Airline Affairs

East West is basing its challenge against the TAP essentially on the validity of the Customs Act and the regulations pertaining to import powers as they are perceived via the Airlines Agreement Act of 1981. Presently the Federal Court is looking into the matters relating directly to fact while the High Court is establishing the situation as it directly relates to law. However, as the TAP and the entire domestic aviation regulatory environment is presently under top level review, following the release of the May report, it is not known it either court will be deemed to preside on matters which are presently under review.

What would happen, for instance, if EWA should win their case and the existing TAP is thus deemed as technically illegal? If the Government had just filed its decision on what was to officially follow on from the TAP and it did not coincide with the Court’s decision, then the Federal Government would be in the embarrassing position of administering an existing regulatory policy that had been deemed as technically illegal. What would, for instance, then stop East West flying their F28 jets the very next morning on as many trunk routes as they wished? In essence, nothing. which is why the timing and outcome of East West’s legal challenge is still of profound importance to the future of Australian civil aviation.

United Buys Hilton Hotels Group:

United Airlines via UAL Inc has purchased the giant Hilton Hotels group for $US980m. This is a part of UAL’s oft stated ambition of becoming the world’s largest travel company and tops up its existing ownership of Hertz rent a car and the Westin Hotels group.

A Record Year for the World’s Airlines:

1986 proved a record year for IATA’s 156 member airlines. Growth over 1985 was an encouraging 5% in passengers and some 7% in freight to 938 million pax and 14. 7 million tonnes of freight respectively. Capacity expanded 1. 3% faster than passenger growth while yield dilution reduced most carriers’ nett profits considerably. There are signs though that 1987 will stabilise on fares as growth this year is expected to be in the 5-7% range. Overall load factor dropped one point to 65%.

Both Boeing and Airbus foresee steady growth of around 5% per annum till the end of this century, a figure which should see a doubling of passenger numbers by the year 2000. The airframers themselves had a boom 1986 with over 800 jet aircraft being sold and a colossal replacement aircraft market foreseen for the coming decade as thousands of ageing DC-98, 7378, 7278, BAC 1118, F278 and 288, A300s, DC-108, Tristars and early build 7478 all require outright replacement.

The times have changed though. It is now the Pacific Rim carriers that are enjoying the airline travel boom at the expense of reduced growth rates for their American and European cousins. Nowhere is this more symbolic than the recently announced poor performance of Swissair against a 50% rise in nett profit (at $US57m) for Thai International. Swissair suffered a three-pronged scourge with Chornobyl, a falling US dollar, and hence less inbound American tourism, and a savage decline in their important Middle East routes. Swissair expect a far better 1987 though as the perceived threat of terrorism subsides and their capacity is better addressed to the new traffic patterns that began to emerge through last year.

Smoking Ban Wins Cabinet Approval:

It appears now to be a fait accompli that a total smoking ban will eventually be introduced on all domestic flights of less than 90 minutes duration. This follows the late December Federal Cabinet approval for the necessary legislation to be enacted providing that it met with the full support of the airlines. The ban would meet with the approval of the vast majority of air travellers as nowadays more than three-quarters of the travelling public opt for non-smoking seats while many non-smokers are often forced to sit in the smoking section if insufficient non-smoking seats are available. Even though they are technically separated, smoke still permeates the overall cabin, clogs filters, impairs the aircraft’s air regeneration system and in all costs the airlines considerably each year in additional aircraft maintenance manhours, increased fuel burn and cabin cleaning and repair services. As it was the airlines who discreetly approached the Minister early in 1986 about the prospect of getting such a policy enacted as law it appears only a matter of time before the policy becomes fact as East-West and Australian support the government’s move. Ansett however, is not fully endorsing the decision and this may well prove the catalyst for delaying the legislation. Australian Aviation believes though that pressure from the flight attendants union will ultimately cause Ansett to take a firmer stand on this issue. The Australian Democrats, spearheaded by Senator David Vigor, are also considering a private members bill to force the Government to enact the airline smoking ban.

