which<br />

were very expensive and had<br />

been bought at duty-free, only<br />

to have them removed because<br />

they were greater than the<br />

amount allowed. That’s a great<br />

argument for standardisation,<br />

so everyone knows what’s<br />

going on,” he said.<br />

“The people who take the<br />

brunt of this are the security<br />

staff who are trying to follow<br />

the procedures. The poor old<br />

passengers have no one else to<br />

vent their frustrations on.”<br />

His point was underscored<br />

in May by protests from passengers on<br />

board a United <strong>Airlines</strong> aircraft diverted<br />

to Brisbane from the U.S. because Sydney<br />

airport was closed.<br />

They could either stay on the aircraft for<br />

nine more hours until a new crew turned<br />

up, or lose their duty-free goods if they<br />

disembarked. Items would be confiscated<br />

when they went through security again<br />

before leaving for Sydney, they were told.<br />

United eventually defused the situation<br />

by labelling liquor bottles and keeping them<br />

in the aircraft hold.<br />

“The industry hasn’t got its act together<br />

on the regulatory side or the operations side,”<br />

said Shanks. “We are still getting people<br />

turning up with liquids.<br />

“The biggest problem is transfer baggage,<br />

particularly if you are coming from a point<br />

of origin where the measures haven’t been<br />

introduced and you are suddenly faced on<br />

transfer with an absolute ban.”<br />

At the International Air Transport<br />

Association (IATA), Georgina Graham,<br />

global head of security, accepts that such<br />

measures are necessary.<br />

“There is a need for efficient, effective<br />

and consistent measures that prevent items<br />

that could potentially be used as weapons<br />

from being brought on<br />

board aircraft,” she said.<br />

“This is especially<br />

critical for liquid-based<br />

explosive devices that<br />

can be broken down into<br />

component parts that<br />

appear to be harmless.<br />

“But effectiveness<br />

does not e qu at e t o<br />

being convenient. We<br />

k now t r avellers a re<br />

being inconvenienced<br />

worldwide.<br />

“Some states have<br />

developed their own<br />

separate responses to<br />

the threat posed by liquid<br />

based explosive devices.<br />

In some cases these<br />

differences cause substantial operational<br />

and customer service problems. This lack<br />

of international harmonization undermines<br />

‘The focus on liquids<br />

means we are taking<br />

our eyes off plastic<br />

explosives in carryon<br />

bags.’<br />

Norman Shanks<br />

Security Expert<br />

>>>>>>>>>>>>>


public confidence in the overall aviation<br />

security system and decreases overall<br />

security.”<br />

In extreme cases there is a cost to bear.<br />

“Certainly states may choose to develop<br />

responses inconsistent with ICAO,” said<br />

Graham.<br />

“But the consequence is the risk<br />

of isolating a nation’s economy and<br />

transportation system from the global air<br />

transportation system.”<br />

Airports Council International is also<br />

worried by the situation. “A real concern<br />

is the detrimental effect this increase in<br />

security checks is having on the passenger<br />

experience at airports,” it said at the time the<br />

measures began to be introduced worldwide.<br />

“We need to regain some of the pleasure that<br />

used to be associated with flying that has<br />

now been replaced with queues and weary<br />

travellers.<br />

“For every step forward in customer<br />

convenience the industry makes – with self<br />

check-in and biometric border crossing for<br />

example – these new security provisions<br />

seem to take us two steps back.”<br />

All major airports in the Asia-Pacific<br />

appear to have introduced the measure, with<br />

the new Bangkok airport at Suvarnabhumi<br />

the latest to do so. Hong Kong and Singapore,<br />

which printed 1.5 million brochures on the<br />

new measures, both reported smooth<br />

implementation after deploying 100 extra<br />

staff each to help passengers through the<br />

process.<br />

Taipei at first required travellers to arrive<br />

three hours before departure, but scrapping<br />

that rule after the system settled in.<br />

Shanks believes measures like this can be<br />

as symbolic as they are practical.<br />

“They heighten awareness,” he said. “It’s<br />

a case of being seen to be doing something<br />

and to get the message across that, yes,<br />

A passenger is checked at security: she may, or may not, have to keep her<br />

shoes on.<br />

there’s a real problem here. We have to take<br />

these extreme measures to cope with it. But<br />

I’m not convinced.”<br />

He understands the need for rationalisation<br />

and uses the issues of laptop searches, where<br />

the target is hidden plastic explosives, and<br />

passengers’ shoes, brought in after Richard<br />

Reid tried to blow up a transatlantic aircraft<br />

using explosives hidden in his footwear.<br />

“Most places now ask for laptops to be<br />

taken out,” said Shanks. Such searches add<br />

to delays, and it’s the same with shoes.<br />

“Where you see long delays, it’s because<br />

people are holding up the screening line,<br />

taking them off or putting them on. It isn’t<br />

