February 2010 Archives

Here's another thing about this morning's press conference - they really show that Jetstar (EBIT of A$121 million) is becoming the star of the Qantas Group, with the full-service flagship Qantas Airways making only half of that at A$60 million.

The traffic figures bear this out, with Jetstar posting significantly stronger growth in RPKS and actual passenger numbers. Qantas is also facing strong competition on key route such as those to Los Angeles and London.

Sure, Qantas would say that full-service carriers everywhere were devastated by the economic crisis. However, the Group's two-brand strategy increasingly appears to be Jetstar leading and Qantas following.

So, has Qantas blinked first or is it the most prescient of the major Asia Pacific carriers?

This morning, I was at the airline's half-year financial results press conference in Sydney when it announced that it made a half-year profit, with the higher traffic at low-cost subsidiary Jetstar helping the full-service carrier Qantas ride through the rough times.

The more significant announcement, however, was a fleet revamp. Their nine newest Boeing 747-400s will have the first class cabins taken out, while eight Airbus A380s due to be delivered from 2012 will not have any first class seats.

This is a major response to what some airlines, including Qantas, believe is a structural change to passenger traffic demand patterns in the wake of the economic crisis, from which the world is still recovering.

It is also different from Singapore Airlines' response to the crisis, which its CEO Chew Choon Seng spelt out in his Airline Business interview last month.

I'm interviewing Qantas CEO Alan Joyce (above) tomorrow for the next edition of Airline Business, and it would be interesting to get his views on this and other issues relating to Qantas.

First up, let me say that the New York Times is one of my favourite newspapers. But when one of my colleagues brought this to my attention, I can't help but think that the NYT put two and two together and came up with five.

Its conclusion that Air China's order of 20 Airbus A320s has to do with China's displeasure at Boeing due to the USA's recent sale of arms to Taiwan is off the mark. Sure, it is unlikely that any Chinese carrier will order Boeing aircraft for a while until this bad cloud passes.

But these deals are not made overnight. The Air China A320 deal has been in the works for a while and was only confirmed yesterday. Surely, it is a bit of a stretch to say that Air China made the decision just over a week after Washington's announcement?

This order is part of its fleet renewal plan, as is a 2008 order for 30 737-800s and 15 Boeing 777-300ERs that are due for delivery from 2011 to 2015. Now, if Air China cancels those orders, we could perhaps conclude that something's afoot.

But the NYT is stretching it when it concludes that Air China's recent order for A320s is to show its (and Beijing's) displeasure.

Okay, this is gonna be a highly embarrassing video but it just shows the fun (and, erm, hard work) that that the Flightglobal team put into the Singapore Airshow and especially our digital dailies. We hope you enjoy these outtakes!

Two weeks ago, we went to the Low Cost Airline Asia Pacific conference in Singapore and talked to CEOs from several airlines. These included AirAsia X's Azran Rani-Osman (above), Jetstar's Bruce Buchanan, Virgin Blue's Brett Godfrey, and Viva Macau's Reg McDonald.

You can see the videos at our landing page, which is located here. But one thing was obvious from our coversations - they are all optimistic about their future as the region's airline industry emerge from the economic downturn.

Making predictions is a risky business at most times, but it is almost certain that the Asia Pacific air traffic market will follow the trend set by the USA and Europe and result in a greater role for low cost carriers.

That will put even more pressure on the likes of Garuda Indonesia, Philippine Airlines, Malaysia Airlines and Thai Airways to up their game, or risk becoming irrelevant or even worse - insolvent.

Asia's airline industry will continue to grow, but it is fundamentally changing at the same time.

Here is a pretty cool (and at times corny - what's with the feathers, boys?) video of the Korea Aerospace Industries T-50, which is in contention for advanced jet trainer competitions with the twin-engined Alenia Aermacchi M346 for contracts in Singapore and other parts of the world.

The KAI fellas passed it to me last week and I thought that it might be great to share it with everyone.

The Republic of Korea Air Force has ordered over 80 aircraft, including some in the A-50 armed configuration. Powered by a single GE F404-102 turbofan engine, the T-50 is capable of up to a maximum speed of Mach 1.4, and produces up to 7.8kN of thrust with afterburn.

