ISSUE ALL THE NEWS FROM

SUnDAY 13 June 2018

INDUSTRY SNAPSHOT 7% Increase in passenger traffic over the first four months of 2018 5.1% Increase in air freight traffic over the first four months of 2018 Air stake sale bid closes with no offers BOC Aviation orders three Boeing 787-9s for lease to Laudamotion begins flights from AUSTRALIAN RETURNS its base The IATA AGM returns to Australia row,” says IATA director general Al- Locally the outlook is bright too. at a time of record profits for the exandre de Juniac. “Even with the expects its full-year under- sector and a revival in the financial last few years [of growth] passenger lying pre-tax profits to come in fortunes of host carrier Qantas. and cargo [traffic] are still growing. between A$1.55 ($1.16 billion) and “The mood should be pretty “Some costs are rising- fuel, la- A$1.6 billion, some turnaround after $76.79 good because the financials are re- bour infrastructure - so there are the record losses it incurred in 2014. Barrel price of Crude Oil ally positive for a fourth year in the some areas of concern.” See p7 and p24 for more as of close on 1 June

Inside this issue

Tripping the light fantastic in Sydney………………………3 How airlines fared in the first quarter……………………...15 Airlines in it for the long-haul…………………..4 Departing CEOs leave their mark………………………….22 De Juniac outlines key challenges………………………….7 Revived fortunes in Australia……………………………….24 What’s driving airlines’ record run?………………………...8 Slotting into place at airports………………………………26

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April traffic growth slows Early Easter hits monthly industry figures, but carriers still expanding at a rapid rate

sia-Pacific markets led pas- the 9.7% growth enjoyed in centage point to stand at 82.3%. Asenger traffic growth in March. But direct comparison is Asia-Pacific carriers increased April, a month in which the distorted as the busy Easter holi- traffic almost 11% in April and overall rate of expansion day period fell in April last year. collective load factors grew over a dropped as a result of the earlier Traffic growth in April was still point to reach 82.8%. Asian carri- falling of the busy Easter period. above historic trends and out- ers posted an 8.5% traffic rise in IATA data shows collective pas- paced the collective 5.9% in- international traffic for the month, senger traffic rose 6.2% in April crease in airline capacity during the strongest among the regions compared to the same month last the month. As a result, airline and the first-time since December

year. This, however, is down on load factors inched up 0.2 per- Asia-Pacific has led the growth. ■ BillyPix Closing in on CORSIA countdown With the clock ticking for airlines to comply with the new global Carbon Offsetting and Reduc- tion Scheme for International Aviation (CORSIA), IATA is re- minding members that opera- tors of international flights must start to monitor their emissions from next year. While offset requirements do not apply before 2021, all opera- tors will need to monitor their emissions from 1 January 2019. Michael Gill (above), director aviation environment at IATA and executive director of ATAG, BillyPix notes that this applies to all carri- Vivid visions of Sydney as harbour lights up host city ers flying international opera- tions regardless of whether their Delegates to this year’s IATA are set to enjoy one of the world’s most spectacular urban waterfronts as part of home state has signed up to the the wide-ranging Vivid Festival here in Sydney. global scheme. In Cockle Bay, just outside the conference centre, the Fantastic Oceans Light and Laser experience is dis- At this year’s AGM, IATA will played nightly. The show, which also incorporates fountains, renders sea creatures and coral from the deeps, in outline the requirements to a spectacular testament to the beauty of the sea. members and offer various For delegates who will spend a few extra days in Sydney after the conference closes, there is fireworks display support and training initiatives at Darling Harbour every Friday and Saturday evening at 8pm. to prepare them for the start of Now in its 10th year, the festival’s music programme also includes an aptly timed interpretation of Brian Eno’s the emissions scheme before ambient Music for Airports, running from 3-5 June. The Alaska Orchestra make their Sydney Opera House debut the sands of time run out for to combine electronic and acoustic sounds for this eclectic re-imagining of Eno’s 1978 experimental classic. airlines to comply.

flightglobal.com/airlines

where to find us Editor Graham Dunn Design & Production Advertising Grace Murphy Our editorial team is located in the Quadrant House, The Quadrant, Reporting team Firdaus Hashim, Alexis Rendell, Printers Camerons Printers Media Room, Cockle Bay Room, Sutton, Surrey, SM2 5AS, UK Ellis Taylor, Greg Waldron Lin Ning, Terence Burke Executive director content 3 Contributors Edward Russell, Copy editing Max Kingsley-Jones, Lewis Harper, Oliver Clark Dan Bloch, Tim Norman Publisher Stuart Burgess © Flight Airline Business 2018 Photography Tom Gordon

3 June 2018 | Flight Airline Business | 3 news

In brief Asian demand stays strong

Qantas seals domestic Traffic still growing in region despite higher oil prices, but margins under more pressure codeshare with Air NZ Qantas and he recent spike in oil prices to will codeshare on each oth- Taround $80 a barrel is putting ers’ domestic networks but pressure on some carriers, but exclude any co-operation on the Association of Asia Pacific the transtasman market. The Airlines continues to see posi- arrangement will see Qantas tives in ongoing strong growth of place its code on up to 30 Air passenger and cargo demand. NZ-operated flights within “The global economy is in good New Zealand, while the Star shape, and that’s reflected in very Alliance carrier will place its robust passenger numbers. Cargo code on up to 85 Qantas-op- growth rates have slowed, but erated flights within Australia you’re still setting new highs on from 28 October. The new last year’s strong performance, so codeshare will start a day on the demand side things look

after the long-running joint good,” says director general An- BillyPix venture between Air New drew Herdman. Herdman: consumer and business confidence remains robust Zealand and But he admits that some observ- stops. Qantas will continue to ers are starting to get nervous moving upwards to restore those squeezed.” Nonetheless, he re- codeshare on ’s flights about the recent rise in oil prices, margins - mostly due to the com- mains upbeat that the strong glob- within New Zealand. which reached $80 per barrel in petitive environment. al economic conditions will con- recent weeks, with some airlines “If the fuel prices are up by tinue to push demand up. sale deadline in Asia seeing pressure on their about a third, you’d have to see “Consumer confidence is still passes with no bids margins. Last year, that was offset fares would have to go up six or high, business confidence and New Delhi has confirmed it by stronger passenger volumes seven percent to neutralise that. trade is still solid, and it’s very has not received any respons- and higher load factors, but there We haven’t seen that yet, so that hard to find economies that aren’t es from interested parties for has been a “lag” in ticket prices implies that margins are being growing,” he adds. ■ the privatisation of Air India. “As informed by the Transac- tion Adviser, no response has been received for the Expres- set to reclaim longest flight crown sion of Interest floated for the strategic disinvestment of Air Singapore Airlines will start oper- SIA will receive its first A350- be in operation. India. Further course of action ating the world’s longest commer- 900ULR in September, with the re- “Singapore Airlines has always will be decided appropriate- cial flight from 11 October, com- maining six on order scheduled taken pride in pushing the bound- ly,” says the ministry of civil mencing a near-19 hour nonstop for delivery by the end of the year. aries to provide the best possible aviation. The 31 May dead- Singapore-Newark service. All seven aircraft feature 67 busi- travel convenience for our custom- line had already been extend- Using A350-900ULRs configured ness and 94 in premium economy ers, and we are pleased to be ed by two weeks. New Delhi with 161 seats, the carrier will initial- class seats. leading the way with these new wants to sell a 76% stake in ly fly thrice-weekly on the route, be- Plans to launch nonstop Singa- non-stop flights using the latest- Air India, which includes its fore growing to daily frequency on pore-Los Angeles services will be technology,” says SIA’s chief exec- subsidiary 18 October. announced at a later date. Its Sin- utive Goh Choon Phong. and a 50% stake in ground gapore-Frankfurt-New York John SIA last operated nonstop handler Air India SATS. Indi- F Kennedy service will Singapore-Newark services in Go and both continue to 2013, when it returned the Airbus ruled out making bids. One A340-500s that were used at that major obstacle has been the time to the manufacturer. requirement for the new own- ers to take on half of the carri- er’s Rs488 billion ($7.47 bil- lion) debt, plus about Rs88.2 billion in current liabilities. Another unknown relates to how many of the Air India The carrier’s first group’s 38,000 employees A350-900ULR is in would have to be retained. flight-testing Airbus

