Airline Affairs

Recent foray into the domestic market, Qantas is achieving 25% to 30% of its total revenue from national operations, contributing around 50% to the airline’s overall profitability. Though contributing substantially to profits, the company concedes, however, that there will continue to be hard play to steal the leading market share on the domestic networks away from Ansett. “Costs were up on 1993 levels by less than the increase in capacity, giving an overall improvement in productivity. However, with no strengthening of yield in prospect, further reductions in unit cost levels will continue to be a major priority,” Gary Pemberton said. Yields continue to be unimpressive, with little change on either the domestic or international networks. Nor does the company see a dramatic improvement in yields given steady competition and the oversupply of capacity on a number of key international routes. Despite the kilometres on international services rose by 10.1% over the previous year, with lessor ILFC. The 249 seat 767-300ER (pictured here recently departing Sydney) replaces the carrier’s 767-200 it has had in service since 1990, and it will be used international routes also improved, from March 1993 are finally beginning to be place,” he said. “In a very short period a complete product service review has Qantas’ figures for the current year show a mately prove its case as the second been $508m and $455m respectively. Put another way, on each one billion dollars of revenue, Qantas achieved a net margin of $46m, Ansett $69m and ANZ $77m. Food for thought.

Europe Outdoing Japan

The growth rate of Europeans travelling to Australia is now outstripping that of Japan according to figures released by the Australian Tourism Commission. Figures for June this year show the number of visitors from Europe increased by nearly 11% compared with June 1993 to 33,205, while the number of Japanese visitors grew by just 2.1%. The Japanese still lead in overall terms, however, with 51,858 visiting Australia in June. The 1993-94 financial year saw 690,323 Japanese come to Australia compared with 677,284 Europeans including 318,935 from the UK. Further increases in the number of European visitors are expected as many of the countries in the area start to climb out of recession. The Netherlands is leading the charge with growth of 63% in the two years to June 1994.

Stowaway Causes Emergency

Continuing its recent run of wretched luck, a Polynesian Airlines Boeing 737-300 was forced to make an emergency landing at Western Samoa during September when the body of a stowaway jammed the starboard main undercarriage leg. The stowaway was hiding in the wheel well and was apparently crushed by the aircraft’s undercarriage as it retracted after takeoff, although the 737’s cruising altitude of 33,000ft (10,000m) would have claimed him anyway through lack of oxygen and freezing cold. When the pilot selected wheels down for landing, the starboard wheel was jammed due to the presence of the body. The aircraft landed on its nose and port wheels only with minimal damage (mainly to the starboard engine pod) and no injuries to the 72 passengers and crew. Refer Traffic for more details.

Foster’s Out Of Northwest

The Foster’s Brewing Group (formerly Elders IXL) is continuing its programme of disposing of non core assets, this time by selling its stake in Northwest Airlines for $242m. Foster’s sold the common stock and preferred shares to KLM Royal Dutch Airlines – already a major Northwest shareholder – for a profit of $95m. The company invested $US40m in Northwest in equity during 1989 and a further $100m in loans. The cash received from the sale will be used for debt repayment, currently standing at $1.85bn.

Skywest Introduces Fokker 50

Ansett subsidiary Skywest has introduced the 46 seat Fokker 50 turboprop to its Western Australia routes. The Fokkers replace a leased 36 passenger Saab 340A which entered service in May to cover Jetstream maintenance and for route assessment. The larger capacity and spacious cabin of the Saab helped stimulate extra business for the airline which the Fokker will exploit as well as allowing for future growth. It will be operated on Skywest’s eastern goldfields routes and to Albany, Esperance, Geraldton and Kalgoorlie. Skywest’s introduction of the aircraft also helps its parent company by using some of the surplus Fokker 50s it currently has on its books. Attempts to sell some of the aircraft have been thwarted by a flat market and two Fokker 50s have recently returned from lease to other operators. Refer Traffic for more details.

Extra 767 For Ansett

Ansett is importing a 211 seat Boeing 767-200 in time for the Christmas holiday travel peak. The aircraft has been obtained from British charter operator Britannia Airways and will add nearly 9000 seats per week to the airline’s domestic capacity. The 767 arrives this month and is similarly configured to Ansett’s existing 767-200s. A second aircraft has been optioned for delivery late next year. Refer Traffic for more details. The 767 will be the seventh aircraft Ansett has taken delivery of this year. Previous 1994 deliveries comprise four Boeing 737-300s and two 747-300s, the latter used on Ansett’s new international services to Japan and Hong Kong. Meanwhile, five Airbus A320s are on order for delivery between October 1995 and November 1997 and a further five A320s are optioned for 1997-98 delivery. Regarding Ansett’s international aspirations, press reports that it is planning to shortly enter the Australia/Hawaii market (using 767-300ERs) have been firmly denied by the airline however it did bid for the Australia/China route though surprisingly dropped its application to the IASC several weeks later.