AirAsia's Tony Fernandes appears to have finally succeeded in his long-held ambition to make AirAsia the ASEAN carrier with operations in all the major southeast Asian markets.

Today AirAsia announced that it is buying 30% of Vietnamese start-up VietJet which will be positioned as a low-cost carrier and be branded VietJet AirAsia.

VietJet has been trying to launch for two years but kept delaying. AirAsia, meanwhile, tried in 2007 to establish an airline in Vietnam with state-owned shipbuilding company Vinashin but the deal floundered because the Vietnamese authorities refused to give the go-ahead.

But AirAsia says the country's ministry of transport has approved its 30% acquisition of VietJet. It will be interesting to see how much they let AirAsia take market share from national carrier Vietnam Airlines. I'm sure Tony will be talking up how the new entrant will help grow the market rather than take share from the national carrier.

It's also interesting that Tony is willing to settle for a minority stake. Generally speaking, AirAsia has strong control over its affiliates in Indonesia and Thailand. But with only 30% market share, it will be harder for AirAsia to exert control over the Vietnamese venture.

That said, the rewards can be tremendous. Vietnam is a market with a population of 70 million and there is so much demand for domestic flights that Vietnam airlines is operating Airbus A330s domestically.

When China (and Eurocopter) says so, it seems.

Taiwan's air force has bought three EC225s for search and rescue missions. Eurocopter says that it is for civil use, and emphasises that this is not a military variant. Yet, doesn't the fact that this was bought by the air force rather than a civilian agency make it a military sale?

There doesn't seem to be much of a buzz about this. That is a surprise, especially after the fuss that China kicked up last week over the USA's approval of a slew of military sales to Taiwan. Civil helicopters or not, this is a military sale no matter how anyone tries to couch it.

Has China finally realised that it is not worth kicking up a fuss? Did it exhaust all of its energy last week? Maybe Eurocopter's protests that this is really a civil deal are being heard by the right people in Beijing? Or maybe, it is because this is not the USA that is selling stuff to the Taiwanese military?

Hmmmm...I wonder what the reason is.

Myanmar Airways International, the country's main international carrier, is in the throes of another ownership change.

This carrier was a joint-venture between Singapore's RegionAir and the Myanmar
government. The government's stake was controlled via the auspices of government domestic carrier Myanma Airways (yes, that is the correct spelling).

The Singaporeans exited the business a few months ago and Myanma Airways is now working to sell an 80% stake.

Some news reports in the country say Myanmar's privately-owned Kanbawza Bank has succeeded in buying the 80% stake. The bank is controlled by Myanmar businessman U
Aung Ko Win, who (not surprisingly) has strong links to Myanmar's military junta including General Maung Aye.

But a senior source I spoke to yesterday at MAI says the bank's proposal to buy 80% is still before the transport ministry.

There is also at least one other private company vying for the stake, says the source, who declines to name the competing bidder.

MAI presently operates two Airbus A320s on lease from a Hong Kong leasing company. It plans to add a third A320 on lease source, says the source.

One of the reasons the Singaporeans let Myanma Airways take over 100% of the carrier is because they didn't want to inject money to recapitalise the business, adds the source.

The government's move to sell an 80% stake in MAI, is in line with its general policy at the moment. Reports in Myanmar say the government is busily selling state-owned assets before the country's national elections due to take place later this year. So far no firm date has been fixed yet for the elections.

It will be the country's first in 20 years although it is likely to exclude the country's pro-democracy leader Aung San Suu Kyi, who remains under house arrest thanks to the country's military junta which controls the government.

 

Got a tip off late last week that Royal Brunei are back at it again trying to get leases on Boeing 777s and that the carrier is currently in talks to try and secure some of Singapore Airlines' Boeing 777-200s.

This perked my curiosity enough that I put in a call this morning to my old boss , Nick Ionides, who now works at Singapore Airlines. Didn't ask him about Royal Brunei because I know he's never going to confirm it but I did ask him what the situation is with the airline's fleet of 777-200s and Boeing 747-400s.

This is the response I got "by the end of this financial year, ie March 2010, we will have seven 777-200s and three 747-400s available for sale."

"As we've said before we expect to phase out the last 747-400 pax aircraft around 2011. No plans to phase out [all the] 777-200s in the immediate future" as some are being retrofitted for routes to China and India.

