July 2009 Archives

AirAsia X is eyeing a "virtual hub" in the Middle East, possibly in either Abu Dhabi or Bahrain.

That is an interesting move for the carrier, which needs to deploy its aircraft beyond the 8-hour limit in order to maximise the yields and grow new markets.

I wonder, though, how Abu Dhabi's Etihad Airways or Bahrain's Gulf Air would react. Their governments might be happy for the additional services out of their airports, but the airlines could feel threatened if AirAsia X bites into their market for flights beyond their countries.

Given how AirAsia shook up the airline sector in Southeast Asia, this could develop into a very interesting situation in the coming months after AirAsia X unveils its new hub.

Korea Aerospace Industries and Eurocopter rolled out the first Korean Utility Helicopter today.

The maiden flight of this prototype is planned for the early months of 2010 and a serial production will start for 245 helicopters for the Republic of Korea Army. It is scheduled to enter into service in 2012.

Next up is the question of whether they will collaborate for South Korea's attack helicopter requirement as well. Seoul is assessing all international options, including Eurocopter's Tiger and Boeing SH-64D Apache Longbow.

Here is a picture of the 1,000th aircraft to be delivered from the Airbus A330/A340 family. The aircraft, an A330-300, was handed over to Thai Airways in Toulouse yesterday.

Someone said the other day that if Singapore Airlines is reeling from the economic crisis, the prognosis must really be bad for the airline industry.

That came true today when SIA reported a net loss of S$307 million ($212 million) for its fiscal first quarter. This was its first loss since the 2003 SARS crisis almost six years ago. This time, the future looks a little bit bleaker.

SIA is suffering from the triple whammy of a collapse in the cargo market, the fall in demand for long-haul travel and company cost-cutting measures that resulted in a drop in business class travel.

It can manage its costs better than many other full-service airlines, and it is a bit more nimble in the way it can deploy capacity. This time, however, there are several economic conditions that are beyond its control.

The airline has warned that it could report a net loss for the full year if the adverse situation continues. That could be even worse news for the entire industry than it is for SIA itself.

So we were all wondering how bad things were at India's Kingfisher Airlines and here goes.

The airline had a net loss of 16.09 billion rupees ($333.5 million) for the year ended 31 March, and carries 60 billion Indian rupees of debt, or around $1 billion, on its balance sheet. It plans to raise 5 billion Indian rupees by tapping India's equity market.

Chairman Vijay Mallya appears to be confident that the airline will do well in the future, but those are worrying figures. It certainly is symptomatic of the focus in India for the last few years, when the airlines went after market share and forgot about running a viable operation. Mallya refers to that in his interview.

Kingfisher's motto is to live the "Good Times", but these are anything but for the Indian airline industry.

It appears as though a merger between AirAsia and AirAsia X will probably not go ahead and that is a good thing.

It makes sense to keep AirAsia's highly successful (albeit still not very profitable) short-haul low-cost business separate from AirAsia X's riskier low-cost long-haul model. Why should AirAsia's owners and shareholders take on the additional risk and debt, especially at a trying time for the regional long-haul market?

Analysts remain doubtful about a near-term recovery for the segment, and we still do not know if the AirAsia X model can be successful. They need to keep their costs low enough to increase yields, have high enough load factors, and mitigate against rising fuel prices.

Tony Fernandes had something in mind when he mooted the idea, but he has been quiet about it thereafter. He has shown with AirAsia that he can beat the odds, and there is a chance that AirAsia X will do the same. Until that happens, however, a merger is likely to remain a very bad idea for his flagship carrier.

It was a Monday filled with rich irony for Virgin Blue after a wheel fell off one of its Boeing 737 aircraft in the morning.

That came almost at the same time as the carrier's announcement that it plans to raise A$231.4 million ($190 million) in fresh equity to shore up its balance sheet, that it would likely post a net loss of A$160-165 million in the year to 30 June, and that co-founder Brett Godfrey was "retiring" as CEO.

