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Also to be fully cost recovered are the airport security services being provided by the Australian Protective Services (APS). The cost of providing such services is not specifically known, though is estimated to be at least $10m a year. These services will now be charged to the airport operator and eventually passed on to the aviation community. Airport security duties are presently funded by the Commonwealth, with the first year of full cost recovery being 1991/92.

 Black Tuesday, Almost!:

Tuesday 11th September could have gone down in history as Australia’s blackest day in terms of aviation safety as two Qantas aircraft became involved in incidents at Sydney and over Thailand.

The Sydney incident involved a towed (empty) Qantas 747 being given approval by ATC to cross the main 16/34 runway en route from the jet base to the international terminal at the same time as a fully laden Cathay Pacific 747 was cleared to takeoff on runway 34 bound for Hong Kong. The Cathay crew had not seen the QF 747 slowly transiting the runway until they were well down the 4km runway and unable to abort. While the Cathay 747 easily rotated clear of the Qantas aircraft, it begs the question what would have happened if the Qantas aircraft had been crossing one more intersection south of where it was (opposite the Australian ter- minal) and it had been a hot summer’s day with the heavily laden Cathay 747 requiring much more runway than it did. Two controllers have been relieved as a result of the incident and a full enquiry is underway.

Only hours after the Sydney incident, QF10, bound from London to Singapore, was involved in a near collision with a USAF C-5 Galaxy transport. It is claimed that the two aircraft passed within 17m of each other over Phuket on roughly opposing tracks. Thai ATC were responsible for the placement of the two aircraft with QF10 being correctly cleared overhead Phuket at 0931UTC and the Galaxy at 0913UTC, it is believed the times were confused by the USAF crew, the mistake not being noticed by Thai ATC.

AA Comment: The two incidents highlight the role of pure good luck in keeping such events as incidents rather than accidents. Australia has not had a single fatality in a jet airliner accident since these aircraft began operating in the late fifties. While it is an enviable safety record by any standard, it does make it increasingly difficult to beat the statistical law of averages. One day a major jet accident will occur, that is unfortunately statistical fact, but we only hope that when it does the lay press look for facts, not fiction and do not immediately blame deregulation as a trendy knee jerk response if indeed the cause of the accident lies elsewhere. Here’s hoping, but let’s not hold our breath on that degree of rationality occurring!

 USSR, Israel & USA Move Closer on Joint Airliner Project:

In yet another example of the rapid merging of Western and Soviet interests, senior government ministers from the Soviet Union and Israel have met to discuss the possibility of the two nations, along with the USA, jointly producing a major wide body airliner to challenge Airbus, Boeing and MDC.

The basis of the concept revolves around Ilyushin’s II-96, a 300-350 pax Airbus A340 look alike that would use Pratt & Whitney PW2037 high bypass turbofans and Israeli avionics, systems and electronics. The basic flyable airframe would be built in the USSR with its primary avionics fitted in Israel along with possibly western cabin furnishings and associated systems. The engines would come direct from Pratt & Whitney and be fitted in the Soviet Union.

The concept on paper is a potential winner as both the USSR and Israel are cost competitive in the export market while the addition of the PW2037 to the presently fuel thirsty II-96 (refer Farnborough report this issue) would make it an immediate seller on the world stage. Israel needs the work for its hard hit aerospace sector, while the USSR desperately needs foreign exchange and access to Westem markets. With the inability of Western manufacturers to meet the demand for large, long haul airliners the modified II-96 could well be a major program come the mid nineties.

 Iafc Says No to Domestic Air Fare Increase:

The Independent Air Fares Committee (IAFC) announced on 4 September that passenger fares for domestic air services operated by Ansett Airlines and Australian Airlines would not be raised.

A review of air fares was initiated by the committee on 23 July, as was agreed when air fares were raised by 5% in January this year. Both Ansett and Australian made extensive submissions to the IAFC seeking further fare increases to offset costs mainly associated with the Gulf crisis fuel price increases. The IAFC, however, concluded that no additional increase was warranted.

