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Aviation History
2002
2002 - 1731.PDF
BUSINESS DOWNTURN NICHOLAS IONIDES / SHANGHAI Jeanniot slams 'ill-prepared airlines' But incoming IATA director general pledges to tackle insurance issues and press for end to global ownership restrictions Long-serving International Air Transport Association director gen eral Pierre Jeanniot, who retired last week after nine years at the helm, has criticised airlines for being unprepared for the downturn that followed the September terrorist attacks in the USA. In his final report on the state of the industry at IATA's annual gen eral meeting in Shanghai, Jeanniot said airlines were adding too much capacity before 11 September with out focusing adequately on con trolling costs. "We simply cannot blame all our poor results on exter nal factors," he said of the $12 bil lion losses estimated to have been suffered by airlines in the last financial year. In an effort to reduce its massive debt, Malaysia Airlines (MAS) is conducting sale and lease-back deals on eight widebody aircraft to raise more than 3.8 billion ringgit ($1 billion). MAS, renationalised early last year under a debt of around 10 bil lion ringgit, said in January that it planned a sweeping asset sale pro gramme under which the govern ment would buy aircraft and prop erties and lease them back to the airline. The carrier has now won regula tory approval for the main stage of the cash-raising plan, covering the sale of three established Boeing 747- 400s, plus three new 747-400s and two new 777-200ERs. The aircraft will be sold to a special-purpose company called Aircraft Business Malaysia, set up by the ministry of finance, and leased back. The proceeds will be used to repay Japanese loans and help in the acquisition of the five new Boeing aircraft. MAS is also planning to sell to the government and lease back its "In retrospect, and looking at the deteriorating situation even before 11 September, we would be forced to conclude that this indus try was ill-prepared to successfully weather even a fairly mild, regular economic cycle. When a business is concentrating on market growth the focus is seldom on costs. And, unfortunately, growth can mask for some time any increases in operat ing inefficiencies and the creeping expansion of overheads," he added. Jeanniot said that "before 11 September, there was insufficient evidence that airlines were prepar ing for a downturn. We were giving clear indications that achieving market growth was more impor tant than sustained profitability." headquarters building in Kuala Lumpur as well as offices at Kuala Lumpur's old Sultan Abdul Aziz Shah Airport at Subang and build ings at the flagship Kuala Lumpur International Airport at Sepang. Regulatory approval for the plan is expected shortly. The airline has been in financial difficulty for years and recently reported its fifth consecutive year of losses for the 12 months ended 31 March. Meanwhile, work continues on a He added that there are signs the "recession is ending and there will be some growth", although first- quarter financial figures are "not terribly encouraging". IATA estimates member airlines will lose between $4 billion and $8 billion this year, Jeanniot said, adding that the industry's heavy discounting of fares after the attacks may have gone too far. "One truly wonders whether the full depth of the discounting that took place was really required and whether the degree of resulting market stimulation more than compensated for the amount of actual yield dilution," he added. "Improving the yield could well be the most difficult result to achieve sweeping corporate structure over haul that will see the carrier's rela tively healthy international arm separated from loss-making domes tic passenger operations, a new company take over the marketing of MAS's passenger and cargo capacity on international routes and cargo capacity on domestic routes, and the company's listing on the Kuala Lumpur stock exchange. Unlisted domestic oper ations and subsidiary operations will remain with the government. for the balance of this year and well into the next." Former Alitalia chief Giovanni Bisignani formally took over from Jeanniot on 5 June. He says one of his key tasks is to see IATA speed up processes to deal more quickly with issues affecting its members. "We have to react at least at the same speed as the airlines. Before, you had a certain amount of time to discuss issues and to execute, but now the world has changed." He adds that 1ATA will continue to press for a global solution to insurance issues facing airlines, work to convince service providers to lower fees, and push for an easing of global ownership restrictions on airlines. • Boeing has appointed Kevin Brown vice-president of air traffic management (ATM) pro grammes, replacing Kent Fisher, who has been promoted to vice-president marketing at Boeing Commercial Airplanes. Brown was formerly director of Puget Sound Engineering for ATM and site leader of the business unit's Bellevue facility. • KLM has named Kees Storm as supervi sory director of its supervisory board, replacing Jan-Willem Oosterwijk, who left last July. Storm was chairman of the board of directors of Aegon, the holding company of the Dutch life insurance group. • Donald Garvett. South African Airways' (SAA) executive vice-president strategy and plan ning, will join Alaska Airlines in mid-August as vice-president of planning. His replacement at SAA has not been announced. Garvett will be responsible for revenue management, the development of the carrier's annual business plan and longer-term strategic planning. He was brought in as a consul tant to SAA in 1997. DEBT REDUCTION Malaysia Airlines aims to raise $1bn with aircraft sale and lease-back MAS will sell its Boeing 747-400s and lease them back www.fliqhtinternational.com FLIGHT INTERNATIONAL 11-17 JUNE 2002 21
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