standard; it seems to be random,” he said.<br />

Shanks’s concern is that the industry is<br />

ignoring other threats while dealing with<br />

such specifics.<br />

“It’s similar to the immediate post<br />

9-11 time when we started to look for sharp<br />

objects,” he said.<br />

Singapore Changi International Airport:<br />

100 extra security staff<br />

“We were looking for scissors and nail<br />

clippers. If you had those you were suspect,<br />

never mind what else you were carrying.<br />

“The focus on liquids means we are<br />

taking our eyes off another long-term issue,<br />

plastic explosives in carry-on bags.<br />

“We have nothing in operation to address<br />

that. The technology is around, but it’s not<br />

deployed.<br />

“There’s a lot of plastic explosive around<br />

and it’s a lot easier to handle and mould than<br />

liquid explosives.”<br />

IATA wants aviation security to be risk<br />

based and globally harmonized and it feels<br />

it has made some progress.<br />

“For many years, the real challenge was<br />

educating industry and regulators about the<br />

basics of these concepts,” said Graham.<br />

“Now we find ourselves in a position where<br />

the definitions are understood and our focus<br />

is making the case for specific harmonization<br />

measures.”<br />

For instance, the association is now<br />

pushing for passenger name records to<br />

be sent just once to a government, using<br />

a single window, instead of the same data<br />

being transmitted more than once and in<br />

different forms.<br />

It wants changes to customs data formats<br />

to be consistent and it is keen that regulators<br />

recognise screening services performed by<br />

another competent regulator.<br />

“<strong>Aviation</strong>’s security resources are<br />

scarce,” said Graham, “and it makes little<br />

sense for regulators to redo the work of their<br />

counterparts when it has been done in a<br />

professional, complementary and compatible<br />

way.”<br />

JULY/AUGUST 2007 ORIENT AVIATION 35


SPECIAL REPORT<br />

<strong>Aviation</strong> Security<br />

As the biometric eye scans wider …<br />

It’s bad news<br />

for the bad guys<br />

Increasing use of biometrics, coupled<br />

with moves towards Internet or<br />

kiosk check-in, are strengthening<br />

the hand of security personnel,<br />

allowing them to not only better<br />

identify travellers, but also gain valuable<br />

clues about what they might be up to.<br />

Moves are under way to integrate security<br />

requirements into passenger processes<br />

as self-service becomes more common,<br />

allowing immigration staff to put biometric<br />

and other information taken from a machinereadable<br />

passport strip alongside check-in<br />

data and ticket purchase details. Then they<br />

can perform a kind of online profiling to<br />

track down anything suspicious.<br />

Matthew Finn, director, government and<br />

security solutions at SITA, the industry IT<br />

cooperative, explained the advantages.<br />

“From a security perspective, those who<br />

work in counter terrorism organisations<br />

within a national police force are very worried<br />

that some frequent travellers may appear to be<br />

clean when they are not,” he said.<br />

“Take the example of someone who<br />

has a biometric passport, is a member of a<br />

registered traveller programme and routinely<br />

flies out of Hong Kong. There is no issue with<br />

any of his data. No one is sensing any kind of<br />

risk as part of his profile. He is not on a watch<br />

list. But then, on one particular day, he has<br />

been compromised, or has been acting as a<br />

sleeper for a few years and is planning to get<br />

up to mischief.”<br />

Biographical data collected each time<br />

the man has travelled can be used to build<br />

up a picture and a risk assessment study<br />

begins. “Part of this process also provides<br />

the reservation data and it does tell a story,”<br />

said Finn. “They discover he booked at a<br />

travel agents where they previously had<br />

problems in the past.<br />

“That travel agent’s reference number<br />

will be in his reservation data, as will his<br />

credit card information. Maybe that card<br />

has been used in another environment that<br />

caused concern.”<br />

The passenger might still appear clean,<br />

but he either booked or checked in with<br />

someone seen to have a higher level of risk.<br />

“Linking all this data gives a real sense of<br />

who is travelling and what people are doing<br />

as part of the travel process,” said Finn.<br />

There is the risk, however, that security<br />

personnel will want to go too far. “There<br />

are privacy dimensions that have to be<br />

handled very carefully. Privacy advocates<br />

are concerned about political, medical and<br />

religious data,” said Finn.<br />

SITA, which operates information<br />

and security systems at airports, removes<br />

sensitive fields that are causing concern to<br />

bodies such as the European Parliament and<br />

converts the information into a format a<br />

government can use.<br />

Increasing industry reliance on selfservice,<br />

along with the International Air<br />

Transport Association’s (IATA) Simplifying<br />

Passenger Travel initiative, has put security<br />

aspects of information technology processes<br />

under the spotlight.<br />

‘We need to understand how to<br />

