RESURRECTION at ROYAL BRUNEI? for CEO and Deputy Chairman, Dermot Mannion, Improving the Financial Fortunes of Royal Brunei Remains a Work in Progress

Vol. 22 No. 8 October 2015 orientaviation.com

RESURRECTION AT ROYAL BRUNEI? For CEO and deputy chairman, Dermot Mannion, improving the financial fortunes of Royal Brunei remains a work in progress

Attracting the Qantas tops Pacific partners Google generation region for first to meet new to the cockpit ancillary revenue tracking targets MRO

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COVER STORY 24 RESURRECTION

PUBLISHED BY AT ROYAL ORIENT AVIATION MEDIA GROUP BRUNEI? Mailing address: GPO Box 11435 Hong Kong For CEO and deputy chairman, Office: 17/F Hang Wai Commercial Building, Dermot Mannion, turning around 231-233 Queen’s Road East, Royal Brunei remains a work Wanchai, Hong Kong Tel: Editorial (852) 2865 1013 in progress 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 Dominic Lalk Tel: (852) 2865 1013 E-mail: [email protected]

North Asia Correspondent Geoffrey Tudor Tel: (813) 3373 8368 E-mail: [email protected] COMMENT MAIN STORY 7 Approaching crisis point? 14 Asia’s congestion contagion India Correspondent R. Thomas Tel: (852) 2865 1013 NEWSMAKERS E-mail: [email protected] 9 Internet king, Jack Ma, invests in China’s “smart Photographers airports” Rob Finlayson, Colin Parker, Graham Uden, Ryan Peters 9 Frankfurt airport finally victorious in Manila airport terminal dispute Design & Production Chan Ping Kwan 9 THAI staff resisting change says the airline’s boss

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General Manager TRAINING Shirley Ho 30 Airlines must attract the bedazzled Google E-mail: [email protected] generation to the cockpit ADVERTISING 31 Pan Am/ANA Thailand’s flight training academy

South East Asia and Pacific wins third party clients Tan Kay Hui Tel: (65) 9790 6090 E-mail: [email protected] NEWS BACKGROUNDERS SPECIAL REPORT 11 PAL disappointed with new UAE air services deal MROs battle for business with OEMs goliaths: The Americas / Canada Barnes Media Associates An Asia-Pacific update Ray Barnes 32 IATA boss objects to “runaway aftermarket Tel: (1 434) 770 4108 Fax: (1 434) 927 5101 agreements” 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]

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Approaching crisis point?

The fact that 30% of flights into China operated by Cathay Lumpur are facilities that have met the challenge of Pacific Airways and Dragonair were delayed in the first servicing the world’s fastest growing aviation market. half of this year is no news to anyone in the industry. However, the International Air Transport Association’s China is a red hot congestion spot that is showing no (IATA) drive to have “Seamless Skies” implemented in the signs of cooling in the immediate future. Asia-Pacific has been disappointing. Designed to improve But it is not the only country in the region with choked air traffic flow along airways using cross-border flow airports and airline fleets flying in confined skies. Gateways management, its success is “patchy” and in some cases including Jakarta, Manila, Bangkok and Hanoi are operating “very slow”. far beyond their design capacity. Some countries have upgraded their air traffic systems, As a result, carriers are losing millions of dollars a year others have not. It results, IATA said, in everyone having to because they are forced to fly holding patterns and run operate at the lowest common denominator, which does engines on taxiways while they wait for gates to clear. very little to relieve the increasing air traffic congestion that And then there are the passengers and the crews. costs airlines so much time and money. Passengers are entitled to be annoyed when they have to Governments understand the importance of aviation sit in packed planes for hours - a common experience in to their local economies, but many of them are backing China - and then often miss their onward flights because away from the multi-billion dollar decisions required to of delays. build modern aviation infrastructure. They must step up It isn’t fair either that cockpit and cabin crews and to the plate and build facilities that will keep up with the operations staff have to suffer the complaints, often demands that increasing numbers of jets are placing on abusive, of passengers outraged by delays. Or to have to the system. constantly manage changing operating schedules. Aviation is a complex industry built on partnerships. So what to do? The present congested state of airport New airports alone will not eliminate congestion. There must and air traffic management has developed because be a dramatic improvement in air traffic management to the infrastructure master plans of many Asia-Pacific accompany the onground hardware. governments and airport authorities have failed to keep up Unfortunately, the evidence to date suggests that this is with demand. not going to happen soon and that congestion in the Asia- There are exceptions. Singapore Changi and Kuala Pacific is going to get a lot worse before it gets better. ■

TOM BALLANTYNE Chief Correspondent Orient Aviation Media Group

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China’s Internet king, Jack Ma, invests in China’s “smart” airports

Alibaba founder, Jack Ma, fabled vast Pudong facility “smarter”, payment systems for his airport for his rags to riches success as reported Hong Kong’s South passengers”. Shanghai Pudong the founder of China’s first and China Morning Post last month. International airport opened its most popular online commerce Shanghai Airport president, fourth runway last year and has site, has joined forces with Ying yiming, said he wanted to embarked on a US$3.135 billion rival, Tencent Holdings, and “leverage the two groups’ key expansion of the complex to Shanghai airport to make the advantages in big data and virtual meet passenger demand. ■

Frankfurt airport victory in Manila terminal dispute

The Supreme Court of the Philippines Justice system for the last ten years as the said it was waiting to hear if the parties has ruled in favour of the Philippines facility grew to handle 13 million passengers to the decision would seek further legal International Air Terminals Co. Inc. annually and earn corresponding revenue recourse. No deadline was specified for the (PIATCO) and its joint venture partner, in retail and airport fees. Frankfurt Airport compensation to be paid. ■ Frankfurt Airport, in a decade long dispute with the Philippines government about the ownership of terminal 3 at Manila’s Ninoy Aquino International Airport. The judges directed the Philippines government to pay PIATCO and its partner US$510 million, which included the US$59 million the government paid to the company in 2006. The joint venture received approval to build the much needed terminal in 1997, but in 2002, the government took over the facility, shutting out the joint venture partners and refusing to compensate them for taking ownership of the facility. The case has travelled through the Philippines

THAI staff resisting reforms, says the airline’s boss

Walking the talk in his battle to turn around told Bangkok’s media last month that the To encourage acceptance of the flag carrier, Thai Airways International majority of the airline’s 25,000 strong work restructuring, which will include more (THAI), is proving tougher than its reform force does not share his urgency for the executive and cabin crew redundancies by minded president and chief executive, radical changes necessary for the airline’s year end, he has been holding employee Charamporn Jotikasthira, expected. He survival. road shows to explain his reform programme and outline the problems created by the airline’s entrenched “silo management” structure. Whatever long-term THAI employees feel about their very business- minded boss, some changes are inevitable. By year end, 1,400 more employees will leave the airline under its Mutual Separation Plan and a forecast similar number of cabin crew will be retrenched under the Golden Handshake scheme as the carrier’s network shrinks. THAI’s target for recovery is a 70% implementation of the turnaround plan by January next year, with a return to profitability, and completion of the full agenda for financial reform, by 2017.■

