Airline Affairs

The situation for Australian aviation/ aerospace industry workers in recent times. has not been a happy one. Qantas has already shed just over 3000 jobs in the past year whilst Australian has slashed 1200 positions. Nearly 1100 jobs were lost when Compass closed last December and the Ansett group has shed more than 1000 position these past two years whilst at least a further 2000 positions have been lost within GA and the regionals since mid 1990. The CAA has also shed nearly 2000 posi- tions this past year with more to come while even the ADF is trimming and indus- try (ASTA/HdH) has also trimmed more than a 1000 positions since 1990. The only bright spot was the recent employment of around 600 with the new Compass and the prospect of several hundred more positions becoming available with that airline early next year as additional aircraft enter service.

Qantas will run Australian as a fully owned subsidiary with a three member board. All members of the previous Australian board have been forced to resign and only the chief executive John Schaap retains his position. The other two board members will be Qantas chairman Bill Dix and chief executive John Ward.

The new combined airline has a staff of 27,000 and last year earned $5. 7bn in revenue. The amalgamation moves Qantas to the world’s 11th largest carrier in terms of RPKs and 15th in terms of airline sales. The fleet will be concentrated on Boeing 747s, 767s and 737s.

The first phase in the privatisation of Qantas has already begun with the granting of access to financial records for prospective trade buyers, with bids to be submitted by the end of November. The public float of 51% and the remaining unsold trade portion will be sold in a public float due around April next year.

Icao Forecasts Five Per Cent Annual Traffic Growth:

The International Civil Aviation Organisation has forecast an annual growth of five per cent through to the end of the decade, despite a worldwide decline of three and a half per cent in passenger kilometres during 1991.

Forecasts released by ICAO predict in the 1990 to 2001 period the annual total of international and domestic departures will rise by nearly 18 million, passengers uplifted increasing by half and freight carried by three fifths, rising to 29 million tonnes annually. Trans-Pacific (8%) and Europe-Asia Pacific (7. 5%) traffic are expected to be the major growth areas, as is traffic within the Asia Pacific region (8%). Asia Pacific freight growth is expected to be as high as 10% a year over the 1990-2001 period.

 Australian Reports Loss:

Australian Airlines has announced an operating loss of $38. 5m for the 1991/92 financial year on a revenue of $1. 5bn, compared with a profit of $6. 3m for the previous year.

After tax and abnormals, the loss amounts to $49. 3m. Abnormals included provisions for employee redundancy costs and diminution of engines and spares value, while $0. 98m was incurred in expenses for the preparation for privitisation. Interest fees of $86. 8m were incurred, although a tax credit of $20. 3m was applied for the year. An alarming figure released by the airline was its worsening debt to equity ratio of 86:14, an increase over the 81:19 gearing ratio of the previous year. The dehabilitating effects of such a debt burden is illustrated by the fact that if this figure was reduced to a ratio of 60:40, some $25m would be saved. Much of the blame for this situation can be placed on this and preceding governments for failing to properly capitalise the airline.

An operating profit before interest, tax and abnormals of $48. 3m was recorded, giving some indication of the airline’s performance at a time when load factors were at record highs and yields at record lows. This of course is a reflection of the highly competitive post deregulation domestic airline market and is reflected in reported Ansett losses of $66. 4m and a massive $142. 6m for Eastwest (refer separate item). AA Comment: Australian’s loss this last financial year comes as a surprise to most industry observers. Given the strength of its performance it must be asked honestly where the airline is going wrong.

Obviously the high level of debt is a major problem but that is not the total answer. For instance, how does an airline with an average 91/92 load factor of 82. 7% (a world record?) with a growth in RPKs that year of a staggering 29. 7% in addition to being the only airline in Australia to record an increase in market share during the year go on to record a loss? Obviously yield is down due to fare discounting and a reduction in full fare business traffic. That is nothing new. However, if you still cannot make a profit on load factors in the eighties and a 30% annual growth in traffic then what do you need to be in the black? We sincerely hope the new board at Qantas will be able to sort this out and get Australian back into profit again as a viable domestic arm of the international carrier.

Us Fare War Continues:

As if the US airlines weren’t suffering enough huge and largely self inflicted losses due to a discounting frenzy over the northern hemisphere summer (refer p14 Sept 92 AA), it seems they are determined to continue losing into the autumn and winter months.

Northwest Airlines has introduced the latest round of cuts by reducing fares to five European destinations (from the USA) by 30-45%, and American, United and Delta are ‘selectively matching them. United recently went one step further, offering 30% reductions on trips between the US mainland and Hawaii.