integrate security requirements<br />

into the passenger process’<br />

Matthew Finn<br />

Director, Govt & Security Solutions<br />

SITA<br />

>>>>>>>>>>>>>>>>>>><br />

Passport information can<br />

provide the trigger for<br />

security procedures<br />

“Everyone is moving into self-service,<br />

whether it be Internet or kiosk check-in,”<br />

said Finn. “We need to understand how to<br />

integrate security requirements into the<br />

passenger process.”<br />

Australia provides an example of how this<br />

can be done through its “advanced passenger<br />

processing system” which uses data from<br />

the machine-readable zone of a passport<br />

belonging to inbound travellers when they<br />

check in elsewhere.<br />

“That information is sent directly from<br />

the check-in environment to the Australian<br />

government, so they can verify your<br />

biographic details and make sure you aren’t<br />

on their watch list or haven’t been a previous<br />

visa overstayer,” said Finn.<br />

With some forecasts putting the majority<br />

of check-ins outside the airport environment<br />

within 10 years, there is an obvious need to<br />

ensure appropriate security systems are in<br />

place.<br />

SITA is keen on the use of a thumbprint,<br />

maybe originally stored in a passport, as a<br />

traveller makes his way through the airport<br />

processes. “Instead of data having to be<br />

provided to multiple entities at multiple<br />

times, when we bring security and selfservice<br />

together, the trigger comes when you<br />

put your fingerprint down,” said Finn.<br />

“A ll t he biog r aph ical d at a , t he<br />

documentary, f light and reservation<br />

information can be extracted, cleaned up,<br />

filtered and delivered.”<br />

Again, harmonization is needed. “There<br />

must be inter-operability and we can’t be<br />

looking at fragmentation when it comes to<br />

identity management. That’s the reason the<br />

machine-readable passport with biometric<br />

information stored in it is key, because that<br />

will bring us standardization,” said Finn.<br />

36 ORIENT AVIATION JULY/AUGUST 2007


SPECIAL REPORT<br />

Flagship show adds<br />

to its strengths<br />

Asian Aerospace International<br />

Expo and Congress 2007<br />

is now set to st age its<br />

pioneering move to AsiaWorld-Expo,<br />

its new location in Hong Kong, as<br />

the largest dedicated civil aerospace<br />

gathering on the international<br />

industry calendar.<br />

Reed Exhibitions’ f lagship<br />

aerospace industry event, which<br />

runs from September 3-6, will be<br />

an exclusive business-to-business<br />

showcase featuring more than<br />

500 exhibitors from more than<br />

AsiaWorld-Expo: the new home of Asian<br />

Aerospace<br />

20 countries, with 12 national pavilions. Some 400 delegates are expected to attend the<br />

congress’s opening executive sessions, which will feature speakers at ministerial and<br />

director-general level.<br />

Reed Exhibitions has brought together a number of complementary events under one<br />

umbrella through organic growth, acquisitions and commercial collaboration.<br />

The company followed its acquisition of the region’s leading air freight conference and<br />

exhibition, Air Freight Asia, at the start of the year with the acquisition of all six events of the<br />

aviation division of international events company, UKIP Media & Events, which organises<br />

events in the specialised markets of aircraft interiors, aerospace design and testing. Both Air<br />

Freight Asia and Aircraft Interiors Expo Asia will be integrated into Asian Aerospace.<br />

Another agreement, this time with Halldale Media Group, will see Reed Exhibitions<br />

collaborate in the staging of the Asia Pacific Airline Training Symposium (APATS), to be<br />

held alongside Asian Aerospace.<br />

Perfect platform for debate<br />

With Asia emerging as the world’s fastest-growing aviation market, the Congress<br />

will provide the perfect platform for topical discussion during three days of highlevel<br />

debate on issues central to the region’s expansion.<br />

The Congress is organised in partnership with Flight International.<br />

Congress themes over the three days will cover air transport strategy, air transport<br />

operations and aerospace technology. Aircraft Interiors Expo Asia, Air Freight Asia and<br />

APATS will include specialist conference programmes.<br />

Specialist master classes will be held to complement the main Congress themes, to include<br />

business aviation, aircraft finance, maintenance and East-West technology partnerships.<br />

Networking sessions and hosted opportunities to tour the Asian Aerospace exhibition<br />

will also be arranged to ensure delegates and speakers alike maximise their opportunities<br />

to do business in the Asia Pacific region.<br />

Kevin O’Toole, Flight’s head of strategy, said: “We have worked closely with a range of<br />

regional regulatory bodies, investors, airlines, airport operators, industry associations, and<br />

the technology and aerospace manufacturing communities to ensure our programmes reflect<br />

both the needs and ambitions of the aviation sector in the Asia-Pacific region.<br />

“All the conference programmes will be integrated with the Asian Aerospace exhibition<br />

and there will be a host of opportunities to network and do business with key decision<br />