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Sustainable business

Ahead of this year’s AGM IATA director general Alexandre de Juniac outlines his confidence that the Association’s members are in better shape to withstand rising cost pressures and is working on the challenges the sector faces

ATA director general Alexan- dre de Juniac arrives for his second AGM in the chair with “Any measure that industry profits at almost is aiming at closing unprecedentedI levels – but with plenty of challenges to be faced in borders to people sustaining them. or trade is bad The headline numbers are news“ strong. Last December IATA pro- jected industry net profits of $38 Alexandre de juniac Director-general, IATA billion for 2018 – a fourth con- secutive year of profitability in excess of $30 billion. While a sharper-than-expected rise in oil prices over this year’s first half may lower these expec- tations, airlines are largely far bet- ter prepared now to deal with

$80-per-barrel Brent crude. BillyPix “We are coming back to the [oil price] levels that were problem- area, which is absolutely crucial. worse for the aviation business. and putting in the right format atic a few years ago, but in the “If we want to cope with the We are the first to be hit.” [of] safety data for the industry is meantime the airlines have been potential growth, we desperately That was evident during last probably among one of our big very active in trying to clean their need it to be efficient, affordable, year’s AGM in Cancun, when a missions,” he says. “The big data balances, restructuring their and [to have] enough infrastruc- diplomatic spat in the Middle and data analytics and all the operations, reducing their costs ture to cope with that.” East escalated into the closure of tools that can used by IT now, it and being more competitive and airspace to Qatar by four neigh- will provide a lot of relevant, resilient,” de Juniac told Flight- progress bouring states. A year on, the accurate information and predic- Global on the eve of the AGM. He believes IATA’s progress in blockade remains in place. tive information to help prevent “So we think the fuel-price this area represents some of the Likewise, president Trump’s or limit accidents.” increase shouldn’t have the same association’s most significant decision to impose tariffs on steel consequences it did [than in pre- action, alongside working with and aluminium imports to the new MEMBERS vious years].” governments on a collaborative USA – bringing with it the pros- IATA has added several new Industry profit levels, while approach to security. “We have pect of retaliatory moves – pro- members in the last year and rep- now delivering returns above been very active in terms of advo- vided a reminder of ongoing chal- resents around 82% of the indus- invested capital, are still below cacy to convince governments to lenges ahead of this year’s AGM. try. But several of the biggest low- the double-digit margins which co-operate with the industry He also highlights work by cost carriers still remain outside other industries enjoy. when they want to implement IATA to support the industry on the association. “We are making slightly less new measures, particularly with environmental issues, like the “Ten percent of our members than $8 a seat, which means some- security,” he says. “I think the introduction of ICAO’s Carbon are low-cost or new-model carri- thing like 4-5%, which is still thin most significant result we have Offsetting and Reduction Scheme ers – we have almost all that are margins,” de Juniac says. reached is [that] none of these for International Aviation (COR- medium- or small-size. Yes, we Sustaining those profits is not governments will implement uni- SIA); distribution initiatives; and have not succeeded yet to attract straightforward either: de Juniac laterally any measure.” efforts in data analytics. the five or six big ones. But we are highlights rising labour and infra- Since taking over as IATA “We are investing a lot in data working on that – we are trying to structure costs alongside fuel as director general almost two years products. Analytics that serve the convince them,” he says. challenges for airlines. ago, de Juniac has consistently industry in safety,” de Juniac “Already, some are IOSA-certi- “We have been very vocal and I flagged the sector’s role in sup- says, noting that this builds on fied, some others are considering think influential in giving guid- porting the “business of free- IATA’s established role in sup- to be IOSA-certified, so frankly I ance to governments in terms of dom”. He says: “Any measure porting industry safety, devel- think they will join. One day it managing their infrastructure, of that is aiming at closing borders oped through its IOSA audit pro- will happen. And I think it will being cautious about privatising. to people or trade is bad news. It’s gramme. be a good thing for everyone, par- There are a lot of results in that bad news for the economy, even “Preparing for the collecting ticularly them,” he says. ■

3 June 2018 | Flight Airline Business | 7 FINANCIALS

RECORD PROFITS RUN

For a sector that had grown Industry net profits by region used to slumps and booms, $/bn the recent sustained run of $38.4 40 $35.9 industry profits means $35.3 $34.5 airlines have enjoyed their 35 best period of financial 30 fortunes yet. Ahead of 25 IATA’s unveiling of its latest 20 $17.3 industry outlook for 2018 $13.7 15 tomorrow, we track some $10.7 $9.2 of the main dynamics and 10 $8.3 key metrics that have 5 driven the profit highs in 0 the current cycle, beginning 2010 2011 2012 2013 2014 2015 2016 2017 2018 (forecast) when the sector returned North America Europe Asia Other Total: $204.3bn Source: IATA to the black in 2010 $96.3bn $57bn North American carriers’ projected cumulative net Asia-Pacific carriers’ projected cumulative net profit 2010-18 profit 2010-18 North America Asia-Pacific

North American operators have been the mainstay of industry profits Asia-Pacific carriers were the most profitable going into this current since 2013, driven by the restructuring and consolidation among US cycle, but fortunes among the region’s carriers flagged – especially as carriers. The region contributed well over half of the industry’s profits the air cargo market struggled. By 2015, profits in the region had re- between 2013 and 2015, and just under half in 2016. IATA’s most re- turned to previous levels and have remained steady ever since. IATA cent forecast for 2017 was for a slight dip in North American carriers’ was projecting a further uptick this year, aided by the welcome recovery net profit to $15.6 billion for 2017. of the air cargo market. In issuing its first take on the current year last December, IATA pro- jected a small rise in North American net profits to $16.4 billion. Much may hinge on the extent to which higher fuel costs, evidenced in the first quarter, will hit these largely unhedged carriers during 2018. -$2.6bn $42.3bn African carriers projected cumulative net loss 2010-18 European carriers’ projected cumulative net profit 2010-18 Africa Europe While carriers in Africa posted a collective profit of $100 million in 2010, the region’s operators as a whole have not been profitable since, in what In December IATA projected European carriers recording their most prof- has been a challenging few years. A combination of weakness at several itable year in 2018, making $11.5 billion. After the challenging rebuilding key carriers, strong international competition, hits to key tourism markets years during the Eurozone crisis, strong air transport demand and a rela- and struggling energy economies all compounded a continued lack of tively encouraging economy have helped the continent become the sec- progress in the liberalisation of African skies. IATA has been forecasting a ond most profitable region. further loss of $100 million among African airlines this year.

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Load factor development % 82 80 2.7pt 78 Projected rise in collective global airline 76 passenger load factor from 2010 to 2018 74 Load factor 72 Rising load factors have been a key part of airlines’ improved fortunes 70 2010 2011 2012 2013 2014 2015 2016 2017 2018 during the recent profit run, with levels maintained or increasing every Source:IATA year since 2011. These have averaged more than 80% since 2015 and Load factor IATA was most recently projecting a further climb in industry passen- ger load factor to average 81.4% in 2018.

Airline ASK capacity growth % change 7 62.7% 6 Projected rise in ASK capacity this December 5 compared with the same month in 2009 4

Capacity 3

That improvement in load factor has been achieved even with the con- 2 tinued expansion of airline capacity. FlightGlobal schedules data 1 shows airlines lifting global ASK capacity by more than 5% every year 2010 2011 2012 2013 2014 2015 2016 2017 2018 except 2012. This year airline caacity is set to expand by more than 6% Source: FlightGlobal schedules data for a fourth year in succession. IATA projections show global sched- ASK capacity uled passenger numbers, which stood at around 2.5 billion at the end of 2009, topping more than 4.3 billion at the end of this year.

Passenger yield change development % change 12 10 8 6 3% 4 Projected rise in airline passenger yield for 2018 2 0 -2 Yields -4 -6 Lower fares have helped stimulate strong traffic growth since 2010 -8 during the current cycle, but this has had a significant impact on pas- -10 senger yields. IATA figures show these have fallen every year since -12 2010 2011 2012 2013 2014 2015 2016 2017 2018 2012, including a double-digit fall in 2015. But in its most recent fore-

Source: IATA cast, it was projecting an upturn in yields this year.

