Shaping up?

The good news for Virgin Australia’s long-suffering shareholders and the management and employees having to implement these fleet-related measures is they will soon be over.

All 18 Embraer E190 regional jets are expected to have been to be withdrawn by the end of December, while six ATR 72-500 and two ATR 72-600 turboprops would also be out the exit door at the end of June. That will lead to the closure of Virgin’s ATR crew base.

Virgin Australia group executive for airlines John Thomas says the benefits of simplying the airline’s fleet to Boeing 737 narrowbodies, Airbus A330-200 and Boeing 777‑300ER widebodies and a smattering of turboprops to be used in NSW and Victoria will begin to show in the next financial year.

Further, Thomas argues the use of A330-200s – of which Virgin has six – for its venture into Hong Kong and, eventually China will also be good for the company.

“To us, they were tough decisions but they were the right decisions to make, in particular making the 737 the core of our domestic operation,” Thomas told Australian Aviation on the sidelines of the International Air Transport Association (IATA) annual general meeting in Cancun, Mexico on June 4.

“You take a short-term hit to do that. As you can imagine, the efficiency of the crew that are flying the E190s at the moment is not great because obviously you’ve got less and less aircraft, you’ve got timing of crew that are being retrained to go from E190s up to the 737s.

“We’re going to feel the impact of that for the first half of FY18 but in the second half of FY18 hopefully we will have more than the five flights to Hong Kong each week if we can get some more slots in the November schedule so that will give us more A330s flying to Hong Kong which we think is good for that fleet.

“So I think second half of FY18 will be when we will be over a lot of the transitional cost.” Virgin Australia recorded a $69.0 million statutory net loss for the three months to March 31 2017, a deterioration from a loss of $58.8 million in the prior corresponding period.

The airline group was also in loss making territory on an underlying basis, which removes one-off costs and was regarded as the best measure of financial performance, slumping to an underlying before tax loss of $62.3 million, from underlying profit before tax of $18.6 million a year ago.

The company told the Australian Securities Exchange (ASX) in its trading update on May 2 the result was impacted by costs associated with the airline group’s fleet simplification program, as well as foreign exchange movements, Tigerair Australia’s withdrawal from Bali, severe weather events in Queensland and subdued domestic market conditions.

As Thomas alluded to earlier, Virgin Australia is due to begin nonstop Melbourne- Hong Kong service from July 5 using A330‑200s five times a week.

The new flights, operated in partnership with HNA Group as part of an alliance between the pair that received the blessing of Australia’s competition regulator in June, will require the equivalent of 1.5 aircraft, given the schedule features a combination of morning and late-night departures from Melbourne.

That will entail the reduction of A330-200 operated services between Perth and Australia’s east coast capitals Brisbane, Melbourne and Sydney. Thomas admitted the slots Virgin Australia was able to obtain at the busy Hong Kong airport were less than ideal. However, the desire to start the service earlier rather than later outweighed any thought of waiting until more slots became available.

“Obviously from an aircraft utilisation, we’d much rather have the daylight flight up and the night time (flight back),” Thomas said. “I think that’s what people are used to, that’s what been the traditional route.

“We had to do the schedule based on the slots that we got and it was our first time getting Hong Kong slots so it was always difficult that first time.”

“Our view was we’ve got some night slots, we’ve got some daylight slots so let’s see what the market likes and then we will evolve that over time.”

The ever-positive Thomas said the mix of day time and night time flights from Melbourne to Hong Kong may actually prove popular for some business travellers – despite not have a daily schedule – as the evening departure from Melbourne is more productive from a work point of view.

Meanwhile, tour groups would be able to save a night’s accommodation thanks to the overnight service, he said.

More reductions on transcontinental flights with the A330 are on the cards in the future and Virgin Australia attempts to secure takeoff and landing slots at an equally congested Beijing.

Asked if Virgin Australia would be able to mount service to the Chinese capital with its existing fleet, Thomas said: “Yes.” “We’re aggressively trying to get slots. Really it is all dependent on slots. It’s great that we have open skies but at the end of the day it’s the slots that are the constraint,” Thomas said of Virgin Australia’s ambitions for Beijing.

“In reality, people won’t be able to get decent slots at Beijing until the new airport.”

