Vol. 23 No. 2 March 2016 orientaviation.com
MUELLER’S MEDICINE FOR MALAYSIA AIRLINES Airline corporate doctor, Christoph Mueller, is facing his toughest test yet – building a new airline from the former stricken MAS
Air New Zealand China blacklists Mixed messages well prepared to their badly behaving emerge in region’s battle Gulf carriers passengers capacity debate
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Client: Pratt & Whitney Commercial Engines Ad Title: Time on wing is our thing. Publication: Orient Aviation - March Trim: 202 x 273 mm • Bleed: 212 x 283 mm • Live: 182 x 253 mm CONTENTS Volume 23, Issue 2
12 China and South Korea black list their disruptive COVER STORY passengers 13 Flush with cash: Australasian carriers announce 20 MUELLER’S record interim profits MEDICINE FOR 14 Mixed messages emerge in the region’s capacity MALAYSIA AIRLINES debate PUBLISHED BY 15 Airbus and budget carrier, Vietjet, team up for Airline corporate doctor, Christoph training in Ho Chi Minh City ORIENT AVIATION MEDIA GROUP 26 Nowhere to grow: several of the region’s Mailing address: Mueller, is facing his toughest test GPO Box 11435 Hong Kong yet – building a new airline from the overcrowded airports are holding back passenger Office: growth 17/F Hang Wai Commercial Building, former stricken MAS 231-233 Queen’s Road East, 29 Singapore upgrades its aircraft tracking system Wanchai, Hong Kong Tel: Editorial (852) 2865 1013 E-mail: [email protected] MAIN STORY Website: www.orientaviation.com 16 Risky business: the impact of cheap oil on the
Publisher & Editor-in-Chief region’s airlines Christine McGee E-mail: [email protected]
Chief Correspondent Tom Ballantyne Tel: (612) 9638 6895 Fax: (612) 9684 2776 E-mail: [email protected]
Greater China Correspondent Dominic Lalk Tel: (852) 2865 1013 E-mail: [email protected]
North Asia Correspondent Geoffrey Tudor Tel: (813) 3373 8368 E-mail: [email protected]
India Correspondent R. Thomas ENVIRONMENT Tel: (852) 2865 1013 28 International Civil Aviation Organisation unveils E-mail: [email protected] landmark emissions standards Photographers Rob Finlayson, Colin Parker, Graham Uden, Ryan Peters SPECIAL REPORT ‘Avalanche’ of business coming for Asia-Pacific Chief Designer Chan Ping Kwan COMMENT MROs 5 Pros and cons of cheap oil 30 Global MROs and OEMs move deeper into the Printing Printing Station(2008) region to attract customers of next generation PERSON OF THE YEAR AWARDS jets to their services ADMINISTRATION DINNER General Manager 6 Orient Aviation Person of the Year and Lifetime Shirley Ho Achievement award recipient, IATA’s Tony Tyler, E-mail: [email protected] accepts his awards at a China Club celebration in ADVERTISING Hong Kong
Southeast Asia and the Pacific Tan Kay Hui Tel: (65) 9790 6090 E-mail: [email protected]
The Americas / Canada Barnes Media Associates Ray Barnes Tel: (1 434) 770 4108 Fax: (1 434) 927 5101 31 Singapore and the U.S. Federal Aviation E-mail: [email protected] Administration agree on new shared MRO
Europe & the Middle East standards REM International 32 AFI KLM E&M set up joint venture MRO Lab Stephane de Rémusat in Singapore to identify cutting edge MRO Tel: (33 5) 34 27 01 30 Fax: (33 5) 34 27 01 31 NEWS technologies and applications E-mail: [email protected] 9 Air New Zealand ready to do battle with Gulf 34 MTU Aero Engines wins big at Singapore Air
© All rights reserved carriers Show Wilson Press HK Ltd., 10 Airbus breaks ground at its A330 Cabin and 34 ST Aerospace opens VIP jet service centre at Hong Kong, 2016 Delivery Centre in Mainland Tianjin Seletar
MARCH 2016 / ORIENT AVIATION / 3 ELIMINATE CREDIT CARD FEES NEW REVENUE STREAMS
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Pros and cons of cheap fuel
Fuel is an airline’s largest expense. The fact that oil is is the ever constant issue of over-capacity. Hundreds of at its lowest price in years is a massive boost for an new airliners have been ordered by Asia-Pacific carriers industry that was paying more than US$120 a barrel for and the need to build load factors on these expanded aviation kerosene 19 months ago. fleets is creating downward pressure on airfares, With crude oil prices at a 12-year low, the industry’s especially in a low fuel price environment. annual fuel bill will be cut by $12 billion this year, the Asia-Pacific LCCs now carry 54% of passenger traffic International Air Transport Association (IATA) has in the region. They also are among the worst culprits in forecast. Fuel is expected to average 19% of operating terms of the aircraft capacity they have on order. With costs in 2016 compared with up to 40% last year and these commitments in mind, IATA director general and 25%-30% in 2014. Operating margins for the industry CEO, Tony Tyler, said in Singapore last month that several are predicted to be the highest in more than 50 years at airlines in the region are reviewing their fleet plans. They 8.2%. are likely to cancel or defer some of their airliners to But cheap jet fuel alone will not position airlines for avoid a new period of excess aircraft supply, he said. long-term sustainable profits, particularly during this But these are not the only issues that have emerged period of development in the Asia-Pacific. President of since oil hit its historic low. It was absolutely critical that Emirates Airlines, Sir Tim Clark, told Middle East media in airline management did not allow the shrinking fuel bill to January that lower fuel costs was “a double edged sword”. reduce commitments to efficiency gains at their carriers, He said the plunge in fuel prices lowered operating Clark said. costs, but it also impacted on global business confidence Another factor to consider is the industry’s and fostered market volatility. commitment to reducing emissions from aviation. It In the region, a beneficial oil price has been offset by is an issue of particular relevance in a low fuel cost the depreciation of many local currencies against a rising environment. Some airlines are considering returning U.S. dollar. Additionally, a number of the best managed older, gas guzzling aircraft to flying because oil is so Asia-Pacific airlines have hedged a significant proportion cheap. It is a decision that will hinder the industry goal of of their fuel costs at prices that are double, and often being carbon neutral by 2020 and set back the ultimate triple, the present spot price for oil. target of a 50% cut in emissions by 2050. Another challenge to healthy airline balance sheets There are some rocky months ahead. ■
TOM BALLANTYNE Chief Correspondent Orient Aviation Media Group
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MARCH 2016 / ORIENT AVIATION / 5 PERSON OF THE YEAR AWARDS DINNER
Tony Tyler honored as Orient Aviation’s Person of the Year
ony Tyler, IATA’s director general and CEO, was honored as a Lifetime Achievement award recipient and Orient Aviation’s Person of the Year at aT dinner in Hong Kong in February. Guests from government, airports and airlines attended the China Club celebrations, which included tributes from Boeing’s Randy Tinseth, Qantas CEO Alan Joyce and the 2014 Person of the Year Christopher Luxon. IATA staff contributed some witty anecdotes about their boss and Swire “lifer”, James Barrington, brought the house down with a memorable roasting of the former Cathay Pacific Airways chief executive. ■
Photos: Graham Uden
Boeing’s Randy Tinseth, Tony Tyler and Orient Aviation’s Christine McGee
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1. Guests toast Tony Tyler 5. James Barrington 8. Philippe de Gentile-Williams, Mark Hoey, 2. John Slosar, Professor Anthony Cheung Bing-leung 6. Tony Tyler Marc Chere, Randy Tinseth, Jason Bender 3. Joy Slosar, Gregory So Kam-leung 7. Marc Chere, Shiree Tong 9. Norman Lo Shung-man, Fred Lam Tin-fuk 4. Randy Tinseth 10. Idalina Abreu de Silva, Mark Sutch
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Boeing’s Randy Tinseth, Tony Tyler and Orient Aviation’s Christine McGee
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11. Nonthakorn Trakulpa, C K Ng 14. Yvonne Ho, Benjamin Chan, Claire Chan, Zhang Baojian 17. Fred Lam Tin-fuk, Simon Li Tin-chui 12. Jack So Chak-kwong 15. Wilson Fung 18. Paul Tuck, Laura Crampton 13. Kenny Tang, Florence Craig, 16. Stanley Hui Hon-chung, Laurence Barron, Carine Truong, 19. Tony Tyler and his wife Charlotte Henry Craig James Ginns, Chris Gibbs
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put it, Air New Zealand is “fitter than it’s ever been and is in a Air New Zealand stronger financial position to fight several battles at the same time”. Nevertheless, Emirates’ non-stop arrival inAuckland - it ready to do battle serves New Zealand through Australia – will present some challenges for Air NZ’s marketing executives. Presently, New with gulf carriers Zealanders have only two one stop options to Europe. They can fly to Los Angeles on their home When fuel was expensive, ultra-long-haul flying was a losing carrier and then onto Europe or they can go through Hong game. But with oil at its lowest level for years, New Zealand is Kong and onwards to Europe a new target for U.S., Middle Eastern and Asian airlines. with code share partner, Cathay Pacific Airways. A third option is Australia-Asia-Europe. Emirates and Qatar will be By Tom Ballantyne able to offer one-stop flights from Auckland to their hubs ew Zealand may be The SIA services will provide direct take advantage of existing and and onto dozens of destinations small in population flights between the two capital new opportunities,” said Luxon. across Europe. Emirates alone has and remote in cities of Australia and Wellington He has every right to be 38 European destinations in its destination, but it for the first time. confident. Air NZ has been in the network. The Emirates flights will is becoming a hot It all adds up to a dramatic black for 13 consecutive years be operated with B777-200LRs, Nproperty in the airline world. increase in competition for local and reported a record net profit with an estimated flight time of In January, Emirates Airline carrier, Air New Zealand (Air of US$216 million in the twelve just under 16 hours from Dubai announced it would be flying NZ), one of the world’s best months to June 30, 2015. The to New Zealand and 17 hours, 15 non-stop between Dubai and performing airlines. But the wave strong financial results mean minutes in the other direction. Auckland from June and Qatar of new capacity is not keeping the Luxon is sure the carrier is very “Having just one stop on the Airways has hinted strongly it will airline’s CEO, Christopher Luxon, well positioned to confront new long haul flight to New Zealand follow suit from Doha. awake at night. competitive challenges. As he has will make the journey quicker In Asia, Malaysia’s AirAsia “Air New Zealand is and more comfortable,” said X plans to extend its Kuala performing really well,” he told His Highness Sheikh Ahmed bin Lumpur-Gold Coast Australia Orient Aviation. “Our customer Saeed Al Maktoum, chairman service to Auckland, with the satisfaction scores, brand health and chief executive of the budget carrier’s chief executive, and corporate reputation are Emirates Airline Group. “This Benyamin Ismail, saying if the the best they have been. And will be a boon to many business route is successful his airline could as we have indicated to the people, tourists, expatriate New soon return to Christchurch. The market, we are on track for Zealanders and other travellers in route was dropped in 2012 after a strong interim result later Europe, parts of Africa and the the city suffered a devastating this month. At press time, the Middle East.” earthquake in February 2011. airline reported a NZ$338 With the introduction of the He added the country’s capital, (US$226 million) interim profit non-stop service, Emirates will be Wellington, was being considered compared with NZ$133 million flying more than 2,000 seats a as an addition to AirAsia X’s a year ago. day in each direction on its New network. “Reported moves by the Zealand services. These new flights Middle Easteran carriers to start followed an American Airlines ultra-long haul flying to New Air New Zealand CEO, announcement that it would Zealand come as no surprise Christopher Luxon launch Los Angeles-Auckland given the lower fuel cost services in June and a decision by environment that Singapore Airlines (SIA) to add a allows us to Singapore-Canberra-Wellington route to its network later this year.