One point against the implementation of the ban, which already exists on most commuter flights, is that a smoker may retreat to the toilet thereby creating a potential fire hazard. Modem smoke alarms presently being fitted to Australian RPT aircraft should cope with this in addition to the possibility of the act of smoking in an aircraft toilet being made a federal of- fence. Meanwhile, in the US, a similar ban is currently before Congress with the full support of the American Medical Association.

Meanwhile USAir and New York Air have decided to designate flights as non-smoking services once check-in verifies that a large majority of passengers prefer a non smoking environment. The policy has met with applause from already boarded passengers on most services.

Air New Zealand and Australian Airlines Sign New Marketing Agree-ment:

Air New Zealand and Australian Airlines have entered into a wide-ranging commercial agreement which opens up a number of areas of cooperation and includes a commitment to generate business for each other. While the two airlines had enjoyed a good working association for a number of years, the formalised commercial agreement deepened the liaison.

Australian Airlines’ travel centres will now sell Air New Zealand services wherever possible and Air New Zealand’s retail outlets will do the same for Australian Airlines. Regular discussions and planning will take place in the two airlines’ joint major markets of Australia, New Zealand and North America in a major effort to head off the competition from the re- cent similar agreement between Qantas and Ansett.

Qantas Boost Schedules to the North:

International tourists will have greater access to the Northern Territory and North Queensland when new Qantas schedules are introduced this April.

The new schedules will give Cairns and Townsville a total of 7 flights a week from Japan, Hawaii, the US West Coast, Vancouver, New Zealand and Singapore with its many interline connections through to Europe and the UK. The services will be operated by 767 aircraft which have through their smaller size been able to greatly enhance frequency on all of Qantas’ secondary routes. Meanwhile Qantas is fighting back against its US competitors with the addition of three additional 747SP non-stop services linking San Francisco with Sydney effective June 1. Qantasis won with their long-legged SPs on the non-stop Pacific route as their chief rival, United, operates older ex-PanAm SPs which with their early series Pratt & Whitney JT98 consume around 12% more fuel than QFs more modern RB211s. This results in Qantas rarely having to land at an alternate due to low fuel state caused by stronger than forecast westerly winds whereas United, and PanAm before it, still suffer this fate with regular monotony. To this end, Qantas may be bemoaning the amount of low-yield economy-class traffic that is being stolen by United and Continental on the intermediate sectors but is laughing regards its major share of the important high-yield business and first-class market.

So strong is Qantas in this area that the airline easily won both the first class and business class sections as the most preferred airline in a recent frequent traveller survey undertaken by Australian Business magazine.

Qantas has meanwhile enjoyed a record Dec/Jan period with traffic up a startling 20% on the same period last year. Overall, 1987 will certainly be another record year for QF with overall growth in passenger uplift likely to reach an extremely healthy 10%. On this basis, Qantas will soon have to consider acquiring additional capacity and is soon expected to firm its production slots on up to 8 new 747-400 aircraft. The airline is also evaluating both the Airbus Industrie A340 and the McDonnell Douglas MD-11 (both reviewed elsewhere in this edition) as long-term intermediate-size aircraft, though we believe a firm decision is not expected on either type in the coming quarter.

Lufthansa Increases Services to Australia:

Lufthansa has boosted its services to Australia with the introduction early in February of a third weekly 747 Combi Lufthansa now operates into both Sydney and Melbourne on each Monday, Wednesday and Saturday. This will allow a greater opportunity to capture additional business market share (Lufthansa’s business class does not attract a surcharge above standard economy tariffs) while also reducing the crew costs through having a shorter layover time.

Lufthansa has also now officially taken over JAL as the world’s largest carrier of air cargo, something which forms the backbone of its Australian operation as all of its 747s are Combis rather than straight passenger aircraft. Lufthansa also operates a weekly 747 freighter into Australia in conjunction with Qantas while the carrier reports that freight uplift is greater now than at any time in the past with viable payloads now occurring in both directions.

Continental Moves to Digest Its Acquisitions:

Frank Lorenzo’s Texas Air Corp moved on February 1 to fully bring its latest acquisitions, People Express and New York Air, into the Continental Airlines system. These two carriers will now cease their former identities and become regular full-service low-fare operators in concert with established Continental Airlines.