Passenger yield

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Air cargo revenue development $bn 70 65 $59.2bn 60 Projected air cargo revenues in 2018, marking a rise of nearly $5 billion on 2017 55

50 Cargo

45 Though the current cycle has been strong for the passenger business, the air cargo sector has been in the doldrums for much of this period. This in 40 2010 2011 2012 2013 2014 2015 2016 2017 2018 part has been a product of the success of the passenger business, bring- Source: IATA ing with it continually increased belly capacity to the market. Air freight Cargo revenues revenues stood at $66 billion in 2010, after a sharp recovery from the heavy falls in 2009. But revenues largely fell until the trend was finally re- versed in 2017. IATA has been projecting a further boost for 2018, al- though air cargo revenues would still be below 2010 levels.

years In-service passenger fleet 2010-2018 11.3 ‘000 Fleet Average age Average fleet age in May 2018, down from 11.5 30 12.0 years in the same month of 2010 25 11.5 Fleet The in-service global fleet has expanded during the cycle, in support of 20 11.0 airline traffic growth. Flight Fleets Analyzer shows the fleet stands at 26,276 as of May 2018, almost 6,000 more aircraft than the same month 15 10.5 in 2010. Over the same period, the average age of the fleet has fallen

from 11.5 years to 11.3, in part reflecting new aircraft development. Nota- 10 10.0 bly, the average age of the widebody fleet has fallen by more than a year May’10 May’11 May’12 May’13 May’14 May’15 May’16 May’17 May’18 and stands at 9.5 years, making it the youngest portion of the global fleet. Source: Flight Fleets Analyzer Average age Fleet

Fleet Average age (%) Brent Crude oil and jet kerosene price development 140

120

100

80

60 20%Projected share fuel expense will comprise of total airline expenditure in 40 2018 based on IATA forecast 20 Jan Apr Apr Apr Apr Apr Apr Apr Mar 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Note: Jet kerosene = ICIS, Brent = US Energy Information Administration

Brent crude Jet kerosene

Fuel expenditure Alongside increased competition, much of the fall in yields is a product of lower fuel costs. It has been a roller-coaster ride for oil prices during this cycle, with a sharp spike in oil prices and then the unexpected sharp fall. After that, they have gradually risen since the turn of 2016. While this is taking the edge off profits, particularly among unhedged carriers, the oil price remains well below the highs seen in 2011 and 2012.

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Costs cap profit hopes

Continued momentum in passenger and cargo demand helped airlines strike a largely positive note in the first-quarter reporting season, although higher oil prices and market pressures for some mean there are still clouds on the horizon

fter reaching record highs in 2017, airlines Asian carriers are are well set for another enjoying continued year of strong profit, strong growth Agiven a positive picture across most key economies and the back- dop of robust passenger and air- freight demand. Carriers across the regions largely reported profitable first quarters, though rising oil prices -– which have continued to climb into the second quarter – have either already clipped or threat- ened to temper profit levels. This was most evident in North America, where the region’s carri- ers, while still leading industry profit levels, are among the first to feel oil prices moves, given their relative lack of hedging. US carriers reported a profitable first quarter – with only Spirit Air-

lines posting a loss. But profit lev- Commons BriYYZ/Creative els were down on the same quar- ter last year. revised their 2018 system capacity Some airlines, notably South- those seeking to take advantage of Operating margins largely fell guidance in April, maintaining west, are making a point of not new ventures cloud the picture. as carriers started to feel cost pres- growth expectations by roughly slowing growth. Strong passenger and cargo sure, not least from jet fuel. 2.5% and 2-3%, respectively. “We’re still better off flying demand among European carriers Crude oil prices are up by United, however, is the big ele- these shoulder flights because continued into the first quarter, nearly 50% since last year, phant in the room. The airline is they are profitable and… add prof- though the period did benefit from prompting questions over in the middle of a multi-year plan its as compared to simply not fly- the inclusion of the busy Easter whether US airlines will slow to recapture what executives call ing,” said Gary Kelly, chief execu- travel period – which fell in April capacity growth to buoy fares and its “natural share” of the US tive of the Dallas-based carrier, in last year. cover their rising expenses. domestic market through elevated April. “If we were not able to raise But rising fuel costs put the pros- capacity growth of 4-6%/year fares, would that immediately pect of a stronger headwinds than until 2020. lead to a decision to stop flying anticipated on the horizon. British Operating margins The Chicago-based carrier some of our airplanes? Well, not if Airways and parent IAG, for largely fell as carriers revised its 2018 capacity outlook they’re still profitable.” example, noted fuel prices rose “sig- down slightly to a 4.5-5.5% year- Southwest plans to grow capac- nificantly” in the three months to 31 started to feel cost on-year rise in April, the midpoint ity in the low-5% range in 2018. March, although this was partly off- pressure of its multi-year annual guide. Airlines and Wall Street ana- set by a weaker US dollar. It is, how- Executives have not commented lysts still expect the industry to be ever, still expecting to turn in a on whether it will slow growth in profitable this year, even with ris- higher full-year operating profit. response to higher oil prices. ing oil prices. The question is: ’s profit progress is “As we look beyond [the sum- Alaska, which completed the how profitable? being capped by expansion costs mer peak], we will certainly take a integration of Virgin America in at its low-cost grouping Eurow- look at – assuming fuel prices stay April, has made the largest down- OPTIMISTIC NOTE ings divisions. Its operating losses at this level – what is the right ward revision to its 2018 capacity European carriers largely set an rose during the quarter, which the level of capacity,” said Doug guidance. It plans to grow by optimistic tone during the first carrier attributed in part to the Parker, chairman and chief execu- about 6.5% this year, one percent- quarter reporting season, though one-off impact of its integration of tive of American, in April. age point lower than its initial rising fuel costs, labour disruption former assets and its Neither American nor Delta expectation in January. and expansion expenditure for rapid growth. ❯❯

3 June 2018 | Flight Airline Business | 15 FINANCIALS

❯❯ “One-off expenses will con- That marked a notable turna- tinue to burden unit cost trends at round after years of struggling air in the months ahead,” freight fortunes. Lufthansa notes. “There has been very limited That was offset by the group’s growth, yields were under pres- network airline division – formed sure and there was always latent by Lufthansa Airlines, Swiss and over-capacity and parked freight- Austrian – which transformed a ers, as belly capacity kept growing €53 million operating loss in the relentlessly,” says Herdman. “[But same quarter last year to a €119 in 2017] the growth rate was million operating profit. almost double-digit and we saw While higher fuel costs were on yields turn and start to recover. So the agenda of the third of Europe’s you have a big volume jump and major network groups, - the momentum has continued KLM, more pressing is the indus- into this year, though the numbers

