Airline Affairs

The cash injection has enabled Continental to present a viable reorganisation plan to the US Bankruptcy Court, enabling it to carry on business as normal. When it went into Chapter 11, Continental had long term. liabilities of $US5. 6bn. This has been reduced to $US1. 7bn and the airline survived its Chapter 11 period without actually having to sell many assets.

The primary ownership of the airline will now comprise Air Canada and Air Partners with 27. 5% each and the airline’s creditors with 35. 6% of the stock.

The new firm orders are valued at $US4. 5bn and cover 50 Boeing 737s (plus 50 options), 25757s (25 options), 12 767-300ERS (18 options) and five 777s (five options). The 737s will be powered by CFM56 en- gines, the 757s by Rolls-Royce RB211s, the 767s by GE CF68 and the 777s by GE90s.

The new aircraft will replace existing types, giving the ‘new’ Continental a young fleet, 80% of which will be new technology aircraft complying with Stage 3 noise requirements by 1996.

Fac Bond Issue:

The Federal Airports Corporation has gone to the market for the second time with a tranche (part of an overall total) of $120m which will mature in June 2003.

The issue is part of the FAC’s $600m bond programme which will be used to fund various major projects at Sydney, Melbourne and Brisbane Airports, including Sydney’s parallel runway. The first tranche of $150m was issued in November 1991 and both have been enthusiastically taken up by the mar- ket.

TALAIR CLOSES DOWN: After a series of threats to do so, expatriate Australian Sir Dennis Buchannan has closed down Papua New Guinea’s largest domestic airline, Talair.

Talair has been losing about $1m a month since the beginning of this year. It has been operating in PNG since 1952 and its closure came just two days after an order for two Embraer EMB-145 regional jets had been announced. These aircraft will now serve in Queensland with Sir Dennis’ Flight West Airlines when delivered around 1996.

It is expected that Air Nuigini will fill some of the routes left vacant after Talair’s demise, although many rural areas may miss out on services.

Ansett Goes International:

The long awaited announcement regard- ing Ansett’sinitial international services was made during early June with operations to Bali scheduled to commence this September.

The airline has wisely chosen to tread carefully in developing its Asian based international route system with the Bali service being purely tourism oriented and able to utilise existing 767 and A320 assets during their weekend downtime. Ansett plans to fly a single 767-200 service from Sydney and Melbourne each Saturday direct to Bali whilst A320s will also operate Saturday services out of Brisbane, Darwin, Adelaide and Perth with the latter city also having an additional Sunday service.

Six night packages competitive with Garuda and Qantas are already in the Ansett computer and the airline hopes to be able to access its vast domestic market to ensure that its Bali service is financially profitable. The airline also hopes to be able to tap into the large European market visiting Ballin an effort to lure them onto Australia utilising its domestic network to its advantage.

Ansett has also signed an innovative enterprise agreement with flight crew that will eliminate the need for expensive overnighting in Bali. This more equates with standard practices exercised by interna- tional carriers where crews can operate for up to 14 hours in a given 24 hour period as against just nine hours domestically.

However, due to an inability to quickly resolve a range of issues relating primarily to Customs, Immigration and Quarantine matters, Ansett has postponed its trans Tasman services till next year at which time it will also be serving Singapore and Malaysia with the potential of additional uplift into Indonesia.

The airline is also hoping to win International Air Services Commission (LASC) ap proval to serve Hong Kong and Osaka though at presstime was still awaiting draft approval for these routes.

AA Comment: Ansett’s selection of Bali as its entree to the world of offshore aviation is a sensible choice indeed and reflects the mature thinking within the company that it is best to grow with measured haste rather than rushing into yield decimating fare wars with much bigger rivals. As ATI currently controls nearly two thirds of the total do- mestic market its chances of making a success of the Bali service are good indeed. This is also aided by the status of the compe- tition on this particular route where Garuda (Good And Reliable Under Dutch Adminis- tration!) is world renowned for its mediocre cabin service and from numerous contacts who have flown QF to Bali it sadly seems that our own national carrier is hardly any better.

 Into Africa:

Australians and New Zealanders are visiting Southern Africa in ever greater numbers, so much so that South African Airways is looking to launch a sec- ond weekly fight between Sydney/Perth and Johannesburg.

SAA’s traffic from Australia grew by 84% in the first quarter of 1993 and by 39% from New Zealand during the same period, com- pared with the first three months of 1992. Even better news for SAA is the fact that much of this new business is high yield first and business classes, loadings for them in- creasing by a staggering 418% during the three month period. The growth has been stimulated by substantial reductions in fares.

Qantas Gets Good Rating:

Qantas’ chances of achieving a successful float later this year have been boosted by the awarding of a BBB-plus investment grade debt rating by the international credit agency, Standard and Poor’s.