Unfortunate Timing

The crash of a USAir Boeing 737 at Pittsburgh on September 8 with the loss of all 132 on board turned into a double disappointment for the airline as it occurred just a few hours after the announcement of its new ‘Business Select’ services. Business Select is based around the fitting of movable cabin dividers and convertible Recaro seats which can be changed from economy to business class arrangements with the switch of a lever. This ‘flexible cabin’ concept was designed to create a new niche for USAir in the US short haul market but the bad publicity resulting from the crash completely overshadowed its launch. Business Select (which also features streamlined check-in, better food and priority baggage handing) is due to be offered on 210 daily flights to 16 east coast destinations from December 1, although at the time of writing it was thought this would be postponed and the marketing campaign put on hold.

Ansett Introduces Business Class In Wa

There’s nothing like a bit of good ol’ fashioned competition to help give the customer what he wants, and Ansett has done just that by introducing business class on its services within Western Australia and between Perth and Darwin. Business class services in WA began in late October, the airline’s BAe 146s being fitted with eight seats in two rows and its Fokker F28s a single row of four seats. Apart from the wider seats and increased legroom, business class passengers will get free drinks and newspapers plus priority baggage handling. A special introductory business class fare of $30 more than the normal economy rate is being offered until the end of this month. The move comes ahead of Qantas’ commencement of services on WA routes this month.

Thai A Big Improver

Thai Airways, for many years suffering by its inefficient, military dominated management, has gone from strength to strength following its partial privatisation and installation of new management in 1992. Cost cutting and the introduction of new efficiencies have resulted in Thai recording a June 1994 quarter operating profit which is 67% greater than the same period of the previous year. It is anticipating 65% profit growth for the full financial year, which ended in September. By comparison, a 2.6% decline in profits was recorded in the 1992-93 financial year. Thai has also recorded strong traffic growth with an averaged rate of 10% expected until the turn of the century. The airline has improved productivity and reduced costs, while restraining capacity to help boost load factor. Thai recorded 11% traffic growth in the June quarter, while capacity increased by only 9%. By comparison its main regional rivals, Cathay and Singapore Airlines, both had capacity increase faster than traffic growth in the same period.

European Business Travel Up

In what is seen as a sign of hope after years of recession, a report by British Airways’ chief economist says the European economy stands on the threshold of an accelerating recovery. Confidence is increasing, interest rates are coming down and competitiveness is improving, all of which are starting to positively impact business travel in Europe. Even in the recession, European business travel by air increased by 15% between 1989 and 1992 and scheduled air traffic is predicted to grow by 4.4% next year and 5.5% in 1996. This forecast takes into account the effects of the Channel Tunnel, which is expected to divert some city centre London to Paris traffic but also to stimulate leisure travel between Britain and the Continent and have a negligible overall effect on air traffic growth.

Malaysian International Growth

The effects of a free aviation market are being felt by Malaysia, whose liberal aviation policies have encouraged substantial growth in international air services. With 32 international carriers now offering direct connections to 60 destinations to and from Malaysia, the country has seen the number of international air passengers increase from 3.4 million in 1986 to 7.8 million last year. An annual growth rate of better than 10% is anticipated until 1996, by which time Malaysian airports are expected to be handling 11 million international passengers per year.

It is interesting to reflect where East-West Airlines would be now had not Ansett taken over Australia’s third domestic airline during the late 1980s. No doubt it would have become a major competitor against Ansett and Qantas operating a jet fleet that quite possibly would have included 737s. Today 737s do fly under the East West Banner, but in India. Bombay based East West Airlines currently operates a fleet of seven 737-200s on domestic routes, and has recently placed an order four two 737-400s (pictured) as part of a fleet renewal plan.

Airports Will Be Leased

The ALP national conference in Hobart has decided that the privatisation of the 22 airports now controlled by the Federal Airports Corporation will proceed and that the airports will be individually leased for a period of 50 years. The decision comes not so much as the best solution to the problem, but rather as the result of an ALP deal brokered by Transport Minister Laurie Brereton and designed to keep as many of the numerous ALP factions as happy as possible. By leasing rather than directly selling the airports, there is an argument that they are not really being privatised at all, thus keeping the left wing of the party happy.

The selling of leases — and then for the short period of 50 years rather than the usual 99 years — instead of freehold title has drawn considerable criticism, not the least of which is that the arrangement does not lend itself to negotiating the best possible price. It is therefore likely that the government’s estimates of the income generated by the deal will be rather higher than the reality. Another aspect of the arrangement is that the Federal Airports Corporation will cease to exist as such, as will its monopoly, and according to Prime Minister Keating this will generate competition between Sydney, Melbourne and Brisbane for the status of Australia’s premier gateway for international visitors. Many who should know regard this as absolute nonsense, saying that an airport system is just that — a system — with each airport playing its part in the overall network and each dependent to a large extent on the other.

