Airline Affairs

In addition, common user airport terminals at Sydney and Melbourne will be established (to assist new entrant domestic airlines) and the construction of new international terminals at Melbourne and Brisbane

airports will be brought forward. Charter flights, which for years have been subject to official disapproval, are now encouraged.

The keys to the plan are the in effect merger of Australian and New Zealand air services and the removal of the barriers which define national and international operators within that market. As it stands, these plans are subject to New Zealand government approval but Ansett and Australian Airlines are almost certain to be flying the Tasman by somewhere near the specified date.

As for Qantas, it will initially be restricted to selling only spare capacity on the existing domestic sectors of its international services, which at the moment means about 20,000 seats per week or about 3% of the market. By comparison, Compass Airlines had a 12% share of the total market (there were many routes it did not contest) before it failed last December. The restrictions on Qantas have come about as a result of pressure from the chiefs of the two domestic airlines.

The final result of all this will be a single aviation market which will allow Australian and New Zealand airlines to operate within the two countries and between them. Australian freight carriers will also be allowed to fly international routes.

Mr Keating’s statement also confirmed the government’s commitment to the privatisation of Qantas and Australian Airlines. Cross ownership is finally possible with Qantas. now able to buy into Australian (or Ansett, for that matter) and the domestics able to purchase part of the 49% of Qantas which is for sale.

For its part, Qantas has welcomed the general principles behind the government’s policy but has also warned of potential prob- lems. The airline’s chief executive, Mr John Ward, praised the breaking down of the artificial barrier between domestic and international aviation as a major step forward, particularly if it carried through to the integration of terminals.

Mr Ward also pointed out some potential for danger: “In implementing a multiple designation policy, the government will need to take care that it does not fragment Australia’s resources while the world is going the other way. This would not only weaken our current position, but will put a question mark against the long term participation by Aus-

tralia in international aviation. It also carries the longer term danger of sapping the strength of domestic carriers, with the risk of undermining competition within our domestic industry”.

Generally, the statement as it applies to aviation seems sound, although some observers have noted that the implementation dates seem to be a little optimistic in some cases. Worthy of note is the fact that similar policies have been advocated by the Opposition for some time.

Kendell Stays With Saab:

Wagga’s Kendell Airlines – the recent recipient of the prestigious Air Transport World ‘Regional Airline of the Year’ award and the subject of our first Airline Profile elsewhere in this issue – has taken options on two Saab 2000 regional turboprop aircraft.

The aircraft are scheduled for delivery in 1994 and will be used to boost capacity on the airline’s busier routes and expand hub bypassing sectors from bases in Adelaide and Melbourne. The Saab 2000 is a stretched, 50 passenger development of the 35 seat Saab 340, of which Kendell has six in service. Very fast for a turboprop, the 2000 will be capable cruising at up to 370 knots (685km/h). The first example was rolled out in December last year and first flight is imminent. First delivery will be to Switzerland’s Crossair (also the first 340 customer) in mid 1993 and orders and options currently stand at 194.

Competition Lowers Prices:

A Prices Surveillance Authority survey has not surprisingly revealed that the air fares on routes served by Compass Airlines were proportionately lower than those on which the defunct operator did not fly.

PSA figures show that overall airfares in the December 1991 quarter were 32% lower than the same period of 1990. The discounting put many new travellers into aircraft, the number increasing by 48% between the December quarters of 1990 and 1991. After September 1990, average fares fell 41% on the Melbourne/Perth and Perth/Sydney routes, 30% on Melbourne/Sydney and Brisbane/Melbourne and 27% on Brisbane/ Sydney.

Significantly, the PSA notes that “deeper and more widespread discounting may have been prompted by the recession, the worsening of Compass’ financial position and the extra capacity introduced during the September quarter”.

 Australian Loses on Resorts:

Unseasonally bad weather has been cited as the main reason for a loss of $7. 1m on Australian Airlines’ Queensland resort operations in 1990-91.