Only three airlines in the world have higher ratings British Airways (A), Southwest Airlines (A) and Japan Airlines (A-plus). In the case of BA and JAL it is considered unlikely they would achieve those ratings first up if audited at the present time.

The rating is important because it now makes it possible for Qantas to refinance the $1. 3bn debt it inherited from the merger with Australian Airlines. Without that debt being renegotiable, the float couldhave been jeopardised. The all important investment market bases most of its decision to invest upon the rating achieved by a particular company.

Standard and Poor’s noted Qantas’ broad network and its solid market share, excel- lent domestic feeder network, falling unit costs and very young low maintenance fuel efficient fleet. Noted on the negative side was the airline’s $6bn in debts and a debt to equity ratio of around 70:30, although increased earnings and a low capital spending programme should see this reduced to 60% next year.

The Federal Government is still to decide whether or not to provide an additional cash boost to Qantas prior to the float so as to further enhance the debt/equity ratio and thus boost its likely share value. (refer Recce this issue)

Thumbs Down for Northwest’s Additional Frequencies:

Notsurprisingly, the Dept of Transport & Communications (DoTC) has disallowed Northwest Airlines a four times a week Brisbane/Tokyo/Detroit service.

The decision came on June 7, one week after the Federal Government got tough with Northwest and withdrew the rights for one of its three weekly Sydney/Osaka/New York services due to the airline’s inability to meet the requirement of its bilateral agreement which requires at least 50% of uplift to be Australia US through traffic. Northwest (at presstime) is to drop one frequency per week on this route from June 30 whilst Qantas will have to withdraw three of its presently 10 weekly Sydney/LA nonstops.

Northwest accepted the NY/Osaka/Syd- ney route on the provision that it achieved at least 50% Australia/US through traffic and the run was not used as just an excuse to ‘milk’ the lucrative Japan/Australia market. According to the DoTC, the airline has only ever met the provisions of the signed agree- ment in one of the past 20 months while Northwest itself claims that it signed the agreement under duress and that it was verbally informed that the 50% rule was a mere formality and would not be enforced.

At presstime, Northwest was challenging the legality of the agreement via the High Court with a decision expected late July whilst moves to arbitrate the matter via an independent panel were also underway though a final decision would probably not be forthcoming before September. The matter really reflects the present aggressive trade stance being taken within the US by what appears to be a fairly inexperi- enced administration stridently against foreign competition of any type. Though Qantas and Australia stand to lose in the present dispute the crux of the matter is really the interpretation of fifth freedom rights into and through Japan. Germany, France, Singapore and Thailand are also at war with the US Dept of Transportation over similar is- sues where bilateral agreements forged in the immediate post WW2 period greatly fa- vour the US mega carriers.

AA Comment: Northwest, despite its financial ills, has always been well situated within the halls of power in Washington DC. Whilst it may well have the ear of US Secretary of Transport Federico Pena and has been able to make a point by wounding its foe (Qantas), it remains to be seen how the mass of adverse publicity that the airline has generated locally will affect its future commercial viability in Australia. Given the rape of our crucial primary produce markets at the hands of subsidised US products (refer Recce last issue) and now the bullying of Qantas and the Australian Government with Northwest playing the band leader with gusto, one wonders what Australian would ever want to fly on the carrier. I know we certainly wouldn’t.

Indian Airlines Curries Favour:

State owned Indian Airlines is receiving preferential treatment from its government, despite the fact that private airlines operating India’s domestic routes are providing a long overdue improved stand- ard of service to their customers.

The Indian government – worried by the competition-is now enforcing the Air Cor- poration Act of 1953, an act which effec tively gives the two state owned airlines (Air India and Indian Airlines) a monopoly.

Various restrictions are being placed on the independents. They are no longer al- lowed to advertise their flights’ departure and arrival times (under the act they are ‘air taxis’ and therefore technically have not scheduled flights), they cannot ‘lure’ pilots and engineers away from Al and IA, new entrants must also operate one short haul route for every profitable long route and they cannot operate aircraft which are more than 15 years old. Much of Indian Airlines’ fleet is older than that.

Indian Airlines’ losses for the year to March 1993 have been estimated at $US66m.

Singapore Looking at Ansett:

Fresh from its failure to acquire a stake in Qantas and a massive profit for the year to March 31 of $US452m (the world’s biggest), Singapore Airlines is examining acquiring an equity stake in Ansett.

SIA has confirmed it is discussing the issue with Ansett but says that no firm decision has yet been made though it is expected that a public statement on this matter will be announced before August.

Ansett’s recent return to an operating profit strengthens its bargaining position but a report by brokering house McIntosh Baring (referp16 June 93 AA) has statedthat it needs an immediate cash injection of about $100m and a further $150-200m for a 25-30% stake in the company.