All this is encouraging more people to fly, but it’s the old story-tickets are being sold at a price which results in little or no yield, with inevitable results. Analysts consider that industry operating losses of $US2. 2bn in 1991 will be matched this year. Airlines operating under Chapter 11 bankruptcy protection have been accused of underpricing their fares in a desperate attempt to generate cashflow, with the flow on affecting everyone.

Many consider that by this time next year there will be one or two fewer major US airlines in operation, joining Eastern, Midway and PanAm in oblivion.

 Air Pacific Leases Anz 747:

Fiji’s international airline, Air Pacific, will lease an Air New Zealand Boeing 747 when the similar current agreement with Qantas expires in August next year.

The aircraft will be leased for three years with options to extend and will be flown by Air Pacific crews. Air New Zealand will provide training for pilots, cabin crews and engineers, and will initially provide most maintenance, gradually handing over much of this responsibility as time goes on.

Air Pacific is also building a new maintenance base at Nadi. Other commercial agreements between Air Pacific and Qantas will continue.

Airlines Buy Time:

Bankrupt US airlines America West, Continental and TWA- all currently operating under Chapter 11 protection-have been attempting to buy some extra time to sort out their financial woes.

America West has sought court approval for an additional $US43-60m debtor-in-possession finance including from lessor GPA, which has 16 Airbus A320s placed with the airline and Ansett which as a 27% shareholder is providing $10m in assistance.

Continental also succeeded in winning extra time to work out its recovery plan, a vital part of which is the planned sale of 72% of its stock to a consortium led by US investor Charles Hurwitz. Hurwitz has offered $US350m, while a rival bid has come from Mexican Alfredo Brener, who has offered $US385m for control of the airline although as a non-US citizen he is entitled to only 49%.

Meanwhile, TWA- which went into voluntary Chapter 11-has been given until the middle of this month to sort out its problems. Its plan is to hand over control to employees and creditors, but a $US1. 2bn shortfall in the airline’s pension fund is proving a difficult hurdle to overcome.

Alice Springs Customs Services:

The Northern Territory is to pay up to $180,000 during the current financial year to provide a Customs service at Alice Springs airport.

The move comes as a result of British charter operator Britannia Airways’ plans to operate more than 60 flights to the Alice over the next 18 months, bringing some 14,000 tourists to the area.

The airline will operate 24 flights to Alice Springs or Darwin between November this year and March 1993 and possibly twice that number in the same period of 1993-94. Between them, the flights could generate some $3. 7m in the Central Australia region, making the $180,000 investment well worthwhile. Initially, Customs officers from Darwin will be sent to Alice Springs to service the Britannia flights.

Ansett Links With Big Four:

Ansett Australia has announced trade alliances with four of the world’s leading airlines, All Nippon, British Airways, Cathay Pacific and United.

The move, which counters the Qantas/ Australian merger, will see Ansett and the airlines extend preferential selling agreements, undertake joint advertising campaigns, schedule changes for passenger and freight movements for better connections and the use of Ansett’s selling network for the airlines. Last year, Ansett’s 300 plus sales outlets sold over $350m in international tickets. Specific details of the plans are not yet available, although one agreement to code share exists, and frequent flyer schemes will be expanded to accommodate the new deals. This would see the international airlines’ frequent flyers being able to travel with Ansett for free, and Ansett frequent flyers flying with the international carriers and gaining points whilst on their long haul flights. Ansett says the deal will be mutually beneficial for all involved as it will help combat the strength of the new Qantas. The deal with British Airways in particular would imply that the carrier no longer wishes to buy into Qantas though this has not been officially ruled out by either party. AA Comment: Gaining as marketing partners four of the world’s strongest international carriers is a smart move for embattled Ansett. On the surface it can only do all parties good though there is a potential downside in that Ansett will have to be particularly careful that it doesn’t become a dumping ground for overseas carriers frequent flyers points.

When you consider that Joe Citizen from Chicago might fly to Sydney with United (just as an example) gaining a bag full of additional frequent flyer points on the way and using his United accumulated points (for which he has paid that airline) only to use most of those accumulated points to travel within Australia for free then it does not take an economic genius to see that this is not about to boost Ansett’s yield very much.

The other point is that Australians flying internationally with the four designated

carriers will greatly increase their own personal capability of also flying domestically gratis courtesy of the massive boost a typical Australia/Europe journey would give their domestic point status. It could be that two or three years from now that Ansett may well have a nightmare on its hands in terms of unredeemed frequent flyer points, something that has been a major problem for the US carriers since the schemes were first introduced.

Runway Contract Awarded:

Work on the construction of Sydney Airport’s parallel runway was due to have begun by the time this issue goes on sale following the awarding of the construction contract to Sydney based consortium Baulderstone Hornibrook-Dredeco.

