Vol. 25 No. 2 March 2018 orientaviation.com

DIGITALLY DRIVEN

Air New Zealand CEO, Christopher Luxon, focuses the carrier on achieving digital dominance

Compensation Asia-Pacific Qantas to launch mounts for engine unite to fight cyber pilot training manufacturers threats academy

INDUSTRYSPECIALbest INSIGHT REPORT optionsfor slot shortages ORIENT_PW_EngineWise_Ad_Final.pdf 1 2/22/18 8:28 AM

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COVER STORY 18 DIGITALLY

PUBLISHED BY DRIVEN

ORIENT AVIATION MEDIA GROUP Mailing address: Air New Zealand CEO, GPO Box 11435 Hong Kong Christopher Luxon, admits he Office: 17/F Hang Wai Commercial Building, has become “addicted” to the 231-233 Queen’s Road East, business as he focuses Wanchai, Hong Kong Tel: Editorial (852) 2865 1013 his carrier on achieving E-mail: [email protected] digital industry dominance Website: www.orientaviation.com

Publisher & Editor-in-Chief Christine McGee E-mail: [email protected]

Chief Correspondent Tom Ballantyne Tel: (612) 9638 6895 Fax: (612) 9684 2776 E-mail: [email protected]

Greater Correspondent Dominic Lalk Tel: (852) 2865 1013 E-mail: [email protected] COMMENT 28 Global forecaster remains bullish on Asia-Pacific

North Asia Correspondent 5 A different Airshow MRO growth Geoffrey Tudor Tel: (813) 3373 8368 E-mail: [email protected] ADDENDUM MAIN STORY 6 Good times roll on for Qantas Group 14 Compensation mounts as more engine faults Correspondent R. Thomas 6 Qantas to train 500 pilots a year at its new emerge Tel: (852) 2865 1013 academy E-mail: [email protected]

Photographers Rob Finlayson, Graham Uden, Ryan Peters

Chief Designer Chan Ping Kwan

Printing Printing Station(2008)

ADMINISTRATION INDUSTRY ADDENDUM General Manager 7 Norwegian Air seeking Asian partner with view 26 LEAP engine veteran moves up at CFM Shirley Ho E-mail: [email protected] to marriage 26 SIA Engineering and GE Aviation form joint 7 Asia- and governments unite to venture ADVERTISING fight cyber threats 26 Asiana Airlines invests in IFE connectivity

Asia-Pacific, Europe & Middle East 26 Honeywell seals deals with Lion Air Group and Clive Richardson NEWS BACKGROUNDERS Eastar Tel: (44) 7501 185257 E-mail: [email protected] 9 Digital innovation takes centre stage at 27 Thales and Singapore develop Next Gen ATM Singapore Airshow solutions The Americas / Canada Barnes Media Associates 27 Smiths Detection wins Airport Authority of India Ray Barnes contract Tel: (1 434) 770 4108 Fax: (1 434) 927 5101 27 AAR spreads its wings to India with Indamer E-mail: [email protected] partnership [email protected] 27 Pratt & Whitney marks 35 years in the Asia-Pacific 28 Jet Airways signs up with lessor SMBC Follow us on Twitter @orientaviation also - keep up with the news of the week with Orient Aviation’s Week in INDUSTRY INSIGHT SPECIAL REPORT the Asia-Pacific Too many aircraft with nowhere to land

© All rights reserved 13 Red tape to go promises ’s regulators 24 IATA advocates one slot system for all countries Wilson Press HK Ltd., 16 Philippine Airlines readies for New York A350 24 Differential pricing not popular with airlines Hong Kong, 2018 launch 25 Slot auctions only a short term solution

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A different Singapore Airshow

It is unusual for an international air show to conclude India’s IndiGo and Lion Air in . without a single order from major airlines, especially Other Asia-Pacific airlines, such as Air New Zealand in a region forecast to control 42% of the commercial and the Qantas Group, are assessing next generation aviation market in the next two decades. But it aircraft that will facilitate their network expansion. Their happened last month at the 2018 Singapore Airshow. choices and consequent orders will not be decided until In 2014, airlines wrote orders for new jets worth $32 year end or in 2019. billion at the biennial show. Two years ago, they signed This year’s Singapore Airshow was significant in that up for new planes valued at $12.7 billion. it revealed the industry is a different beast from a decade The fact of the matter is that in 2018 Asia-Pacific ago. The region’s carriers, and their peers worldwide, carriers had already finalized purchases for their fleet have become far more analytical in their fleet planning. upgrades in the short to medium term. They are now Happily, the cycle of capacity shortfall, booming readying to accept a long line of new airplanes from orders and overcapacity, followed by cancellations and manufacturers. deferrals appears to be history. It would be overstating On the Mainland, China Southern Airlines, the the case to say the industry has entered a period of region’s largest carrier, has 296 jets on order, including unrestrained financial rationality, but for the first time in B787-9s and A350-900s. China Eastern has ordered 257 many years it was business written by the services and planes and Air China 172. digital sectors of OEMs that dominated the headlines in Pacesetter Singapore Airlines has 49 B787-10s and Singapore. 20 B777-9s coming its way and there are hundreds of Come Farnborough in July we will find out if narrow-bodies being readied for delivery to low-cost Singapore was simply a pause in orders as airlines assess carriers in the region, including the AirAsia Group, their needs for future network development. ■

TOM BALLANTYNE Chief Correspondent Orient Aviation Media Group

The most trusted source of Asia-Pacific commercial aviation news and analysis

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“It has established itself as the primary source of information on industry topics in the Asia-Pacific region”

MARCH 2018 / ORIENT AVIATION / 5 ADDENDUM

Good times roll on for Qantas Group

The Qantas Group has reported all the targets of our financial network, including hubbing Jetstar’s portfolio of a strong interim pre-tax profit framework. Debt is towards the through Singapore and Perth,” joint venture airlines in Asia of US$761.7 million for the six bottom of our target range. Every he said. was profitable, driven by months to December 31, 2017. division is returning more than “It is taking some routes its operations in Japan and Only its international arm turned its cost of capital. We generated from Emirates on the Tasman and Singapore as well as significantly in a pre-tax profit decline of a record amount of operating starting the unique Perth- improved results at Jetstar Pacific 5.5%, to $173.3 million. cash flow and free cash flow was service, which will be the first as excess capacity in Vietnam Despite higher fuel costs, a almost three times higher than non-stop direct link between moderated. competitive domestic market and the previous first half,” he said. and the UK. These Looking ahead, Joyce said international capacity overkill, Joyce said the international changes will generate material the airline is broadly positive “Qantas Domestic had a record arm has reported a good result benefits from fiscal year 2019 and about trading conditions and the result, the Jetstar Group had a given higher fuel costs and the early signs are very positive.” prospects for consumer demand. record result and Qantas Loyalty increased competitor capacity in The international operations “After several years of turning had a record result”, said Qantas the market. This is “an important of low-cost carrier, Jetstar, around this business, Qantas Group CEO, Alan Joyce, at the transition year” for Qantas generated strong earnings, helped has a lot of momentum behind it. results announcement in . International, he said, and by the favourable operating costs Consistent financial performance Qantas International held its own forecast it was setting up for a of the B787-8, although the LCC gives us the headroom to plan for in a market that is producing bright future. lost an estimated $10 million from the future. We’re vigilant about some extremely low air fares, “The airline is welcoming the disruption caused by the Bali maintaining that performance Joyce added. the Dreamliner [into its fleet] ash cloud in the closing months and we are excited about what is “We met, or exceeded, and making key changes to its of 2017. ahead,’’ he said. ■

Qantas to train 500 pilots at its new academy

Separately last month, Joyce Qantas Group to a 20% intake announced the Qantas Group of qualified women in the 2018 would establish a training Future Pilot Program with the academy to train up to 500 pilots goal of females making up 40% a year at an existing airport in of cockpit crew in the next regional Australia. The Qantas decade. Group Pilot Academy, which Joyce said Qantas will will be funded by an initial partner with one of several investment of US$15.6 million, existing training providers in will open its doors to students establishing the academy and in 2019. will consult governments at “Boeing estimates the world all levels about the location of will need about 640,000 more the training facility. The Qantas pilots in the next 20 years, Group sources pilots from a mix with 40% of them required in of its kind in the southern male. “If we’re leaving out almost of new graduates from existing the Asia-Pacific.” said Qantas hemisphere.” 50% of the population in our flying schools, pilots from Group CEO, Joyce. “That level The academy will initially search for the next generation general aviation and the military of demand makes the academy train around 100 pilots a year of 640,000 pilots, clearly we are and from commercial airlines. important not just for Qantas, for direct entry into the Qantas not tapping into all the talent This is expected to continue but for Australian aviation more Group, including Jetstar and available. As an industry, we in order to provide the different broadly so that all parts of the regional carrier, QantasLink. need to do a much better job of levels of experience needed industry have access to qualified “Depending on demand from encouraging women to become by the carrier. An additional pilots in a country that relies so other parts of the aviation pilots and take up what is an program to help mentor and heavily on air transport. industry, this could grow to 500 exciting career path,” Joyce said. recruit the ‘best and brightest’ “Over time, we see potential pilots a year on a fee-for-service Last year, Qantas announced aviation students from five for the academy to become basis,” Joyce said. the Nancy Bird Walton initiative, Australian universities was a competitive advantage for Qantas also wants to named after the pioneering announced last year. The group Australia in the region. It could address the chronic gender female Australian aviator, to has more than 3,500 pilots and train pilots for other airlines and imbalance among pilots in an improve on its 5% proportion plans to recruit another 350 by grow into the largest academy industry where 97% of pilots are of female pilots. It commits the year end. ■

