Debrief

Virgin Australia

Virgin Australia has expressed significant concerns with a proposed codeshare deal between Cathay Pacific and Qantas that is currently under consideration by Australia’s International Air Services Commission (IASC), the government body that allocates international airline capacity. “Virgin Australia holds significant concerns the proposed variation of the determination will result in an unnecessary expansion of both Qantas and Cathay Pacific’s market power, to the detriment of the travelling public,” Virgin Australia head of government and industrial relations Lee-Anne Tomkins said in the airline’s submission. “This would inevitably diminish the competitive forces in the market and may lead to higher airfares and reduced choices for customers, with corresponding implications for Australian tourism and trade.”

CHANGING OF THE GUARD

Incoming Virgin Australia chief executive Paul Scurrah says he is both incredibly honoured and a bit daunted at the prospect of leading the nation’s second largest airline group. Scurrah, who starts in his new role on March 25 2019, was announced as John Borghetti’s replacement on February 6 (picture). Until then, the former boss of ports company DP World Australia said he planned to spend the next few weeks travelling around the airline getting to know staff across the business. Scurrah, an Australian, said he was coming into the role with “some ideas” about what he would like to do. However, he was reluctant to offer any details on what those ideas were before formally starting as Virgin Australia CEO. “I will be sharing more of my plans … for the future of the Virgin Australia group after I begin in the role on the 25th of March and after I have had time to work with many of the wonderful team members to really understand what we need to do to take the business forward,” Scurrah told reporters in Sydney. “What I really intend to do early days is get around spend as much time as I can with the team and blend those ideas with the feedback that I get from inside the business before then plotting the path forward. I would like to acknowledge the momentum with which I take over the business.” Scurrah was chief executive at ports operator DP World Australia until late 2018, when his five-year contract ended. He was also previously chief executive at Queensland Rail. In addition to executive general manager roles at Aurizon, Flight Centre and Tourism Queensland, Scurrah also has aviation experience, having previously worked at Australian Airlines, Ansett and Qantas. He was also one of the founding directors of Regional Express (Rex). Scurrah will be Virgin Australia’s third chief executive since the airline began flying in 2000, following Brett Godfrey (2000-2010) and Borghetti (2010-2019). “They are very big shoes to fill,” Scurrah said. “So yes it is somewhat daunting.”
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Meanwhile, Borghetti paid tribute to the airline’s staff for realising the vision of transforming the low-cost carrier (LCC) Virgin Blue into a diversified airline group with a presence in all segments of the market and wished his successor every success. “I know that I am leaving this company at a time when it is absolutely consolidating on its transformation and is on a sustainable pathway to profit, growth and importantly return for our shareholders,” Borghetti said. “Over the past eight years I have been really lucky to work alongside some of the best, smartest, nicest, the hardest working people in the industry.”

Air New Zealand

Air New Zealand has launched a review of its network, fleet and cost base following a profit downgrade due to softer revenue growth, chief executive Christopher Luxon said on January 30. The airline said in a statement to the Australian and New Zealand stock exchanges it now expected pre-tax earnings for 2018/19 to be in the vicinity of NZ$340 million to NZ$400 million. This was down from its previous guidance of pre-tax earnings of $NZ425-525 million, excluding a $30-40 million hit from disruptions caused by a global recall of Rolls Royce Trent 1000 engines. Luxon said the review would ensure the business was on a “strong footing going forward”. The company was due to release its 2018/19 first half results on February 28.

