Stop Press

This has long been mooted as an inevitable consequence in addition to being stated Coalition policy. It would allow Qantas access to the domestic market it has long sought to feed its international services. whilst also allowing additional uplift out of New Zealand. Similarly, ANZ would have free access to Australia not currently available. Ansett and Australian would also receive trans Tasman rights though this would perhaps be of little use to the latter without an established feeder in New Zealand. If the radical reforms are undertaken it is believed that a one or two year preparatory period would be alowed for the existing operators to organise their affairs.

Also high on the list of the Government’s objectives will be to resolve the domestic terminal issue which may well see the FAC being funded to build common user terminals in the key ports of Sydney, Melbourne, Adelaide and Perth. Contrary to popular opinion, land has been set aside for such terminals and plans have been in existence for years. The reason none exist is because no new entrant has been willing or able to provide the required capital to construct same whilst for its part the FAC doesn’t want to invest interminals for airlines that do not technically exist. Hopefully government involvement will overcome this classic chicken and egg situation,

Compass Gets Another Five Weeks:

Compass provisional liquidators, Ferrier Hodgson & Co have been given an additional five weeks to come up with a rescue package for the failed airline.

At the February 4 hearing it was revealed that three different groups are still negotiat- ing the viability of a rescue package and that the chances of the airline making a come- back were still rated at 50:50. The wind up case will now be heard on March 10, allowing time for proposed government changes to the regulatory environment to be fully assessed (refer previous story).

It was also revealed that if Compass is wound up that its debt might be less than first expected, down from an estimated $171m to $124m due to $33m being available in con- tingency assets made up of a $30m damages claim against Australian Airlines and a $3m claim for alleged overcharging by the CAA Meanwhile, the last of the Compass A300s departed Australia on February 3.

It Compass is revived it is now certain that none of its previous management team will be left intact. Representing the Australian Securities Commission, one of four bodies examining the airline’s collapse, Annabelle Bennett said, “on present information” the Commission would have “serious concern” If the directors maintained a role in a restructured operation.

Lincoln, Canberra & F-111 Return

AA is particularly pleased to report that we have been able to obtain a consignment of our previously extinct Airpower series- the Lincoln, Canberra & F-111 in Australian Service – from our US distributors.

This means that we can again offer soft cover editions of this very popular book for just $24. 90 post paid. We anticipate delivery late March so if you missed out on getting a copy of this excellent 186 page book then all is not lost.

Reserve your copy today by contacting us on (06) 288 1677, fax (06) 288 2021 or by remitting $24. 90 to PO Box 3105, Weston Creek, ACT, 2611.

 Eastwest Reconfigure 146 Fleet:

Eastwest has reconfigured four of its seven BAe 146-300s to six abreast seating.

The change has increased capacity from 96 to 106 seats and effectively reduces seat kilometre costs by around 10%. Seat pitch has been increased from 32in to 33in whilst the new seats are one inch narrower than those they replace. The move has been made to enhance profitability of the 146 and to capitalise on the very high load factors currently being experienced system wide.

However, Eastwest’s long term 146 plans remain clouded as it is possible that the three non converted aircraft may well be replaced by a second or third 727-200 to augment the one already in operation.

The launch of the EWA/Conrad Jupiters promotion has been massively successful with 80% of the space available for the first six months of the programme presold within the first two weeks of its launch. The success of this joint marketing concept has led EWA to explore similar avenues at other destinations and would help them utilise the greater available capacity of additional 7278.

Falling Values Make Second Hand Airliners the Bargain of the Century:

Due to the rapidly growing glut of capacity worldwide, second hand airliner values have fallen dramatically over the past year, providing an ideal opportunity for new entrants to acquire jet transport capacity at a fraction of the cost of new airframes of sim- ilar performance.

Data carried in the semi-annual appraisal of aircraft values in the February edition of the highly respected Avmark newsletter makes for compelling reading for those prospective airline CEO’s who feel they would rather feed profit to their shareholders rather than their bankers. We thus reprint data for your own perusal on types relevant to Australian domestic operations in the new entrant environment. All ICAO Stage 2 aircraft are available with appropriate hush kits or re-engining programmes though values quoted are in original configuration. All values are in US dollars (millions) and are for aircraft readily available on the used market. Hence the exclusion of such aircraft as the A320, A300-600R, 767-300, 737-300/400, Fokker 100 and MD-88 etc.

Twa Files for Bankruptcy:

Trans World Airlines has become the latest major American operator to file for protection from its creditors under the USA’s Chapter 11 bankruptcy laws.

The planned move has been expected for some time and is designed to reduce the debt. TWA is controlled by corporate raider Carl Ichan who will take a cut in his equity in return for bond holders also agree. ing to a reduction in their debt. Ichan wants to eliminate $US1bn of TWAS $US1. 6bn bondholder debt. TWA’s financial situation is stronger than other US airlines which have had problems in that it at least has $US500m cash on its books. On the debit side is the average age of its fleet-16 years against an industry average of 10. 5 years- and the attitude of analysts who have noted PanAm’s demise after a period of circumstances similar to those in which TWA now finds itself.

Continental, Hawaiian and America West (which lost a further $US213. Bm in 1991) are also currently operating under the protection of Chapter 11 while PanAm, Eastern and Mid-way are all recent casualties of the woes of the US airline industry, which has collectively lost $US6bn over the past 18 months. Remarkably, this is a greater figure than the total profits generated by the airlines over the past 60 years!

Pan American Sues Delta:

Further to the ongoing saga of the collapse of PanAm following Delta Airlines’ withdrawal from the planned takeover and cash injection (refer Newsdesk) comes the news that PanAm is suing Delta for $US2. 5bn

The suit claims that PanAm was forced out of business in December last year when Delta breached its obligations, a perhaps surprising submission as it is known that PanAm’s management was party to the decision which finally killed the airline. A separate suit against Delta has already been filed by PanAm’s creditors.