Sydney Airport says it is able to meet growth “within our existing footprint”

Sydney Airport chief executive Kerrie Mather says plans to expand Terminal 1 and the introduction of international flights at the Terminal 2/3 precinct will ensure Mascot has the necessary aviation capacity to meet the expected growth in passenger traffic in the years ahead.

Speaking at the company’s annual general meeting (AGM) in Sydney on May 30, Mather said Sydney Airport has begun preparing its 2039 master plan, which factors in the opening of the proposed airport at Badgerys Creek in 2026.

Mather, who announced in March her intention to step down at chief executive once a successor is appointed by the board, said that initial work showed Sydney Airport was able to “meet significant aviation growth within our existing footprint”.

“Over the next 12 months, we will be preparing for the release of our 2039 Master Plan, and importantly progressing our expansion plans,” Mather said in prepared remarks. “This includes a greater focus on co-location, new terminals, and differentiated products.”

“These include an expansion of our international Terminal 1, by adding new gates, baggage system expansions and apron capacity. Also a new Terminal 4, which will provide new, international gates adjoining T2/ T3. And also new aeronautical facilities in the SSE sector, south of General Holmes Drive.

“It is important these plans remain flexible, and that we deliver an integrated solution for passengers, terminal connectivity and ground access, whilst improving the customer experience, and optimising the capacity and operations at the airport.”

Sydney Airport chairman Trevor Gerber said: “We think the time is about right to have some significant expansion. We think the demand is clearly there, too.”

A slide presentation from the AGM showed the proposed Terminal 4 would be located where Qantas’s current maintenance facilities is currently.

Qantas chief executive Alan Joyce said the airline was in good dialogue with Sydney Airport regarding any move of its jet base.

However, Joyce said any move would be over a long period of time.

“We are working through exactly where the maintenance facility and what happens to the cargo facilities as well, so there is significant redevelopment of Sydney,” Joyce told reporters on the sidelines of the International Air Transport Association (IATA) annual general meeting in Cancun, Mexico on June 6.

“We’re talking about over the next couple of decades.” Joyce said having domestic and international operations form the same terminal would offer Qantas real revenue benefits in terms of more connectivity between flights, as well as help reduce costs through the removal of duplication and reduced towing of aircraft between terminals.

Earlier in May, Sydney Airport said it would not take up its right of first refusal (ROFL) to build and operate the proposed airport at Badgerys Creek. The Commonwealth said it would build the airport.

At the time, the company said the risks associated with the development and operation of the proposed airport were “considerable and ensure for many decades without commensurate returns for our investors”.

Although Sydney Airport will not be involved in Badgerys Creek, Gerber said the consultations with the federal government and others regarding the development would be useful in compiling the 2039 master plan.

Asked by a shareholder what the impact of Badgerys Creek would be on Sydney Airport’s profitability, Gerber said “looking a decade out is awfully difficult”.

Gerber confirmed previously issued guidance of a 33.5 cent distribution per stapled security for calendar 2017, with an interim distribution of 16.5 cents per stapled security.

Embraer improves range of E2 jets

Embraer has lifted the published range of its E2 family of regional jets that, on initial estimates, will be capable of operating Sydney-Denpasar or Darwin-Hanoi nonstop.

The range improvements for the E190-E2 and E195-E2 were announced at Embraer’s media day in early June and based on the results of the flight test program so far.

The E195-E2 is capable of flying 2,600nm, up from the previous figure 2,450nm when Embraer made changes to the wing and from 2,000nm at the launch of the E2 in 2013. The maximum takeoff weight (MTOW) has also increased to 61,500kg, from 60,700 previously. By way of comparison, Bombardier’s CS100 has a range of 3,100nm.

Similarly, Embraer said the E190-E2’s performance at socalled hot and high airports such as Denver, or short-field airports such as London City was expected to be better than initial estimates, based on the how the aircraft has been operating during flight test.

In an Australian context, range circles from Embraer provided to Australian Aviation showed the E195-E2 configured with 120 passengers would be able to fly between Sydney and Bali (2,495nm) or Sydney and Apia (2,336nm), based on certain assumptions.

From Darwin, that puts destinations such as Bangkok (2,378nm), Hanoi (2,496nm) and Taipei (2,310nm) within range of the E195-E2, again based on certain assumptions.