makers.”<br />

Support for the event has come<br />

from a variety of public and private<br />

sector individuals and organisations<br />

in Hong Kong and China, including<br />

Invest Hong Kong, Hong Kong<br />

Civil <strong>Aviation</strong> Department, General<br />

Administration of Civil <strong>Aviation</strong> of<br />

China (CAAC), Commission of<br />

Science Technology and Industry<br />

(Costind) Media Centre, Airport<br />

Authority Hong Kong, Hong Kong<br />

Tourism Board and the Aerospace<br />

Forum Asia.<br />

T he U . S . D e par t ment of<br />

Commerce has also granted Trade<br />

Fair Certification to Reed Exhibitions<br />

Aerospace & Defence Group for<br />

Asian Aerospace.<br />

Cathay Pacific Airways, which<br />

has been named official carrier for the<br />

event, is offering exclusive airfares<br />

for visitors and travel companions in<br />

business and economy class.<br />

The offers are only available to<br />

pre-registered participants, who are<br />

given a booking code in the automated<br />

r e s p o n s e they w i l l r e c e i ve o n<br />

registering for the event, which can be<br />

done at www.asianaerospace.com<br />

For inquiries contact:<br />

Hong Kong Hotline:<br />

T: (852) 2965 1689<br />

E: hongkong_registration@<br />

asianaerospace.com<br />

China Hotline:<br />

T: (86) 10 6523 4092<br />

E: china_registration@<br />

asianaerospace.com<br />

International Hotline:<br />

T: (65) 6780 4646<br />

E: international_registration@<br />

asianaerospace.com<br />

A full conference programme is available at: www.flightglobal.com/asianaerospace<br />

Editorial supplied by Asian Aerospace International Expo and Congress<br />

JULY/AUGUST 2007 ORIENT AVIATION 37


COMMUTER AVIATION<br />

Yeti scaling new heights<br />

By Charles Anderson<br />

Eight years ago Yeti <strong>Airlines</strong><br />

began business operating just<br />

two Twin Otters, flying from<br />

Kathmandu to remote areas<br />

of Nepal. There was nothing<br />

special about another fledgling carrier<br />

arriving at the short take-off and landing<br />

(STOL) airports peppered around the<br />

mountainous country, apart perhaps from<br />

its name. Many small domestic operators<br />

have tried their luck over the last 10 years,<br />

with many failing to survive.<br />

Now Yeti has a 10-strong fleet, split<br />

evenly between Twin Otters<br />

and newly-acquired Jetstream<br />

41s, flying on trunk routes<br />

as well as to out-of-the-way<br />

destinations. It claims 55%<br />

to 60% of domestic market<br />

share and the carrier has just<br />

won permission to expand<br />

overseas.<br />

Executive director, Bijaya<br />

Shrestha, told local media Yeti<br />

could start flying on some of<br />

the routes designated by the<br />

government – Bangkok, Seoul,<br />

Sharjah, Lhasa and Butan<br />

– within a year. But general<br />

manager, Umesh Chandar Rai,<br />

was more circumspect when he<br />

talked to <strong>Orient</strong> <strong>Aviation</strong>.<br />

“The groundwork has started, but the<br />

project is in the preliminary stages and<br />

not much can be stated at the moment,” he<br />

said. Rai’s caution is understandable. Three<br />

Nepali airlines have launched international<br />

services in recent years, only to withdraw<br />

them and one other failed to begin within the<br />

stipulated timeframe.<br />

Yeti, however, is not planning to go<br />

it alone. The carrier is looking to form a<br />

joint venture with an overseas partner that<br />

can inject capital and expertise to make the<br />

expansion work, said Rai.<br />

Outside airlines are increasing services to<br />

Kathmandu, but Yeti was the only operator<br />

to respond to the Nepal government’s<br />

latest push to find an established domestic<br />

company – it must have been flying for five<br />

38 ORIENT AVIATION JULY/AUGUST 2007<br />

years – ready to join national carrier, Nepal<br />

<strong>Airlines</strong>, in offering overseas services run<br />

by Nepalis.<br />

Troubled Nepal <strong>Airlines</strong>, which dropped<br />

the “Royal” from its name after Nepal’s<br />

king lost his powers last year, is asking for<br />

approval from its government owners to<br />

modernise its fleet of two B757s and seven<br />

Twin Otters. Meanwhile, it is seeking to lease<br />

another B757 from August for its New Delhi,<br />

Bangkok, Kuala Lumpur, Dubai and Hong<br />

Kong services.<br />

While Yeti moves cautiously in that<br />

direction, it has been quicker off the mark in<br />

increasing domestic services after a shakeout<br />

Yeti <strong>Airlines</strong>: spending $1 million on safety and navigational<br />

