Doing Business Beyond Traditional Airline Boundaries

Vol. 25 No. 10 December 2018-January 2019 orientaviation.com

ORIENT AVIATION PERSON OF THE YEAR 2018 GOH CHOON PHONG CEO Singapore Airlines

DOING BUSINESS BEYOND TRADITIONAL AIRLINE BOUNDARIES

Goh Choon Phong debates incremental change versus ground zero overhaul at the airline group

China Southern Airlines Qantas “cloud cost map” Air New Zealand and abandons SkyTeam for to cut millions from ATR form venture to American partner group’s fuel bill develop regional aviation NEW

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COVER STORY

16 ORIENT AVIATION 2018 PERSON OF THE YEAR

ORIENT AVIATION MEDIA GROUP 17/F Hang Wai Commercial Building, DOING BUSINESS 231-233 Queen’s Road East, Wanchai, Hong Kong BEYOND TRADITIONAL Editorial (852) 2865 1013 E-mail: [email protected] AIRLINE BOUNDARIES Website: www.orientaviation.com Mailing address: Singapore Airlines CEO, GPO Box 11435 Hong Kong Goh Choon Phong, Publisher & Editor-in-Chief pushing boundaries of Christine McGee technology to keep SIA at E-mail: [email protected] the top of the airline game 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 COMMENT 10 Low-cost carriers maintain head of steam but Geoffrey Tudor 5 Propping up flag carriers a recipe for failure challenges ahead for all Asia-Pacific airlines Tel: (813) 3373 8368 E-mail: [email protected] ADDENDUM Photographers 6 International Air Transport Association’s Rob Finlayson, Graham Uden, founding China boss retires Ryan Peters 6 Qantas cloud cost map to cut millions from Chief Designer annual fuel bill Chan Ping Kwan

Printing Printing Station(2008) ALLIANCES 14 Global alliances adjusting to new operating ADMINISTRATION reality General Manager 14 Asia’s biggest airline deepens ties with American Shirley Ho Airlines E-mail: [email protected] 6 Malaysia Airlines Group fine tunes leadership structure INDUSTRY ADDENDUM ADVERTISING 7 Virgin Australia Airlines close to choosing CEO 21 Aireon creates customer affairs leadership role Asia-Pacific, Europe & Middle East Borghetti’s successor Clive Richardson Tel: (44) 7501 185257 E-mail: [email protected] CHANGES IN 2018 Digital revolution takes hold at region’s airlines The Americas / Canada Barnes Media Associates Ray Barnes Tel: (1 434) 770 4108 Fax: (1 434) 927 5101 E-mail: [email protected] [email protected] 21 ATR and Air New Zealand to explore future of Follow us on Twitter @orientaviation regional aviation Keep up with the news of the week 21 SITA reports China’s airlines and airports to with Orient Aviation’s Week in the spend big on cybersecurity Asia-Pacific 22 Boeing and UK’s ELG develop breakthrough © All rights reserved 8 CEO shuffle: recognition and ruptures at the top technology to recycle excess carbon fibre Wilson Press HK Ltd., 9 Cyber transition front and centre of airline 22 Hong Kong’s China Aircraft Services Ltd takes Hong Kong, 2018 transformation honors with VR MRO training platform

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Propping up flag carriers recipe for failure

It has been a challenging 12 months for Asia-Pacific from government owners, have settled management airlines but as another year draws to a close there has teams that enjoy the confidence of their boards. been some recent good news. Most of the region’s struggling carriers have Oil, which peaked at US$76 per barrel in October, their governments involved at a much deeper level of dropped below $60 in November. It is does not decision-making. In Malaysia, Thailand, Indonesia, India approach the price of $40 in 2016 and $52 in 2017 and and Sri Lanka the performance of state-owned airlines whether it is a trend in the volatile cycles of oil pricing is has been poor. anyone’s guess. There is a discussion to be had about the long-term The downward shift in the oil price highlights the viability of airlines rescued by governments and fact there are so many factors that challenge the ability therefore usually controlled by those governments. of airlines to make a profit. For an airline to succeed, airline leaders must have the In 2018 those challenges were much the same as freedom to complete their transformations without past years: increases in fees and charges, flight delays being removed half way through the process because because of cramped, overloaded and ill-equipped government owners don’t like what they are doing. airports and ATM systems, expensive investment Reputable forecasts point to a rich future for the in information technology and the cultural changes region’s carriers, both full service and low cost, but necessary to win and keep customers. unless competent management teams are permitted to In this world successful Asia-Pacific airlines, turn failing airlines around without outside interference, whether privately owned or operated at arms length many of today’s flag carriers will be no more. ■

TOM BALLANTYNE Chief Correspondent Orient Aviation Media Group

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DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 5 ADDENDUM

IATA’s founding China boss retires

Baojian Zhang, a linchpin on the Mainland has grown to 36 of extraordinary service to IATA figure in the development of carriers, the largest concentration and to the airline industry. His the International Air Transport of member airlines of any achievements are impressive as Association’s (IATA) airline country, an IATA statement said. is the well-established and strong member expansion on the “In the last 24 years, our team he leaves behind. The Mainland retired this month China team has grown from three whole of IATA joins me in wishing after 24 years as its regional vice staff to more 130 in 2018 and Baojian all the very best for his president North Asia. IATA’s China BSP is the largest in well-deserved retirement.” Zhang joined IATA from the the world, recording almost 190 Until a permanent successor Civil Aviation Administration of million transactions in 2017,“ IATA is named, IATA’s regional vice China in 1994 when he set about said. president for the Asia-Pacific, establishing the global airline IATA director general and Conrad Clifford, also will body’s operations in China. Under CEO, Alexandre de Junaic, said: lead IATA in North Asia, the his leadership, IATA membership “I thank Baojian for his 24 years association said. ■