“We think Asia and Australia markets are markets where the E-jets can offer a huge role in a network both from a capacity and a range perspective,” Embraer Commercial Aviation chief commercial officer Arjan Meijer told Australian Aviation in an interview on the sidelines of the International Air Transport Association (IATA) annual general meeting in Cancun on June 6. As of June 2017, Embraer had four E190-E2s and one E195-E2 in its flight test fleet.

The E190-E2 is one of three models in the E2 family of jets that can seat between 97 and 114 passengers, depending on configuration. The first E190-E2 is expected to be delivered to launch customer Widerøe in the first half of 2018.

The E2 improves on the current generation E-Jets with new engines, a new aerodynamically advanced, high-aspect ratio, distinctively shaped wings, and improved systems and avionics, including fourth generation full fly-by-wire flight controls.

This is expected to result in double-digit reductions in fuel and maintenance costs compared with the current E-Jet family. From an environmental perspective, the new aircraft also produced less emissions and less noise. The aircraft will also have a new interior with larger overhead bins and a new first class concept, among other interior improvements.

The other two E2 models are the E175-E2, which seats 80-90 passengers, and the E195-E2 (120- 144 seats).

The Brazillian aircraft manufacturer recently appointed a new regional sales manager for Australia and New Zealand and the feedback so far has been that the fleet of 18 E190s Virgin is letting go as part of the airline’s cost reduction and efficiency push have had little trouble returning to the skies with other operators in what Meijer described as an “attractive aftermarket”.

“Of course, the first aircraft were delivered in 2004 so only over the recent few years we saw the aircraft coming onto the market,” Meijer said.

“There were a couple of big batches that are now being placed and at the moment we are back to very healthy after market numbers in terms of available aircraft.

“Our lessors see sufficient potential in the market to place them out so we think there is a very good market for any aircraft that comes out of operators at the moment.”

In contrast to Virgin, other Embraer operators in Australia have grown their fleets in recent times. In September 2016, Airnorth picked up its fifth E170, while Jetgo recently took delivery of two ERJ‑140LRs for its expanding RPT network.

While Australia represented almost the ideal place for older aircraft to keep flying well into their third and sometimes fourth decade given the hot, dry climate across vast areas of the continent, there will come a time when even the Fokker 70s, Fokker 100s and Avro RJs will need to be replaced. And Embraer is hoping its E-Jets will prove to be the right solution for operators of those existing aircraft.

“That is a significant size of the market,” Meijer said.

“In the longer run we see a replacement market for those either in new E2s, E1s or maybe even used E1s.”

Further, Embraer has identified 50 city pairs in Australia which “are not operated at the moment which could be operated by our segment”.

The aircraft will be powered by Pratt & Whitney PW1700G and PW1900G geared turbofan engines. In addition to the E2, the Pratt and Whitney geared turbofan engine will also be featured on Airbus A320neo, Mitsubishi Regional Jet, Bombardier CSeries and Irkut MC‑21 programs.

While Pratt & Whitney’s troubles with ramping up production for the A320neo are well known, Meijer said the experience at Embraer with the powerplants has been very smooth so far.

Meijer described the E-jet family as a complement to existing narrowbodies from Airbus and Boeing rather than a direct competitor.

“The strength of the E2 as a complimenter is that we actually can deliver a plane with fewer seats,” Meijer said.

“By doing so, we can allow the airline to easier start up new routes or to increase the frequency on their network.

“We can do so at a significantly lower trip cost than what they can on the narrowbodies but the seat costs are roughly the same.” The one cloud over the Embraer program is the E175-E2, whose entry into service was recently pushed back a year to 2021 as negotiations between pilot groups and airlines in the US are yet to reach an agreement on an expansion of the so-called scope clause agreements that restrict the MTOW of aircraft flown by regional affiliates.

While the current E175 is within the current scope clauses, the heavier E175-E2 exceeds the MTOW limit.

Meijer said he believes there will eventually be agreement. Until then, there is a big potential market for the E175-E2 outside the US. “If you look at the success of the E1, most of the E175s were placed in the US market,” Meijer said.