upgrades for mountain flying<br />

in 2004, which saw a number of operators<br />

go under when the Maoist insurgency cut<br />

tourist arrivals that led to over-capacity on<br />

main routes. Yeti took the chance to fill the<br />

gap when the ensuing bankruptcies in turn<br />

led to a shortage of seats.<br />

“We were basically a STOL operator<br />

ferrying passengers and food stuffs into<br />

remote areas which had no access to<br />

roads,” said Rai. “But in 2004 we saw the<br />

opportunity to expand into the non-STOL<br />

market by moving to fill the void.<br />

“We acquired three Saab 340Bs on lease<br />

and quickly became a major player in this<br />

segment of the domestic market. Later it<br />

was felt the Jetstream 41 was more suited to<br />

these sectors – hot and high with short flight<br />

times.” Four were acquired last year and a<br />

fifth arrived in late April.<br />

“The strategy is to base our schedules<br />

on four Jetstream 41s and use the fifth as<br />

a backup to ensure delays due to technical<br />

snags or weather conditions are kept to a<br />

minimum,” said Rai<br />

Yeti has three main domestic rivals,<br />

including Nepal <strong>Airlines</strong>. Thanks to this<br />

and to ongoing instability, Rai doesn’t see<br />

further expansion in the near future.<br />

Meanwhile, Yeti has the dangers of flying<br />

in Nepal to contend with. It has lost two Twin<br />

Otters, one in 2004 and the other in 2006,<br />

resulting in a total of nine deaths, through<br />

crashes in remote areas. Now it is spending<br />

US$1 million installing up-todate<br />

navigational and safety<br />

avionics on its turboprops.<br />

“Previously it was considered<br />

unnecessary and economically<br />

unfeasible for Twin Otters to be<br />

equipped with such expensive and<br />

advanced avionics, but we think<br />

it is the answer to eliminating<br />

the risks inherent in flying in the<br />

mountains of Nepal,” said Rai,<br />

who pointed out Nepal’s four<br />

other Twin Otter operators have<br />

all suffered fatal accidents due to<br />

controlled flight into terrain.<br />

“STOL operations in these<br />

remote and mountainous<br />

areas do represent a challenge,<br />

especially as the support from<br />

air traffic controllers on the ground is almost<br />

negligible,” he said. “The Twin Otter is widely<br />

recognised as the best for such operations<br />

and maintenance of these aircraft has never<br />

been an issue. It is largely an operational<br />

challenge.”<br />

Yeti is owned and funded by brothers<br />

Lhakpa Sonam Sherpa and Ang Tshiring<br />

Sherpa. Rai said because of the difficulties<br />

inherent in running a publicly traded company<br />

in Nepal, it is likely to stay private.<br />

He doesn’t see that as a problem.<br />

“Important decisions are made after seeking<br />

opinions from the relevant people within<br />

the company,” he said. “This has helped in<br />

arriving at the right ones. Most other airlines<br />

in Nepal have been run by one individual,<br />

like a personal fiefdom.”


