Airline Affairs

Listed as applying for the right to serve Australia is American Airlines, Northwest, Delta and fledgling America West Airlines. The latter is 20% owned by Ansett Transport Industries with many of its Boeing jets being leased straight from the Ansett Worldwide leasing inventory. It did not go unnoticed that during late November AWAS signed an order for 6 long-range Boeing 767-300ERs with options on an additional 7. Though the use of such aircraft is forbidden for such a route due to their inability to legally fly the long West Coast/ Hawaii sector without an alternate, it is generally considered that this ruling will be relaxed within the coming year, a move that would see the big twinjets operationally viable for the US/ Australia route.

Favourite of the pack is the US’s largest single carrier, American Airlines. American actually served Australia during the early seventies for a brief period before withdrawing due to low load factors and lack of yield. At the time there was minimal growth on the route, a vast change from today where growth is logged in ever increasing percentages that would have been unheard of just a few years ago. American also has strong ties with Qantas and operates a seat lease facility with Qantas to several ports in the USA on behalf of our national carrier. Qantas is due to begin attacking the internal US market seriously this year and plans to serve, in conjunction with American, up to 9 ports by the end of 1989.

Northwest Airlines is meanwhile keen to serve Australia via Tokyo and to be able to better link its Asian network into Australia via both Asian and Pacific ports while Delta would be handicapped with having to initially use long- range but fuel thirsty Lockheed L1011-500 Tristars on the route (Delta has ordered MD-11s but these won’t be operational till at least 1992). Like the DC-10-30 and the 747SP operated by American Airlines, this aircraft would carry the fiscal burden of seat kilometre costs up to a third greater than the new generation of 747s which would be operated by United and Qantas. In a fare discounting war this added cost burden might just be the tool to drive a competitor, who is using this type of equipment, from the route.

The decision on which airline wins the fifth airline traffic rights has been delayed owing to the time taken for the recently elected Bush administration to settle into its new role in Washington, though it was hoped that an announcement would be made in the first quarter of 1989.

 Movements on the Increase:

Even though they will be several months old by the time this goes to print, figures recently released by the CAA on movements at Sydney and Canberra airports indicate the need for quick action to relieve congestion, particularly in the case of Sydney.

At that airport there was a total of 18,949 air- craft movements during last August, 9% more than a year earlier and representing an average of one movement every 1. 67 minutes dur- ing the then non-curfew hours of 6am to 11pm. The small number of legal movements recorded during the curfew hours has only a negligible effect on this figure.

Canberra also set a monthly record of 15,292 takeoffs and landings in August (to which must be added nearly 1,600 practice instrument approaches), the combined figure beating the previous February 1986 record by just under 20%

Ansett and Australian Team on Galileo Crs:

Ansett and Australian Airlines have teamed to join the international Galileo consortium as an effective longer term replacement for their involvement in the existing TIAS system.

A new Sydney-based company. Southern Cross Distribution Systems, has been established to market Galileo on behalf of the two airlines. In a joint statement, Ansett joint Managing Director, Sir Peter Abeles, and Australian Airlines Chief Executive, Mr James Strong, said that they had opted for Galileo after an exhaustive assessment of the global CRS scene and a detailed study of travel agency requirements.

Australian travel agents will be able to eventually book on more than 600 airlines globally through Galileo as well as having last seat availability with local airlines. Galileo will also offer instant access for agents and their customers to a global database and can be integrated with agents back office accounting and administrative systems. According to both airlines, one of Galileo’s primary attractions is that it is based on the technical expertise of a large consortium of airlines, offering retailers and their clients an unbiased and vast selection of travel and airline products.

Galileo is shaping up as Europe’s largest transaction management company and is a joint venture between Aer Lingus, Alitalia, Austrian Airlines, British Airways, KLM, Olympic, Sabena, Swissair, TAP and Covia, a United Airlines subsidiary. Southern Cross will initially market Apollo, a Galileo-associated CRS, with subscribers becoming Galileo agents when it becomes available in late 1989.

Air New Zealand in Expansive Mode:

Air New Zealand is beginning to expand rapidly owing to a considerable strengthening in the tourism market both in New Zealand and within the region.