6 / ORIENT AVIATION / MARCH 2018 ADDENDUM

Norwegian seeking Asian partner with view to marriage

Wanted: An Asian no-frills airline Based at Fornebu in Norway passengers onward connections York to London. The journey was to partner with rapidly expanding and operated by Norwegian to other parts of Asia and places completed in just over five hours. Norwegian Air, which has been Air Shuttle, Norwegian Air UK as far as Australia,” an airline The Norwegian B787-9 reached flying London-Singapore for six is a fully owned subsidiary of spokesperson said last month. a top speed of 776 miles per months. The ambitious LCC, Norwegian Air Shuttle which In February, the carrier hour (mph). As the aircraft sped which attracted considerable launched to Singapore from launched the UK’s first low-fare across the Atlantic it benefitted industry interest when it launched London Gatwick last September. route to South America, a non- from an extra strong jet stream its first long haul low-cost flights “Our Singapore-London flights stop service from London Gatwick that at times reached a speed of in 2013, has confirmed “the door continue to perform well. The to Buenos Aires. A month earlier, 202 mph. The official time for the is open” for exploring expansion door is open to exploring potential it set a record for the fastest 3,458 mile journey was five hours elsewhere in the Asia-Pacific, ways we can cooperate with other transatlantic flight in a subsonic and 13 minutes, 53 minutes faster including Australia. low-cost carriers that would offer passenger aircraft from New than expected. ■ Norwegian said in a statement that as an ambitious airline with huge aircraft orders “it is no secret that we have plans to expand globally”. It has 160 jets on order and already is flying 119 B737-800s with eight more to be delivered and six B737MAX8 that will grow to 110 of the type when all orders are filled. It also has eight B787-8s and 15 B787-9s in its fleet with 18 more -9s committed and an order for 30 A321LRs.

Asia-Pacific airlines and governments unite to fight cyber threats

The Association of Asia Pacific and Trade, Singapore’s Ministry resilience and fostering networks and break-ins are inevitable. Airlines (AAPA) is strengthening of Transport and the Civil to position the Asia-Pacific as a Therefore, on cybersecurity, it is airlines’ defenses against Aviation Authority of Singapore global leader in aviation cyber essential to work cooperatively cyberattacks with the formation (CAAS). resilience. together to strengthen our of an alliance with regional The threat of cyberattacks Issues highlighted at the collective resilience through governments. Supported by on airlines, airports and other Singapore workshop were: shared intelligence and non-AAPA airline, the Qantas aviation sectors has been an * Aviation safety and security technological innovation. Group, the new partnership increasing concern in recent is built on a network of trusted “The AAPA is committed includes the Australian years, where there is close to relationships to working in partnership with Department of Foreign Affairs universal agreement that it is not * Growing digital connectivity other aviation stakeholders to a matter of “if” an attack will take attracts increased challenges and develop, implement and enhance place but “when”. vulnerabilities strategies for strengthening The AAPA said the * Wider regional understanding cyber security and resilience of public-private partnership will needed about the shared cyber the aviation sector.” run a series of capacity building risk environment Australia’s Ambassador interactive workshops with the * Building more resilient for Cyber Affairs, Tobias first of them held in Singapore systems that focus on response Feakin, who also spoke at the last month. Participants included and recovery to re-establish Singapore workshop, said: representatives from regulatory business continuity “This public private partnership agencies, airlines, airports, AAPA director general, model is an essential element service providers, suppliers and Andrew Herdman, said at the of successful cyber resilience, academia. Singapore workshop: “Although which will provide the enabling Each workshop focuses our cyber security defenses may environment for this region’s on risk awareness, strategic be robust, it is never enough. In booming connectivity and planning, strengthening the long-term, system breaches growth.” ■

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Digital innovation centre stage at Singapore Airshow

Global original equipment and service companies chose February’s Singapore Airshow to showcase their new focus on digital MRO, artificial intelligence and investment in training, technology and manufacturing. Chief correspondent, Tom Ballantyne, reports.

t was not surprising the closing press conference at the region’s biggest show, in Singapore government invests US$47 million in Singapore in February, was university aerospace research cancelled. The Civil Aviation Authority of Singapore conduct research into air traffic management “Companies are becoming I (CAAS) announced during the Singapore Airshow solutions in five areas: Artificial Intelligence (AI) confidential on transaction that it would extend its collaboration with and Data Science; Urban Aerial Transport Traffic values and the number we have Singapore’s Nanyang Technological University for Management and Systems; Regional Air Traffic will not be meaningful,” said the another five years by investing up to US$47 million Management Modernization and Exploratory show’s managing director, Leck in artificial intelligence and data science research. Studies of Emerging Technologies and Talent Chet Lam. In the next five years, the partners will Development, with a focus on innovation. He was right. With none of the big aircraft manufacturers million purchase by Chinese Caldecott, complimented Fanmei signed with airlines and suppliers. announcing any sales of Flight Training specialist, Fanmei for “establishing a prestigious At the 2014 show, purchases commercial jets, the only Aviation Technologies, of 152 pilot development program committed hit $32 million. But announcements were from Piper Aircraft training planes. to meet the growing need for this year, show analysts said, Bangkok Airways for four ATR It was the biggest order in the exceptionally trained airline flight many full service and low-cost 72-600 turboprops, at list prices history of the U.S. company. crews”, adding that the synergy Asia-Pacific carriers had placed of $100 million, and an $80 Fanmei president, Don Li, was a “wonderful opportunity large orders for jets over the last million sale of a Honda business said the new aircraft will be for both organizations as we five years. Airbus and Boeing in to European air taxi operator, a “key element” in China’s work collectively to help address particular have record backlogs Wijet. general aviation roadmap as the the global pilot shortage”. of aircraft orders. Of more significance, country’s commercial passenger At the last Singapore Airbus estimates more considering demand for pilots market expands. Piper President Airshow in February 2016, deals than 14,000 aircraft, including in the Asia-Pacific, was the $74 and chief executive, Simon valued at $12.7 billion were freighters, are required in Asia to 2036, some 42% of world demand. But airlines are being cautious. They fear overcapacity. Endau Analytics’ Shukor Yusof added that weak profitability was to blame for the declining appetite for more new planes at the region’s airlines. “Although the traffic numbers in Asia point to huge growth, the reality is that profit margins are thin. It’s harder to make money,” he said. The real action in Singapore this year was among the sales teams for MROs and

