Vol. 23 No. 6 July-August 2016 orientaviation.com

LOADED Group CEO, Alan Joyce, answers his critics with record profits and transformed international operations

Lucrative King Power’s football U.S. open skies days are numbered says loving Thai tycoon buys policy changing Emirates boss into Thai AirAsia course? innovation Industry insight:in global aerospace B:8.35” T:7.95” S:7”

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IMAGES: xom_mjo_print_image_04_layered_071814.psd CMYK 525 ppi, -526 ppi exmo_elh_tm_w.eps Mobil_Jet_BLL_Technology_H_4C_R-TM.eps CONTENTS Volume 23, Issue 6

COVER STORY

22 LOADED Qantas Group CEO, PUBLISHED BY Alan Joyce, answers his ORIENT AVIATION MEDIA GROUP critics with record profits Mailing address: GPO Box 11435 Hong Kong and transformed Office: international operations 17/F Hang Wai Commercial Building, 231-233 Queen’s Road East, Wanchai, Hong Kong Tel: Editorial (852) 2865 1013 E-mail: [email protected] Website: www.orientaviation.com

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

Chief Correspondent Tom Ballantyne Tel: (612) 9638 6895 Fax: (612) 9684 2776 E-mail: [email protected] Greater China Correspondent COMMENT NEWS BACKGROUNDERS Dominic Lalk Tel: (852) 2865 1013 5 U.S. barriers to regional airline expansion 14 I ndia’s feeble aviation reform disappoints E-mail: [email protected] industry

North Asia Correspondent ADDENDUM 15 China rides to the rescue at Geoffrey Tudor 8 No more excuses warns THAI CEO 18 ’s Arif Wibowo: a bottom line Tel: (813) 3373 8368 E-mail: [email protected] zealot

India Correspondent R. Thomas Tel: (852) 2865 1013 E-mail: [email protected]

Photographers Rob Finlayson, Colin Parker, Graham Uden, Ryan Peters

Chief Designer Chan Ping Kwan

Printing Printing Station(2008) 8 Lucrative days of business class numbered predicts Emirates Airline boss ADMINISTRATION 8 China’s home grown Asian Regional Jet, the 20 U.S. open skies changing course? General Manager ARJ21, completes first revenue flight 26 Struck off: Airbus boss loses patience with Shirley Ho 9 Thai billionaire and Leicester City football team delinquent suppliers E-mail: [email protected] owner expands empire to Thai AirAsia ADVERTISING 9 CEO-designate says offers value to INDUSTRY SIGHT: INNOVATION IN

Southeast Asia and the Pacific airline joint ventures GLOBAL AEROSPACE Christine McGee 28 Airbus’ astonishing ink jets of the future Tel: (852) 2865 1013 E-mail: [email protected] MAIN STORY 10 T he invisible foe: countering cyber threats to The Americas / Canada Barnes Media Associates ’ safe operations Ray Barnes Tel: (1 434) 770 4108 Fax: (1 434) 927 5101 E-mail: [email protected]

Europe & the Middle East REM International Stephane de Rémusat Tel: (33 5) 34 27 01 30 Fax: (33 5) 34 27 01 31 E-mail: [email protected]

© All rights reserved 29 Digital passports make security obsolete? Wilson Press HK Ltd., 30 experience is the worst part of Hong Kong, 2016 travelling

JULY-AUGUST 2016 / ORIENT AVIATION / 3 OUR ENGINEERS HAVE DISCOVERED A WAY TO MAKE HEARTS BEAT CLOSER

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U.S. barriers to regional airline expansion

As the U.S. presidential election approaches on November 8, the U.S. believe the policy threatens American jobs and puts an issue of concern for Asia- is the fate of the undue pressure on the big U.S. carriers, despite their booming Trans-Pacific Partnership Agreement (TPPA), a groundbreaking businesses. regional free trade agreement that was formally signed in New Examples supporting the changed U.S. position are Zealand last February. Signatories to the TPPA were the U.S., attempts to halt the accelerating capacity foreign airlines, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, particularly from the Middle East, but also from Mainland China, New Zealand, Singapore and Vietnam. want to put into North America. As well, discussions on an open Republican presidential contender, Donald Trump, has said skies treaty between the U.S. and China have stalled, with no he will dump the TPPA if he is elected. Democratic presidential resolution in sight. candidate, Hillary Clinton, favoured the TPPA when she was Another indicator of a changed U.S. approach to liberal U.S. secretary of state. She changed her mind earlier this year skies is the U.S. Department of Transportation’s (DoT) lengthy to counter support that then rival Democratic candidate, Bernie delay in approving the joint venture between Qantas Airways Sanders, had garnered by opposing the TPPA. and . Australia and New Zealand have Since then, the Democratic Party has voted against approved the partnership, but it is felt the U.S. is holding off an amendment to a platform that would have opposed the consent until the country’s aviation bureaucrats know who their TPPA, but said any trade deal must protect workers and the president will be. environment. While no one wants to overreact to these separate sets Asia-Pacific supporters of the TPPA regard it as critical of circumstances, if it is true that the U.S. is beginning to to the region’s economic growth - and therefore air traffic re-regulate to protect its own airlines, then it would hardly be expansion. But there is a growing fear, exemplified by the visit to surprising if other nations did the same, including countries Washington DC by Singapore prime minister, Lee Hsien Loong, where U.S. carriers either do good business or where they want in August, that the pact won’t be ratified by President Obama to build their businesses. And that includes the Asia-Pacific. and that it won’t see the light of day after he departs from office. In an era where airlines are seeking more freedom to Adding to the uncertainty about future U.S. trade policy operate across borders rather than less, a new wave of U.S. are indicators that U.S. aviation regulators are being pressured aviation protectionism would be a grim prospect indeed, by special interest groups to roll back the open skies aviation particularly if airlines in the world’s largest future market policy the country has pursued for years. Open Skies critics in decided to retaliate against a retrograde U.S. aviation policy. ■

TOM BALLANTYNE Chief Correspondent Orient Aviation Media Group

The most trusted source of Asia-Pacific news and analysis

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

JULY-AUGUST 2016 / ORIENT AVIATION / 5 What is today’s best aircraft investment that ensures profitability?

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Airbus_OrientAviation_July.indd Pg1 Prodigious UK 16/06/2016 12:07 What is today’s best aircraft investment that ensures profitability?

Airbus Widebody aircraft. Offering standard 18 inch wide seats in economy. Unrivalled low operating costs of the A330, 25% less fuel burn with the A350 XWB, up to 65% more profit per flight with the A380. Airbus is the answer.

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© AIRBUS, 2016. All rights reserved. Airbus, its logo and the product names are registered trademarks.

Airbus_OrientAviation_July.indd Pg1 Prodigious UK 16/06/2016 12:07 ADDENDUM

No more excuses warns THAI boss

Thailand remains Europe’s favourite long-haul conference in Zurich, Charamporn conceded Charamporn arrived at THAI there were 11 getaway. But with to Orient Aviation that there were problems types. “It’s supposed to be only five or six” putting evermore flights into the kingdom for THAI when it came to completing its three going forward, he said. and beyond and short haul budget airlines year structuring program. Nevertheless, THAI will commence building market share at the expense of “Last year we had the excuse of accepting its twelve on-order A350-900s the country’s flag carrier, grounding so many aircraft. We had to from August, despite the fact the airline said International (THAI) president, Charamporn reduce everything, but this year we have it did not need them and that they were “way, Jotikasthira, might sometimes wish he was to benchmark against the world’s best,” he way prior commitments”. He said the orders back at his old job running the country’s stock said. THAI is investing in a new web booking were “difficult to exit economically”. exchange. engine and an up-to-date IT system and is If he could turn back time, THAI would This month alone, Emirates Airline added upgrading a very uncompetitive premium not have ordered the 12 A350s and six a seventh daily A380/B777 frequency into cabin. B787s, he said. “We should have bought ’s near-capacity Suvarnabhumi In tandem with the closing down of loss- 20 or 40 aircraft at a time, for economies of airport and fellow Gulf carriers, making routes to Los Angeles, Johannesburg, scale, rather than six and twelve, which is in and Etihad Airways, have maintained a high Moscow and Madrid, the airline has sold 25 nowhere land.” The A350 will replace older frequency schedule of four times a day of the 38 aircraft it grounded as part of its B777s, Charamporn said. services to the Thai capital, as well as flights to turnaround plan. In 2014, THAI had a cabin load factor resort destinations of Phuket. “Definitely, we have to reduce the of 68.9%. The goal this year is 80%, to At the most recent Star Alliance CEO number of [aircraft] types,” he said. When be achieved with more rational capacity

Lucrative days for business class numbered says Emirates boss

Corporate long haul travelers would migrate Airline yields have continued to to cheaper seats and “high end stuff is not decline this year, with some carriers in the going to come through as it did in the good Asia-Pacific reporting a drop of 13% for the old days”, Emirates Airline president, Sir last six months. Air fares are expected to fall Tim Clark, told the Financial Times at the by a global average of seven per cent in 2016, International Air Transport Association’s but passenger volume will increase, IATA has (IATA) annual general meeting last month. predicted. “We are going to be there [for a “I see a change in the way corporate long time] on these fare levels,” Clark said. is going to develop, which will, of In a recent Oxford Economics study, course, affect our yields,” he said. He Chinese travelers, already the world’s biggest repeated that the Dubai-headquartered spenders when they travel, are forecast to airline was considering the introduction of a double their spending in the next decade. premium economy cabin into its fleet. “We Outbound Mainland travelers whose are mapping out where we think the market household income exceeds US$20,000 per will go. We have to recognize that things are year, spent $137 billion in 2015. This figure going to be slightly different for the mix,” he will increase by 86%, to US$255.4 billion in said. 2025, said the study. ■