The carrier commenced its inaugural weekly service into Cairns on December 17 which brings its NZ/Australia frequencies to 53 a week, a dozen of which link Queensland with New Zealand. Queensland has in recent years become a major tourist destination for the Kiwis and nowadays more real estate is purchased on the Gold Coast by New Zealanders than any other non Australian group.

Asia is also booming for ANZ with Japan being the number one target for growth. More than 90,000 Japanese, many of them young honeymooners, visited New Zealand during 1987 and in the four months to the end of July 1988 growth averaged a startling 48%. While the average length of stay of Japanese visitors is still relatively short at around 11 days, they spend roughly $300 a day, or 70% more than other visitors. New Zealand is also seeing a considerable increase in tourism from the other nations of SE Asia and as a result ANZ has moved to boost frequencies to Singapore, Hong Kong and Japan.

The airline is also improving its Business Class and will increase seating from a present 16 on the 747 fleet to 54 during 1989. The 7678 were reconfigured from 18 to 24 a year ago to meet a growing demand for premium class seats throughout the ANZ network. The new seats will debut in ANZ’s first 747-400 due for delivery mid ’89 and in the interim refurbished Cathay Pacific Marco Polo class seats will be used as a stopgap till the new Club World-type seats are available towards the end of 1989. For the year ended July 1988, ANZ reports that inbound business travel to New Zealand increased 23% compared with a total traffic increase of 8% while outbound business travel is up 26% compared with a total market increase of 23%.

Qantas Adds 2,000 Seats a Week to Japan Route:

Australia is still the fastest growing destination in the world for Japanese tourists. According to figures recently released by the Japanese Government, the number of Japanese visitors to Australia grew by 75% in the first half of 1988 compared with the same period last year.

Responding to this big increase in demand, Qantas during November added more than 2,000 seats each week on the Australia/Japan route. Looking at all destinations, total numbers of Japanese travelling overseas rose by 28% in the first half of this year compared with the same period the year before. The annual increase is expected to be 25% compared with 23% in 1987. Only three years ago the annual increase was around 6%.

The appreciation of the yen has spurred Japanese ‘overseas travel fever with nearly 4 million Japanese travelling overseas in the first half of the year. If the trend continues, more than 8. 5m Japanese will travel overseas by the end of 1988. The USA, including Hawaii and Guam, attracted the most Japanese travellers, accounting for approximately one-third, followed by Taiwan, Korea and Hong Kong. But the destination that saw the greatest rate of growth was Australia.

Traffic Continues to Grow:

Australia’s domestic airlines are continuing the upward trend in traffic levels which have been recorded over the past few years.

Figures issued by the Department of Transport and Communications show a 15. 6% increase in passenger numbers in the September quarter of 1988 when compared to the previous year. Cargo tonnes carried by the airlines increased 10% over the same period.

Both Australian Airlines and Ansett showed substantial growth, particularly Australian, which increased its number of passengers by a very healthy 22. 8% and its flying hours by 11. 4%. Ansett’s increases were 16. 7% and 9%, respectively.

To cater for the expected boom in international holiday traffic over the Christmas/ New Year period, the government has approved up to 400 extra international flights to assist the airlines in meeting the anticipated demand.

Some 200,000 extra passengers are expected to go in and out of Australia during the period, which officially began in September and ends in March. Of the extra services, Qantas has received approval for 114 additional flights with another 244 flights being split between 16 of the 30 foreign airlines currently operating to Australia.

Fantasia Out, Aspac In:

The long mooted regional rival to a squadron of imported CRS systems, codenamed Fantasia, has at last come to fruition in a new guise as Aspac. Aspac decodes to Asia Pacific computer reservations system and is a linking between Qantas, Japan Air Lines, All Nippon Airways and Air New Zealand.

Aspac actually became fact after Ansett and Australian Airlines announced during late November that they had become the regional agent for the United Airlines/British Airways based Galileo system. Such a forthright move by the ambitious domestics created an environment where the petty differences between the Aspac partners had to reach a speedy conclusion or else their plans could have been rapidly overwhelmed by the might of an Ansett/Australian backed regional Galileo system.

