Debrief

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Virgin Australia and Hainan Airlines have expanded their partnership to include the Australian carrier adding its VA code on Hainan’s flights from Sydney to Changsha, Haikou and Xi’an, Melbourne to Changsha and Xi’an, and from Brisbane and Cairns to Shenzhen. Meanwhile, Hainan will add its HU code on Virgin Australia domestic and trans-Tasman flights.

QANTAS GROUP NEWS

Qantas announced on May 23 it would reinstate a codeshare agreement with Air France for flights between Australia and France via Asia that was dropped six years ago when it forged a global alliance with Emirates. Under the new agreement, Qantas will add its QF airline code on Air France’s daily nonstop flights from Paris to Hong Kong and Singapore. Similarly, Air France will place its AF airline code on Qantas’s flights from Singapore to Brisbane, Melbourne, Perth and Sydney, as well as from Hong Kong to Brisbane, Melbourne and Sydney. The AF code will also appear on Qantas-operated flights from Sydney to Adelaide, Canberra, Cairns, Darwin and Hobart.

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Qantas chief executive Alan Joyce said the airline had scrapped plans to operate a seasonal Perth- Johannesburg service after failing to reach an agreement with Perth Airport over the use of its Terminal 3/4 precinct to operate the nonstop flight. Qantas has planned to fly the route between November and March.

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In a case of frenemies coming together for a common cause, Air New Zealand and Qantas have inked a codeshare deal covering domestic destinations on both sides of the Tasman. Under the arrangement Air New Zealand will add its NZ airline code on 85 Qantas-operated domestic services in Australia and Qantas will add its QF code on 30 Air New Zealand-operated domestic services in New Zealand from October 28 2018. There will also be reciprocal lounge access for eligible frequent flyers.

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Jetstar group chief executive Gareth Evans said the codeshare would have no impact on the Jetstar New Zealand domestic operation and the airline group was “fully committed” to that business.

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However, Virgin Australia group executive for airlines Rob Sharp said the arrangement was bad for consumers and will have some flowon consequences on the Tasman. Further, Sharp said Virgin Australia management was considering the question of what role regulators could have.

AIRLINE NEWS

Etihad Airways’ 10-year naming rights sponsorship of Melbourne’s Docklands stadium will end in 2019. It is the latest example of the Abu Dhabi-headquartered carrier’s reduced presence in the Australian market, following confirmation it was ending flights to Perth in October 2018 and downgauging its service to Melbourne.

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Air New Zealand chief operating officer Bruce Parton will leave in September 2018 after a 22-year career at the airline. The airline said on May 28 Parton had decided to take a break from corporate life. His role has been split into two parts, with Carrie Hurihanganui to be chief ground operations officer and John Whittaker to be chief air operations and people safety officer.

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Meanwhile, Air New Zealand chief financial officer Jeff McDowall says the airline is working towards placing an order with Airbus or Boeing for new widebody aircraft by early 2019. The timetable for the replacement of Air New Zealand’s Boeing 777-200ER fleet was outlined at the company’s investor day in Auckland on June 14. McDowall said the company was “at the tail end” of evaluating the responses to the Request for Information (RFI) process that began in 2018. “We’ve got an opportunity, and a need actually, to replace our 777-200 fleet between the 2023 and 2025 financial years.” McDowall said there were “no bad choices” among the candidates to replace the 777-200ER, which comprised the 787 family and the 777-X family from Boeing, as well as the Airbus A350 family.

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Still on Air New Zealand, the airline has commenced legal action against BP and Z Energy after the fuel pipeline leak at Auckland Airport that left airline schedules in chaos. Both BP and Z Energy said they would fight the claims.

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Singapore Airlines’ regional wing Silkair has operated a limited season of charter flights between Singapore and Broome. The first of four trial flights touched down in Broome on May 23. The service was supported by tourism bodies and the local Shire council.

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Singapore Airlines’ low-cost carrier Scoot has boosted its sales presence in Australia with the appointment of Kirsty Lucas as national sales and partnership manager. Based in Sydney, Lucas will report to Scoot general manager for Australia Jared Simcox.

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Alliance Airlines has commenced charter flights for Japanese travel company JTB as part of a three-year deal signed in April. The first service took place on June 1 carrying 64 passengers from Brisbane to Uluru. Alliance Airlines chief executive Lee Schofield said there were 25 charters planned for the rest of calendar 2018.