The $200m contract was awarded after an intense four month evaluation of the six bids received. The Federal Airports Corporation has emphasised the fact that environmental aspects were carefully considered before the contract was awarded. Environmental impact studies associated with the runway have already cost more than $9m and have been the most extensive (and expensive) ever conducted in Australia. In addition, a further $27m will be spent on environmental protection and monitoring during construction.

The project will create jobs for 250 people on site with hundreds more employed in a variety of related industries. The runway is scheduled to become operational in June 1995.

 Better Baggage Handling:

Qantas is installing an advanced baggage handling system in Sydney Airport’s new international terminal extensions, due to open in December.

The system is capable of handling two bags every second, or 7,200 per hour using laser readers to scan baggage tags and automatically divert each piece to the correct flight. The system is the only one in the world which is directly linked to the check in counter computer terminals, allowing the location of the baggage to be known at any time. Hopefully, the system will also help reduce losses and misplacements.

Ansett and Tnt Losses Continue:

Both Ansett and its co-parent company TNT have recorded disappointing results for the 1991/92 financial year.

Ansett’s loss for the year is $66. 4m while subsidiary Eastwest Airlines has lost a stunning $142. 6m. Eastwest’s losses are not expected to reduce but continue. There has been considerable industry speculation about Eastwest’s long term future in recent months.

TNT has been losing heavily for the past two years, its 1990/91 loss of $A199. 47m improving only slightly to $A195. 42m this year. This loss was considerably worse than had been predicted, and was exacerbated by the performance of Ansett and Eastwest. Restructuring is expected to help next year, while positive signs include a reduction in debt from $1. 38bn to $1. 05bn and a decrease in net interest payments from $167. 3m to $110. 2m.

Meanwhile, Ansett’s other co-owner, Rupert Murdoch’s News Corporation, has recorded a substantial turnaround in 1991/92, announcing a profit of $501m compared with a loss of $393m the previous year. News also has plans to raise $2. 3bn in long term public debt so as to reduce its bank debt and analysts are predicting the eventual sale of its half of Ansett and companies though it has reaffirmed its commitment to Ansett for the time being. In other Ansett news, the airline has recorded the first overseas sale of its ANTARES pricing software to Lufthansa, something which could promote further sales to other airlines. ANTARES copes with rapid changes in ticket pricing, enabling an airline’s analysts to make thousands of pricing changes per day if necessary in a deregulated market. The record is reported as being 25,000 changes in a 24 hour period.

Vertical Lift:

Here’s one straight out of Hollywood. . . in August this year four thieves carried out a robbery with what has been described as “military style precision”. Their target was an Air Inter jetliner at a Corsican airport and the prize a bag containing seven million French francs (about $A1. 8m) in cash. The robbers hijacked a helicopter and just before the airliner was due to takeoff, forced the helicopter pilot to land in front of the Air Inter aircraft, preventing it from moving. The robbers then entered the aircraft’s baggage compartment, stole the bag and made their escape. None of the 90 passengers on the airliner were injured.

 Rockdale Council Concedes:

The Rockdale Council has dropped out of a court action against the FAC trying to prevent the construction of the third runway at KSA.

The council’s withdrawal from court action is in return for an FAC promise to pay for any damage caused to Lady Robinson’s Beach during the construction of the new runway. The FAC and Rockdale deal means that the only local authority legally challenging the third runway is the Botany Council. This Council is arguing that the FAC must complete a new environmental impact study on the planned dredging of sand from Botany Bay, under NSW planning and environment laws.

Back to the Future:

The more things change, the more they stay the same. . . a new bullet train service between Tokyo and Yamagata could force All Nippon Airways (ANA) to reduce or even cut air services between the two centres, due to the comparative times for the journey.

By air, flight time is less than one hour but the extra time involved in travelling to and from the airports, going through check in, security and so on adds at least an hour to the journey. The rail journey takes about 2. 5 hours but is also less expensive than the airfare. ANA has already stopped flying on three other routes out of Tokyo because of business being lost to the Shinkansen ‘bullet trains’.

Delta Defers Orders:

Delta Air Lines plans to save as much as $US1bn by deferring firm aircraft orders due to be delivered during 1993/94.

The cost cutting measure is in addition to the already announced $US5bn reduction in outlays on capital equipment announced earlier in the year. Before these moves were announced, Delta had 452 aircraft on order, and any substantial deferrals and/or cancellations would have a tremendous effect on the world’s aircraft manufac turers order books. The measures are indicative of the currently fiercely competitive US domestic airline market.