“So I think it is fair to say the success of the E175-E2 depends largely on what happens with the scope clause but that’s not the whole story. We think there’s definitely a role to play in the rest of the world.”

Virgin, Alliance charter partnership approved

Australia’s competition regulator has reversed course and cleared Virgin Australia/ Virgin Australia Regional Airlines (VARA) and Alliance Airlines to work together in the charter and fly-in/fly-out (FIFO) market.

The two carriers’ charter alliance involves joint tendering for corporate FIFO contracts, as well as cooperating on aircraft maintenance, procurement of aircraft and parts, parts pooling, airport operations, airport handling, check-in, frequent flyer programs, lounge access, scheduling, pricing, sales and marketing and service policies.

Virgin and Alliance had argued the tie-up would benefit charter customers through operational efficiencies, the increased flexibility and optimisation of aircraft utilisation through combining their fleets, and the bringing together of VARA’s (Virgin Australia’s) national regular public transport (RPT) network with Alliance Airlines’ national charter network.

The Australian Competition and Consumer Commission (ACCC) knocked back the alliance in a draft decision published in December 2016, citing concerns the tie-up would reduce the number of players in the market.

In January, Virgin and Alliance submitted new information urging the ACCC to reconsider. The ACCC was ultimately persuaded and on May 18 gave the partnership its approval for five years.

The ACCC said further inquiries with industry following the draft determination had raised a “number of factors that mitigate the risk to competition” and it was now satisfied that the likely public benefits of the alliance outweighed the likely public detriments.

“The operational synergies which are likely to result from the charter alliance and bringing together VARA and Alliance Airlines’ complementary networks should reduce their costs and allow them to make more competitive offers to customers,” ACCC commissioner Roger Featherston said in a statement.

“Further, many of the larger FIFO customers are sophisticated and well-resourced companies with procurement expertise who have strong bargaining power in their negotiations with FIFO operators.

“These customers will continue to have viable alternatives, in particular Qantas and Cobham.

Market conditions in Western Australia suggest that these airlines will continue to compete strongly with the charter alliance.” Virgin and Alliance argue their proposed charter alliance would allow them to compete more effectively against the “one-stop shop” offering from Qantas.

The ACCC noted that Virgin had no aircraft for its charter services with fewer than 100 seats, while the Alliance fleet did not feature aircraft with more than 100 seats.

The combination of the two fleets would offer a broader mix of aircraft to charter customers and is “likely to enhance their service offering”.

“Some acquirers of FIFO services the ACCC spoke to as part of its market inquiries indicated that they considered that this would be one of the main ways in which they would benefit from the charter alliance,” the ACCC said in its determination.

And although both carriers had overlapping operations in Western Australia, the ACCC said the pair’s services elsewhere in the country were “largely complementary” given Virgin’s strong RPT presence and small charter footprint in contrast to Alliance’s extensive charter services and minimal RPT network.

A321neo delays leave Hawaiian Airlines’ network plans in limbo

Hawaiian Airlines chief executive Mark Dunkerley says delays to new Airbus A321neos deliveries are frustrating, given the late arrival of the aircraft has forced the carrier to put expansion plans on hold.

Issues with the aircraft’s Pratt & Whitney engines have put Hawaiian in the same position as scores of other carriers around the world having to readjust their network and fleet plans in response to the delay of A320 family aircraft deliveries.

And while the A321neo narrowbodies were unlikely to ever fly to Australia from Hawaiian’s Honolulu hub, Dunkerley says their entry into service would facilitate the freeing up of Airbus A330‑200 widebodies that could enable more international services to destinations around the Pacific.

“We had some important network development plans that have been put on hold pending the arrival of these aircraft,” Dunkerley tells Australian Aviation in an interview on the sidelines of the International Air Transport Association (IATA) annual general meeting in Cancun, Mexico on June 5.

“We remain hopeful to get a couple of deliveries before the end of this year which is especially important to us.”

Hawaiian has 16 A321neos on firm order, as well as recently announced plans to lease two more. Aircraft deliveries were expected to commence in the middle of calendar 2017 and run until 2020. However, reliability and production issues with Pratt & Whitney’s PW1100G geared turbofan engine has led to a backlog at Airbus, which is producing completed A320neo and A321neos that are waiting for engines.