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According to insiders, the Gulf team opened the talks with PAL disappointed with a complaint about the public joint statement from local operators, which the UAE said was a threat UAE air services deal and an affront they threatened to report to Abu Dhabi. The UAE also alluded to The big Gulf airlines didn’t succeed in securing all Philippino foreign workers – more their demands at recent air talks with the Philippines than a million - employed by Gulf airlines and by other businesses in government, but they walked away with far more than the UAE. Some of the Philippines local carriers wanted. negotiating team believed it was a veiled threat to stop or slow down hiring from the Philippines if the Gulf airlines’ air rights demands Tom Ballantyne reports were rejected. The new agreement is far hilippine Airlines two countries. “We hope our bin Ghaleb. They participated below the 30 or more new flights (PAL) president, Jaime own government will promote directly in the talks. the UAE reportedly sought. The Bautista, was far from fair competition and support In contrast, PAL, Cebu Philippines also wanted Gulf happy last month our airlines who have invested Pacific and other local carriers carriers to operate direct flights after his government much in re-establishing air had no place on their country’s to other destinations, particularly Pconcluded two days of air rights links to the Middle East and negotiating team and were Clark and Cebu, in return for new discussions with the United Arab Europe,” said Bautista. “We classified as observers. slots into Manila. Emirates (UAE) that will allow Gulf call on the Philippines panel to Earlier, a non-governmental The UAE’s reluctance to airlines to increase their weekly the UAE air talks to refrain from organization, Save Our Skies (SOS), service more domestic cities led to flights to the Philippines by 25%. giving Mid-East carriers undue which promotes fair and open a watered down agreement. The “Frankly, we are disappointed advantage by granting more skies, had urged the government Philippines Civil Aeronautics Board by the results of the UAE capacity and frequency beyond to re-instate Philippines carriers (CAB) executive director, Carmerlo aviation negotiations with our the requirements of the market.” as full members of air negotiating Arcilla, announced the granting of government,” he told Orient A spokesman for Cebu Pacific panels (normal practice in most extra flights to Manila was subject Aviation. “There was no market made a similar plea. He pointed countries) and pointed out their to UAE carriers operating to Clark justification for expanding out the existing entitlements were role as observers “makes no sense or Cebu “within a year” from the capacity rights.” still not being fully utilized by and is absurd”. signing of the MoU. The new agreement, which Philippines carriers. Their appeals SOS president, Robert Lim This condition is “in line was concluded without local for no increases in entitlements for Joseph, said local carriers should with our open skies policy in our airlines’ full participation, will the Gulf carriers fell on deaf ears. be given equal opportunity to developmental gateways outside allow each country 35 flights From the outset of defend their positions and fight Manila, and forces UAE airlines a week, an outcome that had negotiations, the Philippines for reciprocity and fairness. to invest in our developmental been opposed by the country’s carriers were at a disadvantage. “Where in the world can you see gateways”, he said. international carriers, PAL and When the discussions opened in airlines being relegated to mere Arcilla said that while Cebu Pacific, as well as several Manila in late August, the UAE observers in critical negotiations this development may be domestic airlines. team included representatives concerning their business and “disadvantageous” to local Before the talks began, from Emirates Airline and Etihad future?” SOS asked. carriers operating flights between the two airlines issued a Airways, who sat to the left Manila and Dubai or Abu Dhabi, joint statement that and right the UAE’s chief the Philippines government opposed increases negotiator, Omar succeeded in negotiating in flights additional fifth freedom traffic between the rights to the United Kingdom, the U.S. and Saudi Arabia for its airlines. “Our carriers can fly from Manila to UAE and onward to any country, including the Gulf carriers win approval for UK, the U.S., and Saudi Arabia. more Philippines-UAE flights This will improve Philippines

OCTOBER 2015 / ORIENT AVIATION / 11 NEWS BACKGROUNDER

connectivity and the commercial began, Bautista cautioned the viability of our routes to the UAE,” Philippines negotiating team “to he said. learn from the bitter experience” Arcilla said the parties have of major U.S. airlines in dealing agreed to “co-terminalization”, with airlines from the Arabian which allows an airline from one Gulf, including Emirates and country to fly to a city in the other Etihad. country and onward to another The U.S. government is city in that country without looking into allegations of unfair picking up passengers on the practices by Emirates, Etihad and domestic leg. Qatar Airways after claims by “Overall, the talks were a the “big three” U.S. airlines that success for Philippines connectivity the Gulf carriers have received and network development. The government subsidies of up to Philippines government panel and $42 billion. The allegations have our airlines view the exchange as been strongly denied by the Gulf more or less fair,” he said. operators. “The increase in traffic rights Frankly, we are disappointed by the Being a realist, Bautista for both sides, which our airlines results of the United Arab Emirates (UAE) told Orient Aviation after the opposed, is minimal. We also agreement was concluded: “while achieved unilateral concessions for aviation negotiations with our government. we can’t expect a fair fight, PAL the increase, in terms of subjecting There was no market justification will fight back where it counts; in the operation of the additional for expanding capacity rights the market, day by day.” traffic rights by the UAE carriers Analysts tend to agree. They for services to Clark or Cebu.” Jaime Bautista think the results of the talks could In August, before the talks President Philippine Airlines have been a lot worse. ■ Pacific partners first to meet new tracking targets The International Civil Aviation Organization (ICAO) is committed to recommendations for a 15-minute aircraft flight tracking standard, but several carriers and ATM providers are already operating systems that meet the new rules.

Tom Ballantyne reports are being tracked more than in the world to meet ICAO’s Navigation System (FANS) that four times an hour, Airservices recommendation for tracking airlines use for oceanic ATC t will be sometime before Australia has announced. oceanic flights every 15 minutes communications. every commercial aircraft Since June, Australian, or less years ahead of the The upgraded tracking flying across the globe New Zealand and U.S. air deadline. system is the product of will be tracked every 15 traffic controllers have used To comply, the airlines use co-operation between Airservices minutes, but in the Asia- existing Automatic Dependent communications technologies Australia, Airways New Zealand IPacific, three regulators are Surveillance-Contract (ADS-C) already onboard modern and the U.S. Federal Aviation already meeting the ICAO technology to track aircraft across aircraft, including the Aircraft Administration (FAA), said standard, planned for global the Pacific every 14 minutes, Communications Addressing Airservices executive general implementation by 2018. more than halving the previous and Reporting System (ACARS) manager air traffic control, Greg Passengers flying over the tracking interval of every 30-40 datalink, Automatic Dependent Hood. Pacific Ocean between Australia, minutes. Surveillance-Broadcast (ADS-B) “It is rewarding to see New Zealand and the United As a result of the new and the Automatic Dependent Airservices’ close cooperation States can now be secure in the procedures, flights in the Oceania Surveillance-Contract (ADS-C) with New Zealand and the U.S. knowledge that their flights region are among the first application of the Future Air result in this boost to passenger

12 / ORIENT AVIATION / OCTOBER 2015 NEWS BACKGROUNDER

Many Asia-Pacific airlines have increased their tracking procedures to every 15 minutes ahead of the ICAO deadline of November 2016