China’s home-grown ARJ21 finally takes off

After a 14-year program and so many in western China. certified the ARJ21 in late 2014. Development delays that it no longer matters, China’s The ARJ21 is China’s first homegrown of the jet started in 2002 with the aircraft Asian Regional Jet for the 21st century, the jet aircraft and is aimed at China’s domestic scheduled to make its maiden flight in 2007. ARJ21-700, made its maiden revenue flight airlines. It was developed to compete with It is equipped with many components that with launch customer, Chengdu Airlines, on global aircraft manufacturers, particularly are the same as those built for the McDonnell June 28. The aircraft, carrying 70 passengers, Canada’s Bombardier and Brazil’s Embraer. Douglas MD-80 and Douglas DC 9 . flew from Chengdu to Shanghai’s Hongqiao China also has a full size jet under development, Chengdu Airlines, which is expected to airport and return, a service the western the C919, with an eye to taking some of the receive two more ARJ21s this year, received the Chinese airline said it would operate three future market share of Airbus and Boeing in aircraft from its manufacturer, the Commercial times a week. It also will fly the aircraft to China and elsewhere in the Asia-Pacific. Aircraft Corp. of China, last November. It has Shenzhen, Nanjing and several smaller cities The Administration of China orders for 30 of the aircraft. ■

8 / ORIENT AVIATION / JULY-AUGUST 2016 ADDENDUM

management, more efficient sales and recent media reports that claimed THAI would marketing and better network planning. sell its 39% equity in the LCC were “false”. “Above 80%, and we’ll make a profit for sure,” Regionally, THAI intends to develop he said, but admitted “this year will be a tough partnerships with as many as ten airlines one”. in ASEAN (Association of South East Asian The airline has tweaked its schedule to Nations) to counter the recent advent of offer better hub connectivity to 28 cities, the LCC alliances, Value Alliance and U-Fly. particularly between Europe and Australia, Long haul, he would like to add Seattle or once the carrier’s bread and butter. Also, Vancouver to the carrier’s network, using Charamporn said, ’s the A350 or B787, when Thailand regains its had allocated concourse C at Suvarnabhumi Federal Aviation Administration Category 1 exclusively to THAI. The airline will redecorate certification. the area “THAI Airways style”, and “manage He said Chicago and New York, where our own aircraft better”, the president said. alliance partner, , is strong, Charamporn believed THAI will always be remain on THAI’s radar. At press time, a hub carrier, although several new airlines the 56-year-old airline had announced a are serving the country’s secondary cities four-weekly return to Moscow and a new point to point. “Mind you,” he said, “we have three times a week service to Tehran from , so we can use it for this.” He said November. By Dominic Lalk in Zurich. ■

Thai billionaire and Leicester City team proprietor expands empire to Thai AirAsia

Fifty eight year old Thai duty free tycoon, Fernandes’ AirAsia Group (45%). Bijleveld will the vice chairman of The Foxes and a serious , whose Leicester retain a five per cent share of the carrier. Thai polo player. Last year, the King Power Foxes City Football team won the 2016 English AirAsia is one of the more successful AirAsia polo team won the Queen’s Cup and the Gold Premier League, has added a substantial Group franchises. Cup. holding in a local LCC to his portfolio of airport Vichai has a huge public profile in Britain A Buddhist with an estimated US$3 billion retail outlets, hotels, polo tournaments and top after his previously under-rated football team, fortune, Vichai has remained true to his Thai league English football. “The Foxes”, overtook the titans of English heritage despite his globetrotting existence. The billionaire owner of monopoly duty football to win the Premiership league trophy Before he made his decision to appoint free concession, King Power, at Bangkok’s this year. Vichai, who bought Leicester City Claudio Ranieri as his football team’s coach major airport, Suvarnabhumi, paid US$225.8 in 2010 for US$58 million and is a genuine 18 months ago, monks from the Wat Traimit million to Tassapon Bijleveld for 39% of Thai football fan, is no retiring tycoon. He divides Withhayaram Woraviharn (Golden Temple) AirAsia. Before the latest transaction, the his time between Bangkok, the family’s west in Bangkok had to agree to the decision. The Bangkok-based LCC was 55% owned by Asian London home, a Berkshire polo estate and temple’s monks are regularly flown from Aviation, a company controlled by Thai AirAsia Leicester. He often by helicopter to Thailand to Britain to attend Leicester City CEO Bijleved, private investors and Tony watch his team play, along with his son, Top, games and bless the pitch. ■

CEO-designate says Star Alliance offers value to airline joint ventures

Jeffrey Goh, 47, a distinguished aviation legal academic and latterly Star Alliance’s chief operating officer, will succeed Mark Schwab as the Frankfurt-headquartered alliance’s CEO in January. Goh joined Star in 2007 from the International Air Transport Association and had previously worked at leading firm, Beaumont and Son, as well as lecturing on public and aviation law at Sheffield University in Britain. Speaking at the most recent Star Alliance CEO meeting in Zurich last month, Orient Aviation’s Dominic Lalk asked Goh about the impact of joint ventures on alliance partnerships. They are “a phenomenon that is not going to go away” so Star will have to find a way of co-existing with them, he said. “We have a role to play, particularly the technology support we provide. There is a future and continuing relevance to support our joint venture partners.” Asia-Pacific airlines in the 28 are , , , , , EVA Air, , and Thai Airways International. ■

JULY-AUGUST 2016 / ORIENT AVIATION / 9 MAIN STORY THE INVISIBLE FOE When leaders of the world’s airlines gathered in last month for the annual general meeting of the International Air Transport Association (IATA) security took centre stage, as experts warned fighting cyber assault and terrorism will only become harder.

TOM BALLANTYNE reports

ark agents or hackers should be industry friends point, wherever that may be, as more applications migrate to rather than foes when setting up systems to the cloud and become available through portable and smart fight aviation cyber assault and terrorism, devices. In 2016, it’s not just about if we are going to be security experts said at the recent IATA annual hacked, it’s about when,” he said. gathering of air industry leaders in Dublin. “We are recognizing - and it is very well documented that DThink like a hacker not a defender, they said, when cyberattacks are probably precursors to one of the worst building IT defences against digital destruction and threats to our industry and that is a physical attack,” Faye breaching of airport and airline security by terrorists. Dark Francy, leader of Boeing Commercial Airplanes Cyber ONE agents are really “effective agents”, they believed, because team, told SITA delegates. they often identify a company’s greatest vulnerability. “Hackers access data that contains personal information “Most of us agree. The problem continues to worsen,” about who’s flying when, where, how and why. They can take said security futurist and risk consultant, Dr. Simon Moores that data and use it against us in a potential attack. at the SITA summit in Barcelona in the week leading to the “Incidents across the world indicate the need for us to IATA annual general meeting and World Air Transport come together as an industry and recognize that there are Summit. potential vulnerabilities,” said Francy, whose Cyber ONE “In fact, it is much worse if you measure the impact in team was a leader in establishing the public-private 2015 alone. Criminals are finding new ways to reach the end partnership, the Aviation Information Sharing and Analysis

10 / ORIENT AVIATION / JULY-AUGUST 2016 MAIN STORY

Centre (A-ISAC). A-ISAC’s goal is to increase intelligence and information sharing on threats. At IATA in Dublin, the association’s outgoing IATA director general and CEO, Tony Tyler, said: “Our electronically connected world is vulnerable to hackers bent on causing chaos. We are all vulnerable and there is no guaranteed way to stay a step ahead.” Real time collaboration and information exchange between industry and governments in the issue is critical, he said. “Make no mistake. We face real threats. Governments and industry must be nimble, share information, use global standards and keep a risk-based mindset when developing counter-measures,” he said. IATA has put in place a three-pillar strategy of risk management, advocacy and reporting and communication to support its members’ ability to preserve cyber security and pre-empt terror attacks. At the summit, a Civil Aviation Cyber Security Action Plan was signed and the work of the Industry High Level Group, which includes various stakeholders and organizations, was recognized. A priority for IATA is the establishment of a coherent approach to cybersecurity across the industry. It is estimated that cyber security breaches cost billions of dollars last year alone. A former member of the Lloyds of London underwriting syndicate said the Association of Asia-Pacific Airlines director general, Andrew potential liabilities from cyberattacks are becoming far Herdman: “We are stuck with too many decisions being made the too large for the big insurance companies to cover. day after the latest outrage” It is estimated that 94% of global companies have experienced some form of cyberattack. Despite the increasing sophistication of the general population about the in Dublin coincided risks of cyber theft or threat, about 13% of them still click on with the recent release of phishing attacks that could lead to the loss of their personal Cybersecurity And The Airline Industry, produced by details, including their banking information. Large PricewaterhouseCoopers (PwC). In a survey conducted by businesses will suffer an attack three times each and every the global professional services firm in 2015, 85% of airline year, it is forecast. chief executives viewed cybersecurity as a significant risk. There are tens of millions of threats every day. In the first “Online attacks are on the rise, resulting in quarter of this year, there were 264 million botnet attacks. A headline-grabbing stories. In the last few years, we’ve botnet, or zombie army, is a number of Internet computers witnessed data breaches across multiple industries, including set up to forward transmissions, including spam or viruses, to banking, retail, health insurance and online-only other computers on the Internet. The owners of the businesses,” the study said. computers are unaware they are part of a botnet. “The financial impact alone is staggering. The cost of Drones, too, are an data breaches globally could increasing threat to the industry Not enough is being done reach $2 trillion by 2019. and not only because they enter Inevitably, cyber threats will airspace and endanger aircraft. about aviation security. grow in number, cost and They also have the ability to We have had so many wake-up calls sophistication.” eavesdrop. in the last couple of years. We have The importance, and Nor are passwords, which difficulties, of protecting are supposed to protect data, to be doing more than we are doing. aviation against cyber assaults tamper proof. There are various There were too many opportunities was highlighted by the experts password-cracking tools freely for security breaches at . on the IATA summit’s cyber available on the Internet that security panel. Air Force can try 300 million variants of “Biometrics need to be general, Linda Urrutia-Varhall, potential passwords in 20 much more to the fore” from the U.S. Department of minutes - at the cost of about Defence, said aviation is a U.S. two dollars per apparatus. Sir Tim Clark central focus for terrorists and The industry cyber debate Emirates Airline president criminals. Industry role-players