trial action which has plagued its High Level/REX/Shutterstock are off a bigger base.” operations so far this year and ulti- BA parent IAG projects higher profits despite increasing fuel costs AAPA reports cargo yields mately resulted in group chief improved 6% in 2017. Passenger executive Jean-Marc Janaillac’s for 2018-19, it opted for an out- the region posted a combined net yields fell 1%, though this was a resignation after less than two look on the “pessimistic side of profit of $8.8 billion in the region. lower fall than in recent years. years in the role. cautious”, because it expects “It’s been running at about $7 “Growth and profits are still Air France-KLM warned that its higher oil prices which will add billion and more of the same was strong in north Asia, Australasia, 2018 result will be “noticeably €400 million to its fuel costs. where we were thinking we and Chinese carriers [are] doing down” on last year’s after its first- Elsewhere in Europe, Turkish would be last year, and we’ve quite well. But you are still seeing quarter operating loss rose to €118 Airlines and come out slightly ahead of it,” that density of competition in million amid disruption caused underlined improved fortunes for says AAPA director general ,” says Herdman. by pilots’ industrial action. Turkey’s operators with improved Andrew Herdman. European low-cost carrier first-quarter performance, as did “The traffic picture has been UNEVEN SPREAD EasyJet presented a bright underly- SAS Group and . pretty good, a surprise was the Latin mainly ing picture, but was dragged to a One uniting view, however, fuel price kept on rising, and that’s grew their operating profits in the £68 million ($92 million) pre-tax from European carriers is for more obviously continued into this first quarter, although higher fuel loss for the six months ended 31 opportunities resulting from higher year. But you have to say the prices and currency depreciation March by the financial impact of its oil prices, intensifying pressure on global economy is in pretty good crimped overall performance and expansion into the Berlin Tegel the region’s struggling carriers. shape… and that’s supporting cast further gloom upon the already market and integration of former pretty robust demand. seasonally weaker second quarter. Air Berlin assets. KEEPING MOMENTUM “What we have is a pretty syn- The region’s seven listed air- and Wizz Air both Strong passenger and cargo chronised momentum in the lines collectively reported a 31% confirmed improved profits for demand momentum among Asia- global economy. We shouldn’t go increase in first-quarter operating their financial years ending Pacific carriers has continued into overboard, we are talking about a profit to $619 million, compared March. But while Wizz is project- this year, building on improved few percent of a percent of GDP with the same period in 2017. ing a further rise for the coming profitability from 2017. growth over the year before. And However, profitability was une- year, Ryanair struck a less posi- Preliminary figures released by that ties into consumer sentiment, ven across the board, with Mexi- tive note. While still projecting a the Association of Asia-Pacific which is pretty good.” co’s two listed carriers turning in profit range of €1.25-1.35 billion Airlines (AAPA) show carriers in All this has come despite con- net losses. tinued uncertainty on the global Airlines with a substantial pres- stage. “Policy uncertainty is still ence in Brazil – Azul, Gol and there, but what we don’t have is LATAM Airlines Group – contin- the sense of imminent crisis. ued to ride on the recovery in the There are always complexities country’s economy and posted the and uncertainties in the political strongest growth in operating profit. agenda, but to the man in the Mexico’s airlines continue to street things seems pretty stable,” grapple with a tougher macroeco- says Herdman, noting this has nomic climate compared with resulted in strong travel demand. their peers in South America. AAPA figures show Asian air- Both Aeromexico and lines grew international passen- reported net losses in the first ger traffic in terms of RPKs by quarter. Aeromexico saw its oper- 8.6%. The air freight market, of ating profit plummet 95% to Ps24 which Asia-Pacific carriers have million ($1.2 million), while Vol- a relatively large share, proved aris further deepened its operat-

Denver International Airport even stronger as international ing loss to Ps906 million from Delta has so far kept its 2018 system capacity guidance unchanged cargo traffic jumped almost 10%. Ps729 million. ■

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2018, global jet kerosene prices – IATA predicts higher prices which tend to track just above will have a $37.6 billion crude oil prices – were on average impact on airlines around 28% higher year-on-year, data from energy intelligence pro- vider ICIS, analysed by Flight- Global, shows. Compared with two years earlier, the increase is around 61%. IATA has predicted that fuel price increases will have a $37.6 billion impact on the industry’s bill for 2018.

RELATIVELY LOW While these extra costs look swingeing, prices are still relatively low. In April 2012, for example, ICIS data shows jet kerosene prices averaged 329 cents/USgal; at the end of the first quarter this year,

Gazprom Neft Gazprom they averaged 189 cents/USgal, albeit on an upward trend. The average price crept up to 204 cents/USgal in April and, since that last measure, oil prices Jitters as jet fuel have spiked again. Brent crude flirted with $80/barrel (around 222 cents/USgal) by mid-May. In that context and in typically prices creep up outspoken style, Ryanair chief executive Michael O’Leary told For several years a helpful factor amid record industry profits, low oil prices Bloomberg Television in mid-May appear to be a thing of the past – at least temporarily. This tougher cost that “spot prices close to $80 a barrel are going to lead to a signifi- environment could be about to test the mettle of airlines across the world cant shakeout in the industry as early as this winter. Some of those loss-making airlines who couldn’t ising jet fuel costs have prices in the last few years – com- years has created a unique envi- make money when oil was at $40 been a ubiquitous talking pared with the decade before – ronment, meaning there are a lack a barrel certainly can’t survive”. point for airlines as they have been a very important ele- of historical reference points O’Leary is not alone in holding report their latest earnings ment of the airlines’ recovery. It when considering the potential such a view. Ray Webster – who R and consider the outlook. is not the only part of that recov- impact of fuel price rises. was chief executive of EasyJet Those higher costs may not ery, but it was a factor.” Analysts at KPMG described between 1996 and 2006 – said at prove problematic for everyone in In regions such as Europe, those this conundrum in their Aviation the Routes Europe event in April the short term – in some instances lower fuel prices have arguably Leaders Industry Report 2018, that the outlook for low-cost air- thanks to hedging, where airlines been at the centre of recent growth. released at the turn of the year: lines was “quite worrying” lock down a proportion of their “Generally, fuel prices rise with because they were unprepared near-term fuel supply at a fixed IMPORTANT STIMULUS economic growth, but over the for future economic shocks. Car- price – but the airline industry is “Effectively, Europe’s growth was past years, oil prices fell while riers have not been put under at least temporarily losing one of fuelled by fuel,” says Daniel passenger demand continued to pressure and have not experi- the “free passes” that have com- Roeska, senior research analyst rise, giving airlines the ability to enced the typical peaks and bined in recent years to aid record covering European transportation invest in growing capacity and troughs of the market, he says. industry profits. at Bernstein. “The decrease in oil networks, adding destinations Webster forecasts that rising oil As this plays out, some players prices since 2013 enabled the and planes,” it states. prices will have a “dramatic” are set to discover just how robust industry to stimulate growth “The steep rise in competing impact on carriers’ bottom lines. their business models are. through declining yields – while routes and additional capacity But on the other side of the “Oil is a significant component expanding margins. If high fuel pushed down ticket prices. Now argument, industry body IATA of an airline’s costs, so its price is prices persist, airlines will have to oil is rising, competition appears relaxed about the price always relevant,” says Andrew seriously consider revising their remains and fares remain trend beyond the short term, stat- Charlton, managing director of growth aspirations.” depressed, particularly in the ing in a May report that relief the Aviation Advocacy consul- The confluence of positive fac- Southeast Asian market.” from price rises might not be far tancy. “The relatively lower tors enjoyed by airlines in recent At the end of the first quarter of off: “Recent gains in oil prices ❯❯