Qantas “cloud” cost map to cut millions from annual fuel bill

Put together in collaboration “It’s a subtle shift to pick up with the University of Sydney’s the wind. And that is the beauty Australian Centre for Field of the system. It’s just being able Robotics, the “Constellation” to find those subtle changes [in system was launched in October patterns] that we could not do in with several of Qantas’s A380s, the old days of paper systems,” B747s and B787s. It will be the A330 captain said. installed across the entire fleet by “The older system was almost year-end 2019. like planning in your car. You just Qantas head of flight go left and right basically. The new operations systems, Allen system, built on work with drones, Dickinson, told media the new adds wings to your vehicle. It lets system had delivered impressive you fly in that dimensional space Qantas expected to reduce its reported earlier this month that results. and go to different altitudes at fuel bill by up to $40 million a the airline group was using cloud On a recent flight from different times.” year as a result of its new “cost computing to crunch the data of Sydney to Santiago Chile, Qantas estimates Constellation map”; a revamp of its route thousands of possible flight paths Constellation slightly diverted will reduce its fuel bill by close planning system that took five and the factors they encounter from the airline’s B747 route to to one per cent a year, or US$40 years and a multi-million dollar during a journey to determine take advantage of a tailwind. It million, based on the airline group’s investment to develop. the most efficient route between saved Qantas one tonne of fuel, estimate of US$4 billion in annual The Sydney Morning Herald destinations. Dickinson said. fuel costs. ■

Malaysia Airlines fine tunes executive team

Malaysia Airlines Berhad, has two airliners and all passengers in the turnaround office of the returned to profit under the announced the carrier’s head onboard in 2014. He also served carrier in 2004 before it briefly leadership of Idris Jala, now of strategy and network, Phillip the CEO of his own global See, will take up the position of management consultancy. CEO of LCC, Firefly, on January 1, On October 1, Hasman reporting directly to MAB group Hilmi Sallahuddin, who has held CEO, Izham Ismail. several positions at the sovereign See joined the airline wealth fund supporting MAB’s from consultancy, McKinsey restructuring, was appointed and Company, as the airline CEO of Project Amal, the unit commenced its restructuring responsible for profitably operating after the calamitous losses of several of the carrier’s A380s. ■

6 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 ADDENDUM

Virgin Australia edges closer to naming Borghetti successor

Three candidates have emerged enough airline for me right now. as contenders for the position But whatever opportunities arise, of CEO of Virgin Australia I’ll grab,” she said. Airlines, a position CEO, John The third candidate for Borghetti, has decided he will the top Virgin job is Mark not extend after his contract Dunkerley. According to some expires on January 1, 2020. media reports, the former Local candidates are Virgin CEO of Hawaiian Airlines, who Australia Airlines group stepped down earlier this executive, Rob Sharp, who year, is the board favourite as runs the day-to-day operations the role he was confirmed in the Regional Airlines and Group Borghetti’s successor. of the full service carrier and position in November last year. Cargo at Virgin Australia Holdings Media friendly Dunkerley Merren McArthur, the recently Former Lawyer McArthur Ltd. She was named as CEO of joined Hawaiian in 2002 and was appointed CEO of low-cost has worked for the airline group Tigerair in May and formally took appointed CEO in 2005. A critical carrier, Tigerair Australia. If for ten years. Her first job was up the position in August. element of his strategy for the McArthur succeeds Borghetti, company secretary with Virgin In an interview with the carrier’s international expansion she will be the first female CEO Blue. As the LLC shifted its Australian Financial Review was a pivot to the Asia-Pacific. of a full service Australian airline strategy to a full service model, in July this year, McArthur said In November last year group. McArthur’s new responsibilities “maybe’ she had ambitions to Dunkerley announced he would Sharp moved to Virgin sequentially included group run a major airline. not be renewing his contract with Australia from LCC Tigerair, executive alliances, network “I don’t really have these the Honululu-headquartered where he was chief executive, in and yield management, group lofty goals that I focus on. I focus airline. His successor is Peter 2016. After a period of acting in executive of Virgin Australia on my current role. This is a big Ingram. ■

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DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 7 YEAR IN REVIEW CHANGES AND CHALLENGES IN 2018 In Asia-Pacific aviation required to implement aviation workforces. in 2018, achieving digital digital blueprints across Several carriers have thrived transformation rapidly the industry were only one but some have failed. rose to the top of the of the challenges that The threat of cyber assault agendas of the region’s Asia-Pacific carriers faced became real rather airlines, airports, in the last 12 months. than predicted. ATMs and suppliers. Since January this year, Air passenger growth Despite the complexity fuel costs jumped, forecasts increased and the cost of incorporating U.S-Sino trade tensions as the year drew to a close advanced digital technology opened a fault line in the with China and India, into their airlines, the shift to region’s growth forecasts, fueled by low-cost carrier digitally based operations problems at engine expansion, holding their promises carriers lower manufacturers were positions as the two fastest costs, more accurate, still causing costly delays growing aviation real time applications of in new aircraft deliveries markets in the world. critical information and and airports continued to Chief correspondent, forensically targeted crowd up. Some traditional Tom Ballantyne, customer engagement. alliance relationships reports on another But the analysis and have been severed and groundbreaking year in multi-billion investments technology was reshaping Asia-Pacific aviation.