Meanwhile, Texas Air is to maintain Eastern Airlines identity for the time being though major shake-ups are planned to get the ailing carrier back to long-term consistent profitability. On the cards are a major confrontation with all of Eastern’s unions as management moves to introduce increased efficiency to the carrier’s maintenance and flight crew divisions. Texas Air management point out that it routinely takes Eastern at least 30% longer to undertake even the simplest maintenance task as against the established industry average. Consequently, over a period of time the carrier has lost all of its external support contracts which has resulted in its vast Florida maintenance facility being under-utilised.

One Commuter Goes and Another Is Reborn in Turbulent Third-Level Scene:

State Air, a recent addition to the totally deregulated and cut-throat world of third level South Australian aviation has ceased operating with resultant debts of some $2. 4m.

State Air was previously known as Commodore Aviation, a small commuter and charter operator that was incorporated in Port Lincoln back in 1965. Early in 1986 the airline restructured itself as State Air, acquired a 36 seat Shorts 360 and also at the same time lost its dual designator status with the then TAA as that airline embraced the emerging Lloyd Aviation and their widespread commuter network.

Ansett at the time had decided to disband the loss making Airlines of South Australia in favour of the rapidly expanding Kendell Airlines while Commodore at the time had links with TAA.

Left out in the cold with no viable on carriage from one of the majors, State Air’s destiny was virtually sealed. The fledgling airline flew against the odds for several months though load factors on the Shorts were rarely above breakeven due to the intensity of the competition and the inherently small size of the traffic base being served. At present the company is being offered for sale intact though the receivers envisage that ultimately State Air’s five Cessna 4028’s will have to be sold separately. Fortunately the Shorts was leased while a new 360, due to have been delivered last Spring, has not incurred the company any additional liability.

On a happier note, and a little to the northeast of the SA airline battleground, lies the charming city of Mildura and an ongoing battle for survival with its own Murray Valley Airlines.

MVA has always flown a precarious financial existence and its second attempt at survival met with the same ultimate fate as the first- failure.

MVA also operated a 36 seat Shorts 360 against stiff competition from Kendell with their faster Metro and SF340 aircraft. However, with the demise of MVA, the people of Mildura rallied to the cause and inundated Mr James Strong, Australian Airlines GM, who were hosting MVA on carriage into Tullamarine, with telexes and messages of support. So strong was the level of support for a second level of service into the Mildura region that Australian immediately took over the repossessed Shorts 360 and formed a new company in association with Mr Bevan Whitaker of Sunstate Airlines of Brisbane. Sunstate operate as a dual designator to Australians out of Brisbane on its southern Queensland coastal routes and this name will now be employed to challenge Ansett and its subsidiaries in the intrastate and third level market throughout Australia.

For the new ‘southern’ Sunstate, a third of the ownership will be in the hands of Bevan Whitaker while the remaining two thirds will remain in Mildura. Australian Airlines for its part will continue to supply technical and operational assistance as required in addition to strengthening its existing dual designator links with the new carrier.

Ansett to Operate 727 to Vila:

Following the required upgrading of Vila’s Bauerfield airport, Ansett will commence weekly Boeing 727-200 trijet services from March 1st to Port Vila. The aircraft will be configured in a business and economy class layout and will also be equipped with full audio entertainment facilities.

Ansett is also renegotiating with the Western Samoan government its existing contract with Polynesian Airlines and hopes to be able to upgrade from the existing early series 737 presently used on these routes to a new 737-300 equipped with suitable extended overwater equipment.

Meanwhile the option of using a hush-kitted 707 on the various Ansett-managed Pacific services was recently dropped as not being economically viable. Ansett will thus continue their Cook Islands International service with their 767-200.

Qantas Slam Us Aviation Policy:

Qantas Deputy Chief Executive, John Ward, recently slammed the US Government, United Airlines and Continental for their predatory policies towards aviation in the Pacific.