Pilot Seniority Resolved

The ongoing problem of pilot seniority following the Qantas takeover of Australian Airlines has been resolved with overwhelming acceptance of an eventually combined structure. The so-called Y list basically comprises two groupings of pilots (international and domestic) operating as separate entities in terms of seniority, thus protecting the jealously guarded ‘pecking order’ on which promotion, pay and ultimately superannuation are based. The other side of the coin is that it will take about 30 years for a genuinely integrated seniority list to evolve as those currently on it gradually retire and new recruits start at the bottom and work their way up.

New Russian Reservations System

Sabre Decision Technologies, IBM and AT&T are well on the way to concluding financial arrangements for the establishment of a state-of-the-art airline reservations system in Russia. The project — called Sirena 3 — will provide a comprehensive information management system for airlines in Russia and other former Soviet countries. The project will provide capabilities which include passenger reservations processing, flight scheduling, departure control and cargo reservations which will be on par with the West’s most advanced systems. When fully operational, Sirena 3 will process the reservations of about 50 million passengers each year and will have the capacity to handle substantial increases in volume in the future.

International Traffic Keeps Growing

The Australian international scheduled airline passenger market grew by 8.9% in 1993-94, according to figures supplied by the airlines to the Department of Transport. The number of revenue passengers carried in June 1994 (the last month of the financial year) was up 9.3% compared with the same month of 1993. The figures show that in the 10 years to June 1994, international traffic to and from Australia grew at an average annual rate of 9.1%, compared with the world-wide average of 6.3%.

Qantas continued to increase its share of the market to 40.6% in 1993-94, followed by Air New Zealand (10.5%), Singapore Air Lines (6.4%), JAL (4.4%), Cathay Pacific (4.3%), United (4.1%) and British Airways (3.8%).

Union Wants More Qantas Employee Ownership

With the Qantas share float now about six months away, the Flight Attendants Association of Australia is pushing for the proportion of shares on offer to employees to be doubled from the expected 5% to 10%. This would be sufficient for the airline’s staff to be represented on the board and it is reported the move has some support from within the ACTU.

Melbourne Perishables Terminal Mooted

A consortium comprising refrigeration, architectural, agricultural and legal interests is considering developing a perishables terminal at Melbourne Airport. The move follows the recent decision to cancel an agreement between the airport and another consortium to develop a large freight terminal. Early plans for the $3-4m project include the construction of a 10,000 sqm site with completion earmarked for the middle of next year.

Domestic Air Fares Up

Figures released by the Prices Surveillance Authority (PSA) have revealed that domestic air fares rose by a substantial 6.3% in the June 1994 quarter and by 5% overall in the 1993-94 financial year. The June quarter figure compares with a 7.8% increase in the same period of 1993. The airlines have taken advantage of better conditions by improving their margins and therefore their yields, although fares remain 22% lower than they were in the pre October 1990 days before deregulation.

Anz Moves To Heathrow

After 12 years of operations at London Gatwick Airport, Air New Zealand is changing its United Kingdom gateway to Heathrow from later this month. The move to Heathrow was prompted by the need to boost connections from European and UK regional ports and is anticipated will open up new markets and help lift the airline’s profile to the business traveller.

Qantas’ Busiest Domestic Week

Qantas recorded its busiest ever week of domestic operation in late September/early October with record passenger numbers, flights and load factors. Over the seven days ending October 4, 218,710 passengers were carried by the airline on 1707 flights. Average load factor was an incredible 91% with flights departing Sydney on September 30 averaging 99%.

Qantas Commissions Sydney Package Centre

Qantas has commissioned a $1m express mail and courier package processing centre at Sydney Airport which is designed to increase the airline’s share of this growing and lucrative market. The centre will allow Qantas to better expedite the processing of high yield fast freight and courier packages and is planned to help increase the airline’s share of the market.

Noise Payout Extended

It was decided at the recent ALP national conference in Hobart that the Federal Government should extend its plans to insulate houses affected by noise from Sydney’s third runway and to increase compensation. The conference resolution basically commits the government to a compensation payout of between $400m and $600m, requires the purchase of the 500 most affected homes and sees nearly 10,000 houses near the flightpath eligible for insulation.

Legal Action Over Air France Subsidies

The European Commission’s decision to allow the French government to give State owned Air France new subsidies worth $US3.78bn has resulted in heavy criticism and legal action by the British government and a group of seven European airlines. The action has been launched in the European Court of Justice and involves British Airways, KLM, SAS, AirUK, Maersk Air (Denmark), British Midland and French regional carrier TAT.