MARCH 2018 / ORIENT AVIATION / 9 NEWS BACKGROUNDER

tracking and communications accidents in recent years, IATA systems, particularly Air Traffic analysis has revealed. Management systems that are “The accident investigation designed to manage the largest process will continue to be a aircraft market in the world. fundamental tool in improving During the show week, safety. However, as the number the International Air Transport of accidents declines, we need Association (IATA) and the Civil to take a system-based, data- Aviation Authority of Singapore driven, predictive approach to (CAAS) signed a Memorandum preventing accidents, including of Collaboration (MoC) to analyzing the more than 10,000 establish a Global Safety flights that operate safely every Predictive Analytics Research day. The Singapore Government Center (SPARC) in Singapore. The and the CAAS have been strong 2027, that is hardly surprising. Engineering, and its Heavy MoC was signed by IATA director partners of IATA and we look At Singapore, Boeing signed Maintenance Services general and CEO, Alexandre de forward to working with them nearly $1 billion in new service Singapore joint venture with SIA Juniac, and the director general through SPARC to help to take deals, including with Singapore Engineering. of CAAS, Kevin Shum. aviation safety to an even higher Airlines to use Boeing’s Electronic Singapore Airlines MRO arm, SPARC will utilize predictive level,” said de Juniac. Logbook on its B777 and B787 SIA Engineering, was also busy. analytics to identify potential Shum said the establishment fleets, a landing gear exchanges It finalized a joint venture with aviation safety hazards and of SPARC in Singapore is contract with Japan’s All Nippon GE Aviation for GE90 and GE9X assess related risks by leveraging especially timely given the Airways and a partnership with overhauls, following an initial the research capabilities in anticipated doubling of air China Southern Airlines and announcement of the initiative at Singapore, and operational flight traffic in the Asia-Pacific by Aircraft Maintenance the 2017 Paris Air Show. data and safety information 2036. “SPARC’s predictive data Engineering Company to develop GE Aviation also announced available under IATA’s Global analytics capabilities will help services for the Boeing Global plans to build a facility to Aviation Data Management the aviation sector in Asia-Pacific Services (BGS) program. manufacture GE9X engine (GADM) initiative. and better anticipate, prioritize Airbus, which is reporting parts in Singapore, growing its End users across the and address safety issues more double digit growth in its presence in the components aviation community can work effectively,” he said. Services By Airbus aftermarket segment, which accounts for the collaboratively at the system In the MRO sector, there division, announced the largest MRO market in the region level to address and implement was more evidence that original establishment of a new in 2018, at 33%. appropriate safety measures equipment manufacturers customer services center at its Pratt & Whitney, through its to mitigate risks or prevent the (OEMs) such as Boeing and Airbus Asia headquarters at Pratt & Whitney Eagle Services occurrences of safety hazards. Airbus are continuing to make Singapore’s Seletar Aerospace Asia business, expanded The first area of focus for SPARC inroads into the aftermarket Park. The center adds to its its offering in Singapore by will be runway safety, such as sector. With forecasts that the existing regional presence, launching full services for the runway excursions, which are Asia-Pacific MRO market will be which includes -based Engine Alliance GP7200 that the most frequent category of worth $22.7 billion annually by acquisition, Sepang Aircraft powers A380 aircraft. The U.S. subsidiary, which previously carried out low pressure Singapore broadens FAA cooperation compressor module overhauls on the engine, plans to conduct its first full service on the widebody In early February, the Civil Aviation Authority of Areas of focus are international aviation safety, Singapore (CAAS) said it would deepen its co-oper- regional cooperation and development, air traffic engine this year. ation with the U.S. Federal Aviation Administration management, environment, and cybersecurity. Britain’s Rolls-Royce chose (FAA) by signing revisions to the Bilateral Aviation The revisions to the BASA-IPA simplify and Singapore to showcase its Safety Agreement – Implementation Procedures remove some issues for achieving airworthiness IntelligentEngine strategy, for Airworthiness (BASA-IPA) on the sidelines of approvals and they will save airlines money. which will change the process the Singapore Airshow. “The removal of the limitations will now allow of its design, manufacturing and The enhancements follow the launch of the airlines to undertake a comprehensive supple- servicing of its engines. “We see U.S. – Singapore Joint Aviation Steering Committee mental type certificate package of modifications it as being almost as big a shift as (JASC) in December 2017. Co-led by the FAA for cabin, mechanical and electrical systems, as it was to move from the piston to Administrator and the CAAS Director-General well as the in-flight entertainment system. This will the gas turbine. It’s almost a new of Civil Aviation, JASC manages and strategically certainly help airlines reduce lead times and costs guides technical collaboration of aviation initiatives of cabin retrofit programs,” said Singapore Airlines way of thinking,” Rolls-Royce’s between the two bodies. senior vice president engineering, Lau Hwa Peng. marketing senior vice president, Richard Goodhead, said. ■

10 / ORIENT AVIATION / MARCH 2018 B:215 mm T:205 mm S:182 mm

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Red tape to go promises Vietnam’s regulators

By chief correspondent, Tom Ballantyne

ietnam is forecast draft strategy said it contains to create a boom conditions that will make it in new domestic difficult for new airlines to airlines as traffic be established, including numbers soar in demanding investment processes Va market served by only four in addition to the three to four scheduled carriers. Industry years it now takes to secure an insiders estimate at least six AOC. more airlines will be required to Congestion at some satisfy accelerating commercial Vietnamese airports also is a passenger demand. hurdle. Government authorities New entrants preparing for already have postponed issuance the challenge include Vietstar Ministry of Transport (MoT) overseas in 2016, a figure of permits to Vietstar Airlines Airlines, Tân Cảng Airlines and wants to expand this number to expected to surge by 9.5% in the because of congestion at Tan , with the latter 220 aircraft in two years and to next five years. Son Nhat airport. Tan Cang and already party to a Memorandum 400 by 2030. In February, the MoT Viet Bamboo Airlines have not of Understanding with Airbus The MoT recently forecast completed a 2018-2020 draft submitted their documents to for A321neo jets. Bamboo hopes annual passenger growth of plan for the country’s aviation the Ministry of Planning and to launch operations next year, 16% to 2020 and 8% a decade industry and also outlined a Investment, a process necessary dependent on government later. Passenger numbers will vision for the sector to 2030. for the start-ups, which make it approval of its Aircraft Operators increase to 64 million passengers Details of the plan have not unlikely they can be approved for Certificate (AOC). in the next two years and to 131 been disclosed. The ministry take-off before 2021. Vietnam has a fleet of 180 million in 2030, it said. is collating industry feedback At a meeting last November aircraft operated by Vietnam Statistics from the Vietnam on its works before submitting deputy prime minister, Trịnh Đình Airlines, Jetstar Pacific, Vietjet National Administration of the draft plan to the country’s Dũng, said adjustments were and Vietnam Air Services Tourism have reported that 6.5 department of prime minister. necessary to create a framework Company (VISC). The country’s million Vietnamese travelled Analysts familiar with the for future airline expansion. ■

MARCH 2018 / ORIENT AVIATION / 13 MAIN STORY COMPENSATION MOUNTS AS MORE ENGINE FAULTS EMERGE It has been a rough twelve months for most of the world’s major jet engine makers as problems continue to surface on engines that power the world’s airline fleet. Chief correspondent, Tom Ballantyne, reports.

ratt & Whitney’s new PW1100G GTF (Geared regulatory approvals. Pratt & Whitney has begun Turbofan) engines, which power Airbus’ latest implementing this solution and production engine deliveries single aisle A320/321neo, took a turn for the incorporating this change will begin in early March,” the worse last month when the U.S. Federal Aviation engine manufacturer said. Administration (FAA) issued a formal warning If that was a concern for Pratt & Whitney, there was no sign Pthat the power plants posed a potential shutdown risk. The of gloating across the Atlantic in Derby, England, where rival announcement followed a similar decision by European Rolls-Royce also has its troubles. In December, it had to issue an regulators earlier in February. advisory that some of its Trent 1000 engines on B787-9 airline In an airworthiness directive, the FAA cited a knife edge fleets required maintenance sooner than previously indicated seal fracture in the engine that could lead to an engine stall, because of corrosion issues. consequent inflight shutdown and rejected takeoffs. It forced Air New Zealand to cancel several international On February 22, Pratt & Whitney announced it had flights and also to ground some of its 11 B787s. Problems with released a revised configuration as a remedy for a knife edge the engines had caused two of the carrier’s flights to be aborted. seal on the High Pressure Compressor (HPC) aft hub. One flight from Auckland to Tokyo had to turn back to home “The solution is based on a design with which the company base when the plane experienced shaking and registered strange has significant experience and this solution has noises. all the necessary Last year, some Rolls-Royce engines on the B787s of All Nippon Airways 787s were taken out of service because of turbine blade corrosion. For airlines operating the new aircraft, these incidents are serious issues that disrupt schedules, force flight cancellations and reduce revenue. For aircraft manufacturers, Airbus and Boeing, while they are not responsible for the engine purchases, the incidents are doing them persistent brand damage. To date, 113 Pratt & Whitney powered A320neo family aircraft are flying with 18 customers. One airline seriously impacted by the Pratt & Whitney problems is Indian low-cost carrier, IndiGo, which has more than 400 of the aircraft on order. It said it has been forced to replace faulty Pratt & Whitney engines on its jets in 69 cases over the last 18 months. There had been three occasions when engines shutdown during IndiGo flights and three other cases when flights were