It has been a tough year for Virgin Blue, which has been tottering under the losses at V Australia and deal with growing competition from other carriers. There is also increasing opposition to its proposed joint venture with Delta Air Lines.

One week ago, we asked Virgin Blue about its plans to raise fresh equity. All we got, despite numerous follow-up phone calls and emails, was silence from an airline that prides itself on being open and innovative. Now that the true state of affairs is out, we know why they preferred to be silent rather than transparent.

The reality is that Virgin Blue has helped Australian consumers and it would be a pity if it went under. The latest plans should ensure that it stays afloat. But it also appears to have somewhat lost its way, and Godfrey's departure could help to ring in the necessary changes.

And those will be essential before the wheels really come off at Virgin Blue.

Some may have thought that Indonesian airlines would rush to fly to Europe after the EU lifted its ban. Not Garuda, it seems. The flag carrier plans to fly to Europe only next year as part of a gradual five-year growth programme with reasonable targets.

The airline has had a rough time in recent years, but it has been reporting a profit, increasing revenues and cutting costs. It is still carrying a lot of debt, although it has been taking steps to manage that.

There remains a big image problem - many people are still afraid to fly on an Indonesian carrier due to worries about their safety and maintenance records. That can be overcome with time, and a good track record.

It is, however, a good sign that Garuda is taking the slowly-slowly approach. Garuda Indonesia has just unveiled a new livery and we hope to put those photos up shortly. Hopefully, that marks a new beginning for the carrier and the Indonesian airline industry.

According to India's defence minister, the fatal crash of the IAF Su-30MKI in April was caused by a failure in the aircraft's fly-by-wire system.

The country's Su-30 fleet was grounded for three weeks after the crash, and they were allowed to fly again after investigations indicated no serious fault in the aircraft.

As these are only the preliminary investigations, further details could be revealed in the coming months. But I am thinking that if there is a fault in the fly-by-wire system, that is a serious issue. Or am I reading too much into this?

Like a lover who embarked on an unfulfilled courtship, Japan nears the end of its F-22 dream

Lockheed Martin's chief financial officer Bruce Tanner, when asked by analysts about the prospects for overseas sales, was pessimistic. "I'm not particularly positive on the ability for us to make [an F-22 export deal] happen in the next few years," he said. Given that the Senate has voted to end funding for the Raptor, it appears as though it is literally the end of the line.

It should not be a surprise. Given the amount of opposition to exports and the fact that it would have cost up to $250 million to develop an exportable version of the stealth fighter, Japan would have had to move mountains to get the aircraft and received better value elsewhere.

The 30 August general elections in Japan look like they may result in a new government. Let's just hope that they will be able to move beyond the F-22 and get on with the much-needed F-X competition as soon as they can.

The reality is that the closest they are probably going to get to the Raptor is when the fighters are on exercise at Kadena air base in Japan (see video below).

Here are some pictures of the first Airbus aircraft in Shanghai Airlines livery. The carrier took delivery of the A321 last week. This is the first of 10 A321s ordered by the Shanghai-based carrier in 2006 and 2007.

Juneyao Airlines, a Shanghai-based privately-owned carrier, took delivery of its first purchased A320 last week. Here is a picture of the aircraft in the Chinese carrier's livery.

Singapore Airlines has launched a cabin retrofit programme for its older Boeing 777s, which it says it is going ahead despite the economic situation. Still, some belt-tightening must be expected and that has led to tough decisions by the SIA bosses.

After all, why else would it change the seats only in the first and business class to what is available on the newer 777-300ERs and Airbus A330s? Economy class passengers can live with new seat covers, after all.

For first and business class in-flight entertainment systems, you get new bigger screens that do not tax their eyes. In economy, you can look forward to "updated, more intuitive and user-friendly" systems. Just what I needed.

Hey, I can live with used cushions and the same old in-flight entertainment systems. It could be worse - they could take away my favourite cheese and cream crackers! We, the economy class, should learn to be grateful for the little mercies, I say.

