Asia-Pacific
Japan Airlines has joined the slowly swelling ranks of carriers offering a premium economy class. From the autumn, the new seats will be available on its international services.
The seats will be in a 2-4-2 configuration with a 38in pitch, which is 20% more than its regular economy seats. They will feature on JAL's Boeing 777s operating from Japan to Europe and the US.
JAL is several years behind its main rival All Nippon Airways in bringing in a premium economy section. ANA launched its take on this class back in early 2002. It must be doing something right for JAL to finally follow suit.
Unlike in Europe, where the UK market is particularly active in offering an enhanced economy product, Asian carriers have not seen a great customer demand for this class. Taiwan's EVA Air was one of the first to bring in this super economy class, while Vietnam Airlines, Garuda Indonesia and China Airlines, also of Taiwan, offer it too.
Virgin Atlantic Airways is another focusing on premium economy. It has introduced its second generation product.
AirAsia took delivery today of its 50th aircraft, an impressive accomplishment given the Malaysia-based low-cost carrier is only five years old.
The carrier, which pioneered low fares in Southeast Asia, says with the 50th aircraft it will embark on the second chapter of its amazing story. In the second chapter, AirAsia promises to “strengthen and enhance its route network by connecting all the existing cities in the region and expanding further into Indo China, Indonesia, Southern China and India”.
The carrier launched with a hub in Kuala Lumpur and has since added hubs in Bangkok and Jakarta with affiliates Thai AirAsia and Indonesia AirAsia. It also has added three hubs in Malaysia – Johor Bahru, Kota Kinabalu and Kuching. The latter two opened this year after a landmark deal with the Malaysian government which saw its main competitor, Malaysian Airlines, withdrawing from most domestic routes. The two continue to compete on major trunk routes.
AirAsia says its second chapter will also include new training and maintenance facilities plus new ecommerce initiatives. The carrier will soon introduce web and PDA check-in services.
“The past five years has been a blast,” says AirAsia’s flamboyant chief executive, Tony Fernandes (pictured below). “Our growth from 2 to 50 planes is a testament that we have a winning product – low fares and quality flying experience.”
AirAsia now has a fleet of 15 A320s - the 15th A320 arrived today in Kuala Lumpur – and 35 Boeing 737-300s. It has another 85 A320s on order which will be used to replace the 737-300s and provide another 50 growth aircraft that will allow AirAsia to hit the 100 aircraft mark in 2011. AirAsia should reach the current size of Easyjet and Ryanair in 2012.
AirAsia already operates 300 flights per day on 70 routes across 10 countries. It has already carried more than 26 million passengers since launching in December 2001 and expects to carry another 18 million passengers in 2007.
Qantas boss Geoff Dixon is not one to mince his words, or to avoid getting stuck into a fight, so it is no surprise to see him vigorously defending the takeover of his carrier by a privately backed group. Here is an example of the reporting on the Qantas deal from The Australian newspaper.
As an exercise in putting the record straight, from his point of view, Dixon's lengthy tirade is a worthy read.
The Airline Business leader in our December issue was entitled "Merger mania" on the back of the move by US Airways to acquire Delta Air Lines. Just days after the magazine came out two other potential deals have been aired: a takeover of Australia's Qantas by a partnership of Macquarie Bank and the Texas Pacific Group private equity firm; and more talks between Air France-KLM about the Franco-Dutch carrier possibly taking over troubled Alitalia.
What is puzzling about the Qantas approach is that it includes Texas Pacific, which has successfully invested in Continental, America West, Ryanair and Tiger Airways. At the IATA Annual General Meeting in June its founding partner, David Bonderman questioned the wisdom of going anywhere near an industry that was past the peak as far as the cycle goes. "It's time to sell ladies and gentlemen," he said.
So now it's time to buy is it David? So what has changed your mind? Perhaps the industry is, after all, headed for a soft landing and the doomsayers are getting less gloomy.
Buying Alitalia has many more pitfalls, so don't expect this story to run anywhere as close as the Qantas one. Still Air-France-KLM is the logical partner in many ways for Alitalia and its board would be remiss if it didn't take another close look at whether a partnership could finally work.