EMISSIONS VOLATILE FUEL REDUCTIONS PRICES

CREW CYBER SHORTAGES ASSAULTS LOW-COST MILLENNIALS CARRIERS EXPECTATIONS

EAST-WEST SLOT TENSIONS SHORTAGES

8 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 YEAR IN REVIEW

Airlines MH370 and all its Despite considerable industry passengers and crew over the scepticism, more long-haul Indian Ocean on March 8, 2014. low-cost routes have been For airframe and engine introduced to the global network manufacturers, 2018 has been this year. AirAsia X, Scoot, Cebu witness to bulging order books Pacific and Jin Air have extended that will keep OEM production their operations to destinations lines humming for the next including Hawaii and Europe. decade. Problems with new Airlines investing in training generation Pratt & Whitney centres include the first of and Rolls-Royce engines, two green field Qantas pilot and to a lesser degree those academies in Australia, Singapore manufactured by joint venture Airline’s joint venture with CFM, are seriously delaying Airbus and also with Boeing and t the Association of heading in the same direction delivery of Airbus and Boeing CAE and the Thai International Asia-Pacific Airlines until the loss of a Lion Air B737 aircraft to customers. Airways partnership with Airbus 62nd Assembly MAX in November, which took Nevertheless, new ultra-long in U-Tapeo south of Bangkok. of Presidents in the lives all 189 passengers and haul (ULR) aircraft such as Asia-Pacific airlines transport Jeju, South Korea, crew onboard. Investigations are the A350 and the B787 are an estimated 40% of the world’s Ain October airline delegates continuing into the cause of the producing an ever shrinking air freight. After a big spike last passed resolutions to redress accident. world. In March, for the first year, some heat has gone out of restrictive regulatory regimes In November, new time, Qantas Airways connected the market in 2018 which will that govern safety and cross International Civil Aviation Australia with Britain when be threatened if the trade war border manpower demands, Organization (ICAO) rules, it launched its B787 Perth to between China and the U.S. the retrogressive trend to a that require all aircraft to be London route. In October, escalates. patchwork of emissions taxes tracked at least every 15 minutes Singapore Airlines (SIA) chose All in all in the Asia-Pacific, and a commitment to fighting while in flight, came into force. the A350-900 ULR to re-launch 2018 has seen the best of the wildlife trafficking at airlines. The regulation was written in non-stop flights, after a five-year region’s airlines shown out as they After a stellar accident-free response to the still unresolved hiatus, from Singapore to New build the region’s collective airline 2017, the current year was disappearance of Malaysia York. revenue. ■ Recognition and ruptures at the top

arly in the year, Japan the position in August when and chairman of the executive the door. Airlines (JAL) announced he succeeded acting president, committee at the airline. His successor is Askara “Ari” a major leadership Usanee Sangsingkeo. Dhanarak A month later, Indonesia’s Danadiputra, who had been transition, with chief Asset Development is 99.99% Ministry of State-Owned Garuda’s chief financial officer executive Yoshiharu Ueki government owned. Enterprises, which controls in 2016, but was more recently E(65), the former pilot credited Also in Thailand, Piya Yodmani Garuda Indonesia, not only president of port operator with leading the carrier’s recovery walked away from his job as CEO removed the carrier’s president Pwlindo III, another state-owned post its humiliating bankruptcy, of Nok Air after 11 months. Piya director Nugraha Mansyuri, who enterprise. moved up to chairman of the had served as deputy CEO at the had taken charge in April 2016, There was turbulence in board. Former chairman, Masaru LCC. His acting successor is Prajev but demanded six of the airline’s China following the accidental Onishi, has retained a board seat. Ongarsittigul, a Nok director eight directors follow him out death in Europe of HNA Group JAL managing executive officer engineering and maintenance, Yuji Akasaka, succeeded Ueki in April. In Thailand, after a search of more than a year, Thai Airways International made a very unusual decision when it appointed government asset fund managing director, Sumeth Damrongchaitham, as the airline’s president and CEO. He took up

DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 9 YEAR IN REVIEW

co-chairman and co-founder, expatriate CEO, Andrew Cowen, LCC, IndiGo, was a surprise. Etihad Airways CEO, Peter Wang Jian. Wang died when he in what appeared to be a midnight Whatever his reasons, his timing Baumgartner. The former Etihad fell backwards down a short hill as coup. The LCC has significantly was good. The carrier continues to airline boss is now senior strategic he was photographing a church in reduced its network this year. have issues with its OEM engine advisor on global partnerships and rural France. The group, struggling Malaysia’s long-haul budget suppliers. The airline is being innovation at the group. All the with billions of dollars of debt carrier, AirAsia X, appointed managed by the very capable group’s divisions report directly to after a global investment spree, Nadda Buranasiri as group CEO co-owner of IndiGo, co-founder Douglas. immediately announced colourful with the intention that he fill and Interglobe billionaire, Rahul Following a family feud and co-founder, Chen Feng, had the seat of co-founders, Tony Bhatia. a successful plot to unseat him taken full control of the Mainland Fernandes and Kamarudin West of the Asia-Pacific, as chairman of the Taiwanese aviation to services group and that Meranun, with immediate effect. former big spending Etihad international carrier, Eva Air his son had been promoted to a Buranasiri had been CEO at the Airways is undergoing shrinkage commercial airline pilot, Chang position of significant influence. Thai arm of AirAsia X since 2014. under the leadership of Tony Kuo-wei, is starting a new full There were changes too at To outsiders, the decision by Douglas, the Etihad Group’s service carrier, StarLux, in Taiwan. HNA subsidiary, HK Express, early 42-year-old Aditya Ghosh to step CEO. Douglas replaced his senior Time will tell if there is wisdom in in the year with the departure of down as CEO of India’s leading management team including his decision. ■

spend another $3.2 billion on 24 Asia-Pacific low-cost carriers A321neo. Air Astana’s new LCC will begin operations in mid-2019 maintain head of steam with four A320s in an all- economy, 180-seat configuration. elsewhere in Asia as well as Chief executive, Peter Foster, said North America. The airline’s the fleet would grow to at least founder, FLC property to tourism 15 airplanes by 2022. tycoon, Trinh Van Quyet, said the Plans call for FlyArystan’s planned airline had committed network to serve new and for 20 B787s, worth an estimated present routes now flown by Air $5.6 billion and intended to Astana. ■