MARCH 2016 / ORIENT AVIATION / 9 NEWS BACKGROUNDER
The new interest in New Al Baker, said the airline planned and Singapore in 2018, which may extend their direct services Zealand is a result of a wave of to launch ultra-long haul flights, at 9,535 miles (15,256 km) and to New Zealand and onto the ultra-long haul routes that are not only to Auckland but to a journey time of 18 hours 50 U.S. West Coast if they receive being launched as the fuel price Chile’s capital, Santiago. minutes, held the record for the approval from the relevant has plummeted. When oil prices The latter would be a 9,034 longest route in the world until it regulatory authorities. rose above US$100 a barrel mile (14,454.4 km) journey of was discontinued in 2013. Air NZ is not letting the and continued to climb, airlines 18 hours and 34 minutes. The There is every chance some grass grow under its feet as eliminated uneconomic ultra longest flight in the world is airlines will look at even longer competitors move into their long haul destinations from their Qantas Airways’ Sydney-Dallas flights. Emirates’ president, Sir traditional turf. With its six new networks. Fort Worth service of 8,578 miles Tim Clark, has talked about the B787-9s, eight B777-200ERs That has all changed. Reports (13,724.8 km) and 16 hours and possibility of a 20-hour flight that and seven B777-300ERs, it that Qatar could launch a record- 55 minutes in duration. would link Sydney directly with launched services to Houston and breaking flight to Auckland As well, Singapore Airlines Rome. Buenos Aires in December and is emerged at the Bahrain air show, has shown interest in resuming Industry insiders also have considering more destinations for when Qatar Airways CEO, Akbar direct flights between New York suggested the Gulf carriers its long haul network. ■
NEWS Airbus launches Tianjin A330 centre
By Dominic Lalk is going extremely well. China is to a “Chinese customer” growing extremely fast. We need scheduled for June that “ he new A330 Cabin wide bodies for domestic and year. Airbus Tianjin general and Delivery Centre international growth, so we are manager, Andreas Ockel, (CDC) is good targeting the A330,” said Airbus said demand for the A319 news for Chinese CEO, Fabrice Brégier, on the side is shrinking and the Tianjin airlines,” said Airbus lines of the Tianjin ceremony. “I plant could potentially switch ChinaT CEO, Eric Chen, at a think this is only the beginning of to production of the larger news conference celebrating a long and successful journey,” A321. the ground breaking of the he said. “I am personally China’s air travel market manufacturer’s first A330 CDC in committed to the partnership is forecast to increase to 1.7 Tianjin on March 2. with China.” billion in 2034, which will “As air traffic limitations, Having delivered an average make China the largest civil airport congestion and pilot 20 A330s to Mainland carriers a aviation market in the world. shortages continue to hinder year in the past decade, Airbus -300ceo variants, with deliveries Airbus forecast China will airline growth in China, we believed the Tianjin plant will from 2016-2018. At press time, need 5,400 new passenger need larger aircraft such as the offer a “win-win” opportunity Chen did not confirm if the order and cargo aircraft in the next A330,” said Chen, who was the for local airlines and the was a new commitment or part two decades. first Chinese national to join the manufacturer to work closely of the 45+30 A330 orders placed Chen predicted the aircraft manufacturer. during the final delivery stages. by China Aircraft Supplies last market could become even The A330 CDC will be a “It takes 30 minutes by July when the A330 Tianjin CDC bigger, and very quickly, if facility where a flyable aircraft “in express train for Air China’s plans were unveiled. the Chinese government green” will arrive from its final managers to travel from Beijing “The continuing news about improved its bilaterals that assembly line (FAL) in Toulouse to Tianjin,” said Chen, a 31-year the slowing Chinese economy would allow its nationals to have its cabin installed, veteran of Airbus. “It is a big does not worry us,” said Chen, visa-free access to Europe furnished and exterior painted. improvement for executives who who added Airbus has grown its and the U.S. The facility is on schedule to ordinarily would spend up to a market share on the Mainland “If travellers no longer open in September 2017, with an week travelling between France from 6% in 1995 to 50% today. require a visa to travel output of one aircraft a month. and the Mainland to take delivery Its expansion was aided to Europe or the U.S., By 2018, Airbus said it will deliver of their aircraft.” significantly by its Final Assembly international air travel two A330s every four weeks out This may have been the Line for the A319/A320, also originating in China would of Tianjin for a total of seven a rationale behind the Mainland in the port city of Tianjin. The skyrocket,” said Chen. “If month, including those produced flag carrier’s announcement, in facility will start manufacturing that happened, even the in Toulouse. the week of the ground breaking the re-engined neo from A380 would not be big “The cooperation with China ceremony, for 12 additional 2017, with the first delivery enough.” ■
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China blacklists badly behaviouring passengers An increasing number of unruly passenger incidents at the region’s airlines have persuaded two Asia-Pacific governments to introduce tougher measures to combat air rage. While welcoming the initiatives, the world’s airline association said enforcement of a global protocol to punish disruptive travelers should be the ultimate goal.
Tom Ballantyne reports
he New Year brought an aircraft’s emergency exits bad news in two without instruction and spreading Asian countries for false information about terrorist disruptive airline attacks. passengers. China, CATA will record the Tone of the world’s unruly personal information of passenger hot spots, is creating a disruptive passengers and share passenger black list that will see it with airlines and state-owned anyone causing trouble aboard TravelSky, China’s national commercial aircraft banned electronic travel distribution from travelling. And in South system. Inclusion on the blacklist Korea, the government has will be kept on record for one to massively increased penalties for two years, CATA said. misbehavior on aircraft. China’s biggest airlines - Air It is good news for the China, China Eastern Airlines, industry, said the International Korean Air heiress, Cho Hyun-ah: Her tantrum over mis-served nuts in China Southern Airlines,Hainan the airline’s first class cabin has resulted in tougher penalties in South Air Transport Association (IATA). Airlines and Spring Airlines – also Korea for disruptive passengers “The actions taken by South have agreed to share the names Korea and China will help send a extending the legal jurisdiction While China and South Korea of passengers who misbehave strong signal that unruly behavior for such events to the territory in have toughened their stances and to ban them from their will not be tolerated by the which the aircraft lands. against unruly sky-high behavior, flights. respective states,” IATA’s assistant Legal jurisdiction has been neither country has ratified MP14. “We have come up with our director for external affairs, Tim a grey area in penalizing unruly “We urge China and South Korea own list already,” Zhang Wuan, Colehan, told Orient Aviation. passenger behavior because to make the ratification of MP14 a Spring Airline’s marketing chief “However, as an industry, we incidents occur on aircraft that are priority,” he said. told local media. “It includes (the think the best way to deal with registered in one country but land China’s new regulation will names of) those who beat up our unruly behavior onboard is the in another. As a result, it is not blacklist passengers who threaten staff, refuse to get on the plane or enhancement of the international clear who is responsible for taking or assault airport staff and cabin block the exit.” legal deterrent, specifically the action against the offending crew. Introduced by the China In Korea, a revised aviation Montreal Protocol 2014 (MP14).” passenger and they frequently Air Transport Association (CATA) safety law that has imposed The protocol was adopted walk free on landing. January, the misconduct that will tougher penalties on people who by the International Civil Aviation Colehan said MP14 will result in blacklisting includes in obstruct or harass flight crew Organization (ICAO) at a ensure states have the necessary blocking and attacking check-in came into effect in January. The Diplomatic Conference in early legal powers to deal with counters, security check passages bill was proposed by Saenuri 2014 when governments agreed unruly passengers, even if these and boarding gates, fighting Party lawmaker, Ha Tae-keung, to strengthen Tokyo Convention incidents take place on foreign inside the airport or on board of the National Assembly’s Land 1963. It provides a more effective registered aircraft that land in the the aircraft, attempting to force and Transportation Committee. deterrent to unruly behavior by offending passenger’s territory. entry to the cockpit or to open It followed the nut-rage scandal
12 / ORIENT AVIATION / MARCH 2016 NEWS BACKGROUNDER
in late 2014, in which Korean Air unacceptable behavior. Many heiress, Cho Hyun-ah, threw a airlines have trained both violent tantrum onboard because ground staff and cabin crew in she had been incorrectly served procedures not only to manage nuts in a packet and not a bowl in incidents of unruly behavior, first class. but also in measures to prevent Under the new law, anyone them. But a robust solution needs obstructing or harassing pilots alignment among airlines, airports or other flight crew is liable to and governments,” he said. be jailed for up to five years or The definition of unruly be fined up to 50 million won behavior is broad. It includes (US$41,255). The previous At its annual general disturbing good order on board non-compliance with crew maximum fine was five million meeting in Doha in 2014, IATA or failing to follow lawful crew instructions, consumption won. unanimously adopted a resolution instructions. At the time, IATA of illegal narcotics, sexual Intoxicated passengers who which called on governments director general and CEO, harassment and physical or injure other passengers face and the industry to produce a TonyTyler, said the resolution verbal confrontation or threats. fines of up to 10 million won, an balanced package of measures to confirmed the determination of The number of incidents being increase of 100%. The number deter and manage the significant airlines to defend the rights of reported annually is understood of reported air rage incidents problem of unruly air passenger their passengers and crew. to be around the 10,000, but involving Korean airlines and behavior. “Everybody on board is a majority of offenders are not passengers increased from 203 in Such behavior includes entitled to enjoy a journey charged. They escape with little 2013 to 369 last year. committing physical assault, free from abusive or other more than a verbal warning. ■
NEWS Flush with cash down under
he CEOs of Australia’s a 234% improvement over the financial performance following every part of its business two major airlines and same period a year earlier. his announcement of a half is profitable, including its Tasman rival, Air New In Auckland, Air New year underlying profit of $7.3 long-haul international Zealand, unveiled Zealand CEO, Christopher Luxon, million, which represented a operations. Once the rosy financial pictures reported a 154% increase in net $38.9 million turnaround from group’s worst performing Tfor their airlines at the February income, to $223.5 million, for a year earlier. The improved division, Qantas International announcements of their interim the period and forecast full-year result was driven by the group’s reported earnings up almost financial results, to December earnings would surge at least “disciplined execution of a 360%, to $192.9 million. 31, 2015. 70%. five-year $1 billion cost reduction While competition in Qantas Airways Group CEO, And Virgin Australia CEO strategy”, he said. the Australasian market Alan Joyce, who not that long John Borghetti and his team Qantas has well and truly remains tough, the carriers ago was announcing record have fought their way back into bounced back from the dismal have benefited from lower losses, described the company’s the black after several years $2 billion net loss it declared fuel costs and a truce in a US$491.4 million profit for of losses. Borghetti declared in 2014, although most of that fierce domestic capacity the half year as the best in the there had been a “significant was the result of writing down war between Qantas and carrier’s 95-year history. It was improvement” in the group’s the value of aircraft. Today, Virgin. ■
MARCH 2016 / ORIENT AVIATION / 13 NEWS BACKGROUNDER
Mixed messages emerge in the region’s capacity debate
At last month’s Singapore Air Show, manufacturers’ forecasts of more orders from the region’s airlines contrasted with industry analysts’ concerns about a looming capacity crunch in the Aisa-Pacific.