Airbus chief operating officer for customers John Leahy acknowledged the delays were unfortunate for the affected airlines. However, he was confident Pratt & Whitney would find a solution. “Yes there were issues with the ramp up of the engine and production,” Leahy told reporters on the sidelines of the IATA AGM.

“The airframes unfortunately are ready, which is why some people go to Hamburg and Toulouse to see our glider fleet sitting there. “This happens in the industry from time to time. It is pushing new technology. We wish they had done a better job at Pratt of industrialising their program.”

“They are getting on top of it now but that does mean that some airlines, in fact all airlines on the Pratt powered neo are going to be late, it is just a matter of where they are in that ramp up cycle, how late it is.”

Airbus executive vice president and head of programs Didier Evrard described it as “more maturity issues, design maturity issues that we are progressively tackling one by one”.

Notwithstanding Pratt & Whitney’s handling of the matter, the delays are having an impact on airlines.

Currently, Hawaiian serves Sydney daily, competing with Qantas and Jetstar on the route. Meanwhile, it is the only airline offering nonstop flights between Brisbane and Honolulu, which it operates four times a week.

Hawaiian also flies to Auckland. While Melbourne has long been touted as Hawaiian’s next destination in this part of the world, Dunklerly said any potential expansion into Australia will depend on availability of aircraft and the result of weighing up where best to deploy those assets in markets around the Pacific.

“At the moment we don’t have access to additional widebody aircraft pending the arrival of the A321neos,” Dunkerley said. “I think once the A321neos do arrive we will have some extra widebody capacity to deploy around the Pacific Rim and additional capacity to Australia will be on the list of potential uses. “What we would say about Australia in general is it went through a period of soft demand immediately following the slowdown in the natural resources sector and the commodities sector that is such an important part of the Australian economy.

“Of late, the Australian economy is back and with it is demand for the Hawaii vacation and we’ve seen pretty encouraging signs in the Australian market.”

Hawaiian was also still keen to forge a deeper partnership with Virgin Australia beyond what was in place currently, where the Australian carrier codeshares on its services from Brisbane and Sydney to Honolulu. The pair also have a reciprocal frequent flyer arrangement.

“I think Virgin has been a good partner of ours over the years. I think we’ve always wanted more out of the relationship,” Dunkerley said. “They’ve had some management changes there, it will be interesting to see we can will bring that relationship into a more fruitful stage.”

In other fleet news, Dunkerley said Hawaiian was evaluating its requirements for the six A330- 800neos it has on firm order.

“At the moment we have A330neos for delivery in 2019. At the same time we are beginning to look at what is the appropriate fleet for us in the next decade so the situation is a little fluid at the moment,” Dunkerley said.

“We are going to be having a good look at what our aircraft needs are for the next decade and that work is going on as we speak.” Also, Dunkerley said Hawaiian was about two-thirds of the way through cabin upgrades on its 23 A330-200s that include an upgraded lie-flat business class product and increased extra legroom economy section. Work on the reconfiguration program has been paused during the peak northern hemisphere summer and was planned resume in the autumn. It was expected to be completed by the end of calendar 2017.

Hobart Airport runway extension to be completed by March

Hobart Airport’s runway extension project is on track to be finished by March 2018.

The airport’s master plan, which was approved December 2015, features lengthening Runway 12/30 by 500m to 2,751m, with a 150m extension at the northern end and 350m at the southern end.

Federal Minister for Infrastructure and Transport Darren Chester said on May 26 the building of the extra 150m northern end has been completed, with work set to begin on the final stage of the redevelopment at the southern end. This was due to be completed by March 2018. “This will allow the airport to support larger passenger and freight aircraft, increasing the ability of the airport to meet the needs of the Asian market and beyond,” Chester said.

The federal government is contributing $38 million to the project, with Hobart Airport contributing $2 million.

Acting no more, Shane Carmody confirmed as permanent CASA chief

Shane Carmody has been appointed director of aviation safety at the Civil Aviation Safety Authority (CASA) for a five-year term.

Carmody, who was deputy chief executive of CASA between October 2006 and October 2009, has been acting in the role since October 2016, following previous CASA director of aviation safety and chief executive Mark Skidmore’s resignation from the position in August 2016.