JULY-AUGUST 2016 / ORIENT AVIATION / 11 MAIN STORY

“There is no silver bullet. We must continuously monitor threats as they materialize”. Former chief information officer at Los Angeles World Airports, Dominic Nessi, now an airport consultant with AeroTech Partners, told IATA delegates cybersecurity threats were growing faster than mitigation efforts. “Airports have been attacked. They will continue to be attacked and anybody who thinks it is not going to happen is completely wrong. We have so many potential areas to be hacked in an airport that it’s amazing. It can be done in many different ways.” He said it was not known precisely the amount of industry money lost to cyber attacks or how many airports had been attacked because the facilities that were breached did not want anyone to know about them. Some examples, however, included 75 airports that suffered from a phishing e-mail from two nation states and an that had its passport control system affected, possibly from malware. Departures at the attacked airport were delayed significantly. In another attack, an airport had its website defaced by Islamic State and the site had to be shut down. “Many airports believe a cyberattack could not happen to them,” said Nessi. The threats could be an internal threat, a random attack or a hacker assault from a disgruntled Leader of Boeing Commercial Airplanes’ Cyber ONE team, Faye passenger, among many lines of digital assault. An extensive Francy: industry cyberattacks are probably precursors to a physical attack education program for airport managers, at all levels, also is and authorities needed essential.” to collect and share information to deal Aviation is improving its global security, but the with threats, she said. deterrent measures vary widely between countries. “The Kurt Pipal of the U.S.’s Federal Bureau of Investigation foundation stone of security has been rocked by tragedy. In (FBI), said airlines sit on a lot of big data that could be the the last twelve months, terrorists have laid claim to atrocities target of industrial espionage. He warned airlines and their involving Metrojet 9268, Daallo 159 and the Brussels partners to be very careful about subcontractors and stressed Airport attack,” said IATA’s Tyler. the importance of sharing intelligence information across the “These are grim reminders aviation is vulnerable. Airlines industry. rely on governments to keep passengers and employees secure “Build awareness and do not have a silo approach. as part of their responsibility for national security. And we Identify your vulnerabilities. Assume you are going to be are committed to working with them in that challenging hacked. Participate in a 24/7 securities operation centre. task,” said Tyler. Occasionally, you could even use a ‘dark agent’ to test your Association of Asia Pacific Airlines (AAPA) director system. Companies do fire drills so why do they not do cyber general, Andrew Herdman, said aviation security should be security drills?” Pipal asked. Another member of the IATA panel, the president and CEO of Thales USA Inc., Alan Pellegrini, said aircraft had IATA’s goals for enhanced become nodes of connectivity and the types of protections that encompass connected systems need to evolve apace. industry security “How can we protect [commercial] aircraft that are Airlines and governments must: becoming more and more connected with each other as a • Work in partnership with each other and with airlines to result of new technology?” he asked. counter the risks of terrorist threats to aviation and rec- “Maintenance, operations, fleet and flight planning and ognize the International Civil Aviation Organisation’s critical role in facilitating better transparency passengers themselves generate a huge amount of data which • Commit all possible government resources, particularly the airline must handle properly, securely and in a way that intelligence resources, to fighting the use of aviation for assists their businesses. terrorist acts “This data is naturally shared between different nodes • Share relevant information to ensure that measures to and, increasingly, with aircraft themselves. Therefore, prevent and respond to terrorist acts are appropriate and protections need to be developed as fast as the use is being effective made of the data.”

12 / ORIENT AVIATION / JULY-AUGUST 2016 MAIN STORY

treated more like safety, where a general. “As far as aircraft cost-benefit analysis was The most effective defense tracking is concerned, it’s a typically performed before was government intelligence disgrace,” he told IATA delegates. deciding on change. IATA said the recent attack “In security, I’m afraid we used to stop terrorists long on Brussels Airport highlighted are stuck with too many before they reach airport property. the importance of security at decisions being made the day Risk in airport public landside airport public areas and after the latest outrage. While we that keeping this area secure is may harbour doubts, areas can be mitigated fully the responsibility of particularly after we have made with efficient processes governments. The most effective those decisions, it is very hard to defense was government reverse them,” he said. International Air Transport Association intelligence used to stop terrorists “You lack the evidence to say long before they reach airport ‘well, if it made sense to make that decision what is the new property. It added risk in airport public areas can be evidence that persuades us we can relax it?’ ” mitigated with efficient processes. Emirates Airline president, Sir Tim Clark, said not “Intelligence is the most powerful tool governments have enough was being done about aviation security. “We have to protect their citizens wherever they are - at work, at home had so many wake-up calls in the last couple of years. We or traveling. One of the biggest risk areas is large crowds,” have to be doing more than we are doing,” he said and added Tyler said. there were too many opportunities for security breaches at Industry is helping to bolster these efforts with practical airports. measures—Smart Security and Fast Travel—that will “Biometrics need to be much more to the fore. We need mitigate risk by reducing airport queues. Government and to streamline the processes,” he said. Clark also criticized the industry must be nimble, share information, use global industry’s inability to quickly locate lost aircraft and said standards and keep a risk-based mindset when developing more needed to be done to ensure air passenger safety in counter-measures.” ■

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JULY-AUGUST 2016 / ORIENT AVIATION / 13 NEWS BACKGROUNDER

two aircraft can fly to India. So I said Vistara has been talking to see little reason [for it], especially potential partners such as British No great leap if you are satisfied with the way it Airways, Emirates Airline, All has set up safety. Once all that is Nippon Airways and . He satisfied, it should not be treated added the carrier may accelerate forward for worse than an external airline. its fleet plans. Objectively, there should be no The arrival of its 20th aircraft requirement at all.” is scheduled for June 2018. The Indian aviation The watered down regulation airline could lease aircraft earlier does not mean Indian airlines will than that date and would be rush into launching international looking at a mix of narrow body routes. Vistara has 11 A320s and wide body planes with flights By Tom Ballantyne and is at least a year away from to the UK and the U.S. being having the 20 planes needed to considered. inally, the Indian which promotes the overall fly abroad. AirAsia India has six Even airlines that have 20 government has revised growth of the country”. A320s and its fleet growth plans planes are not quite ready to its aviation policy and, Said Amar Abrol, chief remain unclear. enter the international fray. GoAir, as expected, it has not executive of AirAsia India: The policy has failed to fully which recently took delivery of pleased anyone. For “although an 0/0 or 0/10 would please parties on both sides of its 20th jet and the first of 72 Fambitious new airlines, one of have been more than welcome, the argument. Incumbent carriers A320NEOs it has on order, does the biggest bones of contention the amendments made to the such as Jet Airways, IndiGo, not intend to serve regional had been the 5/20 rule. This policy are encouraging.” SpiceJet and Go Air, through destinations until next year. regulation only allowed airlines to “The policy gives us a the Federation of Indian Airlines Civil Aviation Secretary fly internationally if they been in clear direction to ramp up our (FIA), fiercely opposed the rule’s Choubey told local media: “GoAir business for five years and had a operations in India and grow revision. They argued they had has expressed its intention to fly fleet of 20 aircraft. our business domestically before to comply with 5/20 in their overseas from next calendar year. Under the new policy, airlines we scale our operations to fly development, so new operators It has indicated some regions,” can begin flying abroad earlier international. We will focus on also should do so. FIA had warned he said. Adding that the Gulf and than five years, but they still aggressively investing in India that if 5/20 was abolished or Europe were among destinations must have a 20 plane fleet and and increasing the fleet six to our adjusted the government also the Mumbai-based operator was operate 20% of their capacity target of 20 aircraft,” he said. should do away with Route considering. But he said the airline domestically. Singapore Airlines CEO, Goh Dispersal Guidelines (RDG), a set “has not yet submitted a formal “We want airlines to start Choon Phong, said recently: of rules that force airlines to fly plan in this regard”. flying quicker so there is more “Ideally, there should not be a a percentage of their flights on As well as adjusting the 5/20 competition,” said civil aviation limitation. If you look at the set tier-II and tier-III secondary routes, rule, the new policy brought good secretary, R.N. Choubey, when up outside India, an airline with which are often unprofitable. news for maintenance, repair he announced the new policy in “We stick to our stand and overhaul (MRO) businesses. mid-June. against the abolishing or The policy waives all royalties. Although newcomers to relaxation of 5/20. We have They can constitute up to 20% Indian aviation, TATA/Singapore also said you can’t do away of their total costs that MRO Airlines joint venture, full-service with 5/20 and keep RDG. Why facilities now have to pay to Vistara, and AirAsia India should we keep operating airports where they operate. The welcomed the relaxation of the unprofitable flights?” said an FIA transport ministry has said it will 5/20 rule, a regulation they had spokesperson. try to persuade state governments wanted to be abolished. Vistara’s Yeoh said he to do away with value added tax Vistara chief executive, Phee hoped the new policy would on MRO activities. “These are Teik Yeoh, gave his qualified lift existing restrictions on new a great set of steps, especially support for the decision. “We carriers operating codeshare the one on royalty. Royalty would have preferred that the rule flights with foreign partners. He payments can prove pretty be completely abolished to ensure costly for MRO operators,” said Indian aviation achieves its full Vistara chief executive, Phee Teik Srinivasan Dwarkanath, president potential.” He added it was “very Yeoh: lost the battle for now of the Airbus division in India. encouraging to see that the to abolish aviation’s “India currently has about 400 government has 5/20 rule commercial airplanes and massive established order books from airlines. We a policy need good MROs. We need the existing ones to grow,” he said. ■

14 / ORIENT AVIATION / JULY-AUGUST 2016 NEWS BACKGROUNDER

China rides to the rescue at Virgin Australia

After two Chinese investors agreed within days of each other to buy up to 40% of Virgin Australia, the carrier followed the news with a successful A$1 billion plus fundraising. The cash injection will go towards debt reduction at the heavily leveraged airline.