Tom Ballantyne reports
he big plane makers all the airlines are studying their were more than happy orders in the context of what the at the Singapore market is telling them.” Air Show and little Even a senior executive at wonder. They view Boeing hinted at a change in Tthe Asia-Pacific as a future cash the pattern of airline orders. cow. Some 12,800 new aircraft Dinesh Keskar, Boeing’s senior worth $2 trillion, or 40% of world vice president for sales for the demand in the next two decades, Asia-Pacific and India, said Asian is Airbus’s forecast for the region. airlines, famed until now for At Boeing, it is 12,820 jets at list multi-billion-dollar orders, have prices of $1.89 trillion. become more cautious as the But their confidence was not global economy slowed and shared by everyone. Expectations profits became thinner. of rapid growth and world- “Nobody has come to us and leading increases in air travel asked for any deferral,” he said, demand are all well and good, but but added the time for big-ticket as the show progressed it became orders may be over. They could clear a new caution about the be replaced by smaller buys with market is gaining traction. shorter replacement cycles. Governments, analysts and “You have not seen any some airlines suggested the substantial orders from this part forecasts would be dented by of the world (recently) and I think economic conditions, both in the there was a time when a 100 region and worldwide, as well plane order was considered the as aviation’s perpetual spoiler, fashion. It is not the case right Singapore minister for transport, Khaw Boon Wan: the Association overcapacity. of Southeast Asian Nations (ASEAN) and the European Union are now,” Keskar said. “From the Singapore minister for exploring a long-term aviation agreement Boeing point of view, we are in a transport, Khaw Boon Wan, good spot. warned of a darkening economic portend a slowdown in travel prompted them to order hundreds “In terms of the low-cost outlook that could slow air demand, he said. of jets. carrier market, our big customer transport growth when he spoke International Air Transport Carriers in the region, that in Southeast Asia is Lion Air. We at the Aviation Leadership Summit Association (IATA) director include Indonesia and Malaysia, have delivered 165 airplanes for in Singapore on the eve of the air general and CEO, Tony Tyler, also are confronted with overcapacity them and they continue to take show. tempered the manufacturers’ and intense competition, he said. deliveries on time. When we look Even collapsing oil prices, optimism. Airlines in Southeast “It’s easy to place these orders at airlines like Virgin Australia, Jet which on the face of it seem Asia, he said, may need to push when times are looking good. I Airways or SpiceJet in India all to benefit the region’s airlines, back delivery of aircraft, after wouldn’t be surprised if some of of them are doing fine. In fact, reflected a highly volatile a decade of economic growth them are pushed back. I’m sure some of them want their airplanes economic environment that could and optimism about air travel the planning departments of early, but our backlog is over
14 / ORIENT AVIATION / MARCH 2016 NEWS BACKGROUNDER
5,000 airplanes so it is difficult to new aircraft valued at $2 trillion, boosting the number of middle unmanned aerial systems. Safety accelerate anybody’s airplanes.” he said. class families and enabling them is an increasing challenge for Air Airbus president and chief “The Asia-Pacific will to spend more on air travel. Navigation Service Providers in executive, Fabrice Brégier, who continue to experience stronger Asia-Pacific traffic is expected to such an environment.” released the company’s regional growth than any other region in rise nearly 5% a year for the next Another challenge was forecasts at the Singapore show, the world as more people fly more two decades, and China is poised the increasing pace of aviation said traditionally the region has often,” he said. to become the world’s biggest liberalization in the region, Wan been one of Airbus’ strongest Concern about overcapacity, a travel market, said IATA. said. markets. frequent theme of commentaries Despite his short term The minister confirmed “In recent years, we have in recent years, has accelerated concerns, transport minister Wan ASEAN was working with consolidated our position with our as China’s economy slows down. also predicted a good long-term partners such as China, the modern and efficient products. Despite the Mainland downturn, outlook for aviation, but said European Union (EU) and others We expect this trend to continue said IATA’s Tyler, air travel remains that growth raises challenges for to conclude liberal air service in the coming years, especially robust in the country. “China is air navigation service providers agreements. The EU and ASEAN in the wide body market where seeking to shift the economy away (ANSPs). are exploring a comprehensive air the A350 XWB is setting new from capital investment and more “The number of passengers transport agreement, following standards in the 300 - 400 towards consumer spending, within ASEAN has tripled in the the EU-ASEAN Aviation Summit at seat category,” he said. Airbus which benefits airlines,” he said. last decade and routes have the last show in 2014. expected the Asia-Pacific to Across the region, with grown by almost 40%, to more He argued for greater continue to lead demand for new budget airlines holding 54% of than 1,500 city pairs. The region’s harmonization, information aircraft in the next 20 years. the market - more than twice reaction must involve air service sharing and collaborations John Leahy, chief operating the global average - fares and liberalization,” he said. between aviation regimes. officer, customers for Airbus, profitability have declined and “Airport capacity cannot “Increasingly, governments and explained the company’s forecast. that does pose a threat to the increase overnight and the volume industry need to work hand-in- An annual increase in passenger industry, he said. of airspace for aircraft to operate glove. Industry has the technical traffic of 5.6% would contribute While its economy is slowing, is finite. We also need to share expertise and governments set the to a requirement for some 12,800 economic growth in the region is this volume of airspace with rules of play,” he said. ■ NEWS
US$3.6 billion. The aircraft will be delivered between this Teaming up for training year and 2020, to facilitate the airline’s regional expansion. irbus and low-cost This agreement is a milestone a major milestone in delivering In 2014, at the Singapore Air carrier, Vietjet, have for both organisations. Airbus’ Training by Airbus in the region,” Show, the airline finalized an agreed to establish training expertise will ensure said Head of Airbus Customer order for 100 A320 family a flight training Vietjet’s capabilities in flight Services, Didier Lux. In January, aircraft. and maintenance training and maintenance is the Vietnam Civil Aviation At the close of 2015 Atraining facility in Ho Chi Minh in line with internationally Authority awarded Vietjet Vietjet had a fleet of 29 A320 City, the first Training by Airbus recognized standards. Investment Training Centre its Aviation and A321 planes, operating agreement in Vietnam. in an aviation institute is one Training Organisation certificate up to 190 flights per day on Under the terms of the of the most important goals At the Dubai Air Show in 35 routes including Singapore, partnership, Vietjet will install in Vietjet’s sustainable growth November last year, the LCC South Korea, Taiwan, an Airbus A320 full flight strategies.” ordered nine A321ceos and Mainland China, Myanmar simulator at its home base in the “Teaming up with Vietjet is 21 A321 neos, at list prices of and Thailand. ■ southern Vietnamese city to train flights crews for its A320 fleet. The facility also will introduce maintenance training, using the Airbus Competence Training classroom programme, to Vietjet’s training organization. Vietjet vice president, Dinh Viet Phuong, said: “Vietjet and Airbus have effectively collaborated with each other.
MARCH 2016 / ORIENT AVIATION / 15 MAIN STORY RISKY BUSINESS The knock-on effects of cheap oil for Asia-Pacific airlines are emerging as the industry’s reporting season moves into full swing. Some carriers are reporting rocket charged profits, especially if they had not hedged their fuel at past high prices, but that is only part of the story. Chief correspondent, Tom Ballantyne, reports on the impact $30 a barrel oil is having on the region’s airlines.