The underlying reason for granting the 5% fare increase in January was to partly offset the significant additional abnormal costs incurred by Ansett and Australian as a result of the pilots’ dispute, when the airlines were forced to meet their obligations under the Airlines Agreement Act. With passenger lev- els still down on previous years and with recent rises in aviation fuel costs, both Ansett and Australian sought to have fares increased. The IAFC, however, noted that the lower passenger levels and higher fuel costs were partly offset by a favourable exchange rate and productivity improvements, in particular with flight crews. After examination of all cost factors the Committee, in the final decision it would historically make, “concluded. . . that no variation to present levels was justified”.

With deregulation commencing on 1 November, existing Commonwealth regulatory controls over domestic air fares will cease to have effect and the IAFC will no longer be responsible for determining domestic air fare rates. Ansett, Australian and other interstate airlines will be free to adjust fares at their own discretion, subject only to Government commercial regulations applicable to industry generally.

Atr Buys Boeing Canada:

Avions de Transport Regional (ATR), the Franco-Italian regional airliner manufacturing consortium, has signed a letter of intent with Boeing to buy Boeing Canada, formerly de Havilland Canada.

Though details of the deal are still sketchy. it is believed that the sale will be completed by the end of the year. Boeing has been seeking a buyer for de Havilland for several months, the struggle to make its Canadian subsidiary profitable in the face of unsuitable (for Boeing at least) work practices being suggested as a reason for this.

Boeing purchased de Havilland Canada for $US155m from the Canadian Government in January 1986 and has since invested another $US450m in the company, this going towards research and development, the launch of the Dash 8-300 and the upgrading of buildings and equipment. Though de Havilland has profited from Boeing’s ownership (the Dash 8 literally took off under Boeing ownership and employment is up from 4,300 to 5,600), Boeing has experienced numerous industrial relations problems with the company which have continually soured the relationship.

In February this year the Canadian Govemment agreed to pay Boeing $US100m to resolve outstanding issues associated with the original sale, one problem reportedly being the added costs to Boeing of rectifying health and safety hazards at the de Havilland plant. It was also agreed to pay another $US50m to Boeing to aid development of the Dash 8-400. Boeing had also faced difficulties with DHC employee work practices. Its attempt to have its Canadian employees work during Canadian public holidays in exchange for time off during US public holidays was not-unsurprisingly-successful. Sale of DHC must be approved by the Canadian Government (despite it already being owned a foreign company) and the governments of Italy and France, who jointly own the ATR consortium.

How ATR ownership will help DHC, per- haps its main rival in the marketplace, remains to be seen. While having some ATR work performed in North America would assist ATR in selling its product in that part of the world, it is difficult to see much work being taken from either Italy or France as the aerospace factories of those nations look seriously for work to make up for a rapidly dwindling military aviation base.

Meanwhile, ATR has received an order from American Eagle, the regional airline subsidiary of American Airlines, potentially worth $US1bn. The order is for 16 ATR428 and nine ATR728 with options for a further 75 aircraft. If all options are taken up, it will represent the biggest deal yet achieved by the Franco/Italian consortium.

 Tnt Blames Pilots’ Dispute for Fall in Profits:

TNT Ltd has blamed the pilots’ dispute for cutting profits, following the posting of its 1989/90 financial year results.

The company posted a $140. 7m profit for the year ended 30 June 1990, a drop of some 36. 8% on last year’s figure of $222. 6m. Despite the drop, the figures were slightly above market expectations. Ansett Transport Industries Ltd, owner of Ansett Airlines and itself jointly owned 50/50 by TNT and News Corporation, contributed just $2. 58m to pre-tax profits compared with last year’s contribution of $67. 33m.

Sir Peter Abeles, TNT Managing Director, noted that yields from the airline businesses were significantly down on the previous year, but that a late increase in inbound tourists had pushed the volume of domestic airline passengers to “surprisingly high levels”. This trend has continued to enable Ansett Airlines, Eastwest Airlines and smaller subsidiaries to benefit.

Eastwest Airlines affected TNT’s financial results to the tune of a $7. 22m loss, compared with a $4. 7m loss last year. Ansett Worldwide Aviation Services, the airliner leasing company jointly owned by TNT, made a relatively small profit contribution this financial year but, with the company now well up and running, is expected to be a key contributor to TNT profits during the 1990s.

 Rockwell Awarded Raaf F-111 Avionics Update Contract:

A team led by Rockwell Electronics (Australasia) has been awarded the contract to update the RAAF F/RF-111C avionics package.