f anyone thought the rush Korea require launch airlines South Korea is Asia-Pacific’s to launch Asia-Pacific airlines to have seed funding of US$26 fastest growing budget market was losing impetus they million and five aircraft before LCCs hold 55.5% of domestic marketing in South Korea, up should think again. At least they can be granted an Aircraft 270 times compared with 13 years ago when the first domestic seven prospective carriers Operator’s Certificate (AOC). The LCC flight by T’way Air was launched. The budget sector is Ihave announced plans to launch previous requirements were $13 making deep inroads onto international routes. A report from the in the next 12 to 18 months. million and three aircraft. Korea Transport Institute said LCCs in South Korea will see their The biggest stampede to At press time, Jeju Air international passenger traffic soar nearly 20% year in 2019, to the region’s runways is in South ordered 40 B737 MAX 8 aircraft 30.4 million passengers. Korea, home base to six low-cost with options for ten more of In the past five years, LCC performance in terms of interna- airlines. the type. The deal, valued at list tional traffic has grown an average of 40% annually. “Budget South Korea’s Transport prices of US$5.9 billion, is the carriers’ rapid growth may continue in the coming year thanks to Ministry confirmed last month largest order to be placed by a efforts to boost their international passenger traffic capacity by diversifying routes,” the report said. In contrast, local full-service four budget carrier applicants, - South Korean LCC. carriers are projected to suffer stagnant growth in their international Fly Gangwon, Aero K, Air Premia Elsewhere in the region, passenger traffic. and Air Philip - have applied for Vietnam’s Bamboo Airlines has business licenses in response received its licence to fly and Air to a government initiative to Astana has stated its intention add more LCCs to the nation’s to launch a subsidiary LCC, airline fleets. A fifth prospective FlyArystan, mid next year. operator, Guardians, was Bamboo Air, a hybrid carrier, reported to be ready to progress said its goal was to fly 100 routes, to a licence application. including to lesser-traveled New regulations in South destinations in Vietnam and

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Alliances adjusting to new operating reality

More than two decades after they arrived on the aviation scene alliances are facing a shake-up. China Southern Airlines, the region’s largest airline has, as expected, left SkyTeam in favour of a closer relationship with oneworld’s American Airlines. In Doha, Qatar Airways is strongly signaling it will walk away from oneworld in 2019. Chief correspondent, Tom Ballantyne, reports.

businesses whether they are from Hong Kong to Guangzhou alliance partners or not. on the way to Europe. So what’s next? Will CSA join CSA’s departure from oneworld? Will Qatar join another SkyTeam was “based on alliance or return to independence the needs of the company’s like its fellow Gulf airlines, development strategy and would Emirates and Etihad Airways? Is better align it with the new trend there any truth in reports Cathay of cooperation in the global is weighing up resigning from aviation industry,” it said. oneworld? “CSA would “explore the Industry insiders postulate possibilities of establishing Qantas will strengthen its partnerships with advanced hen China benefits of the unions, bilateral co-operation with CSA, perhaps airlines, promote bilateral and Southern co-operation with non-alliance with a joint venture that would multilateral cooperation and Airlines (CSA), member airlines has become just encourage passengers to switch provide quality services to the country’s as important, if not more so, than largest carrier, being in only one club. Wannounced last month it would In recent years, SkyTeam’s China Southern and American be pulling out of the SkyTeam CSA has been closely co-operating Airlines deepen codeshare after alliance on January 1, it was with oneworld’s Qantas, which SkyTeam exit confirmation of rumours that had in turn has a serious relationship been circulating in the industry with non-affiliate, Emirates In November, following China Southern Airlines’ long forecast announcement that it would exit the SkyTeam alliance on January since 2017. Airline. Star’s Air New Zealand 1, the Guangzhou-headquartered carrier signed an agreement Within the month, it was code-shares with oneworld’s with oneworld’s American Airlines to expand their code shares the turn of Qatar Airways to Cathay Pacific Airways. Star’s and initiate other business partnerships. churn that same rumour mill. Singapore Airlines co-operates The expanded code sharing, expected to be activated early The outspoken group CEO of with SkyTeam’s Air France/KLM as next year, will cover the trunk routes flown between China and the airline, Akbar Al Baker, is does oneworld’s Qantas. U.S. by both airlines, which could be as high as 65 flights per believed to be ready to extract his Oneworld’s American Airlines week during peak periods of travel. The two carriers also will carrier from oneworld because of last year took a $200 million, introduce reciprocal frequent flyer benefits and lounge access for souring relations with two alliance 2.68% holding in CSA. Star’s Air passengers in 2019. members, American Airlines and China owns 30% of oneworld’s China Southern Air Holding Company Ltd assistant president, Zhang Lin, said: “through sharing resources, our cooperation the Qantas Group. Cathay Pacific and oneworld’s is market and passenger oriented and based on a win-win No-one should be surprised Qatar Airways holds another relationship.” at this turn of events. In the world 9.94% of the Hong Kong-based “With the opening of Beijing Daxing International Airport of global airline alliances, sleeping carrier. in 2019, and the ability to cooperate fully with China Southern with the enemy has become par In essence, individual airlines Airlines, we are incredibly excited about the airline’s future in the for the course. It is increasingly are ready to co-operate with any Chinese market,” American Airlines president, Robert Isom, said. evident that whatever the partner that adds value to their