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uel is the life blood of the airline industry and its biggest cost. It also can be its Achilles Heel as past, extremely elevated aviation kerosene prices have demonstrated. This year, a barrel of oil will be the cheapest it has been in 12 years and airline profit Fmargins will be the highest they have been for more than 50 years. But it is becoming apparent that cheap oil can have its downside for in the Asia-Pacific, even at the best run Asia-Pacific carriers. In the latest financial monitor of the International Air Transport Association (IATA), it was reported that crude oil prices dropped to a 12-year low in January. The triggers for the decline were weaker global demand and concerns over excess supply, including the additional barrels of crude being pumped out of Iran. “If sustained,” said IATA, “the most recent declines in oil prices would reduce the industry’s annual fuel bill by approximately $12 billion in 2016.” That has to be good news for the airline industry, but for many carriers it’s a long way from a financial windfall. Overall, lower fuel costs may be pumping up profits but the reality is that Asia-Pacific airline profitability is lagging behind other regions. Asia-Pacific carriers are expected to grow earnings to $6.6 billion in 2016, from $5.8 billion last year, according to IATA. Average forecasts for overall profit per passenger is $5.13 in Asia, well behind the U.S. and Europe, where profit per passenger is expected to be $21.44 and $8.80, respectively. Asian carriers’ managers “are working to overcome numbers for the quarter. Operating these challenges”, IATA’s Tyler said. “It’s hard to say when profit was up $205 million, but losses from jet fuel things will improve. It’s going to take a little bit of time to hedges were $51.3 million. Foreign exchange (forex) losses recover in terms of profitability.” Whether the improvement came in at round $55 million. continues to gather pace or suffers another setback won’t only Said SIA in its official results statement: “While more depend on managements continuing to introduce operational relief could arise from lower fuel prices, which have declined improvements and efficiencies but if the price of oil remains to a 12-year low, fuel continues to make up a significant stable at relatively low levels,” he said. portion of the Group’s expenditure, with 46.6% of the IATA pointed out the hedging policies of a large number Group’s fuel requirement in the fourth quarter hedged at a of airlines have fixed their fuel costs at earlier, higher prices, so weighted average price of $90 per barrel.” there will be a delay in benefiting from cheaper oil. That, said Shukor, is quite a significant volume hedged An example is Singapore Airlines (SIA).The carrier posted at prices well above the current levels of jet fuel per barrel a net profit of US$196 million for its third quarter, ending (between $35 and $33 per barrel at press time).He said a sharp 31 December 2015, up 36% rise in oil prices accompanied compared with the $144 million by more weakening of the profit it reported in the same Overall, the lower fuel costs Singapore dollar would raise period a year earlier. may be pumping up profits costs and put more pressure on The better results were but the reality is that Asia-Pacific margins. largely due to a 24% drop in the While SIA is far from being company’s fuel costs plus gains airline profitability is lagging alone in having fuel hedged at from the sale and lease back of other regions. Asia-Pacific carriers prices well above the current some SIA aircraft. But they could spot price for some months to have been better. are expected to grow earnings come, other issues that could As principal analyst at to $6.6 billion in 2016, alter airlines’ strategies, because Malaysia-based Endau Analytics, from $5.8 billion last year oil is so cheap, have emerged. Shukor Yusof, explained, the SIA Analysts are asking if cheap profit report contained other key International Air Transport Association fuel will encourage airlines to
MARCH 2016 / ORIENT AVIATION / 17 MAIN STORY
in fares during 2016 as fuel hedges unwind,” said IATA. And low oil prices also are helping to increase seat capacity. Aircraft that had been in storage because they were uneconomical to fly, are being reintroduced to airlines’ fleets. The flipside of this trend is the negative impact it will have on the industry’s carbon emissions reduction programme. Rather than invest in cleaner planes, airlines can operate less-efficient, fuel-hungry aircraft, without a significant cost impact. Another worrying development is that global seat capacity increased 5.1% in 2015, but the average passenger load factor “dropped back sharply” in December and airlines’ break-even load factor declined in line with the fall in unit costs. keep older aircraft flying In essence, declining load factors coupled with intense longer and postpone or delay deliveries competition, particularly in the Asia-Pacific, are putting of costly new fuel-efficient jets. increasing pressure on yields and a brake on potentially higher As well, airlines have been criticized for keeping fuel profitability. surcharges in place in a cheap oil environment and accused The stagnant state of the cargo side of the business - Asia of profiteering by not passing on fuel price reductions in the has been hit hardest in this sector – is not helping. Air freight form of cheaper fares. volumes ended 2015 just 0.5% higher than they started the “It is nonsense,” said Tyler. “It is simply not the case that year. The freight load factor has settled at a six-year low, anyone is profiteering. While fuel is still a big element of maintaining intense pressure on cargo yields. airline costs, there is still a huge chunk that is not affected, so There also are broader ramifications to consider in the to expect fares to tumble just because fuel has come down is cheap oil scenario. For example, thousands of Filipinos work wholly unrealistic.” overseas, many of them on oil rigs, tankers and as domestic or Speaking at an aviation summit on the eve of the construction workers in oil-producing nations in the Middle February air show in Singapore, Tyler said industry East. profitability remained fragile despite the record $36 billion They sent home $22.8 billion in the first 11 months global airline industry profit forecast for 2016. of 2015, which is approximately 10% of the Philippines “Certainly, lower oil prices have helped, but that impact gross domestic product (GDP). A prolonged period of has been delayed and diluted in many parts of the world due oil at less than $30 a barrel could have a negative impact to forward hedges at higher than market rates and the rise of on remittances, produce less revenue from fuel taxes, cut the U.S. dollar against local currencies. thousands of jobs and potentially produce a slump in travel. “As costs come down so will fares, and the public is Weak economic data from China, the world’s largest getting an extremely good deal from the industry right now,” energy consumer, has hit global stock markets hard. The he said. Airlines argue they are only starting to develop a Mainland’s manufacturing sector contracted at its fastest sustainable profit for their investors due to high capital costs, pace since 2012 in January, adding to worries about demand regulatory constraints and intense competition. at a time when the market is already weighed down by a large Tyler pointed out that the majority of this year’s industry oversupply of oil. profits, or $19.2 billion, will be generated in North America “China is the last standing consumer of oil outside of and he warned again about the profitability of carriers in the U.S. The problem is that everyone is relying on them,” Southeast Asia, home to cut-throat competition between said Carl Larry, director of business development at Frost & low-cost carriers. Sullivan in Houston. While fuel has fallen, the dollar has risen by 20% against When it comes to fuel charges, airlines said the travelling regional currencies in the last 18 months, he said. public does not understand that fuel charges do not fully Despite the fuel surcharge criticisms and the claims of reflect the true costs of fuel when it is expensive. Airlines sell profiteering, IATA statistics clearly show airfare levels have tickets months in advance without any knowledge of what been falling. In the first 11 months of 2015, they decreased the cost of fuel on a given day of travel will be. It is one of the 12% year-on-year. Even adjusting for the impact of an reasons they hedge. It allows carriers knowledge of what they appreciation of the US$ they were still 5% lower. will pay for fuel on a future date. “Recent falls in oil prices and competitive pressures Nevertheless, most airlines in the Asia-Pacific have within the industry are likely to translate into further declines reduced or removed their surcharges. Airlines in Japan,
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where surcharges are regulated, and South Korea, have been to rise to 4.9% in 2016, CAPA said, to above the historic removing the charges in recent weeks. average 4.4% - for the first time since 2001. “The percentage Qantas began rolling fuel charges into their base fares a of retirements among new deliveries is also falling, possibly year ago. Hong Kong’s Civil Aviation Department banned because the lower fuel price makes it economic to keep older fuel surcharges for flights originating in the city in February, aircraft longer,” it said. ■ “because fuel prices have greatly reduced and stabilized to a reasonable level”, it said. Fuel surcharges on flights operated by Taiwanese The oil price prognosis carriers have been lowered, but not eliminated by the Civil Mohammad A. Al Sahlawi, a former member of the Aeronautics Administration (CAA). The fuel surcharge for advisory board, Supreme Economic Council of Saudi short-distance flights was cut by $2.50 per sector to $5 and for Arabia, and now a professor of economics at the college of long-haul flights by $6.50 to $13. industrial management, King Fahd University of Petroleum In Malaysia, budget airline group, AirAsia, removed all and Minerals in Riyadh, said in January the price of crude fuel surcharges a year ago. In Indonesia, the Transportation should stay around $20 for at least 12 months. “We don’t Ministry announced in January it would cut the airfare see a major growth in demand in emerging economies ceiling price for economy-class flights by 5% following the like China, and supplies are expected to increase from slump in the oil price. If the fuel price goes up fare caps will be many countries especially Iran and the U.S. So there is less demand and more supply, so prices would be at adjusted accordingly, the ministry said. lower level.” SIA said it regularly reviews its fuel surcharges and “and Asked at a financial markets conference in Dubai whenever changes are decided upon we announce them to the when he expected a recovery in oil prices, Al Sahlawi market”. said: “not very soon, we may see a recovery in 2-3 years”. As for hedging, the picture among the region’s airlines is That forecast seems plausible, given the reluctance of mixed. Chinese carriers have not hedged at all since losing big oil producers to slow production and cut supply, which time during the global financial crisis. They have benefited would drive the price up. Despite the huge slump in oil greatly from buying fuel at spot prices. But most other airlines prices in the last 18 months, the IEA (International Energy have some of their fuel hedged. As these hedging contracts Agency) said it is unlikely that Saudi production will fall mature in coming months, the decision to renew them or below 10 million bpd (barrels per day) in the coming months. operate in the hope fuel prices remain low is the $64 question Saudi Arabia has produced more than 10 million bpd in the present uncertain global economic environment. for ten consecutive months, pushing its average output In January, Peter Morris, chief economist at Ascend, said at the end of 2015 to a record 10.17 million bpd. The low oil prices were not expected to result in airlines cancelling Organisation of the Petroleum Exporting Countries (Opec) orders for new fuel-efficient planes, developed when the oil is pumping close to record amounts of oil despite tumbling price was high. prices. To add to the supply glut, another 400,000 bpd is “The oil price has gone down, but the added benefit is expected to come on line from Iran, Opec’s fifth largest someone has brought a whole new range of toys to play with,” producer. he said. Nevertheless, the possibility of cancellations of fleet A contrary view was voiced at an airline economic orders has been raised. conference in Dublin in January, where Mike Corley, head of Mercatus Energy Advisors, warned the oil price could A report by accountancy firm, PwC, suggested airlines bounce back quicker than people were rethinking fleet management as oil prices shrank. expected. “Carriers may opt to keep older planes operating longer and/or lease older aircraft that otherwise would have been decommissioned,” it said. “Consequently, the older fleet becomes more valuable while fuel prices remain low. There could be an adverse impact on Boeing and Airbus if airlines opt to delay orders for new aircraft although the two manufacturers will continue to benefit from a backlog of unfilled orders for 12,000 aircraft, valued at $12 trillion.” CAPA consultancy said fleet growth had been below the long-term average since 2002, as airlines retired aircraft at a faster rate than normal. However, the fleet growth rate is expected
MARCH 2016 / ORIENT AVIATION / 19 COVER STORY MUELLER’S MEDICINE FOR MALAYSIA AIRLINES Airline corporate doctor, Christoph Mueller, has a reputation for turning around failing aviation businesses. His latest project, resusciating Malaysia Airlines Berhad (MAB), is his toughest test yet. After almost a year on the job, the MAB CEO told Orient Aviation’s chief correspondent, Tom Ballantyne, the transformation is on the way.
