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Some regulatory issues were also raised in the TPC’s report, notably whether Com- pass” prospectus and subsequent public statements were misleading to investors and consumers, whether Compass continued trading when it was insolvent, whether some advertising of discount fares was misleading and whether ticket sales were made when there was no reasonable expectation that the service paid for would be provided. The latter, if proved, is contrary to Section 58 of the Trade Practices Act.

Not surprisingly, Compass founder, Bryan Grey, has rejected the report. A full analysis of the TPC report will appear in the next issue.

Eastwest Planning to Acquire Additional Boeings:

Eastwest Airlines is hoping to acquire an additional two to three Boeing 727-200s over the coming year to boost its capacity and profitability.

The 164 seat all economy 727s are more efficient on the longer haul routes and according to EWA GM Neil Berkett, have the lowest seat kilometre costs of any aircraft operating domestically in Australia. The move will enable Eastwest to be more profitable on its long haul routes where the 727 is far more efficient than the 106 seat 146-300s. This will enable the airline to better utilise the 146s on the airline’s 60 to 90 minute sectors.

Operating costs for the 727 are factored at 10c a seat kilometre versus 12c for the smaller, slower 146. While these costs are actually about 20% lower than either Australian or Ansett Australia’s average seat kilometre costs, the leisure based airline’s yield is also lower.

EWA’S 727s are ex-Ansett aircraft and are in the A registration series of LR (Long Range) models acquired during the early eighties specially to fly non stop between Sydney and Perth, the first Australian domestic jetliners to be able to do so. However, in EWA service they will be used to boost capacity between Melbourne/Coolangatta and Brisbane/Cairns in addition to augmenting peak period capacity on the heavily trafficked Sydney/Coolangatta route.

Though EWA has just 5% of the total domestic traffic base and will for the first time ever this year carry more than one million passengers, the niche operator often dominates on its primary routes. For example it has 40% of the total market share into Coolangatta, almost two thirds of the total. Sydney/Hobart market and 50% into the Whitsundays, where it serves both Proser-pine and nearby Hamilton Island airports. Its latest coup was in officially renaming Maroochydore airport (via ICAO) the Sunshine Coast Airport in addition to extensively boosting frequencies into what is the fastest growing port in the EWA network.

Despite this significant growth the airline has not had a happy record with regards to profitability. It is not expected to make a profit this year, largely as a result of being left financially responsible for three Fokker 100 twinjets in the US for more than half a year and ongoing establishment costs with the recently introduced 146 fleet. The Fokkers were originally ordered by EWA prior to the ATI takeover and had been operated by now defunct Canadian feeder Intair. Fortunately they have now been sold to ILFC.

Next financial year though is looked upon as being extremely viable with the extra capacity available from the Boeings, increas- ing inbound tourism (17% of the airline’s traf- fic are foreign tourists), a reduction in maintenance costs through amalgamating this more effectively within the ATI group and hopefully a return to general economic growth within Australia.

Creditors After Lorenzo:

Continental Airlines’ unsecured creditors have asked a US bankruptcy court for permission to sue the former chairman of Continental Airlines, Frank Lorenzo and another former Continental director, Robert Snedeker.

Lorenzo sold his stake in the airline four months before it went into Chapter 11 bankruptcy protection in December 1990 and the creditors claim he should have known the airline was close to insolvency when the deal was done. Lorenzo and two other Continental executives sold their shares to Scandinavian Airlines System (SAS), the executives each making about $US40m on the deal. The creditors are seeking $US180m in compensatory and punitive damages and want the transaction declared void.

Aeromil Expands North:

Australian Embraer representative Aeromil has established a spare parts subsidiary at Cairns to better cater for the support of Embraer and other regional types in northern Australia and the south-west Pacific region. Currently, some 44 Embraer Bandeirantes are operating in the area, along with Brasilias. The company’s large Sydney spares facility is unaffected by the new operation.

 Parafield and Albury Upgrades:

Albury and Adelaide’s Parafield airports are both subject to current plans for upgrades which will enhance their capabilities in the future.

The Albury City Council and the Albury-Wodonga Development Corporation have appointed aviation consultants Airport Planning Pty Ltd (Airplan) to develop a development strategy for Australia’s 21st busiest airport. Albury City Council will be taking over the airport from the FAC sometime this year. Possibilities include the establishment of aviation related industries at the airport and on adjacent Council owned land plus some minor strengthening of the 1,900m runway’s paving to enable it to take the BAe 146 jetliner.