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Hong Kong Airlines will end flights to Australia from October 20 2018 when it drops its three-times-a-week Hong Kong-Cairns-Gold Coast-Hong Kong service with Airbus A330 equipment. Cairns Airport said in a statement the HNA Group carrier and Virgin Australia alliance partner was ending the flights due to its “changing business strategy in the Australian market”.

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Singapore Airlines (SIA) plans to bring Silkair under the main SIA brand and spend $100 million upgrading the regional carrier’s cabins to offer closer product and service consistency for passengers. The product upgrades were due to begin in 2020 and include lie-flat seats in business class and seat-back inflight entertainment for every seat.

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Still on SIA, the airline group reported a more than doubling of net profit for the 12 months to March 31 2018 at S$893 million, from the S$360 million in the prior financial year. Meanwhile, operating profit, which excludes one-off items, rose 70 per cent to S$1.057 billion, SIA said on May 17. The company said the impact of its three-year transformation program alongside passenger and cargo growth were behind the improvement.

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Royal Brunei Airlines (RB) will join an already crowded field offering a onestop product on the Kangaroo Route between Australia and Europe when it begins nonstop Bandar Seri Begawan- London Heathrow service with Boeing 787-8s from the end of October. The new route would enable it to offer a one-stop Melbourne-Bandar Seri Begawan-London Heathrow option, compared with its current two-stop Melbourne-Bandar Seri Begawan- Dubai-London Heathrow offering.

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Regional carrier Jetgo on June 1 entered into voluntary administration and suspended all regular public transport (RPT) flights. McLeod and Partners’ Jonathan Paul McLeod and Bill Karageozis were appointed joint administrators of the company. While all RPT flights were cancelled, the administrators said Jetgo was continuing to operate some limited charter services. The airline had been planning to commence Brisbane- Karratha-Singapore flights with Embraer E190s later in 2018.

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International Airlines Group (IAG) chief executive Willie Walsh says he is hopeful British Airways (BA) will be able to expand its network in Australia beyond the current sole daily flight to Sydney. “I fully expect BA to continue to have a presence here in Sydney. I’d like to think we could expand back into Melbourne at some stage,” Walsh said at the CAPA conference in Sydney on June 6.

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Also at the CAPA conference, Cathay Pacific chief executive Rupert Hogg said that with the Australia-Hong Kong air services agreement full on the Hong Kong side, his airline was focused on continuing to upgauge its services between Australia and Hong Kong with larger aircraft, with Airbus A350-900s and Boeing 777-300ERs replacing airbus A330-300s.

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Two former SIA Airbus A380s owned by German leasing company Dr Peters will be broken up and sold for parts. Dr Peters said it came to the decision after it was unable to reach agreements with potential airline customers following intense negotiations. “The market for the A380-800 aircraft type has not developed positively in recent years,’’ Dr Peters chief executive Anselm Gehling said in a statement. The sale of aircraft parts is expected to fetch US$45 million.

AIRPORT NEWS

Canberra Airport has installed a new Category II lighting system featuring new touchdown and runway centreline lights that it says will allow pilots to reach 100ft off the ground before deciding if they have enough visibility to land, compared with 200ft previously.

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Sydney Airport chief executive Geoff Culbert told shareholders at the company’s annual general meeting on May 25 he believed advancements in aircraft technology, particularly the development of ultra long-range jets such as Boeing’s 777X and Airbus A350-900ULR would open up new markets for Kingsford Smith Airport. “Sydney as a destination only becomes more attractive as aircraft technology improves and range increases,” he said.

– A report commissioned by lobby group Airlines for Australia and New Zealand (A4ANZ) has found lighthanded regulation of Australia and New Zealand’s airports has been ineffective at protecting consumers from higher charges due to their monopoly power. “More effective regulatory pressure is required to prevent excessive profits by airports and return more value to consumers and the economy,” the report prepared by Frontier Economics published on May 25 and launched at Parliament House in Canberra said. The Australian Airports Association said in response to the report the current regulatory regime for Australian airports has served airlines, airports, Australian and overseas travellers and the broader economy extremely well.

OEM NEWS

Airbus and Bombardier said on June 8 they had received the necessary approvals to form a partnership on the C Series from July 1 2018. The partnership, which will see Airbus take a majority stake in the C Series program, was first announced in October 2017. It is still unclear whether the CS100 and CS300 narrowbodies will be renamed, as airbaltic chief executive Martin Gauss quipped at a CAPA – Centre for Aviation conference in Sydney on June 6. “We have no idea what our aircraft is called next week. They said they will send us stickers to Riga,” Gauss said.