alaysia Airlines had been in intensive care for months when the former CEO of the Aer Lingus Group, Christoph Mueller, arrived in Kuala Lumpur last Myear to embark on the formidable task of restoring the airline’s reputation. In the previous 12 months, the carrier had lost 537 lives from two jet accidents, with one of the aircraft, MH370, and all its passengers and crew, still missing. The accidents did massive damage to the airline’s brand. The 54-year-old European’s remit from the airline’s new owner, sovereign wealth fund Khazanah, also required him to make the new airline entity, restructured from a failing MAS, profitable. The former flag carrier had been loss-making for years. It was generally agreed that if anyone could do it, calm but battle hardened Mueller could. He took over as CEO of struggling Aer Lingus in 2009 and within a year had put the carrier into profit. He also staved off an assault on its share register from low-cost carrier, Ryanair. Before that he had imposed balance sheet discipline on several aviation businesses MAB CEO Christoph Mueller: and had had many successful years in senior management at His airline’s code share with Emirates Lufthansa. Airline almost doubled the routes At MAB, Mueller was faced with a technically the carrier offers to its customers
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bankrupt business. He knew the cure would not be pretty. In what he described as a “hard reset program” some 6,000 jobs Winning back the Chinese have disappeared at the carrier, capacity was reduced by 30% Mueller is confident that MAB has excellent prospects and loss-making routes have been eliminated with clinical in the China market, where it took a big hit in reputation precision. Unsurprisingly, morale was reported to be at an and bookings in the wake of MH370. The ill-fated flight all- time low. was operating from Kuala Lumpur to Beijing and had many Today, with several major changes accomplished, it was Chinese passengers on board. now a matter of “rolling up our sleeves” and getting stuck into “We are recovering in China. We have reached the the hard work, Mueller said. “That is no rocket science. There seabed. One thing, of course, is a certain damage to our is no element of hope or wishful thinking in it. It’s really a very reputation. We may just need some time to recover that. military plan that needs implementation.” Other airlines have experienced the same. You cannot “The airline is on track to return to profit in 2018. “That change that overnight.” Mueller said. is still our projection going forward,” Mueller told Orient He pointed out that China “has taken a little bit of a haircut” on GDP (Gross Domestic Product) in recent times. Aviation in an exclusive interview last month. “The correlation between GDP and passenger demand is A more difficult task could be fully re-establishing MAB as above 95%, but we have now a phenomenon in China that a recognized and reputable brand. “We had the two tragedies. has not been observed in many countries in the world. In We do not feel guilty. I think the attitude is to look at it as fact, business traffic still correlates to GDP so business fate. To re-establish customer perception is most probably the traffic to and from China is down,” he said. biggest challenge. That will take some time. We just have to “But surprisingly, private consumption has not been tour the world and re-establish our place as a new company,” affected by the decreasing GDP at all. There is an interest- he said. ing explanation behind this. Private consumption - tourism In the meantime, it is difficult to judge how well MAB or outbound tourism in China - correlates with the number is performing financially, but it certainly remains in the red of passport holders, not with GDP. “And the number of passport holders in China is only operationally, at least for the time being. Khazanah has secured 4% of the entire population. It’s an astonishingly low the airline’s stability with funding of US$1.4 billion, but it has number. With the rate at which new passports are issued, piled up debts close to $1.5 billion. we expect that to increase to 10% in the next seven or The airline was delisted in November 2014. It was the eight years. last time it announced a result, a $308.9 million loss for the “So outbound tourism is increasing and there is strong first nine months of that year, compared with a loss of $196.5 tourism demand originating in Mainland China. The million in the same period a year earlier. It has made a financial second factor that is helping us recover is that Chinese loss every year since 2011. tourists have two things they like very much when they Unfortunately, the plunge in fuel prices has not helped the travel somewhere: people with the ability to speak their carrier’s bottom line, thanks to the depreciation of the local language, which is plentiful in Malaysia, and secondly Chinese food. So we are one of the destinations of choice currency, the Ringgit. “In fact, the depreciation of the Ringgit for Chinese tourists. They also come here in large numbers is slightly stronger than the benefit we have enjoyed from the to shop in Kuala Lumpur and that helps.” low fuel price, so it’s not entirely a wash,” said Mueller. “We are harder hit by the Ringgit and that is easy to explain. More than 50% of our costs are denominated in US has removed several jets from its fleet. They include 17 dollars and we still have income of approximately 50% in B777-200ERs, which are all of grounded, sold or returned to Ringgit. This is the reason we are being hard hit. lessors. Its fleet stands at 77: six A380s, 15 A330-300s and 56 “The Ringgit has recovered compared with the beginning B737-800s. The latter is due to be reduced to 35 by year end as of the year, but we still have a slight deviation to our business older planes are retired. plan. So let’s knock on wood that the Ringgit is strengthening On order, for delivery from 2018, are four A350-900s and the fuel price stays where it is.” with options on another two. It also has options with lessor, Until now, the airline has not hedged its fuel. “We were Air Lease Corporation, for two A330-900neos. Although it simply too poor to do hedging, but now, with the funding from was widely reported that MAB tried to sell its fleet of A380s, our shareholder we are contemplating re-entering the hedging Mueller said there had been “a huge misunderstanding” in the scene. That would not be limited to fuel. Currency hedges are media. one of our considerations,” he said. “We always wanted to retain them until 2018 because He sees fuel hedging as a risk mitigation tool. “Basically, they are the only aircraft we can fly with to London. London it dampens a little bit the spikes and gives our commercial has never been questioned as a destination in our network. department a little bit more lead time to react to fuel prices. London is basically so important to Malaysia, for a variety of I believe a proper revolving hedging policy going forward 18 reasons, that we would never have contemplated touching that months is applied by most carriers in the world and that’s how route and we need all of the A380s. That will be the case until we will do it. The risk mitigation is just stronger than forgotten our new A350s arrive and that will be 2018. We are also, on opportunities,” he said. an increasing basis, using the A380s for religious traffic to the However, the fuel bill has been shrinking because MAB Middle East,” he said.
MARCH 2016 / ORIENT AVIATION / 21 COVER STORY
The right-sizing of the fleet and the reduction in staff from 20,000 to 14,000 were no back of the envelop exercises. It was Capacity crunch coming? a carefully devised plan based on where MAB needed to fly, Has he found any differences in running an airline in where it didn’t and what its focus should be. MAB has dropped Asia from Europe. “You sometimes wonder if the industry services to Paris, Frankfurt, Amsterdam and Istanbul and cut has learned anything from the deregulation in the U.S. and capacity to Australia by 40%. It also reduced frequency to Europe,” he said. “We are making the same mistakes all several Asian destinations. over again, pouring too much capacity into otherwise very Mueller said the restructuring of an airline should be done healthy markets and destroying the whole place. Currently, with markets in mind. The carrier’s long-haul network was we have offerings in the market to fly to Langkawi for 20 designed when most airlines focused on traffic between Europe Ringgit ($4.75). It’s unsustainable. It is a little bit of a surprise and Australasia. that the same mistakes are being made all over again.” Even today, he said, big airlines were using re-fueling stops in hubs such as Singapore and Hong Kong to link the markets. and then places where it is difficult to generate enough traffic “What I’m saying is that the world has changed and there from Malaysia to fly to such cities as Tashkent, Teheran and are two main impacts. Number one, that entire traffic from many other destinations in the Middle East. Europe to Australasia has gone to the Middle East carriers. “By the end of the year, the choice of destinations you They are much more competitive because of their geographic can reach with Malaysia Airlines will have increased by more location and of course they are start-ups and are in a superior than 60. “That is significant because we operate ourselves to cost position,” he said. a little bit more than 70. It’s almost doubling the end points “Secondly, the trade between Europe and Australasia in our network. What our customers like most is that they became inferior with the ascent of China. In 2001, China was can earn miles in our Enrich frequent flyer program for these number nine or 10 in ranking in the world economy. Now it flights. Very soon they will be able to redeem them on Emirates is a very close number two to the U.S. Relevant traffic streams flights.” have changed. So our new network design was based on new Initially, the MAB code is appearing on Emirates flights origin and destination flows and new trade relationships to 38 European destinations, 15 cities in the U.S. and 38 in the between Malaysia and these emerging economies.” Gulf, Africa and Indian Ocean, with more to come. None of this means Europe is being downgraded in As for the financial benefits expected from the partnership, importance. One of the major steps Mueller took was to Mueller wasn’t saying. “Yes, we know that, precisely down to follow the example of Australia’s Qantas Airways and sign an the last cent, but I would be reluctant to share that with you. It extensive codeshare deal with Emirates Airline. The deal was is significant and it is not only in terms of delivering additional done in Dubai late last year. revenue to us,” he said. “We are in a similar situation to Qantas. Flying into “What you have to take into account is that we axe the Europe ourselves had very thin traffic streams that left you with losses on certain of our European routes and that is a bottom insufficient load factor. What does it mean for us? Clearly, we line improvement in its own right. We are getting rid of the want to extend our network to those places where we will never losses, but still retaining the traffic.” be able to fly with a full aircraft ourselves,” he said. One of the key factors in achieving success at MAB was “That is Europe in the first place, but we will have more reducing the staff to fit a smaller airline. Termination letters network extensions [through Emirates] to Africa, Latin were sent to all 20,000 staff, with 14,000 being retained America, North America on new contracts. The airline has another 2,000 workers on temporary contracts, but these jobs will be gone within this year. “Why is that? Because you simply cannot adopt new working procedures overnight,” said Mueller. “In some cases you need the help of supporting IT systems. In others you have to rewrite standard operating procedures. Now we are in a phase of the restructuring where we have to roll up our sleeves because the hard work is coming. “We have structured more than 200 projects on the revenue and cost side. Some of them can be implemented rather swiftly and some others are dependent on a better IT structure and that can take up to two years in some cases. That’s where we stand.” Mueller and MAB’s senior management also have to deal with staff morale, which was at an all- time low after years of losses and the two accidents in 2014. Mueller described the morale situation today as “a
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little bit of a mixed bag”. It was explainable, he said, because entire service chain,” he said. “those who were offered permanent contracts are very excited, But achieving sustainable profitability still won’t be easy. looking forward and wanting to create something new”, he MAB continues to operate in a fiercely competitive market said. awash not only with full-service rivals, but aggressive and still “For those who are with us on a temporary contract and expanding low-cost carriers. know the leaving date is coming closer, I cannot blame them Mueller said competing is difficult, but not impossible. when they are not singing and dancing. But we will overcome “If you had a choice between two or three carriers price still is that situation in a couple of months’ time. I would answer by the predominant factor. But what we can utilize, particularly saying staff morale has increased.” against LCCs, is the quality of our schedule. Another Another critical change to be introduced at MAB is a important factor is connectivity here at KLIA (Kuala Lumpur measure to ensure staff and management can communicate International Airport),” he said. effectively, often a problem for airlines. MAB has no unions, “We are the only carrier in the land able to seamlessly but Mueller believed it was very important to have employee connect passengers and luggage. Low-cost carriers don’t have representation. the IT capabilities to do that according to IATA standards. It “Shortcomings, leadership and whistle-blowing and all is the benefit of a well-planned network. We are known in the these type of things need to be channeled in a certain shape and market and we offer full service. That’s where we compete, on form. So what we did, which is most probably unprecedented, service and on schedule.” ■ was call in the employee representatives and asked them if they could kindly consider electing work councils so we had a counterpart to speak to,” he said. The corporate doctor “That process is currently on-going. We have invited each There is little doubt that Malaysia Airlines’ owners employee group to elect two representatives: two from the could not have found a better candidate to resurrect their flight attendants, two from the pilots, two from the mechanics, stricken flag carrier than Christoph Mueller. two from ground handling and so forth. It will allow us Having built a reputation as a turnaround specialist in to communicate better with our employees and enable the more than 25 years in the aviation, logistics and tourism employees to tell us what needs to be improved.” industries, the 54-year-old executive’s record for results Absorbed as he is in the complexity of the airline’s spoke for itself. His latest project, before taking charge of restructuring, Mueller is not ignoring the need for MAB the new Malaysia Airlines Berhad (MAB) in March last year to offer world-class service. He said the carrier has rightly was the successful rehabilitation of Ireland’s Aer Lingus. been recognized for its good service delivery – the Malaysian Mueller, a 1988 graduate of the University of Cologne and a holder of an MBA, joined Lufthansa as a financial mentality is to be very hospitable – but conceded the product analyst in its internal audit department in 1989. From 1991 needs a complete refresh. to 1994, he was a financial controller with Daimler-Benz “Little had been done because the airline was suffering Aerospace, where he implemented restructuring programs from losses in the last couple of years. What is needed is a heavy in several subsidiaries, including Dornier and Fokker. He investment in our products,” he said. re-joined Lufthansa as senior vice president finance in Several improvements will be rolled out this year. A 1994 and was promoted to executive vice president in completely new catering concept is being introduced. “We corporate planning and network management. will be absolutely leading in our food offering. Food is a very After completing an Advanced Management Program important factor in Malaysia. The cultural diversity we enjoy at Harvard Business School in 1999, he joined Belgian will enable us to offer the best Indian food if you fly to the airline, Sabena, as its chief executive; a job cut short by the downturn in the airline industry that followed the 9/11 subcontinent, the best Chinese food if we fly to China and also terrorist attacks in 2001. As bankruptcy approached for the to Australia, a good steak cannot be rejected,” he said. airline, Mueller went to the market for funds and launched “Catering will be rolled out in three waves. We started on Brussels Airlines on the day Sabena was grounded. our First Class just a week or two ago. That will be followed by He was chairman of the airline until 2002 and then long-haul business class and then the shorter routes.” moved across to DHL Worldwide as chief financial officer. New Business Class seats are being introduced. “The Within a year, he had taken the company to an improved seats are above business class average. They are totally lie flat, bottom line of $300 million. Mueller also was the executive but they are very wide and very long. There is a lot of storage aviation director at Tui Travel, where he restructured the space. I think they are just a notch below certain First Class lease portfolio and order book of seven airlines and their seats I have flown recently on competitor carriers. That’s very 170 aircraft. He also held non-executive directorships at several important because we fly long stretches,” he said. companies including LOT, Luxair, Lauda Air and Tuifly. The airline’s lounges worldwide are being refurbished and In 2009, he was appointed chief executive of Aer Lingus, modernized and crew will have new uniforms. A completely guiding the loss-making carrier to profitability in just 12 new inflight entertainment system will be installed on the fleet. months. Under his leadership, Aer Lingus improved its When Orient Aviation spoke to Mueller he had just operating results from a loss of $90 million to an $80 returned from a meeting on the introduction of Wi-Fi on most million profit in a shrinking Irish market. of the fleet, beginning early next year. “We are redoing our
24 / ORIENT AVIATION / MARCH 2016 16T0300_ATR_11_OrientAviation_GB_202x273mm.ai 1 29/02/2016 10:28
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No where to grow As Asia-Pacific airport traffic continues to outpace forecasts, the growth is prompting more warnings from carriers that governments must accelerate their infrastructure expansion.