Meanwhile, the FAC has begun work on upgrading Parafield, which will have two of its runways and taxiways reconstructed and sealed, which in combination with additional drainage works means year round use of these runways and an end to wet weather restrictions as they now apply.

Parafield’s utilisation has increased significantly since the Australian Aviation College was established there. Another

Garuda to Townsville:

north Queensland city looks set to become an important international gateway. This time it’s Townsville, to which services by Indonesian flag carrier Garuda have been approved.

Garuda will begin flying to Townsville in June this year, operating two services per week. The round trips will be: Jakarta/Bali/ Townsville/Caims/Bali/Jakarta and Jakarta/ Bali/Cairns/Townsville/Bali/Jakarta. The new services will mean same day connections to points in Europe, the UK, the Middle East and Asia.

 Boeing Job Cuts:

Boeing is to reduce its workforce by 8,000 due to major defence cuts and a reduction in the 737 airliner production rate (refer Newsdesk this issue).

Of those, 6,500 will be from the Seattle area (where 104,000 are currently employed) and the remainder from the company’s Wichita plant, where the soon to end Grum- man A-6 Intruder rewinging programme is conducted and large 737 sub assemblies are built. The recent US defence cuts have badly affected a number of programmes in which Boeing was involved, including the B-2 bomber, RAH-66 Comanche helicopter, KC-135 tanker re-engining and the Midget- man ICBM.

Cessna’s Good Year:

Cessna had a remarkably good 1991, recording sales of $US818m (up 10% on 1990) and an operating profit of $US114m. At the end of 1991 the company’s order backlog was worth $US1. 04bn, up 2. 5% on the previous year. The Citation family of corporate jets-par- particularly in the smaller models was a strong performer with 113 delivered. Of these, 97 were of the small variety (35 Citation Ils and 62 Citation Vs) and 16 were of the mid-size family (12 Citation Ills and four Vis).

In addition, Cessna delivered 62 Caravan single turboprops and two Caravan II twin turboprops, the latter via Reims Aviation in France.

 Australian Drops First Class:

A sign of the times? Australian Airlines has revamped its cabin, dropping first and restructuring to offer three classes, with the upper one designed to capture the newly cost conscious Australian business traveller.

The airline’s premier class costs the same as what was previously business class but with first class catering, and improved (four abreast) seating and service. Premier class also allows patrons to use the Airline’s Flight Deck lounges free of charge, a considerable attraction in itself as it was previously reserved for first class travelers only.

Meanwhile, Club class is for those paying the full economy fare but with increased leg room and improved service over the old economy class, while the new economy class is for those on discount tickets. It offers basic service and catering. First class accounted for 10% of Australian’s business a decade ago but has nowadays shrunk to just 2%. The changes became effective on March 23. AA Comment: It is hardly surprising that first class has rapidly become extinct given the current economic circumstances of the nation and the excellent business classes that currently exist in Australia. In our April edition last year (p17) we tipped that first class would eventually time expire as it became increasingly irrelevant to the vast majority of the business community. Though Ansett have just recently upgraded their first class cabin it would not be surprising to see them abandoning it if the product is simply not attracting sufficient revenue, and traffic switches to Australian as a result of the changes. Watch this space!

 1991 Disappointing for Airlines:

As expected, the world’s airlines had a less than wonderful 1991 according to figures released by the International Air Transport Association (IATA), although there were signs of a slight recovery in December when pas- senger traffic (measured in revenue pas- senger kilometres – RPKS) increased by 3% over the same month in 1990.

Overall, 1991 recorded a 4% decrease in RPKs compared with 1990 and revenue tonne kilometres (the measure of freight traffic) was down 4%. Available seats remained static and the overall passenger load factor was recorded at 67%.

Ltv Rescue Bid:

The financially troubled LTV Corporation (another victim of US defence spending cuts) may have been. saved following a joint bid to purchase it by Lockheed and Martin Marietta.

It is understood that the Lockheed/Martin Marietta bid is for $US350m and is for LTV’s remaining defence businesses, althought another bid from a consortium comprising Thomson-CSF and the Carlyle Group investment company has also been made. The Lockheed/Martin bid is subject to approval by the bankruptcy court. LTV is the latest incarnation of the famous Vought company. designer of a series of famous naval combat aircraft including the F4U Corsair, F-8 Crusader and A-7 Corsair II.