The $210mm F/RF-111C Avionics Update Program will be a total systems integration task, and will provide virtually all new navigation and weapons delivery electronics for the RAAF’s 16 F-111C and six RF-111C strike aircraft. The update is expected to extend the mission life of the aircraft by up to 20 years. Rockwell Electronics is the prime contractor for the update, however three major Australian aerospace companies will also be involved. Hawker de Havilland (Melbourne) will provide the necessary airframe design modifications and production installations; C3 Pty Ltd, an information technology and software engineering company, will develop operational flight software for the aircraft; and Honeywell Australia will provide the multi-function display sets, standard inertial navigation units and training for RAAF maintenance personnel. According to Rockwell Electronics (Australasia) the value of the pro- gram’s local content is $52. 5m, 25% of the contract price. The program is planned to retum converted aircraft to the RAAF through the 1993-96 period.

Rockwell International now employs over 700 people at 12 locations throughout Australia, being responsible for considerable technology transfer and other offsets to the Australian aerospace and defence related industries. Through its subsidiary Rockwell Ship Systems Australia, the company is also managing the design, integration and installation of the combat system for the RAN’s six new Collins class submarines. As part of the F-111 update program, Rockwell Electronics will develop a Weapons Systems Support Facility at Amberley for future system development and modification.

Kuwaiti F-18 Order Goes Ahead:

Despite Iraq’s invasion of Kuwait, work on the 40 F-18C/D Hornets ordered by the Kuwaiti air force is continuing.

McDonnell Douglas was requested by the US Government to continue work on the 32 F-18C and eight F-180 Hornets ordered by Kuwait. The $US1. 9bn contract is a government to government deal, so the order was actually awarded by the US Government, not Kuwait. Delivery of the aircraft is therefore assured, with the US Government destined to take delivery prior to handing the Hornets over to Kuwait. The same FMS arrangement was made with Australia’s purchase of 75 Hornets and is the medium by which most similar transactions take place. Deliveries of the General Electric F404 engines for the aircraft are also continuing.

The decision to continue production is indeed good news for both MDC and GE. Both companies have been forced to lay off substantial numbers of workers of late, mainly due to defence related cutbacks.

US Airlines Facing Huge Financial Losses:

The US airline industry is facing a 1990 loss of at least $US1bn as a result of fuel price increases and other associated cost rises.

The Gulf crisis induced cost increases are placing even more pressure on an industry in which several carriers are already heavily in debt and battling to compete in a very competitive low or zero growth market. Traffic growth in the US airline industry is already markedly down, there having been only a 2-3% increase in 1990 as against a capacity increase of 6-7%. In the first quarter this year the breakeven load factor rose to 63. 2%, yet the actual load factor of the airlines was 60. 2%, leading to a first quarter industry loss of $US684m. Some 90% of US passengers fly on discounted fares, the average discount in July being 67%, so many airlines’ yield suffered from discount fares.

Fuel prices had remained relatively stable during 1987/88 and only rose gradually in

1989. The massive almost overnight increase in fuel prices, therefore, hit the airlines very hard. A price increase of just US1 cents per US gallon costs the airline industry $US160m, so 10 cents costs $US1. 6bn-yet the airlines faced a 30c increase in only a matter of weeks. The price of fuel is expected to eventually drop but the added costs will still affect airlines. As the recent fare rises will only half cover the rising fuel costs, airlines will be flying about 5% less in an attempt to reduce the amount of fuel being consumed.

Financially weak airlines are already having a hard time with the combined price increases and continued softening of the market. The chances of a further concentration of the US industry is seen as high while several smaller airlines may have to cease operations or merge.

Saudis to Receive MDC F-15F:

Saudi Arabia is set to become the launch customer for the McDonnell Douglas F-15F fighter.

The expectation of a launch sale comes after extended talks between the US Department of Defense and the Royal Saudi Air Force (RSAF). Serious interest in the aircraft has reportedly been expressed and an initial order for the F-15F variant is expected during 1991. Still only in the concept stage, the F-15F is planned as an improved single seat air superiority variant of the basic F-15E airframe, powered by the P&W F100-220 engine giving it an 81,000lb maximum takeoff weight (MTOW) and equipped with advanced avionics and a Hughes APG-70 radar package. Israel, Japan and West Germany have also been targeted as potential customers.