 Expensive Typo:

It’s not only maga- zines and books which contain the odd typo- graphical error, as Continental Airlines found to its cost recently.

An advertisement in the Boston Herald which touted a $US48 one way Boston/Los Angeles fare should have read $148. As a result, 20,000 round trip tickets were sold at a loss of $200 each, an overall exercise in the red of $4m! Continental actually disagrees with those numbers but won’t release its own and also says that ticket brokers purchased hundreds of the tickets and then resold them. That’s against Continental’s rules, so customers with the tickets must bring a photo ID with them when they check in.

Virgin/BA Saga Continues:

The battle between Virgin Atlantic and British Airways and the ‘dirty tricks’ issue carries on, the latest episode in this international soap opera being Virgin’s launching of ac- tion in the UK High Court against BA for alleged use of BA’s computer reservation system to gain access to and misuse Virgin customer data.

Copyright infringement, breach of confidence and misuse of confidential informa- tion are all alleged in the writ, which will probably be preliminary to further actions Virgin will bring against BA in the USA.

The UK action follows a brief period where the two airlines discussed settling things slightly more civilly, but these fell apart when BA once again insisted on a ‘gagging clause’ which would prevent reference to BA’s campaign even if another were to be started.

Sunstate to Fly Cairns/ Proserpine:

Sunstate Airlines will in- troduce three weekly flights between Cairns and Proserpine from September, providing a convenient link for Japanese tourists who want to visit the Whitsundays.

The new flights will operatevia Townsville and will be timed to connect with international flights arriving from Japan on Tues- days, Wednesdays and Saturdays. Return services will connect with flights from Cairns to Japan. Sunstate will use their de Havilland Canada Dash 8s on the route.

Pax Growth Figures Interesting:

Whilst researching a story recently we came across passenger uplift data that made us fully appreciate the incredible growth that has taken place in Australian air transport since the fifties.

Delving back through DoTC records we came up with the accompanying table which records the pax throughput for the nation’s major airports for the years 1958, ’66, “78, 85 and ’92. To get a broad impression of the growth in air travel then consider that in 1958 there were just 56,000 pax through Coolangatta as against more than 1. 5m this year whilst Cairns grew from just 42,000 to nearly 2. 2m last year. Cairns will also prob- ably double that figure by the end of the decade.

Looking at the periods individually, you can see the massive growth that took place between 1958 and 66, reflecting the halcyon days of sustained economic growth and very low unemployment which was a feature of that era. Also the introduction of larger aircraft such as the DC-4, DC-6 and Viscount in the period also boosted capacity greatly over what had previously been largely a DC-3 domain. These ‘modern’ airliners also enabled better connections between the major East Coast centres and far flung des tinations such as Perth and Darwin.

Despite a significant recession through the mid seventies the growth in the 1966-78 period was also strong, influenced no doubt by a greater acceptance of air travel and the coming of the jet age with its significant effect on revenue passenger kilometres flown. A single 727-100 in one day for in- stance could typically fly as many RPKs as four or five DC-6s of the earlier era.

The 1978-85 period saw growth slow due largely to the (then) worst recession since the thirties. Traffic through Canberra hit a brick wall in 1979 when the Holcroft Report rearranged the flag fall and per kilometre scale of fare setting to load short primary routes so that the longer hauls would be cheaper. This did serve however to boost Perth, Cairns and Darwin as can be seen in the table.

The final period reflects to some extent the effects of deregulation with incredible growth into every city despite the severe economic times. Virtually every port has soared ahead on the back of domestic tour- ism and an ever increasing avalanche of international visitors. Passengers

Heathrow Express:

travelling from between central London and Heathrow Airport will find it considerably more convenient from 1997 with the open- ing of the $A750m Heathrow Express rail link The Joint British Airports Authority/British Rail venture will operate between the airport and London’s Paddington station, the journey taking about 16 minutes. Four services will be run each hour and more than six million passengers are expected to use the trains each year. The BAA plans to sell its share of the project two years after it becomes operational.

Southwest on Top:

Perhaps not surprisingly due to its enterprising management, US airline Southwest has emerged as the dominant carrier on the USA’s busiest domestic routes.

AUS Department of Transportation study looked at the top 100 city pair markets and found the profitable and efficient South- west carries more passengers on them than any other US airline, including the likes of American, United and Northwest. Overall – in terms of passenger uplift – Southwest is placed fifth among US airlines.

Southwest apparently does all the right things it operates a single aircraft type (Boeing 737), specialises in busy routes of less than 430nm (800km), keeps its over- heads and operating costs low and its utili- sation high, offers low fares and has avoided establishing a frequent flyer programme. It doesn’t even have its own computer reservations system!