Royal Brunei presently uses Boeing 767s for its international services and is waiting to receive Boeing 787s that it ordered via a leasing company.

The fact that the 787 programme is delayed means that Royal Brunei is in desperate need for some interim lift.

This is because Royal Brunei's 767s lack the range to go non-stop to Europe so they have to do a stopover in the Middle East.  This puts them at a competitive disadvantage because it means they are right up against the wealthy Middle East carriers.

After speaking to SIA, I put in a call into Royal Brunei's PR department. Unfortunately, I didn't have any luck confirming the bit about talks with SIA. But I'll keep digging and if I get anything ...you can read it on this blog.

Royal Brunei has said publicly they are in the market for interim lift. It is a just a question of when they can get the aircraft. Although I would be surprised if the aircraft end up coming from SIA. Royal Brunei wants to lease 777s as interim lift and SIA is not really in the business of leasing aircraft. They much prefer to sell their older aircraft.

Some old things are still good. The Lockheed Martin C-130 is still relevant in the global military airlift market, especially in the wake of the woes facing the Airbus Military A400M programme.

Countries will still continue to order the latest variant of the aircraft, the C-130J, with Lockheed saying that it is in final discussions with an unnamed Asian customer.

As a treat, I managed to get a ride on one of the US Air Force C-130Js that were at the show.

It has been a pretty quiet airshow so far - the only major one I've been to so far where there has not been any big orders. CNBC were asking me about the mood in the industry when I appeared on their show this morning.

The F-15 has been flying for more than 35 years in air forces all over the world, but the line finally appears to be coming to an end with a lack of recent orders.

Boeing, however, believes that its latest variant, the F-15 Silent Eagle, will snag some new contracts from countries like South Korea, Singapore and Japan.

It is likely to remain a challenge to get new contracts, but the F-15SE will compete against aircraft like the F-35 Joint Strike Fighter in upcoming competitions and Boeing says that it will be a viable alternative.

We will know if there is any basis to Boeing's optimism over the next year.

The fact that European and US companies have been coming to Asia for a long time is not new. It is new when a venerable British company like Rolls-Royce moves the production of what could become its most successful passenger aircraft engine to Singapore to lower its costs and gain market advantage. You rarely see that - the only other real example I can think of is Airbus manufacturing its A320 in China.

It also benefits countries like Singapore that hope to develop an indigenous aerospace industry. Expect more countries to offer incentives to companies like Rolls-Royce as they try to attract investments in this part of the world.

Boeing believes that the F-15 is still relevant for air forces globally, and the entry of service of the aircraft into the Republic of Singapore Air Force will help them to spread that message.

I got a chance to sit in the F-15SG simulator as Boeing gave me a glimpse of what the RSAF pilots would go through in their training. It was a pretty interesting experience, to say the least.

We managed to catch up with Boeing's head of marketing Randy Tinseth, and he had some interesting comments to make about the 787 programme on video. He also told us a bit more about the delivery schedule this year for the aircraft and the prospects for the 787-3 variant.

They are more confident that they have overcome the obstacles that led to the massive delays, but I wonder if the flight test phase will lead to more problems. We'll know in the coming weeks.

Flightblogger and I met up with Didier Lenormand, head of freighter marketing for Airbus, yesterday to talk about the Airbus A330-200F and the future of the cargo market.

He made some interesting comments about the aircraft and Asian demand, and conversion of the older passenger aircraft into freighters.

Embraer plans to continue producing regional jets in China, looking to replace the ERJ-145 line in Harbin with assembly facilities for the E-190.

That would be an ambitious plan, given that the aircraft will be solely for the Chinese market. The Brazilian manufacturer would compete against the Commercial Aircraft Corporation of China ARJ-21, which is now in flight testing and is Beijing's answer in the segment.

Most of the Chinese carriers that want to buy regional jets will buy the ARJ-21 due to political pressure. Embraer, however, is probably banking on the fact that not all of them will want to buy the locally produced (and dare we say it, inferior) aircraft.

In addition, the Chinese airliner market is likely to grow tremendously and the number of ARJ-21s produced are unlikely to meet this demand.

That could open a small market for the E-190/195 family of Embraer jets. The question then may be if political pressure or market forces wins out in the end in China.