Kingfisher Airlines's plans to get almost $2.6 billion in loans, which is likely to to be put towards funding its aircraft purchases, will be closely watched by observers.

That is a big debt burden, even for an airline that is the leader in the Indian domestic market, has been expanding its international routes, and has a great in-flight product.

Unfortunately, it has a high-cost operation and the yields are not believed to be good. It is certainly not a good sign that Kingfisher has delayed releasing its financial results to August. That, however, is just one example of the troubles faced by India's airline industry.

Both its investors and those following the Indian airline industry would be keen to know the real situation at the carrier, and the sooner Kingfisher clarifies it the better for everyone.

Maybe this is an airline's way to getting touchy-feely with customers, and it certainly is a public relations exercise. Somehow, though, I don't know if Singapore's Tiger Airways has really thought through its latest plan.

It is inviting passengers to join a task force, where they can give their feedback on customer services, destinations, and product offerings. If you are keen, sign up at their website. Those who are selected will get S$500 worth of free flights.

Rosalynn Tay, managing director of Tiger Airways Singapore, says: "These are our customers and when it comes to finding out how we can enhance our product to meet their needs I want the raw facts."

Maybe I am just cynical but, judging from the reactions online, Tiger may not want to hear some of these "raw facts". Good luck to them, though. At least they are trying!

For those who are keen to see what happened a few days ago, here is a video from the BBC.

Nobody is really sure what caused this incident, although I have been reading a lot about a combination of pilot error and strong winds. Let's see what the investigation turns up.

I wrote a story last week on a start-up in the south Pacific called Solomon Islands Seaplanes that has started operating a Beechcraft 18 and a Convair 580.

It also plans to add a Grumman Goose to its fleet later this year, the Solomon Islands CAA principal flight standards officer, George Satu, told me over the phone.

I wasn't able to reach the carrier's founder Bob Keys but if you see this post Bob please give us a call. Would be good to do an interview with you.

Solomon Islands Seaplanes is a small outfit but I do like writing about such carriers because there is always a lot happening in small countries like the Solomon Islands and these countries often get overlooked by other news media.

There must have been a sigh of relief among Indonesian airlines after the European Union confirmed that it would lift its ban on four of them. The quartet can now begin to plan flights to Europe, and they will be able to get European passengers who will be able to book tickets on Indonesian airlines at home.

While the Indonesian domestic market is big and lucrative, the reality is that international passengers are a major source of income that nobody can afford to pass up on - especially in these tough times for the airline industry.

One problem for Indonesia's DGCA is that it is one thing to implement new rules regarding maintenance and safety. It is much more difficult to control the numerous smaller airlines and scheduled operators who fly below the agency's radar. There need to be tighter checks on them to ensure that the regulations are stringently followed.

Still, this is a chance for Airfast Indonesia, Garuda Indonesia, Mandala Airlines and Premiair to show that the country's airlines can meet global safety standards. It will take some time, and they will need to continue working at it and convincing everyone. Letting this opportunity slip could prove disastrous for the Indonesian airline sector.

China Eastern Airlines' $1.3 billion bid for Shanghai Airlines is nothing less than an attempt to survive in the highly competitive Chinese market. While Air China and China Southern had close to a 50% market share in their Beijing and Guangzhou hubs respectively, China Eastern had only just over 30% in Shanghai.

Buying Shanghai Airlines will increase that to closer to 50%, give it a wider network and additional aircraft. It could also result in economies of scale that enable allow it to compete with the other two majors.

The problem is that both China Eastern and Shanghai are highly unprofitable and have inefficient operations. Massive changes must be made to make the merger work, and China Eastern must trim its workforce, eliminate unprofitable routes and cut costs.

Government interference in the Chinese airline industry does not help either, especially since the bureaucrats seem determined to snuff out the country's private carriers. Consolidation is important, but so is the freedom to operate as a proper business without worrying too much about big brother. That may be difficult as long as the government remains the main shareholder, but it is not impossible as other regional carriers have shown how it can be done.