Anz Calls for More Freedoms:

Air New Zealand has announced plans to operate Korea/Brisbane services later this year, to introduce daily Japan/Brisbane flights from 1994 and to take advantage of additional rights granted under the single aviation market reforms.

The airline has also called for the Austral- ian government to treat sympathetically important and unresolved Korea/Australia air rights issues and to hurry along progress towards a full exchange of Australia/New Zealand beyond’ rights. ANZ effectively has the right to fly from Korea to Brisbane but says it is prevented from doing so until Korean Air is able to operate across the Tasman, as issue which has been under discussion for some time.

ANZ will operate up to seven Boeing 767 services a week from Japan to Brisbane with the opening of Kansai Airport in 1994 and wants to increase its frequency of serv ices beyond Brisbane to other points on its network.

How to Get a Hit Record:

If you are a budding muso and want a hit record then you might well be advised to get your music used as the basis of an airline advertising campaign.

No doubt most readers by now have seen Ansett Australia’s television advertising campaign featuring the haunting music of Irish new age singer Enya. So popular has the advert proven that Ansett’s PR section receives phone calls several times a day from people wanting to know what the mu- sic is from. For the record (if you’ll excuse the pun) Enya has over the years released a number of excellent albums and Ansett’s particular piece is entitled Storms in Africa, from her Watermark album. The original was released back in 1988 and in recent months has seen a marked resurgence due largely to the Ansett adverts.

This is not the first time this has happened though. Air New Zealand ran a campaign back around 1989 that was used within NZ to inspire younger people to travel to Aus- tralia. The music featured in the ad was that early seventies Daddy Cool hit, Eagle Rock. The television campaign was so successful that ANZ was swamped with young Kiwi’s wanting to check out Oz and the long buried song was released and went to number one on the NZ charts.

Now we hear that aboriginal rock group Yothu Yindi has also made it big with the Japanese, featuring as they do in the latest Qantas adverts in that country with massive increases in applications for visas, etc to visit Australia. Okay guys, who’s next?

Extraflight to Kuala Lumpur:

Malaysia Airlines will introduce a fifth weekly Boeing 747-400 service from Syd- ney/Melbourne to Kuala Lumpur this month. The new service departs Australia on Tuesdays, adding to the existing Thursday, Friday, Saturday and Sunday nights. The airline has also reconfigured its 747-400s to carry more business class passengers, 60 in all, 38 in the upper deck (as before) and an additional 22 on the main deck immediately behind first class.

By Anz to the Snow:

Air New Zealand has introduced Australia’s first in- ternational ‘theme’ flights – party atmos- phere flights to the land of the long white cloud on the ‘Air New Zealand Snow Express’ a twice weekly Boeing 767 service especially for skiers.

The ambience of the trip starts at Sydney Airport where passengers are greeted by a giant snowman and continues on the flight to Christchurch where they will be able to try a ‘Mogul Blaster’ or two (or three), a cocktail designed by ANZ flight crew who took part in a competition to find the ideal drink for jetsetting skiers.

Entertainment includes ski footage and the captain will provide snow reports from the cockpit while the passengers play vari- ous lucky draw competitions which will enable them to win backpacks, sweatshirts, soft toys and assorted ski paraphernalia. And if they’re still capable of standing up, they can go skiing once they’re in NZ!

Aeroflot Comes to Australia:

The former Soviet state airline, Aeroflot, has begun regular services to Australia and intends changing attitudes towards itself, a necessity due to the poor image it has gener- ated over the years.

Now called Aeroflot Russian Airlines to reflect the breakdown of the old Soviet Un- ion, the airline is flying Moscow/Bangkok/ Sydney (refer Traffic p76) using a new Air- bus A310-300 and offering very competitive fares – $1500 return off season and $1650 return in the high season. The aircraft’s maintenance and crew training are conducted by Lufthansa. Two services per week are offered and an extension to Melbourne is planned for later this year.

The old Aeroflot is still subject to discus- sion as to how it will be divided between the now independent former Soviet states. Be- cause of the state of flux with them, defining international and domestic flights isn’t as simple as it may seem. In one case last year, a domestic flight reportedly turned into an international one while the aircraft was in the air because the destination state declared its independence while the flight was in progress! • QANTAS POSH NOSH: Qantas pas- sengers in all three classes are to be offered a new range of inflight meals, snacks, wines and amenities as part of ongoing reviews of service.

The airline’s cuisine will tend towards healthier and lighter foods promoting Aus- tralian fish, meats and produce, with first and business classes featuring delicacies such as emu meat and freshwater crayfish.

Amenity kits for first class passengers will feature Hermes products for men and Christian Dior for women, while the rest of us down the back will be able to rejoice in the ‘do not disturb’ sticker we can attach to our seats. Thatin itself will makethepriceof a ticket worthwhile! First class passengers will also be offered anewselection of premium Australian wines, while both first and business will have inseat video systems and a communications link enabling them to send messages from the aircraft to a fax or telex machine.