Qantas

In a sign of confidence regarding the outlook for the resources-rich states of Queensland and Western Australia, Qantas has bought a 19.9 per cent stake in regional and charter operator Alliance Aviation Services and signalled its intention to increase that shareholding over time. The company said in a statement on February 1 it planned to seek Australian Competition and Consumer Commission (ACCC) approval to eventually become the majority owner of Alliance. Qantas chief executive Alan Joyce said the investment reflected the fact that Alliance was a quality, well-managed business with strong growth potential. “It also reflects our confidence in future demand growth from the resources sector, particularly in WA and Queensland,” Joyce said in a note to staff. Alliance said its board had not received any approach from Qantas. The ACCC said on February 7 it would investigate the purchase “to assess whether there has been a breach of section 50 of the Competition and Consumer Act”. The Act prohibits acquisitions likely to have the effect of substantially lessening competition.
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Qantas will send its Boeing 717s offshore for their heavy maintenance checks after concluding keeping the work in Canberra was not sustainable. The airline said on January 30 Singapore-based ST Aerospace had won the contract to do the heavy maintenance work on the 717s following a competitive tender process. The contract begins in July. In explaining the decision to take the work offshore, Qantas said in a statement the maintenance requirements for the fleet of 20 717s over the next few years would include periods of up to a month where there would be no work for third-party provider Korr Aviation’s contractors, which performs the heavy maintenance checks on the aircraft for Qantas. This was not sustainable, the airline said. Australian Licensed Aircraft Engineers Association (ALAEA) federal secretary Steve Purvinas said the move would leave 40 aircraft engineers out of work.
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In other Qantas fleet news, the airline said on February 7 it had formally cancelled its outstanding order for eight A380s after discussions with Airbus. The eight aircraft were part of an order for 20 A380s made in 2006. “Following discussions with Airbus, Qantas has now formalised its decision not to take eight additional A380s that were ordered in 2006,” it said in a statement. “These aircraft have not been part of the airline’s fleet and network plans for some time.”
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Qantas will return to Fiji for the first time in nearly two decades from March 31 when it begins nonstop flights between Sydney and Nadi four times a week with Boeing 737-800s.
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American Airlines expected to receive a decision on its proposed joint venture with Qantas on trans-Pacific routes “in the next few months”. The application, which is the airlines’ second attempt at forging a deeper partnership after their initial effort was rejected in 2016, is currently before the United States Department of Transportation (DoT). American Airlines vice president of planning Vasu Raja told the company’s Crew News question and answer session that getting approval from the DoT would allow the airline to start flying more services to the South Pacific. “At this point in time we anticipated that we would have approval of our Qantas joint venture,” Raja said, according to a January 18 post on the View From The Wing website. “We’re optimistic that will get approved in the next few months; should that be the case we’re looking forward to starting service as soon as we can in 2019, likely in the winter time.”