14 / ORIENT AVIATION / MARCH 2018 MAIN STORY

cancelled after engine issues were identified. Other big Asian customers We’re expecting to for the neo are AirAsia, with 304 on deliver another record order, Lionair with 113 and VietJet with 42. number of deliveries So what has gone wrong? Pratt & in 2018. Of course Whitney has been transparent in its reaction. It said in February that the we need engines for company had implemented an these aircraft, but I am “engineering change” in the middle of confident our partners last year that was intended to improve the durability of the knife edge seal on the will not let us down high pressure compressor aft hub on a Tom Enders limited number of the GTF engines. Airbus CEO Engines that incorporated this change entered revenue service on customer aircraft beginning in December 2017. “In late 60 aircraft. “We’re expecting to deliver another January and early February of this year, four record number of deliveries in 2018. Of course we need engines of these modified engines did not perform as anticipated,” it for these aircraft, but I am confident our partners will not let us said. It added that defective engines are installed on about 32 down,” he said. aircraft across the world. The latest Rolls-Royce Trent 1000 engine problem was not “The current population of impacted engines is 43 engines the first hiccup in the program. Introduced into service seven installed on 32 aircraft, of which 21 aircraft have one engine years ago, the engine has had several adjustments to rectify fuel with the modified configuration and 11 aircraft have two burn and reliability issues that have pushed up development engines with that configuration. There are also approximately costs of the turbine. 55 such engines delivered to the Airbus final assembly line, In 2012, launch customer, All Nippon Airways (ANA), which are now awaiting installation on customer aircraft. Pratt grounded five of its B787s due to corrosion within an external & Whitney is working with Airbus to implement the gearbox on the Trent 1000 engines. The component, a gearbox remediation plans set forth in its all operator transmission,” it from Hamilton Sundstrand, was replaced for all existing and said in a statement. subsequent aircraft. Last year, it disclosed it would have to The engine maker said that in coordination with Airbus it is replace the turbine blades on the entire fleet of Trent 1000 presenting a proposed mitigation plan to regulatory authorities engines powering the B787 after corrosion and cracking for a modified configuration. “Pratt & Whitney will be in a problems were discovered on some passenger jets also operated position to provide greater detail around the remediation plan by ANA. and impact, if any, on its 2018 delivery plan, once the regulatory At its interim results in 2017, Rolls-Royce took an $85 authorities address its proposed solution,” it said last month. million provision to cover technical costs on large engine Airbus, which ended 2017 with a record order backlog and programs, just under half of which was related to the costs of delivered more jets than ever despite the engine issues, is replacing the turbine blades on all engines affected — roughly promising 20% growth in earnings this year. Announcing the half the installed base of 434 turbines. company’s full year results last month, chief executive, Tom The problem with Air New Zealand aircraft is not isolated. Enders, said Airbus was working on measures to gain control Virgin Atlantic revealed it plans to lease up to four A330-200s over the engine issue. for at least a year from this month to make up for the fact that “The A320neo ramp-up remains challenging and requires some of its B787s have been grounded by Trent 1000 problems. engine suppliers to deliver in line with commitments,” he said, Rolls-Royce said it is working closely with Air New and added the impact on deliveries of the latest turbine issues is Zealand (and other carriers) to “minimize this impact and under assessment. restore full flight operations as soon as possible. This is the The latest issue relates to a seal Pratt replaced after an continuation of work that started last year to upgrade Trent earlier version exhibited durability issues. Fixing the glitch is 1000 engines to the latest standard”, it said. “not rocket science”, Enders said, and confirmed the U.S. Over three years, Rolls-Royce will replace all Trent 1000 engine marker appeared to have identified the root cause of intermediate pressure turbine blades and airlines will replace the malfunction. Deliveries of modified engines should start blades impacted by corrosion with new or minimally used from April. blades in the interim. Airbus 320neos equipped with a rival power plant made by Analysts said the good news is the problem has been the CFM International alliance of General Electric and France’s identified and a solution is underway for both Rolls-Royce and Safran are also behind schedule, due to less serious “maturity” Pratt & Whitney. Now, it has to be decided is who pays the concerns. Enders said, Airbus would still look at increasing the airlines for their lost income and additional expenses and how production rate of the neo to 70 jets a month from the planned much they will pay. ■

MARCH 2018 / ORIENT AVIATION / 15 NEWS BACKGROUNDER

Philippine Airlines readies for New York A350 launch

Philippine Airlines (PAL) president, Jaime Bautista, last month achieved a goal he has long had in his sights – a four star Skytrax rating for his carrier. The next step for PAL is the launch of non-stop routes to the U.S. and Europe with its new A350-900s.

By chief correspondent, Tom Ballantyne

hen Airbus’ year as well as six A321neo. The configuration and has a range of of the A321neo – it has 21 newest long- Airbus wide bodies will allow 14,800 kilometers. in the pipeline – represents range jet, PAL to fly non-stop from Manila The PAL president said a major step forward for the the A350- to the U.S east coast via the Polar the -1000 has 95% common carrier in terms of fuel savings 1000, called route, and launch more services systems and parts numbers as and a longer range capability Win to Manila during an Asia- to Europe. They will replace PAL’s well as the same type rating as compared with its predecessors. wide demonstration tour last ageing A340s. the -900. Carriers elsewhere in The first A321 neo will fly the month, Philippine Airlines (PAL) PAL’s first non-stop route to the Asia-Pacific have ordered new Manila-Brisbane non-stop president, Jaime Bautista, made the U.S. will be New York with 287 A350s, a third of the 854 service. it clear he would be happy to Seattle, Chicago and a point in ordered worldwide. Asiana PAL will be the first Asian have the US$366 million aircraft Western Europe to follow. PAL Airlines, Cathay Pacific Airways, airline to operate a narrow-body in his fleet. also will continue to strengthen China Airlines, Hong Kong airliner equipped with 12 full-flat In a buoyant mood after its network of services from Airlines, Malaysia Airlines, Business Class seats. All 168 receiving a four star rating Clark, Cebu and Davao as part Singapore Airlines, Thai Airways seats in the aircraft’s two cabins from Skytrax a few days earlier, of its “multi-hub” network International and Vietnam – business and economy - will Bautista told media the airline is strategy. Airlines already fly the -900. have in-seat video monitors, spending big money, a forecast Bautista clearly believes the PAL operates the B777- another first for PAL’s single $2 billion, to expand its 88 A350-1000, 40% larger than the 300ER, the A340 and the A330 aisle aircraft – and free WiFi. The aircraft fleet to 100 planes. smaller -900, would be a good on its longer haul services and A321neo will also fly non-stop Four A350-900s will be fit for PAL. It accommodates the A320 on its domestic and from Manila to Sapporo, New delivered to PAL from June this 366 passengers in a three-class regional network. The arrival Delhi and . ■

16 / ORIENT AVIATION / MARCH 2018 THE GROUND.

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14043_AIR_Airspace_273x202_Orient_Aviation_1.0.indd 1 13/02/2018 14:51 COVER STORY

DIGITALLY DRIVEN Air New Zealand overcame serious disruptions to its operations in 2017 as it went head to head with new competitors. Despite these challenges, the carrier continues to report record annual profits built on innovation and service. Chief correspondent, Tom Ballantyne, reports from Auckland.

ir New Zealand chief executive, Christopher “The domestic market continues Luxon, has every reason to be satisfied with the to show strength driven by the New performance of his business. “We are having Zealand economy as well as inbound a really good year. Another good year, which tourism. We will increase capacity by is really fantastic,” he told Orient Aviation in approximately 6% across our regional AAuckland last month. and jet services to support that On the other hand, he was quick to point out that the demand over the second half of the last year, while good commercially, presented the carrier financial year,” said Luxon. with plenty of challenges. As well as several new competitors “It’s been quite a flying into New Zealand, the carrier had to manage periods challenging 24 months to be of extreme weather, overcome disruption to its flying schedule honest,” Luxon told Orient from a ruptured fuel line at Auckland Airport and ground Aviation. “Last year some of its B787-9 Dreamliners because of problems with was all about dealing their Rolls-Royce Trent engines. with lots of new Despite these setbacks, the carrier reported a US$276 competitors. We had million after tax profit for the year ended June 30, 2017. It was 10 new competitors a decline of 17% over the previous year, but the results were show up in twelve still the second biggest profit for the carrier in its history. months in New Last month Luxon reported another impressive interim Zealand. profit, to December 31, 2017, of US$237.7 million. While “But the business the results were slightly lower than the $256.8 million profit was highly resilient. it reported for the same period a year ago – as higher fuel prices dampened profits – Luxon said the airline group was on track for its second highest profit in the company’s history for the full year to June 30.

