Airline Affairs

The priority allocation covers four gates at Sydney and Melbourne and two gates at Adelaide, Perth, Coolangatta and Launceston. As deregulation comes closer, the FAC is also being increasingly pressured to begin constructive negotiations with the new entrants to develop independent terminal facilities at the key ports of Sydney and Melbourne. Capitol Airlines has already withdrawn largely due to the thorny issue of terminal access whilst Compass, the most likely operator to be flying by year end, has signed with Australian Airlines.

Closer Links Between European Airlines:

In May, Austrian Airlines, Finnair, SAS and Swissair signed a cooperation agreement which effectively links the air transport systems of five of the six European Free Trade Association (EFTA) member nations (the exception being Iceland. ) The agreement will allow the four airlines- representing EFTA members Austria, Fin- land, Norway, Sweden and Switzerland – to withstand expected strong competition from major European Community (EC) carriers such as British Airways, Air France and Lufthansa, which from 1993 will have free access to the EC market. Separate airline identities will be maintained, but the group will cooperate in marketing, sales, customer and technical services, and airliner purchasing. The four airlines will be computer linked for booking purposes, will operate joint check in desks and passenger lounges, and will modify existing timetables to eliminate duplication of services.

Already the group is using its new found strength. It recently invited Airbus and MDC to make A320 and MD-90 proposals, the belief being that the Boeing 737 will be technically outclassed by the late 1000s. It has been pointed out that Airbus and MDC will be bidding for a market of more than 200 aircraft, which gives the five airlines much better purchasing power.

 Airbus Offer to Buy Back Braniff Orders:

Airbus Industrie have offered to purchase Braniff’s 24 orders and 50 options on the A320 for $US50m, and its spares order for another $US32m.

Purchase of the V2500 powered A320s would enable Airbus to make up for the drop in A320 production caused by the recent strike at BAe, who produce the airliners’ wings. A320 production will be 20 fewer than planned this year.

The sale would also allow Braniff’s bankruptcy proceedings to be wound up. The airline filed for Chapter 11 bankruptcy protection last year, so the proposed sale must have the approval of the Federal Bankruptcy Judge. If approved, it will at least allow unsecured creditors of the failed airline to get back ten cents for every investment dollar.

Compass Suggests 25% Foreign Ownership:

Mr Bryan Grey, chief executive of Compass Airlines, has indicated that a 25% stake in the airline could be held by foreign investors at the close of the company’s prospectus.

The airline, which is seeking $50m to finance its operations, is offering an initial 100 million 50c shares in its bid to raise capital (refer p. 30 June 90 AA). Mr Grey has suggested that 25% of the shares could be purchased by foreign investors, 50% by domestic institutions, and the remaining 25% by the public. Investors are being attracted by the airline’s profit predictions which predict shareholders getting back the value of their initial investment within two years.

Compass will not, however, issue shares before leasing of five A300-600s from the United States has been finalised. Although this proposed leasing may make the airline sensitive to exchange rate movements, Compass believe the terms of the lease will enable it to meet profit and dividend payment forecasts.

 Airlines Form Global Action Group to Fight Inefficiencies:

The world’s major airlines have formed a global Infrastructure Action Group to fight delays and inefficiencies that are costing them billions of dollars each year.

The action group is the idea of British Airways Deputy Chairman and Chief Executive, Sir Colin Marshall (refer Recce, this issue). He called for a group to be established to tackle the problems associated with crowded, old fashioned airports; out of date and inefficient air traffic corridors and air traffic control methods; road and rail networks that fail to adequately service airports; and government actions that take little account of the needs of passengers.

The global action group idea has received backing from the world’s airlines and will operate under the aegis of the IATA. The group aims to alert governments to the problems facing the aviation industry and develop public support, particularly within businesses and over industries, to solve costly problems.

 Hamilton Island to Introduce Charter Flights:

The Hamilton Island resort in Queensland is to charter Ansett 7678 to fly tourists to the island.

In an offer aimed primarily at the domestic market, chartered flights will operate direct from Melbourne, Sydney and Brisbane every Saturday from July 14th through to December 15th. The charters will enable the resort to offer significantly reduced prices to bargain hunting tourists seeking a one week break in the sun, and make it better able to compete in a market still feeling the ill effects of the pilots’ dispute and a soft economy.

The charter flight concept is one that has worked well with overseas resorts in the past, though it has not yet been fully utilised in Australia. This present charter operation could, however, be a sign of things to come in the soon to be deregulated airline industry.

 Australian Airlines Preparing for Deregulation:

Speaking at the National Press Club on May 30, Mr John Schaap, Managing Director and Chief Executive Officer of Australian Airlines, detailed several aspects of the airline’s operations of interest.