Those who feel the need to allay their guilt about spending that extra night in Bang- kok will also be able to take advantage of an arrangement with Interflora to send flowers anywhere in the world while in the air.

Compass Chief Joins Continental:

The former chief executive of Com- pass II, Sam Coats, has been employed by the newly resurrected Continental Airlines to head a project to establish a no frills, all economy subsidiary of the US operator.

The aim of the new airline is to compete with the USA’s successful low cost opera- tors, of which Southwest is a prime exam- ple. According to US sources, Continentalis planning to reconfigure 50 of its 325 strong jet fleet to all economy class seating to establish the new services, which would fly direct from city to city without passing through the major hubs. Continental has just emerged from Chapter 11 bankruptcy protection and placed a large order with Boeing (refer Airtime Affairs, this issue).

Us Regionals Grow:

While the USA’s major airlines lose ever increasing amounts of money and lurch from crisis to crisis, the regionals continue to grow and recorded encouraging results in 1992.

The US regional industry seems to be settling down if the statistics are any indica- tion, with fewer operators carrying more passengers. In 1990 there were 150 regional operators in the USA which between them carried 42 million passengers. In 1992 the number of operators was down to 127 but the passengers carried increased to 49 mil- lion, a 16% increase over both 1990 and 1991. Australia’s total RPT uplift in 1992 was by comparison just over 18 million.

The average US regional operator in 1992 flew a typical trip length of 312km (168nm), carried 385,000 pax in a year, had aircraft with an average of 23 seats and flew them 2052 hours per annum. The latter figure was up 11%on 1991, while the average number of passengers carried was up a massive 32%. The average Revenue Passenger Kilometres (RPK) figure was also impressive at 120m, a 37% improvement on the previous year.

Overall, total RPKs increased by 21% to 15. 2bn (vs 18. 4bn for all of Australia) while the overall fleet increased slightly to 2081 aircraft. The Embraer Brasilia (200 aircraft) accounted for 12% of the available capacity followed by the ATR42 (107 aircraft) with 11% and Saab 340 (158 aircraft) with 11%. The number of airports served decreased slightly from 811 in 1990/91 to 802 last year.

 Banolonger Most Profitable:

British Airways is no longer the world’s most profitable airline following the an- nouncement of its results for the past year.

For the year to the end of March 1993, BA recorded a pretax profit of £185m (about $A411m), a 35% reduction on the previous year. The drop has been blamed on falling yields and heavy investment, BA having spent some £628m ($A1. 4bn) on stakes in Qantas, USAir, TAT and its takeover of Dan- Air.

These purchases have increased the debt to equity ratio to 1. 6to 1, although the launch of a £442m ($A983m) rights issue should reduce this to equity.

BA’s smaller profit comes despite carry- ing a record number of passengers at a load factor of 70. 8%, the second best figure in a decade. But yields fell by 5. 7% as premium traffic declined, although this is now show- ing signs of improvement.

Northwestwants Deferral of Debt:

Northwest Airlines has asked its lenders to defer much of its $US2. 14bn bank debt.

The move represents an apparent change of stance for the airline, which previously said it wouldn’t ask for deferrals until after its unions had signed a three year conces- sion package worth about $US900m. Two unions have agreed to the packages but the pilots have not, and the result is the unions asking that the concessions and deferrals be agreed to simultaneously.

The banks have generally indicated they will go along with the plan because the alternative is more than likely to be bank- ruptcy for the airline.

Frequent Flyer Tax Ruling Wrong?:

The National Tax Agents Asso- ciation (NTAA) has cast doubts on the Aus- tralian Tax Office’s recent ruling that frequent flyer benefits are taxable.

The Association has stated that travellers should wait until the ruling is tested in court before cashing in frequent flyer programme benefits or should not claim merchandise awards but only swap points earned for further business travel.

The NTAA claims that when the issue does go to court the Tax Office would prob- ably lose, although the cost of mounting such a challenge could be prohibitive. It says the ATO would find it difficult to prove a direct connection between a person’s employment and the benefits received.

Euro Mega Airlines:

SAS, Swissair, Austrian Airlines andKL Marenow considering the implications of joint inter- nal studies which have recommended what amounts to a merger between the four air- lines.

The studies were created by the airlines to look at organisational structures and conclude that founding a new company with a single balance sheet and which is jointly owned by the four airlines would offer anew “jointly branded product”.

The basis of the arrangement would be 30% ownership each by KLM, SAS and Swissair and 10% by Austrian Airlines which is also talking with Lufthansa about forming an alliance between the two carriers. The advantages of suchan arrangementare listed as the formation of a strong European multi hub system using the airlines’ existing hubs, a larger market share and greater efficiency.