14 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 passengers around the world”, it said. (airline) companies should be aviation markets.” designed. People have a lot of CSA president, Tan Wangeng, said in a economically independent Joyce said Qantas choice on the Qantas-coded recent Bloomberg Television interview and not cross-subsidized by a customers won’t lose out if network to get to the same there was potential to deepen ties with government. “If aviation was Qatar resigned from oneworld European points that they had American Airlines – and it has. governed by the World Trade because its pacts with Emirates by using Qatar.” The Civil Aviation Administration Organization (WTO), there and Air France/KLM would Whether Qatar does leave of China (CAAC) has granted CSA would be some dumping cases replace any lost destinations oneworld remains to be seen. approval to establish Xiongan Airlines. against people for going in well served by Qatar. While the departure of Qatar It will be based at Beijing Daxing below cost to force people off “We’ve plenty of would be a blow for oneworld, airport and is planned to operate routes and markets. We think alternative mechanisms, which snaring CSA would more than a fleet of A320s on domestic and those rules should apply to is the way our network is make up for the loss. ■ international routes. Speaking at World Routes 2018 in September, CSA’s Tan said the carrier intends to increase its fleet from 800 to 2,000 aircraft by 2035 as it pursues its dual-hub Guangzhou-Beijing strategy. At oneworld, Qatar’s unhappiness has long been bubbling below the surface of the carrier’s relationship with some oneworld members. The airline has not confirmed its departure, MIAMI, FLORIDA | 26 28 FEBRUARY 2019 but Al Baker has said several times on the record that he did not see any point in the airline remaining a member of the oneworld alliance Take the Fast-Track “when other partners see us as a threat”. to the Hottest Topics He has publicly accused fellow alliance member, Qantas, of failing to in Aviation Industry act “in the spirit” of the alliance by lobbying against Qatar’s request to Intelligence and Security! operate more flights into Australia. The Doha-based airline flies to Sydney, Melbourne, Canberra, Adelaide and Perth from Doha and has been trying to gain entry to Brisbane. The request has been stymied by Qantas, which has accused Qatar of dumping capacity and being Join us at AVSEC World 2019 in sunny Miami, Florida on 26 - 28 February, for the most “uncommercial and uncompetitive” by up to date information on key security topics that impact the way you do business every day. selling tickets at low prices. It pointed to research by a U.S. lobby group that This year’s targeted workshops, panels and presentations will transport you past the chatter and straight to the hub of what matters to you the most, like: Human Trafﬁcking, Digital claimed Qatar Airways has received Security, Security Performance (the SeMS experience), ICAO Working Group on Innovation more than US$17 billion in state aid and much more. and interest free loans. “This distorts markets and For registration and information, please visit: www.iata.org/events/avsec threatens the sustainable operation of For sponsorship and exhibition opportunities, please contact: international carriers to Australia,” said Michael Huntington, Business Development Director - [email protected] Qantas. The airline’s CEO, Alan Joyce, said “nobody should be in an alliance where they believe its not working for them”. In his first public comments since the rift made headlines, Joyce said: “Our view has been very simple. We’re after fair competition. This means that

DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 15 COVER STORY

DOING BUSINESS BEYOND TRADITIONAL AIRLINE BOUNDARIES

Singapore Airlines CEO, Goh Choon Phong, the 2018 Orient Aviation Person of the Year, puts forward fundamental questions about the depth of structural change his carrier must undertake to hold its place as a leading airline of the world.

Chief correspondent, Tom Ballantyne, reports from Singapore

16 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 he transformation program Singapore Airlines is undergoing, explained the carrier’s boss, Goh Singapore Airlines Choon Phong, last month is forensically focused on building the best foundations for the airline digital blueprint group – and it could result in a complete change Singapore Airlines Group CEO, Goh Choon Phong, inT the company’s structure, he said. said there are four legs to its digital transformation: “Of course, there will be specific challenges along the * How to create greater digital awareness across the way. Fuel price is one of them as well as increases in capacity, organization among all staff, including putting all staff whether from the Gulf carriers, the Chinese carriers or the through basic courses in digital appreciation and getting staff to initiate projects so there is hands on experience of proliferation of low-cost carriers (LCCs) in our market,” said how they can improve their work flow. Goh (55). * Upgrading and reinventing the airline’s infrastruc- “Do we do something incremental? Make short-term ture because being more flexible in data analytics requires changes to address immediate concerns or do we look at a different IT infrastructure. ourselves more fundamentally and ask ‘maybe we have to * Creating new delivery capabilities, which means change the whole structure’?” more manpower both in business units and in IT. There Since taking charge of SIA in 2011, Goh has been has been more recruitment of necessary talent in data driving change unthinkable for the group a decade ago. He analytics, important for both the digital delivery of the IT has built a powerful budget subsidiary by taking control of applications and the business. regional low-cost carrier, Tigerair, and merging it with Scoot, * Creating an ecosystem such that staff who are implementing and conceiving digital initiatives are able to the group’s 100%-owned medium to long-haul LCC. collaborate with external communities such as start-ups He has led a multi-hub strategy by forging joint venture and research institutions. airlines in India and Thailand, launched a major digital transformation program and is investing heavily in the group’s fleet and product to maintain SIA’s reputation as a 19 A330-300s, 19 A380-800s, seven B777-200s, six B777- world leader in service innovation. 200ERs, five B777-300s and 27 B777-300ERs. Goh also has been pushing harder on adjacent businesses “We have ordered more than $50 billion worth of to secure new sources of revenue. Examples include the joint aircraft,” said Goh. “New generation aircraft such as the venture (JV) Airbus Asia Training Centre in Singapore A350 and B787 are our game changers. The A350 in and another JV with Boeing and CAE, Singapore CAE particular, if you look at the size of the aircraft and the Flight Training (SCFT). The Airbus venture, Goh said, is operating economics, has allowed us to finally grow in areas tremendously successful. we could not have served with larger B777s. “We have more than 40 airlines from all over the world “We have launched routes like Dusseldorf, Stockholm training with us. As we speak, we are considering how to and now non-stop to Los Angeles and New York in a much expand further than we initially planned. It has become more viable manner. That’s a cost reduction measure in itself another revenue stream. That’s the total purpose. This is part and an investment in the future. It is strategic because it is of our adjacent businesses strategy. We want to have some opening up opportunities for growth.” focus for growing revenue beyond ticket revenue,” he said. Non-stop Singapore to Seattle will be launched next Now into phase two of its three-year transformation September. SIA also is stepping up its airline partnerships, program, Goh said that “in this second phase, we are including joint ventures with Lufthansa and Air New basically focusing on the core business. It is about how we Zealand and collaboration with other Star Alliance partners continue to ensure we can establish ourselves as the number and non-Star carriers such as SkyTeam member, Air France/ one market leader in providing customer service products to KLM. our customers”. “This again is about leveraging the combined strength While the market has been tough, with yields under of partners to make us more competitive by offering joint pressure, SIA is making a huge investment in new wide-body FFP programs, corporate access, more choices and better jets. It has 25 A350-900s in its operating fleet and 42 more connectivity for our customers,” he said. to come. As it progressively updates its fleet, SIA has not ignored They will replace A330-300, B777-200, B777-200ER the contribution of its flagship A380s to the airline. With 19 and B777-300 aircraft. The carrier was the launch customer of them in the fleet - five of them recently acquired with a for the ultra-long-range A350-900ULR. It has four in new cabin layout - it is spending $850 million reconfiguring service with three more to be delivered. In October, the the original 14 of the type. A350-900ULR variant launched the world’s current longest “Because of new seats and a new layout, we were able non-stop flight, from Singapore to New York. to optimize the configuration with 471 seats. The program The carrier also was the launch customer for the B787-10. actually achieves two things,” Goh said. “One, it provides the It has ordered 49 with seven of the type in operation. It has latest and best industry leading product across all cabins to firm orders for 20 B777-9s that will commence arriving at all customers. We also saw the opportunity to optimize the the airline from 2022. Its current fleet of 115 planes includes real estate deployment and utilization that increased our seat

DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 17 COVER STORY

We think we should be progressive. Generally, we are talking about the aviation and travel related space, but if something comes along where we can leverage our reputation and data base to be more relevant to our customers while also creating revenue opportunities, why not?