Aspac is essentially a clone of the giant American Airlines system, Sabre, which is also the world’s largest CRS network. With strong marketing links between Qantas and American and a developing relationship between American and the Japanese carriers, it was considered only a matter of time before American Airlines would become seriously involved in what for nearly two years was referred to as Fantasia. Aspac will later begin to develop a more regional operational personality once the system is up and running as it moves to provide unique regional services not presently available with the largely northern hemisphere based mega CRS systems.

 Qantas, Lufthansa Form Strategic Alliance:

Qantas and Lufthansa have teamed to form what the latter calls a ‘Strategic Alliance’ in developing better end of route connections for both carriers within their relative spheres of influence.

Qantas will benefit by being able to use Frankfurt as a major hub and will also be able to integrate directly into the vast Lufthansa European network in order to better serve any onwards destination within that continent. In the southern hemisphere, Lufthansa will gain likewise with a myriad of Qantas services ex- Singapore and Bangkok in addition to Qantas ability to fly Lufthansa passengers domestically within Australia on existing OF intercity connectors. Lufthansa passengers will also be able to enjoy similar benefits via Ansett’s established carriage agreement with Qantas.

Qantas presently operates four services a week into Frankfurt with Lufthansa operating three, though this will go to four in the near future. Both carriers will begin using their one stop 747-400s on the routes when they are available while Qantas is expected to forego direct services to Amsterdam as a rationalisation towards its Frankfurt LHVQF hub.

Qantas Boost Flights and Evaluates New Routes:

Qantas and the principal foreign carriers serving Australia have scheduled up to 400 additional flights in and out of Australia this summer to cope with the expected high season traffic demand.

Additional Qantas flights will be put into service as bottlenecks begin to develop while new moves to eliminate the ghost booking phenomenon of last year will ensure that seats are available as required.

Meanwhile the airline surveys the prospects of new routes and alliances in an effort to further strengthen its position in an ever more competitive world. A seat lease agreement with Argentinean carrier, Aerolineas Argentinas was launched on December 8 when the first weekly service departed Sydney, via Auckland for the Argentine capital of Buenos Aires. Around two thirds of the traffic previously carried by this airline on its BA/Auckland over the pole route is actually Australian based. The carrier plans to boost its schedule to two services a week in the high season and Qantas see a large and growing ‘soft adventure” market in South America that has up till now been difficult to tap.

Looking northwards, Qantas also hope to commence a service into Seoul before the end of 1989 and would at some time in the future obviously like to serve Taiwan. The latter is a thomy problem though due to the political implications via the Australian Government and its strong relationship with the People’s Republic of China.

Meanwhile traffic logjams continue into Hong Kong due to an impasse between Qantas and Cathay Pacific which has been aggravated somewhat by the position of the British Caledonian HK/London rights that have gone automatically to British Airways since that carrier acquired BCal earlier in 1988. Qantas reports that around half the Australia originating Cathay Pacific traffic is actually Europe bound while Qantas itself does not have such beyond rights and that Cathay is benefiting greatly by being able to syphon off Australia/ Europe traffic at the expense of the Kangaroo Route to the south. Discussions between the airlines concerned and our Government were due to take place in the new year, in the meantime additional flights have been approved to ensure that extra capacity is provided for this booming market.

Big Moves at Cairns:

Cairns airport saw its one-millionth passenger pass through the facility in the year ended September 30, bringing true predictions that this would occur before the end of the decade.

In the past four years Cairns Airport has grown in terms of total passenger traffic from the 11th busiest in Australia to 8th, with expectations of being 6th within the next three years. In terms of international passenger traffic the airport has moved from 9th to 5th position, passing Townsville, Darwin, Hobart and Adelaide.

In our last issue we also stated that the main runway at Cairns was 2,071m in length. That data had been taken from a 1983 edition of AGA-3 and was unfortunately out of date. The present length is in fact 2,600m while a $56m upgrading programme will see this increase to 3,200m during 1990, sufficient to see a 747 carrying 100 additional passengers and up to 10 tonnes of extra cargo on a typical Cairns/ Honolulu non stop flight.

Other recent developments at Cairns include Qantas 767s being replaced with 747s on two flights a week linking the northern city with Tokyo. Thai International introducing a second weekly DC-10-30 service between Caims and Bangkok and both Continental, Britannia and Air New Zealand operating into the port for the first time.