By Tom Ballantyne
hen a number of Asia-Pacific airports released their detailed traffic Wstatistics for 2015 it confirmed the predictions of airlines that airports will face serious congestion if they don’t fast track infrastructure expansion. In 2015 at Tokyo Narita international airport, which already is squeezed for slots, domestic and international passengers hit a record high in 2015, for the second consecutive year. They increased by 5% over the previous year, to 37.32 million. The growth, including a bringing it closer to full capacity. million passengers for 2015. growing to 21.1 million, an 23% increase in foreign visitors, Following a record-breaking Airports of Thailand (AoT) said increase of 35.9%. to 12.49 million, reflected a 2014, the airport’s traffic the expansion momentum is The director general and surge in visitors to Japan as volumes continued to surge expected to continue in 2016 CEO of the International Air the Yen declined and domestic last year, with 68.5 million and conservatively projected Transport Association (IATA), flights operated by low-cost passengers and 406,020 flight 11% growth in combined Tony Tyler, wrote in a recent carriers increased, said the movements, growth of 8.1% and passenger numbers for the year. commentary in Japan’s Nikkei Narita International Airport 3.8%, respectively. The airport’s Bangkok’s Suvarnabhumi, Asian Review that historically, Corporation. cargo throughput also reached a the gateway to Thailand, the Asia-Pacific had shown It was a similar story at record 4.38m tonnes. accounted for the lion’s share leadership on infrastructure. “It Osaka’s Kansai International “Expanding the airport into a of air traffic, handling 52.9 is home to several of the world’s Airport. For the first time since it three-runway system (3RS) is the million passengers last year, up best and biggest airports. opened in 1994, foreign travelers only option for us to meet long- by nearly 14% over the previous The Asian travel experience topped 10 million in 2015, a 59% term air traffic demand,” said 12 months. Its official passenger is certainly among the most increase over 2014. Passenger Airport Authority Hong Kong capacity is 45 million a year. pleasant in the world,” he wrote. traffic hit a record 23.21 million, chief executive, Fred Lam. “We The city’s second airport, Don “It will not stay that way with the number of people on will continue the preliminary Mueang, had the strongest without continuous hard work, international flights jumping work on the 3RS project, aiming passenger growth, not only in strategic investment and regional 24%, to 16.25 million, also a to commence construction this Thailand but in the region, as cooperation. Singapore, Hong record. Domestic passengers year,” Lam said. surging low-cost carrier traffic Kong and Seoul are legendary grew 11%, to 6.96 million. It is a similar story across the pushed the facility well beyond for great passenger experiences. Hong Kong International region. In February, Thailand its limits. Passengers using But there are some regional Airport (HKIA), the third busiest reported its six main airports Don Mueang leapt 40.7%, to bottlenecks to sort out. airport in the Asia-Pacific, also had robust passenger growth 30.27 million, with international “For example, you would be set records for passenger traffic of 21.3% last year, setting numbers jumping 53.1%, to 9.17 hard-pressed to find anybody and aircraft movements in 2015, a record of just under 110 million, and domestic passengers singing the praises of the
26 / ORIENT AVIATION / MARCH 2016 NEWS BACKGROUNDER
airports in Jakarta or Manila airport, but it will likely be and comments on Bangkok’s inaugurated five years behind Suvarnabhumi airport are as schedule if it follows procedures likely to be about its crowded as required, the National corridors as about its great Assembly Economic Committee shopping experience,” Tyler said. in Hanoi has warned. “Building the infrastructure To complete all procedures to meet growing demand would mean that site clearance for people and businesses won’t start until 2020 and to connect by air is a global land acquisition by 2023, the challenge, he said. “The committee said. Construction pressure is most intense in were fulfilled. There is no reason the AAPA is concerned that could commence as late as the fast growing Asia-Pacific, to believe that the ASEAN adequate provision be made to 2030. The $16 billion airport, where airports and skies will experience will be any different. accommodate the expansion. with a capacity of 100 million need to handle 2.5 billion more Cost-efficient infrastructure must “Most big hub airports, passengers and five million passengers than they do today.” be available to accommodate such as Singapore and Seoul, tonnes of cargo annually, would Tyler said that all the region’s demand,” he said. are ahead of the game, but not be completed until 2050. aviation infrastructure will come Association of Asia Pacific red tape is causing bottlenecks Many believe that even in under increasing demand as the Airlines (AAPA) director general, elsewhere,” he said. China, one of the worst areas for Association of Southeast Asian Andrew Herdman, said: “Looking An example of cumbersome airport and airways congestion, Nations’ (ASEAN) single aviation at the region’s forecast of 5% to bureaucracy inhibiting airport the $11.7 billion being spent market policy comes to fruition. 6% continuing annual growth, development is the proposed this year on the construction “Every market that has liberalized and with the region projected Long Than International Airport, of civil aviation infrastructure is has seen an economic boost as to order around 40% of all new to be built outside Ho Chi Minh insufficient to solve forecast air people’s needs for connectivity aircraft over the next 20 years, City. It will be Vietnam’s largest traffic and airport congestion. ■
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MARCH 2016 / ORIENT AVIATION / 27 ENVIRONMENT
Landmark industry standards for emissions Airlines and industry manufacturers universally supported the long-awaited announcement on emission standards for passenger and cargo jets but some critics want more stringent rules.
Tom Ballantyne reports
t has taken six years of phase of flight, starting in 2028, council president, Olumuyiwa manufacturers. “Airbus has painstaking negotiations and when compared with planes Benard Aliu, said the agency’s invested significantly in improving technical work, but finally the delivered in 2015. They also must goal “is ultimately to ensure that the environmental performance world’s aviation regulator, in set a 33% emissions reduction when the next generation of of its sites, products and services, the form of the International target for new large aircraft in aircraft types enters service, there consistently bringing the most ICivil Aviation Organisation’s production, commencing in 2023 will be guaranteed reductions in eco-efficient aircraft to the (ICAO) environment panel, has and staggered over a five-year international carbon emissions”. market, meeting and surpassing announced new standards for period. “The agreement of this environmental performance greenhouse gas emissions from Negotiators agreed to a CO² standard is a vital and very requirements,” the Toulouse- aircraft. second standard, which would welcome development,” said based plane maker said in a From 2020, ICAO will deliver a 36% reduction in Tony Tyler, director general and statement. require all new aircraft designs emissions on new models of CEO of the International Air It said its new A320neo to meet the new standards. large planes from 2020. The Transport Association (IATA). reduces CO² emissions by 15% Designs already in production new standards will not apply to “The CO² Standard does not today, rising to 20% by 2020, must comply after 2023. There existing in-service aircraft. solve aviation’s climate challenge while the A350 XWB is cutting will be a cut off date of 2028 The Committee on Aviation on its own, but it is an important CO² emissions by 25% compared for manufacturers that have Environmental Protection (CAEP)’s element in our comprehensive with the aircraft it is replacing. not introduced the new ICAO agreement must be approved strategy for tackling carbon The A330neo will offer a 14% standards into their aircraft fleets. by ICAO’s 36-nation governing emissions. reduction in CO² emissions, and The standards will be council, but no substantial “The next milestone will be the A380, in service since 2007, the first to impose binding changes are expected. ICAO the implementation of a Market shows a 40% reduction in CO² energy efficiency and carbon Based Measure to address CO² emissions compared with previous dioxide (CO²) reduction emissions, which we hope will be generation very large aircraft. targets for aviation. When fully agreed at the ICAO Assembly in Boeing commended the implemented, they are expected September. Our shared industry CAEP agreement and said it to reduce carbon emissions from goals are for carbon neutral is fully committed to meeting aircraft by more than 650 million growth from 2020 and a the new emissions standards. tons between 2020 and 2040, 50% cut in CO² emissions This agreement represents real equivalent to removing more than by 2050. This CO² standard progress beyond the substantial 140 million cars from the road for is a significant milestone industry achievements already a year. in meeting those targets. made to reduce aviation Airliners must achieve an It proves the industry and emissions, it said. average 4% reduction in the world’s governments are “The new standard is fuel consumption during working together in seeking a ambitious and will become part of the cruise sustainable future for aviation.” the certification process applied The announcement was to every airplane before delivery welcomed by the big aircraft based on the ICAO schedule,” it said in a statement. “We have ICAO council president, made significant investments Olumuyiwa Benard Aliu: the next to improve the efficiency and generation of aircraft types will have guaranteed reductions in environmental performance of carbon emissions our products and will continue to
28 / ORIENT AVIATION / MARCH 2016 ENVIRONMENT
do so. Environmental goals are of achieving when the ICAO aligned with our business goals as standards take effect. greater fuel efficiency and lower As a result of demands from emissions are top priorities for our their airline customers, the latest commercial customers. Boeing and Airbus designs already "We believe the ICAO meet the proposed efficiency standard will have the intended standards, he said. In the results of ensuring older aircraft meantime, the manufacturers can are replaced by newer, more continue to sell older, less efficient efficient aircraft that will further designs for years as airliners now reduce fuel use and carbon in use are exempt from the new emissions.” standards altogether, meaning Boeing said its B787 even dirtier planes can continue to Dreamliner family reduces fuel fly, he said. use and CO² emissions by 20% Environment groups added to 25% compared with aircraft it ICAO had been working on replaces. international standards for 18 The new B737 MAX, with years and is now proposing to give first delivery expected in 2017, aircraft manufacturers another will reduce fuel use and emissions dozen years to comply. by 20% compared with the in with praise, when it said the environment groups was muted. “This outcome was the original Next-Generation B737. agreement “is an important signal Dan Rutherford, aviation director minimum needed from ICAO The B777X, with first delivery that the international community at the U.S.-based International for a credible first start,” said Bill scheduled for 2020, will be is well-positioned to rise to the Council on Clean Transportation, Hemmings, aviation director at the world’s largest and most challenge of implementing a said the standards don’t set the Brussels-based NGO, Transport fuel-efficient twin-engine jet, said global market-based approach to bar high enough. He said they & Environment. “The Europeans Boeing. reduce aviation emissions”. require reductions of only a third moved a bit, but it was not what Even the White House chimed But the response from some of what aircraft will be capable the U.S. administration wanted.” ■