The cost of the pilots’ dispute was put at $100m with profitability predictions having been set back by at least a year. Pilot efficiency, however, has improved as a result of the dispute and Australian are now able to employ just 280 pilots instead of the 547 it previously had. Pilots now fly an average of 17 hours per week or about 700 hours per year (instead of the pre dispute 370 average hours) and this is still well below the 900 hour limit set by the CAA. The cost of pilot employment is now $21m less than in 1988/89 though this actually represents only about 2% of total estimated company expenditure for 1990/91. Of the 280 pilots currently employed, 123 are former Australian Airlines pilots who elected to return to the airline, 19 are former expatriate Australians previously flying overseas, 65 are foreign pilots, while others have been recruited from the GA sector. Mr Schaap refuted the claim that safety has suffered the airline recruited only highly trained, capable’ personnel. Australian Aviation believes that possibly an additional 100 pilots will be required by the three domestics over the following year.

On the subject of deregulation, Mr Schaap countered claims by potential competitors that they would be able to offer a cheaper fare structure. It was noted that the airline industry is already competitive in nature (albeit not as competitive as it no doubt will be!) and that Australian already offered discounted fares of up to 50% between all major cities except Darwin. Mr Schaap even put forth the claim that 45. 6% of their pas sengers already flew at discounted rates averaging 41%! In any case, he stated, cheaper fares were not the only incentive for customers to fly with an airline. It was noted that Australian is continuing the upgrade of airport lounges and is placing emphasis on retaining a high proportion of business class passengers.

On worsening congestion it was noted that delays were already costing the airline about $20m per year and affecting the systemwide network well beyond the trouble spots of Sydney and to a lesser extent Melbourne as connecting flights failed to arrive on time in the more remote ports. Only a third runway at KSA would change the situation, because Australian and other airlines would not be willing to radically change their timetables despite the threatened introduction of peak pricing by the CAA. Passenger demand dictated departure times, so peak pricing would only disadvantage the smaller regional airlines and possibly increase some fares.

 Britannia Restructuring Operations:

Britannia Airways are to undertake a large scale restructuring program follow- ing a recent drop in profits.

Britannia is striving to reduce operating overheads and improve efficiency following a fall in the airline’s profits in 1989 to £36. 7m (down £5. 1m on 1988) and a review of its operating strategy. The drop in profits is, the airline claims, the result of the increasing size of the airline and the 1989 acquisition of Orion Airways, which has left the airline with reduced efficiency and higher operating overheads.

Britannia plan to reshape their fleet by acquiring six 7578 by 1992 and ordering up to 20 150 seat class airliners as long term replacements for the 737-200 fleet. The reduction in fleet numbers which will accompany this should lead to a reduction in the number of staff (aircrew, ground crew and operations) and maintenance costs. The airline hopes the resulting increased efficiency and reduced overheads (eg, wages, aircraft registration) will increase its profitability in the face of an expected drop in demand for British charter holidays. A major feature on Britannia’s Australian operations appeared in our June edition.

 Wanted – More 747-400s:

American Airlines are negotiating with at least five other carriers in a bid to purchase more 747-4008.

The airline is understood to be willing to pay a premium to acquire 12-400s from other carriers, rather than have to order the aircraft direct from Boeing and wait for their completion. New -400 orders nowadays won’t be fulfilled till around 1993/94 at the earliest. The only question is whether other carriers with 747-400s soon to be delivered will be willing to accept a quick profit by selling their new aircraft, but at the cost putting their own fleet expansion plans on hold.

More on Airport Congestion:

The International Air Transport Association task force on airport congestion is turning its attention to the Asia-Pacific region (refer Recce). This will of course include a study of KSA, the region’s third most congested airport after Narita and Osaka in Japan.

An IATA study team is expected in Australia before year end to investigate Sydney’s worsening airspace congestion. Among complaints to be studied are that three quarters of domestic flights arrive late and about half leave late because of congestion, while international carriers must often circle for up to 40 minutes or reduce cruise speed en route before landing. The situation is such that all international flights arriving at KSA must now carry 40 minutes’ holding fuel in case of delay, instead of the 20 minutes’ fuel required during the mid 1980s.

The situation is also projected to only get worse. Demand by international carriers for flights through KSA rose by almost 20% last summer and some 43% of flights had to be rescheduled as a result. A third runway has yet to be given the go ahead, and even if construction does proceed (God help us if it doesn’t! Ed) it will not be completed until 1995 at the earliest. By this time KSA will have reached its operating capacity limit.

Runway Battle Heats Up:

The battle for Sydney Airport’s third runway is set to begin again with the reformation of the KSA Taskforce, the group which last year was successful in contributing to the federal government’s decision to conduct an environmental impact study into the project and to give general approval for it.

The Taskforce will continue to fight the anti third runway groups and their influence on the government’s final decision. The Task- force’s efforts will be helped by its acquiring of a powerful ally, the Tourism Task Force, which has resolved to join the KSA group’s fight to get work on the third runway underway as soon as possible. The Tourism Task Force includes in its members some of Australia’s most powerful business leaders reproocnting all aspects of the tourism industry (including the Australian Tourism Commission) plus banks, investment companies, developers, resort operators and hoteliers.