“The new Director of Aviation Safety was chosen after an international search for the best available person to further develop CASA as a world leader in aviation safety regulation,” CASA chairman Jeff Boyd said in a statement on June 7.

“CASA’s board has full confidence that under the continued leadership of Shane Carmody, Australia’s excellent aviation safety record can be further enhanced.” Carmody has previously committed to leading a CASA that is “firm, fair and balanced”.

“My focus is on delivering a firm, fair and balanced aviation safety regulation system, promoting a positive and collaborative approach,” Carmody told the Regional Aviation Association of Australia’s annual convention in October 2016.

“Many would argue that CASA doesn’t always get this right and I agree absolutely. But the industry doesn’t always get it right either and a lot of you would agree with that. “So somewhere in between is the reality.”

Federal Minister for Infrastructure and Transport Darren Chester said Carmody’s appointment will ensure CASA “retains strong leadership into the future”.

“Under Mr Carmody CASA has already commenced the examination of a number of priority issues raised by industry including fatigue rules, aviation medical, and targeted regulatory reform,” the Minister said in a statement. “I look forward to continuing to work with Mr Carmody and the CASA board to ensure that CASA implements the government’s recently announced Statement of Expectations which will focus on regulatory activity that is pragmatic, practical and proportionate, and continues to maintain Australia’s strong aviation safety record.”

PEOPLE NEWS

Air Vice-Marshal Gavin Turnbull has been appointed Deputy Chief of Air Force (DCAF) following Air Vice- Marshal Warren McDonald’s posting to the newly-created position of Chief of Joint Capabilities. AVM McDonald served as DCAF for two years, while AVM Turnbull comes into the role – his appointment took effect from May 1 – after two years as Air Commander Australia (ACAUST). AVM Turnbull’s replacement as ACAUST is the newly-promoted Air Vice-Marshal Steve ‘Zed’ Roberton, the previous Commander Air Combat Group. Air Commodore Michael Kitcher is the incoming Commander Air Combat Group.

Qantas chief executive Alan Joyce has been named a Companion of the Order of Australia, Australia’s highest civil honour, in the 2017 Queen’s birthday honours list. Joyce, who has led Qantas since 2008, was recognised for his: “eminent service to the aviation transport industry, to the development of the national and international tourism sectors, to gender equity, inclusion and diversity, and to the community, particularly as a supporter of Indigenous education.”

“I’m truly honoured by this award, which also recognises the work of thousands of people who make Qantas an institution that Australians can rightly be proud of,” Joyce said in a statement. Joyce was one of 15 prominent Australians to be awarded the Companion of the Order of Australia, or AC. As well as leading a transformation of Qantas that last year saw it post record profits, he has been a champion of social issues, including marriage equality.

IATA forecasts US$31.4bn in airline profits in 2017

Cargo has emerged from years in the doldrums and is roaring again as firms move to quickly restock their inventories amid a more positive international economic outlook.

The brighter picture for cargo is one of the reasons the International Air Transport Association (IATA) has upgraded its calendar 2017 profit forecasts for the world’s airlines.

Collectively, the industry is expected to post US$31.4 billion in profits for 2017, an improvement from the estimated profit of US$29.8 billion that IATA published in December 2016.

The outlook was presented at the IATA annual general meeting in Cancun, Mexico on June 5.

The airline industry body’s chief economist Brian Pearce says cargo is a very positive story.

“Since 2010 it has been a pretty miserable story for air cargo. That does seem to have changed,” Pearce told reporters at the IATA AGM.

Pearce said companies have restocking inventories of tools and finished goods and turning to air transport to do that quickly.

The growth in online retailing, particularly in North America, as well as pharmaceutical shipments, were also factors in cargo’s revival. Airlines have been retiring older freighter aircraft during the weakness in the cargo market over previous years in an effort to reduce the overcapacity in the market as a result of the strong growth in passenger traffic adding tonnes of belly space to the market.

As a result, cargo yields took a big hit and airlines, particularly in the Asia Pacific region, posted losses from their cargo operations. The Asia Pacific region accounts for about 40 per cent of air cargo shipments, IATA said, with cargo revenues rising for the first time in several years boosted by the restocking of retailers and industry in the initial stages of the economic upturn.