confidence in the safety of flying provide real-time aircraft position AirCentre Flight Explorer solution, he said. over vast expanses of oceans monitoring over remote and providing real-time data for Iridium Communications such as the Pacific,” he said. oceanic regions. accurate decision-making in flight plans to have 66 new satellites Airservices was one of “By adding ADS-B, ADS-C, operations. The flagship feature, orbiting the planet within three the first ATM operators to trial FANS, ACARS position reporting, Fleet Monitor, builds on existing years. Its NEXT constellation more frequent satellite flight along with air traffic control, airport and flight monitoring will be able to receive an tracking when it conducted an the system provides clearer, capabilities to give airlines a airplane’s location signal every initial proof-of-concept trial last more precise location of the comprehensive dashboard view few seconds. The company’s January. The 14-minute standard aircraft. It also supports operators of their entire fleets. satellites gather information from was extended to all Australian in managing flight paths for “As part of our strategy equipment in the aircraft cockpit. airspace by the end of May. efficiencies and weather and commitment to provide our The satellites are monitored in Airways New Zealand introduced avoidance,” said SITA OnAir customers with intuitive flight Virginia in the U.S. with a second enhanced tracking at the same commercial director for the management solutions, Flight centre for emergency operations time. The FAA followed suit in Americas, Larry Thomas. Explorer delivers actionable, being built near Shannon Airport U.S. Pacific airspace at the end Airlines can also access real-time information at the key in Ireland. of June. Malaysia’s Department information to set up parameters moment of decision making,” Last month, Inmarsat of Civil Aviation recently of their own if an aircraft deviates said Kamal Qatato, vice president launched the third of its Global implemented more frequent from its pre-determined flight of Sabre AirCentre, which Express (GX) constellation of aircraft tracking in its airspace path. provides software for airline satellites - Inmarsat-5 F3 from using the same technology. SITA isn’t alone in introducing operations. the Baikonur Cosmodrome in Many Asia-Pacific airlines improvements to tracking “For example, if a plane goes Kazakhstan, a key step towards have upgraded their tracking systems. Global technology off route or does not report its delivering global commercial capabilities ahead of any formal provider, Sabre Corporation, last position within a few minutes, service introduction of GX deadlines, including ICAO’s rule month began offering clients the airline will be alerted and services by the end of this year. on 15 minute tracking. Among enhanced capabilities on its escalation can begin instantly,” The $1.6 billion GX program carriers using SITA OnAir’s is “the first and only global FlightTracker are Malaysia Airlines broadband service designed, and Berhad, Singapore Airlines, Royal Airservices Australia’s close now deployed, for the aviation Brunei Airlines, AirAsia India and cooperation with New Zealand and industry”, said Leo Mondale, Air Costa, also in India. president of Inmarsat Aviation. The FlightTracker technology the U.S. to introduce 14 minutes “The successful launch and early was developed for airlines intervals in aircraft tracking is deployment of Inmarsat-5 F3 is to meet proposed tracking a huge milestone for Inmarsat guidelines without the cost of a boast to passenger confidence Aviation. GX Aviation is poised to significant aircraft modifications. when flying over vast expanses of transform aviation connectivity. It uses multiple data sources, oceans such as the Pacific It replaces the marginal solutions including air traffic control radar adapted around infrastructures data, terrestrial and satellite feeds Greg Hood that were never intended to serve and an airline’s flight plans to Airservices Australia executive general manager air traffic control aircraft.” ■

OCTOBER 2015 / ORIENT AVIATION / 13 MAIN STORY ASIA’S CONGESTION CONTAGION Talk air traffic congestion to an Asia-Pacific airline boss and the mood will darken. A combination of timid political will at some aviation authorities, varying capital resources in emerging economies and widespread planning procrastination have created an infrastructure shortfall that is lagging far behind airline growth.

Tom Ballantyne reports

onnections missed. Flight schedules in havoc. indication of the impact,” he said, “about 30% of our Cathay Weary cockpit and cabin crew coping daily Pacific and Dragonair flights to Mainland China were with frustrated passengers. Tourism in several delayed during the first half of this year. Asia-Pacific countries taking a bottom line hit. “Extensive flow controls for flights to and from Welcome to the new normal at airports across Mainland China have had a significant impact on operations Cthe region where escalating air traffic congestion is choking and the workload of our operations teams. Flight delays up gateway hubs and confining network expansion across or disruptions are having a knock-on impact on aircraft the region. rotation, which means that flights to non-Mainland China Cathay Pacific Airways director service delivery James destinations are also being affected.” Ginns, told Orient Aviation last month: “To give you an Hong Kong’s problems, it has to be said, have not been

14 / ORIENT AVIATION / OCTOBER 2015 MAIN STORY

helped by the implementation problems of the airport’s new The Civil Aviation Administration of China (CAAC) Air Traffic Control system, Raytheon’s Autotrac III, which has reported the average on-time rate for China’s domestic was planned to be operating in 2012, but will not be fully airlines this year was down to 65%, from 68% in 2014. functional until next year. In June, it dropped below 60%. A passenger flying on a And Cathay Pacific Airways and Dragonair are hardly Chinese airline experiences a flight delay in one of every alone in their struggle to ensure their customers board flights three trips. Chinese carriers are among the least punctual that depart and arrive on time. But like their counterparts airlines in the world. across the region, Ginns and his teams are facing the fact that A report from Civil Aviation Data Analysis, a Chinese keeping a commitment to on time performance is becoming organization tracking the on-time performances of 103 tougher by the day at Asia-Pacific airports. major global carriers, found Guangzhou-based China And China, the originator of most delays into the Pearl Southern Airlines was a poor 86th with an on-time rating of River Delta air traffic zone, is not the only choke point in 70.45%. the region’s congestion chain, In Indonesia, the Philippines, Beijing-based Air China was 93rd with 66.41% and Thailand,Vietnam and elsewhere, gateway airports are Shanghai-based China Eastern Airlines was 94th, with operating at, or well above, their planned capacity levels. only 64.46% of its flights on schedule. Airports in Beijing, In the air too, as low-cost carriers continue their Shanghai and Guangzhou have to deal with at least 90 take- unprecedented growth, airways are becoming more clogged, offs and landings per hour. The average amount of traffic on leading to increased aircraft holding, reduced gate and the country’s busiest air routes exceeds 1,100 planes a day, taxi-ing capacity and the burning of more fuel. which is double the aircraft managed by air traffic managers “To put things in perspective, said Vinoop Goel, in Europe and the U.S. the International Air Transport Association’s (IATA) The CAAC has attributed some of the blame for the Asia-Pacific regional director for airports, passengers, cargo worsening flight delays to increasingly extreme weather and security, “the region is already home to one-third of conditions in the last year. Before 2009 more than 80% of global air traffic and traffic is forecast to double in the next flights in China were on time. Their on time performance twenty years. has fallen every year since 2010 and is now at a record low. “If you compare these figures with the contemporary China’s chronic delays – often up to six hours at state of aviation infrastructure, both on the ground and in Shanghai Pudong International airport – have an impact the air, and the announced plans for airport and air traffic well beyond the country’s borders. “These ATC delays expansion, we see a significant gap. are not only affecting airlines such as Cathay Pacific and “For us, it is a gap so big that we need governments and Dragonair,” said Ginns. “Congestion, both at airports and airports in this part of the world to really work on developing air traffic control, is an increasingly major feature across master plans and implementing them.” Asia.” As examples of the problem, Goel said Manila, Jakarta Particular issues, due to the extremely rapid growth of and Bangkok’s Suvarnabhumi airports come to mind. “But flights within, to and from Mainland China, cause even when you go down even further, to secondary airports the greater delays during times of bad weather, which in most of problem is pretty substantial across the region. That’s why Greater China is in the summer holiday season governments need to focus on this problem to capture the “Importantly, it bears a potential significant impact potential growth out there.” on Hong Kong’s standing as the premier gateway to