Tom Ballantyne reports

own Under’s Virgin requirements. It became clear Australia (VA) was the VA balance sheet was in rarely out of the need of extensive repair and news last month. As the equity fundraising process May turned to June, began. Dthe carrier confirmed its newest Fortunately, VA’s investors, investor was from China. As Singapore Airlines (SIA), HNA, widely speculated, the purchaser the UK’s , Nanshan was a subsidiary of China’s HNA Group and Air NZ took up their Group, HNA Innovation. The pro-rata entitlements of the company agreed to buy an initial equity raising. SIA, HNA and the 13% of the debt-heavy carrier, Virgin Group also signed binding with plans to build the holding commitments to contribute to 20%, after Air New Zealand to the sub-underwriting of (Air NZ) announced earlier this entitlements not taken up by year that it would dispose of all other shareholders. Notably or most of its 25.9% holding in missing from the participants’ Australia’s second international list, at the press conference and carrier. since then was Etihad Airways, a As the market absorbed the 21.8% partner in VA. news and the implications of it Virgin Australia CEO, “Etihad is still going through for VA’s expansion to China, Air John Borghetti: their internal processes and we NZ’s bosses were busy closing planning to use both haven’t received the outcome Virgin Australia and a deal with another Chinese of that yet. Obviously, they its low-cost carrier company, Nanshan Group, a subsidiary, need to go to their board,” said conglomerate with interests in Australia, on future short Borghetti. At press time, the Abu clothing, finance, real estate, haul international routes Dhabi carrier had made no public constructional materials and statement on the matter. 26-month-old Qingdao Airlines negotiated a A$852 million debt in its long transformation The refinancing is only the tip of Shandong. Nanshan, Air NZ (US$627.7 million) equity from low-cost carrier, Virgin of the iceberg for VA as it rather announced in early June, would raising, a response to critics’ Blue, to the full service airline slowly works its way towards buy 20% of the Kiwi airline’s view of the airline’s scrappy it is today. After going back to sustainable profits. A priority 25.9% equity in Virgin Australia. cash flow. Combined with its shareholders for a hefty top will be reducing its aircraft types Ten days later, with only 15 HNA Innovation’s $159 million up loan earlier this year and from 10 to three. Its Fokker F50s minutes notice, Virgin Australia investment, the deal will put then enduring public criticism have been decommissioned and CEO, John Borghetti, called a $1.011 billion into the carrier’s of the carrier’s management by 14 Embraer ERJ-190s will follow press conference to announce seriously depleted kitty. a disgruntled Air NZ, the airline them out the door in the next his carrier had successfully VA has fallen heavily into underwent a review of its capital three years. Its Fokker 100s will

JULY-AUGUST 2016 / ORIENT AVIATION / 15 NEWS BACKGROUNDER

debt and [will be] linked to a very rigorous and comprehensive cost reduction program and efficiency drive,” Borghetti said. There will be some redundancies among the carrier’s 10,000 staff, but new positions will be created as the airline was restructured, he said. “It’s an evolution, not a slash and burn exercise,” he added. For Borghetti, the most exciting aspect of the new partnership is the opportunity it offers VA to make serious inroads go too. Up to six of its 14 ATR way it has been growing, and of It has recently agreed to buy into China. Late last month, turboprops also will leave the course it will, then you have to tap Swiss airline caterer, Gategroup Australia’s International Air Virgin fleet and its E-170s have that market,” he said. Holding, for a reported US$1.4 Services Commission approved been leased to . “You can’t tap that market billion and is in talks with Air VA’s application to fly to Beijing Virgin has a fleet of 131 aircraft, unless you have a strong partner France to buy 50% of its catering and Hong Kong, with the flights including three B777-300ERs, six at the other end that provides unit, Servair. Other recent to commence on June 1, 2017. A330-200s, two A320-200s and distribution. Like travel agents investments included the 1,400 VA can link its services to the 75 B737-700 (2) and -800s (73), who give us feed and like airlines property Carlson Hotels Inc, most two cities with Hainan Airlines’ according to its website fleet and so on. The value-add is going widely known for its Radisson extensive regional network. listing in June. to come from this relationship.” hotel chain. He has the aircraft to serve Virgin’s only firm order is for Borghetti said when work Nanshan is a large, privately the routes. “We are fortunate,” 23 new B737MAX 8s, which it started five years ago on owned Chinese conglomerate he said. “We have a pretty good announced in 2012. They are due repositioning the company, it that controls Qingdao Airlines mix: B777s and A330-200s. The for delivery from 2019 to 2020. was approached “with a very and a private jet business along B777s are a good volume mover It is understood the airline has stretched balance sheet at the with interests in sectors spanning for long-haul travel to America converted another order for 17 time” and with many initiatives aluminum, agriculture, education and the A330-200 is perfect for B737-800s to the MAX model. funded with debt. It is time to and property. In Sydney, it owns China, particularly the northern As part of the planned strengthen the balance sheet and the Riverside Oaks Golf Course part of China. The A330-300 restructuring, inefficiencies will deleverage the company, he said. and the Pullman Hotel, adjacent can’t make Beijing, but the -200s be eliminated in crewing, ground The HNA Group has to the international airport. can. handling, MRO, catering and fuel invested more than US$15 billion VA’s first outlay with its new “When we took the -200s handling. worldwide by taking ownership found cash will be repayment for domestic operations we When Borghetti was or part-ownership in companies of the A$425 million (US$313.2 bought them with the view that asked if VA’s new Chinese ranging from supermarkets, travel million) advance it received from we needed the wide-body for partners threatened the airline’s agencies and transport related its existing shareholders earlier trans-continental services. But independence he said: “They are firms to nine airlines and Avolon, this year. “The balance of the we knew that at some point we two separate entities based on an aircraft lessor. funds will be used to reduce would need some international the assumption they both acquire coverage in Asia and the best 20% [of the airline]. Importantly, aircraft would be the -200. It has if you look at our board I’ll be sticking around. the range.” protocols, we have a majority There’s lot to do. I’m just getting Would Virgin consider of independent directors. This on with it. In the big picture, flying to Europe? It services this company always has been run demand with code-shares with independently. No shareholder this has been about repositioning SIA through Singapore and Etihad has had control of the business. the company, growing it, Airways via Abu Dhabi. “I am very It is the way it will continue to be happy with what we are doing run. Nothing will change.” fixing the balance sheet and making it with SIA and Etihad. It works On the other hand, Borghetti ready for the next stage of growth. very well for us,” he said. “There said VA’s Chinese investors would Obviously, it is going to be China are no plans afoot for us to start bring huge benefits to the airline. flights to Europe. “If we accept that the China John Borghetti “We have good coverage market will keep growing the Virgin Australia CEO there and that’s not going to

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change. More holistically, are we network almost certainly will be Or it may look at its own tie-up Borghetti said:“the big, big going to fly more internationally expanded to include Singapore with HNA, its new partner on the issue for consumers is they have as Virgin? I’d answer that question and/or Bangkok. Virgin Australia board. the choice of two strong, very two-fold: Categorically yes to The fact that VA is finally Unlike the VA/HNA competitive airlines who cover China with the Virgin brand. headed for Asia has not elicited investment, the Nanshan buy-in every part of the market and give Let’s not forget inbound China is much public comment from surprised the market. Kuala consumers choice. the only market that is growing friend or foe of the carrier. Lumpur-based analyst, Shukor “We can’t allow ourselves at the moment. Qantas group CEO, Alan Joyce, Yusof, head of Endau Analytics, to say ‘this is the next step and domestic market is pretty flat and said he would rather be in his described Hainan Airlines as a very once we have done that, that’s outbound from Australia is not position in China and Asia than well run airline. “They are flush it, we’re good’. You have to keep too flash either. his competitor. (see LOADED with cash and seemingly have re-inventing and evolving. It will “The big standout is inbound page 22). a mandate from the (Chinese) never stop. The moment it stops China so yes, we will fly to China. SIA CEO, Goh Choon Phong, government to go around the is the time the company will The next question is about short- speaking during the International world and source or make be overtaken and won’t have a haul international. What roles do Air Transport Association (IATA) lucrative investments,” he said. future.” , (a 14 A320 LLC annual general meeting in Dublin “It makes sense for them As for his future, Borghetti owned by VA) and ? last month, refused to be drawn to go into this part of the said: “I’ll be sticking around. We are not ready to talk about on the impact of VA’s new world where there is a boom There’s lot to do. I’m just getting that yet, but we will have two shareholder mix. “It is premature in Chinese demand. When you on with it. In the big picture, this brands available for short-haul to talk about it. We will see what have very deep pockets you can has been about repositioning international.” comes out of it,” he said. do anything. They have a huge the company, growing it, fixing Tigerair Australia’s only SIA, which carries VA traffic appetite to do more, not just the balance sheet and making international destination is Bali to China through Singapore on from an airline perspective, but it ready for the next stage of in Indonesia. Borghetti’s remarks a code-share arrangement, may from the entire ecosystem of growth. Obviously, it is going to suggested VA’s international lose some business from the deal. transportation.” be China.” ■