 Indian Airlines Accused of Putting A320 Into Service Too Fast:

An Indian Government investigating committee has accused Indian Airlines of putting the A320 into service before it was really ready to do so.

The committee-which was set up follow- ing the Indian Airlines A320 crash at Banga- lore on 14th February – has found that the A320 was put “. . . into operation while the airline was ill equipped to handle this sophisticated aircraft in such large numbers. ” In the recently released interim report, the committee also found that Indian Airlines management did not appreciate the need to properly train pilots and engineers to handle the aircraft, while the airline did not have an adequate infrastructure to support operations of this new type.

Airbus Industries did not escape criticism in the report. The committee has found that Airbus failed to properly meet the training requirements of Indian Airlines for either the flying or servicing of the A320, there being in particular “. . . insufficient emphasis on flying manual non-precision approaches; and fly- ing with the limited navigation and landing aids available in India. ” Airbus have refuted this claim.

The actual Bangalore crash has been blamed on pilot error, though this has not stopped Indian Airlines grounding their entire A320 fleet. The result is that the 12 existing aircraft are to be leased out with the four undelivered aircraft being sold outright. It is unlikely that the 12 options will now be exercised though their delivery positions may be sold on the open market, a move that should see the airline realise a healthy profit. LA’s A320s though are different from those of most operators due to their IAE V2500 engines and the four wheel bogeys.

 Ansett and Australian Extend Deep Discount Fares:

Ansett and Australian have extended their 50% discount fares from the traditional Sydney/Melbourne route to most of their primary jet network taking in the ports of Adelaide, Brisbane, Perth, Canberra, Hobart and Launceston.

The main conditions of Ansett’s Fare Go 50 and Australian’s ‘Off Peak’ fares are that travellers must depart at nominated off peak times on Tuesdays, Wednesdays and Thurs- days, must include one weekend away and tickets must be purchased at least seven days in advance. The fares are primarily aimed at the leisure and VFR market. Also recently introduced are special 25% and 35% discount weekender fares with associated accommodation packages.

Fares like these are what deregulation will hopefully bring as the established carriers look to stimulate the long neglected leisure market. Hopefully sufficient seats will be allocated to make the fares realistically attainable, as in the past this has often been the problem with many deep discount fares being difficult to get due to lack of capacity.

 Law Unto Itself:

For those interested in a first rate seminar at a first rate Venue, the Aviation I aw Association’s 1990 annual conference will be held at the Hyatt Regency, Sanctuary Cove, on October 18 and 19 this year. For details contact Cindy Last, KK Travel, on (008) 33 4143.

Airline Performance Begins to Recover in March Quarter:

Passenger activity levels in the domestic airline industry during the March quarter overall were 86. 8% of the same period in 1989.

This indicates a reasonable return to pre-dispute activity based on the fact that the March quarter 1989 was still very strong with an overflow of momentum carried over from the Bicentennial and Expo period. There was a significant increase in services during the quarter, with the number of passengers carried increasing by 31. 8% over the previous quarter.

During the March quarter airline services were provided on a more conventional basis using company and leased airliners. This reflects a marked change from the December quarter 1989 where RAAF, Qantas and foreign internationals performed part of the domestic uplift. The March quarter also saw a cessation of leased airliners with domestic services returning to normal as the airlines built up their pilot numbers to required levels.

International Air Cruise Held Over for One Year:

Political instability and the spectre of outright war at several key destinations have forced Aircruising Australia to delay their launch into international air cruising by one year.

Originally scheduled to depart Australia on June 13, Aircruising’s 70 seat VIP configured Boeing 727 was to visit a number of areas now on the list of places not to be. Kashmir, Nepal and the entire Northern Indianregionfacing Pakistan are all in turmoil effectively making a 1990 departure impossible. Aircruising had strong support from their initial advertising campaign and hope to be able to try again in a hopefully more peaceful 1991.

 Aircrew Arrested:

The crew of the Korean Air DC-10 which crashed on approach to Tripoli in heavy fog in July last year have been arrested on charges of man-slaughter and violations of aviation law.

The two pilots and flight engineer had their licences suspended after the investigation found them at fault, and if found guilty they could face a fine of up to $US?,000 each and/ or a maximum five years in gaol.

Australian’s Child Seats:

Australian Airlines has become one of the first airlines in the world to introduce child restraint seats purely for use in aircraft.

The airline has 50 such seats available for use by children under four years of age and can be requested at the time of booking a flight. Until earlier this year, regulations required that all children under three had to be held on an adult’s lap and two small children required two adults. The new arrangement is not only more convenient but would be safer for both a child and an adult in the event of an emergency.

 Recycling Trend Catches On:

Employees of American Airlines are actively involved in a voluntary recycling program of paper and aluminium collected from flights.

The program started last year in San Francisco, has since been extended to include east coast USA, and is scheduled to be systemwide by year end. Proceeds from the 6,000kg (13,230Ib) of aluminium and 80,000kg (176,400Ib) of waste paper so far collected benefit local non profit organisations.