18 / ORIENT AVIATION / MARCH 2018 MARCH 2018 / ORIENT AVIATION / 19 COVER STORY

We fought back and were highly competitive, which was great. had the planes here and operating,” he said. All the work of the previous five years stood us in good stead. “It was a phenomenal effort from all our people that It is why we were very proud of the results despite the pressure made that happen. Think about the network implications, we had competitively.” Among the newcomers flying into an the customer communication tasks and all the logistics that already crowded market were Qatar Airways and Chinese actually made that come into being.” carriers Sichuan Airlines, Hainan Airlines and Tianjin Airlines. Air NZ and its subsidiaries operate 106 aircraft of which Last September, the challenge was more immediate, to 56 fly operations: 30 A320s for domestic and say the least. Thousands of airline passengers were stranded in short haul international flights, eight B777-200ERs, seven Auckland after a pipeline burst that was the only conduit for jet B777-300ERs and eleven Dreamliners that service the carrier’s fuel to Auckland airport. long haul network. “These are issues outside our control, but it is the culture Mount Cook Airlines, a domestic subsidiary carrier, flies we have built [at Air New Zealand] and the speed and agility 27 ATR 72s and Air Nelson operates 23 Bombardier Q300s of our reactions that allowed us to deal with them. The fuel in New Zealand. Two more B787s and four A321/320neo will pipeline rupture was incredibly frustrating,” said Luxon. arrive in the Air NZ fleet this year as will four more ATRs. “We had to run the airline for two weeks on 30% of fuel. The airline is proceeding through an assessment process Our flight operations people arranged to uplift fuel from other with Airbus and Boeing as it considers replacement of its ports. How we managed fuel stocks and how we managed B777-200s. The A350, the B787-10 and the B777X are being flying again was a pretty impressive response.” considered. Just as serious was the news in December that some of the Like Alan Joyce, his trans-Tasman Qantas rival, Luxon is airline’s 11 B787s would have to be grounded. Rolls-Royce extremely interested in the opportunities new generation jets had to inform Luxon, in the lead up to the peak Christmas offer for ultra long haul flying. But unlike Joyce, Luxon is not travel season, that the Trent 1000 engines that powered the interested in flying non-stop to London. airline’s B787s required premature maintenance. Worse still, “For us, Europe is best delivered through our alliance Rolls-Royce said, no replacement engines were available. driven network. It operates to London via Los Angeles. But The fault, which centres around corrosion of intermediate we have a real source of competitive advantage in linking pressure turbine blades, is effecting B787 fleets worldwide. Asia to South America, two big, growing and emerging parts “We’ve had really good transparent conversations with Rolls- of the world. We are seeing that already in our traffic flows Royce. We also have very good engineering and maintenance starting to come out of Asia into South America and South resources here in New Zealand,” said Luxon. American goods travelling through Auckland on their way to “We have worked our way through the issues incredibly Asia. We also are seeing huge growth from this strategy around well. We realized that if we were to deliver our peak summer Australia, through New Zealand and onto the Americas.” schedule when the engines could not be serviced as quickly as Ground-breaking advertising campaigns featuring Dave we would have liked we had to find other aircraft. We hired the Goose and more recently, Pete the Kiwi, have promoted two A340s from Hi Fly, a Lisbon-based wet leasing specialist, flying on Air New Zealand to North and South America from which we have been operating between Auckland, Sydney and Australia via Auckland. They have been a huge success. Perth.” “It’s going superbly well,” said Luxon. “In the last three The A340 is hardly a fuel efficient replacement for the years, we have built a much stronger presence in Australia. B787, but Luxon said it was much more important that the We are the number one corporate reputation company in airline’s customers could travel as planned during the peak Australia, which is unusual for a foreign company to have that summer period. “Within a week of reaching the agreement, we title.

20 / ORIENT AVIATION / MARCH 2018 COVER STORY

“We have expanded our sales presence across all the states. to service. We have relationships with Aerolineas Argentinas We have a compelling story that says if you are in Adelaide why and All Nippon Airways and a bunch of other players around not jump on a Dreamliner, come through Auckland and then the world. We have the set of partners we want. With an transition out to Buenos Aires, to Houston, to Los Angeles. alliance driven network we have both skin in the game and “To give you a feel for it, probably 40% of our traffic to the ability to support each other in our home market, under Argentina is Australians. Twenty five per cent of our traffic to the blessing of the competition authorities. It is a really good Houston would be Australians. It’s been a great source of extra outcome,” he said. volume in a country of five million people to tap into a much Unlike many airlines who complain they are carrying larger market.” more passengers for less yield, Luxon begged to differ. “It has Air NZ’s fleet has an average age of seven years and is one not been our experience. If you look at our monthly statistics, of the youngest in the world. “Our network is 30% bigger we’ve had an improving RASK (Revenue per Available than it was five years ago,” said Luxon. “It is affording us some Seat-Kilometer) situation for the last year. It has been a very big opportunities and connectivity that have not been tapped. focus for us, getting the revenue mix right and where possible “For us, to go from Australia through New Zealand out to making sure, as fuel costs rise, that we try to recover that the east coast of North and South America is very promising. through our RASK. Yield has been moving in a very positive To be able to connect China and Southeast Asia through direction.” Auckland to South America also is very promising. Being Luxon strongly believes digital technology improves three hours closer to the Americas than the eastern seaboard of customer outcomes, simplifies the business operationally and Australia means that yes we think there is a huge opportunity helps it commercially. And when it comes to customer service for us to do launch into the east coast of North America he is not shy about his views. and also South America. As we go through the B777-200 “When you are airline of the year for five years in a row, Request for Information and Request for Proposal, as we look when you’re doing lots of things within an airline world for a replacement for those aircraft, this is very much in our incredibly well, we’re not being arrogant but we don’t think thinking.” there is heaps to learn from other airlines about customer As for the increased competition, Luxon said 2017 was the service,” he said. most competitive 12 months in the seven years he has been at “We think there is a lot more to learn about serving Air NZ, but the airline is handling it. “We have started to see customers from celebrity cruises, from Zappos (an online shoe much more rational behavior over the Tasman, which is really and clothing shop based in Las Vegas, Nevada), from Four fantastic because there was over-capacity sitting there,” he said. Seasons, from Disneyland. We are much better to go to those “The American carriers have reduced their services to New places because they have much higher levels of service than Zealand. And yes, the Chinese have come in, but a lot of the airlines.” Mainland traffic is from secondary and tertiary cities, which Luxon has sent Air NZ hospitality teams to Disneyland impacts us less. We have built a pretty good business model for where they saw the magic band the theme park uses to manage China where we have gone after upper middle-class travelers.” traffic through the park. “We actually stole it because we Partnerships are a key plank in Air NZ’s strategy. Apart are a big believer of nicking things with pride. We actually from its greater China partners, it works closely with Star repurposed that as our Air New Zealand Air Band,” he said. Alliance partner, United Airlines. into North America. “We “It is used for unaccompanied minors travelling with the have Virgin Australia and the Singapore Airlines relationship, airline. It’s highly anxious putting your kid on a plane under which is huge for Europe and for Southeast Asia. 12 years old and sending them off to see your grandparents “They are a great set of JV partners for the markets we need in Sydney from Auckland. We have an unaccompanied

Seeking China’s wealthy travelers

“We are interested in the free and independent traveler, with limited annual holidays - two weeks a year – and they not the group traveler. You can fill planes up with different want to start their holiday on an Air New Zealand flight customers, but without the right margin structure and interacting with Kiwis. They have consciously chosen Air economics, there is a real problem. Your planes are full but New Zealand over Chinese mainline carriers. This is how you are losing money flying to China,” said Air New Zealand we have margined up our business and how we got the CEO, Christopher Luxon. economic model right.” Over the last five years, Air NZ has changed the whole New Zealand was the first country in the world to sign set of wholesalers and retailers it deals with in China. “We go a free trade agreement with China and Luxon wants to after wealthy 30-year-old couples and wealthy middle-class deepen the airline’s presence on the Mainland. It flies daily families. Eighty per cent of the passengers on our flights spend to Shanghai and has a revenue-sharing joint venture (JV) with eight days or more in the country, which is almost as much Air China on daily flights to Beijing from Auckland. As well, as U.S. tourists’ daily spend,” he said. it has a JV with Cathay Pacific Airways between Hong Kong, “It’s a much better mix for us. They also are customers Shanghai and Beijing.

MARCH 2018 / ORIENT AVIATION / 21 COVER STORY

minor bracelet that sends five text messages to the parents in Auckland and five text messages to the grandparents sitting in Air New Zealand’s digital vision Sydney. The kid has a cool band which helps us operationally because it digitizes. We know exactly where everyone is so we High on the agenda of Air New Zealand CEO, can track everybody. Christopher Luxon, are innovation and the application of “Commercially, our customers have come back and said digital technology across the entire business. “We have about 700 people in our digital team. We want to be the we love the service so much. They will pay a premium for that most digitally advanced airline in the world and also one and a service fee for that. It is a situation of high anxiety. It is of the most digitally advanced businesses in Australia and a pain point in the customer dealing process. We have used New Zealand,” he said. technology and innovation to solve that problem.” “We are well on that pathway, but there is a lot more None of this, Luxon insisted, has anything to do with we want to do in the next few years. We think this is a replacing people with technology. “For some things, the big strategic agenda that needs to be planted and seeded technology gets you through the process quicker, faster, with really well and that it wil pay off in five, ten or fifteen more accuracy,” he said. “It means that rather than leaving our years.” people behind a desk where you line up and check in, we can The array of Air NZ trials with new technology have our people circulating, concierge-style, around the kiosk is astounding. Last August, in conjunction with the Commonwealth Bank of Australia, it conducted a five-day who ask ‘Sir, can I help you?’ experiment that utilized Chip, the bank’s social humanoid “We have a lot of flexibility and we think we can robot. It interacted and assisted Air NZ customers to check augment the service we offer. Its not a cost-cutting exercise in and also assisted staff and passengers at the airport gate where you use robots or machines to do the jobs humans can in Sydney before boarding. do. It’s an end. The airline also is testing Google Pexil Buds, which “We need everyone doing all the jobs we possibly want are wireless earpieces that allow Air NZ staff to speak done because we have higher standards of customer service and in English to a foreign language speaker and have the operational efficiency as well as goals for commercial revenues exchange instantly translated into the other language. and commercial performance. It’s a combination of human “With language as a barrier, [Pexil Buds] allows us to and automation working together.” engage with that customer. The frustration and the pain point are minimized by technology,” Luxon said. When Luxon joined Air NZ in 2011 as group general Twelve months ago, the carrier launched Oscar on manager for the carrier’s international arm, he had chosen the airline’s website, where it began testing the waters of to quit his high powered position as president of Unilever Artificial Intelligence (AI). Oscar answers customer queries Canada, a US$1.4 billion business, and return to his native and learns as it goes. New Zealand. “It has been going incredibly well,” said Luxon. “It’s When he arrived at the carrier, he was not exactly learning 900 new questions a day. enamoured with the airline industry in general and was critical “There’s a whole spectrum of technology available. of some of its traditional practices. “From when I started [at Air We don’t want to run everything as a bog standard airline New Zealand] to today, airlines have become more like proper doing incrementalism. We have a bigger and better vision businesses rather than excuses for poor performance which is of where we want to go.” Last November, Air NZ announced it would explore what they kind of were,” he said. Blockchain technology, a secure ledger database that “There’s still a lot of that around, a lot of incrementalism records and stores every transaction by all parties and lot of calcified paradigms that sit out there that people participating in a transaction and eliminates third parties don’t challenge. Having said that, in the last five or six years such as banks and payment processors. the industry has become commercially orientated, much more Luxon told Orient Aviation the trial is at a very early rational and thoughtful about what they can control in their stage, but potential applications for cargo and baggage business. tracking, retail, distribution and loyalty program opportu- “The history of airlines is they have not faced up to the nities are being assessed. Air NZ also has a mobile app that shortfalls of their business model with the sufficient regularity scans and saves the passport information of passengers that you would do in a normal business. So sometimes and sends a timely reminder for the document’s renewal. Every month around 550 customers turn up at the airport airlines get what they deserve because they just have not been with an expired passport. innovative enough and they have not evolved their business Also under review is the elimination of physical model. The market has changed around them and these are baggage tags on luggage by employing computer chips just the basics of how you constantly have to be dynamically in bags. “Why do we put bag tags on bags? We’ve been tuning up the business. doing it for 75 years. No one questions the paradigm, but “We have built a business in the last six years that can it’s a pain and a hassle for the customer to go to a kiosk or deal with fuel at higher levels or low levels, or God forgive to an agent and put a bag tag, a physical piece of paper, on a fuel pipeline or any engine issue. That’s just the stuff that a bag,” said Luxon. “In the 21st Century it does not make happens in any given year. If you have a really great culture, any sense. We need to disrupt and take these pain points really good people and a really great executive team you can out and the frustrations away from customers.” deal with it.” ■