The loss is nearly twice that reported in the previous year and although the occupancy rate increased slightly in 1990-91 it was still just under 50%. Australian owns seven resorts in Queensland of which three- Bedarra Hideaway, Bedarra Bay and Capel York Wilderness – are for sale.

Qantas Chief Cites Effects of Gulf War on Profitability:

Qantas recorded an after tax profit of $44. 3m for the 1990-91 financial year despite the fact that the Gulf War cost the airline about $200m. Its pre tax profit of $81m was helped considerably by the sale of aircraft worth $348m, although this was partly offset by the airline’s redundancy programme, which cost $109m.

Qantas’ chairman, Mr Bill Dix, pointed out the effect of the Gulf War on the airline’s performance: “As the company was emerging from the aftermath of the Australian domestic pilots’ dispute, war in the Gulf had a devastating effect. The price of jet fuel tripled, resulting in a cost blowout of some $118m net of the positive impact of the company’s fuel hedging programme.

“Once hostilities commenced, airlines were affected world wide as passengers, particularly those on business, re-evaluated their needs to travel, resulting, for Qantas, in an estimated revenue shortfall of some $160m. Although costs were tailored to demand by, among other things, rationalising services and deferring discretionary expenditure, profits were reduced by an estimated $200m directly as a result of the war”.

Polynesian to Lease 737:

Western Samoa’s Polynesian Airlines will lease a Boeing 737-300 from International Lease and Finance Company (LFC) for use when Ansett withdraws its involvement in the airline this month.

The 737 will replace the previously used Ansett 727-200 on Polynesian’s routes from Apia to Auckland, Sydney, Rarotonga and Tonga. A second hand 737 will be supplied initially, but this will be replaced by a new air- craft in September. The lease period is seven years. The Western Samoan government will now run the airline itself, rather than engage the services of another operator to provide management expertise, as had been the case with Ansett’s involvement.

Continental Reduces Services:

Low yields from traffic originating in Australia and a lack of growth from the USA have forced Continental Airlines to cut back on services to Brisbane and Melbourne from June this year.

Melbourne/Honolulu services will be reduced from seven to five per week (and will route via Auckland rather than direct) and Brisbane/Honolulu flights will fall from three to two per week. The latter will now use Boeing 747s instead of DC-10s, meaning only a 10% reduction in capacity. Flights to Sydney remain intact.

Meanwhile, Continental – which is operating under Chapter 11 bankruptcy protection – has presented a reorganisation plan which will reduce long term liabilities by $US4. 1bn and may allow it to emerge from Chapter 11 by the middle of the year. Included in the plan is the issue of 50 million new shares of common stock to unsecured creditors, who will in effect become Continental’s new owners. The new company will be authorised to issue up to 200 million common and 100 million preferred shares. The above requires the elimination of all existing common and pre- ferred stock and subordinated debt.

Tassie Tourism Booming:

Tasmania seems to be a favourite for tourists at the moment, if advanced bookings for this year’s Easter holidays are any indication.

Forward bookings with Australian Airlines for travel to Hobart until the beginning of May are 79% up on the same period last year and Launceston bookings are 35% better. All this is on top of a 44% increase on Hobart traffic in 1991 compared with 1990 and a 32% increase to Launceston. The airlines normally cutback on their summer schedules to Tasmania in the autumn/winter period but this year summer flight frequencies will be retained offering excellent holiday bargains. to the Apple Isle.

 More Canberra/Brisbane Flights as Australian Boosts Schedules:

Australian Airlines has doubled its weekly direct flights from Canberra to Brisbane to six, largely replacing Boeing 737s with regional subsidiary Australian Airlink’s smaller BAe 1468.

