October 2003 CONTENTS ORIENT AVIATION VOLUME 11, ISSUE 1 COVER STORY 14 Asia’s low-cost challenge Mainline operators can no longer ignore the potentially serious challenge posed by a wave of new low-cost carriers. How will they react to these new, and not so new, competitors? EXECUTIVE INTERVIEW 20 AAPA Director General to bow out Richard Stirland will attend his last Assembly of BUSINESS AVIATION Presidents this 34 Culture shift? month before Bid to educate Japanese execu- retiring next tives to view corporate jets as a year business tool 27 Fleet Census Update 35 Banking on China Orient Aviation’s twice-yearly New Hong Kong carrier has high update of Asia-Pacifi c’s fl eets hopes that the growth in China’s economy will be good for busi- ness 4 ORIENT AVIATION OCTOBER 2003 SPECIAL REPORT Orient aviation TRAINING PUBLISHER 22 Home birds WILSON PRESS LTD More Mainland Chinese pilots are training GPO Box 11435 Hong Kong Tel: Editorial 852 2893 3676 at home as airlines become increasingly Fax: Editorial 852 2892 2846 E-mail: [email protected] accountable to shareholders Website: www.orientaviation.com Chief Executive & Editor-in-Chief 24 Home away Barry Grindrod from home E-mail: [email protected] Publisher Hong Kong proving Christine McGee popular for China’s E-mail: [email protected] Chief Correspondent trainee pilots Tom Ballantyne Tel: 612 9638 6895 Fax: 612 9684 2776 26 Business as usual E-mail: [email protected] Training courses China Melody Su Down Under bounce Tel: 852 2893 3676 back after SARS Japan and Korea Daniel Baron Tel: 813 3203 7106 E-mail: [email protected] Photographers NEWS Rob Finlayson, Andrew Hunt, Hiro Murai Design & Production Patrick Dunne 8 Air China teams up with United Airlines Colour Separations Twinstar Graphic Arts Co. 8 Dragonair drops Cathay Pacifi c licence appeal Printing 8 Indonesia’s Merpati to be privatised Hop Sze Printing Company Ltd. ADVERTISING 8 Qantas, AirNZ to appeal after being South East Asia and Pacifi c denied alliance Shirley Ho Tel: 852 2865 1013 10 Thailand’s Angel Air grounded again Fax: 852 2865 3966 E-mail: [email protected] 12 AirNZ back from the brink with a healthy profi t The Americas / Canada Barnes Media Associates Ray Barnes 12 Government may sell extra THAI shares Tel: 1 434 927 5122 Fax: 1 434 927 5101 E-mail: [email protected] REGULAR FEATURES Europe REM International Tel: 33 5 34 27 01 30 7 Comment: Budget carriers up the ante in Asia Fax: 33 5 34 27 01 31 E-mail: [email protected] 40 Business Digest: SARS drop arrested New Media & Circulation Manager Leona Wong Wing Lam Tel: 852 2865 1013 E-mail: [email protected] Association of Asia Pacifi c Airlines Secretariat © All rights reserved Wilson Press HK Ltd., Hong Kong, 2003 Suite 9.01, 9/F, Kompleks Antarabangsa Director General: Richard Stirland Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Commercial Director: Carlos Chua The views expressed in this magazine are not necessarily Tel: (603) 2145 5600, Fax: (603) 2145 7500 Technical Director: Leroy Keith those of the Association of Asia Pacifi c Airlines. E-mail: [email protected] OCTOBER 2003 ORIENT AVIATION 5 COMMENT Budget carriers up the ante in Asia hile many believed Asia’s diversity precluded a There are multiple dangers, including the touchy Wrepetition in this region of the success budget issue of labour relations. Airline management will need to airlines have achieved in the northern hemisphere, it is convince staff to accept less advantageous employment becoming increasingly clear the low-cost carrier has, conditions for a start. There also is a real possibility a low- indeed, arrived. cost offshoot of a major carrier will dilute the revenue and AirAsia is entrenched in Malaysia as is Virgin Blue in service reputation of its established mainline owner. For an Australia. There are privately owned low- operator such as Singapore Airlines, with cost operators in Thailand, the Philippines, its almost legendary service standards, a Indonesia and Japan and there are plans Orient Aviation budget subsidiary, even with a different to launch one in Singapore. has a new, modern name, could damage that aura. In the face of recent crises, damaged look to celebrate its It also is apparent the model used fi nances and this new competitive threat, 10th anniversary. We by Europe’s Ryanair or EasyJet cannot it is hardly surprising some of Asia’s hope you like the re- simply be duplicated in Asia. Conditions big airlines also are looking outside the design. The magazine are different. Each airline has to fi nd a square to fi nd new ways of making their was launched in unique model that works in the markets it October 1993 as a businesses more effi cient and profi table. intends operating. That’s a tall order and quarterly publication. Launching a low-cost subsidiary is