Ansett New Zealand Order Bae 146:

Ansett New Zealand have ordered two BAe 146-200s to further boost their overall NZ network.

The new jets, which combine very low noise signatures with short field performance, will be used primarily to develop new tourist traffic through the south island tourist port of Queens- town. Previously, services to Queenstown were via ML. Cook’s turboprop HS 748 aircraft. The 146s, which will be delivered during 1989, will now also offer non stop jet links between Queenstown and Auckland and Wellington.

Ansett New Zealand also took the move during October to drop its under-utilised First Class and replace it with what is termed Executive Class. This will essentially offer first class service and seating at a $33 premium above full economy fare. As most jet sectors in New Zealand are of similar distance, both Ansett NZ and ANZ generally choose to promote their fares with a dollar premium rather than as a percentage difference, as in Australia.

The launch of Executive Class follows very low patronage of the carrier’s First Class and reflects the difference in attitudes in different markets where initially Ansett NZ was cloned on its Australian parent. Users of Executive Class also gain access to the Golden Wing lounges at Christchurch, Wellington and Auckland. The carrier also hopes to uplift one million passengers during 1989 and will replace its 5 early build 737-100s with new 737-500s during 1990 to complement the two 146-200s and the two existing DHC Dash 8-100s.

Meanwhile, Air New Zealand has dropped its entirely economy configured City Saver 737s in favour of selling a limited number of deep discount tickets on its regular services. Both carriers are economically marginal at present though this is expected to change through this year as Ansett NZ begins to amortise its very large start-up investment and ANZ better refines its services in a truly competitive environment. The latter airline’s recent profit increase (refer Bottom Line, Newsdesk and NZ News) would seem to verify this trend towards an improvement in profitability for ANZ domestic operations.

Lack of Terminal Facilities a Major Deterrent to New Airlines With Deregulation Imminent:

Nationwide press adverts by the FAC calling for registrations of interest from potential airline operators come the advent of deregulation in October 1990 have met with an overwhelming response.

At presstime, the FAC had received a dozen applications, several of which are believed to be from people with considerable expertise and resources at their disposal. Primary amongst these is Brian Grey’s Compass Airlines which has already completed its in- depth economic justification study and is now in the process of preparing an underwriting and capital raising venture for release later this year. Compass will specialise in heavily discounted no-frills primary trunk route travel using aircraft in the 200 seat class.

Success of such an operator, who actually does offer discounted fares, rather than merely printing brochures carrying details of them, would be a great step forward for the Australian travelling public. An example of just how meaningless the present range of discount fares are was illustrated vividly to us recently when an associate of this magazine tried in April to book five Apex or Flexi Fare seats from Canberra to Perth for travel in the December/ January period. The airline reservations girl laughed and said, “Which year?” at which time it was explained that to get these fares you nowadays have to book at least a year in advance! With service like that both domestics should not be surprised when their continuous rejection of this potentially vast domestic travel market is attacked by new and innovative operators willing and able to provide budget jet air travel to the non business community of Australia.

This might be easier said than done though as Australian Aviation believes that under the present guidelines drawn up by the then DOT&C and unenthusiastically inherited by the FAC, that new entrants will find it extremely difficult to be able to operate out of many of Australia’s primary airports.

The reason is that under the lease agreement that a new operator has to sign with either Ansett or Australian in Sydney and Melbourne, the new entrant has, according to Brian Grey little or no rights while suggested gate rentals would prove uneconomic in the extreme. By law, both airlines are forced to make 2 gates available to new entrants at their Sydney and Melbourne terminals. However, the fine print, which was endorsed by the DOT&C at the time with the then aviation Minister’s full approval, states that all bids will be held in trust till March 1990. The decision will be then made by the FAC (who naturally are not impressed with having inherited this seemingly unfair and potentially controversial task) on which airline is the successful bidder for the additional gates in the existing Ansett and Australian terminals. With deregulation becoming effective on October 1, the new entrant barely has six months in which to become fully operational, an impossible task at best considering that no operator could possibly afford to acquire aircraft without a gilt-edged guarantee of having access to terminal space at Australia’s two most important airports. The rental clauses also state that if construction work is in progress by the tenant then the new entrant will have to wait till it is completed so as to not interrupt that work-something that could last forever as a stalling motion to frustrate a potential competitor. If one thinks back to the constant, indeed almost maniacal, legal pressure that Ansett continually applied to the then independent East-West Airlines, then one might be forgiven for questioning the basis of the present arrangements that the then Aviation Minister, Senator Garth Evans professed would be so good for the Australian travelling public.