OCTOBER 2015 / ORIENT AVIATION / 15 MAIN STORY

China, a major aviation hub in Asia and, ultimately, a top governments been caught by surprise by the growth? tourist and business centre globally. Aviation and affiliated “No,” said Goel. “For example, expansion has been industries contribute about 8% of Hong Kong’s GDP, and planned at Bangkok since they opened Suvarnabhumi. There any downturn in industry will ultimately hurt the city’s was always a plan for a mid-field terminal, a third runway economy,” Ginns said. and maybe a second terminal. Its necessary to develop robust Just how much this is costing Cathay and other airlines master plans and actually implement them. In Bangkok we is difficult to assess. No comprehensive data is available have seen plans made and revised, then revised again yet, although a recently released study by a German “But we have seen very little action on the ground. consultancy provided an indication of the gravity of the It’s the same in Manila and Indonesia. Some governments problem. and some airports have got it right, like Changi, Kuala In April, Frankfurt-based aviationexperts published Lumpur and Hong Kong. Yes, they are going through their its second annual on-time performance study, which approval processes, but at least they have a plan and they also attempted to calculate delay costs. It examined 130 are working on it.” carriers worldwide and found airline delays amounted to an Some budget carriers are so concerned by capacity astonishing $25 billion in 2014. issues at several regional airports they are willing to invest in By region, the 33 North American carriers were the terminal infrastructure to improve on time performance and worst performers, with delays costing $14.4 billion. Delay aircraft rotation. costs for 34 airlines in Asia were $7.5 billion, with 38 AirAsia Group chief executive, Tony Fernandes, told European airlines incurring delay costs of $3.3 billion and delegates at an airport conference in Bangkok last month four Middle East operators $520 million. that the budget carrier group could invest, or become a joint As long ago as 2006, an investigation of airspace venture partner, in airport development. congestion in the Pearl River Delta Region of Southern “Such partnerships could be an answer if capital China was done by the Aviation Policy and Research Center requirements are an issue,” he said. “We’re big enough, and at Hong Kong’s Chinese University. The study found airport I don’t see why we should not have our own (passenger) and ATC delays were costing airlines about $80 million a terminals.” AirAsia has long nurtured a desire to have its year, a figure certain to have skyrocketed in the following terminals, but its bids to invest in such facilities in Malaysia nine years. and Indonesia have been turned down by airports and their “It’s not only airlines,” pointed out IATA’s Goel. “If regulators. you look at all the costs, the cost of At the same conference, Fernandes said Japan needed fuel, pilot time, cabin crew to find a solution for congestion at its airports because of time, passenger time and the country’s rising number of tourists. “Japan has to have the productivity lost in solutions for Tokyo. Low-cost carriers don’t really have a terms of GDP. The cost is strong home there and Haneda/Tokyo airport is too full,” substantial.” he said. While many of the There is a long list of airport expansion plans, but region’s major airports in most cases, completion is years away. Beijing Capital have expansion plans, International Airport, the busiest airport in China, they are not expected announced last month it would start building another to be ready in time to runway to ease the heavy burden on existing facilities and avoid an Asia-Pacific improve flight punctuality. congestion crisis. Have The airport’s three runways handle about 1,600 flights each day, more than their intended capacity. Luo Liang, James Ginns, Cathay Pacific head of the airport’s planning and development department, Airways director of service delivery: Initiatives are said the runway would be completed before the end of 2017 underway aimed to ensure and would increase the airport’s handling from 86 million the long-term stability of flight passengers a year by above eight million. Beijing’s second operations and to allow for airport, south of the city and reported to cost $13.11 billion, expected continued growth will open in 2109 at the earliest. The region’s most congested airport, Jakarta’s Soekarno- Hatta International, recently announced it had set aside $240 million for a third runway, but it has yet to acquire the necessary land. It also intends to expand its terminal space, but no completion dates have been announced for the project. The capital city airport handles more than 60 million passengers annually, nearly three times its design capacity of 22 million. Manila is almost as bad. The country’s Department

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of Transportation and Communications (DOTC) is working with the Japan International Cooperation Agency (JICA) to plan and construct an international airport by 2025. It is still at the feasibility study stage, with estimates it will cost between $10 billion and $13 billion when, and if, it is ready in 2025. As recently as July, IATA identified Manila’s gateway airport as a high-risk airport in the region because of its unresolved safety issues. IATA said airlines routinely reported problems at the Ninoy Aquino International Airport (NAIA) due to air traffic management, including extended holding, delays and non-standard air traffic control procedures. In Thailand, Bangkok’s second airport, spot because of the power Don Mueang (essentially an LCC facility) is of its military to shut down air traffic designed to handle a maximum of 18.5 million pathways at any time. The impact of this control over ATC passengers annually but it is now processing 22.5 million in the north/south corridor between Beijing, Shanghai and budget airline travelers a year and the numbers are rising by the Pearl River Delta was clear for all to endure when China’s the month. air force closed a large swathe of the country’s air space on Airports of Thailand (AoT) president, Nitinai September 3, a special public holiday declared to celebrate Sirismatthakarn, said the first half of this year saw a 50% the 70th anniversary of China’s war time victory over Japan. surge in passenger traffic compared with the same period last Goel said China had a “very robust” airport year. Work on a new Terminal 2 has been speeded up to be development plan. “But one of the issues is air traffic completed in November . conditions. A fundamental cause [of these conditions] is the Meanwhile, the board of AoT has approved the control of airspace that lies with the military in China,” he construction of a reserve runway and a new passenger said. “Airlines have to fly around the airspace blocks that terminal at Suvarnabhumi airport, worth a combined $1.3 are controlled by the military. We recognize you have to billion, with the runway to be operating in 2017 and the strike the right balance. In China they are investing in ATC terminal in 2019. systems but it is a work in progress. Yes, we would like to see Then there is the issue of efficiency. “In a lot of areas in more and we are hopeful that things will change over time.” the region we are not using the infrastructure as efficiently as Each country in fact has different issues to manage we possibly could,” said IATA’s assistant director safety and when building airports to feed demand. After decades flight operations, Dave Rollo. “Some of the processes and of opposition from residents affected, the Australian procedures, such as separation, are not at the best practice government has approved funding to build a second airport levels you would expect in Europe, the U.S. and Australasia. west of Sydney, but it won’t be finished for at least a decade. This restricts capacity as well.” Singapore Changi’s three passenger terminals and To a degree, China has a special status as an ATC hot runways are expected to run out of capacity in 2018 but, in contrast to many other locations, it will have opened Terminal 4 and an expanded Terminal 1 by then, increasing ATC delays a “financial its handling capacity from 66 million passengers a year to 85 million. Changi has joined with British public/private burden” for Cathay Pacific partnership UK air navigation provider, NATS, to increase Cathay Pacific Airways chief executive, Ivan Chu, the number of flights it can handle in Singapore. outlined the issues choked ATC pathways and airports While airlines are increasingly concerned about the created for the carrier in the company’s magazine, CX congestion situation, Goel pointed out that infrastructure World, in September. development is a complicated balancing act. “Master “Another key focus will be on trying to reduce the planning to implementation can be a very lengthy process, operational burden of ongoing ATC controls in the region and the disruptions resulting from congestion in our home especially in places like Hong Kong or Japan where you hub,” he wrote. are looking at reclaiming land and letting it stabilize to “These operational issues are having a serious impact build runways,” he said. on our passengers and staff as well as placing a significant “So if you take that into account, yes, they should financial burden on the airline.” have looked at doing something faster. But you don’t want to build too far in advance because then you might have

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a ghost terminal or a ghost airport that ends up costing governments, airports and passengers a lot more.” Asian Seamless Skies’ While he said there is an urgent need to develop master slow progress plans and implement projects, in the short term governments and airports need to focus on maximizing the throughput The International Air Transport Association (IATA has and potential of the existing infrastructure with new been leading a drive for several years to have “Seamless technologies and processes such as Fast Travel. Skies” in Asia,” IATA’s assistant director safety and flight operations, Dave Rollo, told Orient Aviation. “Regulatory approvals need to be given for Progress in implementation “has been a bit patchy and e-immigration, mobile boarding passes and home printed has been slow, and to a certain extent, disappointingly bag which reduce the infrastructure burden at airport,” slow”, said Rollo. IATA believed the time had passed for he said.” Asia-Pacific countries, in particular Southeast Asia and Airlines across the region stressed they are doing North Asia, to act in isolation if they want in management everything possible to minimize disruption for passengers of Air Traffic Flow. and are working with authorities to find solutions. But “We need to be working in groups of states, sub-re- Cathay Pacific’s Ginns said many delays and cancellations gional or regional, with linked up planning and linked up are beyond the airline’s control. “We have been consolidating thinking about managing air space and how to meet air flights and upgrading our aircraft, as the circumstances traffic demand that is forecast for the region,” Rollo said. demand, to minimize the impact. “However, the situation is deteriorating rapidly and and airports, IATA has developed the Value of Aviation requires immediate attention. We are working closely initiative, tailored to meet the needs of different parts of the with all the concerned authorities regarding these delays. world and staffed with different teams. A number of initiatives are underway, which are aimed to “In the Asia-Pacific, we are working to link the value ensure the long-term stability of flight operations in this area aviation brings to the need to invest in infrastructure and and, at the same time, allow for expected continued growth,” develop policy. In Africa, it is more about airline commercial he said. freedom,” said Goel. Cathay believed the limited number of available slots “In Europe, it is focusing on Single Skies.” should be put to better use by giving priority to airlines who In reality, said Goel, some governments don’t have the want to launch destinations and increase frequencies to cities capability to make billion dollar investments. “In that case with major trade and business relationships with Hong Kong PPP (Public, Private Partnerships) or participation by private - to maximize the economic value of these scarce resources. equity are options.” Another issue is that the industry is concerned that some But there is a caveat to these funding options. governments don’t understand the economic importance “Governments must make sure they are not selling the of aviation to their economies and the negative impact country’s “crown jewels”. Secondly, to ensure they are congestion has on growth targets. protecting the interests of aviation, they should resist Said IATA’s Goel:“from our observations and discussions resorting to higher taxes on international aviation,” said Goel. with governments, many see the link between increased traffic “You can kill the goose that lays the golden egg. If you growth and the benefits of aviation. Most of them do get it. make the gateway to your country expensive, it will have a “But we see a failure in policy in that the link long-term impact on the competitiveness of the airport and does not exist in some countries. Governments the country. It has to be remembered the Asia-Pacific say they want tourists and understand the is home to a third of the world’s airline business, benefits tourists bring to their countries’ but it has two-thirds of the global population. economies. “If Asians have the same propensity “But when you ask ‘well OK what to travel as the rest of the world, you are are you doing to increase tourism?’ Are looking at a potential four fold increase in you expanding your airport capacity? air traffic. It is a very sobering thought. Are you making the commercial To cater for that growth you need environment more airline-friendly? airports. You need the right ATC Are you improving your facilitation infrastructure and procedures. You need processes?’ You end up with a whole the right human capital - pilots, flight bunch of question marks.” attendants and mechanics. To address the wide range of “You need to have the right policies government responses to crowded skies on taxation and commercial and economic regulation. A whole series of policy and Vinoop Goel, IATA’s Asia-Pacific director planning steps need to happen. airports, passengers, cargo and security: Governments need to focus on Governments really need to get congestion to capture the their act together and get potential growth out there going.” ■