There are disadvantages as well, not the least of which is the fact that there would be job losses at all levels. The airlines have so far been looking at this in an informal man- ner, now they must decide whether to pro- ceed formally. If that happens, a Memorandum of Understanding could be signed next year.

United Defers A320 Deliveries:

Faced with continuing losses and the need to limit capacity growth and retire older aircraft, United Airlines is to delay the deliv- ery of 14 Airbus A320s.

The airline’s controversial order for 50 A320s (plus 50 options) was placed in July last year, the original delivery schedule call- ing for the arrival of 21 aircraft in 1993/94 and the remainder in 1995/96. The revised schedule affects the second batch, and the final 14 A320s will now be delivered in 1997/98. Deliveries of the first batch begins on schedule in November this year.

Meanwhile, United will accelerate the retirement of older aircraft as the A320s and other new types arrive. At least five DC-10-10s, four 747SPs and ten 727-200s will be withdrawn by the end of 1994. The airline recorded an operating loss of $US121m in the first quarter of 1003.

Tnt Gains Finance Package:

The TNT transport group has reported a nine month to March 31 loss of $92m but at the same time has gained a $US350m financ ing package for its jointly owned (with News Corp) Ansett Worldwide Aviation Services (AWAS) leasing arm from the US Govern- ment’s Exim Bank.

The loan will be used to finance the pur- chase of five Boeing 767-300s due for delivery this year and comes after stronglobbying from Boeing and AWAS. It will cover about 80% ofthe Boeings’ costs. Exim helpedAnsett purchase Boeing 737-200s in the early 1980s.

The airliner manufacturers have suffered from recent cancellations and Boeingis keen to see the AWAS order proceed. AWAS has meanwhile placed a 767-300ER with El Sal- vador’s TACA, is expected to sign Air Viet- nam for two additional 767-300ERs and has placed four 737-300s with Indian newstart, Jet Airways.

Vietnam a Potential Earner:

Despite a continuing US trade embargo which prevents western airliners being sold to Vietnam, the potential market in that country is sufficiently large to justify the manufacturers’ salesmen making serious efforts to sell.

The situation eased somewhat last De- cember when the US government author- ised companies to sign contracts in Vietnam, although these cannot be finalised until the embargo is fully lifted.

Boeing and Airbus (whose aircraft have US engines and other equipment) have both been courting the Vietnamese lately, the immediate prize an order from Vietnam Air- lines for six narrowbodies (737s or A320s) and two widebodies (767s or A310s) worth about $US400m.

Ansett Worldwide Aviation Services (AWAS) already leases a 767 to Vietnam Airlines and is expected to shortly sign con- tracts on two more as the carrier plans its mid year launch of a Paris service

Coolangatta Misses Out:

Coolangatta Airport’s plans to become an inter- national destination have suffered asetback with the Singapore Civil Aviation Authority banning charter flights to the airport.

A Royal Brunei Boeing 767 chartered by a Singapore travel company was to have oper- ated a flight at the end of May, but the SCAA decision intervened. The Authority has apparently decided that because the Gold Coast is adequately serviced by Bris- bane Airport, services to Coolangatta were not necessary. At first it was thought the decision was made purely because of a lack of facilities at Coolangatta.

Meanwhile Coffs Harbour in northern NSW is in the process of deciding whether or not it should widen and lengthen its run- way to cater for international charter flights. The airport already has the necessary Cus- toms and Immigration facilities but needs to spend about $7m on the runway upgrade.

Tax Audit Targets:

The Austral- ian Taxation Office (ATO) has indicated that airline employees are one of several occupational groups that are being targeted for tax audits this year. Another related aviation industry group that the ATO has targeted is defence workers.

The ATO will be reviewing specific items including travel claims, particularly home- to-work claims; self education expenses; clothing expenses and use of home office claims. The ATO will also be looking closely at claims made for non employer sponsored superannuation.

One tax agents’ association has noted that those employees of targeted occupa- tional groups claiming more than 10% of their assessable income will almost defi- nitely be candidates for an audit. (Kim Todt)

Air Pacific Records Growth:

The introduction ofregular Melbourne and Tokyo services has made a significant con- tribution to the growth recently recorded by Fiji’s Air Pacific.

The airline operates four Boeing 767-200ER Melbourne/Nadi services each week and uses a 747-200 to operate three weekly Sydney/Nadi flights. In addition, the 767 and a new 737-500 fly three weekly Brisbane/Nadi services, while the 747 flies directly from Nadito Tokyo’s Naritaairport. From October next year, and assuming the on time completion of Osaka’s Kansal Air- port, two additional Fiji/Japan services will start with the lease of a Boeing 767-300ER. It is not yet decided whether the 767-300 will supplement or replace the existing 767-200, while the airline’s current 747 (which is leased from Qantas) will be re- placed by a similar aircraft on lease from Air New Zealand in August this year. An in- depth profile of Air Pacific will appear shortly in AA .