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JULY-AUGUST 2016 / ORIENT AVIATION / 17 NEWS BACKGROUNDER

Sky Beyond Garuda Indonesia’s at Garuda Indonesia bottom line zealot Said Garuda Indonesia’s CEO and president, Arif Wibowo: “we are working After guiding Garuda Indonesia back to profit in 2015, with consultants to make sure that in the next five to 10 the airline’s CEO and president director, Arif Wibowo, is years and onwards Garuda will be run as a business by embarking on a fleet and network expansion to lift the synergizing every company carrier into the top tier of the world’s airlines. in the group. “I have to prioritize and understand which is revenue stream driven in the group and which one is the service Tom Ballantyne reports stream. I hope by restructur- ing the organization we will hen Arif months later, his “Quick Wins” told Orient Aviation on the build and, as I say, dream Wibowo strategy returned the airline to sidelines of the International Air of becoming a $10 billion took charge the black, with a profit of $77.7 Transport Association annual business with margins of at least 5%.” of Garuda million. general meeting in Dublin last The key elements of the Indonesia in “It was perfectly done,” he month that he is pressing ahead Garuda Indonesia Group’s WDecember 2014 , the carrier was said of the plan, which reduced with “Sky Beyond”. Sky Beyond strategy are: about to announce a $368.9 costs, re-structured the network The new strategy aims to * Leveraging Indonesian million loss for that year. Twelve and streamlined part of the fleet. add growth of between five hospitality because it is the “We benefited from the fuel and six per cent a year to the differentiator Garuda can price. At the same time, we were parent company’s businesses offer to the market. struggling with the depreciation and integrate the operations of * Building a low-cost lead- of some currencies in the the Garuda group to improve the ership mindset at Garuda’s region, not only the Indonesian efficiency. full-service airline and encouraging Garuda staff Rupiah but in other markets Its goal is to build the to do everything possible to like Japan, Korea and Garuda Indonesia group into maximize returns. elsewhere. That really dragged an enterprise with an annual * Achieving work syn- on the top line,” he said. turnover of $10 billion, compared ergies across the Garuda But the Quick Wins of with $3.8 billion today, and for group, which comprises 2015 are not enough for the airline and its subsidiary, Garuda itself, Citilink, the the very energetic and social Citilink, to be the operators of air cargo arm, GMF (Garuda media focused Wibowo. He 250 airliners, 53 more aircraft maintenance), ground than the two carriers fly now. handler Gapura Angkasa and Aerowisita , the group’s food, CEO and president director Wibowo said: “Now is the travel and hotel arm. Garuda Indonesia, Arif Wibowo: era when we have to be on a Hopeful of flying to the par with other global airlines. U.S. in 2017 We have to be strong, not just and Airbus about a potential domestically, but regionally and order for B787s or A350s. internationally.” “I think size really matters A critical element of the [when competing with leading expansion strategy is a fleet carriers] so we have to fight renewal plan that will see with bigger capacity, but have a A320neos for Citilink, 50 B737 low-cost mindset while delivering MAXs for Garuda, with 30 high service,” said Wibowo, who options, and the conversion ran the group’s low-cost carrier, of an order for seven classic Citilink, before he was promoted A330-300s to 14 new to the top job at Garuda. A330neos. Wibowo also is At present, Garuda flies in discussions with Boeing B777-300ERs to London and

18 / ORIENT AVIATION / JULY-AUGUST 2016 NEWS BACKGROUNDER

Amsterdam, as well as to of this year so flights to the U.S. fleet costs, reduced overheads, is scheduled to open at the end Jeddah. In March, it moved its can be considered for next year,” a restructured route network of the year. Garuda, its SkyTeam London services from Gatwick he said. and a concentration on revenue alliance partners and all other to Heathrow and offers a five “If that happened, it would management. international airlines will be times a week service. It flies to be part of the utilization of the “We also are strengthening housed at the terminal, which will Amsterdam six times weekly. B777 to the west coast cities of our IT backbone on the significantly enhance the airline’s It also has been focusing Los Angeles or San Francisco. The commercial side. With the digital hub status at its home airport. on new destinations in China, size of the market from the U.S. economy, e-commerce has to Longer term, the government where it flies to Beijing, Shanghai to Indonesia is around 400,000, be improved as soon as possible. has said that in five years, and Guangzhou from Jakarta. but from the west coast it Garuda has to be very strong Jakarta’s Soekarno Hatta airport This year it wants to link the big is around 120,000 from Los in high-tech and high-touch, will have a third and that three Chinese cities directly with Angeles. So we could consider human-to-human and be it expected to have approval by Denpasar, which is the entry launching services.” customer focused,” he said. then to build a fourth runway airport for Indonesia’s premier The Garuda CEO said his Another plus for the group at the airport metropolis. It is resort of Bali. ultimate aim is to shape Garuda is Garuda’s planned move to forecast that transit passengers But the most important into a stable business that has the new Terminal 3, Ultimate, will increase from 12 million a breakthrough Garuda could sustainable profits. To do that at Soekarno-Hatta International year today to 15 million annually achieve this year would be the he has identified four priorities: Airport in Jakarta. “Ultimate” within a few years. right to fly to the U.S. Garuda As for 2016, Wibowo is well suffers from the problems of an aware that these are challenging national aviation infrastructure In terms of traffic we have grown it times. “It is quite tough. We are and regulatory regime that does at around 4%-5%, but in terms of yield still growing so our profit in the not meet U.S. aviation standards. it has decreased about 13%. first quarter was quite narrow, The airline cannot fly to only $1 million. This is very low. North America because Indonesia That is very challenging. But at least “In terms of traffic we grew only has a Category 2 rating we are still secure about capacity growth. it around 4%-5%, but in terms of from the U.S. Federal Aviation yield it has decreased about 13%. Administration (FAA). I am confident we will be profitable That is very challenging. But at But Wibowo told Orient overall this year. But we have least we are still secure about Aviation in June there could be to do that consistently capacity growth. I am confident positive news coming from the we will be profitable overall this FAA for Garuda. “I am hopeful Arif Wibowo year. But we have to do that it can be sorted out by the end Garuda Indonesia President and CEO consistently.” ■

JULY-AUGUST 2016 / ORIENT AVIATION / 19 NEWS BACKGROUNDER

Is U.S. closing down on global open skies?

Asia-Pacific voters may have no say in the upcoming U.S. elections, but the outcome could have serious implications for the region’s economies and its airlines. Washington is under increasing pressure to roll back its open skies policy, fueling fears global liberalization of aviation is under threat.

Tom Ballantyne reports

EO Qantas are arguing that U.S. open skies is International and costing the nation jobs. Freight, Gareth Evans In Dublin, Ireland’s new appears to have no transport minister, Shane Ross, in apparent concerns the opening address at the IATA Cabout the U.S. Department gathering fired a broadside across of Transportation’s (DoT) slow the Atlantic when he warned the response to approving a joint U.S. against reversing airspace venture between the Australian liberalization between the U.S. carrier and its U.S. partner, and Europe. American Airlines. Some industry His particular beef was the observers think he should. delay in granting Norwegian Air The partnership has been International rights to launch approved by the Australian flights between Cork and Boston. and New Zealand regulators, “The airline is still waiting for a but to date there has been no permit from the U.S. authorities. news from Washington D.C. Representations on this issue on a positive signing. At the have been made at the very International Air Transport highest level and we’re still Association (IATA) annual general waiting. It’s extremely frustrating meeting in Dublin last month, in this new era of liberalization,” Singapore’s prime minister, Lee Hsien Loong: Visiting the U.S. in Evans was pragmatic about the he said. August to conclude critical trade and liberalization agreements before delay. the November presidential election While that may be happening “We are not in daily contact on the other side of the world, with them (the DoT), but we are the not too distant future.” A case in point is the very one established Southeast Asia- in reasonably regular contact If it was simply that U.S. public dispute between Gulf based aviation analyst believed with them. I think the work regulators are snowed under carriers – Emirates Airline, Etihad the region’s airlines should be load they have over a range of with work – during a contentious Airways and Qatar Airways – and extremely worried about the different approvals is partly the presidential election campaign America’s big three airlines, potential damage that could issue. There’s no hard and fast – then it could quite rightly be an United Airlines, Delta Air Lines be done by a U.S. liberalization date,” he said. administrative delay. and American Airlines, about roll-back or an election outcome “We would have liked But in recent months, subsidies the Middle East airlines that gives Donald Trump the U.S. the joint venture to have been industry analysts have been allegedly receive from their presidency. approved earlier, but the wondering if the U.S. is pulling governments. Head of Endau Analytics, Americans are working through back from the global Open Skies To date, there is no happy Shukor Yusof, said Trump the process and we’re looking policy it has been pursuing for ending in sight. Instead, domestic has promised, if elected, to forward to hearing something in years. U.S. politicians and unions leaders opt out of the Trans-Pacific

20 / ORIENT AVIATION / JULY-AUGUST 2016 NEWS BACKGROUNDER

Partnership Agreement (TPPA), Aviation in Dublin, believed there the groundbreaking regional free We’d have liked the joint venture was “growing pressure” in the trade deal concluded last October U.S. to pull back on liberalization. between the U.S., Australia, to have been approved earlier, “It needs to be resisted,” Brunei, Canada, Chile, Japan, but the Americans are working he said. “We are very much Malaysia, Mexico, Peru, New through the process and we’re looking committed, as a small airline, on Zealand, Singapore and Vietnam. developing new products and TPPA has huge job creation forward to hearing something ideas and being able to grow. We potential across the region’s in the not too distant future are focused on an environment in economies, including at airlines. which markets are opened rather “It should be a worry because Gareth Evans than closed so the large airlines the TPPA has not been ratified CEO Qantas International and Freight don’t become so dominant and Trump has said he is going that they stifle competition and to dump it. It is a very serious (Association of Southeast Asian change of government. One of innovation.” concern because it has some Nations) and Singapore itself, he the key items on the agenda in He sees early signs there will bearing on aviation and on the said, especially as ASEAN has just talks with outgoing President be pressure to re-regulate air transportation industry,” said introduced its own open skies Barack Obama will be the TPPA. traffic, which he said amounts to Shukor. policy. In the U.S., pressure for a protectionism. “And not perhaps With the big American He said Singapore’s prime roll-back in liberalization is not done as explicitly as before, in airlines seeking curtailment minister, Lee Hsien Loong, universal. Several smaller carriers the 1980s, but done implicitly of Gulf airlines’ access to the will visit the U.S. in August, have sided with the Gulf airlines through lack of access to routes, NorthAmerican market, there apparently in an attempt to in the dispute. But Hawaiian lack of access to airport slots, lack is also a belief they may apply conclude critical trade and Airlines chief executive, Mark of access to airport facilities,” he that same political pressure to liberalization deals before any Dunkerley, speaking to Orient said. contain Mainland Chinese airline “All of these things, the trans-Pacific expansion. approval of joint ventures From this year, Chinese between dominant airlines airlines have flown more on both ends of routes, all of passengers between China and these things represent barriers the U.S. than U.S. airlines. China’s to competition, barriers to major carriers have made it clear industry growth and barriers to they are intent on expanding their innovation.” international reach much more While it awaits U.S. approval rapidly than they have done in for its trans-Pacific partnership, the past. Qantas said the benefits of the At present, their growth is relationship were clear. “We being held back by restrictive have a much better spread of traffic rights in France, Germany destinations across the Pacific. and more recently in the U.S. We are seeing the relationship The U.S. has more than 100 with American starting to liberalized air services agreements stimulate some inbound traffic to in place, but it is reported to be Australia,” Evans said. reluctant to negotiate an open “It gives us better connectivity skies treaty with Beijing. “There beyond the various points in is no open skies between China U.S. protectionism will the U.S. for Australian travelers and the U.S. because talks have travelling the U.S. We have stalled. What is happening in “perhaps not be done as explicitly American adding additional America makes it less likely to as before, in the 1980s, services into New Zealand so the happen, especially with the but actually done implicitly, benefit to consumers is clear.” uncertainty surrounding the Besides, Evans pointed out, election,” Shukor said. through lack of access to routes, the position in the Pacific already Nothing can be ruled out, lack of access to airport slots, is one of partnerships and Qantas he added. Singapore, which is not any different. “You have Air is usually three or four steps lack of access to airport facilities” New Zealand partnered up with ahead of everybody else, is now Mark Dunkerley United, Delta partnered up with analyzing the impact the U.S. CEO Hawaiian Airlines Virgin [Australia] and American election will have on ASEAN with us,” he said. ■