22 / ORIENT AVIATION / OCTOBER 2015 15T1868_ATR_54_OrientAviation_GB_202x273mm_HR.pdf 1 06/08/2015 09:09

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atrbroadcast atraircraft atraircraft atr COVER STORY RESURRECTION AT ROYAL BRUNEI? Royal Brunei Airlines (RBA) has survived several near busts in the last decade, but Dermot Mannion, the man charged with the carrier’s corporate revival, is determined to improve its financial fortunes.

By Tom Ballantyne

oyal Brunei Airlines is one of the most secretive But discussions about the new strategy don’t include airlines in the world when it comes to financial details of the airline’s balance sheet for analysts’ scrutiny. transparency. But you don’t need to be a When it comes to money matters all lips at RBA are sealed. company insider to recognize the carrier is No details of the financial performance of the carrier, under siege from nimble budget airlines and full wholly-owned by Brunei’s oil-rich government, effectively Rservice rivals with better networks. the Sultan of Brunei Darussalam, are published. To counter this fierce competition, What is known is that RBA has flirted with RBA recently completed a restructuring fiscal failure. Industry analysts said it continues to and is now writing a five-year plan the lose money, though not nearly as much as it did company’s CEO and deputy chairman, during its darkest days after the GFC of 2008. Dermot Mannion, hopes will improve It was then, in 2009, that Brunei’s RBA’s long-term financial viability. Ministry of Finance brought in Mannion to Mannion told Orient Aviation lead a restructuring of the carrier. The trained in Sydney recently: “Restructuring accountant had a solid track record, having is a never-ending story. That’s the spent 15 years with Emirates Airline, rising to challenge. In this industry, you go be president of group support services before through one restructuring program leaving to take charge of Aer Lingus. and sign that off. The next morning At the Irish flag carrier, he floated the you get up and ask: ‘well, what’s next’? company on the London and Dublin stock And what’s next is seeking to grind exchanges and defended two hostile takeover more cost out of the business.” The bids from Ryanair. His reputation for achieving latest plan is scheduled to be put strong cash flow, improved productivity and low unit before Brunei’s government costs was just what RBA needed. and shareholders next month. Deputy chairman and CEO Royal Brunei Airlines, Dermot Mannion: “the elephant in everybody’s room is the Gulf carriers. During the restructuring, the best way to compete with them was not to compete with them”

24 / ORIENT AVIATION / OCTOBER 2015 COVER STORY

Mannion did not take long to right-size the airline. He week. More recently, we returned to Bali and there are very reduced staff by 25%, to 1,500, and eliminated costs of $100 attractive passenger opportunities there from China.” million in five years. The route network was rationalized, RBA considers Brunei, with a population of about with services to five of its 18 destinations cancelled: 400,000 that enjoys the world’s fifth highest GDP per Auckland, Perth, Brisbane, Kuching and Ho Chi Minh City. capita, is well positioned, midway between the region’s north The next step along the RBA road is the new business and south, to attract transit traffic. plan, designed to run from April next year to March 2021. “We also have an airport where there is little congestion It will build on expansion of RBA’s regional network and and also offers growth opportunities. It’s a relatively easy extend to partnerships in Gulf Cooperation Council (GCC) airport, with its refurbished terminal, at which to operate countries. and transit,” Mannion said. Operating a fleet of four B787-8 Dreamliners on Long haul, RBA has switched to Melbourne from long-haul routes and four A320s and two A319s regionally, Brisbane as part of its network restructuring. It flies Brunei- RBA will add up to 10 A320neo as it returns to routes it had London via Dubai and directly to Jeddah in Saudi Arabia. closed when times were bad. “We made decision in 2010, early in my tenure, to focus very Mannion said: “Now we are better able to compete with much on the 787,” he said. the LCCs in the regional market and the full-service airlines “We are probably the only airline in the world whose on long haul. Sixty per cent of seats in Southeast Asia are on long-haul services are exclusively B787. So if you want to fly LCCs. Either we compete in that market or we withdraw between London and Australia and you like the B787, we’re from it altogether. the only ticket in town. It’s been a great success. “We compete well with AirAsia and Cebu Pacific. On “Previously, we used the B777-300ER. Just on fuel burn long haul routes, we have introduced the B787 and offer a alone we are doing 30% better than we were with the 777 unique B787 service between London and Australia. The fleet. That’s been a tremendous boost to the overall product. challenge is identifying profitable opportunities. One has to We have four in the fleet, with another one to come. We be honest and say that in the current market that is a very, don’t have a definite delivery date yet. It will be sometime in very difficult challenge indeed.” Nevertheless, Mannion sees opportunities around the region, especially in China. RBA flies to Hong Kong and Pilot and engineer shortages Shanghai from Brunei’s capital, Bandar Seri Begawan, and “biggest headache” he said there is considerable scope to expand in both cities. “A very important development that will soon come to Royal Brunei Airways’ deputy chairman and CEO, fruition is a codeshare with China Eastern Airlines, which Dermot Mannion, told Orient Aviation pilot and engineer will open up many of the behind points in China. It is shortages were the carrier’s “biggest headaches”. critically important to us. That’s not a market we have had “Managing talent and retaining the loyalty of good talent is the biggest challenge we face,” he said. access to in the past,” he said. “The Middle East carriers are very hungry. They “We have been developing, because of the limited size recruit people wherever they can. We lost some pilots to of the Brunei market, a very successful two centre product. the Middle East, but we have won some back and that is Passengers from China spend a couple of days in Brunei a good sign. Its a similar story with engineers because we and go on to Kota Kinabalu, which is the fastest growing train them very well. Some went off to the Middle East, destination in Malaysia. but we are beginning to see them returning.” “We have a very big presence there, with 14 flights a