AA Comment: The similarity between PanAm and Qantas is that they were both international carriers without a domestic network-worth thinking about!

 Defence Cuts Spreading:

It seems the world must be getting safer by the minute if the defence cuts being regularly announced these days are any indication. Let’s hope the more potentially aggressive nations are also cutting their ‘defence’ budgets!

The largest cuts have been announced by the USA, President George Bush calling for a reduction in military spending of some $US50bn over the next five years during his recent State of the Union address. The pro posed cuts are part of Mr Bush’s overall plan to help the USA out of its own recession, a plan which involves large reductions in spending generally along with tax cuts.

A major portion of the proposed cuts revolve around a significant reduction in the USA’s strategic nuclear weapons arsenal (assuming a similar reduction from Russia), the cancellation of the MX intercontinental ballistic missile programme, a slowdown of other nuclear warhead projects, and the termination of the Northrop B-2 stealth bomber programme after the completion of just 20 aircraft out of the initial planned procurement of 138.

For the first time since World War the USA will have no nuclear weapon projects underway due to the cuts, while the US military generally will have fewer active duty personnel than at any time since 1950.

The Russian government has also announced enormous cuts in defence spending, reductions which will in effect see the end of the Red Army as a world offensive power. More than 80% of the Russian defence budget will be slashed and Russian military manpower will be halved from the current level of 3. 9 million within two years.

Japan and Germany have also announced defence spending reductions, although in Japan’s case these reflect more of a slowing down than an actual reduction. Germany, on the other hand, is planning substantial cuts totalling some 35% between 1993 and 2005. The cuts will see the end of plans to purchase new submarines and tanks and will probably affect upgrades to the MBB BO 105/PAH-1 helicopters and purchases of the new Eurocopter Tiger anti-tank and NH-90 trans- port helicopters. It is not thought that Germany’s participation in the European Fighter Aircraft project will be influenced by the cuts.

Record Domestic Figures:

Australians have been doing more of their flying at home since deregulation, with the year to October 1991 seeing an increase of 22% in domestic air ticket sales compared with a decline of 33% in international ticket sales.

Meanwhile, the December 1991 quarter (refer tables) produced another record period for Australian, Ansett, Eastwest and Compass, the carriers between them carrying just under five million passengers during the three month period. The previous record was set during the September 1991 quarter, during which 4. 7m passengers were carried. In the 1991 calendar year, total passengers carried by the domestic airlines was 16,7m, 2. 4m up on the previous best in 1988.

Average system wide load factor for the 1991 calendar year was 74. 8% against 71. 6% for 1990 whilst the December quarter average stood at a very healthy 79. 5%. Load factor for 1991 (’90 in brackets) for Australian was 77. 8% (72. 5%). Airlink 70. 5%, Ansett Australia 75. 8% (71. 2), Eastwest 68. 7% (74. 2), Ansett Express 65% (66. 5%) and Compass 67. 3%. Eastwest and Express figures were influenced by substantial increases in capacity. For the December quarter Ansett posted a load factor of 81%, Aus- tralian 83. 6%. Eastwest 69. 9%, Airlink 69. 2%, Express 69. 9% and Compass 71. 2%. On an RPK market share basis the Ansett group led in 1991 with 46. 2%, the Australian group recorded 38. 3%, Eastwest 4. 9%, while Compass had 10. 5%.

Caa Responds to Compass Allegations:

In an unusual move, the Civil Aviation Authority has responded to claims by Compass Airlines chief Bryan Grey that the Authority was partly responsible for its failure and deliberately pulled the rug on it at a time which would cause maximum disruption.

A statement by CAA Chief executive Frank Baldwin was issued to counter the “extensive misinformation” which was reported following the airline’s collapse.

Among the points noted were the fact that the placement of liens by the CAA did not cause Compass’ collapse, they were imposed to secure the debt owing to the CAA and did not stop the aircraft flying. The lessors’ own moves did that.

Also, and significantly: “Compass had undertaken to pay overdue debts to the CAA by specific dates in several written agreements Compass frequently failed to honour those payments and the amount owed to the CAA continued to increase”.

A new formal written agreement between Compass and the CAA was signed on December 1, 1991. The agreement contained specific dates for payments and “Compass chose the amounts to be paid and the dates the payments would be made. . . . the first ‘due date chosen by Compass was December 18, 1991. Compass did not pay the amount it nominated. . . and more debts were mounting.

“The agreement quite clearly stated that if the payments were not made according to the schedule, the CAA had an unconditional right to register liens against the aircraft and protect its debt. Contrary to Mr Grey’s reported statement, Compass did not pay the CAA $12m on December 18. It did not even pay the $3m which it had promised under the agreement”.

Northwest Japan Service in Doubt:

The Japanese government is considering withdrawing permission for Northwest Airlines to continue operating its Osaka/ Sydney service which was inaugurated only in October last year (refer p. 22 Nov 91 AA).

The service caused some controversy when it was approved by the Australian government as it left Qantas somewhat out in the cold on the Australia/Japan market and according to National Party leader Mr Tim Fischer “handed on a silver plate consider- able revenue to Northwest Airlines”. It is reported that the Japanese government was never happy with Australia’s decision to approve the three times a week flights which in effect gave a US carrier access to Australia through Japan. Negotiations to resolve the situation were continuing at presstime.

Qantas meanwhile has begun charter services to and from three new Japanese gateways. Beginning last December, Aomiri, Akita and Okayama will be served under the northern winter programme which runs until April. The charters are run in conjunction with the Japanese Tourist Board and the Kinki Nippon Tourist Company. Qantas already operates charters to and from Sapporo and Sendai.