JULY-AUGUST 2016 / ORIENT AVIATION / 21 COVER STORY

LOADED Qantas Group CEO, Alan Joyce answers his critics with record profits and transformed international operations.

TOM BALLANTYNE reports from Dublin

f Qantas Airways group CEO, Alan Joyce, has any brushed off suggestions that a potentially resurgent Virgin concerns about Chinese investors’ recent dramatic moves Australia, now approved to fly to China for the first time, and into the boardroom of arch rival, Virgin Australia, he is allied with Hainan, China’s fourth largest airline, might alter not showing it. As events played out at Virgin Australia’s the balance of airline power Down Under. Brisbane headquarters, following the announcement “We think our position in Asia, including China, is Ithat Hainan Airlines parent, the HNA Group, was taking very, very strong given the fact we have a massive network a major shareholding in the airline, Joyce was in a Dublin from Australia into a lot of destinations in Asia and that the hotel meeting room with chairman, partnerships we have in the region are just phenomenal,” he Liu Shaoyong. Under discussion was the expansion of the told Orient Aviation. partnership between Qantas and the Shanghai-based member “We have a great partnership with China Eastern. We of China’s “Big Three” airlines. have a code share with China Southern [Airlines]. We have a Joyce demonstrated the same equanimity a few days later network in China that is pretty well established. We have just when Air New Zealand announced it was selling most of its moved into Eastern’s terminal at Shanghai’s Pudong airport. own holding in Virgin Australia to Chinese engineering and “It’s a big China market with huge growth. It’s a market construction conglomerate, Nanshan Group. that has more than 120 million tourists a year of which In the Irish capital to attend the International Air Australia, as we all know, gets 1%. It’s a market I think will Transport Association (IATA) annual general meeting, Joyce quadruple in the next few years.”

22 / ORIENT AVIATION / JULY-AUGUST 2016 It is not only mainline Qantas that is broadening its the sector because of the addition of AA and Air New Zealand presence in China. Its low-cost subsidiary, , and its stable services. of Asian offshoots have an expanding Mainland network. “We are very pleased with the performance of that route. Joyce pointed out that estimates are there will be up to 800 San Francisco did not work for us last time, but this time it has million Chinese tourists in the next 20 years. “So the numbers worked straight away and is a good indication that the U.S. for us are going to be extremely important and extremely is a very good market. We are exceeding our expectations to important for the domestic market as well, given where the San Francisco, which shows the power of the transformation tourists go,” he said. program at Qantas. It is making routes work that didn’t work “We’re comfortable with the partnerships we have and we in the past.” think we can compete, along with our other alliance partners, For Joyce, who has been vilified by much of the media and American Airlines and Emirates Airlines, with the best in the also by some competitors for Qantas’ dismal performance in world. I’d rather be in our position than in our competitor’s recent years – especially losses of up to $400 million a year at position.” its international unit - the group’s successful transformation Indeed, China is not the only priority on Joyce’s expansion program is music to his ears. map. His once controversial decision to abort a long-standing He has answered his critics by achieving a re-engineering joint venture with , on the traditional of Qantas’ operations and recent record profits. By December Kangaroo Route between Australia and London, and climb last year, $1.03 billion of savings – of a three-year $1.5 billion in bed with Emirates is a target – were achieved. massive winner. Excluding fuel, available seat “The Emirates There are lots of opportunities, kilometres (ASKs) have been partnership has been not just with the B787s, not only in reduced by eight per cent and phenomenal,” said Joyce. were on target to reach 10 per “Both Qantas and Emirates Qantas but in the Jetstar operations. cent by press time. are extremely happy. Before It’s a lot better than we were a few years That’s not to say the the partnership was launched ago when we were struggling to justify radical re-writing of the we were carrying 400,000 group’s operations was without people to continental Europe acquisitions of aircraft for parts of our heartache. Five thousand on the Qantas code. This business that were not making returns. jobs were eliminated. There year we will be well over We’re in such a great position now that were deferrals of B787 orders six million. It has delivered and A320 deliveries. The massively for us and is one return on investor capital across all of retirement of the group’s of the pillars that helped us our businesses covers its back and it is B747-400s and B767-300s turn around the international allowing us to go after growth for was speeded up, a heavy business.” maintenance base at Avalon Across the Pacific, a the first time in a long, long while near Melbourne was shut joint venture with down and executives had their Alan Joyce alliance partner, American salaries frozen. Qantas Airways group CEO Airlines (AA), that has been The result, a year after the approved by Australia and airline group announced the New Zealand regulators but still awaits the green light from massive loss, of which much was related to a fleet write down, U.S. authorities, promises to be just as lucrative as Emirates for was a $413.7 million profit to June 30, 2015. It was the biggest Qantas. turnaround in Australian corporate history and was followed Under the agreement, Qantas, which previously flew by an interim profit of $683.3 million to December 31, last to Los Angeles and Dallas Fort Worth, has returned to year. San Francisco after a long absence. At the same time, AA “What’s great is that so many parts of the business are has launched services to Sydney and added Auckland to its performing really well. Jetstar International is performing very trans-Pacific network. well. Qantas international is performing very well. Domestic Joyce said AA would not have come on to the route is performing very well and the Asian business is doing very without the partnership. “They made that very clear. There is well,” Joyce said. Low-cost subsidiary, Jetstar, with its Jetstar more capacity, more competition and more distribution taking Asia Singapore, Jetstar Japan and Jetstar Pacific in Vietnam place in the U.S. because of it,” Joyce said. offshoots has become a critical contributor to the group’s “People can complain about it, but our partnership with performance. American provides more destinations in the U.S. and provides “We always have said that our Asian businesses, like better connectivity, better co-ordination and consumer any of our businesses, have earned the right to grow and you benefits.” can’t tap unprofitable growth, which some carriers like to do. He said the U.S. market is still a very good one for Qantas, It has been demonstrated we can make returns from these despite the fact there is more competition and more capacity in businesses,” he said.

JULY-AUGUST 2016 / ORIENT AVIATION / 23 COVER STORY

“The first half of the year was fantastic. The big progress of flying it [the Dreamliner] from Perth to London. Settling has been made in Japan. We have a huge franchise in Asia. on the network will depend on the support we receive from We are doing it in a very considered way and Jetstar has been a Australia’s state governments and airports,” he said. massive growth vehicle. The airline is only 12 years of age and “We are just starting the dialogue with the airports and it has more than 120 aircraft across the region. We have been governments. You’ll see a very luxurious configuration on these profitable every year at Jetstar.” aircraft. There will be a big business class and a big premium Joyce said the group’s strategy in the region, and in economy because of the distances we are flying. We obviously Australia, is clearly demonstrating good results. Our will be giving some very good seat pitch for the economy seats intellectual property, with the two brand strategy, is working because of the length of journeys.” really well in Australia, in Vietnam and in Japan and that As well as the eight firm orders for the B787-9s, Qantas intellectual property is being sought by many carriers,” he said. has 15 options and 30 purchase rights for 787s. “We have a “You’ve got and using lot of aircraft on order with good pricing and good delivery our brand in the region and that shows how well-considered schedules. If we can make good money with those eight, the and thought through the Qantas group strategy has been in happiest thing we will do is order the rest of them,” said Joyce. developing low-cost carriers. We’ll keep on enhancing and The Dreamliner is not the end-game for Qantas. Longer building it, but we will do it in a profitable way.” term, said Joyce, Qantas is extremely interested in the ultra- The next big step forward for the group will be the long-haul B777X or the A350. “We have a bit of time,” he said. acceptance of eight B787-9 Dreamliners at the mainline “The B777X is not going to be available until 2022, 2023 carrier, the replacements for five B747-400s. Jetstar has 11 or probably a bit later. But Boeing and Airbus always keep B787-8s. The first four B787-9s will arrive at the airline group’s some slots back for big brands like Qantas so we would be able Sydney headquarters in the 2017-2018 financial year with the to get availability when we need it. remaining four scheduled for delivery in 2018-2019. “Not many airlines fly the lengthy sectors that Qantas The new aircraft will open up some exciting, new does, Joyce pointed out. “We are at the forefront and always non-stop opportunities, said Joyce. “There is Sydney-Chicago, have been. We have operated some of the longest operations in Melbourne-Dallas or Brisbane-Dallas. There’s the possibility the world,” he said.

