Airline Affairs

The slow progress of the the giant back to profitability was underlined by its performance against other majors in the used market. It edged out America by a scant million in the operating profit stakes but was edged out by the remarkable US Air in the net profit race. US Air netted $28millionfrom an operating profit of $38. 3 million in the quarter.

The performance of Pan Am has again moved Wall Street analysts to reassess its value for possible stock buyers, with some brokers now putting buy flags on its shares.

Most of the US carriers are expecting to better show the effects of an almost universal return to cents per mile fare basing formulas during the third quarter.

Amongst the big losers was Eastern once more, with a loss of $ 59 million.

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An absolutely spectacular turnaround in the Australian domestic market share has been achieved by TAA. The government airline was long on the receiving end of some innovative marketing by Ansett but it has managed to reverse the situation and has been carrying up to almost 53 per cent of the market in some recent weeks.

It puts its achievements down to an improvement in product, but some of its executives contend that Ansett management’s apparent preoccupation with the doings of East-West is also quite helpful. Industry pundits have said that while TAA might be cornering the largest market share, its revenue yield could be better. They say that it is being rather more liberal than Ansett in its application of the 45 per cent discount fares which both airlines announced in July. TAA says it has carried more than 10,000 passengers on the fare, which is basically a top-up type and is going close to the limit allowed by the Independent Air Fares Committee.

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Ted Forrester has at last ended his long wait in the wings at Ansett and has been named the airline’s general manager.

After probably more years than he would care to remember, Forrester was one of the understudies to the recently retired general manager, Frank Pascoe.

It will be interesting to see whether the assistant manager who did not get the top job, Graeme McMahon, is willing to serve a similarly long apprenticeship. Forrester is only in his early fifties.

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The teams of aircraft salesmen continue to keep their vigils at Qantas and TAA.

They received great encouragement with the$175 million cash injection given by the Federal Government to its airlines earlier this year, although the profitability of the airlines would not appear to give grounds for big purchases, especially from a political standpoint. There is also little hope of recovery in the depressed markets in which both are operating.

Boeing, according to the pundits, appears to have a front run at Qantas which wants possibly six twin jets to supplement its all Boeing 747 fleet, especially on the shorter haul regional runs. Airbus is hopeful that it has put to rest a reservation in Qantas about carrying of fuel in the horizontal tail of the A310-300 to give it more range.

McDonnell Douglas remains hopeful that Qantas will defer a purchase decision until next year, when it would be able to offer the re-vamped, high-tech version of the DC-10, the MD100, as an alternative.

Speaking at the annual conference of the Australian Federation of Travel Writers in Sydney recently, the chairman of Qantas, Mr J. B. Leslie, was talking in terms of a Qantas buy, ‘in the next few years’. The official line from the carrier is the usual: ‘It is the policy of Qantas to continually evaluate new aircraft. ‘

Some observers believe the Qantas decision may be swayed by a Boeing 767/747-300 stretched upper deck deal, which would allow the national carrier to offer similar equipment and standards, especially in the high yield first-class market, to that of Singapore Airlines, which is already operating the EUD here.

Others, rather more bluntly, assert quite rightly that there could never be a better time economically to buy aircraft and that with the B767 and the A310 being almost twins, the result could be decided by a good old-fashioned price duel between Boeing and Airbus Industrie, both of which are desperate for new orders.

Which ever way the decision goes, it is likely to include the acceptance of some of the older Qantas 747s which are surplus to requirement and which have not been able to be moved by the airline itself.

While a TAA buy seems less imminent because of the awful state of the domestic market, the salesmen still have the hopeful flag flying over Franklin Street.

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Speaking of excess capacity, Qantas has decided to use one of the excess 747s it has as an expensive fence decoration, to launch aerial cruises.

Departing Sydney on November 19, it will use the same aircraft, the City of Hobart, and crew, on a 16-day wander through Tahiti, Chile, Brazil, Kenya and Sri Lanka.

The airline’s director of flight operations, Captain Allan Terrell, will be in command, and will preside in Tahiti at one of maritime cruising’s most enduring traditions – the captain’s dinner.

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Boeing is said to be offering a rollover of the DC-9 and 727 fleets against a B737 and 757 mix, with a rumour doing the rounds that at least a couple of Airbuses could be acceptable as trade-ins.

McDonnell Douglas is hopeful of selling a mix of the higher-tech MD Super 90 of the same size as the presently operated DC-9-30s and of the Super 80 series.

Airbus remains optimistic that a decision might be delayed long enough for it to be considered with the new generation 150 seater, the A320, for which TAA has been a substantial contributor on design specifications.

However, the airline has been firm that it will not be a launch customer for the A320.

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East-West Airlines continues its fight against the two airlines agreement with a challenge to the High Court which is to begin soon.

The airline’s managing director, Bryan Grey, is directing the first part of the legal assault against the Independent Air Fares Committee Act, which he claims contravenes Section 92 of the Australian Constitution, which guarantees free trade and commerce between the States.

The policy now appears to have no public defenders except Ansett, with even the Liberal Party, which drew up the original agreement in 1952, producing an alternative, but as yet unpublished domestic airlines policy. It is believed that this document will retain control over capacity because of the size of the market, but the most often criticised part of the existing agreement, the requirement for consultation between Ansell and TAA on first and economy fares, will be thrown out.

Grey showed the broad thinking of his airline when he told a Sydney Journalists’ Club lunch recently that East-West had investigated the possibility of buying TAA.

Grey said that if there was a possibility of a change of government policy on ownership of the TAA, East-West would like to see it offered for sale with TAA employees getting the first chance to buy shares, East-West picking up about 20 per cent through an amalgamation/sale formula, and the remainder being offered to the Public, with equal share packages being offered to each State, to produce a ‘real people’s airline. ‘

He was quick to say that if such an event occurred, East-West would rip up the two airlines’ agreement and would have no objections to the introduction of third, or even fourth airlines to the domestic trunk routes, if it were economically viable.

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The chief executive of Air New Zealand, Norman Geary, said in Sydney recently that the days of the silk scarf and goggles management in modern airlines has gone.

He told the National Aviation Press Club more and more people are coming into airlines with commercial and marketing experience and this, “is a very healthy sign. ”

Geary said that it was imperative that airline executives be more commercially and money oriented than in the past, especially in these straintened times.

Geary epitomises his argument. He went to Air New Zealand last year after I had returned the greatest corporate loss in New Zealand history. He had not worked in the airline industry, having most of his background in oil.

The move worked. The 1982 trading year results for the airline saw the $90 million operating loss sliced to $32. 5 and the overall result improved from a loss of $49 million to a profit of $33. 5 million.

The profit was largely realised through the sale of four DC-10s, some achievement itself in a glutted market, which had become surplus with the airline’s Boeing 747 re-equipment.

Geary emerged as a strong proponent of higher yields through less discounting. Air New Zealand is purportedly one of the most aggressive marketers in the Australian arena, with some industry sources claiming they are offering commissions to some agents 10 and 15 per cent above the official nine per cent.