22 / ORIENT AVIATION / MARCH 2018 COVER STORY

For us, there are no insurmountable challenges, headwinds or tailwinds. It is about our strategic agendas of sustainability and digital innovation. They are big fixation points for us

Christopher Luxon Air New Zealand chief executive

MARCH 2018 / ORIENT AVIATION / 23 INDUSTRY INSIGHT SPECIAL REPORT ASIA’S SLOT SHORTAGE WORSENS

Peak and off peak pricing One global slot not favoured by airlines system for all IATA said peak and off-peak pricing would not replace slot allocation. Instead, it would charge air- countries lines for using infrastructure in the hope of encouraging Airline operations are threatened with chaos in some Asian carriers to use off-peak periods at airports. Maughan airports unless a slot allocation system is established the said the peak and off peak International Air Transport Association (IATA) predicted pricing model does not work in a recently published study. Chief correspondent, Tom in practice because market demand dictates schedules. Ballantyne, reports. Other difficulties with the model are: * Airlines are incentivized for high utilization of their fleet and can’t avoid peak irport capacity and flying, especially on long airline demand for haul sectors which have the added complexity of night access to airports restrictions. cannot keep pace * ICAO guidance has with each other, shown that peak/off-peak Asaid Head of Worldwide Airport charges have been ineffec- Slots for the International Air tive in prompting airlines Transport Association (IATA), Lara to reschedule flights to less Maughan. “Without a process of congested airports. allocating available slot capacity * Capacity constraints we will see chaos, with more should not be used to aircraft than stands being offered increase airport revenue. The solution has to be completely and more passengers than revenue neutral. terminals and their systems can * Slot constraints limit the handle,” she said. ability of airlines to modify Speaking at a recent briefing the schedules. Cost reduc- in Geneva, Maughan painted tion by operating off-peak is a gloomy picture of what lies be established that only allows practice] that need updating,” attractive but is unachievable ahead at many of the region’s carriers with slots to fly. IATA is she added. due to demand, schedules/ airports as passenger numbers convinced that its Worldwide The worsening slot situation slots, connections and global double in the next two decades Slot Guidelines (WSG) is the is reflected in the number of network. to 7.2 billion annually. Aircraft answer to fair and equal airports that are resorting to * It redistributes costs between different airline flying the world’s skies also management of future slot slot co-ordination to cope users arbitrarily. will almost double in the same allocations. with the pressure of passenger period, Airbus and Boeing “The WSG provides a traffic. The number of slot forecast. reasonable solution that co-ordinated airports continues “Realistically, there could be “There is no doubt we are promotes competition and has to grow in every region. IATA another 100 airports declared full entering a period where capacity enabled the birth of the low-cost said that at November 30 last in 10 years –that’s 50% growth. availability is going to impact carrier at many slot controlled year there were 189 Level 3 Slot In the worst case scenario, we the ability to serve predicted airports,” said Maughan. “We Co-ordinated airports worldwide could have more than 300 slot demand. This significant gap have initiated the WSG Strategic and 122 Level 2 airports that coordinated airports in 10 years,” between capacity available and Review with Airports Council are less congested airports with said Maughan. capacity demand needs to be International (ACI) and the some peak congestion. China There is by no means managed,” Maughan said. coordinator community to revise has 21 slot coordinated airports. universal industry agreement She said a system should the areas [of slot allocation The airline body said: about the direction airport slot

24 / ORIENT AVIATION / MARCH 2018 allocation policy should take. pricing would not replace slot markets without additional entry movements, terminal constraints Apart from IATA’s preferred allocation. Instead it would costs and that slots are allocated of check-in, security, gates, slot coordination policy, other charge airlines for using free of charge, a huge benefit to baggage reclaim and aircraft solutions to resolve airport infrastructure in the hope of the passenger as it does not load stand availability for different congestion include peak/off- encouraging carriers to use up air fare prices. aircraft sizes. peak pricing and slot auctions. off-peak periods at airports. The usage requirement also * The airlines need to match IATA said peak and off-peak Maughan said the peak and ensures scarce capacity is not the slots they hold to fleet off peak pricing model does not wasted, with airports achieving rotation and crew rostering as work in practice because market 98% utilization and also allows well as matching a slot at both Slot auctions demand dictates schedules. airlines to operate in markets ends of the journey to satisfy Slot auctions, another where demand exists. There is schedule requirements and a short term suggestion system, would no favoring of certain airlines, onward connections. solution penalize airlines that don’t have business models or their ability * Operating restrictions Another proposed the funds or the influence to to pay. and bans on night flights are solution, Slot Auctions, is in acquire the landing slots they “It is not perfect, but is increasing and are restricting vogue at some airports, but need to serve their network. altogether a better option than the feasibility of operations it is uncertain they will stand Administrative Allocation the others on the table,” said between airports, particularly the test of time. “They may through Slot Co-ordination is Maughan, who added finding for long-haul Asian journeys that seem like an ideal solution the preferred model for slot a perfect solution is almost depart late at nght and arrive in as a market-based measure to allocation, usually following impossible, especially when it Europe as airports open. achieve absolute efficiency in allocation. They would be a the WSG process. It involves must work worldwide. Maughan said: “A lack scarce commodity that could an independent and neutral Other factors that must of capacity still remains the be sold to the highest bidder coordinator who reviews the be considered in future slot critical issue and none of these which maximizes economic operations of previous seasons. allocation systems are: [present systems] solve the benefit. Perhaps not,” said Airlines that have achieved * At some of the most problem. Responsible investment Maughan. 80% usage of each slot series congested airports in the world, in infrastructure needs to be “Recently, China exper- retain it through historic there are huge numbers of forthcoming and now. Maybe imented with the idea by precedence. New slot requests slot requests that cannot be if governments could make the putting a selection of slots are considered against available immediately met. They are difficult decision to agree to on the market at Guangzhou capacity. At least 50% of the waitlisted and managed during expansion as soon as we’d like Baiyun airport and it also ran a slot lottery at Shanghai capacity pool is directed to new the season. Where possible, it, I could happily be without a Pudong,” she said. “It has not entrant airlines. ad hoc capacity is allocated to job well before my very distant been repeated.” Administrative Allocation applicants. It is not unusual for a retirement.” ■ The feeling among takes place globally according seasonal waitlist to have 60,000 airlines was that market dis- to a timetable to ensure airlines requests. tortion would be rife. Airlines receive their slot allocations at * The number of slots to be with slot co-ordinated bases the same time. It allows carriers allocated is staggering. In a would be most hurt by having to match slots to their planned week at London Heathrow to pay for all their slots while schedules and put their seats up 9,500 slots are allocated for some of the world’s largest for sale. airport operations. carriers would only be paying for slots on 10%-20% of their IATA said the process * The process of allocation operation. ensures airlines can enter new must consider runway Slot auctions would also dramatically change the busi- ness. Marginally profitable No airline wants to be routes would be destroyed, dealing with these cumbersome which would eliminate the social benefit of connecting [slot] systems for planning their remote communities with operation and securing growth larger cities. Providing leisure travel at in new markets. They want to reasonable prices would be serve the demand, with schedules a huge challenge for airlines, especially low-cost carriers, and fares that are attractive when they are confronted and competitive with enormous payments for slots on top of airport charges. Lara Maughan IATA head worldwide airport slots