Hornet Shoots Down Hawkeye:

AUS Navy F/A-18 Hornet fighter recorded a ‘kill of sorts last year when it shot down a Grumman E-2C Hawkeye early warning air-

craft over the Mediterranean Sea.

The Hawkeye’s crew was forced to abandon the aircraft after an uncontrollable engine fire broke out off the coast of Cyprus. It continued flying after the crew baled out, so a Hornet from the same ship, the USS For-restal, was sent out to shoot it down whilst the Hawkeye was still over water. The Hornet’s 20mm rotary cannon was used to do the job.

Adf Flying Training Goes Commercial:

History was made at Tamworth NSW last month when the government’s Defence Commercial Support Programme, a major reform of basic pilot training for the Australian Defence Forces (ADF), was launched.

The British Aerospace-Ansett Flying College at Tamworth has been awarded an initial three year, $3. 6m contract to undertake basic flying training and flight screening for all three services (plus the PNG Defence Force), resulting in a reduction in pilot trainee failure rates and a reduction in costs. The flight screening programme is in itself a new concept for Australia for the first time potential ADF pilots will have their suitability assessed before they officially join the services.

The move means the end of a great Australian aviation institution, No 1 Flying Training School at Point Cook, Vic. , which was the RAAF’s first flying unit. It will now close by the end of the year and its 45 CT-4 trainers will be sold.

The BAe-Ansett College has 12 new CT-4s in service along with orders for 24 Aerospatiale Tobagos and nine Piper Senecas. Candidates who successfully complete the screening/basic training process at Tamworth will then go on to No 2 FTS at Pearce WA where they will fly the Pilatus PC-9. Train- ing will be carried out by civilian instructors but final assessments flights will be conducted by ADF instructors.

 Tourism Reaches New Heights:

Despite recession and the lingering effects of the Gulf War, a record number of overseas tourists visited Australia in 1991, surpassing the previous mark set during Australia’s bicentennial year, 1988.

The number of short term visitors was 2. 37m (2. 25m in 1988) of which more than half a million (or about 25%) were from Japan. New Zealanders accounted for 481,000 of the total and the strongest increase was shown by Korean visitors, up 67% on 1990 figures and a direct result of a large increase in the number of direct flights available. Overall, 1991 was 7% up on the previous year and strong growth averaging 12% was recorded in the latter part of the year.

Conversely, the number of Australians travelling overseas on holidays in 1991 dropped by 0. 3% on 1990 figures. The leading destinations for Australian tourists were. NZ (318,300), the USA (308,700), the UK (220,600), Hong Kong (130,400) and Singapore (100,200). About two million Australians travelled overseas in 1991 of which just over hall were holidaying.

Australian Warns on Reforms:

Australian Airlines’ managing director, Mr John Schaap, has warned that the aviation industry reforms announced by the government in its recent economic statement (refer Airline Affairs and Recce this issue) could indirectly cause a new fares war and a further airline collapse.

Mr Schaap’s warning stems from the fact that more airlines are likely to be operating.

on Australian domestic and international routes and that growth within these areas will be necessary to support them. Also, the fact that Australian Airlines (and Ansett) will be permitted to move into international operations doesn’t necessarily mean that Australian will do so. According to Mr Schaap: “There is a very big difference between hav- ing an opportunity to act, and actually doing so. In this case, to do so would be a very risky exercise, in which we would be seeking a slice of somebody else’s business, and they would be seeking to protect themselves by possibly seeking a slice of our established business. Clearly, the result is a price war which might be good in the short term for the consumer, but which, in the long term, could cause irreparable damage to or even destroy an airline by eroding its existing market. . . ” • PACIFIC AVIATION REGROUPS: General aviation company Pacific Aviation has restructured, reflecting the depressed state of the industry in Australia and overseas.

The company’s ownership has been changed. Previously owned jointly by Ansett Transport Industries and Consolidated Press Holdings, Pacific is now wholly owned by Ansett. Somecost cutting will be achieved by the closure of several small maintenance hangars, maintenance and engineering services now being concentrated on two facilities at Bankstown and Brisbane. Parts distribution, sales and product support activities will continue at all locations.

Final Airline Bids Soon:

Final bids relating to the privatisation of Australian Airlines and Qantas are expected in about July. according to the Minister for Finance, Ralph Willis.

One hundred per cent of Australian Airlines and 49% of Qantas are up for grabs. The sale was first announced in October 1990 but the government’s so-called ‘One Nation’ economic statement changed the status quo somewhat and bidding was reopened last month. A short list of bidders will be established probably next month and the process of sorting them out and receiving final bids should be completed some time in July.