China's airline industry has tremendous potential. But without making the necessary changes, it will continue to face problems and China Eastern's merger with Shanghai may not have the impact that its shareholders - including the government - wants.

First a warning - this is a slightly longer post than usual, but I think this topic deserves it.

I was on holiday when this story in the Jerusalem Post, that Washington blocked Israel Aircraft Industries from offering an Elta Systems radar for the Saab Gripen proposal to India, came out. I have since had time to think about it and ask around.

The Post says that Israel's defence ministry ordered IAI to back out due to the Pentagon's concern that US technology in the radar may find its way to the Indians. That makes little sense.

If Washington were worried about technology transfer, it would have tried to scupper India's earlier deals with Israel and prevented US companies from competing in the same tender under similar conditions. It did not.

Furthermore, Saab said in March that France's Selex was developing an AESA radar for the Gripen NG. Industry sources say that India had been keen on the Elta radar earlier, but it dropped that plan realising that it would not be offered.

It is not clear why that happened and the Americans could have had a hand. But that does not matter now anyway, given that New Delhi has been assessing the Gripen for the last few months on the basis that it comes with the Selex and not the Elta radar.

Industry sources say that there are probably two underlying issues behind this debate.

The closely-watched Indian medium multi-role combat aircraft competition has some way to go before being resolved, and we can expect plenty of "news" until then about the contenders facing difficulties or getting kicked out. For example, word went out earlier this year that first the Gripen and later the Dassault Rafale was eliminated. Both stories were wrong, and we were one of the first to say so.

Others say that if the Pentagon stepped in, it reflects the growing competition between the US and Israeli defence companies, which developed a lot of their technology with American help. This competition has existed for several years, but Israel is fast becoming a major player globally. In India, for instance, it recently overtook Russia as the country's leading arms supplier. That is a threat to the US companies, which need export markets like India to overcome falling revenues and budgets at home.

This latest story about the Elta radar in India appears to be just a sub-plot to a bigger narrative about the increasingly competitive global markets for defence contractors.

V Australia, Virgin Blue's long-haul operation, said today that it is offering some of its business class passengers a free limo ride to town and back. Now, I really don't know if the passengers that it targets are those who will bother about a free ride to town.

I travel economy anyway. So you know what would make my day? Some of the stewardesses who appear in their advertising coming out back to serve me. Check this clip out!

Here are some photos from yesterday's unveiling of the first Australian Boeing F/A-18F Super Hornet. The Royal Australian Air Force is the first export customer for the type, a fast that will help Boeing in other international competitions.

India's defence minister said yesterday, almost as an afterthought during remarks to the upper house of Parliament, that the IAF will have 230 Sukhoi Su-30s by 2015.

That is a significant announcement. It is the first time, to my knowledge, that India actually set out a firm target for the Su-30s and represents an acceleration of the procurement plan.

India now has 98 Su-30s, comprising the advanced Su-30MKIs and earlier Su-30 models that it is upgrading. These were bought off the shelf from Russia and license-produced by Hindustan Aeronautics. It is not clear if the additional fighters will be manufactured by HAL or bought directly from the Russians.

New Delhi has been looking to accelerate the retirement of its older Russian fighters, given that it is too costly to upgrade them and keep them in service. By getting more Su-30s, the IAF will be able to modernise its fighter fleets even faster. And that is exactly what it needs to keep up its operational capability in the coming years.

Just to stir things up a bit, here is the infamous video about a USAF F-15 pilot talking about the Indian Su-30s that took part in Operation Red Flag in 2008.

Ratan Tata (above) could once again be involved with Air India, this time as the head of an international advisory board that will help the airline to revamp its operations.

Which is very interesting, given that someone told me after an earlier blog post about the issue that the Tata Group could be allowed to run the loss-making and debt-ridden carrier. I wonder if he had any inside information!