MARCH 2018 / ORIENT AVIATION / 25 INDUSTRY ADDENDUM

LEAP engine veteran moves ST Engineering invests in has a fleet of 82 long and short haul aircraft that fly to 64 international and 10 domestic up at CFM IFE connectivity destinations in 23 countries. Separately, Lufthansa Technik Shenzhen LEAP program director with the commercial ST Engineering subsidiary, Singapore is strengthening its capabilities in component engine division at Safran, Sebastien Technologies Electronics Ltd, has agreed to repair and composite repair as well as engine Imbourg, has succeeded Francois Bastin as form a joint venture with SatixFly UK Ltd, to repair. The MRO has 600 employees and the CFM executive vice president. increase the Singaporean company’s access capability to support the A350, the B777 and to the high growth commercial aviation B787. For 2018, capability will include thrust connectivity market. reverse actuators, hydraulic pumps and The new company will be set up in Britain batteries. and will develop a state-of-the art satellite In February, the facility was approved antenna system that will deliver high quality as the first MRO service provider for the IFE to the aircraft cabin. ■ Commercial Aircraft Corporation of China (COMAC), with work commissioned on the Chinese manufacturer’s ARJ21 engine Asiana signs five-year nacelles and components. ■ A380 MRO with Lufthansa Technik Philippines Honeywell seals deals with Bastin, who has served in the role since Eastar and Lion Air Group early 2015, has been appointed as executive Lufthansa Technik Philippines and Asiana vice president of commercial engine Airlines have signed a five year-agreement Last month, U.S. headquartered aerospace programs at Safran Aircraft Engines. to provide base maintenance for the South conglomerate, Honeywell, signed its largest As a member of the CFM executive team, Korean carrier’s A380 fleet; an extension of Asia-Pacific contract to supply auxiliary Imbourg will be responsible for overseeing previous MRO on Asiana A380s. The MRO power units, in fleet terms, with Indonesia’s programs carried out by CFM, the company will conduct 14 checks, starting this month. Lion Air Group. It also extended its contract said. Along with his counterpart at GE, Allan “During previous checks on our A380s, to supply and service its wheels and brakes Paxson, he also will be a primary interface Lufthansa Technik Philippines has shown for Eastar Jet in South Korea. between the joint venture partners. sincerity and dedication to the campaign, The Lion Air Group agreement will CFM, headquartered in Ohio, has which ultimately led to our decision to award cover 620 aircraft, run for 17 years and delivered nearly 33,000 CFM56 and LEAP them the contract,” Asiana Airlines general include aftermarket services. The group’s engines to airline customers worldwide and manager aircraft and supplies purchasing, subsidiaries include Thai Lion Mentari, is one of the most successful aircraft engine Dong Jun Shin, said. Malindo Airways, PT Batik Airways and PT suppliers in aviation history. The company Asiana’s six A380s are scheduled to Batam Aero Technic. was formed in 1974 and the joint venture undergo light to heavy maintenance from In the same week, at the Singapore agreement extends to 2040. ■ March this year to 2022. The Philippines Airshow, Honeywell and budget carrier, MRO also will carry out modifications on the Eastar Jet, extended a contract to supply doors, flap tracks, wing tips, engine feed fuel wheels and brakes to the 27 aircraft South SIA Engineering and GE pump systems and other structural repairs on Korean low-cost carrier for another five Aviation form joint venture the six aircraft. years. Asiana Airlines, headquartered in Seoul, The extended agreement will include Asia-Pacific MRO, SIA Engineering (SIAEC), and GE Aviation have announced they will form an engine overhaul joint venture in Singapore; a confirmation of their initial announcement in June last year. The Singapore listed MRO will hold equity of 49% in the company and GE Aviation 51%. The GE90 engine powers the B777- 300ER and the B777-200LR. The GE9X is the sole engine for Boeing’s new B777X aircraft. “The new joint venture will ensure our GE90 and GE9X operators have access to high quality maintenance, repair and overhaul facilities,” president and CEO of GE Aviation Services, Jean M. Lydon-Rodgers, said. ■

26 / ORIENT AVIATION / MARCH 2018 INDUSTRY ADDENDUM

in India. Airports to be fitted with the units Initially the facility will be equipped with include International Airport and six narrow body bays, including one bay for Kolkata Airport. painting. The complex will eventually have AAI manages 125 airports across India. 16 bays and component repair workshops It is responsible for creating, upgrading, available for airline clients. It is scheduled to maintaining and managing the country’s be opened in the fourth quarter of this year. civil aviation infrastructure on the ground AAR president and chief operating and in the air. AAI also builds terminals officer, John Holmes, said last month: “We for many airports that fall under the Modi are excited to expand AAR’s MRO expertise government’s small airports development outside the Americas in partnership with initiative. The CTX 9800 bought by AAI can Indamer, which has the local market and screen up to 1,800 bags an hour. It is certified cultural knowledge needed for success. We to operate in Europe, by North American are looking forward to bringing our MRO homeland security regulators and the Civil experience to central India to serve the Aviation Administration of China. ■ country’s fast-growing airlines.” exchange, repair and overhaul services for Said Indamer Aviation CEO, Rajeev the 11-year old domestic and regional carrier, Gupta: “When we started planning a new which is based at Gimpo International airport MRO in India, we knew we wanted to leverage in Seoul. ■ the experience of a leading independent MRO that had been successful in more mature aviation markets. AAR is the ideal Thales and Singapore to partner for us and brings the knowledge develop Next Gen ATM and processes needed to help establish in-country capability and jobs in aircraft solutions heavy maintenance.” ■

Global Aerospace, Transport, Defence and Security conglomerate, Thales, and AAR spreads its wings Pratt & Whitney marks 35 the Civil Aviation Authority of Singapore years in Asia-Pacific (CAAS), have signed a Memorandum of to India with Indamer Understanding to analyse digital ATM trends, partnership including artificial intelligence as it applies to ATM. Mixed use of airspace by manned Global provider of aviation services to aircraft and drones also will be explored. commercial airlines, AAR, has announced a “Thales no longer views the digital joint venture with India’s Indamer Aviation revolution as an emerging trend but as an to establish an MRO facility in Nagpur, immediate reality with a Euros one billion a relationship that has fast tracked to investment in digital technology already commencement of construction in the materialized by the group,” Thales executive largest city in central India. vice president for land and air systems, Alex Cressell, said. “The aviation eco-system is one of the domains we feel will benefit most from Pratt & Whitney kicked off its 35th year in digitalization.” ■ the region with the inauguration of a GP7200 overhaul capability at its Singapore engine centre, Pratt & Whitney Eagle Services Asia; Smiths Detection wins a joint venture with the SIA Engineering explosive screening Company. In addition, the facility is planned to be contract in India equipped with overhaul capabilities for the P&W Geared Turbo Fan PW1100G-JM engine Aviation threat detection and screening by 2019. technology company, Smiths Detection, has “We are excited to inaugurate the signed a US$50 million contract with Airport GP7200 facility in Asia,” said senior director Authority of India (AAI) for the supply of aftermarket operations Asia-Pacific Pratt & high speed explosive detection systems Whitney, Brendon McWilliam. for hold baggage screening at nine airports “While the engine centre is a centre of