We’d like to have the B777X or A350 in our [long-haul] fleet eventually. It changes the game completely for Qantas, allowing us to have a [long haul] network we could only have dreamed about in the past

24 / ORIENT AVIATION / JULY-AUGUST 2016 COVER STORY

“It’s the nature of where Australia is. Our pilots and the airfares needed to cope with that engineers are very good at managing fuel and flight planning low return. on these routes. So it’s good expertise to have. “More than 70% of our profits “It is why we bought the B787-9 and why we’d like to come from domestic traffic and frequent have the B777X or A350 in our long-haul fleet eventually. It flyers. Domestically, we are seeing all changes the game completely for Qantas, allowing us to have a airlines acting commercially [long haul] network we could only have dreamed about in the and making corrections to past.” capacity when the demand is not Among the other possibilities, when the final decision is there. So we think that component made about the A350 and B777X, are non-stop services from of our business is very stable. Sydney to New York and London. “But it is the 30% Qantas also has ordered a large number of A320neos, associated with destined for Jetstar as replacements for its A320 fleet, but no international that specific delivery dates have been announced. Qantas itself is is a very different business deciding on either the A320neo or the B737MAX to allow it to and that is because of the transformation program. phase out its B737s. Very good returns on our international business were made in “We’re a lot better than we were a few years ago when we the first half and it definitely received a big benefit from fuel. were struggling to justify acquisitions of aircraft for the parts “Of course, as fuel goes up that business gets an impact, of our business that were not making returns. We’re in such a but we see the transformation program making that business great position now that return on investor capital across all of sustainable through the cycle. It is why we’ve always said our our businesses covers its back so we can go after this growth for target is to recover cost of capital and return of investor capital the first time in a long, long time,” Joyce said. right through the cycle. We believe we are in a position to do For Qantas, the transformation process was not only that going forward, even with a high oil price as part of that about cutting staff and reducing costs. It also has been about mix.” introducing efficiencies that have broken ground for full service And for weary Qantas shareholders there is finally some airline operations. good news. “We got our investment grade credit rating back One example is that Qantas is the only full service carrier and are one of the few airlines around the globe that has. We that turns around its domestic flights in 35 minutes. “A pilot are generating a lot of free cash,” Joyce said. came up with an idea called fish-boning where the cleaners “So we decided this year to make a A$1 billion return to come on to the aircraft as people are getting their bags down,” shareholders. It will be A$500 million in August, which was explained Joyce. capital return. “There are always gaps. The cleaners go into the seats and “We are completing a A$500 million buy-back that we clean as people are disembarking. It’s a very efficient use of the expect to finalise by the end of June. We are making good ground time. We are moving to more 35 minute turns in the progress. Next year, the board will look again at the cash domestic market over time. position of the company, which is very strong. “Last time, [the most recent assessments) we had the “We will look at the appropriate ways of capital highest on-time performance in our history domestically. The management. The company will consider if it is optimal to utilization on B737s overtook our competitor for the first time issue a dividend or optimal to do another buy-back.” since they were created. As for rival, Virgin Australia, and the arrival of Chinese “We are continuing with this drive because our people investors with deep pockets at the carrier, Joyce’s view is are figuring out ways of improving efficiency. There’s more clear. “When it comes to the competition we want a stable, of that to come and its part of our transformation program. competitive environment where the competition is acting It will free up more aircraft and those aircraft will either help commercially. us retire airplanes early, help us return leases or help us take “It is very clear from what the shareholders have said at our opportunities internationally.” competitor. They all wanted to make a return. It’s not making One crucial airline operational cost that does not concern a return for them. They’re burning through cash. They need to Joyce is the trajectory of fuel prices. “The way we always have correct their balance sheet. worked is to take out hedging and to be able to cope with it. “But there is nothing that anybody is saying that argues What determines low or medium or a high oil price is supply the competitive dynamic is going to change, that we are not and demand,” he said. going to have a commercial operation and that continues to be “When you have a functional market where everybody is important for us. acting commercially you can cope with a high oil price and you “The domestic market, as long as I’ve been here, has had can cope with benefit from a low oil price as well. So we give two players and I don’t think that is going to change. While I’d ourselves time for the market to correct. love to have a monopoly, that’s just a dream.” “We are very well hedged. I’m not going to quote you the One fact that is startlingly clear: Qantas is reborn. It is full figures. As oil prices go up, and if they go very high, those of optimism and well and truly back to its old self. hedging benefits kick in. It gives us time to correct capacity and The “Flying” is decidedly back in the Flying Kangaroo. ■

JULY-AUGUST 2016 / ORIENT AVIATION / 25 NEWS BACKGROUNDER

delay in what has become a huge headache for the European plane maker. Airbus on the CAL has 14 of the aircraft type on order and was due to receive four this year, six in 2017 and the final four in 2018. supplier warpath And the flag carrier is not alone in waiting longer than The normally uber cool Airbus president and CEO, Fabrice expected for the jets planned by airline customers to bring huge Bregier, is losing patience with delinquent suppliers as delays savings in fuel costs and overall hold up A350 deliveries to its customers. economics to their operations. Thai Airways International was supposed to receive the first of eight A350s in July, but its Tom Ballantyne reports from Hamburg delivery has been pushed back to August. Airways hen it comes to for the seat. This is frustrating, but of delinquent suppliers who are was in line to accept the first A350 seats and this is our responsibility to make it not meeting the standards of our of the 48 A350s it has ordered bathrooms, work with the suppliers.” customers.” earlier this year, but it did not take Airbus boss, Bregier said cabin suppliers In other words, Brégier delivery until late May. It expects Fabrice Bregier are very good at marketing. They warned that suppliers who another nine at its Hong Kong Whas a big problem – several of the are not only ramping up work for continue to fail at delivery headquarters by year end. groundbreaking jet’s suppliers. Airbus and Boeing, but for their milestones could see themselves A spokesperson for Cathay In a year when the Toulouse own retrofit businesses. not only removed from the Pacific told Orient Aviation the headquartered manufacturer is “But they are understaffed in supplier furnished equipment (SFE) carrier was targeting delivery of supposed to deliver 50 A350s to manufacturing and engineering catalogue, but potentially blocked 22 A350-900s in 2016 and 2017. airlines around the world, nine and in the quality of their program from working with Airbus. “It is our normal practice to build had made it to their customers at and supply chain management. When Taiwan’s some flexibility into our annual press time. “They just cannot continue (CAL) announced last month that aircraft delivery schedules to The airplane manufacturer like this. This is the message and Airbus had to revise its delivery take into account different and has sold 804 of its new A350 I will constantly repeat it very schedule for its first A350 from unforeseen scenarios,” she said. XWB jet, but only delivered 24 to vocally: “I will progressively get rid July to September, it was the latest “The Cathay Pacific team date (at press time). Speaking at the manufacturer’s 2016 Innovation Days, Bregier said: “Our customers, when they fly long range, expect to have toilets with doors that close.’” And many of them did not. “I was not satisfied. I was upset,” he said. “I joined Airbus almost 10 years ago and we started this new A350 development in early 2007. We went through tons of difficulties. We put together thousands of complex parts to assemble this aircraft and now we are blocked because seats or toilets are not ready or the quality is poor. “It’s a bit like getting your new car, but you have something missing that does not allow you to drive it. Airbus bosses Didier Evrard, Tom Williams and Fabrice Bregier: Airbus making production changes that will “Everything is there except deliver a “a much higher level” of A350 output in 2016

26 / ORIENT AVIATION / JULY-AUGUST 2016 NEWS BACKGROUNDER

the fix is completed. It cancelled the delivery of its first A320neo. Qatar Airways group chief executive, Akbar Al Baker, said months of delays to the single aisle plane allowed the Doha-based airline to invoke a cancellation clause with Airbus. Al Baker has intimated that his airline, the one-time launch customer for the A320neo, could walk away from more orders when contracts permitted. Qatar has ordered 50 A320neo-family planes and was is working very closely with our by the customer themselves, come with a very high level of due to receive the first of the type cabin suppliers and Airbus to it was no different. That was a effort from the A350 team and last year. Al Baker said that under protect the integrity of the delivery big crisis. And we have issues industrial systems to enable that the original agreement the airline program to ensure our A350-900 with other cabin suppliers so [it because the level of disruption should have had five A320neos in aircraft are delivered according to has been] a very, very difficult we have seen with these cabin service by now. schedule.” beginning of the year.” problems is very high.” “It is making a huge impact And the A350 delays are not There had been some As for the A320neo “gliders”, on my bottom line. We are, quite the only production and delivery improvements in the last three Williams said new standard Pratt frankly, screaming,” he said. issues the company is facing. months, he said, but they had & Whitney PW1100G engines Pratt & Whitney took the Problems with the engines for come at a price. “We have to are about to arrive at the Airbus unusual step of publicly rebuking its new A320neo have forced the mobilize additional Station 20 Final Assembly Lines in Hamburg a customer when it said Al Baker’s postponement of the aircraft to its (final assembly line positions) and Toulouse, so deliveries [of the comments were “completely initial customers. Delays caused by where we put the cabin in the A320neo] will resume. inaccurate” and that they teething problems with the Pratt aircraft,” he said. “The aircraft are parked, “mischaracterize the performance & Whitney’s PW-1100G engines, “We are lucky that this year finished, painted and ready to of the engine”. said Airbus chief operating officer, the A330 is going down so this go. All they need is engines,” The engine maker said it is Tom Williams, ruefully, has meant frees up additional Station 20s he said. Pratt & Whitney has meeting its fuel-consumption the company has effectively been that we can use for the A350. developed software upgrades and promises and has “resolved the building A320neo “gliders”. “A number of additional a hardware fix that reduces the very few initial teething items Bregier said in Hamburg that changes are necessary to meet problem of cooling time during airlines have experienced” production will ramp up on both the targets. “What we are putting engine startup. and that information about its the A350 and the A320neo and together today is a strong summer The manufacturer wants to “solutions for the items are well delivery targets could still be met. plan to allow us to reach a much limit the delay to 90 seconds per known” and widely disseminated Can Airbus achieve its higher level of throughput in the engine in the short term and to 30 to its customers. target of 50 deliveries this year? second half of the year. seconds by the end of the year. For Pratt & Whitney is now Executive vice president and head “We are where we are. Fixes now, only and IndiGo delivering production engines to of programs, Didier Evrard, said are in place: additional capacity have taken delivery of the new Airbus with changes, but they yes it can, but conceded the delay of workmanship, hangars and variant - a total of six aircraft. have yet to be flight-tested. issues were placing “additional stations. The target remains Querulous Qatar Airways has Brégier said “mature stresses on the system”, in a absolutely achievable, but it will refused to accept the aircraft until aircraft” would be ready by manufacturing environment mid-year and that Airbus aimed already stressed by an aggressive They [suppliers] just cannot continue to meet its delivery commitment, delivery timeline. but acknowledged “it will be “The 50 (A350) aircraft: we like this. This is the message and I will challenging”. have challenges for that,” he constantly repeat it very vocally: At the end of last month, said. “I am really disturbed by the Airbus finally had some good lack of cabin equipment. Cathay I will progressively get rid of delinquent news. On May 31, it received Pacific’s seats are being delayed. suppliers who are not meeting joint type certification of the CFM We have the same issue with the standards of our customers Leap-1A-powered version of the other operators as well. A320neo. The variant is to be “Whether it was seats in the Fabrice Bregier delivered in July or August to an as catalogue or it was seats chosen Airbus President and CEO yet undisclosed customer. ■