Pat James thought an easy life<br />

awaited him when he retired<br />

to the Thai holiday island<br />

of Phuket after 40 years in<br />

aviation, writes Charles<br />

A nderson . But now the American<br />

globetrotter is back in the business as<br />

managing director of start-up Destination<br />

Air Shuttle, Thailand’s only seaplane<br />

operation.<br />

Destination Air, which runs scheduled<br />

services from Phuket’s busy international<br />

airport to 12 points within 55-minutes flying<br />

time, started business in February.<br />

It currently operates two Cessna<br />

amphibians, but has plans to add two more<br />

within six months. Destination also is looking<br />

at an exchange programme with the world’s<br />

largest seaplane operator, Kenmore Air, on<br />

the U.S. West Coast, to bring extra aircraft in<br />

on an exchange basis, boosting each other’s<br />

fleets during their own low seasons.<br />

All this fits in with the fact that Destination<br />

Air is no Kodak-moment carrier. As James<br />

emphasised, this is not a “you call, we haul”<br />

charter operation for sightseers. Transfers<br />

from Thailand’s second busiest airport –<br />

Phuket handled 2.9 million passengers last<br />

year carried by 10 airlines – will be its core<br />

business.<br />

“We are running a transfer service, or<br />

interline feed, so to speak, with other airlines<br />

and the tour companies, the big boys with<br />

inbound tour customers. We will be a part<br />

of their package,” he said. “More than likely<br />

we will be booked six months in advance<br />

for all our flights which provide service to<br />

remote locations.”<br />

The carrier’s shortest route is 10 to 12<br />

minutes to Phi Phi Island. The longest<br />

flight, to Ranong on the Thai-Burma border<br />

for visa runs or a casino visit, takes just under<br />

Seaplanes making<br />

a splash in Phuket<br />

Destination Air Shuttle: fulfilling a need to<br />

service isolated Phuket destinations<br />

an hour. The average comes out at 20 to 25<br />

minutes and at present there are 12 flights a<br />

day, leaving at two-hour intervals.<br />

Phuket International Airport, is the<br />

only land-based destination. All others are<br />

waterbound.<br />

Pat James has logged 20,000 hours as<br />

a pilot but he leaves the flying to three<br />

expatriate seaplane pilots.<br />

James’ career started in the U.S. military<br />

in the 1960s and took him through Cessna<br />

dealerships in Texas, government contract<br />

work in South America and start-ups in the<br />

Pacific region where his core skills as an<br />

aviation asset manager stood him in good<br />

stead.<br />

Then came contact with a consortium of<br />

Thai investors from various fields after his<br />

supposed retirement to Phuket. “I was in the<br />

right place at the right time,” said James.<br />

The success of seaplane operations in<br />

the Maldives underlined the potential for a<br />

similar operation in Phuket. “The need is no<br />

different from the Maldives where you have<br />

a wide spread of resorts located on isolated<br />

islands and coastal areas with no kind of<br />

infrastructure,” said James.<br />

The process of setting up Destination<br />

Air was not simple. Aircraft were sourced<br />

in the U.S. requiring an investment of several<br />

million U.S. dollars, said James.<br />

Pilots were easy enough to find, but it<br />

took 18 months to sift through the paperwork<br />

required by the Thai government and gain the<br />

necessary approvals.<br />

“We’ve had a lot of false starts and ups and<br />

downs clearing the way. But we are definitely<br />

in it for the long term,” said James.<br />

<br />

<br />

<br />

<br />

<br />

<br />

<br />

<br />

<br />

JULY/AUGUST 2007 ORIENT AVIATION 39


BUSINESS DIGEST: MARCH STATISTICS<br />

Airline Codes<br />

RPK Growth by Carrier<br />

Passenger Load Factor<br />

Growth by Carrier<br />

BI<br />

Royal Brunei <strong>Airlines</strong><br />

MH <strong>Malaysia</strong> <strong>Airlines</strong><br />

BR<br />

EVA Air<br />

NH<br />

All Nippon Airways<br />

25%<br />

15<br />

CI<br />

China <strong>Airlines</strong><br />

OZ<br />

Asiana <strong>Airlines</strong><br />

20%<br />

CX<br />

GA<br />

JL<br />

Cathay Pacific<br />

Garuda<br />

Japan <strong>Airlines</strong><br />

PR<br />

QF<br />

SQ<br />

Philippine <strong>Airlines</strong><br />

Qantas Airways<br />

Singapore <strong>Airlines</strong><br />

15%<br />

10%<br />

10<br />

5<br />

KE<br />

Korean <strong>Airlines</strong><br />

TG<br />

Thai Airways Int’l<br />

5%<br />

KA<br />

Dragonair<br />

VN<br />

Vietnam <strong>Airlines</strong><br />

0%<br />

0<br />

Percentage<br />

(Mar 07 vs Mar 06)<br />

Percentage Points Change<br />

(Mar 07 vs Mar 06)<br />

-5%<br />

Percentage<br />

(Apr 06-Mar 07 vs Apr 05-Mar 06)<br />

Percentage Points Change<br />

(Apr 06-Mar 07 vs Apr 05-Mar 06)<br />

-10%<br />

BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />

-5<br />

BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />

Vietnam leads RPK charge<br />

Compiled and presented by KRIS LIM of the Research and Statistics<br />

Department of the Association of Asia Pacific <strong>Airlines</strong> Secretariat<br />

March inter national<br />

p a s senge r t r a f f ic<br />

for Association of<br />

Asia Pacific <strong>Airlines</strong><br />

(A A PA) c a r r i e r s<br />

continued to be strong, with passenger<br />

numbers and revenue passenger kilometres<br />

(RPKs) growing by 6.2% and 7.1%<br />

respectively.<br />

The passenger load factor, at 75.2%,<br />

was 1.2 points higher compared with the<br />

same month last year.<br />

The majority of AAPA carriers saw the<br />

rate of passenger traffic growth strengthen<br />

in March.<br />

Carriers posting double-digit RPK<br />

growth were Vietnam <strong>Airlines</strong> (22.7%),<br />

Asiana <strong>Airlines</strong> (22.6%), Korean Air<br />

(17.1%), Thai Airways International<br />

(15.8%) and Philippine <strong>Airlines</strong> (13.7%).<br />

In addition to buoyant traffic, passenger<br />

load factors for most of the carriers also<br />

improved on slower capacity injection.<br />

Asiana <strong>Airlines</strong>’ passenger load factor<br />

gained 8.7 percentage points, to 77.5% in<br />

March.<br />

The carrier with the highest load factors<br />

for the month was Singapore <strong>Airlines</strong><br />

(82.4%), followed by Philippine <strong>Airlines</strong><br />

(81.1%), EVA Air (80.9%), Thai Airways<br />

RPK and ASK (In Percentage)<br />

RPK and ASK (In Billions)<br />

RPK, ASK and PLF Growth Rates<br />

(Apr 06 to Mar 07)<br />

12<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

-2<br />

-4<br />

A<br />

M<br />

RPK, ASK and PLF<br />

(Apr 06 to Mar 07)<br />

RPK<br />

ASK<br />

PLF<br />

J<br />

J<br />

A<br />

2006<br />

S<br />

O<br />

F<br />

2007<br />

RPK<br />

ASK<br />

PLF<br />

0<br />

M<br />

12<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

-2<br />

PLF (In Percentage Points)<br />

-4<br />

A M J J A S O N D J F M<br />

2006 vs. 2005 2007 vs. 2006<br />

N<br />

D<br />

J<br />

80<br />

60<br />

40<br />

20<br />

PLF (In Percentage)<br />

International (80.9%) and China <strong>Airlines</strong><br />

(80.2%).<br />

CARGO<br />

AAPA international cargo traffic<br />

recorded only 0.4% growth in freight<br />

tonne kilometres (FTK) in March. The<br />

FTK growth rate for the same month was<br />

the lowest since May 2006. An increase<br />

of 3.7% in freight capacity resulted in a<br />

2.2 percentage point decline in cargo load<br />

factor to 67.3%.<br />

T he m ajor it y of A A PA ca r r ie r s<br />

recorded declines in FTKs in March.<br />

The region’s large freight operators that<br />

posted declines included China <strong>Airlines</strong><br />

(8%), EVA Air (7.2%), Singapore <strong>Airlines</strong><br />

(5.7%) and Cathay Pacific Airways (1%).<br />

A number of carriers, on the other hand,<br />

were able to register FTK growth: All<br />

Nippon Airways (16.9%), Thai Airways<br />

International (13.6%), Korean Air (9.5%),<br />

Asiana <strong>Airlines</strong> (4.6%), <strong>Malaysia</strong> <strong>Airlines</strong><br />