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❯❯ have been driven by a combi- behind the sector, meaning they Jet kerosene spot prices: world average nation of a gradual reduction in have less room to accommodate Month Fuel price Change over period Month Fuel price Change over period global oil inventories on the back higher fuel prices.” ¢/US gal 1 Month 1 Year ¢/Us gal 1 Month 1 Year of a tightening in supply, as well Norwegian’s potential vulnera- as heightened geo-political con- bility raises inevitable questions Jun 134.7 -6.7% -3.4% Jan 194.9 7.3% 26.1% cerns,” it states. “That said, the about how the low-cost long-haul Jul 144.2 7.0% 11.4% Feb 189.6 -2.7% 20.5% futures curve remains consistent model – a key part of the Euro- Aug 154.9 7.4% 19.4% Mar 189.1 -0.3% 28.3% with a modest decline in oil pean carrier’s business – might Sep 171.0 10.4% 29.0% Apr 203.8 7.8% 33.5% prices from their current levels work amid higher fuel costs. Oct 166.7 -2.5% 13.9% over the next 12-18 months. Morris says: “Low-cost long- Nov 179.1 7.4% 31.4% Source: ICIS Indeed, the current curve points haul may be more vulnerable Dec 181.7 1.5% 19.1% Notes: Prices are world average=median of to oil prices falling to around because higher fares can cause Europe/Singapore cargo and US pipeline spot prices in US¢/gallon. $65/bbl by mid-2020.” tourism to switch to short-haul Av.17 157.4 24.4% While the current set of cost destinations.” headwinds facing carriers might Andrew Herdman, director gen- the rate of expected GDP growth, be without truly meaningful SAME DIFFERENCE eral of the Association of Asia- it is unlikely that higher yields precedent, recent history does Charlton notes, however, that oil Pacific Airlines. He told Flight- and revenues will be able to offset offer some reasons for optimism, price rises are an industry-wide Global in mid-May that there is the rise in the price of fuel, and in not least because higher oil issue that eventually have to be no sign of passenger growth other costs”. swallowed by everyone: “The oil slowing, despite higher oil Roeska concurs when it comes price goes up for all the airlines, prices. “It is still robust,” he to the European market: “In my Major US carriers so many of the advantages the states, citing “good” premium opinion, the current ability to have been talking new disruptors such as the low- traffic in particular. pass on fuel cost is very limited about moderating cost long-haul carriers remain,” Elsewhere, major US carriers in Europe,” he notes. “Capacity capacity growth he states. have been talking about moderat- is still growing at 6%-plus in Indeed, the established players ing growth should jet fuel costs Europe, and in that environment do not necessarily have any in- continue to rise – a trend seen in airlines need to rely on yield built advantage when fuel costs the last period of higher oil stimulation to fill the planes. prices tend to go hand-in-hand rise. , for example, prices. As a mature market, “The market price is the bal- with stronger economic condi- offers an example of hedging where significant consolidation ance of capacity and demand – tions generally. gone awry: “Net fuel costs made has already played out, the US is passing on higher cost will only “The reality is that the global up 30-41% of Cathay Pacific’s likely to feel a moderated impact work if the airlines reduce capac- airline business returned to profit- total operating costs during the from rising jet fuel. “These ity growth.” ability during the period of high- past five financial years, making energy price levels themselves est fuel price,” states Peter Morris, up the single largest cost item for pose no structural challenge to LEISURE RESPONSE chief economist at Flight Ascend the carrier, even when fuel prices the industry,” said JP Morgan in Morris meanwhile acknowledges Consultancy. Morris does, how- fell,” analysts at DBS stated in an an April report. that “there is a price elasticity on ever, acknowledge that fuel prices April report. “A large spike in Looking at the global industry fares”, which varies by region and can have an impact on weaker fuel prices would affect its profit- as a whole, however, CTAIRA type of traffic. He adds that leisure players: “Arguably, the high fuel ability while a quick drop would analyst Chris Tarry suggested in traffic has “the highest price price drove marginal players out also lead to hedging losses.” the June 2018 issue of Flight Air- response” so is most vulnerable to of the market, so when fuel prices In the Asia region as a whole, line Business that “even though customers looking elsewhere fell this provided a bonus for con- however, concerns about the ris- the forecast rates of capacity should fares increase. That, he solidated industry, especially in ing costs are being offset by growth are lower than in the says, means low-cost carriers are North America.” growth in demand, according to recent past and closer to 1.5 times more likely to feel negative The ability of carriers to absorb impacts should fuel prices con- rises in fuel price today needs to tinue to rise. be judged on a case-by-case basis. Charlton, however, notes the Unsurprisingly, much depends on industry might be well placed to the underlying financial strength pass on those higher costs: “As a of a carrier. general comment, airlines have Bernstein’s Roeska identifies been much better at passing on fuel two European airline groups he price rises than many other cost believes are more vulnerable to increases,” he states. price rises than others: “In It remains to be seen, however, Europe, we see especially Air whether carriers that have strug- France-KLM and Norwegian with gled in the recent benign environ- a lower level of fuel hedges than ment globally might find persis- the industry average. This means tently higher fuel costs too much these airlines will feel any move- to handle, and whether even the

ment in price – up or down – Neft Gazprom successful airlines might begin to first. Also, their profitability lags Recent history shows airlines can be profitable amid high oil prices soften growth plans. ■

20 | Flight Airline Business | 3 June 2018

Chief executives

Leaving strong legacies The past 12 months have seen a number of high- profile chief executives leave their roles – many of their own accord, some for other reasons. Using FlightGlobal schedules data and Flight Fleets Analyzer, we looks at a selection of data for key TAP TAP Hawaiian BillyPix leaders’ spells at the helm of their respective airlines. Fernando Pinto Mark Dunkerley Aditya Ghosh TAP Portugal IndiGo In most cases, the statistics reflect wider growth trends Started: October 2000 Started: June 2005 Started: August 2008 in the industry – both in Departed: January 2018 Departed: March 2018 Departing: July 2018 terms of aircraft operated Months in role: 206 Months in role: 152 Months in role: 118 and destinations served – Fleet on joining: 34 Fleet on joining: 25 Fleet on joining: 19 as demand for air travel has Fleet on departure: 67 Fleet on departure: 53 Fleet on departure: 165 boomed since the turn of Fleet change: +33 Fleet change: +28 Fleet change: +146 Destinations on joining: 18* Destinations on joining: 16 Destinations on joining: 16 the century. The data also Destinations on departure: 67 Destinations on departure: 27 Destinations on departure: 45 shows that most airline Destinations change: +39* Destinations change: +11 Destinations change: +29 leaders tend to stick around Flight growth: 129%* Flight growth: 79% Flight growth: 656% for a few years before Seat growth: 196%* Seat growth: 97% Seat growth: 656% heading to a new challenge ASK growth: 524%* ASK growth: 153% ASK growth: 671% Jeju Air Elena Ahmad Jane Shauck Astoria Jerusalem Waldorf Ken Choi Jayne Hrdlicka David Neeleman David Maimon Jeju Air Jetstar Group Azul (still chairs board)

Started: September 2012 Started: July 2012 Started: January 2013 Started: March 2014 Departed: March 2018 Departed: November 2017 Departed: July 2017 Departed: February 2018** Months in role: 65 Months in role: 63 Months in role: 53 Months in role: 46 Fleet on joining: 10 Fleet on joining: 86 Fleet on joining: 66 Fleet on joining: 38 Fleet on departure: 32 Fleet on departure: 127 Fleet on departure: 126 Fleet on departure: 39 Fleet change: +22 Fleet change: +41 Fleet change: +60 Fleet change: +1 Destinations on joining: 13 Destinations on joining: 65 Destinations on joining: 33 Destinations on joining: 37 Destinations on departure: 33 Destinations on departure: 109 Destinations on departure: 41 Destinations on departure: 44 Destinations change: +20 Destinations change: +44 Destinations change: +8 Destinations change: +7 Flight growth: 175% Flight growth: 55% Flight growth: 130% Flight growth: 24% Seat growth: 169% Seat growth: 58% Seat growth: 130% Seat growth: 27% ASK growth: 226% ASK growth: 39% ASK growth: 116% ASK growth: 19%

22 | Flight Airline Business | 3 June 2018 Chief executives Bursa Westjet REX/Shutterstock BillyPix Orhan Coskun Gregg Saretsky Carolyn McCall Bernard Gustin Atlasglobal WestJet EasyJet

Started: February 2008 Started: April 2010 Started: July 2010 Started: June 2012 Departed: October 2017 Departed: March 2018 Departed: December 2017 Departed: March 2018 Months in role: 115 Months in role: 94 Months in role: 88 Months in role: 68 Fleet on joining: 6 Fleet on joining: 88 Fleet on joining: 191 Fleet on joining: 48 Fleet on departure: 24 Fleet on departure: 124 Fleet on departure: 275 Fleet on departure: 50 Fleet change: +18 Fleet change: +36 Fleet change: +84 Fleet change: +2 Destinations on joining: 11 Destinations on joining: 60 Destinations on joining: 115 Destinations on joining: 62 Destinations on departure: 34 Destinations on departure: 87 Destinations on departure: 130 Destinations on departure: 93 Destinations change: +23 Destinations change: +27 Destinations change: +15 Destinations change: +31 Flight growth: 91% Flight growth: 10% Flight growth: 57% Flight growth: 5% Seat growth: 199% Seat growth: 16% Seat growth: 66% Seat growth: 32% ASK growth: 585% ASK growth: 50% ASK growth: 58% ASK growth: 48%