“Despite their enormous advantages, Continental and United combined carried less than half of all US residents between the USA and Australia last year. On Continental flights the number of seats occupied by USA/ Australia passengers had actually declined from 40% in 1979 to just 27% in 1986. Since 1984, Continental’s Australia/USA carriage increased by 32% whereas carriage to intermediate markets had leapt by 145%,” he said.

Mr Ward said Australia’s concerns were that, with their vast domestic networks and market power in the USA, the US airlines flying to Australia could take predatory action against Qantas by dumping capacity at prices Qantas could not get access to. This could include giving free or near free travel on domestic sectors behind the gateways. He then accused the US airlines of operating too much capacity to Australia and of wanting to dominate the Pacific. Primary problem is that the US is free to deploy as much capacity as it desires while most of this is now aimed at uplifting Australians to intermediate ports, such as Fiji. New Zealand and Tahiti rather than encouraging US tourism to Australia.

Since 1980 Qantas claims it has lost $100m on its services between Australia and the USA. This was nearly half the airline’s total after-tax profits for the period. Additionally, the route was important to Qantas as it represented nearly a third of its total services though by comparison less than 2% of the total United Airlines network is aimed at the Pacific. The ability to squeeze Qantas off regional intermediate routes was thus strong, which was something that Australia has little recourse to rectify till the post World War II US/Australia bilateral air traffic agreement is renegotiated in full. At time of going to press both the Department of Aviation and the Federal Government were getting virtually nowhere in fighting for a revised, and fairer, agreement.

Canada’s Minnow Swallows the Whale:

In a classic case of the minnow swallowing the whale, diminutive Pacific Western airlines has purchased Canadian Pacific Airlines.

The early December purchase, for some $A320m, creates Canada’s largest carrier with a combined fleet of 87 jets comprising 72 7378 and 15 DC-10s. Pacific Western employs a mere 2,700 people as against CP with over 9,000 employees. Both carriers will continue to run independently for a time prior to amalgamation through the coming year.

 Boeing Achieves Extended Overwater Clearances for Its Smaller Twinjets:

Boeing has won FAA certification for extended overwater operations with its 757 and 737 models. Boeing had already achieved this for their 767 as had Airbus for their respective A300 and A310 twinjets.

Until 1985, three and four-engined jetliners were ordinarily the only types of aircraft permitted by the FAA to fly routes on which any point was more than one hour from an adequate airport at single engine cruising speed. Twinjets were thus precluded from flying long overwater routes, for example over the Atlantic, except for indirect routings within the one hour rule. The indirect routings resulted in longer flight times and required additional fuel. In the event of an engine failure, a plane was to divert immediately to the nearest suitable airport within one hour of its route.

FAA rules permit twinjet flights beyond the one hour restriction only if authorised by the Agency’s administrator. Following a thorough review, the FAA in 1985 released guidelines for authorising twinjets to fly routes on which there may be points up to two hours from a suitable airport at single engine speeds. Approval under these guidelines has enabled airlines to take advantage of the efficiencies of twin engine operations on many routes which, under the one hour rule, were limited to much larger three and four engined airliners.

Regulatory authorities outside the USA have also granted similar approvals for the 737,757, 767, Airbus A300 and A310. These approvals augment rules issued in the early 1950s when less powerful piston-engined aircraft comprised the backbone of commercial air services. Today’s modern turbofan twinjets not only have much more power and range, but far greater engine and system reliability as well.

the present FAA requirements for extended-range operations include establishing that the propulsion system has sufficient in-service time and high reliability based on world fleet experience with the engine/airframe type. In addition, certain aircraft system modifications and special operating procedures are required, depending on the model of twinjet, to further enhance reliability.

Air Canada, El Al and TWA all operate 7678 across the North Atlantic while Hapag Lloyd has used an A300 freighter on this route for some years. A British charter operator is also planning to deploy its 757s on the Atlantic while a 737-300 is also being used in this role.

Simplified Air Freight Requirements to Further Boost Export Potential:

The DofA has announced further changes to Australia’s international air freight policy to facilitate the transport of additional primary produce by air.