OCTOBER 2015 / ORIENT AVIATION / 25 COVER STORY

the next couple of years. So that’s pretty modest in terms of Like many airlines, RBA is benefitting from the fuel where we are going on long haul.” price collapse. “The fuel situation has been positive, but in RBA also is using the B787 selectively, at peak times, to the airline industry it’s never only good news,” he said. increase capacity to short-haul destinations such as Hong “The currency has been a challenge. The Singapore Kong, Singapore and Shanghai. dollar, to which we are linked, has depreciated against the “A challenge in China is that tourism is heavily driven US dollar. The Brunei economy is heavily oil and gas-based, by groups. There will be days when there is potential which has had an adverse effect in the local market. demand for a large number of passengers. To cater for it, “We don’t hedge. Our view and we need a bigger gauge aircraft. our owner’s view is that Brunei has a Again, the B787 is a very huge oil and gas exposure that creates good performer regionally a natural hedge for us. In my previous and internationally. That life, I have been involved in hedging aspect of fleet management strategies and it’s a difficult game. has been a bonus,” he said. “It is very merciless if you get Mannion, as a former it wrong. When the fuel price falls Emirates Airline senior the market expects adjustments executive, said: “the elephant almost straight away. It is very in everybody’s room is the unsympathetic to long-term hedging Gulf carriers. During the arrangements that might be in restructuring period, we another direction.” decided the best way to compete Freight is also very vital to with them was not to compete RBA’s recovery. “We decided early with them. in my time here we didn’t know as “It is difficult to keep off much about freight as we should. their radar, but we certainly try. We outsourced that part of the We are not ruling out anything business to Air Logistics, which we might do on long-haul, but we is the fifth largest air logistics are being very cautious. The fact company in the world. They’re we have just one more long haul doing a very good job and are aircraft to be delivered is probably very bullish about potential in an indication of that.” China. So we are working with Regionally, apart from Kota them to deliver that potential.” Kinabalu and Bali, RBA flies to One issue that Mannion is Manila, Bangkok, Kuala Lumpur, The challenge is identifying ambivalent about is global alliances. Singapore, Jakarta and Surabaya. It profitable opportunities. “My sense is we probably don’t returned to Ho Chi Minh City last One has to be honest and have the scale to be in an alliance. year after a long absence. For smaller carriers the costs Much of RBA’s focus will be on say that in the current market of joining [an alliance] can be increasing frequencies on existing that is a very, very difficult disproportionate to the benefits, regional routes. Expansion will challenge indeed especially the IT integration costs,” come once the A320neos begin he said. arriving from late 2017. He said: Dermot Mannion “We work on bilateral “Very soon we will have, long-haul CEO and deputy chairman Royal Brunei Airlines arrangements all the time. We have and short-haul, one of the most very flexible code-share agreements modern and fuel-efficient fleets with Thai Airways International in the world. I think we’ve got it right. We’re certainly and Garuda Indonesia. We will look at interesting and very happy with the selection of the 787 and we are very useful bilateral relationships whenever they arise. When I optimistic the A320neo is right. arrived, we had relatively few bilateral relationships. We have “With the A320neo you can potentially go five or six dramatically expanded that.” hours, which traditionally was a wide-body aircraft service. In the meantime, RBA is making progress in its goal The neo gives us the potential to expand to North Asia. We of becoming a “boutique” full-service carrier in a region could not do that with our former fleet. capable of taking on all comers. “We have tended to dip a toe in the market by initially As a recent report from consultancy CAPA put it: operating charter services at peak times of the year. We did “RBA still faces huge challenges and is a long way from this with Seoul. There is certainly potential for charters profitability. But the flag carrier has improved significantly into Northern Asia. They could be a springboard for greater in the last three years while most of its competitors in activity.” Southeast Asia have seen profitability decline.” ■

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Maint_E_202x273_Orient_Aviation_20151001_02.indd 1 08.09.15 10:35 NEWS BACKGROUNDER

Qantas tops region for ancillary revenue

Only some Asia-Pacific carriers are exploiting the benefits of this increasingly important part of an airline’s business.

Tom Ballantyne reports

any Asia-Pacific The Qantas group leads airlines are the region in ancillary revenue income missing out on opportunities to boost their Mbusinesses from ancillary revenue, with only one Asia-Pacific airline listed in the world’s top ten ancillary earners, a new study has reported. Australia’s Qantas Airways is ranked ninth on the IdeaWorks 2015 CarTrawler Yearbook on ancillary revenue, with earnings of $1.38 billion, mostly accrued from the sale of frequent flyer points. IdeaWorks is a brand development agency and consultancy based in Wisconsin in the U.S that publishes an annual report on airline ancillary revenue earnings. IdeaWorks 2015 CarTrawler ancillary revenue earnings are a gained from retail activities and However, a breakdown of Yearbook of Ancillary Revenue is modest contributor to their total the sales of a la carte services and the survey results reveal Asia’s the result of an examination of incomes. United Airlines earned frequent flyer miles.” low-cost carriers fare well in the financial filings of 130 airlines $5.7 billion in ancillary revenue One surprising aspect of the the ancillary revenue stakes across the world. Only 63 of the in 2014, American Airways report is the significant difference when income is calculated as a airlines studied listed an ancillary collected $2.5 billion followed in ancillary revenue income percentage of total revenue. revenue breakdown in their by Delta ($2.1 billion), AirFrance/ among LCCs. Ancillary revenue at Singapore controlled Tigerair financial reports in 2014. KLM and Ryanair ($1.7 billion) and Australia’s Jetstar ($673.2 million) was sixth best, with ancillary The airlines, made up of the Southwest Airlines ($1.6 billion). is 20.8% of its total income. It revenues contributing 23.6% Asia-Pacific (14%), the Americas The average ancillary earnings earns $30.17 in ancillary revenue to the budget carrier’s income. (56%), Europe and Russia (29%) per passenger across all the per passenger. At the AirAsia Jetstar ranked seventh (20.6%) the Middle East and Africa (1%), airlines examined was $17.49, Group, the $556.9 million it and AirAsia X (19.2%) was ninth. reported ancillary revenue of which was 8.5% more than in collects in ancillary revenue is The study also showed Qantas $38.1 billion in 2014 compared 2013. “By every measure, ancillary 18.5% of its revenue, or $13.19 earns an average of $50.16 in with 23 airlines reporting $2.45 revenue continues to grow,” per passenger. ancillary revenue from each billion in ancillary revenue in 2007. said the report. “For the eighth Tigerair earned $118.4 passenger. At loss-making AirAsia Most of the big earners were consecutive year, airlines tracked million, 21.8% of its revenue X, it was $43.22 and at Korean the major U.S. and European by IdeaWorksCompany reported and $23.03 per passenger, in Air $39.28. carriers although their expanding substantial increases in revenue 2014. AirAsia X ‘s bottom line

28 / ORIENT AVIATION / OCTOBER 2015 NEWS BACKGROUNDER

at $7.23 per passenger. Ancillary revenue reported by Asia-Pacific airlines in 2014 Non-core passenger spending at China’s Spring Ancillary revenue As % of total revenue $ per passenger Qantas Airways $1.38 billion 12.1% $50.16 Airlines was 5.7% of its revenue Korean Air $919.24 million 7.8% $39.28 last year at $66.8 million or $5.84 Jetstar $637.23 million 20.8% $30.17 per passenger. Thailand’s Nok Air AirAsia group $556.86 million 18.5% $13.19 gets $28.2 million, 7.4% of its China Eastern $491.2 million 3.4% $5.86 revenue from ancillaries at $3.70 Virgin Australia $218.2 million 5.2% $10.91 from each passenger. Japan Airlines $202.94 million 1.7% $5.15 There also is a significant AirAsia X $182.85 million 20% $43.22 disparity in ancillary revenue Cebu Pacific $131.7 million 11% $9.18 Tigerair $118.4 million 21.8% $23.03 collection among full-service Spicejet $97.9 million 9.3% $7.23 carriers . Qantas’ $1.3 billion in All Nippon Airways $83.73 million 0.5% $1.66 ancillary earnings is 12.1% of its China Southern $81.9 million 0.5% $0.81 revenue and Korean Air’s $919.2 Spring Airlines $66.8 million 5.7% $5.84 million is 7.8%. China Eastern Nok Air $28.2 million 7.4% $3.70 collected $491.2 million, just PIA Pakistan $11.4 million 1.1% $2.72 3.4% of its revenue and $5.86 per Garuda Indonesia $10.2 million 0.3% $0.35 Air Astana $9.3 million 1% $13.19 passenger, and China Southern REX (Regional Airlines) $218.2 million 5.2% $10.91 earnt $81.9 million, 0.5% of its revenue and US$0.81 cents per collects 20% of its revenue from are not achieving such good earnings with spending passenger. Garuda Indonesia ancillaries ($182.8 million) at results. Cebu Pacific receives averaging $9.18 per passenger. took in $10.2 million in ancillaries, $43.22 from each passenger. $131.7 million, or 11% of In India, Spicejet earned $97.9 0.3% of its total revenue at Other Asia-Pacific airlines its total revenue in ancillary million, or 9.3% of its revenue, US$).35 cents per passenger. ■