Goh Choon Phong Singapore Airlines CEO

count by 14% to 15%. This is quite significant for any plane. We don’t pack people in. We want to give people lots of room and comfort so they enjoy the flight with us.” SIA will not order more A380s, said Goh. It believed 19 were optimal for the fleet. “Clearly, there are airports that are slot congested. You can name quite a few, whether they are in China, London or even Sydney. We find it to be a useful aircraft for these dense, slot congested routes. At the same time, customers love it so again this is serving our passenger preference.” When it comes to the bottom line, cutting costs by slashing staff numbers is not what SIA does. “As an organization, we have been quite disciplined in managing our manpower. Our fundamental belief is our staff are truly our greatest asset in many, many ways,” said Goh. “The basic DNA is to want to serve customers. But as WiFi availability. history has proven, continuing to innovate is very much part “With that kind of alignment in product and services we of what we have been doing. You just have to see how many can rebrand and absorb SilkAir into SIA.” It will, explained firsts we have achieved in our history. And a lot of times we Goh, provide a lot more synergy. “Basically, it means the find these new things that we are doing in positioning the group will have two brands, Scoot and SIA, rather than four. organization for the future require us to increase the number We are sharpening the approach to this portfolio model. It of people, rather than reduce them. will be Scoot for all the budget type services and SIA for all “Then the question is: how can we provide the kind of the premium services,” he said. training, the kind of coaching that will allow our staff to “We have one single unit to look at all the planning, the transition into this new working environment? If you talk to group network connectivity. Scoot has Berlin and Athens. our staff many are very excited about what is going on. It covers a lot of the regional medium-haul destinations as “They want to be involved. They can see they will be well: Australia, Japan and certainly the Chinese cities. “Now part of a new environment where they create new things and it has within its fleet, because of the integration with Tiger, a position the company for the next leg of our growth. This sizeable narrow-body fleet.” is important. Airline knowledge also is very important. The Scoot’s fleet is two A319-100s, 24 A320-200s with two combination [of these factors] is what we focus on to grow to come, one A320neo with 38 more on order, 10 B787-8s rather than shrink the business.” and eight B787-9s with eight more to come. At press time, SIA’s portfolio strategy has seen the merger of budget SIA announced the mainline carrier would take over carriers, Tigerair and Scoot, and the planned integration of Scoot’s Bengaluru and Chennai services. Scoot will take full service subsidiary SilkAir into SIA. Retrofit work on the over SilkAir’s Laos route and its services to three second SilkAir fleet will begin in 2020, with the merger scheduled tier Indian cities and also to Kota Kinabalu and several for completion in 2021. Indonesian destinations. It is possible now, said Goh, because technology and The group’s has two joint ventures; full-service Vistara seat manufacturers are offering product that is closer to SIA with Tata in India and medium to long-haul LCC NokScoot aircraft interiors. The merged SilkAir will have an IFE system with Nok Air is an acknowledgement by SIA that Singapore that is not part of its present cabins and will potentially have is not a big market compared with other countries.