The changes involve additional measures to assist the viability of charter flights carrying primary produce and simplifying the administration of the policy by the DotA. Air freight of primary produce was radically changed by the Dotá back in November 1985 and the latest alteration to policy is aimed at further fine-tuning the logistics of the industry.

The basis of the latest ruling would allow primary produce charter flights to top up with livestock, or general cargo, provided that at least 60% of the aircraft capacity is utilised for the carriage of primary produce. Operators would now be able to augment loads and uplift cargo from a combination of gateways to assist in meeting the new 60% minimum load factor required for charter flights. The government will continue to monitor the situation through this year and is now expected to announce further improvements, if required, by October, 1987.

 Ansett on the Buying Trail Again:

The Ansett Transport Industries group went on the buying trail again in late December with the announcement that a new affiliate, Nordstress, of Hong Kong, had signed for 6 Boeing 737-300 twinjets.

Nordstress is a division of the rapidly expanding Ansett Worldwide Aviation Services group and brings to 24 the number of 737-300s ordered for the various ATI leasing organizations. Additionally, Ansett Airlines operates 12 such aircraft locally. The latest batch of 737-300s will be delivered from December 1987 through to March 1988 and will be powered by CFM56-3B1 engines.

Coffs Enters the Jet Age:

Coffs Harbour, one of NSW’s most pleasant destinations, entered the jet age last December with the introduction of its first Air NSW F28 service.

Air NSW will now operate 9 of its weekly 19 Sydney/Coffs services with the 60-passenger Fellowship twinjet cutting some 40 minutes off the regular F27 fight time in the process. Air NSW now operates regular jet services to Dubbo, Wagga, Broken Hill, Casino and Cooma in addition to Brisbane/Norfolk Island.

Additional London/Hong Kong Non-stops From Cathay:

Cathay Pacific have increased the number of weekly London/Hong Kong (and return) non stop flights from one to three effective this April. This brings to 10 the number of CX flights on this airbridge with the remainder routing via Bahrain.

Air Services Between Australia and Japan Increase:

The number of 747 services between Australia and Japan will increase from April 1987, with Qantas and JAL each operating six services per week.

This latest increase means that capacity on these routes will have doubled in the last two years.

January a Big Month for the Bae Jetstream:

British Aerospace is well on the way to further increasing their market share with the hot selling Jetstream 31. For 1986 the little turboprop captured 63% of the 18/19 seat pressurised turboprop airliner market while in January this year BAe logged sales and options against a further 38 of type.

The big buyer was Piedmont dual designator, Jetstream International Airlines, who signed for an additional 14 aircraft with 20 more on option. JIA presently operate a fleet of 13 Jetstreams to feed Piedmont’s hubs at Dayton and Baltimore. Air New Orleans, which is a dual designator for Continental, also ordered 4 aircraft bringing the J31 order book to 148 aircraft with an additional 32 on option.

Locally the type is operated by Skywest and Australian Airlines. Skywest have recently had their first aircraft in for a 7200hr primary maintenance cycle and is logging around 2700hrs annually on each of their four J31s. Skywest maintenance also reports that most of the routine specified maintenance is hardly necessary as if anything the aircraft is over-engineered and thus very reliable in service.

Smoking Ban Recommended on New Generation Airliners:

The US National Academy of Sciences (NAS) has issued a report recommending a total smoking ban on all transport aircraft.

The study found that in a crowded cabin the overall effects of smoke can be quite profound and cause significant eye, nose and throat irritations in addition to causing unnecessary severe conditions for asthma sufferers.

The NAS also focused much of its study on the new generation of airliners which use a more effective (in terms of aircraft operating efficiency) recirculating air conditioning system. These new systems tend to recirculate as much as 50 per cent of cabin air with the result that air filtration for smoke is less effective than in the older aircraft.

Aerospace Symposium Looking Good:

A major aerospace symposium to be held at the Australian Defence Academy. Canberra this November has attracted more than 120 potential speakers.

Organised by the Institute of Engineers and the Canberra branch of the Royal Aeronautical Society, the symposium is to be held between November 18 and 20 and will cover every facet of aviation in Australia. For more information contact the Institute of Engineers, 11 National Circuit, Barton, ACT, 2600.