The RSAF already operates the F-15C/D and, as a result of the Gulf crisis, is to receive an additional 24 F-15C/Ds from USAF production allocations plus 12 previously ordered attrition aircraft. A further five F-158 have been released by the US to Israel to bolster the strength of ‘friendly’ forces in the Middle East.

Australian and Qttc Launch No Frills Holidays:

Australian Airlines and the Queensland Tourist and Travel Corporation (QTTC) have joined forces to develop a series of low cost overnight flights from Syd- ney and Melbourne to Queensland.

Travellers will be able to fly to Queensland between early October and mid December (just prior to the traditional Christmas rush) at reduced cost, provided they are willing to travel at night with minimal inflight catering services. Return air fares on Australian’s special night flights cost $425 for Melbourne/Caims, $285 for Melbourne/Gold Coast and $185 for Sydney/Gold Coast.

In addition, the QTTC has developed a range of accommodation packages to be marketed as “Sunlover Night Rider” holidays. Package prices start at $578 for seven nights in Cairns, ex Melbourne and $388 for seven nights on the Gold Coast, ex Sydney. These prices include return air fares on Australian Airlines, accommodation and transfers to and from Caims and Coolangatta airports. Bookings for the special flights must be made at least seven days prior to departure and passengers must stay at their destination for between seven and 14 days. Mel- bourne/Cairns flights will leave Melbourne at 2am on Saturdays and arrive in Cairns at 5. 10am. The Melbourne/Sydney/Gold Coast flights depart at a more reasonable hour, thanks to the KSA curfew. They depart Melbourne at 8. 15pm on Sundays and connect in Sydney with the special night flights to Coolangatta departing at 10. 15pm.

The special flights are a sign of things to come under a deregulated environment, Australian Airlines having in fact set up a new division to develop and market “no frills” packages. They offer very good value holidays in the pre Christmas period and enable the Queensland resorts to better battle those overseas such as Bali, Noumea, Vanuatu, Fiji and New Zealand.

Airlines to Be Privatised?:

At the time of going to press, it seemed that the eventual privatisation of Qantas and Australian Airlines had moved a giant step forward. Federal Cabinet has agreed that the privatisation is necessary in the cases of the two airlines, though whether this be partial or full privatisation remains to be seen. The question of privatisation was set to be debated at the ALP national conference on September 24. The conference was expected to settle the extent of the privatisation of the airlines.

At the time of writing the Labor Party national executive had already decided that 51% of Qantas should be retained by the Federal Government because of the airline’s status as the Australian flag carrier. No limit was set on Australian, though a 49% sale of the domestic carrier would seem more likely given ACTU and Left Wing concerns about foreign ownership and privatisation in general.

Meanwhile, foreign airlines are reportedly lining up to purchase a stake in either Australian Airlines or Qantas. It has been confirmed, for instance, that Japan Air Lines has been invited by Qantas management to take a share in the airline. JAL and American Airlines are already partners with Qantas in Air New Zealand and cooperation agreements exist in other areas of the airlines’ operations. Other airlines Qantas management would prefer to be involved with have reportedly been approached, though at this stage nothing has been confirmed. Qantas chairman, Mr Bill Dix, has mentioned JAL, Lufthansa, British Airways and American Airlines as possible buyers of a stake in the airline. Qantas chief executive, Mr John Ward, has stated that the airline needs a capital funds injection of $500m in the short term and $1. 1bn in the long term to bring its debt to equity ratio from 78:22 to a more manageable 55:45 in line with most other international airlines. Partial privatisation of the airline would have to achieve this, therefore, to be effective.

Airlines mentioned as being possible primary shareholders in Australian Airlines include British Airways and United. A three way marketing agreement between these airlines already exists, and certainly BA would seem a logical airline to acquire a stake in Australian Airlines, which despite its 1989/90 loss remains a very attractive airline for investors. Foreign airlines, however, have indicated that the current 15% limit for foreign investment is considered too low- a 20% or 25% limit is stated as being more desirable.

Ansett Introduces Additional Flights:

In a move designed to tackle deregulation head on, Ansett has introduced a new timetable, effective October 28, featuring a greater frequency of flights.