Don't expect these moves to be the last of the merger plays as the takeover market starts to hype up.
A true salesman always tries to make something positive come out of adversity. The Airbus team that has managed to not only ensure that one of its launch A380 customers - Australia's Qantas Airways - is staying with the programme, but is in fact ordering more of the superjumbos, can be forgiven for popping the champagne all this week.
OK, Qantas has negotiated what it calls an "attractive" package in buying eight more A380s to add to its original order for 12. Attractive is probably Aussie code for "bloody amazing".
For Qantas, the deal makes sense. It has negotiated a deal that will most likely feature spectacular financial breaks on its existing and new A380s, and perhaps more critically a range of attractive delivery slots from 2008 up to 2015.
And we've not even mentioned the four A330s Qantas is taking to help fill in for the late delivery of the A380. These will not be free, even that would be too much for the tough-talking Qantas executive team to secure, but could be some of the cheapest widebodies ever sold.
“We talk about the Far East – it’s not the Far East any more – it has come very close to us.” This was Lufthansa chief executive Wolfgang Mayrhuber addressing assorted local dignitaries, ex-pat customers and European journalists in Beijing (seen below), during a three-day tour to celebrate the 80th anniversary of the German carrier’s first flight to China, and its involvement in the country ever since, writes Helen Massy-Beresford, business reporter of Flight International, the sister title to Airline Business.
Back in 1926 the trip from Germany to China took 10 days. Now it takes more like 10 hours, and Lufthansa operates 52 flights a week between Germany and China, and has 8,000 of its 92,000 employees based there.
Mayrhuber himself has been to China six times already this year, a statistic that serves to underline how important the carrier’s engagement with this market is to its strategy.
As its economy booms, China has become a byword for future sales potential in aerospace, providing a significant proportion of the expected growth in passenger numbers, and Western airlines are increasingly committing to the market, not just by flying there, but by creating their own footprints in the region.
Lufthansa is at the forefront of this journey east – the trip began with a ceremony to lay the foundation stone for the Lufthansa/Air China joint venture Ameco’s Airbus A380 maintenance hangar at Beijing airport. Mayrhuber says Lufthansa’s “stronghold” is Europe, but China is clearly an extremely significant market too.
Its investment in China over the last 80 years began early on with joint venture, Eurasia and today includes its Ameco maintenance and training joint venture with Air China and its investment in Jade Cargo International, a new cargo carrier.
Amid the flurry of positive comments about the Chinese market during the visit, however, Mayrhuber kept coming back to one sticking point for the airline’s future development, taking the chance to call for a resolution to the issue of US-Europe Open Skies, as he wondered aloud how there could even still be debate over Open Skies when Lufthansa was able to form a joint venture in China all those years ago.
But the overall theme of the visit was of celebration of the airline’s ongoing success in the Chinese market, in which Mayrhuber insists it is important for the airline to be a “corporate citizen”. As well as helping to lay the a foundation stone for the A380 hangar, Mayrhuber presided over the opening of a Lufthansa gallery at the Imperial Art Museum, with a selection of photographs documenting the last 80 years of the carrier.
“In 15 years there will be more than 4 billion people flying – this is not a dream, this is reality,” said Mayrhuber during the trip, and there’s no doubt that China will make a significant contribution to this growth as its economy booms. Lufthansa is taking advantage of this growth already, but it remains to be seen whether other European carriers will follow suit to the same degree.
Qantas Airways today became the first Airbus A380 customer to disclose how much compensation it will receive from Airbus for mounting delivery delays, writes Airline Business deputy editor Brendan Sobie. If A$104 million ($79 million) in payments to Qantas for delays to its 12 A380s are any indication of what Airbus will have to pony up for the 15 airlines and one leasing company which have ordered 168 A380s, the European manufacturer could be facing total penalties of over $1 billion.
The delivery of nearly every A380 on order has been delayed by at least a half year. However, not all of the customers may be entitled to the $6.6 million per aircraft in penalties Qantas has negotiated. Qantas’ first A380 has been delayed by one year, from late 2006 to late 2007. Only Emirates and Singapore Airlines (SIA) also face delays of one year; the delays to the customers which follow them in the programme are not as severe. And generally manufacturers are not required to pay significant penalties if aircraft are delivered only six months late or less.