OEM news

Turboprop maker ATR reported on January 31 it won firm orders for 52 aircraft and delivered 76 aircraft in calendar 2018. The total of 52 firm orders is down significantly from the 113 firm orders achieved in calendar 2017. However, the 2017 total was boosted by India-based IndiGo’s order for 50 ATR 72-600s. “The 2018 results provide ATR with a solid backlog representing almost three years of production.”
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Bombardier Commercial Aircraft in early February launched a new 50-seat regional jet and signed United Airlines as the aircraft’s launch customer. The Canada-headquartered manufacturer said the aircraft would be called the CRJ550 and have a type certificate based on its existing CRJ700. United said it planned to introduce the first of 50 CRJ550s, which will have 10 first class, 20 extra legroom economy and 20 standard economy seats, during the second half calendar 2019, subject to government certification.
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Airbus has confirmed media reports it is in talks with Emirates regarding the airline’s existing orders for A380 aircraft. The aerospace company issued a statement on January 31 that said it was in “discussions with Emirates Airline in relation to its A380 contract”. It said the details of those discussions were confidential. Earlier, the Reuters news agency had reported Emirates was considering changing its Memorandum of Understanding (MoU) for 36 A380s signed in January 2018 to the Airbus A350. The report said Airbus was open to offering its A350 family of aircraft to Emirates while trying to find other airlines willing to take A380s. “Airbus is trying to broker a complex workaround which could see Emirates take smaller jets also powered by Rolls-Royce while it tries to secure homes for as many A380s as possible,” the report said. The Emirates MoU is yet to be firmed up as the negotiations between Emirates and engine maker Rolls-Royce over the supply of engines for those A380s dragged on.
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Still on Airbus, chief executive Tom Enders has warned the aerospace giant may be forced to wind back its investments in the United Kingdom should parliamentarians fail to secure an orderly withdrawal from the European Union. Enders comment come as the UK approaches the March 29 2019 Brexit deadline without an exit agreement in place. Enders said it was a disgrace businesses were still unable to plan properly for the future more than two years after the 2016 referendum where Britons voted to leave the European Union. “The UK’s aerospace sector now stands at the precipice,” Enders said on a video posted on the Airbus YouTube channel. “If there is a no-deal Brexit, we at Airbus will have to make potentially very harmful decisions for the UK.” He said Airbus employed about 14,000 workers in the UK while there were a further 110,000 jobs supported by its operations in the country.
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Meanwhile, Airbus said in early February the European Aviation Safety Agency (EASA) had certified its A330-900 widebody to operate 285 minutes from a suitable landing field. The extended twin engine aircraft operations (ETOPS) certification for 285 minutes would be an option for A330-900 operators and meant the aircraft could be flown on a route that keeps it within four hours and 45 minutes flying time on a single engine from an alternate airport in the event of an engine failure. This represented a potential air diversion distance of about 2,000nm.
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Boeing said during its calendar 2018 profit results presentation it had embedded its own staff at companies in its supply chain, including at engine maker CFM International, to support efforts to increase the production rate of the 737 to 57 aircraft a month, from 52 aircraft a month currently. “We are moving forward on our plans to ramp up to 57 a month during the year,” Boeing chief executive Denis Muilenburg said. “Some elements of the supply chain have already moved to that position. We still have some work to do before we move the entire line to 57 a month, and we’re going to be very, very disciplined in that process.” Muilenburg said there was nothing unusual about Boeing placing some of its own staff at the factories of engine maker CFM and its sub-tier suppliers, describing it as a “typical process”. CFM is a joint-venture between GE Aviation and Safran Aircraft Engines and is the sole-source engine supplier for the Boeing 737 program. The company also makes engines for the Airbus A320neo family of aircraft.
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Meanwhile, Muilenburg said the company was still planning to reach a decision on whether to proceed with the development of a new mid-market aircraft (NMA) sometime in 2019, with the evaluation of the business case ongoing. Boeing has said previously it expected the NMA, which some have dubbed the 797, to comprise a two-aircraft family designed to carry between 225-275 passengers anywhere from 4,500-5,000nm. It would be powered by an engine capable of producing 50,000lb of thrust. Entry into service was planned for 2025.
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Dassault Aviation announced on January 21 2019 it had bought business aviation company Execujet’s worldwide maintenance, repair and overhaul (MRO) operations in 42 countries across the Asia Pacific, Oceania, the Middle East and Africa. Dassault Aviation chief executive Eric Trappier said the transaction would strengthen the aerospace group’s global maintenance footprint. Execujet is part of Switzerland-headquarterd Luxaviation Group, which bought the company in 2015. In Australia, Execujet’s base at Melbourne Essendon Airport is an FBO and offers MRO servies under an Australian Civil Aviation Safety Authority (CASA) Certificate of Approval and New Zealand Civil Aviation Authority (CAA) approval. It is also a United States Federal Aviation Administration (FAA) Part 145 Repair Station. The terms of the deal were not disclosed.

Defence News

Northrop Grumman’s Don Collins said the company was open to mounting a joint proposal for the Australian Defence Force’s Project AIR 6500. Under Project AIR 6500, the ADF plans to link together many of its key sensors and capabilities to create systems to allow the speediest possible detection, decision and response to the full spectrum of future air and missile threats to the Australian mainland and deployed forces. The 2016 Defence Integrated Investment (IIP) cites an AIR 6500 Program cost of $2-3 billion over the period 2018-30. Further, the consensus was that the complexity and magnitude of AIR 6500 took it beyond the capabilities of any one company. “We have been talking to many companies in Australia and the US,” said Collins, the Northrop Grumman concept lead for AIR 6500. “The key will be to get all the right capabilities together, not just a single point solution. There is no one company that can do it all. Everybody recognises that. There are lots of options to team together with other companies and we are looking at every one of those.” Collins said he believed 2019 was going to be a pivotal year in AIR 6500.
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Meanwhile, Northrop Grumman director of international programs for Triton Ed Graziano said there was a robust plan for Australian industry involvement in production of the MQ-4C Triton unmanned aircraft being acquired by the Royal Australian Air Force (RAAF) and in their long-term support. Graziano said some industry partnerships were already in place for supply of components such as cables and sheet metal, which would be expanded to include electronic equipment, composites for airframe parts and sensors.
A report on the latest Triton project developments starts on Page 32.