Commercial Aircraft Sales

Cathay chairman Peter Sutch has said that CNAC’s plan may be contrary to the Sino-British Joint Declaration agreement on the handover of Hong Kong to China. The treaty stipulates that a local carrier must be genuinely based in Hong Kong. According to Mr Sutch: “The crucial point is whether a Hong Kong company clearly controlled from Beijing can qualify as having Hong Kong as its principal place of business. This interpretation of the Joint Declaration has implications which go well beyond the interests of Cathay Pacific and the aviation industry in Hong Kong”.

Councils Go On The Warpath

A grouping of 12 Sydney councils affected by aircraft noise have banded together to examine the feasibility of taking out a class action civil suit compensation claim against the Federal Government.

The councils are also asking ratepayers to sign a form letter outlining what the Coalition of Councils demands as a solution to the noise problem afflicting most municipalities to the north and south (to a lesser extent) of KSA. The form letter would then be submitted to the coming Senate Select Committee investigating aircraft noise generated since the closure of the east-west runway last November.

The Coalition of Councils extends as far north as Kuringai, more than 20km from the airport, and is demanding that the Government reactivates the east-west runway for day to day operation, closes the third runway till all three runways can be used (though this statement is unclear as to what it actually purports to mean as the runway can be opened as soon as political will dictates, thus this can be done at any time) and implements an extended curfew from 10.30pm to 7.00am. The present curfew operates from 11.00pm through to 6.00am though four jets are allowed to land between 5.00am and 6.00am providing they can land from the south and not employ reverse thrust.

The submission also demands that operational procedures be amended to reduce the effect of heavy jets performing slow turns using increased thrust over residential areas and increasing the speed of descent from 170 to 210kt (315 to 390km/h). The form letter also calls for the fast tracking of Badgerys Creek and upon its commissioning making KSA a domestic only airport with all heavy jet movements transferring to Badgerys.

This of course neatly overlooks reality in that (a) the currently proposed runway at 2900m is incapable of accepting long haul operations or for that matter even many summertime widebody domestic services, and (b) that Qantas isn’t about to transfer its massive 747 maintenance from KSA to Badgerys just to appease politicians.

Nevertheless, the spectre of tens of thousands of form letters being presented at the Senate hearing with a federal election around the corner is something that certainly won’t provide good press for an already embattled Federal Government.

AA Comment: Again, for the millionth time, there is a simple solution to this whole mess: simply reopen the east-west runway for normal operations. Use the primary north-south runway as it always has been used and use the new third runway for departures to the south and arrivals from the south only using this runway for traffic to or from the north if strong winds actually force the closure of the east-west cross runway. Simops could even be used if necessary on 34L if applied only to Australian domestic aircraft no larger than A300s.

Combined with the new radars, taxiways and terminal additions and the STARS arrival and departure airways system, this would allow KSA a capacity of up to 80 movements an hour with noise spread fairly over the city.

Will this happen? Certainly not while the minister responsible has his electorate at one of the now quietened ends of the east-west runway.

Ansett – Air New Zealand Link Nearer

Final negotiations were believed to be underway as we went to press for Air New Zealand to take a 50% shareholding in Ansett.

Air New Zealand would gain its shareholding in Ansett through buying out News Limited’s holding, leaving TNT and Air New Zealand (and possibly the New Zealand carrier’s 42.5% shareholder Brierley Investments) Ansett’s joint owners. Air New Zealand and News are believed to have settled on a price of between $400m and $600m for News’ half share. TNT may also increase its shareholding to just over 50% to satisfy foreign ownership guidelines.

Air New Zealand is now concentrating on negotiations with TNT over the details of their new partnership and Ansett’s management structure. The New Zealand carrier is also believed to be seeking an option to purchase TNT’s share at a later date, possibly in two years time.

If, as seems likely, the sale goes ahead, it opens up a number of problems that will require some innovative solutions.

At the time of writing the future of Ansett New Zealand was unclear, with two solutions mooted. Air New Zealand has been studying turning Ansett New Zealand into an independently controlled airline, removed from and still in competition with its domestic operations. Alternatively Qantas could buy all of Ansett New Zealand, or at least some of its assets, such as terminals, and possibly establish a domestic operation on main trunk routes along similar lines to the National Jet operated Airlink operation. The New Zealand government is determined to see the current competitive duopoly maintained.

The link has also raised further questions over the future of Qantas’ 19.9% shareholding in Air New Zealand. Most industry observers predict that Qantas would sell its holding, although Qantas MD James Strong said at a recent press conference that that would not necessarily be the case.

Further, confusion surrounds the future of Ansett’s international operations, or at least who owns and who can operate Ansett’s fledgling international route rights. There has been some suggestion that Ansett’s international operations, which have suffered badly from the nosewheel up landing at Sydney last October and the Kobe earthquake in Japan, could be shut down, should the link go ahead.

No doubt all three issues will come under the scrutiny of government agencies on both sides of the Tasman.