The Tatas, India's largest business house, formed Air India in the 1930s but sold the airline to the government later on. Almost 10 years ago, the firm wanted to form an airline in India together with Singapore Airlines but was foiled by the country's investment board.

Given the recent troubles faced by the country's carriers, Ratan Tata - an aviation enthusiast, a certified pilot, and former non-executive chairman of Air India - must be thanking his lucky stars that the plan fell through.

His latest involvement appears to be in a purely advisory role - who better than India's best businessman to give advice on how the airline can restructure itself? Still, this is an interesting turn in the ongoing soap opera that is India's financial troubles. I have a feeling that there will be more twists and turns along the way. Watch this space.

 

Lion Air is the second-largest airline in Indonesia but its finances remain a mystery, to me at least. I have been trying to get its total revenue figure for 2007 and 2008 for the Airline Business magazine global rankings but not having any luck. Other large carriers don't have a problem releasing such info. If anyone has an idea of what Lion Air's total revenue was for 2007 and 2008, please let me know. It would go a long way to explaining how Lion has been able to add so many aircraft so fast.

  I attended the Firefly press event at Changi Airport today that was organised to promote the Malaysian turboprop operators' new services from Malaysia to Singapore.

Rather than operating on the trunk routes, Firefly is linking secondary cities in Malaysia to Singapore. These are routes that no other carriers are operating on either because the passenger loads are too low for Airbus A320/Boeing 737s or the airport runways are unable to support such large aircraft.

Firefly operates 70-seat turboprops and its CEO, Ed Leong, said at today's event that the carrier anticipates it will have 70-75% passenger load factors on the routes. He adds, on the Ipoh-Singapore route it has already sold 78% of its seats for July.

If Firefly can make these new routes successful, I wonder if other turboprop operators will move in. Singapore has no turboprop airlines but I wouldn't be surprised if someone from the Singapore side decided to come in. A perfect candidate would be Singaporean Lim Kim Hai who is the chairman and major shareholder of Regional Express, Australia's largest regional carrier and a Saab 340 turboprop operator. Having ATR 72-500s up against Saab 340B+ aircraft would be an interesting fight.

Based on this ad that came out in Singapore newspapers today, I am not too sure what Firefly are inviting their passengers to explore. But the view is pretty good from my angle and it makes me want to take a closer look at what the Malaysian airline offers.

So darling, I may be exploring the best of Malaysia's backyard on Firefly soon. And don't worry, it is all purely business...

Talk about checking out the competition! A US Air Force F-16 pilot was pictured trying his hand on a simulator for China's Hongdu Aviation L-15 advanced jet trainer at last month's Paris Air Show (photos above and below).

It would have been interesting to hear what his reaction was, but these pictures came out in the military news section of China's Sina.com website. The full set of photos can be found in this section of the website. If anyone can find a reaction somewhere, please let me know.

Tiger Airways Australia launched direct flights between Sydney and Melbourne yesterday, with members of the West Tigers National Rugby League team pulling an Airbus A320 aircraft out of the hanger (pictures above and below) as part of the airline's publicity plan.

The carrier will certainly need all the strength it can get to muscle in on a route that is one of the most popular, and competitive, globally. Tiger will have 24 weekly flights and could up this in the future, but it needs to bulk up when compared to the competition.

According to Innovata, Australian national carrier Qantas has over 210 weekly flights between Sydney and Melbourne's main gateway Tullamarine International Airport. Its low cost subsidiary Jetstar has three weekly flights to Tullamarine and 41 to Avalon, Melbourne's secondary airport. Their only serious rival, Virgin Blue, has 164 weekly flights to Tullamarine.

Tiger would need more than rugby players to pull it ahead if it wants to make a dent against such hefty competition. And a bit of luck, too.

Want to know just how badly Air India is doing?

The Indian national carrier has $3.2 billion of debt on its balance sheet, according to the country's civil aviation minister Praful Patel. This is double what it had in November 2007 and mainly related to aircraft purchases by Air India and Indian which merged that year. Air India has taken out loans to pay for 49 of the 111 aircraft it has on order, adds Patel.