The new schedule is part of a programme to rationalise the airline’s use of feeder aircraft operated by its subsidiaries. Until now, Australian operated three direct 737 flights from Canberra to Brisbane per week and one return. The Monday and Wednesday 737 services have ended, leaving a single service with the Boeing on Fridays only, with a return flight on Sunday. The 1468 will be used on the other five weekly flights and a fourth aircraft will be added to the fleet to accommodate these and the airline’s routes within Queensland and to the Northern Territory and Perth. Another Australian Airlines feeder subsidiary, Eastern, has also increased its Sydney/ Canberra services from six to eight per week. (Let’s hope they start to give some meaningful discounts on them! Ed) Meanwhile, Australian Airlines is increasing its frequencies generally, much of which will take up the slack left by the demise of Compass. Increases included in the airline’s latest timetable are direct Melbourne/Bris- bane flights up from 34 to 48 per week, Bris- bane/Melbourne 33 to 43, Sydney/Brisbane from 71 to 95, Brisbane/Sydney 73 to 100, Melbourne/Sydney 106 to 122, Sydney/ Melbourne 114 to 132, Sydney/Gold Coast (and back) 34 to 44, Adelaide/Sydney 28 to 30 and Sydney/Adelaide 30 to 35.

SORRY, I’LL READ THAT AGAIN. . . . How’s this for a potential identity crisis? Earlier this year an airline passenger booked a flight to Perth through Australian Airlines. The flight was conducted by a Qantas aircraft with Qantas staff, chartered by Ansett but carrying Australian and former Compass passengers. And the flight services director was called Brian Grey!

Airliners Sales Slow:

Manufacturers of jet airliners recorded their lowest number of sales in 1991 since 1984, and against the relative boom year of 1990, the figure was down 62%, 467 last year, compared with 1,218.

These figures reflect gross sales but not the effects of cancellations, a major factor in 1991. On that basis, net orders were only 329 in 1991 as against 1,162 in 1990, a drop of no less than 72%.

As can be seen from the accompanying tables, all manufacturers except Canadair suffered from order cancellations. McDonnell Douglas was the worst hit, recording only 44 firm orders and having that poor performance worsened by 72 cancellations for a net result of minus 28 orders for the year.

The best selling jet airliner in 1991 was the Boeing 767 with 77 (net) followed by the Boeing 757 (41) and Airbus A300 (40). Again on a net basis, nil sales were recorded by the Airbus A310 while negative figures were. recorded by the McDonnell Douglas MD-80 and MD-90.

Taxman Looks at Frequent Flyers:

The Australian Taxation Office has been looking at the airlines’ frequent flyer programmes and has decided that fringe benefits tax should not apply to corporations which use them, ruling that it is the airline and not the employer which is giving the benefits. But, the ATO is still examining whether or not members of the programmes should pay income tax on the free flights and gifts they receive. FBT already applies to private membership of airline clubs such as Flight Deck and Golden Wing.

Simple Arithmetic:

Couldn’t resist pinching this piece from our colleague Uncle Roger at Flight International. If it wasn’t so serious it’d be funny- or is it the other way around? Under the heading “Rogernomics, Lesson 1,992,001, Air Fares”. . . “94% of all November 1991 airline passengers in the USA flew at a discount. The average discount from the full economy tariff was 68% – ie, 94% of pas- sengers pay 32% of the full price. This is called competition as a result of deregulation and the triumph of market forces. This is why the biggest and most successful area of post-deregulation competition in the USA is in the bankruptcy administration sector. . . ”

El Al Eyes Australia:

Israel’s airline, El Al, plans to start its fin services to Australia later this year as part its desire to expand into the Asia-Pacific Market generally.

If current plans are realised, the airline fly to Australia via the Seychelles Islands the Indian Ocean, although the (reportedly Melbourne) has not bee announced. Unconfirmed Israeli pres reports have stated that flights from Israel Australia could begin as early as this with a return fare of about $2,200. El also start charter flights between Tokyo an Tel Aviv later this year and flights to China a also a possibility.

 Airlines Share Ticketing:

Following approval by the Trade Practices Commission, Australia’s three major airlines – Qantas, Australian and Ansett – will merge their various separate computerised booking services into one.