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Rolls-Royce said on June 11 it has found a “similar Intermediate Pressure Compressor durability issue” on a small number of high life Trent 1000 Package B engines as had been previously discovered on the Trent 1000 Package C engines. It said an airworthiness directive would require a one-off safety inspection. There were 166 Trent 1000 Package B engines in service.

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Still on Rolls-Royce the engine maker announced on May 30 there had been a “trebling of maintenance capacity” to support airlines disrupted by the Intermediate Pressure Compressor rotor issue on the Trent 1000 Package C engines. Further, the engine maker said it had introduced an inspection technique where the engines would remain on the wing while the work was done. Also, it said first parts for a permanent fix were expected to be available in late 2018.

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Bombardier Business Aircraft launched two new jets aimed at the large category segment of the market in the Global 5500 and Global 6500 at the European Business Aviation Convention and Exhibition (EBACE) in late May. The Global 5500 is designed to fly 5,700nm with a top speed of Mach 0.90 seating up to 16 people. Meanwhile, the Global 6500 had a range of 6,600nm with the same Mach 0.90 top speed and a cabin capacity of up to 17 people. Both are powered by new Rolls-Royce Pearl engines, with entry-into-service expected by the end of 2019.

IATA WRAP

Ticket prices look set to rise in the period ahead as the rising cost of fuel threatens to crimp airline profits. The International Air Transport Association (IATA) has downgraded its profit forecasts for calendar 2018, with airlines around the world expected to collectively post a US$33.8 billion profit in the current year.

This latest outlook, published at the IATA annual general meeting (AGM) in Sydney in early June, was down from its previous estimate for 2018 of US$38.4 billion, as well as a decline from the US$38 billion in profits earned in the prior year.

The lowered expectations reflected the “significant pressures from rising fuel and labour costs”, with the full year average cost of Brent Crude Oil tipped to be about US$70 a barrel, compared with US$54.9 a barrel in 2017.

IATA estimated fuel would account for about 24 per cent of total operating costs in 2018, up from 21.4 per cent in 2017.

“The biggest challenge facing airlines today is this acceleration in costs,” IATA chief economist Brian Pearce told reporters at the AGM.

“The space capacity in the OECD economies has run out this year so we’re starting to see inflation pressures edge up. This is behind the cost pressures that the industry is facing.

“It will mean that air travel will be more expensive this year than it was last year.”

However, Pearce said the expected increases in fares would be broadly in line with the general rate of world inflation, meaning the real cost of air transport would be “roughly the same”.

The estimated calendar 2018 total profit equated to an average profit of US$7.76 per passenger and a “thin” 4.2 per cent net margin, which IATA director general and chief executive Alexandre de Juniac described as “not a big number”.

“It is fair to say 2018 is tougher. But the airlines are doing a good job, they are managing a changing environment,” de Juniac said.

Qantas chief executive Alan Joyce said his airline was responding to rising fuel costs through fare increases, revenue and capacity management, as well as the introduction of new aircraft such as the 787.

“What we see is that certainly domestically we think the business can continue to digest oil prices as we have this year,” Joyce said. “We see internationally it depends on market by market.”

“But I have to say, even though we are seeing airfares increasing in some markets and we have made some announcements in New Zealand, our consumers have never had it any better than they have today.”

Qantas domestic chief executive Andrew David added: “As Alan said with fuel where it is you can expect to see some fare increases, but rest assured we will be continuing to drive the efficiency program.”

Association of Asia Pacific Airlines (AAPA) director general Andrew Herdman said carriers’ ability to raise ticket prices would be constrained by the competitive environment.

“Fuel is just over 20 per cent of total costs so if the fuel price is up 30 per cent the fares have got to go up by six or seven per cent just to compensate for that. It is just maths. But you don’t see it,” Herdman said.

“It tells you the market is competitive, airlines have not been able to pass it on and that means that margins must be being squeezed. “I think we will see fares rising. That might take a little bit out of the growth rate but I don’t think it is going to be dramatic. I certainly don’t see a major impact on demand.”

IATA BRIEFS

Fiji Airways will be the first airline to join the oneworld marketing alliance under a new affiliate membership category called “oneworld connect”, which offers basic benefits to eligible oneworld frequent flyer members and additional perks for members of sponsor airlines American Airlines, British Airways, Cathay Pacific and Qantas. (Qantas owns about 40 per cent of Fiji Airways.)

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Qatar Airways chief executive Akbar Al Baker has apologised for his comments at the IATA AGM closing media conference where in response to a question about his airline being led by a male he said: “Of course it has to be led by a man because it is a very challenging position.” Later, Al Baker issued a statement offering his “heartfelt apologies for any offence caused” by his comments, which he said ran “counter to his track record of expanding the role of women in leadership throughout the Qatar Airways Group”.