The new timetable comes into being just three days prior to deregulation and is an integral part of Ansett’s “D-Day Celebration of Deregulation” campaign. Ansett capacity is up 6% with the new timetable, partly because of the apparent popularity of the new range of discount fares for travellers. Ansett General Manager, Mr Graeme McMahon, noted that an increased frequency of flights is an important part of what deregulation will mean to Australian travellers. “Discounts are important”, he said. “But research also shows that passengers want more choice with flight times – we are offering more choice with this timetable. ”

Features of Ansett’s new timetable include 21 extra flights per week between Sydney and Melbourne; increased capacity between Perth and the eastem states (a not unexpected move as the airline seeks to head off the threat from Compass); daily services between Adelaide and Brisbane in each direction (albeit at times of questionable value to the typical business traveller); seven extra Adelaide/Sydney/Adelaide services per week increased Brisbane/Mel- bourne services; seasonally increased services to Tasmania from December; increased services from Brisbane to Rockhampton and Mackay; nonstop Proserpine/ Brisbane services on Saturdays and Sun- days; more nonstop Brisbane/Cairns services, while retaining the current level of Townsville/Brisbane services; and increased Adelaide/Alice Springs/Darwin flights.

Ansett and Australian Launch Discount Fares Campaigns:

With the onset of deregulation, both Ansett Airlines and Australian Airlines have launched cut price fares campaigns to attract additional market share and head off any threat posed by potential competitors.

The discounted fares apply to most routes operated by the two airlines, though special conditions for the flights do exist. Examples of the fares on offer are the off peak 50% fares offered by both airlines on important trunk routes. The 50% discount is a tremendous saving, for instance bringing the cost of flying Melbourne/Sydney return down to just $204. Off peak discount fares can also be purchased for routes between Sydney. Melbourne, Brisbane, Adelaide, Hobart, Canberra and Perth.

It is Ansett’s ‘Nullarbor Special’ half price flights between Perth and the two eastern cities of Melbourne and Sydney that perhaps best symbolise the drive to head off the potential threat from Compass Airlines. The special discount offers Melbourne/Perth return economy air fares of $472 and Syd- ney/Perth $528. Unlike most of the discount fares on offer, this very attractive fare has no pre-purchase requirements or minimum stay demands, the only requirement being that the traveller flies on a night service.

A range of other discount fares covering most interstate routes are on offer. Australian has introduced a Senior Flyers Fare, offering a 40% saving on routes throughout the network for passengers aged over 60. A Weekend Saver will also save travellers 25% on selected routes, the passenger being required to spend between one and three days at the chosen destination. Island Holidays fares can save the holiday-maker up to 40% in air fares and accommodation during the pre Christmas period, with some conditions applied, while Save 30 specials can save passengers 30% on most routes. While many of these discounts already exist, it is expected that with deregulation the major airlines will now have to take them more seriously and allocate realistic amounts of capacity to these fares to cope with the expected demand for a simplified and cheaper product.

Meanwhile, passengers on both airlines are being offered discounts ranging from 20-45% off. For those with flexible travel arrangements, 45% can be saved by just. nominating the day of travel, with the airline selecting the flight. 50% can be saved on return airfares on selected off peak services between capital cities, though the traveller must stay away for at least five nights, including a Saturday. If booking 30 days prior to flying, and staying away for seven days. 35% is saved. Just turning up at the airport and acquiring a Standby ticket saves 20% on the economy fare, with travel on the next available service.

Thus the era of discounted domestic air fares has at last arrived. While in the traditionally heavy Christmas period of travel these discounts will be very difficult (if not impossible) to get, the cheaper fares do represent welcome savings during other periods. For the tourism industry, there can only be joy. The cheaper flights to Perth, for example, enable it to be marketed better against the once much cheaper destination of New Zealand. Whether the Australian industry reaches the point as in the US where 90% of travellers fly with discounted fares remains, however, to be seen.

New Australia/Japan Air Routes:

The Japanese Ministry of Transport has established two new airways between Japan and Australia, over flying Guam.

The two new airways were established under an agreement with the US Federal Aviation Administration and the International Civil Aviation Organisation. They were made necessary to relieve congestion between the two countries which has been causing chronic departure delays at Tokyo and Osaka. The two new airways will be of great long- term value to the Australian tourism industry and the airlines which serve it, cutting costly delays and making Japan/Australia travel more attractive for travellers from the vital northern Asia market.