NOTES: Schedules data comparisons based on month of taking up position versus last instance of same month during chief executive’s time in role; fleet measured at beginning of month started and beginning of month of departure; fleet refers to in-service aircraft; “Started” refers to taking up the chief executive position, not neces- HK Express Romauld Meigneux/SIPA/REX/Shutterstcok IATA sarily point at which person Andrew Cowen Jean-Marc Janaillac Peter Bellew joined the business; “Months in HK Express Air France-KLM Airlines role” counts whole months only; the selection of chief executives Started: April 2015 Started: May 2016 Started: July 2016 is not intended to be exhaustive Departed: October 2017 Departed: May 2018 Departed: October 2017 and excludes those at airlines Months in role: 29 Months in role: 23 Months in role: 14 with fewer than 20 aircraft in Fleet on joining: 10 Fleet on joining: 546 Fleet on joining: 79 their fleets at time of departure Fleet on departure: 21 Fleet on departure: 554 Fleet on departure: 71 Fleet change: +11 Fleet change: +8 Fleet change: -8 * Schedules based on data for Destinations on joining: 16 Destinations on joining: 418 Destinations on joining: 79 January 2004. Fleet data based Destinations on departure: 27 Destinations on departure: 459 Destinations on departure: 83 on full term Destinations change: +11 Destinations change: +41 Destinations change: +4 Flight growth: 59% Flight growth: 1% Flight growth: -5% ** Departure date estimated Seat growth: 59% Seat growth: 5% Seat growth: -1% due to unquantified handover ASK growth: 66% ASK growth: 9% ASK growth: 1% period with new chief executive

3 June 2018 | Flight Airline Business | 23 AUSTRALIA

s seriously as a monk takes their vows, Aus- tralia’s two airline groups have been Constraint drives adheringA to the mantra of capacity discipline – with strong results to prove it. Qantas issued profit guidance revived fortunes in early May showing that it expects a new record full-year profit before tax of up to A$1.6 bil- With Qantas on track to deliver record profits and Virgin Australia showing lion ($1.2 billion). “We’re seeing solid results from signs of recovery, Australia’s two major airline groups have benefitted each of our business units, which from the tighter grip on capacity instilled after heavy losses in 2014 is a reflection of broadly positive trading conditions and the work we’ve done to strengthen the Qantas has again turned to group,” commented Qantas group Singapore and lengthier non- chief executive . stops for its long-haul growth It is quite a turnaround from 2014 when the carrier reported a net loss of A$2.8 billion, as a capacity war against rival Virgin Australia, a major writedown against the value of international fleet, and tough international conditions saw it report the worst result in its nearly 100-year-long history. Virgin Australia, meanwhile, is further back on the turnaround curve, but has seen a return to profit for the half-year to 31 December of A$103 million. “This demonstrates the success of our long-term strategy to reposi- tion the business and strengthen its financial foundation; however, there is more work ahead to ensure we continue to deliver,” chief executive John Borghetti said in February.

TRANSFORMATION

The once cheap-and-cheerful car- Dinendra Haria/REX/Shutterstock rier has transformed into a more business-focused airline, and one Australian carrier financial snapshot that now competes across all cus- Qantas Virgin Australia tomer segments with the larger Op profit (A$m) Net profit (A$m) Op profit (A$m) Net profit (A$m) Qantas group. 2017 1,590 853 -122 -186 Both carriers have seen demand growth in the key domestic mar- 2016 1,751 1,029 -257 -225 ket slow to single-digit rates in 2015 1,048 560 -70 -94 recent years, largely due to slow- 2014 -3,772 -2,483 -375 -354 ing economic growth, lower busi- 2013 -173 2 -99 -99 ness confidence and a downturn Source: FlightGlobal based on airline figures for financial years ending 30 June in commodity prices, which impacted corporate travel. from the domestic market to replacing some of those with air- leisure travel both growing again. That ultimately forced both international routes. Virgin also craft wet-leased from independ- The latter includes an uptick in carriers to cut capacity on some cut its Embraer 190s from the ent operator . premium leisure demand, which routes, with Qantas and Virgin fleet, and reduced the number of Conditions are strengthening has seen some routes that were both redeploying widebodies ATR 72 turboprops it operates, now, however, with corporate and previously the domain of the

24 | Flight Airline Business | 3 June 2018 AUSTRALIA

budget carriers moved back to Melbourne, Brisbane and Sydney ia’s east coast to Europe and the their ones. to Auckland in March as it con- US east coast. While Virgin has swung into centrates on its nonstop Dubai- Closer to home, Virgin’s limited Qantas is examining the black, it is still emerging from Auckland service. Alliance part- international network focuses on an order for aircraft the damaging competition with ner Qantas has back-filled some of the USA and Pacific Islands, while to fly Australia to Qantas in the 2012-14 period, that using A330s and 737s. last year it launched Melbourne- Europe and the USA which savaged its balance sheet. After years of pulling back, Hong Kong flights. From July it Its search for cash saw the Qantas’s international network will begin flights from Sydney to acquisitive HNA Group inject has started growing again, with Hong Kong, which, like the Mel- close to $1 billion of equity into it the debut of nonstop services to bourne ones, will be underpinned what’s possible. We’re talking last year, while long-term partner Europe through the Perth-London by its alliance with the HNA Group about airports that are very con- Air New Zealand sold out its stake route in March. At the same time, and its unit. gested: Hong Kong, Shanghai and to another Chinese conglomerate, it operated the last services in its others,” he said. Nanshan Group, in 2017. own metal to Dubai and rerouted BREAKING CHINA Qantas has similar benefits That leaves it with a compli- its Sydney-London services back Virgin is also looking to launch a from its joint venture on China cated, multi-airline ownership via Singapore. mainland China destination, but routes with China Eastern Air- structure. Etihad Aviation Group The carrier has sig- as chief executive Borghetti lines, which is supplemented by a holds the largest stake at 25.1%, nalled that longer nonstop flights stated in February, is facing diffi- with China followed by Singapore Airlines are likely to be a major part of its culty getting slots at key gateway Southern Airlines. (20.1%), Nanshan (19.9%) and future strategy, with the airline cities there. Those agreements have helped HNA (19.2%). set to examine an order for air- “With our expansion into the carriers to gain exposure to Similarly, on the international craft that could fly from Austral- greater China, it’s also the art of the surging Chinese tourist mar- front, both Qantas and Virgin Aus- ket, which has seen a number of tralia have been restrained as they carriers including Hainan Air- work among the realities of being lines, and Xia- at the end of the line. men Airlines launch new ser- Qantas still holds a command- vices to Australia over the past ing share of the fragmented inter- three years. national market, with 16.4% of Australians have developed a such passengers for the year strong penchant for overseas ended February 2018 taking the travel, which in part has fuelled a Flying Kangaroo. Subsidiary Jet- large rise in low-cost carrier star was the second largest at capacity to the country. 9.1%, followed by , Sin- Asia’s long-haul low-costers gapore Airlines, Air New Zealand AirAsia X and have both and Virgin. deployed large amounts of capacity to Australia. The latter also sees PARTNERING UP Australia as a key connecting mar- That has seen their networks ket for its European services, and largely coalesce around major has offered very attractive fares con- partnerships to serve key markets. necting Australian passengers Qantas works closely with Emir- through Singapore to Athens. ates, American Airlines and China Filipino carrier Air Eastern; Virgin with shareholders has also received a warm wel- Singapore Airlines, Etihad Air- come in Australia, with its 440- ways, HNA Group and Air New seat, all-economy configured Zealand. Virgin also has a joint A330s plying the Sydney-Manila venture with cov- route five times a week. In August ering North America. it will add a thrice-weekly flight to But Virgin is set to lose one of its Melbourne service. its key partners in October, with Qantas and Virgin’s budget Air New Zealand recently calling brands have also been strong con- time on their Transtasman joint tenders in the international mar- venture. The carrier ket. Jetstar plies a number of has announced a major increase in routes to destinations including capacity, aimed at plugging the Denpasar, Osaka and Honolulu. effective gap from the end of the Australia operated a codeshare with Virgin. number of services to Denpasar That change follows some until early 2017 when it ran afoul wider changes on the Tasman of Indonesian regulators. It is

market, with Emirates ending its Australia Virgin now expected to start services to A380-operated tag services from 737 operator Virgin Australia is set to take its first Max 8s in 2019 New Zealand. ■

3 June 2018 | Flight Airline Business | 25 REGULATORY

Slot control conundrums Debates have long raged over airport slot assignments and a review is under way of the regulations. But could there be a better way of handling the various allocation issues and should airports have a role in the decision-making process?