an Today Orient Aviation if they fail the outcome could be costly obvious opportunity. is published 10 times for an industry which cannot afford any Some have already done so. Japan a year and is read in more losses. Airlines and All Nippon Airways have low- over 100 countries In North America and Europe, efforts cost offshoots, as does Garuda Indonesia, worldwide. by mainline operators to fi ght off low-cost Qantas Airways and Air New Zealand. competition with their own low-cost clones Now, Singapore Airlines and Thai Airways generally have been failures. It will take International are considering following suit. However, if some very careful planning and astute management of there is a message in our cover story this month, it is that resources to ensure the same does not happen in Asia. established international operators need to be extremely careful how they involve themselves in the low-cost TOM BALLANTYNE business. Chief correspondent The Association of Asia Pacifi c Airlines Members and Contact List Air New Zealand EVA Air Qantas Airways Chief Executive, Mr Ralph Norris President, Mr Steve Lin Managing Director and CEO, Mr Geoff Dixon VP Public Affairs and Group Communications, Senior Vice President, Mr K. W. Nieh Group General Manager Public Affairs, Mr Glen Sowry Tel: (8862) 8500 2585 Mr Michael Sharp Tel: (64 9) 336 2770 Fax: (64 9) 336 2759 Fax: (8862) 2501 7599 Tel: (612) 9691 3760 Fax: (612) 9691 4187 All Nippon Airways Garuda Indonesia Royal Brunei Airlines President and CEO, Mr Yoji Ohashi President, Mr Indra Setiawan Chairman, Dato Paduka Haji Hazair Senior VP, Public Relations, Mr Koji Ohno VP Corporate Affairs, Mr Pujobroto Chief Executive, Mr Peter Foster Tel: (81 3) 5756 5675 Tel: (6221) 380 0592 Tel: (673 2) 229 799 Fax: (81 3) 5756 5679 Fax: (6221) 368 031 Fax: (673 2) 221 230 Asiana Airlines Japan Airlines Singapore Airlines President & Chief Executive, President, Mr Isao Kaneko Chief Executive Offi cer, Mr Park Chan-bup Director, Public Relations, Mr Geoffrey Tudor Mr Chew Choon Seng Managing Director, PR, Mr Hong Lae Kim Tel: (813) 5460 3109 VP Public Affairs, Mr Rick Clements Tel: (822) 758 8161 Fax: (822) 758 8008 Fax: (813) 5460 5910 Tel: (65) 6541 5880 Fax: (65) 6545 6083 Cathay Pacifi c Airways Korean Air Thai Airways International Chief Executive Offi cer, Mr David Turnbull Chairman and CEO, Mr Yang Ho Cho President, Mr Kanok Abhiradee Corporate Communications General Manager, Managing VP, Corporate Communications, Director, PR, Mr Alan Wong Mr Jun Jip Choi Mrs Sunathee Isvarphornchai Tel: (852) 2747 8868 Fax: (852) 2810 6563 Tel: (822) 656 7065 Fax: (822) 656 7288/89 Tel: (662) 513 3364 Fax: (662) 545 3891 China Airlines Malaysia Airlines Vietnam Airlines President, Mr Philip Hsing-Hsiung Wei Chairman, Tan Sri Azizan Zainul Abidin President and CEO, Mr Nguyen Xuan Hien VP, Corp Comms, Mr Roger Han Tel: (603) 2165 5154 Dep Director, Corp Affairs, Tel: (8862) 2514 5750 Fax: (603) 2163 3178 Mr Nguyen Huy Hieu Fax: (8862) 2514 5754 Tel: (84-4) 873 0928 Fax: (84-4) 827 2291 Dragonair Philippine Airlines Chief Executive Offi cer, Mr Stanley Hui President, Mr Avelino Zapanta Corporate Communication Manager, VP Corporate Communications, Mrs Laura Crampton Mr Rolando Estabilio Tel: (852) 3193 3193 Fax: (852) 3193 3194 Tel: (632) 817 1234 Fax: (632) 817 8689 OCTOBER 2003 ORIENT AVIATION 7 REGIONAL ROUND-UP Air China Said Air China president, Li Jiaxiang, SHORTTAKES at the signing ceremony in Beijing: “When teams with Air China joins the alliance and whether it AIRPORTS >> Beijing Capital Inter- joins it at all is currently under study.” national Airport will spend US$2.01 United Airlines Separately, the carrier is continuing dis- billion to build a third runway and a cussions with domestic operator, Shandong 350,000 sq. metre passenger terminal eijing-based international carrier, Air Airlines, with a view to buying into the in time for the 2008 Olympic Games BChina, has signed an extensive bilateral Jinan-based carrier. Shandong is a listed in the city. Malaysia’s Kuala Lumpur agreement with Chicago-based United Air- operator with a mixed fleet of Saab, Bom- International Airport is the cheapest airport in the region for airlines, followed lines (UAL) that includes code-share servic- bardier and Boeing short-haul airplanes. by Singapore Changi International es, sharing frequent flyer points and Airport, according to a September In- common use of the airport lounges of ternational Air Transport Association the airlines. (IATA) report. IATA said all airports in the Under the agreement, which goes region have offered rebates to carriers into effect on November 1, the two in 2003 except Bangkok and Narita. airlines will offer 26 non-stop flights Average charges for a three-hour turn- between China and the U.S.