Ansett’s Revives CRM Programme:

Pilots from Ansett Australia and affiliated airlines will now undergo Crew Resource Management (CRM) training to further improve the airline’s safety standards.

CRM training will now be introduced into Ansett’s regular aircrew training programme on a permanent basis and will strive to improve pilot interaction during emergencies. Lack of effective crew coordination and flight deck management has been the most probable cause of a large number of major aircraft accidents, including the Kegworth 737 crash (refer Air Safety p60 March 92 AA). Boeing data in fact attributes 70% of all major aircraft between 1981 and 1991 to human error.

The NASA-Ames Research Centre has found that human error more often than not reflected the failure of proper cockpit communication. Ansett has been involved in Human Factors training in the past but has now fully integrated CRM into its training procedures.

New Anz Achieves Flights Beyond Australia:

Air New Zealand has announced that it will commence direct flights between Brisbane and Taipei and Brisbane/Bangkok.

The new flights are the first time ANZ has exercised its new beyond rights from Australia, part of the dramatic aviation reforms introduced by the Australian government earlier in the year. The rights mean that Air New Zealand can now pick up and drop off passengers in an Australian city before flying on to a third country. The carrier sees Brisbane as an important new gateway for its flights to Asia. Flights through Brisbane to the two ports will commence during November.

Ansett to Malaysia:

Following on from the announcement of a new alliance with four international carriers, (refer separate item) Ansett has revealed that it has lodged an application with the newly formed International Air Services Commission (IASC) to be granted rights to fly to Malaysia The application is the first instance of an Australian domestic carrier officially registering its desire to fly international routes since the sweeping aviation reforms introduced by the government earlier in the year. Ansett intends to move into international operations carefully by first applying to fly to six Asian countries as rights become available. Besides Malaysia, the first country for which the commission has called for applications, Ansett hopes to operate to Indonesia, Thailand, Singapore, Hong Kong and Japan. The IASC has also advertised for applications for flights to China, India, Sri Lanka, Myanmar and Brunel, although not surprisingly Ansett has advised that it does not wish to operate to these countries.

Malaysia is seen as an important market for Australia, with traffic between the two countries (not including through traffic) growing by 11% annually. According to the Australian Tourist Commission 185,000 Malaysian tourists will visit Australia each year by the end of the decade, four times the current figure. Growing trade between the two countries is currently worth $2 billion each year and over one fifth of this is carried by air.

Malaysia Airlines has also recently announced new services between Kuala Lumpar and Perth, Adelaide and Darwin which will come into effect this month. A fourth weekly flight from Perth will operate each Saturday, while a second additional service will operate to both Adelaide and Darwin. The Adelaide flight will fly to Malaysia non stop, while the new Darwin frequency will operate on Tuesday using a 737. All new flights will connect with the airline’s KL/London flight.

By Limo to the Airport:

Malaysia Airlines (MAS) first and business class passengers who live within 60 kilo-metres of their departure airport in Australia will now be able make one of the worst parts of any journey-travelling from home to the airport – much more pleasant.

A complimentary limousine service is being provided by the airline for those passengers following the introduction of an arrangement with Hughes Chauffeured Limousines. The arrangement applies to all six mainland capital cities now served by MAS, although the service is extended in NSW and Queensland where passengers from Wollongong and the Gold Coast/Sunshine Coast areas will be eligible.

New Airworthiness Requirement Problems:

A new airworthiness requirement for airliners which covers passenger head impact safety is causing problems with designers and threatens the on time certification of several projects. The rules are designed to minimise injuries to passengers sitting immediately behind vertical cabin surfaces such as dividers, bulkheads and galleys.

Designers of the Boeing 777, Canadair Regional Jet and BAe Jetstream 41 have found it impossible to meet the required standard so far, with the result that US certification of the Jetstream 41 is being delayed from next month to February 1993 and the manufacturer is seeking a temporary exemption from the British Civil Aviation Authority.

Boeing has also requested a temporary exemption (pending a solution) from the European Joint Airworthiness Authorities and the US FAA while at the time of writing, Canadair’s planned certification of the R in the USA last month was in doubt. The regulation applies only to aircraft for which certification applications were made after June 16 1988, which technically excludes the MD-11 and Airbus A330/340, although the latter company has indicated it will comply.

Various methods for compliance are being investigated by manufacturers, ranging from harness seat belts to air bags, energy absorbing bulkheads and aft facing. Jeats.

 Ansett Computer Travel Planner:

Ansett has developed a computerised timetable which allows travellers to plan not only departures and arrivals, but also displays hotel and hire car companies, alerts secretaries to special needs and reminds them where the airline’s travel clubs are based in their point of call.

