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Aviation History
2003
2003 - 1197.PDF
BUSINESS VIRUS LEITHEN FRANCIS & BRENDAN SOBIE / SINGAPORE Asian carriers reveal cost of SARS Airlines issue profit warnings as devastating drops in traffic continue despite slow-down in spread of epidemic As the spread of SARS appears to be slowing down, the virus's financial impact on Asian carriers is only starting to come to light. Dismal traffic figures for April were released last week by several major carriers and airports from the SARS-battered areas of Asia. Some carriers also have issued profit warnings and the Association of Asia Pacific Airlines (AAPA) says the effective containment of the SARS epidemic by health authori ties in South-East Asia is "not the end of a crisis for the airlines - it is merely the end of the beginning". Carriers in Hong Kong and southern China, where SARS first surfaced, have been hardest hit. Cathay Pacific Airways says revenue passenger kilometres dropped 58% in April and daily passenger figures plunged 66% to 11,300. In the first half of May, Cathay's daily passen ger count dived 39% to 7,000. "Even with a heavily reduced schedule, current passenger load factors are struggling in the 40% range," says Cathay. "Bookings for the rest of May are no better and we do not expect the recovery, when it comes, to be quick or strong." Dragonair is faring even worse and ordered mandatory leave for employees last week as part of cost- cutting measures to offset a 90% drop in passengers. China Southern Airlines says its April traf fic dropped 40% and it has joined Cathay, Dragonair and China Eastern Airlines in seeking aircraft BRIAN DUNN / MONTREAL delivery deferrals Flight Internation al, 13-19 May). China Southern Airlines also warned last week of "a significantly negative impact on the group's financial position". Preliminary revenue figures are also starting to trickle in, including the revelation from EVA Airways that passenger revenues dropped 36% in April to NT$1.59 billion ($46 million). The AAPA says its 17 members have between them removed 1,150 weekly flights from their May schedules and flights that continue to be operated "have load factors that render them highly unprof itable". The group says it will take "months" to restore the industry. Virus panic decimates services for Air Canada Milton: grounding aircraft Air Canada is grounding 40 aircraft, dropping 12 routes and slashing capac ity this summer, largely because of the SARS scare which cost it almost C$5 million ($3.6 million) a day in revenue during April. The airline warns that the next two quarters will be the weakest in its his tory. Even though the World Health Organisation has lifted its travel advisory for Toronto, Air Canada says traffic is down by about 60% on Asian routes and it has not seen "a discernible traffic recovery", with May, June and July bookings falling by up to 25% from a year ago. That has forced the carrier to cut capacity by 17%, with services to some destinations cut indefinitely. "SARS will clearly have a sustained impact in every affected area of the world and has already had a ruinous effect on our summer," says Air Canada chief executive Robert Milton. Air Canada operates a fleet of 336 aircraft and the types to be grounded are yet to be determined. The carrier is discontinuing its Toronto- Tokyo/Narita service and Vancouver-Nagoya service for a year. Capacity to the USA will drop 25%, with route cuts including Toronto-New Orleans and Calgary-Chicago during the summer and services to Dayton, Ohio, and Grand Rapids, Michigan, suspended indefinitely. SUPPLIERS Carlyle Group announces merger of Vought and Aerostructures The long-anticipated merger of Vought Aircraft Industries and Aerostructures - both owned by the Carlyle Group - has been announced and is expected to be completed by July. The downturn in the commer cial aerostructures market is the main reason for the merger, which has been discussed almost since the day investment firm Carlyle acquired Vought from Northrop Grumman in 2000. Carlyle acquired Nashville, Tennessee-based Aerostructures from Textron in 1996, merging it with Brea, California-based Con tour Aerospace in 1998. The com pany now employs 1,400 people and has annual sales of more than $300 million. Vought, based in Dallas, Texas, is already the world's largest independent aerostructures supplier, with more than 5,000 employees and annual revenues of over $1 billion. The merged com pany will retain the Vought name. The merger will broaden the cus tomer base for Vought, which gets 85% of its business from Boeing, as Airbus is Aerostructures' biggest customer. There is almost no over lap, although in several cases the two companies supply different components for the same aircraft. Aerostructures, for example, pro vides the empennage and ramp for the Bell Boeing V-22, while Vought supplies the side-fuselage skins and sponsons. Wings for the Gulf- stream G500/550 come from Vought, and those for the G300/400 from Aerostructures. A transition team has been formed to identify synergies and savings from the merger. Vought will shortly be named to join Boeing's 7E7 technology develop ment team, and the company is anxiously awaiting an agreement on leasing Boeing 767 tankers to the US Air Force because it is a major aerostructures supplier on the aircraft. AGREEMENT EADS creates Chilean link EADS and Chile's largest aero space company, Enaer, have signed a strategic agreement to "identify joint opportunities for future co-operation". The agreement, signed in Santiago by EADS vice-president business development Jean- Marc de Raffin-Dourny and Enaer president Alfredo Guzman, identifies areas for co operation including structures and systems for Airbus aircraft and Eurocopter helicopters, mili tary trainers, missiles, defence electronics and telecommunica tions and maintenance. Raffin-Dourny says the move opens "new worldwide opportuni ties for both companies". www.fliqhtinternational.com FLIGHT INTERNATIONAL 20-26 MAY 2003 31
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