The potential of a combined Ansett-Air New Zealand is vast, giving ANZ access to Ansett’s large Australian domestic traffic base, and giving Ansett access to Air New Zealand’s international services. Further, the tie-up may also finally see the freeing up of trans Tasman services, including new nonstop routes such as Sydney/Queenstown or Wellington/Canberra, and increased frequencies using smaller aircraft on current routes. Further, the two airlines will be better able to market Australia and New Zealand as a single holiday destination to international tourists.

Negotiations for Air New Zealand to buy into Ansett are believed to have been underway since last October’s Federal Government decision to bar Air New Zealand from operating on Australian domestic routes for fear of damaging the Qantas public float, now due this July.

A formal link up would give Australasia two similarly sized airline groups with similar regional route structures, although it seems unlikely that either Ansett or Air New Zealand would be willing to forgo their identities to form a single brand airline.

Between them, the two carriers (including Ansett New Zealand) currently operate a jet airliner fleet of more than 106 aircraft comprising five 747-400s, two 747-300s, four 747-200s, five 767-300s, 12 767-200s, 12 A320s, five 727s, 20 737-300s, 13 737-200s, 21 BAe 146s and more than seven F28s. Qantas in comparison operates 91 jet airliners, plus a further eight 146s in service with Airlink.

For the 1993/94 financial year, Ansett’s revenue topped $A3bn, Air New Zealand’s was$NZ2.6bn (approx $A2.3bn) and Qantas’ was$A6.6bn.

Qantas/Cathay Fifth Freedom Dispute

A major dispute has developed between Qantas and Cathay Pacific over fifth freedom services between Hong Kong and Australia with the colony’s government imposing restrictions on Qantas and the Australian government retaliating.

The basis of the dispute is Cathay Pacific’s allegations that Qantas is abusing some of the terms of the Air Services Agreement between the two countries.

According to Cathay, Qantas is bleeding off too many passengers in Hong Kong and then carrying them onto other ports such as Bangkok and Singapore. Many of these passengers then travel on to Europe, but Cathay’s main concern seems to be protecting its ‘local’ market. Cathay says the intention of the existing agreement is that the primary purpose of Qantas flights to Singapore and Bangkok through Hong Kong should be for ‘end to end traffic’ and not merely a load change at Hong Kong.

Qantas argues that suggestions its services through Hong Kong to Bangkok and Singapore represent a threat to Cathay are “quite amazing and unrealistic” and the claims are even more surprising given the rights being exploited by Cathay flying out of Australia. Qantas’ chief executive officer, Mr James Strong, said “Cathay enjoys virtually unrestricted rights to carry Australians anywhere, but simultaneously wants to limit severely the number of passengers we can take from Australia via Hong Kong to other destinations”.

The dispute began in late April when the Hong Kong government issued a new operating permit to Qantas which from July 1 imposes a 50% of passenger capacity limit on Qantas’ fifth freedom traffic to the so called ‘golden triangle’ ports of Bangkok and Singapore. Qantas says its market share on the routes is insignificant at only 5-6%. To Cathay, however, these ‘domestic’ routes are the airline’s bread and butter and obviously considered to be worth protecting at any cost.

In retaliation, the Australian government has approved Cathay’s current Australian schedules only until June 30, the day before the restrictions on Qantas come into effect.

The dispute has also threatened Ansett’s services to Hong Kong, the colony’s government saying it would have little alternative but to widen the dispute to effect both Australian carriers if the Australian government imposes restrictions on Cathay. Ansett has expressed surprise at unwittingly becoming involved in the widening dispute, one in which Hong Kong maintains it is the wronged party and claims there is “no proper legal basis” for the Australian government’s retaliation against Cathay Pacific.

A meeting between the warring parties was scheduled to be held at about the time this issue of Australian Aviation goes on sale. Cathay Pacific also has other major concerns, notably news that China’s CNAC has applied for an Air Operator’s Certificate to start services from Hong Kong. (refer elsewhere this Stop Press)

Eagle Aircraft Cuts Back

Perth based Eagle Aircraft has stopped production of its innovative XT-S two seat VLA, in preference for development of an improved Series 200 version.

The decision to stop production was made to allow Malaysian owned Eagle Aircraft to streamline its operations and focus design efforts on the new Series 200.

The 200 will incorporate improvements to overcome the original Series 100’s technical problems including its higher than expected stalling speed, and introduce new improvements Eagle had already been working on. Eagle Aircraft’s Cliff Chalon said that the company had the choice of either cancelling the 100 and focusing efforts on the Series 200, or incorporating improvements into the 100 which would have caused considerable delays anyway.

Work on the 200 is in its early stages with production at least 18 months to two years away, while production of the Series 200 XT-S will also be transferred to Malacca in Malaysia.

With the decision to stop production of the Series 100 XT-S and the transfer of production of the 200 to Malaysia, Eagle has retrenched about 45 design and production staff, leaving a staff of about 50 (including some Malaysian expatriates who will be returning to Malaysia).

The transfer of production to Malaysia leaves research and development as Eagle’s Perth facility’s core functions. The 10th XT-S was on the production line at the time the decision was announced.