Gecapitalsavesgpa:

Financially troubled aircraft leasing company GPA has been rescued from possible bankruptcy by GE Capital, General Electric’s financing arm.

GEhas agreed to acquire 45 aircraft worth about $A3bn from GPA in exchange for an option to obtain a controlling stake in the company by 1997. The aircraft which will be purchased are 23 already on GPA’s books and a further 22 which are scheduled to be delivered over the next year. Leases have already been arranged for all the aircraft, mainly Boeing 737s. GPA still has about 80 Airbus and 100 Boeing airliners on order, and its current fleet stands at 460 aircraft.

Instant Visas:

The processing of incoming visitors by the Department of Im- migration has become a large consumer of time as tourism grows, but ways of making it more efficient are being examined.

One method of reducing entry waiting times being looked at is the airlines collecting information from passengers in flight and then transmitting it to immigration offcials at the destination airport. Also being consideredis fingerprint identification meth- ods.

Compass Losers List Substantial:

Apart from the 700 former employ- ees who stand to lose $2. 8m between them, the list of the failed airline’s creditors is an interesting one.

Top of the list is National Mutual, whose recent less than spectacular investments have been added to with the $7. 5m they stand to lose through Compass. Next best is the Queensland government ($7. 4m) fol- lowed by aircraft leasing firm GPA ($4. 6m), Westpac (84m), SAS (which leased aircraft to Compass, $2. 6m), Suncorp ($2. 5m) and the Transport Accident Commission of Vic- toria ($1. 3m). In addition, there are more than 8000 small investors – the ‘mums and dads’ who have lost their money, some for the second time.

Us Airlines Study:

Anationalcommission has been set up to study US airline industry problems, but among the 15 members there are no representatives of the major airlines.

The commission is due to report to the White House and US Congress in August and does have some industry notables on it including Southwest Airlines chief executive Herb Kellaher, Gina Thomas from Federal Express, the head of the Air Line Pilots Association, Cessna’s Russ Meyer, and Robert Daniel, United Technology’s CEO. Despite their lack of representation, the major airlines appear to support the idea.

Qantas Expands Smoke Free Skies:

Qantas will institute a smoking ban on all of its international flights of four hours or less from August 1.

The new nonsmokingflights include serv- ices between Australia and Fiji, PNG, Noumea and Perth/Bali. From last October Qantas introduced a smoking ban on three of its non stop Sydney/Los Angeles flights, and in conjunction with Air New Zealand on its trans Tasman flights.

The bans have been introduced in re- sponse to customer requirements, and more smoke free flights may be introduced as demand requires.

All domestic flights (by Government regu- lation) are non smoking, while on all other Qantas international services 80% of seats are now designated non smoking.

 Joint Asian Frequent Flyer Programme:

Cathay Pacific, Malaysian and Singapore Airlines have joined forces to create Asia’s first frequent flyer programme. The airlines have set up a joint venture company-Asia Frequent Flyer Pty Ltd-and the programme (called Passages’) will be launched on July 1. Members will be able to earn points when they travel first or busi- ness classes with the three airlines. British Airways and Swissair will join the scheme in September this year, and credit card compa- nies plus hotels are also to become involved.

Qantas Domestic Capacity Up:

The introduction of Boeing 767s to Qantas/ Australian domestic routes is providing a substantial increase in capacity at peak times on main trunk routes.

The use of the 767s in combination with Australian’s Airbus A300s (which with their spacious interior and larger freight capacity are proving to be useful) frees up the smaller Boeing 737sforuse on other sectors, includ- ing international routes for the first time. The total capacity increase is about 129%, while the Sydney/Perth route sees an in- crease of 50% and Melbourne/Gold Coast 31%

New Law Could Have Helped Compass:

Changes to the Corporations Law which have just come into effect may have helped save Compass Airlines’ parent company Southern Cross Holdings, accord- ing to a partner in the law firm involved in the airline’s liquidation.

According to Mr Alan Milhouse, the amendments would have allowed up to about 80 days’ grace between the company being placed in the hands of a receiver and then placed into liquidation. Mr Milhouse says that the seven day gap between receivership and liquidation which applied to Southern Cross was insufficient for thecircumstances and allowed inadequate time to finalise emergency funding and to negotiate a debt moratorium.

Negotiations with a local party over a $5m cash injection were going ahead, apparently, but time ran out. For comment on the Compass liquidation, refer to the Recce column in last month’s Australian Aviation.

Qantas Sets Cairns Surcharge:

Qantas has decided to make an issue of the $8 fee charged by the operators of Cairns Airport every time a passenger arrives at or leaves the airport.