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IATA’s member airlines passed a resolution calling on national governments to take a cautious approach on privatising airports, instead encouraging governments to “prioritise the long-term economic and social benefits delivered by an effective airport ahead of the shortterm financial gains provided by a poorly thought-out privatisation”. IATA director general Alexandre de Juniac said airlines were yet to experience an airport privatisation that fully lived up to its promised benefits over the long term.

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IATA is developing a working paper to gather data on the expected shortages of aircraft maintenance engineers and pilots in the years ahead. Items to be covered included global training capacity versus demand, regulatory requirements and licensing harmonisation among different countries, and roadblocks to a career in aviation such as costs. The data collection was expected to be complete by the final quarter of calendar 2018.

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Finally, Korean Air will host the 75th IATA AGM in Seoul to be held June 2-4 2019.

DEFENCE NEWS

The Royal Australian Air Force (RAAF) detachment of F-35A pilots, maintainers and support personnel based at Luke AFB in Arizona has recorded the 1,000th sortie of an Australian F-35A on June 4. The RAAF’s 3SQN operates six F-35As at the Integrated Training Center (ITC) where it is embedded with the USAF 56th Fighter Wing at Luke AFB, Arizona.

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The Australian Army has begun rolling out the PD-100 Black Hornet Nano unmanned aerial system to its units following a successful trial program. “UAS are a game-changer for the Army, providing enhanced situational awareness for better mission execution for Australian soldiers,” said BRIG Susan Coyle, Commander 6th Brigade and the Army’s only UAS unit, the 20th Surveillance Target Acquisition Regiment.

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An RAAF KC-30A MRTT conducted a series of air-to-air refuelling trials with US Navy Boeing P-8A Poseidons during a six-week detachment to NAS Patuxent River in Maryland from February 27 to April 14. The KC-30, along with members of 33SQN and the Aircraft Research and Development Unit (ARDU), undertook the clearance trials with the US Navy’s P-8A Integrated Test Team from Air Test and Evaluation Squadron Two Zero (VX-20).

INDUSTRY NEWS

The Civil Aviation Safety Authority (CASA) has launched a scholarship for current and aspiring professional pilots in South Australia in honour of its former employee Stephen Guerin. The CASA operations inspector was on board a Rossair Cessna Conquest II that was conducting a training flight alongside Rossair chief pilot Martin Scott and experienced pilot Paul Daw, who was undergoing a check flight, when it crashed near Renmark. There were no survivors.

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Federal Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade has launched an inquiry into the Commonwealth Government’s management of perand polyfluoroalkyl substances (PFAS) contamination in and around Defence bases. The chair of the committee’s PFAS sub-committee Andrew Laming said on May 30 the inquiry would examine how the Commonwealth was managing and coordinating its response to PFAS contamination to ensure the best outcomes for those affected communities.

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Airservices said on May 29 it planned to roll out the Aerobahn collaborative decision-making platform from Saab Air Traffic Management that aims to reduce taxi times at airports by about seven per cent, or one minute per aircraft, in busy peak periods. The product covers a range of services such as departure management sequencing, traffic flow management and resourcing. The first Australian airports to feature the platform will be Brisbane, Melbourne, Perth and Sydney.

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Still on Airservices, the federal government has elevated lawyer John Weber to chairman of the air traffic manager’s board for a three-year term, replacing Sir Angus Houston, who steps down after seven years in the role. Weber has been an Airservices director since April 2017, when he was appointed to the board as deputy chair. Separately, current board member Fiona Balfour has been reappointed for a fresh two-year term.

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Satellite launch company Arianespace managing director and head of sales for Asia Pacific Vivian Quenet believed the growing trend in smaller satellites, particularly among universities and entrepreneurs was bringing a lot of new potential customers. “Our challenge is to adapt to these new customers,” Quenet told Australian Aviation on the sidelines of the Australasia Satellite Forum in Sydney on May 21.

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The Australian Government on May 18 announced plans to build a paved runway near the Davis Research Station on Antarctica, which would allow for better access to the continent during the winter months. It said the cost of the proposed new runway would be determined through a detailed business case.

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The first Pilatus PC-24 for the Royal Flying Doctor Service (RFDS) has made its first flight, with images of the aircraft released at the European Business Aviation Convention and Exhibition trade show in Geneva in late May. The Perth-based RDFS Western Section has three PC-24s on order, while Adelaide-based Central Section has one on order. First delivery is expected later in 2018.