How much exactly Airbus will have to pay in penalties is unclear because negotiations with most customers continue and both sides have so far been tight-lipped about these sensitive discussions. Some customers including Emirates, which is by far the largest of the A380 customers with 43 aircraft on order, are also not publicly traded so may not reveal how much Airbus will pay them even after negotiations conclude
Some customers may also opt for discounts on additional aircraft rather than cash payments. For example Singapore Airlines, which is still planning to place the first A380 into service by year-end, placed an order last month for nine additional aircraft.
Qantas disclosed the A$104 figure in releasing its financials for the fiscal year ending 30 June. It says the funds are being recognised as liquidated damages from Airbus and will be paid over time until the delivery of its last A380.
In announcing the second major delay to A380 delivery schedule earlier this year, Airbus said it expected to deliver only one A380 in 2006, followed by only nine aircraft in 2007. Airbus was originally committed to delivering the first A380 to Emirates, Qantas and SIA in 2006 and was planning to deliver 20 aircraft in 2007.
The devil is in the detail it is said. A recent press release from IATA as it deepens co-operation with China’s aviation authorities shows just how significant the country’s air transport business has become: 17 Chinese carriers are IATA members; China’s airlines flew 138 million passengers and three million tonnes of cargo in 2005.
Impressive and growing numbers for sure. But are carriers making money out of all this activity? IATA’s press release noted in brackets: “Industry lost CNY 2.4 billion ($300 million) in the first half of 2006, so we would rather not mention this.”
Clang, sorry you just did. The first half has been a tough period with rising fuel costs, new competition, price regulation in the domestic market and overcapacity all hampering the ability of carriers to make money. The recent Airline Business World Airline Ranking in the August issue showed the big three – Air China, China Eastern and China Southern – collectively did actually made a $11.4 million net profit in 2005. However, Air China’s $294 million profit compensated for losses at the other two.
Encouraging China to adopt e-ticketing as part of its Simplifying the Business campaign is one of IATA’s main motivations for signing the memorandum of understanding with the General Administration of China to “expand strategic co-operation to further the safe, efficient and sustainable development of China’s air transportation system”.
IATA has long been an admirer of China’s aviation minister Yang Yuan Yuan, whose backing has helped the country increase e-ticketing penetration from 0.2% to 60% of transactions in just 19 months. By the end of this year IATA believes this will rise to 80% and that China will achieve IATA’s 100% e-ticketing target by the end of 2007.
IATA adds that all Chinese carriers are committed to making the end of 2007 deadline for the IATA Operational Safety Audit (IOSA). Seven carriers have already been put on the IOSA registry.
This is all good work. However, a renewed focus on the bottom line must certainly be on the agenda in the boardrooms of Chinese carriers.
One of the industry’s most highly respected and successful chief executives, Geoff Dixon of Qantas, will not be bowing out as expected next year. The carrier has confirmed that the 66-year-old, whose contract was due to expire on 1 July 2007, has signed an “ongoing” contract that will extend his service at least into 2008 and possibly beyond.
Qantas is clearly not ready to begin a succession process that had penciled either chief financial officer (CFO) Peter Gregg or executive general manager John Borghetti as potential candidates to take over from Dixon. The carrier announced that Gregg, whose contract was up later this year, has also agreed to remain with Qantas as CFO. He too will have an “ongoing” contract.
Chairman Margaret Jackson said that continuity of leadership in the current aviation environment was important in the airline’s decision. She described Dixon as “an outstanding chief executive. His leadership and experience have been invaluable since he took the role in March 2001, with Qantas outperforming most of its peers in the global airline industry.”
Perhaps Qantas is ready to take a leaf out of the book of arch-rival Emirates, where 77 year-old Maurice Flanagan continues to lead the Middle Eastern carrier and is encouraged to do so. Age, for the Arab leaders of Emirates, is immaterial. It is the capacity and ability to do the job that is important.
Jet Airways has launched its third service between the UK and India with a three times weekly Airbus A330 flight between London Heathrow and Amritsar.