The domestic airlines have always incorporated the fee in the ticket cost, but Qantas has until now absorbed it. From now, Qantas tickets to and from Cairns will itemise the fee as “Australian tax – international passenger charges, Cairns”. Qantas moves more than 24,000 passengers into and out of Cairns each week at a cost of over $192,000 or around $1m per annum.

Cairns is the only major Australian air- port not administered by the Federal Air- ports Corporation, being instead run by the Cairns Port Authority.

CL-215T Certified:

The Canadair CL-215T turboprop conversion of the CL-215 water bomber and utility amphibian has been given restricted category type certifl- cation for aerial firefighting by the US Fed- eral Aviation Administration.

The CL-215T has been in service with the Spanish Air Force and the Quebec govern- ment since Canadian type approval was grantedin 1991. The new build CL-415should be certified in early 1994 following first flight in October this year. Both the CL-215T and CL-415 are powered by Pratt & Whitney (Canada) PW123 turboprops.

Finnair Goes Boeing:

After a long association with McDonnell Douglas, Finnair has announced it is going to replace its entire jet fleet with Boeings by the end of the decade.

Details of which Boeings will be put into service had not been announced at the time of writing, but the airline says it wants a fleet of smaller aircraft due to the large reduction of traffic flowing through Helsinki to and from Moscow since the collapse of the Rus- sian economy.

The airline currently operates some 34 McDonnell Douglas DC-9/MD-80s, five DC-10s and three MD-11s along with two Airbus A300s and six Saab 340 regional tur- boprops.

Spares Cut in Rationalisations:

Airbus Industrie is finding that increasingly hard pressed airlines are cut- ting back dramatically on their spares hold- ings and are placing greater demands on Airbus’ support organisation.

Sighting the example of one airline that operated an A320 for three months without inhouse spares, Airbus has found that as operators cut back on costs, non essential spares items are no longer being held in stock, witha far greater demand beingplaced on Airbus to supply items on an as needed basis. Indeed, more aggressive warranty claims are now the norm, with one operator having formally turned its warranty claims centre into a profit making division. With ‘nice-to-have’ items no longer held, it is a common claim that essential items are a design fault and that Airbus should pay.

Aside from far more pressing demands from existing customers, AI has also had to reduce its lead time in placing support packages with new start-up carriers, with 4-6 months often being the only time Airbus has to put together a full support package, ranging from spares to crew training.

 New Korean Agreement:

In order to cater for an expected tripling of tourism over the next two years, Australia and Korea have signed an agreement for in- creased air services between the two countries.

Airlines from both countries will be able to operate the equivalent of daily Boeing 747 services rather than the current twice weekly. The agreement also expands inter- mediate route rights which now allows Aus- tralian carriersto fly to Seoul via three points while Korean Airlines can fly to Brisbane and another destination of its choice.

Arrival Tax to Bite Hard:

A Federal Government plan to introducea $30 arrival tax has been described as a potential ‘kick in the guts’ for Australian tourism.

The $30 fee (in addition to the current $20 departure tax) would be levied on all over- seas visitors entering the country, and Aus- traliansreturning home. The average tourist spends $2000 to $3000 during their stay, with the damage caused by even a small number of potential visitors being turned away by the new tax being very real.

Meanwhile, tourism industry groups have vowed to fight the tax with Australian Tour- ism Industry Association chief, Peter O’Clery describing the tax as illogical. “It’s about as logical as David Jones charging people to come into their store,” he said in a recent interview with Inside Tourism.

This is not the first time an arrivals tax has been proposed, a $5 fee was successfully overturned by airlines several years ago amidst a storm of controversy.

Unlocking Chinese Tourism:

Chinese visitors to Australia may outnumber Japanese in as little as five years, a visiting Chinese tourist executive said recently.

Amore open government attitude to over- seas travel and an ever increasing number of Chinese with money to spend on travel, are reasons given for the predicted boom. With Australia being one of the first nations to open its doors to China, and our location as the closest western non Asian nation should see us well placed to benefit immensely.

Traditionally Chinese visitors have largely comprised students and business people, although continuing high levels of economic growth, particularly in the south has spawned a high disposable income population, making travel far more accessible (the country’s 10% per year growth doubles liv. ing standards every seven years).

However, the Australian Tourist Commission is slightly less optimistic, saying it could take a decade for numbers to exceed that of the Japanese. The ATC has nevertheless been looking marketing strategies to fur- ther tap into the seemingly burgeoning market.

Interestingly Qantas does not operate its own flights to China, with only Air China providing a direct link. Given the immense potential of China the airline could stand to lose greatly given intending startup carrier Australia Air’s desire to be the country’s sole designated airline between Australia and China. Currently China only recognises one carrier from each country it has air service arrangements with, locking out any other airlines.