18 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 COVER STORY

Now, it is clearly recognized as the best airline in India for Goh Choon Phong, 55, joined Singapore Airlines product quality and service levels. It is poised to serve the in 1990. After holding several senior positions including Senior Vice-President Finance, Senior Vice-President international market with a product and service offering that Information Technology and Senior Vice-President can compete effectively with international carriers,” Goh Commercial Technology and overseas assignments in said. China and Scandinavia, he spent four years as President In July, Vistara ordered 13 A320neos and 10 B787-9s to of Singapore Airlines Cargo before becoming Executive extend the airline’s premium services to international routes. Vice-President Marketing and the Regions in June 2010. It operates 21 A320s, eight of them A320neos. It plans to He joined the airline’s Board on October 1, 2010 and was increase its fleet to 50. appointed chief executive on January 1, 2011. “We continue to focus on how Vistara can grow,” Goh A board director of SIA Engineering Company, he is said. “From an SIA perspective, we give it whatever support it also Chairman of Budget Aviation Holdings, which owns requires. We are very glad our partner has a similar long-term and manages Scoot and is a member of the National University of Singapore Board of Trustees as well as strategic mindset when planning the airline’s growth.” an Independent Director on the board of Mastercard Goh said the mix offered by the group’s carriers has been Incorporated. A member of the Board of Governors of the valuable. “We serve 29 points in China, which makes us one International Air Transport Association, he was the body’s of the biggest, in numbers, of carriers serving China. And we chairman in the June 2017 and June 2018 year. have 14 points in India. That is the biggest, in the number of A recipient of the Centre for Aviation’s ‘Asia-Pacific points, of foreign carriers serving India,” he said. Airline CEO of the Year Award’ in 2015, in 2016 he “It would not have been possible had we not had an received the ‘CEO Lifetime Achievement Award’ from the LCC in our portfolio. Many of these points are only feasible Airline Passenger Experience Association as well as the with an LCC because the traffic segment is more budget ‘Eisenhower Global Innovation Award’ from the Business conscious. Scoot is about 40% cheaper relative to SIA, which Council for International Understanding. He was also named the ‘Outstanding Chief Executive Officer of the gives us a lot more flexibility in serving different markets.” Year’ in the Singapore Business Awards 2017. Goh holds a Beyond the nuts and bolts of airline operations there is an Master of Science in Electrical Engineering and Computer underlying but critical element in the re-engineering of SIA: Science as well as three Bachelor of Science degrees in the digital transformation needed to keep up with the fast Computer Science and Engineering, Management Science changing world of information technology (IT). and Cognitive Science, all from the Massachusetts Institute Goh is no stranger to the computer world. He holds post of Technology. graduate degrees in electrical engineering and computer science from the prestigious Massachusetts Institute of Technology. He said: “as part of our transformation, an “Its geographic location does give us some advantage, overall theme is to create a very dynamic innovative culture but it also prevents us from tapping into certain markets. within the organization. In the last couple of years we have When we look at expansion and meaningful hubs outside been establishing a digital blueprint for the organization. Singapore, NokScoot was one of them for the budget “We have put in place a way for us to connect our people business,” Goh said. to the start-up community, especially in this part of the “The choice of Bangkok is quite clear. It is the most world, so they can come in and co-create solutions with our travelled destination by visitors, even more so than Paris and people. This kind of cross-pollination is very important. It London. It’s been a great attraction for all kinds of travelers. could potentially create business ideas and streams of revenue The idea of setting up a JV based in Thailand that caters as well as allow our people and start-up communities to especially for the LCC market was an appealing one. It develop projects and products for travel-related businesses.” provides a twin hub for our budget operations, Singapore and SIA’s Kris Lab allows staff to work with start-ups with Bangkok. They are attractive in different ways. Bangkok also similar interests. “If they have any idea from any part of is a great gateway into China.” the group, be it Scoot, SilkAir, SIA, overseas or whatever, Vistara is another vital component of the multi-hub they have a collaborative platform to exchange ideas and strategy. “The potential of the Indian travel market is well experiment with concepts. If the idea looks interesting, SIA known,” Goh said. “Around 2024, India is expected to be the will give cash, no questions asked, to take it forward and third biggest travel market in the world after China and the prove its viability,” he said. U.S.” SIA operates a central pricing system, which gives it great Goh conceded the Indian domestic market was difficult nimbleness in response to market patterns. Goh said. “We at the moment, but he said: “if you look at it, the Indian have implemented state of the art, I would say leading edge, domestic market and the Indian international market revenue management systems, developed with the supplier. are quite different. The Indian domestic market is hugely Amadeus has provided us not only with the ability to do competitive. People will move from one airline to another demand forecasts, but also the capability to accommodate because of the slightest difference in fares.” a sense of elasticity of demand. It means you receive some Vistara’s goal is “absolutely” to go international. direction or sense that if you were to change pricing how “When we started Vistara it was a key consideration. demand would be affected. Therefore, you can try to

DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 19 COVER STORY

Fuel bump hurts profits

Rising fuel costs weighed heavily on the Singapore operations. The mainline carrier reported its operating Airlines group’s interim financial performance despite profit declined by $271 million, to $418 million. Regional solid progress in its three-year transformation program. In subsidiary, SilkAir, reported an interim loss of $3 million, November, the group reported an operating profit of $426 a reversal from last year’s profit of $22 million. Budget million for the first six months of its 2018-2019 financial year, subsidiary, Scoot, recorded an operating loss of $10 million. down 44.1%, or $336 million, from its $762 million result in The company said forward bookings were expected to be the same period a year ago. stronger year-on-year, but there were cost pressures arising Group net profit declined to $196 million from $435 from significantly elevated fuel prices compared with a year million, 68.9% lower than for the previous 12 months. The ago and keen competition in key operating markets. company said the decline was the result of a $379 million, Despite global trade tensions, cargo demand in the near or 20.4%, increase in fuel costs. term was expected to remain healthy during the seasonal Higher oil prices offset a 5.8% rise in passenger revenue peak, a group statement said. “Amid continuing challenges and a 7.4% lift in cargo revenue. The group’s passenger traffic in the operating environment, the SIA Group remains com- expanded by 8.8%, outpacing capacity growth of 5.4% and mitted to its three-year transformation program to enhance driving up passenger load factor for the group’s airlines by customer experience, grow revenue and improve operational 2.6%, to 83.6%. efficiency. The program has been producing positive results The fuel burden was reflected across all airline in all of these areas to date.”

optimize the combination of pricing and demand so that you technology issues. optimize the revenue that occurs.” “These research collaborations will be another leg of SIA is the first airline to make practical use of Blockchain the program. You will be pushing not just for an immediate technology, leveraging it to implement ways for customers to application or implementation of an app, but examining redeem their Frequent Flyer points by purchasing petrol at fundamental issues that ask how we can leap frog to that service stations or goods at supermarkets. place. There are a lot of things going on. For example, “We believe there is a lot more potential in it. We are Artificial Intelligence (AI) applications in all areas of making use of data analytics in the engineering field for engineering.” predictive maintenance. We are using data analytics to look All of this, Goh pointed out, is not just about saving at recruitment and how we can enhance our recruitment money. “Cost efficiency is certainly one aspect of the process. We are looking at data analytics to offer a lot more situation. It also is about better productive efficiency and, personalized content for our customers. There are a lot of very importantly, the opportunity to create lines of business, exciting things going on and many of them are ideas our staff revenue generation opportunities and other business ideas,” conceived,” Goh said. he said. Tapping into IT partnerships is part of the SIA Like all airline chiefs, Goh realizes that while airlines transformation agenda. “You can imagine the Apples, the are arguably the most important element of the value Microsofts, the Amazons or Alibaba where we could work chain because they operate the equipment and transport with them. Recently, we announced some collaboration with passengers, they have the lowest margins compared with them to see if we could achieve work on technologies and other sectors in the industry, including airports. create applications together,” Goh said. “We have been in that position for a long time. The value “Related to that are research institutions, the universities chain is not quite balanced. At the same time, it is what it is. where we have more fundamental issues that might Of course we want to see a better balance, but we have to deal require a few more years to think through and to develop with the situation. We have to assume we are able to grow in a solutions. Usually, these are deeper, harder problems. Deeper sustainable manner despite the problems,” he said. ■