Mr Grey also pointed out that at best the terminal leases are for only a 10 year period, as against up to 40 years with Ansett and Australian and at worst could last for as little as six months without any security for the tenant whatsoever.

Skywest Airlines Need Not Go:

In a reversal of its original decision, the Trade Practices Commission has decided not to insist that TNT/News Ltd-the parent company of the Ansett Group – sell the Western Australian regular public transport operations of Skywest. The decision comes as a result of 12 months of intensive negotiations and discussions with a view to selling Skywest’s RPT arm at a price of $40m. No buyer was found and as the airline would most likely have to shut down if the ‘sell’ order was enforced without success, it was decided to reverse the decision in the public interest.

Skywest Airlines operates a fleet of four Jetstream 31s and four Cessna 310Rs throughout Western Australia. In the 1987/88 financial year it carried 79,000 passengers.

Airlines Co-operate:

In what is becoming a more common move among airlines throughout the world, the Scandinavian Airlines System and the Texas Air Corporation have established a partnership with advantages to both in networking and interline linkages.

SAS will take an approximately 10% interest in Texas Air and therefore gain access hitherto denied to the vast domestic US market; in return Texas Air and its subsidiaries – Continental and Eastern – gain a $US50m entry fee for access to Texas Air facilities in the US while their System One computer reservations system will now merge with the Amadeus system owned by SAS and other major European airlines. SAS is also negotiating to acquire a share of Aerolineas Argentinias.

The SAS/Texas Air marriage though did take the industry by surprise given the extreme difference in ‘personalities’ of the two carriers. While SAS is a recognised leader in service standards and is the preferred choice by many European business travellers, Texas Air and its Eastern and Continental siblings is more renowned for indifferent service standards, late or cancelled departures and worrying maintenance procedures. One industry wag light heartedly likened the teaming to that of a partnership between Morgan Fairchild and Phyllis Diller!

Ansett Voted World’s Best Domestic Airline:

“Conde Nast Traveler’ magazine have voted Ansett as the world’s top domestic airline.

Subscribers to the quality monthly magazine, which has a readership of 900,000 frequent travellers, voted Ansett 13th best airline in the world in an independently commissioned poll. The 12 airlines which finished ahead of Ansett in the poll are all international carriers- and Ansett is the only domestic airline to figure in the top twenty.

The accolade is Ansett’s second major international tribute within a year, following its success in becoming the world’s first domestic airline to win a prestigious ‘Air Transport World magazine Passenger Service Award. That award, presented in January 1988, was made in recognition of Ansett’s pioneering development of the Golden Wing Club for frequent travellers.

Ironically though this proud tale has a bitter twist in that Australian Aviation believes that Ansett’s winning of such prestigious awards is being used by its flight attendant’s union against the airline in bargaining for extra pay due to the awards having been won as a direct result of high standards of passenger service.

Smoking Ban Spreads:

Both Air New Zealand and Ansett New Zealand have banned smoking on their aircraft during domestic flights. In a move that is rapidly spreading throughout the world, Philippine Air Lines has also banned smoking aboard its domestic flights while Air Canada has done likewise on all its North American services.

British Airways is also trialling a non smoking scheme on selected European services though admits that there is quite a cultural difference between North America and Europe when it comes to smoking. While North America and particularly Australia has a large and growing non-smoking community, the Europeans (and Asians) tend to still smoke heavily.

Meanwhile, in the USA, Northwest Airlines, which unilaterally banned all smoking prior to the US Government banning it on domestic sectors of less than two hours last April, has seen an upsurge in traffic on its routes. The upsurge in market share, reduced maintenance costs and a happier and more efficient aircrew are the bottom line benefits, claimed a Northwest spokesman.