The Ansett Travel Planner replaces the airline’s normal timetable and is available on computer disk to all travellers on request from Ansett. It consists of four main categories, the timetable, an Itinerary Manager, a Traveller’s Database which records special requirements, and an Information Centre which details various aspects of travel ranging from hotel rates and luggage guidelines, discount fares and frequent flyer details.

24,000 disks were pressed last March and supplies have almost run out, the planner proving popular with executives, travel agencies and individuals who fly frequently.

Airport Tunnel for Ksa?:

New plans to streamline the operation of Sydney airport has seen a proposal for a 1km tunnel extending under the main runway, linking the international and domestic terminals.

This proposal would see a conveyor walkway or rail shuttle operating between the two terminals, cutting travel time to just one minute. Tokyo’s Narita airport will soon be introducing a similar shuttle. An automatic shuttle could carry 150 passengers between the terminals in just over a minute at 20kmh, with shuttles leaving every minute. This would dramatically cut the time and money spent taken to transit between the two terminals, which is about 30 minutes including waiting time.

The tunnel proposal is part of a strategy to transform the airport into a smoother, more efficient operation, although complications already have arisen with the recent merger of Qantas and Australian and a plan to combine the two operations terminal usage using an extension to the international terminal. Ansett’s international aspirations could also see their Sydney terminal being used in a different form whilst the potential of a vacated Australian domestic terminal could see this facility become the long awaited common user terminal. The problem here of course is that this terminal is many times larger than economically needed, even for several new entrants, whilst Australian is currently committed to spending many millions of dollars on improvements that have been firmly contracted for in recent months. . DANCES WITH ROOS: Okay, got your attention and rightly so as this is the innovative title of this year’s foray into slapstick cabaret style entertainment by the Qantas Crew Revue.

This annual presentation of aviation madness is well worth seeing while all the nett proceeds again go to a worthy cause, the Royal NSW Institute for Deaf and Blind Children. Pathfinders, who operate the Revue, conduct charity operations throughout the year in support of those less fortunate than ourselves and the annual Revue is always their raison d’etre. A not to be missed fun filled night.

Dances With Roos kicks off (sorry!) at Sydney’s Paddington-Woollahra RSL from November 4 thru 14. Tickets available through Ticketek and also at the door.

New Rep for Azko Paints:

AZKO Aerospace Finishes, producers of the Sikken range will now be represented in Australasia by Callington Haven Pty Ltd. AZKO’s Sikken brand of aerospace coatings were previously manufactured in Australia under licence, however, in an effort to consolidate its products and ensure the highest standard of quality possible at the lowest cost, the products will now only be manufactured in two plants in Europe and the USA. This is largely because of the ever increasing high technology now used to produce these products which include chromate free primers, high solid topcoats and selectively strippable coating systems. Callington Haven will stock and provide technical support for finishes and can be contacted on (02) 684 1666.

Union Bullies Compass:

Indicative of the general decline of the influence of trade unions and their desperation to remain a force, the Transport Workers Union has successfully vetoed an agreement between Compass Airlines and US company AMR Services, a division of American Airlines.

AMR would have provided Compass with various ground staff, but the TWU warned the airline it would not tolerate non union contract labour, with the threat that that implies. Fearing major disruption close to its launch date, Compass bowed to the union’s pressure and now employs its own ground and baggage handling staff working under TWU awards. Had the agreement with AMR gone ahead, it would have been a landmark situation for Australia. The practice of contracting out ground handling services is common in the USA and is seen as a way of keeping costs under control.

Compass has meanwhile announced it will pay travel agents a 10% commission until the end of November and its ticket Insurance plan- designed to provide for a refund on unused tickets should the airline fail-was in place in time for its launch on August 31.

 Qantas and Australian Combine Frequent Flyer Programmes:

From last month the amalgamated Qantas and Australian have offered a new combined Qantas Australian Frequent Flyer programme.

The new combined programme has some 160,000 members who will now be able to accumulate points on either of the carriers, and Australian Airlines’ regional carriers as well as using Australian Airlines’ Queensland resorts, Hertz and Avis car rental companies and 88 participating hotels. Accumulated points can now be used for upgrades of free travel throughout the airlines’ networks and points can be accumulated for a period of two years before they have to be used. Three levels of Frequent Flyer accreditation will apply, these being White, Silver and Gold, each with progressively improved levels of service as the member acquires more points.

September also saw Australian Airlines double points gained with the airline during that month. The move was obviously aimed at keeping the patronage of regular business travellers who might otherwise have been tempted to sample the new Compass and to boost traffic in an otherwise slow period.