20 / ORIENT AVIATION / DECEMBER 2018-JANUARY 2019 INDUSTRY ADDENDUM

Aireon creates customer On December 30, the final Iridium NEXT Announced in Bejing, the SITA report satellite will be launched from Vandenburg said that in 2018 airlines will have spent affairs leadership role Air Force Base in California. Each NEXT 7% of their IT budget on cybersecurity and satellite hosts an Aireon Automatic airports will have invested 18% of their U.S. headquartered global aircraft Dependent Surveillance-Broadcast (ADS-B) information technology expenditure on surveillance and tracking company, Aireon payload. enhanced cyber defences. LCC, has appointed Peter Cabooter to the Sixty of the 65 NEXT Iridium satellites The recent SITA Air Transport IT Insight new position of vice president customer in orbit are operational. The launch in study analysed nine areas of cybersecurity affairs. Cabooter, whose CV includes December will add 10 satellites and lead to measure rates of cyber defence executive positions at NAVBLUE (previously to Aireon going live with its air traffic implementation. It reported that China’s Airbus Prosky) and Harris Corporation surveillance system in early 2019. Real time airports and airlines are ahead of their peers subsidiary, Barco Orthogon, will support ADS-B tracking will cover oceanic, polar elsewhere in the world in detecting and Aireon’s existing partnerships with Air and remote regions as well as augmenting defending cyber attacks. Navigation Service Providers (ANSP) as well existing ground-based systems that are “Digitilisation is top of mind for airlines as signing up new air traffic management limited to terrestrial airspace. ■ and airports in China,” said Zhou. ”Our providers. research shows that 100% of airlines and 95% of airports have digital transformation in place or are planning for it. It’s encouraging ATR and Air New Zealand to see the emphasis the industry has placed explore future of on cybersecurity in enhancing their IT regional aviation development.” By year end 2019, 100% of China’s airlines also hope to be 50% compliant with the International Air Transport Association 753 resolution, which requires that baggage is tracked at every point of the journey. In two years, 100% of China’s airports will have two of the four steps – the make-up area and loading stages – and 94% of them “We are at the precipice of one of the will be operating transfer and arrival tracking. company’s most important moments in its As a result their fast implementation of history,” said Aireon’s CEO, Don Thoma. resolution 753, China’s airlines and airports “Being able to work with a company that lead the world in transforming baggage is literally changing the entire air traffic handling. management landscape is an honor. I can’t European turboprop manufacturer, Upwards of 70% of Mainland airlines and wait to help usher in this next generation of ATR and leading global carrier, Air 64% of the country’s commercial airports air traffic surveillance,” said Cabooter. New Zealand, will jointly explore the participated in the survey, SITA said. ■ Vice president aviation services, Cyriel role of new propulsion technologies Kronenburg, will add the responsibilities for regional aircraft. The partnership, of Aireon’s regulatory, marketing product announced in November, will investigate Boeing and U.K’s ELG development, commercial data services the development of new solutions and achieve breakthrough in and partner development acitvities to his systems required to support future portfolio. regional travel. ■ carbon fibre recycling

Boeing, which is the largest user of aerospace grade composites for its China’s airports spend commercial and defence programs, will big on cybersecurity partner with Britain’s ELG carbon fibre to recycle aerospace grade composite for the technology manufacture of electronic accessories and automatic products. More than 90% of China’s airports and The agreement covers excess airlines will implement large scale cyber carbon fibre from 11 of the company’s security programs in the next three years, manufacturing sites and will also include reported SITA vice president and general facilities in Canada, China and Malaysia. manager East Asia, May Zhou, in a recent Boeing Materials & Fabrication Director briefing paper. and Future Airplane Development, Tia

DECEMBER 2018-JANUARY 2019 / ORIENT AVIATION / 21 INDUSTRY ADDENDUM

Benson, said: “We are excited about collaborating with ELG to leverage innovative recycling methods.” Hong Kong takes damage on the apron”. Until ELG developed the process to recycle “cured” honours with VR MRO “Trainees are exposed to composites used in aerospace manufacturing technical defects – offered by the company’s barriers held back carbon fibre re-use.”Recycling cured training platform database – that are not commonly carbon fibre was not possible just a few years a ago,” said observed in everyday walk around Benson. Hong Kong-based joint venture, inspections. It helps them for real Boeing and ELG conducted a pilot program to China Aircraft Services Ltd (CASL) inspections that allow no error.” determine if the new technology could handle large scale has developed a virtual reality (VR) The CASL joint venture recycling of excess carbon at Boeing’s composite wing training platform for walk-around structure is made up of the China centre for the huge wings of the company’s new B777X aircraft inspection. National Aviation Corporation aircraft. The interactive platform, Group Ltd (40%), United Airlines Over 18 months, the pilot program saved 1.5 which is based the A320, provides (20%), China Airlines (20%) and million pounds of (681,818 kgs) of carbon fibre that trainees with a realistic and Gamma Aviation (20%). It provides that was cleaned and sold on to electronic and ground immersive apron environment for aircraft line and base maintenance, transportation manufacturers. learning routine walk-around MRO cabin cleaning and ground support Based on the pilot study, Boeing forecast it can save airplane inspections in a virtual equipment and supplies at Hong excess composite materials, which will reduce waste context. Kong International airport. going to landfills from Boeing factories by 20% in 2025. CASL’s CEO, Dr. Angus CASL and China Eastern Separately, Boeing and European aerospace Cheung, said the MRO’s VR training Airlines have operated Shanghai conglomerate, Safran, will proceed with their joint platform “resolves the limitations Eastern Aircraft Maintenance Ltd venture to manufacture auxiliary power units (APU) after of external factors such as flight (SEAM) since 2002 at Shanghai approval from the relevant regulatory authorities. The schedules, weather, potential Hongqiao airport and also Shanghai joint venture company will build and service APUs with personal injury and property Pudong. ■ initial design work to be done in San Diego, in the U.S. ■

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