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OCTOBER 2015 / ORIENT AVIATION / 29 TRAINING

and Apple. “The major airlines in China Attracting the do all of their own training and have significant training facilities. But there are insufficient numbers of flight schools and bedazzled google ab initio training in the region, which is why so many Asian cadets have to go to the U.S., Europe or Australia for their generation to training,” Carbary said. In the Asia-Pacific budget airline sector, the airlines are following the Southwest Airlines the cockpit [in the U.S.] model, which looks to others to help them train crews and maintenance Airlines and manufacturers must forge different partnerships engineers. “This is a role Boeing to meet the region’s crew and maintenance requirements said wants to fill. That’s where we (Boeing) intend to be there for Boeing in its latest Asia-Pacific training forecast. them,” Carbary said. The plane manufacturer recently forecast 38,000 new By Tom Ballantyne aircraft worth $5.6 trillion worldwide would be needed to e’re not and simulator manufacturers partnership (PPP) approach that 2034, with nearly 40% of these moving fast must work with governments, ensured flight schools were airplanes bound for the Asia- enough, says high schools and universities to more locally based, had global Pacific. About 70% of deliveries Boeing’s vice ensure we have a robust pipeline quality standards and focused will be single-aisle jets, which president flight of aviation professionals to serve specifically on meeting future underscored the continuing rapid Wservices, Sherry Carbary, of the this growing market,” she said. Asia-Pacific demand. growth of LCCs. industry’s commitment to training “The ability is there, but Several challenges exist To keep them flying and the 226,000 new pilots and we are probably not moving for airline crew training in the maintained, Carbary said 238,000 new technicians needed fast enough,” she said. She region, Boeing believed. They 100,000 pilots and 106,000 to fly and service the Asia Pacific advocated a public-private included standardization of technicians would be needed fleet in the next two decades. training and pilot and technical in China alone. Southeast Asia Speaking after the release of licencing, managing the will require 57,000 pilots and Boeing’s 2015 Pilot & Technician imbalance between supply 60,000 technicians; South Outlook for the Asia-Pacific last in first world centres such Asia (principally India) 40,000 month, when the company as Singapore and emerging pilots and 37,000 technicians; announced a 5% increase Indonesia, building more Northeast Asia (mainly Japan in demand for pilots and physical flight schools that offer, and Korea) 17,000 pilots and technicians over last year, where possible, cadet ab initio 22,000 technicians and Oceania Carbary said the giant training, and attracting talented (Australia, New Zealand and the aerospace company could young people to aviation in the Pacific Islands) 12,000 pilots and not do it alone when it world of Google, Facebook 13,000 technicians. came to meeting the region’s airline personnel training targets. There are insufficient numbers of “This has to be a flight schools and ab initio training in partnership. All the airlines, aircraft the region, which is why so many Asian manufacturers cadets have to go to the U.S., Europe or Australia for their training

Sherry Carbary Vice president Boeing flight services

30 / ORIENT AVIATION / OCTOBER 2015 Carbary said recruiting more Another issue for aerospace pilot there’s nothing more considering a reduction in the women into the industry would is the allure of social media exciting than to be flying that time required for foreign pilots to be one way of meeting training companies and their hi-tech airplane. As a [B787] mechanic receive licences to fly because of targets. “In the U.S., only 6% of partners. “We are competing for you’re no longer working on the a shortage of commanders. pilots are women. Statistics only kids who are growing up with mechanical part of the airplane, It takes more than 60 days exist for the U.S., but I think it’s smart phones and tablets. They you’re basically a software to be granted a Foreign Aircrew even lower around the world,” are looking at Google, Microsoft engineer as well troubleshooting Temporary Authorisation (FATA) she said. and Apple and high tech on what’s going wrong with the licence in India, mainly because “We should be looking a industries like Samsung for their systems on the airplane. foreign pilots must receive a lot more at women and what careers,” said Carbary. “So it is a really cool place to security clearance before they they can bring to the industry. “We can do a great job in be if I’m somebody starting out can crew an airline. It’s a tough business. You have marketing and branding the and looking at a career.” Boeing is expanding its to invest more than a year to aviation industry as the most A separate obstable to cross training school network in the become a pilot. In some cases, high tech industry there is. region training flexibility is the region, including the planned women are raising families and Building and engineering the imbalance in pilots and engineers installation of a B737NG (next can’t travel as much as their planes that Boeing and Airbus between countries because generation) simulator at its male colleagues. But that’s a are producing won’t get any of disparate regulations and Shanghai campus by year end, false barrier. Women can provide more high tech than that. licence requirements. There is an to meet the demand for pilots a huge role in the industry by “When you look at a flight oversupply of pilots in Singapore, for China’s expanding low-cost becoming short-haul pilots.” deck of a B787 and you’re a yet in India the authorities are carrier business. ■

ANA’s Thailand flight academy addresses pilot shortage

hailand’s first joint Bangkok’s Pan Am flight aviation English and air traffic flight training Training Academy has control courses. academy is building attracted several third “We agree that cadets its reputation as a party airline customers should experience a traditional regional centre for flight training ab initio course,” Thigh quality dry time pilot training Darrow said when asked by at its university-based centre in Orient Aviation if he agreed Bangkok. with Boeing’s view that ab An ANA Holdings subsidiary, initio courses are important for Pan Am International Flight training pilots. Training Academy, is a response Along with simulator and to the demand for thousands of classroom training, “nothing can new pilots needed in the Asia- substitute for actual cockpit time Pacific in the next two decades as The academy operates Bangkok facility trains up to for initial students”, Darrow said. well as a considered investment from Assumption University’s 10 crews per day. Worldwide, Pan Am Flight Training by the Japanese aviation holding Suvarnabhumi campus, near the the Pan Am flight training Academy was originally the crew company. city’s major international airport. facility has an estimated 3,000 training school for the U.S.’s Opened in September 2013, It is equipped with one Level D training cycles a year. Apart from iconic airline, Pan American after ANA Holdings bought the A320 and one Level D B737NG providing training for partner World Airlines, which closed in Pan Am Flight Training Academy simulator and, at this stage, airlines, ANA and Nok Air, the 1991 after 64 years of flying. business, it has established offers dry time training. Three centre “has become a preferred Under its new ownership, it its school in partnership more simulators, another A320 training location for six different operates two flight training with Thailand’s Assumption and two B737NGs, are planned airlines”, said Darrow. facilities in Tokyo, the Panda University’s department of to be added to the facility as its The academy’s plans for Flight Training Academy and the aviation, the first time Pan enrollments expand. the curriculum include ab initio ANA Flight Training Centre, and Am training has had a training An academy spokesman, cadet pilot, cabin crew and airline Pan Am Flight centres in the U.S, partnership with a university. Capt. Greg Darrow, said the maintenance training as well as including Kissimmee in Florida. ■

OCTOBER 2015 / ORIENT AVIATION / 31 SPECIAL REPORT MAINTENANCE, REPAIR AND OVERHAUL: AN ASIA-PACIFIC UPDATE IATA boss objects to “runaway aftermarket agreements”

In a blunt reference to the aviation OEMs of the world, the director general of the International Air Transport Association said his airline membership was concerned OEMs’ aftermarket agreements limited MRO competition.