or more than 50 years, the Growth in slot co-ordinated airports since 2012 guidelines governing slot allocation at the world’s capacity-constrained air- 200 F ports have been overseen by IATA and a set of national co-ordinators. Now, airports are seeking to chal- 150 lenge the status quo by gaining a say in how slots are awarded and 100 – potentially – who benefits from their value. Allocation of slots at congested 50 – or “slot co-ordinated” – airports has since 1974 been guided by a set of best practices dubbed the 0 Worldwide Slot Guidelines 2012 2013 2014 2015 2016 2017

(WSG). The WSG covers every- Source: IATA thing from how new slots should Europe Asia-Pacific North Asia Middle East/Africa The Americas be awarded to the timeline for the process, airlines’ right to keep control of slots based on historic increased over time, so have the the WWCAG – the trade associa- public,” she says. With the vast precedence, and the 80:20 rule number of airports that require tion that represents national slot co- majority of airlines, and many air- that allows carriers to retain slots some form of slot co-ordination. In ordinators – have embarked on a ports, now privately owned, Git- as long as they use them 80% of 2011, there were 142 Level 3 air- joint strategic review of the WSG. tens asks: “Who is [now] looking the time allocated during a par- ports; by 2017, this had risen to The review will seek to address out for the consumer?” ticular season. 189. IATA predicts that this num- “any deficiencies in the slot alloca- Stefano Baronci, ACI’s director While the guidelines are volun- ber could grow by 100 airports tion system” and ensure that the of economics and programme tary – and the USA, for example, within the next 10 years. guidelines “evolve and remain via- development, says that while he operates to a slightly different sys- While slot allocation has a ble for years to come”, say the three hopes the review will be “con- tem – the WSG is widely accepted direct impact on the operations at organisations in a joint statement. structive”, there could be “resist- as the industry standard. The their facilities, airports have no “Capacity is not used to its opti- ance” arising from “a vested inter- ’s slot regulations formal involvement in how the mal ability,” ACI director general est of some airlines to keep the are a virtual mirror of them. guidelines are defined and exe- Angela Gittens told FlightGlobal status quo”. IATA data shows that there are cuted – something that lobby during the trade body’s Airport Fraport’s head of airport slot more than 300 airports worldwide group Airports Council Interna- Economics & Finance Conference management Gunter Heinrich that are subject to the WSG. tional (ACI) is seeking to change. in London in April. “So we are tells FlightGlobal the scope of the A total of 189 airports in 2017 working with IATA and the slot review is more limited than he were defined as “co-ordinated” or STRATEGIC REVIEW co-ordinators group to conduct a would have wanted, being Level 3, a status in which the scale The way slots are divvied out to strategic review, and we will be focused on the “details” of slot of congestion is such that a airlines has long proven to be a reporting to ICAO in 2019.” allocation, such as whether a new national co-ordinator must controversial process, with critics Gittens says the WSG as it now fourth level of co-ordination is impose a schedule on airlines complaining that the process lacks stands is “outmoded” because it required or whether to replace the operating at peak times. transparency. The European Com- was drawn up under a “completely 80:20 rule with a 70:30 ruling. Some 120 airports are defined mission has committed to a different set of circumstances” The principles underpinning as “facilitated” or Level 2, mean- review of the current slot proto- when the majority of airlines and the allocation of slots are not cov- ing that congestion does occur at cols within its aviation strategy, airports were state-owned. ered, he says. certain times of the day. Slot allo- although no conclusion has yet “When it was set up, airlines Heinrich says that for some time cation at these facilities is carried been reached. were national airlines, airports airports have been seeking some out on a voluntary basis, with the During the ICAO general assem- were government-owned, and so form of representation on the Joint co-ordinator seeking to reach an bly in 2016, ACI set out a critique you had the national government Slot Advisory Group (JSAG) – a agreement with airlines on future of the current system and asked the through the airlines [and] the air- 14-member body split between flight schedules. UN body to consider reviewing it. ports looking out for the interests IATA member airlines and slot co- As global passenger traffic has Subsequently, IATA, ACI and of the consumer and the travelling ordinators, which meets to oversee ❯❯

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Air carrier or not? Administrators for collapsed UK carrier Monarch Airlines generated a net £54 million ($73 million) from the sale of airport slots, comprising £50 million from parent IAG for slots at London Gatwick, and £4 million from Wizz Air for slots at Luton. Monarch ceased operations at the beginning of October last year. KPMG secured the right to sell Monarch’s airport slots following a UK court ruling last year, after an initial judgement had blocked it from having the right to sell the slots. Its successful appeal hinged on a wrangle over the legal definition of ‘air carrier’, and whether the UK airline could still be considered as such despite its cessation of operations. Geoff Robinson Photography/REX/Shutterstock Geoff

❯❯ the guidelines. To date, that broken, “essentially work”. He the only country that has the that while Mexico allows airports request has been “refused” by adds: “Is it perfect? No, it is not per- “legal mechanisms” in place to to legally auction slots, none have IATA, he says. fect, but there is a perception that allow for such secondary trading. so far taken place, while China has Lara Maughan, head of world- there needs to be a better balance The sales last year of two conducted only that first auction. wide airport slots at IATA, tells between the interests of the airlines Heathrow slot pairs by SAS to Speaking at the ACI conference FlightGlobal that to date there has and the airports, which the strate- American for $75 million and of in London in April, Stuart Holder not been much input from airports gic review could address.” one by to Delta – senior regulatory policy adviser in the WSG and it is therefore Cann says he can understand Air Lines for $19 million indicates at the UK Civil Aviation Authority “quite right” a review of their why ACI is now keen to overhaul the potential value of slots. – said there was scope for a “real involvement should take place. the process as airports around the ACI’s Gittens describes this as a improvement” in the transparency She acknowledges that the cur- world get busier. “Kafka-esque situation” where of secondary trading in the UK. rent guidelines were put in place to “someone is given something for He warns that alternatives to act as “sticky plaster” for the wider BILATERAL TALKS free and can then sell it for hun- the current system could prove problem created by the lack of Heinrich says that while slots own- dreds of millions of dollars”. “really difficult”, noting the logis- available airport capacity, but says ership is not under discussion as Barconi says that a “sensible tical “nightmare” involved in IATA’s starting position is that the part of the strategic review, sepa- option” would be “to allocate some organising slot auctions. rules are “good as you can get”. rate bilateral talks on this topic are of the proceeds of the secondary Chris Bosworth, former manag- IATA is “not looking for radical being conducted by the heads of trading for infrastructure develop- ing director of ACL, says that the reform of the slot process today, ACI and IATA. Ultimately, ICAO ment”. This, he says, could allow case of Monarch Airlines, where because we do not see it as a prob- may need to become involved in airports to reduce airport charges. the administrators KPMG were lem”, she says. The association is the issue, he adds. IATA’s Maughan An alternative to slot sales on a able to sell slots after the UK car- keen to see “evolution” of the sys- contends that ICAO member states rier had grounded flights, illus- tem, rather than a radical rethink. do not wish to get directly involved trated that the rules on slot trading More than 80 people, including in slot allocation. may need to be reviewed. IATA members and nonmembers, An area that is not under discus- “In light of events following are involved in the strategic sion as part of the strategic review recent failures, including Monarch, review, which is split into four – but which stirs much of the con- 189 Air Berlin and Niki, regulators may working groups. Maughan sees troversy around the current system Number of slot co-ordinated also be looking for greater clarity reasons to be “optimistic” that a – is the ability of an airline to swap, airports in 2017 regarding what happens to slots in good outcome can be achieved. lease or sell their slots for what can the event of an airline going into IATA describes the guidelines be significant money. commercial basis is slot auctions administration,” he says. as a “living document”, which is The WSG state swaps between organised by the sovereign states. While it will be more than a year regularly reviewed and altered. airlines are “encouraged” and can China conducted one in 2015, and until final recommendations on Richard Cann, head of co-ordi- be carried out for “compensation or Mexico has passed legislation reforming the slot regime are nation at UK slot co-ordinator ACL, consideration” where local laws do allowing for the practice. reached under the review, its scope welcomes the review but says the not prohibit the practice. Maughan says auctions “raise a alone means it is unlikely to satisfy current guidelines, far from being IATA’s Maughan says the UK is lot of questions” and points out the demands of the airports. ■

28 | Flight Airline Business | 3 June 2018 TAKE YOUR SEATS...... for The Airline Strategy Awards 2018 This exclusive invite-only event is attended by a select group of senior airline executives, industry professional and international media.