JULY-AUGUST 2016 / ORIENT AVIATION / 27 INDUSTRY INSIGHT INNOVATION IN GLOBAL AEROSPACE Airbus’ ink jets

Astonishing 3D printing or Additive Layer Manufacturing has revolutionized the design and printing of airplane liveries at Airbus. Now the European aircraft manufacturer is using the technology to build entire aircraft, chief correspondent, Tom Ballantyne, learnt at Airbus’ recent Innovation Days in Hamburg.

HOR can’t really four weeks to build from parts year. Airbus head of emerging aircraft components. be described as a entirely 3D printed from aluminum technologies and concepts, Peter Airbus’ commitment to commercially viable powder, is scheduled to complete Sander, said ALM represented new 3D printing technology aircraft, but it has 16 flights in 2016. an alternative to the production is revealed by its investment flown. The letters But building experimental processes of milling, melting, in the “Aerospace Factory” in Tstand for Test of High-tech printed planes is not the end of casting and precision forging. Munich, Germany, which is being Objectives in Reality and it is one the story. Like its U.S. rival, Boeing It also saves resources. It developed with several industry of the more recent developments Commercial Airplanes, Airbus is produces 5% in waste material and research partners. in Airbus’ drive to find new and 3D printing many of the parts it compared with 95% from Based at the interdisciplinary more efficient ways of building uses to build its jets. conventional machining. It Ludwig Bolkow Campus aircraft. A bionic cabin bracket also facilitates more efficient Ottobrunn/Taufkirchen, south It is, in fact, the world’s first “printed” from titanium powder production of detailed, highly of Munich, it will research and 3D printed aircraft and it is one of made its first flight in an complex bionic parts. apply new 3D printing materials the more recent developments in A350XWB on June 20, two years The combination of ALM and production methods for the Airbus’ drive to build its aircraft ago. Airbus also has manufactured and bionic design creates parts aerospace industry, with a focus more efficiently. So far, THOR it is a cabin partition printed from that are up to 55% lighter than in on developing lightweight, cost- only a drone with a wingspan of aluminum powder. previous manufacturing processes efficient and structurally complex four metres, but Airbus believes The result is a panel that is and improve output times by up propulsion systems. the miniature flying machine is 50% lighter than a normal panel to 90%. It is expected that printed With the goal of producing a major milestone in aerospace and a component that is planned aircraft parts could reduce costs 3D mission control propulsion technology. to be trialled on an Airbus test by 75% overall and allow Airbus systems, each partner will The airplane, which took aircraft in the final quarter of this to achieve more rapid analysis of contribute its expertise and

28 / ORIENT AVIATION / JULY-AUGUST 2016 INDUSTRY INSIGHT INNOVATION IN GLOBAL AEROSPACE

The new process uses industrial inkjet printers that decorate VTPs faster, more efficiently and with finer detail than traditional methods. “This is particularly interesting for customers whose liveries include photo-realistic motifs, complex patterns or modern art paintings with color gradients,” Maurer said. Britain’s Thomson Airways was the launch customer for the new livery technology. The direct printer functions much like a traditional model, using a special inkjet head with nozzles that spray the three basic colours of cyan, magenta and yellow as well as black onto the VTP. The ink exhibits good resources from component technologies to develop industry first of “direct printing” adhesion properties and bonds design, metal powder and robust and environmentally of large and complex liveries on well onto existing aviation-specific materials production to additive friendly materials for aerospace aircraft vertical tail planes (VTPs). paint systems. It is applied on manufacturing, process simulation components. Painting an aircraft takes the base-coat of the VTP and and quality control. Airbus recently announced up to two days. Airbus’ head sealed with a clear coat. “This The materials research plans to 3D print half of its future of the A320 Family Paint shop, ensures good durability in extreme laboratory belonging to Airbus airplane fleet and investing in the Ralph Maurer, said the common temperatures, ultra-violet radiation Group Innovations, the group’s e Aerospace Factory and materials practice in the industry ranged and erosion that aircraft paint central global research network, research laboratory is a major step from adhesive film to airbrush must tolerate. Airbus foresees a is a 4,500 square meter facility towards that goal. and stencil techniques. They have time when an inkjet printer will be that will house 65 experts. In a separate project, a few advantages and several able to sweep across an aircraft They will apply 3D printing with engineers from Airbus’ paint shop disadvantages compared with painting its entire livery from nose other advanced manufacturing in Hamburg have developed an new 3D printed technology. to tail. ■ Digital passports to make airport security obsolete?

By Tom Ballantyne in Barcelona biometric authentication in their has provided SITA with the journeys across borders, thereby opportunity to do this at many orderless travel in the travel experience. The forecast eliminating the need for multiple airports and more than 30 of the blink of an eye is on the impact of the technology is the travel documents or storage world’s borders,” he said. technological horizon subject of research at the world’s of passenger details by various “But the underlying design of for the world’s airlines. leading internet companies and authorities. today’s computer systems means But its advocates must technology conglomerates such Speaking at SITA’s recent there are multiple exchanges of Bconvince governments that as aviation communications annual IT Aviation Summit in data between various agencies biometric recognition systems provider, SITA. Barcelona , the company’s chief and multiple verification steps are foolproof – and that will take In its purest form, Blockchain technology officer, Jim Peters, in the process that reduces the time. adopters would have their said SITA envisages a time ability to operate a single global One promising development passports embedded in their when seamless, secure travel system. Blockchain would make is Blockchain. If fully developed, smart phones or wearable would be available to all airline these processes obsolete. it could revolutionise the airport devices, allowing secure, passengers. “To date, technology Peters said it may be ten or

JULY-AUGUST 2016 / ORIENT AVIATION / 29 INDUSTRY INSIGHT INNOVATION IN GLOBAL AEROSPACE

Peters forecast: “The airline industry will not invent this. The financial industries, Amazon, Microsoft, all of these guys who create devices that are driving e-commerce, they want this too. They want better security and they want better experiences. “They want to eliminate your 95 user IDs and passwords on line. They want to look at your device, have it recognize you and allow you to do transactions, use your credit card etc. We are looking to piggy back on these industries to see how these things develop.” “Blockchain is a database where transactions are recorded and confirmed anonymously. Whether it is used for currency or travel it is a record of events that is shared between multiple parties, but once information is entered into its system, it cannot

SITA chief technology officer, Jim Peters: developing system for seamless digital passenger clearance be changed and privacy and security are by design. twenty years away, but it would identity fraud. That’s the big issue Francesco Violante, retiring “You can’t put individuals’ allow airlines to establish the true we confront,” he said. chief executive of SITA, said: biometrics into a big database identities of all their passengers. If it is adopted in the aviation “Knowing that passengers prefer that hackers could go after. At a summit session, the industry, Blockchain adopters to use their own devices and self- One of Blockchain’s objectives managing director of UK-based would create a verifiable “token” service technology throughout is to make sure an individual’s of Augmentiq, Matthew Finn, on their mobile phone or the journey should encourage biometric information never told delegates Europe had issued wearable device that contains airlines, airports and governments leaves his or her phone or device. more than six million travel their biometric and other to examine methods to transform It verifies that the data on your documents last year and that personal data. In this vision of the experience at security, border phone or device has not been possibly more than 650,000 of future travel, an airline passenger control and baggage collection.” changed.” ■ them were provided to potentially could travel worldwide and any false identities. authority could scan your face “These are genuine and your device to verify you are A third of all passengers rates documents so frontline airline the person you say you are. security as their worst airport staff will not be able to identify “Blockchain fundamentally them as counterfeit because they changes the systems that create experience are not. They have been issued decentralized, global, tamper- SITA 2016 Passenger IT Trends Survey indicated airline to people who do not exist,” he proof, distributed databases. passengers are becoming so comfortable with technology that said. “People can create a new It is very early days yet and the they are choosing to use it rather than interact with people. SITA identity, obtain a birth certificate issues of scalability and adoption said 85% of passengers reported a positive travel experience in and then fraudulently obtain a rates need to be examined,” this year’s survey compared with 80% last year. Noticeably, passengers are happier at the steps of the journey genuine [travel] document.” said Peters. He added that the where they have more control in managing their trip. At booking, Finn said International concept “looks as if it’s got legs’. which they can do online using a mobile or through an agent, Civil Aviation Organization “There has to be a 93% of respondents had a positive experience,” the survey said. (ICAO) statistics have identified pitch to governments that it “Passengers experience the most negative emotions during the a major shift from the use of would improve security. The security screening, passport control and baggage collection steps counterfeit passports and visas proof points will have to be of the journey, with dissatisfaction peaking to nearly one third of to fraudulently obtained genuine demonstrated. There has to be a all individuals surveyed at security. These also are the steps with documents. “Document fraud business case for all stakeholders the least number of self-service technology options.” has been replaced by much more and that is cost,” he said.

30 / ORIENT AVIATION / JULY-AUGUST 2016 No.1 Asia-Pacific commercial aviation magazine

ORIENT AVIATION SPECIAL REPORTS 2016

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