Orient Aviation reports

t was a good week for the Association and its director examining commercial, legal and up costs by blocking new entry world’s airline MROs in general and CEO, Tony Tyler. economic options where we may into the market for maintenance mid-September, when they Delivering the opening be able to contribute to efforts repair and overhaul services. acquired a powerful new ally address at the association’s to rein in runaway aftermarket- As a result, airlines often have in their battle to defeat OEM second World Finance related costs. little alternative but to sign onto Idominance of their industry - Symposium, held this year in “Unfortunately, certain long-term OEM maintenance the International Air Transport Barcelona, Tyler said: “IATA is OEM business practices drive and parts agreements containing

HAECO Hong Kong complex:Fighting to contain the success of OEMs in winning MRO contracts

32 / ORIENT AVIATION / OCTOBER 2015 SPECIAL REPORT MAINTENANCE, REPAIR AND OVERHAUL: AN ASIA-PACIFIC UPDATE

airline does not have a power by the hour agreement, OEMS Aftermarket becoming more active in the aftermarket sector, which is strategies of increasing costs for airlines and engine OEMs the cost of maintaining new generation engines. Additionally, well capitalized OEMs are going after the components sector, which is one * Allows airlines and third of the sectors that is profitable. party MROs to compete Some MROs see the day when for maintenance of new- the only business left for them gen LEAP and GENx will be base maintenance engines because OEMs do not to * Airlines can choose to sign maintain the large labour forces maintenance agreements required to service this sector of with OEMs or licensed the industry . But even this sector third party MROs * Has committed to keep the has issues, with the market maintenance cost of LEAP generally in surplus in airline engines at a level similar to parts. the CFMN56 Shah said: “Fifty per cent of engine maker’s profits are in the aftermarket and 80% of orders have an aftermarket contract on the purchase order. The engine * Geared Turbo Fan (GTF) market is clearly going towards engines to be maintained consolidation. How do you at selected engines centres including MTU’s mx combat the threat the OEMs centre and Japanese Aero present to MROs?” Engine Corporation’s Seabury Group executive (JAEC)s overhaul centre. pricing escalations that are often paced growth of aviation in the director and head of the group’s MTU and JAEC were above the inflation rate.” region. maintenance advisory practice, partners in the engine Tyler’s sentiments might be “The engine MRO market is Frank Martin, said the shifting program. music to the ears of MROs, but largely lost to non-OEMs. Unless dynamics of the MRO industry * Percentage of GTF engines it will be a battle to contain the an MRO has a partnership with in the Asia-Pacific meant a large under the company’s Fleet assault on aftermarket services GE, Rolls-Royce and Pratt & portion of future MRO contracts Management Program by OEMs when many of them Whitney. You have no chance,” will be for narrow body aircraft, (FMP)is expected to be higher than PW4000 are restricting availability of the said AAR’s senior vice president which will represent up 71% of parts and technology necessary and managing director Asia- the region’s fleet by 2020. Airline to maintain the new generation Pacific, Middle East and Africa, and third party MROs must fleets of airlines today. Rahul Shah. adjust to this trend if they are to At the Airline E&M China He identified the main issues make money, he said. * Captures most of the after- and East Asia conference in Hong as higher costs for airlines for He forecast healthy growth market share of its own Kong in September, speakers inventory for new aircraft and of four per cent for MRO in the engines, as demonstrated generally agreed that airlines are the costs this imposes if an Asia-Pacific to 2020, because by its huge aftermarket still outsourcing their MRO and services revenue component business to third * Controlling the engine aftermarket by offering its party providers, but that more The engine MRO market is largely comprehensive TotalCare and more of their business is lost to non-OEMs. Unless an MRO has a and TotalCare Flex ser- being won by OEMs, especially in vices the engine sector. partnership with GE, Rolls-Royce and At the conference, pessimism Pratt & Whitney , you have no chance Presentedy by Seabury executive prevailed among several airline director and head of Maintenance and third party MRO providers Advisory Practice, Frank Martin at Rahul Shah AirlineE&M: China and East Asia as they outlined the challenges AAR senior vice president and managing director Asia-Pacific, Hong Kong 2015 MROs face in spite of the fast Middle East and Africa

OCTOBER 2015 / ORIENT AVIATION / 33 SPECIAL REPORT MAINTENANCE, REPAIR AND OVERHAUL: AN ASIA-PACIFIC UPDATE

of the forecast fleet expansion. new time frames for checks on The forecast was in line with the latest airliners being put into PEOPLE the global industry trend, but service. he cautioned there are several Lufthansa Technik’s factors at play that are re-shaping corporate product manager, the industry when economic Carsten Wortmann, said instability is emerging in the successful integration of next region. generation fleets into an MROs will have to adapt to independent MRO’s structure expanding OEM involvement required understanding new in the airframe after market, technologies surrounding adjust their product offerings electrical structure networks, to an increasing application software management, hydraulic of composite materials in new power, prognostics and generation aircraft, revise their composite materials. business plans to increased Lufthansa said that by intervals between checks for new participating in the A350 Andreas Meisel, the former managing director of platforms and train and retain a Customer Focus Group, the Lufthansa Technik Logistik Services has moved to China as skilled labour force, he said. MRO gained experience in the Chief MRO Operations Officer at Ameco Beijing, a Airline MROs and third planning maintenance for the joint venture between the German company and Air China. party MROs will have to build new aircraft type even altho the His successor is Dr. Christian Langer, who was most recently closer partnerships with plane had not yet been flown the founding managing director of Lumics GmbH & Co KG, a engine and component OEMs by an airline and had almost no joint venture between Lufthansa Technik AG and consultancy and demonstrate they have commonalities with other Airbus McKinsey & Company. the financial and technical aircraft. capabilities to compete in the This collaboration with new market environment. Airbus allowed Lufthansa Technik Martin said that independent to learn the behaviour of the engine MROs are the most airframe carbon fiber/composite disadvantaged in the sector technology, the XWB engine and because OEMs have tight control the strengths and weaknesses of over repair data, which limits the unique systems of the A350. the scope of work the shops To win business from airlines of independent MROs can for the new generation aircraft, perform and labour costs in the third party MROs must have Asia-Pacific continue to rise. six major packages to offer The trend of Independent customers: materials, engines/ MRO and airline MROs also APUs, engineering, logistics, losing business to the OEMs is cabin and maintenance, Carsten continuing. They are finding it said, and have the in-house Spairliners, an A380 components spares supplier jointly necessary to co-operate and/ ability to respond rapidly to MRO owned by Air France and Lufthansa Technik, has promoted the or form partnerships with and to component requests. company’s CFO, Sven-Uve Hueschler, to CEO. His successor as OEMs because new aircraft He said Lufthansa Technik has CFO is Benoit Crombois, the former procurement director at AFI types require new product 116,500 components available in KLM E&M. agreements, investment in its pool, an investment not every Global parts supplier and workshops and equipment and independent MRO can afford. ■ inventory manager, AAR, has appointed Timothy Romenesko vice chairman of the U.S. headquartered Satair does yuan deals company and strategic advisor to CEO and chairman, David Storch. Managing director Satair Group China, Yongdong Hu, said The AAR chief has added the role of the company’s policy to sell its aircraft parts in local currency AAR president to his duties. Randy to customers in China unable to pay in US dollars has grown the Satair Group’s customer base by 10%. The Satair Group, Martinez is AAR’s new corporate now a wholly-owned subsidiary of Airbus S.A.S., set up in vice president of strategy and China in 1995. It has more than 100 airline, MRO and aircraft business development, who will manufacturing parts clients in the Chinese aftermarket. also report to Storch.

34 / ORIENT AVIATION / OCTOBER 2015 No.1 Asia-Pacific commercial aviation magazine

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