The carrier was originally going to serve the northwestern Indian city, which is just 50km from the Pakistan Border, from late June with a Boeing 767 from fellow Indian carrier Air Sahara, which is was intending to buy. However, that deal fell through and Jet returned to its plan to serve the route with its own aircraft.
The arrival of a new A330 leased from ILFC gave it the opportunity to launch the route, says Emmanuel Menu, general manager UK & Ireland for Jet Airways. As further A330s are added to the fleet Jet will step up its Amritsar service to six times a week, he says.
At present the only direct service between Amritsar and the UK is an Air-India operation that operates from Amritsar via Birmingham to Toronto in Canada. Menu is confident that there is a strong demand for direct flights from Amritsar to London. It is mainly a VFR (visiting friends and relatives) market with some leisure element. Out of a total Indian community in the UK of around 1.3 million, an estimated 300,000 people have roots in the Punjab region.
Loads for the early flights look encouraging, says Menu. The service was launched on 4 July.
Jet now has four daily services from Heathrow to India. It has two flights to Mumbai, with the second added on 10 July, and one daily flight to Delhi.
The carrier has also expressed an interest in operating to some regional UK cities. However, before it enters regional markets, it will open its fourth route to Heathrow, says Menu. A service to another major Indian city, most likely Kolkata or Bangalore, will come in 2007.
Airline Business editor Mark Pilling presented Kingfisher chairman Dr Vijay Mallya with a framed copy of the July issue of the magazine at last week's Farnborough Airshow. The July issue featured the flamboyant Indian entreprenuer on the cover and contained an in-depth interview inside the pages of the magazine.
Mallya received the framed cover in the ATR chalet at Farnborough where he was announcing a maintenance deal with ATR and Pratt & Whitney Canada for his growing fleet of ATR 72 turboprops.
Kingfisher now has four ATRs in service and all are achieving load factors of over 90%, he said. “They are already making money so we are quite delighted,” he added.
AirAsia co-founder Conor McCarthy interrupted his holiday last week to make a quick stop at the Farnborough airshow and sign a $2.6 billion order for 40 additional Airbus A320s. He is seen below celebrating the signing the deal with Airbus sales chief John Leahy.
McCarthy, who showed up for a brief press conference at the Airbus chalet with his wife and kids in tow, sees AirAsia quickly reaching the current size of Ryanair, where he once served as chief operating officer. AirAsia now operates six A320s and 35 737-300s but the new deal with Airbus guarantees it will have an all-A320 fleet of at least 100 aircraft by the end of 2011.
Ryanair currently operates just over 100 737-800s with another 132 on order, according to ACAS. McCarthy predicts Kuala Lumpur-based AirAsia will also reach the 200-aircraft mark and potentially shatter it if it expands beyond Malaysia and the franchises it currently has in Indonesia and Thailand.
“All three markets are doing very well,” he told Airline Business deputy editor Brendan Sobie following the 21 July press conference. “We see potentially all three markets are more than capable of taking 60 to 70 aircraft each.”
AirAsia’s Malaysian operation - which was re-launched as a low-fare carrier in late 2001 after McCarthy, AirAsia chief executive Tony Fernandes and other private investors acquired the carrier - now operates all six of the company’s A320s and 19 of the 737-300s, according to ACAS. AirAsia Malaysia is poised to expand further because this month it is taking over several domestic routes being abandoned by loss-making Malaysia Airlines as part of a deal brokered with the Malaysian government in March.
“That has had somewhat of an influence [on the decision to order 40 more A320s], but that wasn’t the primary driver,” McCarthy says. “The primary driver was organic growth.”
Thai AirAsia was launched in 2004 with local partners holding a 51% stake and now operates 10 737-300s. Indonesia AirAsia was launched last year with defunct Indonesian carrier AWAIR as a 51% stakeholder and now operates six 737-300s.
AirAsia plans to earmark some of its new A320s for the Thai franchise after the Malaysian operation transitions to an all A320-fleet. Indonesia AirAsia is slated to be the third franchise to switch to A320s. McCarthy says all 35 of 737-300s will be phased out gradually over the next several years.
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