True, the merger resulted in additional debt on the joint balance sheet. But it also shows that Air India's managers were unprepared for a downturn, when low debt levels and strong cash flows are essential to managing operations. As a result, the airline has had to defer paying employee salaries and go to the government, its owner, for additional funds.

The state has approved an infusion of public funds, but it has also demanded that the airline present a plan within a month on how it will restructure its operations in the coming years and return to profitability. Air India must take this opportunity to make the necessary changes it needs. Market share is useless without revenues, and costs have to be trimmed. Unions must also be engaged in order to ensure that the employees are on board as well.

If anyone wants to know why Indian airlines are making massive losses despite growing demand for air travel, they only need to look at Air India's statistics to know how inefficient operations are.

Another aircraft has crashed in Indonesia, and the timing could not be worse.

The Aviastar Airlines' de Havilland Canada Twin Otter cargo aircraft was found yesterday morning and all three crew are believed to be dead. An Aviastar British Aerospace 146-300 crashed in April as well, but the airline will continue with its operations after buying a BAe 146-200 that will arrive on 10 July. It also has three other Twin Otters in service.

There are dozens of small operators like them in Indonesia, and they will be under the spotlight this week. The European Commission banned Indonesian carriers from flying to Europe last year after a string of accidents involving them, and amid worries about the maintenance and safety records of Indonesian airlines.

Indonesian regulators are meeting the EU officials this week to show them how they have tried to improve their safety records, and there are hopes that the Europeans will lift the ban on four airlines - Airfast Indonesia, Garuda Indonesia, Mandala Airlines and Premiair.

The problem, however, is that it can be difficult to get a handle on all of the airlines in Indonesia. From what we can see, there are almost 40 operators in the market.

Until the Indonesian authorities begin to have an effective method of having regular and stringent checks on all of their airlines, and especially smaller ones like Aviastar, there will continue to be doubts about their carriers.

 

Today All Nippon Airways disclosed that it has swapped five 767-300ERs on order for Boeing 787s which means its 787 order increases to 55.

It works out well for ANA because the five 767-300ERs it is cancelling orders for were suppose to be interim lift but the downturn in Japan's aviation market has been worse than expected so there is no need for such interim lift.

As the ANA spokesman pointed out to me today the 787s can be spaced out for later years.

Boeing must also be working hard to appease ANA because the carrier will be the first to fly the 787 and it was suppose to receive its first 787 next February but the latest delay in the 787 programme has pushed back the delivery schedule.

ANA has asked the aircraft-maker to clarify the delivery schedule as soon as possible. But Boeing has said it will take a few weeks to determine the schedule.

It has been an important few days for Pakistan's air force, which has just confirmed upgrades to its US-made Lockheed Martin F-16A/Bs and started the domestic production of the JF-17 fighter (above) that it co-developed with China (see video below of the aircraft flying in 2007).

Islamabad was one of the USA's closest allies during the cold war, but Washington imposed military sanctions after Pakistan exploded a nuclear device in the 1990s. A shortage of spares for its then mainly US air force fleet pushed it towards the Chinese, from whom it has since bought hundreds of military aircraft.

After September 11 2001, however, the dynamics changed. Islamabad became an important ally in the USA's fight against Islamic insurgents in Afghanistan and its border with Pakistan, and that led to a resumption of military ties.

Washington agreed to sell new F-16C/Ds to Pakistan and is helping it to upgrade its older aircraft. Pakistan, however, has continued with its good relations with Beijing. Its money helps China to reduce the cost of its military programmes, and its companies gain the technological knowledge that will help them in the future.

Islamabad is hedging its bets and diversifying its weapons sources. It is keeping China and the USA on its side in an increasingly multi-polar world. By modernising its air force, it ensures that India will continue to fret about its capabilities.

These are interesting times for Pakistan and its air force.