To find out more about availability of places at this excellent celebration of leaders in the market, please contact Chloe Bass on +44 (0)208 652 4669 or [email protected]

Sunday 15 July 2018 | Prince Consort Rooms, HAC | www.strategyawards.com

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Judges choose the winners EVENTS Awards recipients are picked as preparations continue for big night in London on 15 July BIG DATA EVENTS FlightGlobal’s Aerospace ning of the awards and the second Big Data conference series time Flight Airline Business has heads for Miami, Florida in partnered with Korn Ferry, a lead- September. It will bring ing human capital management ­together manufacturers, firm, to deliver the event. MRO providers, suppliers July’s invitation-only ceremony and airlines from across the takes place at a new venue this North American and year: the Honourable Artillery LATAM regions­ to discuss Company’s London home. This topics including informa- stunning venue is located in Lon- tion-sharing challenges and don’s financial quarter, just a few emerging opportunities to minutes from Moorgate, Liverpool unlock the value of aircraft Street and Old Street stations. health data. After Miami,

Lewis Harper/FlightGlobal Aside from recognising the air- events will be held in The judges considered a range of nominees across six categories line industry’s biggest talents, the London on 28-29 ceremony also offers unrivalled November and Singapore udging is now complete for tor Leadership, Low-cost Leader- networking opportunities with in May 2019. FlightGlobal’s J this year’s Airline Strategy ship, Network Strategy, Finance high-profile executives from Aerospace Big Data Awards, which takes place on 15 and Marketing. across the world. Conference made its debut July on the eve of Farnborough The judges were asked to Last year’s winners included in London last year, and­ air show. choose from a list of nominations Alan Joyce of Qantas, Vitaly Save- featured speakers from A team of high-profile judges that was drawn up after several liev of and Joszef Varadi some of the world’s biggest from across the industry gathered months of deliberation and in- of Wizz Air. Other awards went to manufacturers. Discover in London for a meeting in mid- depth research. A special Flight EasyJet, KLM and . more about the upcoming May, hosted by our event partner Airline Business award – judged To find out more, including series of events here: Korn Ferry, where they decided separately – will also be handed information about attending and flightglobal.com/ on the winners across six catego- out on the night. sponsorship opportunities, visit: BigData ries: Executive Leadership, Sec- This year marks the 17th run- strategyawards.com Pick up three World Routes dailies in Guangzhou

FlightGlobal team will be Export Fair – one of the largest Aheading to Guangzhou in exhibition venues in the Asia- September for this year’s World Pacific region. The venue hosts the- Routes event. famous Canton Fair twice a year. Our journalists will be on site in FlightGlobal will also have a south China, producing three spe- stand at the show, where delegates cial issues of Flight Airline Busi- can find out about our schedules ness and publishing all the latest and fleets data, along with our news on Flight Dashboard and news and analysis products. flightglobal.com. As part of a packed schedule – The 15-18 September event including the usual speed dating- takes place at the China Import and style meetings between airlines and airports, and a conference pro- ISSUE ALL THE NEWS FROM

gramme featuring top-level speak- Imaginechina/REX/Shutterstock ALL THE NEWS FROM

2TUESDAY ISSUE 24 APRIL 2018 ers – delegates will be treated to a Guangzhou’s Baiyun airport opened a new terminal in late April Data snapshot Short-haul passenger traffic within- Europe has grown at a rapid rate over the past few years, with last - summer notable for intense com - MONDAY petition on leisure routes. That 123 APRIL 2018 kept the pressure on yields and ul timately took its toll on some carri Cruz control: BA chief highlights networking evening at the Canton ers. While airlines will remain in bold plans for network growth growth mode for this year’s peak season, there is some easing in the rate of capacity expansion for this - summer on intra-European routes, which should provide breathing space as carriers adjust to new dy namics in several markets. y Tower, the fourth-tallest free-stand- Guangzhou is one of the handled 65.8 million passengers. Europe short-haul capacit summer growth 8%

7% 6%

5%

4% 3% ing structure in the world. world’s oldest trading hubs. Its In April, Flight Airline Business 2% 2018 1% 2017 2016 2015 pril to Sep - 0 2014 zerland A lightGlobal schedules data, based on flights within , while , Frankfurt Source: F European Economic Area & Swit SIZING UP THE and Amsterdam rank highest British Airways is imbued with a “sense of ambition” when it comes among international routes, Flight MORE ANALYSIS INSIDE: FlightGlobal schedules data Global data for April shows.to adding new long-haul routes OPPORTUNITIES Aside from IAG carriers,from Air London’s airports,Capacity despite relief at holiday spots KICK-STARTINGshows Volotea has tripled itsGROWTH seats 8 London Heathrow. “It is just tre the slot constraints faced by the Organisers predict 3,000 dele- contribution to China’s economy was in , covering the Routes serving Bilbao in April this year – France-KLM and Lufthansa Group 14 Why Palma is provingmendous popular to get a sense of the de - have a significant presenceUK carrier, at the chief executive Alex gree of ambition that we have to Routes Europe lands in Bilbao at a at 15,750 – versus April 2017. 19 Upheaval in German market Basque capital, as doCruz EasyJet said andat the show yesterday. continue growing the network at - Carlos Munoz, chief executive The fight for control in Italy nected to the hub, Cruz predicts. fascinating time for city’s airport, 25 - of Volotea, says: “Last year we Air Europa, among others.Cruz says that over the past few Heathrow,” he says. But he cautions that the construc with its melting pot of airlines ex - The airport’s networkyears the stretches carrier has managed30 Plotting to ’s growth path achieved an excellent reception to By reducing frequencies on ex tion of any new must be panding their slate of short-haul add new short- and long-haul Airline start-ups and standfailures (S20) our offer [at Bilbao], so this year we east to Istanbul – through Turkish 37 isting services, the carrier- was able accompanied by a “neutral effect services over the past 12 months. - routes despite the “completely slots for short-haul leisure destina - Airlines’ daily flights – and north to FlightGlobalto add new flights to Nashville and - And the region’s government have increased our capacity add - Visit the on taxes” as prices at Heathrow tions such as Malaga this summer, Oslo, servedslot-constrained by Norwegian. environment” at New Orleans from Heathrow. - says recent growth is sustainable. ing also four new destinations.” - to see our comprehensive sched are already “extremely high”. as that was easier to organise in a FlightGlobal data shows total BillyPix “The Basque Country is a gate Bilbao airport’s biggest opera ules data inThe action addition and to of speak a third runway gates will attend from 110 coun- was reflected in the late-April Europe event. Two special issues Elsewhere, Cruz says the acqui restricted time frame. - - seats at Bilbao airport are up at Heathrow will lead to more UK way to Europe and is a natural tors in April are Spanish IAG sta to our team of experts sition of Monarch’s slots at London 11% in April year-on-year. The re and European airports being con “The big emphasis right now is gateway from the continent to the blemates Vueling and Iberia. Gatwick gives the IAG-owned car what do we do next year. Every gion’s government believes it has - southern hemisphere,” says Alfre Both have added capacity at the rier more opportunities to add one has an ambition to add more - the right ingredients to continue do Retortillo, minister of tourism in Basque facility over the past 12 new long-haul routes from the long-haul routes,” he says. Cruz - that trend. - - the Basque government. months – Vueling increasing its gateway. He says BA is using the states the carrier is currently deter- In March, Spanish low-cost carri seats by 39%. mining “what the options are”, - The airport’s busiest domestic er Volotea opened a base at Bil adding that it will need to find the bao, while launching four new destinations are Barcelona and aircraft to fly long distances. - tries. Some 300 airlines, 700 air- opening of a new terminal at Bai- of the magazine were produced on routes. This was marked with). a tra ditional Basque (pictured dance above known as aurresku Untitled-1 1 20/04/2018 10:15 ports and 130 tourism authorities yun airport. site (pictured, left).

20/04/2018 10:15 Untitled-1 1 are expected to be represented. Last year, Guangzhou Baiyun flightglobal.com/WorldRoutes

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