(4.2%) and Japan <strong>Airlines</strong> (1.1%).<br />

Most carriers experienced declines<br />

in cargo load factors in the month under<br />

review, with only a handful of carriers<br />

registering cargo load factors in excess of<br />

70%: Asiana <strong>Airlines</strong> (83.4%), Korean Air<br />

(76.4%) and EVA Air (76%).<br />

40 ORIENT AVIATION JULY/AUGUST 2007


FTK Growth by Carrier<br />

Freight Load Factor<br />

Growth by Carrier<br />

PAX Growth by Carrier<br />

25%<br />

20%<br />

15%<br />

10%<br />

5%<br />

0%<br />

-5%<br />

-10%<br />

-15%<br />

-20%<br />

-25%<br />

BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />

20<br />

15<br />

10<br />

5<br />

0<br />

-5<br />

-10<br />

BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />

25%<br />

20%<br />

15%<br />

10%<br />

5%<br />

0%<br />

-5%<br />

BI BR CI CX/KA GA JL KE MH NH OZ PR SQ TG VN<br />

INTERNATIONAL PASSENGER<br />

TRAFFIC: JANUARY-MARCH 2007<br />

The first quarter saw AAPA carriers<br />

record a total of 35.3 million international<br />

passengers, a year-on-year increase of<br />

4.8%. In RPK terms, traffic was up 4.7%<br />

on a capacity increase of 2.5%, which<br />

resulted in a 1.6 percentage point improvement<br />

in passenger load factor to 76.4%.<br />

CARGO: JANUARY-MARCH<br />

AAPA cargo traffic growth continued<br />

to grow at a modest pace in the first quarter<br />

of the year. In FTK terms, cargo traffic was<br />

up only 2%, while capacity grew 4.6%,<br />

which resulted in a 1.6 percentage point<br />

deterioration in cargo load to 64.7%.<br />

coupled with a 3.3% increase in capacity,<br />

dragged cargo load factors down 1.7 points<br />

to 65.8%.<br />

The first four months saw AAPA international<br />

passenger numbers reach 46.9<br />

million, an increase of 4.3% on the same<br />

period last year. Air cargo demand, however,<br />

has been disappointing, with FTK<br />

growth of less than 2% in the period.<br />

Email: krislim@aapa.org.my<br />

Cathay Pacific and Dragonair are<br />

analysed as one carrier<br />

FTK, FATK and Freight Load Factor<br />

(Apr 06 to Mar 07)<br />

Cargo is only growing modestly<br />

FTK, FATK FLF Growth Rates<br />

(Apr 06 to Mar 07)<br />

APRIL (PRELIMINARY)<br />

AAPA member airlines carried 11.6<br />

million international passengers in April,<br />

a year-on-year increase of 2.9%. International<br />

passenger traffic in RPK terms grew<br />

2.6% on a marginal capacity increase of<br />

0.7%, which resulted in a 1.4 percentage<br />

point improvement in passenger load<br />

factor to 75.9%. International freight traffic<br />

remained sluggish in April, registering<br />

an increase of only 0.7%. Weak demand,<br />

FTK and FATK (In Billions)<br />

F<br />

FTK<br />

FATK<br />

FLF<br />

M A M<br />

J J A<br />

2006<br />

S<br />

O<br />

N<br />

D<br />

80<br />

60<br />

40<br />

20<br />

0<br />

J F M<br />

2007<br />

FLF (In Percentage)<br />

FTK and FATK (In Percentage)<br />

16<br />

14<br />

12<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

-2<br />

-4<br />

A<br />

M<br />

16<br />

14<br />

FTK<br />

FATK 12<br />

FLF<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

-2<br />

-4<br />

J J A S O N D J F M<br />

2006 vs. 2005 2007 vs. 2006<br />

FLF (In Percentage Points)<br />

<br />

<br />

<br />

JULY/AUGUST 2007 ORIENT AVIATION 41


BUSINESS DIGEST<br />

AAPA MONTHLY INTERNATIONAL STATISTICS<br />

Summary of Consolidated Results (thousands)<br />

2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />

Apr 06 11,254 46,456,619 62,377,396 74.48% 4,537,167 6,725,483 67.46% 8,904,257 12,561,764 70.88%<br />

May 06 10,869 45,198,805 63,863,230 70.77% 4,326,655 6,611,184 65.44% 8,600,377 12,594,833 68.28%<br />

Jun 06 11,354 48,072,155 62,337,374 77.12% 4,493,193 6,710,086 66.96% 9,027,147 12,562,568 71.86%<br />