The result should be easier and more efficient booking of seats through travel agents, who will have flight and fares information available from a single source. There were concerns that the arrangement will make life difficult for new airlines and objections were received from two smaller computer booking systems. The TPC’s decision was made despite the fact that it endorses a concentration of market power. Ansett and Australian already have a joint computer ticketing service whilst Qantas has its own.

Australian’s Gold Coast Record:

Australian Airlines set a new record in December 1991 when it carried more than 60,000 passengers into and out of the Gold Coast. The previous record was 54,000 passengers, set in July 1988.

Compared with December 1990, passenger departures increased by 62% and arrivals by 51%, the result of Australian’s ability to offer competitively priced packages for the tourist. The three major airlines can all offer such incentives through their extensive and long established affiliations with resorts, hotels and tourist attractions, a field in which the recently defunct Compass – and any other startup airline – could not compete.

Brierley Increases Anz Stake:

Brierley Investments Ltd has increased its interest in Air New Zealand to 42. 5% following its purchase of the 5% previously owned by American Airlines. Brierley paid $NZ1. 80 ($A1. 30) per share.

The arrangement has a direct effect on Qantas as the Australian airline (which has 19. 9% of ANZ’s voting stock) had previously agreed to underwrite American Airlines holdings to the value of $NZ1. 92 should they decide to sell. A similar arrangement covers Japan Airlines’ 5% holdings in ANZ. Qantas’ liability on the deal is expected to be about $NZ2. 5m.

American Airlines had previously intended selling its shareholding directly to Qantas, but the move was blocked by the New Zealand Commerce Commission. Air New Zealand has just recorded a profit after a period of losses.

Ruskis Organise Air Services:

Faced with considerable disruption to air services within the former Soviet Union following recent political upheaval, the members of the Commonwealth of Independent States have formed the Interstate Aviation Committee to ensure the continuation of aviation services.

The committee’s aim is to maintain reliable air services and ensure safety standards and will oversee operation of the various republics’ airspace as a single unified system which meets ICAO (International Civil Aviation Organisation) standards. Before the of the committee there was concern that nationalist sentiment would cause individual republics to split the airspace by exerting greater controlover their own sector.

DC-3 Australia Drops Sydney:

DC-3 Australia has closed its Sydney operation due to financial constraints.

The company had its office, and several DC-3s positioned at Bankstown for several years. Sources have stated that the company will continue in Cairns, where concentrated tourism is still proving lucrative for the package tours that the company operates from its Cairns base. (Peter Gamble)

Federal Aviation Administration Atc Personnel Visit Australia on Fact-Finding Mission:

During late February two officers of the Federal Aviation Administration visited Australia at the invitation of the CAA.

The visitors were here to discuss ways in which terminal air traffic operations could be improved to reduce aircraft delays and reduce the workload of air traffic controllers.

Among suggestions made by the visitors include enhancing flow control by improving vectoring techniques and speed control. They say “Users must be willing to reduce speeds and make traffic patterns a little bit longer. ” The FAA officers also suggest that “the air traffic controller must be taken out of the cockpit”, intervening less in approach procedures and allowing the flight management systems of the aircraft to operate intercepts. Separation would remain the responsibility of the ATC. Minimising verbal between pilot and air traffic controller and replacing it with less distracting automated or electronic information systems reduces the chance of error of interpretation, and frees up the flight crew to fly the aircraft. The CAA, as a result of the interaction with the FAA, may reconsider the division of work between the pilot and the controller.

communication The FAA will also be able to report back to the US some techniques in use in Australia, which may benefit their operations including Simops which is currently in use at Sydney airport. The FAA report will be presented to the CAA in late March. (Julian Green)

Swissair’s Poor 1991:

Swissair had a disappointing year in 1991, recording a notable decline in business and its first reduction in passenger traffic in eight years.

Swissair’s passenger numbers dropped by 8. 2% to 7. 99 million in 1991, Middle East routes understandably recording the biggest decline (28%) followed by Japan (27%) and the Asian market generally (11%). North African and European routes showed a decline of 7. 3% and North American routes 1. 5%. Swissair plans to initiate services to Australia in 1993 using MD-118.