Pearce says the freight capacity is starting to be more in line with demand as a result, leading to a better yield picture. “Indeed you see that in cargo yields which have flattened off,” Pearce said.

“A lot of airlines have got rid of their freighters but also the surge in cargo demand has meant there’s not a lot of cargo capacity chasing new business now so that’s helping, particularly the Asia Pacific airlines.

“Cargo load factors are up sharply which is a change and encouraging for financial performance of those airlines.” More broadly, IATA director general and chief executive Alexandre de Juniac said the global profit forecast would be achieved on revenues totalling US$743 billion, representing a net profit margin of 4.2 per cent.

Further, 2017 would be the third year in succession airlines would post returns above the cost of capital, with passengers benefitting from modern fleets, an expanded global route network and more product choices.

“Strong demand is driving profitability,” de Juniac told delegates at the annual general meeting in his opening address. “This includes air cargo, which has awakened from a six-year coma.”

While heralding yet another year of overall profitability, the forecast result, if realised, would be down from collective net profit of US$34.8 billon estimated for calendar 2016.

IATA said industry level profitability peaked at a historically high level in the first half of 2016 and has since been slowly declining. This was due to margins being crimped as unit costs rose ahead of unit revenues. Also, after tax profits were impacted by fuel hedging losses.

On a region-specific basis, IATA said North American carriers would continue to be the “powerhouse of industry profitability”, with profits of US$15.4 billion expected in 2017, compared with US$16.5 billion in the prior calendar year. North America represented more than half of the collective global profit.

Closer to home, IATA said Asia Pacific carriers were tipped to record net profits of US$7.4 billion, down from US$8.1 billion a year ago. The region’s performance was highlighted by the rebound in the cargo market.

“The problem for the Asia Pacific region in the recent years has been the troubles with cargo,” Pearce said. “That at least for a while is now turning around.” “As well as the fact that it is a region where growth is so much stronger in the earlier phases of development so you are getting lots of new competition, you are seeing some liberalisation of markets so it is an increasingly competitive market which is obviously tougher to do well in.”

On a negative note, IATA said trading conditions for Middle East carriers, including the likes of Emirates Airline, Etihad Airways and Qatar Airways, among others, had “sharply declined over the past six months”.

“Profitability and load factors are down significantly, as traffic and some business models have come under pressure,” IATA said. “There is growing evidence that the ban on large electronic devices in the cabin and the uncertainty created around possible US travel bans is taking a toll on some key routes.

“Meanwhile, the region is struggling with increased infrastructure taxes/charges and air traffic congestion.”

Middle East carriers were expected to post profit of US$400 million in calendar 2016, barely a third of the US$1.1 billion profit in 2016.

Africa was the only region whose airlines were collectively forecast to be in the red in 2017 to the tune of a US$100 million loss. de Juniac reiterated calls for governments and regulators to find an alternative solution to the electronics ban imposed by the United States and United Kingdom on flights from select countries with “no consultation with industry and little time to implement”.

And the bans were estimated to result in US$180 million in lost productivity, potentially rising to US$1.2 billion should the bans be extended to flights from Europe to the US.

“The measures themselves test the confidence of the industry and the public – confidence that is critical for the success of any security regime,” de Juniac said. “We need to get security right. There is a clear duty to make sure that the measures are logical, effective and efficient. That is not the case with the current ban. And it must change.

“We must find alternatives to the ban. In the short-term, these include more intense screening at the gate and skills training.

“In the medium-term more advanced and faster explosive detection technology is the solution to evolving bomb threats.”

Japan Airlines to serve Melbourne as Australia- Japan market surges

Japan Airlines has underlined the resurgence in the Australia- Japan market with the launch of nonstop Melbourne-Tokyo (Narita) flights from September. The oneworld alliance member said it would serve Melbourne daily with Boeing 787-8s, with the first flight scheduled to take off on September 1.

Japan Airlines president Yoshiharu Ueki said the Australia- Japan economic partnership agreement (EPA) had brought the two countries closer together and supported the mounting of flights to Melbourne.

“We are delighted to introduce a new service to Melbourne, our second destination in Australia,” Ueki said in a statement.