MARCH 2018 / ORIENT AVIATION / 27 INDUSTRY ADDENDUM

excellence for engine overhaul and repair services across multiple engine lines, our operations in this region offer a wide range Bullish business for of engine maintenance, repair and overhaul services for operators”. MROs in Asia-Pacific Pratt & Whitney Eagle Services Asia is the only facility in the region to service GP7200 engines. The engine was developed The business of airline maintenance, repair and by Engine Alliance, the 50/50 joint venture overhaul (MRO) could be heading for a golden between Pratt & Whitney and the General era the latest market forecast from global leader in Electric Company. management consulting, Oliver Wyman, reveals. In 2017, the facility was designated as an overhaul facility in Singapore for the Pratt As with the airline market in general, growth will & Whitney GTF engine at an investment be driven by Asia-Pacific players, reports chief cost of US$85 million. The facility will begin correspondent, Tom Ballantyne. modifications this year. ■

t’s good news for the world’s MRO expected to increase market size to nearly Jet Airways signs lease deal providers and for original equipment 16% of world MRO.” with Japan’s SMBC manufacturers (OEMs) such as There is, however, a note of caution. Boeing and Airbus, who continue “While China will be the key driver of MRO SMBC Aviation Capital, a joint venture to make significant inroads into the spend growth in Asia, rising labor costs, leasing company owned by Japan’s SMFG and Imaintenance aftermarket space. According coupled with temporary infrastructure the Sumitomo Corporation has signed a sale to consultants Oliver Wyman, in its 18th and capacity constraints, are likely to force and leaseback agreement with Jet Airways in annual Fleet & MRO Forecast, annual Chinese operators to look to countries India for 13 B737 MAX 8s with first delivery spend is set to increase by 48% from 2018 south and east to fulfill maintenance needs. scheduled for August this year. through to 2028. Complicating the demand in Asia-Pacific SMBC has been a client of the full The commercial MRO industry is valued and China, operators around the world service airline since 2004. It has previously by the consultancy at $77.4 billion this year are currently sending nearly 24% of leased three B737-800s to the Mumbai- (2018) and this figure is expected to climb wide-body heavy airframe maintenance headquartered carrier that were delivered in quickly. In just five years’ time, it predicts, needs to the region. There will be an recent months. the MRO segment’s market value will inflection point where capacity growth rise to $91.9 billion at a 3.5% compound within Asia cannot keep pace with the annual growth rate. By 2028, this will MRO demand of its own countries plus that increase to 4.5% with the industry value of foreign operators, particularly those in totalling $114.7 billion. “The likes of China, the mature North America and Western Asia and the Middle East regions will all see Europe regions. Operators will have to look a marked increase in spending levels, while elsewhere for their MRO needs, presenting the established duo of North American and opportunities in North America, Western Europe will remain resolute,” according to Europe, and Latin America.” the forecast. Across the world this year, the Oliver Wyman says that, as has been majority of MRO spend will emanate the case for years, Asia remains the driver from narrowbody and widebody aircraft of MRO growth. Regionally, as fleet operators, accounting for $69.2 billion growth shifts to Asia and other developing and more than 90% of the projected total. “We are very pleased to conclude this economies, the consultancy says MRO The remainder of the $8.2 billion global transaction, our most significant MAX sale and spend will also migrate to those regions. outlay will be spent on the maintenance of leaseback to date,” SMBC Aviation Capital “By 2028, the combined MRO demand in regional jets and turboprops, CEO, Peter Barrett, said: “This transaction, the Asia-Pacific, China, and India will be Unsurprisingly, the Airbus A320 family which follows a competitive tender process, more than double that in North America. and the Boeing B737 variants will account demonstrates our ability to deliver innovative India is forecast to grow 5.6% annually, but for the most spend in 2018 and also ten financial solutions to our customers.” will represent less than three percent of the years from now. Newer aircraft types such Jet Airways CEO, Vinay Dube, said: “This market. The Asia-Pacific region will grow as the Boeing B787 and the Airbus A350 agreement will facilitate a well programmed at a healthy four percent annually, with will be among the aircraft generating the induction of the much awaited B737MAX MRO demand levels rising to equal those highest spend in 2028. “These newer 8 aircraft to our fleet and help us enhance of Western Europe and North America. widebodies will depose the likes of operational efficiency.”■ China, forecast to jump 10.6% annually, is Boeing’s B747 and B757 aircraft, which are

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still generating some of the highest spend in The MRO industry is no exception, and demand for air travel is keeping production the industry now, but will be retired from the companies are beginning to feel the pinch, lines at aircraft, engine, and component global fleet with increasing frequency.” particularly when it comes to finding qualified manufacturers busy and setting records. Some of the fastest growth is projected mechanics.” Lower oil prices, along with the willingness for MRO operations owned by aircraft In its executive summary the consultancy of airlines to spend on upkeep, are resulting manufacturers and other major original says these are the hey days for the commercial in delayed retirements of older jets, which equipment manufacturers (OEMs), such aviation industry as well as businesses in turn provide more business for the MRO as engine makers General Electric and supporting it from the MRO sector. “For the industry because of their additional servicing Rolls-Royce. “Boeing, for instance, has set a first time in airline history, carriers recorded needs. And despite recent political instability $50 billion goal for its aftermarket services three consecutive years of record or near and rising global tensions, aviation seems as part of its effort to capture more life-cycle record profits, thanks to constrained fuel headed for more of the same—at least over value out of its aircraft. That represents prices and operational efficiencies. Rising the short term.” ■ a tripling of its current revenue from the aftermarket. Our research indicates that OEMs servicing engines handle about 53% of Benefits and threats to MRO growth the market, while airlines and their affiliated Forecasts are just that: a probable future scenario given current and expected trends. MRO operations control 64% of the airframe But they can, ultimately, be overtaken by events. In its latest MRO insight for the next maintenance market. OEMs handle about decade Oliver Wyman also puts forward a look at what could happen in the best of worlds 58% of the component MRO aftermarket,” and the worst of worlds. It’s “Cloud Nine” scenario is the most extreme and therefore the says Oliver Wyman. most unlikely. “For this best-case turn of events to come about, global GDP would need The consultancy also says that one to dramatically increase along with traffic growth, and fuel prices and interest rates would new technology that could shake up the need to stay lower than expected. In this environment, operators would be quite profitable and have a low cost for borrowing, increasing demand for additional seat miles and new aftermarket later in the decade is 3-D aircraft deliveries. Because fuel prices would be low, older, less fuel-efficient aircraft printing. “Using models built through would likely remain in the fleet to meet demand as there is no longer a high, variable cost computer-aided design, 3-D printing can disadvantage to operate them. In this scenario, the commercial fleet would grow to 41,695 produce virtually any solid object—even by 2028, a nearly 4,000-aircraft increase from our base forecast. This fleet growth would those with complex architectures—in a range fuel the MRO market to $128.5 billion in 10 years’ time, nearly $14 billion more than our of materials, including plastic, ceramic, and current base forecast.” metal. For aerospace manufacturers, this A “Black Swan” period, the worst-case scenario, would involve a devastating event that has been a boon for producing prototypes, severely impacts the world economy in general and the airline industry in particular. “The an activity that accounts for half of additive horrific terrorist attacks of 9/11 are a prime example of such an event. In this scenario, world manufacturing today.” GDP growth would be much lower than anticipated, traffic growth would be exceptionally low, fuel prices would soar because of economic uncertainty or supply problems, and While the forecast for aviation, fleet interest rates would increase. In this environment, operators would likely increase aircraft growth, and the MRO market is basically retirements because of high fuel prices and low passenger traffic growth. New aircraft bullish, there are still risks on the horizon, orders would be deferred or canceled altogether. In a Black Swan event, the fleet would warns Oliver Wyman. “Fast growth often grow to only 31,156 by 2028, nearly 7,000 aircraft fewer than the base forecast. The lack leads to strained capacity and higher costs of new aircraft and the removal of older, more MRO-intensive aircraft would see the MRO as pent-up demand allows suppliers to raise market reach only $106.7 billion by 2028.” rates and workers to seek higher wages.

30 / ORIENT AVIATION / MARCH 2018 No.1 Asia-Pacific commercial aviation magazine

ORIENT AVIATION SPECIAL REPORTS 2018 APRIL SEPTEMBER THE FUTURE OF THE AIRLINE DATA ANALYTICS TO DICTATE CABIN IN THE ASIA-PACIFIC AIR PASSENGER MANAGEMENT? BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: AIRPORTS COUNCIL INTERNATIONAL (ACI) ASIA PACIFIC REGIONAL WORLD ROUTES CONFERENCE AND EXHIBITION, Guangzhou, China; ASSEMBLY, Narita, Japan; AIRCRAFT INTERIORS EXPO, Hamburg, Germany; CIVIL AVIATION SOUTH EAST ASIA SUMMIT, Bangkok, Thailand AEROSPACE SUMMIT MANILA, Manila, Philippines

MAY OCTOBER MAJOR TRENDS IN ASIA-PACIFIC COUNTERING CYBER THREATS AT AIRCRAFT LEASING ASIA-PACIFIC AIRLINES BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: ISTAT, Singapore; CABIN SAFETY CONFERENCE (IATA), Bangkok, Thailand; DIGITAL ASIAN SKIES, Hong Kong AIR CARGO CHINA, Shanghai, China; SIXTH SHANGHAI INTERNATIONAL AVIATION SERVICES TRADE FAIR, Shanghai, China NOVEMBER JUNE ASSOCIATION OF ASIA-PACIFIC AIRLINES AIRLINE LEADERS IDENTIFY THE BIG (AAPA) ASSEMBLY OF PRESIDENTS TRENDS IN AVIATION BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: MRO ASIA-PACIFIC 2018, Singapore; AIR SHOW CHINA, Zhuhai, China INTERNATIONAL AIR TRANSPORT ASSOCIATION AGM, Sydney, Australia; AAPA ANNUAL ASSEMBLY OF PRESIDENTS, South Korea; CIVIL AIR NAVIGATION SERVICES ORGANISATION (CANSO) BAHRAIN INTERNATIONAL AIR SHOW, Manama, Bahrain ASIA-PACIFIC CONFERENCE, Bangkok, Thailand

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