NEWS Singapore upgrades aircraft tracking
By Tom Ballantyne CAAS will set up the necessary services for the areas under our the company said. infrastructure to integrate responsibility.” Aireon is deploying a ingapore’s regulator, the service with its Air Traffic Chief executive at Aireon, global, space-based air traffic the Civil Aviation Control systems. The system will Don Thoma, said Aireon had surveillance system for ADS-B Authority of Singapore supplement existing surveillance signed a Memorandum of equipped aircraft across the (CAAS) has become sensors and improve air traffic Agreement with CAAS a little globe. For the first time, it the first air navigation controllers’ situational awareness. over a year ago to explore will provide real-time ADS-B Sservice provider in the Asia- “Demand for air travel the feasibility and impact of surveillance to oceanic, polar Pacific to adopt space-based is growing rapidly in the implementing space-based and remote regions as well ADS-B (Automatic Dependent Asia-Pacific region,” said Kevin ADS-B in the Singapore FIR. as augment existing ground- Surveillance – Broadcast) that Shum, the director general of “The CAAS and Aireon based systems that are limited will allow equipped aircraft to be CAAS. “CAAS is committed to teams successfully worked to terrestrial airspace. tracked wherever they are flying continuously investing in cutting together to evaluate the In partnership with in the country’s airspace. edge and cost effective air traffic capabilities, assess the leading Air Navigation Service The CAAS signed a 12-year management capabilities to operational changes and Providers, NAV CANADA, the subscription agreement with manage this growth. The use measure the benefits that could Irish Aviation Authority (IAA), Aireon during the Singapore Air of space-based ADS-B will keep be realized by spaced-based ENAV and Naviair, as well Show last month that will provide Singapore at the forefront of ADS-B. We are proud of our as Iridium Communications, space-based (ADS-B) data for emerging air traffic management continued partnership and fully Aireon will have its global, the Singapore Flight Information technologies. By doing so, we support CAAS in providing space-based air traffic Region (FIR). can safely improve the efficiency enhanced services to their surveillance system by In the next two years, and capacity of air navigation customers and the flying public,” operational by 2018. ■
MARCH 2016 / ORIENT AVIATION / 29 SPECIAL REPORT MRO ASIA-PACIFIC UPDATE
“Avalanche” coming for Asia-Pacific MROs Boeing and Airbus didn’t use much ink signing up orders at the Singapore Air Show last month, but it was a different story on the maintenance, repair and overhaul (MRO) front. A flurry of deals underscored the growing importance of the sector in the region and the scramble by non-Asian players for a share of the business.
Tom Ballantyne reports
ales of $3.15 billion at With such financial incentives services for A380, A350 and for Airbus wide body planes. It list prices may sound ahead, it is not surprising A330 aircraft operating in the will continue to drive demand for like a lot of money, but that both independent MRO region. The joint venture is larger aircraft types such as the historically speaking, providers and original equipment subject to the relevant regulatory A380, the A350 and the A330. deals for new jets at manufacturers are focusing on approvals. Setting up a world class facility in SFebruary’s Singapore Air Show the region in their search for It is SIAEC’s first collaboration this region with SIAEC reflected were thin on the ground. growth. with a major aircraft Airbus’ strategy to develop a The big story at the show In Singapore, Airbus and the manufacturer for airframe full range of support services for was MRO growth, with several Singapore Airlines Engineering maintenance. SIAEC will hold operators of our aircraft near non-Asian companies upgrading Company (SIAEC) signed an 65% equity in the joint venture to their home bases.” The joint their investments in the region to agreement to form a joint and Airbus the remaining 35%. venture partners will lease two secure a share in the expanding venture, based in Singapore, to Said Fabrice Brégier, Airbus hangar bays from SIAEC for its aviation MRO industry. provide airframe maintenance, president and chief executive: operations, with plans to add two The global MRO market is cabin upgrade and modification “the Asia-Pacific is a key market more in the next six years. valued at $65 billion, with the Asia-Pacific holding almost 30% of it. In 2015, the MRO spend in the Asia-Pacific, including China and India, was estimated at $18.3 billion, said Christopher Doan, vice president of Oliver Wyman, a global management consulting firm. Oliver Wyman acquired MRO forecasters, TeamSAI, in February last year and integrated it into CAVOK, its aviation technical consulting business and services practice. Doan forecasts MRO Asia-Pacific business will grow to $34.8 billion by 2025. Another management consultancy, ICF International, is more cautious. It said that by 2024, the global MRO market will be worth $90.1 billion, with the Asia-Pacific’s share predicted to be $29.2 billion. The region will grow 4.9% a year and in China by 6.8% for MRO providers.
30 / ORIENT AVIATION / MARCH 2016 SPECIAL REPORT MRO ASIA-PACIFIC UPDATE
Europe’s AFI KLM E&M also decided, as an initial step, to open is making a major investment a pool location in Hong Kong.” Singapore and FAA sign MRO in Singapore through its He hinted other developments, partnership with Indian including an A350 XWB MRO standards agreement software company, Ramco, and partnership, could follow. “There The U.S. Federal Aviation Administration (FAA) and the Civil the support of the Singapore is a certain interest among Aviation Authority of Singapore (CAAS) concluded a milestone Economic Development Board. potential partners in the region Maintenance Implementation Procedures (MIP) agreement last The research and development for a joint approach,” he said. month that allows for reciprocal acceptance of safety oversight requirements, as well as the mutual recognition of procedures for (R&D) centre, the MRO Lab, Insiders speculated that the approval and monitoring of aircraft maintenance organizations. is focusing on strategic MRO Cathay Pacific Airways, with 22 The MIP was concluded under the wider ambit of the U.S.- sectors from Big Data solutions A350-900s and 26 A350-1000s Singapore Bilateral Safety Agreement (BASA)1 signed in 2004. to predictive maintenance and on order, could be a potential The BASA is a government-to-government umbrella agreement customer experience to artificial partner. LHT is preparing for a that gives provides a framework for the FAA and CAAS to develop intelligence. large Asia-Pacific requirement for implementation procedures for reciprocal acceptance in areas “We are proud to extend our A350 XWB and B777X MRO by including, but not limited to, approval and monitoring of mainte- R&D capability and anchor it in expanding two of its four existing nance facilities and maintenance personnel, flight operations and the heart of Singapore, one of facilities at Lufthansa Technik flight crew members, as well as aviation training establishments. the world’s greatest innovation Philippines (LTP) and Lufthansa platforms,” executive vice Technik Shenzhen (LTS). president AFI KLM E&M, Franck LHT sees engine and Terner said. component MRO as the Ramco vice chairman “strongest drivers of growth” and managing director, P in the Asia-Pacific and it has R Venketramana, added: established the strongest “The MRO Lab will set a new products, measured on volume,” benchmark for innovation and said Steinhoff. The company we are happy to have an anchor manages component MRO for customer who shares the same more than 300 aircraft in the passion to develop solutions that region and operates spares pools can transform operations in the in Hong Kong and Singapore for The MIP will significantly reduce regulatory burdens and aerospace industry.” several aircraft types. compliance costs for the aviation industry and will eliminate Also in February, Germany’s Steinhoff said his company’s duplication of inspections and audits on aircraft maintenance Lufthansa Technik (LHT) overall business is growing organizations in Singapore and the U.S. announced it would establish an especially fast in Southeast Asia, “This landmark agreement with the Civil Aviation Authority of Airbus A350 XWB spares pool although “geographically, we Singapore will strengthen aviation safety while reducing the cost in Hong Kong, the first step in have customers in every Asia- of inspections for aircraft repair work,” said FAA Administrator, its efforts to be a MRO leading Pacific country”. An example is Michael Huerta. “The United States looks forward to our continued collaboration with ASEAN Member States.” provider for the new Airbus wide the contract LHT signed with Lion Director-General of CAAS, Kevin Shum, said: “This latest bodies in the Asia-Pacific. Air to build a facility for machine agreement between CAAS and the FAA reflects the strength of It also has completed various maintenance at the Indonesian our bilateral relationship that dates back more than two decades. Asia-Pacific construction and airline’s Batam complex. We share a common goal in finding solutions to tackle complex MRO service-expansion efforts to Also in Indonesia, Garuda challenges in the aviation landscape, in areas such as aviation secure business from new aircraft MRO subsidiary GMF AeroAsia safety and security, air traffic management, environmental issues types–including the A350 XWB has set up a partnership with related to aviation, and human capital development.” and Boeing 777X–that have been aircraft services provider, SR ordered in large numbers by the Technics, to develop its aircraft contract with Malaysian airline, the signing of SR Technics as region’s airlines. component business and improve Eagle Express, for its A330 and Vietjet’s long-term partner for “The priority for our services. B747 aircraft and MRO contracts CFM56-5B engine services in customers is parts availability GMF will be supported with KLM and Indonesia’s 2015. and reliability,” said Gerald by SR Technics in providing Sriwijaya Air. U.S. headquartered engine- Steinhoff, the global MRO’s B737NG aircraft components At the Singapore Air Show, maker, Pratt & Whitney, is moving senior vice president corporate to its customers. GMF president SR Technics and Ho Chi Minh deeper into the region with the sales Asia-Pacific. “It is important director, Richard Budihadianto, City-based Vietjet signed a announcement it will incorporate where our A350 material will be said the company signed six-year integrated component V2500 engine overhaul capability placed and how fast it can be contracts worth $100 million at support agreement for the into its joint venture facility in delivered to the airlines with MRO February’s Singapore Air Show, budget carrier’s A320 and A321 Shanghai. The Pratt & Whitney capabilities in the area. We have including the extension of a fleet. The new agreement follows Shanghai Engine Centre opened