Jul 06 12,293 51,556,113 65,500,277 78.71% 4,569,956 6,865,248 66.57% 9,425,084 13,065,776 72.14%<br />

Aug 06 12,306 50,789,484 65,339,978 77.73% 4,503,292 6,907,390 65.20% 9,283,081 13,098,610 70.87%<br />

Sep 06 11,218 47,174,361 63,014,588 74.86% 4,769,987 6,920,681 68.92% 9,117,981 12,734,101 71.60%<br />

Oct 06 11,691 48,230,014 63,908,449 75.47% 4,952,961 7,347,283 67.41% 9,507,263 13,382,021 71.05%<br />

Nov 06 11,592 47,261,577 62,605,192 75.49% 4,992,607 7,295,734 68.43% 9,457,841 13,201,605 71.64%<br />

Dec 06 12,249 51,247,685 66,389,040 77.19% 4,882,414 7,244,918 67.39% 9,713,140 13,517,039 71.86%<br />

Jan 07 11,897 51,264,667 66,016,857 77.65% 4,153,705 6,736,909 61.66% 8,987,690 12,980,908 69.24%<br />

Feb 07 11,160 45,557,018 59,691,338 76.32% 4,033,799 6,197,849 65.08% 8,345,541 11,840,561 70.48%<br />

Mar 07 12,257 51,598,161 68,602,988 75.21% 4,928,028 7,324,118 67.28% 9,786,884 13,551,384 72.22%<br />

TOTAL 140,140 584,406,659 769,646,707 75.93% 55,143,765 82,886,882 66.53% 110,156,288 155,091,171 71.03%<br />

2006-07 PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />

Apr 06 6.2% 6.6% 2.5% 2.9 5.3% 3.1% 1.4 5.8% 3.2% 1.8<br />

May 06 4.0% 3.9% 1.5% 1.7 3.3% 2.2% 0.7 3.7% 2.3% 0.9<br />

Jun 06 3.1% 3.0% -0.6% 2.7 3.0% 2.6% 0.3 3.0% 1.5% 1.1<br />

Jul 06 2.5% 2.0% 0.2% 1.4 3.0% 2.1% 0.6 2.6% 2.1% 0.3<br />

Aug 06 3.6% 2.9% 0.7% 1.7 6.2% 3.6% 1.6 4.6% 3.2% 0.9<br />

Sep 06 1.7% 1.6% 0.3% 1.0 6.2% 2.6% 2.3 2.8% 1.6% 0.8<br />

Oct 06 4.1% 4.1% 0.3% 2.8 3.0% 5.6% -1.7 3.7% 4.0% -0.3<br />

Nov 06 6.5% 5.2% 1.3% 2.8 7.1% 6.9% 0.1 6.4% 5.3% 0.7<br />

Dec 06 6.8% 6.5% 2.4% 3.0 5.3% 6.3% -0.6 6.0% 5.3% 0.5<br />

Jan 07 3.2% 3.1% 0.7% 1.8 1.4% 3.1% -1.0 3.1% 3.3% -0.1<br />

Feb 07 5.0% 3.8% 1.3 % 1.8 4.6% 7.3% -1.7 4.8% 5.7% -0.6<br />

Mar 07 6.2% 7.1% 5.4% 1.2 0.4% 3.7% -2.2 4.1% 3.9% 0.1<br />

GROWTH 4.4% 4.1% 1.3% 2.1 4.1% 4.1% -0.0 4.2% 3.5% 0.5<br />

Percentage or Percentage Point Change<br />

CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />

2002 116,252 491,401,221 659,537,957 74.51% 42,441,232 61,785,652 68.69% 88,851,456 122,017,587 72.82%<br />

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%<br />

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%<br />

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%<br />

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%<br />

2007 YTD 35,314 148,419,846 194,311,183 76.38% 13,115,532 20,258,876 64.74% 27,120,115 38,372,853 70.68%<br />

CY PAX RPK ASK PLF FTK FATK FLF RTK ATK OLF<br />

2003 -11.6% -9.5% -3.2% -4.8 4.6% 7.0% -1.6 -3.2% 2.2% -3.9<br />

2004 22.9% 18.4% 13.0% 3.3 13.7% 13.1% 0.3 16.4% 13.6% 1.7<br />

2005 5.1% 5.1% 4.5% 0.5 3.6% 5.6% -1.3 4.4% 5.0% -0.4<br />

2006 4.2% 4.0% 1.2% 2.0 5.0% 3.8% 0.8 4.4% 3.1% 0.9<br />

2007 YTD 4.8% 4.7% 2.5% 1.6 2.0% 4.6% -1.6 4.0% 4.3% -0.2<br />

Note: 1. Data includes all 17 AAPA member airlines<br />

2. Figures for January to February 2007 restated<br />

3. AAPA consolidated traffic figures include estimates for Air New Zealand and Qantas Airways<br />

Percentage or Percentage Point Change<br />

42 ORIENT AVIATION JULY/AUGUST 2007

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