“Since 1969, JAL has been operating to Australia and contributing to the promotion of bilateral relations between Japan and Australia. This partnership has become even stronger since the EPA went into force, and so we are pleased to serve Melbourne and continue supporting both nations from every possible aspect including business and tourism.”

Japan Airlines said the 787-8 to be used to Melbourne featured 161 seats, comprising 38 business class seats with direct aisle access for every passenger, 35 premium economy seats in a 2-3-2 configuration and 88 economy seats in a passenger pleasing eight across 2-4-2 layout.

The airline is the only 787 operator to have an eight across economy cabin.

The Melbourne flights have been scheduled as a morning departure from Tokyo (Narita) arriving in Melbourne just before 2200.

Meanwhile, the reciprocal flight takes off from Tullamarine a little after midnight and lands at Tokyo in the morning.

Currently, Japan Airlines’ Sydney-Tokyo (Narita) operation is a morning departure from Sydney and red-eye service from Tokyo.

The new Melbourne-Tokyo (Narita) service is latest nonstop flight in an Australia-Japan market that has seen healthy growth over the past couple of years.

In August 2015, Qantas launched a new daily Brisbane- Tokyo (Narita) service with Airbus A330 equipment.

Then, in December that year Japanese carrier All Nippon Airways touched down in Australia for the first time since 1999 when it commenced nonstop Sydney-Tokyo (Haneda) flights.

And Qantas resumed Melbourne- Tokyo (Narita) flights in December 2016, returning to the route for the first time in eight years with a daily offering on Airbus A330s, following Jetstar’s withdrawal from the route.

Although Jetstar ended its flights to Japan from Melbourne, the Qantas-held low-cost carrier maintains services to Osaka and Tokyo (Narita) from the Gold Coast and Cairns.

Qantas chief executive Alan Joyce said the Australia-Japan market was at levels not seen in decades.

“It is a very robust market in both directions, which is great, because the capacity going in is getting more Japanese to travel and we are seeing the biggest boom in Japanese travel since the 1980s and 1990s,” Joyce told reporters on the sidelines of the International Air Transport Association (IATA) annual general meeting in Cancun, Mexico, on June 6.

Indeed, the Japan National Tourism Organisation statistics indicated 445,237 Australians visited Japan in calendar 2016, up 18.4 per cent compared with the prior corresponding period. In terms of Japanese heading to this country, the latest figures from Tourism Australia showed there were 413,800 Japanese visitors to Australia in 2016, an increase of 22.7 per cent from a year earlier.

Japan was Australia’s sixth largest source market of foreign visitors. The latest annual report on international airline activity from Bureau of Infrastructure, Transport and Regional Economics (BITRE) indicated loads on Australia- Japan flights were quite healthy. The airlines carried 1.26 million passengers in calendar 2016, with an average seat factor of 82.2 per cent.

And capacity, measured by available seats, is also on the up. In calendar 2016, there were about 1.5 million nonstop seats between Australia and Japan, up about 20.1 per cent from the prior year.

While encouraging, the figures are a long way away from the heady levels reached in the 1990s when there were more than 2.5 million seats a year between Australia and Japan, with Qantas the dominant carrier on the route.

In 1999, total seat capacity was still about two million. Qantas international chief executive Gareth Evans said the new Brisbane and Melbourne flights were performing strongly “considering the timeframe that they have been operating because we’ve really seen a very quick ramp up period”.

Further, the airline was looking at new opportunities for Japan. “We’ve had conversations here with our friends at JAL as well around the markets and what they are saying in terms of how the markets are going to develop,” Evans told reporters at the IATA AGM.

“It really is an opportunity for us and we will continue to explore it. “If we see more demand and then we’ve got the capacity to cater to that demand we will.”

While Qantas and Japan Airlines are partners of Jetstar Japan and do work together on some Australia- Japan services via third countries, the pair do not codeshare on each other’s nonstop flights between the two countries.

Tourism Australia managing director John O’Sullivan said: “A critical reason behind the strong inbound performance we have enjoyed from Japan over the past 12 months has been increased aviation capacity.”

“We know that Japanese travellers have a strong preference for full-service carriers and direct nonstop flights, so we expect the new service to be very popular and help maintain what has been a significant bounce back from what is such an important market for Australian tourism.”