 Air Fares Down:

Deregulation of the Australian airline industry has resulted in a substantial reduction of average air fares, according to a Prices Surveillance Authority report.

The report monitored the fare structures of Australian, Ansett, Eastwest and Compass Airlines between September 1990 and December 1991 and found that average fares between capital cities had dropped by as much as 41%. Conversely, it was discovered that full economy fares had increased by 21% during the same period, although the concern this high figure would usually attract does not apply as well under a quarter of passengers paid full fare.

The Melbourne/Perth and Sydney/Perth routes attracted the biggest drop in average fares (each down 41%) and Adelaide/ Perth reduced by 35%. Sydney/Melbourne recorded a decrease of 30% while the only main route to suffer increased fares was Sydney/Canberra, up 0. 5%. Interestingly, average revenue per passenger kilometre (RPK) fell by 31% on routes contested by Compass and 19% on those it did not.

 Boeing Optimistic:

Despite current difficulties in the airline industry worldwide, Boeing has predicted strong growth over the next 20 years.

According to the manufacturer’s new Current Market Outlook document, which looks ahead to the year 2010, world air traffic measured in revenue passenger miles will nearly triple between now and then and achieve growth averaging 5. 2% per annum. The predictions are based on travel growth rebounding from recent disruptions (as is historically the case), improved financing capability. continuing low oil prices, more efficient use of aircraft by the airlines, consolidation and integration of airlines and improved technology and labour skills. The fastest growing market is expected to be Asia/Pacific at about 8. 6% per annum.

Boeing sees $US857bn worth of new jet airliners being delivered between now and 2010 comprising an average 655 a year until the tum of the century and 580 a year between 2001 and 2010. Of these, 73% will be delivered to accommodate growth and the remainder to replace existing aircraft. It is assumed that 4,200 aircraft will be retired by 2010, or just under 40% of the 10,600 flying today.

AAA Faces Problems:

Australia’s latest proposed new airline, AAA, received national publicity in February when some of its alleged shortcomings were revealed, including a lack of aircraft (DC-9-30s are proposed for an east coast no frills service), a lack of finance, a lack of a qualified chief pilot and a lack of an Air Operator’s Certificate.

The previous financial performance of its principal was also called into question as was the corporate structure of the airline. A shelf company called AAA Airlines was established with five share subscribers but no directors, a technical breach of the Corporations Law.

AAA’s principal, Mr Ron Bartsch, publically stated that three directors (including himself) had been appointed as required by the law but according to Australian Securities Commission records, this was not the case. The US broking and underwriting firm, Forum Financial, was named as the source of AAA’s finances (about $US30m), but this company has itself come under scrutiny.

A well known Sydney broker and under writer has stated that previous dealings with Forum have been unsuccessful and that the large broking fees demanded were not returned. He considered that Forum did not have any money to invest.

Australia/Us Radar Agreement:

Australia and the United States have signed a co-operative agreement which will result in enhanced performance for the Jindalee over-the-horizon-radar (OTHR).

Under the new agreement, two OTHR systems will be installed near Longreach in Queensland and Kalgoorlie in Western Australia. A $679m contract has been placed with Telecom Australia and the co-operative agreement with the USA covers research and development, testing, evaluation, command and control and other aspects of the development and operational use of radars and associated technologies. A separate joint programme covers the study of the OTHR performance data over a wide range of conditions.

Tampico Sells in USA:

Continuing its success in the airline pilot training market, Aerospatiale’s TB series of light aircraft has recorded another major sale.

The Emery-Riddle Aeronautical University at Daytona Beach USA has ordered 14 TB9 Tampico Clubs, delivery of which is now underway. Further orders are expected. Other significant training sales won by the TB series in recent years include orders by the Australian Aviation College (ten TB10. Tobagos and six TB20 Trinidads), China (28 Trinidads) and schools in France, India and Tunisia. The newly established British Aerospace/Ansett Flying College at Tamworth NSW has 24 Tobagos on order (plus six options), the first of which was delivered in early March.

Of the more than 1,450 Tampicos, Tobagos and Trinidads delivered so far, over 400 are used by some 20 professional flying training organisations, including six in the USA. Aerospatiale also has plans to establish an assembly line in the USA at a new facility near the company’s Grand Prairie, Texas, American headquarters. The full range of TBS will be built there, with the first scheduled to come off the line later this year.