MARCH 2016 / ORIENT AVIATION / 31 SPECIAL REPORT MRO ASIA-PACIFIC UPDATE
in conjunction with China Eastern chief executive of HNA Aviation B777-300ER aircraft. “GE seven Embraer 190 aircraft. Airlines in 2009 to overhaul Group. “I am confident that Aviation is honored to have Unveiled in January, CFM56 engines. Maintenance of under this V-Services agreement the opportunity to continue Rolls-Royce’s SelectCare is an the V2500 engines at the facility we have the right resources in maintaining Singapore Airlines’ additional services option to will commence in 2017. place to maintain our engines to GE90 engine fleet,” said Kevin the company’s comprehensive “The Shanghai Engine Centre the highest regard.” McAllister, president and chief TotalCare package and the is a proven, high-quality engine OEMs continue to extend executive officer of GE Engine more basic MRO services maintenance provider in this their MRO market share with the Services. offer. Senior vice president of very competitive Asia-Pacific region’s airlines, particularly with One of GE’s largest customer strategy civil engines market,” said Matthew aftermarket power-by-the-hour customers in Asia, China Airlines, at the manufacturer, Richard Bromberg, president of Pratt & services. Many airlines regard has confirmed a 15-year OnPoint Goodhead, said Rolls-Royce has Whitney Aftermarket. “Growing these agreements as more materials solution agreement effectively provided a package capabilities at this facility efficient in handling their with the U.S. provider for new that allowed customers to have a exemplifies our commitment engines, maintenance and deals parts, component repairs and set number of overhauls at a fixed to providing operators with for components. used, serviced materials for price while offering them access comprehensive services at a Singapore Airlines (SIA) has the overhaul of its fleet of to some service options available competitive cost.” signed a 10-year Flight Hour CF6-80E engines that power the with TotalCare. Three of China’s HNA Services Tailored Support Package Taiwanese carrier’s A330 fleet. Following the success of its Group subsidiaries have signed a (FHS-TSP) contract with Airbus GE’s aviation engine arm has first off site customer service V-Services Fleet Hour Agreement to integrate and provide full announced it will invest US$78.6 centre (CSC) in Singapore, the (FHA) with Pratt & Whitney for component support, line and million in Singapore aerospace Derby, UK-based engine maker, maintenance of their combined base airframe maintenance and ventures in the next decade. which has forecast a 300 per fleet of 46 V2500 engines. fleet technical management GE also negotiated an cent increase in MRO business The agreement covers West services for the carrier’s 19 OnPoint Solutions agreement in the next 15 years, will open Air, Beijing Capital and Tianjin A380s. with Colorful Guizhou Airlines for in three more CSC: in Derby Airlines. “When it comes to our It also extended its OnPoint the carrier’s CF34 engines. The (Europe, the Middle East and fleet, we do not compromise on solution agreement with GE 10-year deal, worth $56 million, Africa), Washington D.C. for The our aircraft’s performance and for the MRO of the GE90-115B covers all MRO work for its CF34- Americas and Beijing for Greater overall reliability,” said Xin Di, engines that power 19 of its 10E engine fleet that powers its China. ■
AFI KLM E&M builds business with its Asian clients
Global MRO provider, AFI KLM E&M, announced major deals with two Asia-Pacific airlines and Indonesia’s giant aircraft mainte- nance operator, GMF AeroAsia, in February. The Southeast Asian MRO and the European headquartered company signed a comprehensive Memorandum of Understanding (MoU) that extends their relationship for engine overhaul and repairs and C checks on B744 aircraft. The MRO includes component support synergies for Boeing and Airbus fleets and the maintenance of GE90, CFM56-7 and other CRM56 engines. AFI KLM E&M said it also is considering subcontracting maintenance services for B747 series in 2014,” AFI KLM E&M said. confirmed a support agreement with the airplanes to GMF. In South Korea, fast expanding budget European MRO for the CF6-80C2 engines “The extension of this agreement with a carrier, Jeju Air, has agreed with AFI KLM aboard its seven A300 aircraft. The deal major MRO in the Asia-Pacific demonstrates E&M to extend its maintenance contract includes spare engines and 14 shop visits. the competitiveness of our component for the CFM56-7B engines that power its AFI KLM E&M has “a personalized and engine offering,” said executive vice B737-800 fleet for more visits. The long term approach to the client and their expertise president AFI KLM E&M, Franck Terner. “A contract will eventually cover a planned Jeju and their wide range of resources are an wide range of topics are currently under Air fleet of 40 aircraft. assurance of fast and efficient services for discussion. This is a natural continuation of In the same month, new client, Wuhan us,” Uni-Top executive vice president, Yu the successful partnership agreement signed based Chinese cargo airline, Uni-Top Airlines, Huang said.
32 / ORIENT AVIATION / MARCH 2016 Over 15,000 shop visits in 35 years for more than 30 programs MTU – Maintaining your power
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Maint_E_202x273_Orient_Aviation_20160305_01.indd 1 16.02.16 14:54 SPECIAL REPORT MRO ASIA-PACIFIC UPDATE
MTU Aero Engines wins big in Singapore ingapore was good news for Leasing Company. MTU Aero Engines orders with In the Original Equipment the engine manufacturer scoring Manufacturing (OEM) business, MTU business worth US$570 million Aero Engines plays a key role in the during the February air show. development, manufacture and marketing SThe German engine manufacturer and of high tech components with international MRO provider scored especially high with partners. Almost a third of today’s active commitments for the PurePower PW1000G- aircraft in service are equipped with MTU family geared turbo fan (GTF) engine, a components. power unit developed in conjunction with MTU CEO, Reiner Winkler, said: “In U.S. manufacturer, Pratt & Whitney. A320neos and A321neos, powered by the commercial engine business, the GTF Air Canada signed a Letter of Intent GTF variant, the PW1100G-JM engine, and programs for single aisle aircraft are critical with Bombardier, the manufacturer of the the Letter of Intent signed between lessor, in defining MTU’s future. new CSeries jet for 45 of the -300 variant Aerolease, and Mitsubishi Regional Jets “At our headquarters in Munich, plus 30 options, to be powered by GTF for 20 of the Japanese aircraft, also to be preparations are going full steam ahead engines, in February. The aircraft deal is powered by a GTF variant. for the final assembly of the A320neo estimated to be worth US$3.8 billion. As a bottom line bonus, MTU shared engine. MTU will assemble one third of all Adding to the order book was budget in an order for IAE V2500 engines for 23 the engines for the neo jets. This is a pretty carrier Vietjet’s decision to order 63 A320ceo jets ordered by the China Aircraft demanding task.” ■
ST Aerospace opens VIP jet repair centre at Seletar
Tom Ballantyne reports realistic impression of each centre specializes in completions customers in this region for VIP element before the production and refurbishment of Airbus and aircraft interiors,” said Lim Serh he Singapore Seletar phase,” said ST Aerospace. Boeing aircraft and benefits from Ghee, president of ST Aerospace. Aerospace interiors ST Aerospace’s latest venture, access to the skilled craftsmen “Besides increasing our centre, officially a facility to equip and maintain and engineering talent pool in the geographical footprint to provide opened in mid- private jets, is the first of its U.S. state. convenience to customers in this February, is equipped kind in the region. The MRO Now ST Aerospace has region, what is also exciting is the Twith facilities that “allow aircraft company entered the VIP aircraft expanded its VIP aircraft interior amount of skills transfer involved. owners to work with in-house completion and refurbishment offerings on the back of the New skills are imparted from our designers to visualise the interior business in 2011 through its successful build-up in San Antonio successful set-up in the U.S., to of their aircraft through 3D U.S. affiliate, VT San Antonio and set up the VIP Aircraft ensure we offer the same level renderings and 3D printing of Aerospace. Operating as AERIA Interiors Centre in Singapore. “We of aesthetics, engineering and scale models that give the most Luxury Interiors, the Texas-based see potential in reaching out to on-time delivery in Singapore,” he said. By going up the value chain at Seletar, its 70 staff will provide VIP luxury cabin interior design, engineering, installation and maintenance services to customers from across Asia-Pacific and the Middle East, the MRO said. Executive vice president, aircraft maintenance and modification of ST Aerospace, Ang Chye Kiat, said the company had noticed rising demand from aircraft operators for VIP aircraft cabin interior refreshes to be done at the same time as heavy maintenance. ■
34 / ORIENT AVIATION / MARCH 2016 No.1 Asia-Pacific commercial aviation magazine
ORIENT AVIATION SPECIAL REPORTS 2016
APRIL SEPTEMBER MAINLAND CARRIERS BATTLE MRO AFTERMARKET BATTLE FOR EQUAL RIGHTS IN THE SKY IN THE ASIA-PACIFIC BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: China Commercial Aircraft Conference, Shanghai, China; MRO Asia, Singapore Airline E & M Middle East, Abu Dhabi
MAY OCTOBER DEVELOPING A REGIONAL AIR AIRCRAFT LEASING IN CHINA BONUS DISTRIBUTIONS: TRAFFIC MANAGEMENT NETWORK Japan International Aerospace Exhibition, Tokyo, Japan; BONUS DISTRIBUTIONS: The 5th Shanghai International Aviation Services Trade Fair, Civil Air Navigation Services Organisation (CANSO) Shanghai, China; Asia-Pacific Air Finance Conference, Hong Kong Asia Pacific Conference, Queenstown, New Zealand NOVEMBER JUNE ASIA-PACIFIC AIRLINE AVIATION TRAINING IN THE DOMINANCE EXPANDS ASIA-PACIFIC: AN UPDATE BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: Air Show China, Zhuhai, China; Airline E & M Asia-Pacific, International Air Transport Association AGM and World Transport Summit, Dublin, Ireland; The 5th Shanghai Kuala Lumpur, Malaysia; Association of Asia-Pacific Airlines International Aviation Services Trade Fair, Shanghai, China Assembly of Presidents, Bangkok, Thailand
JULY/AUGUST DECEMBER/JANUARY INNOVATION IN YEAR IN REVIEW: AVIATION GLOBAL AEROSPACE WINNERS & LOSERS IN 2016 BONUS DISTRIBUTIONS: BONUS DISTRIBUTIONS: Farnborough Air Show, Farnborough, England Orient Aviation Person of the Year Awards Dinner, Hong Kong, SAR
ADVERTISING ENQUIRIES TO ORIENT AVIATION MEDIA GROUP SALES DIRECTORS:
The Americas / Canada Europe & the Middle East Asia-Pacific (including China and the Indian subcontinent) RAY BARNES STEPHANE DE RÉMUSAT TAN KAY HUI E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]
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