air transport world - december 2013
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AIR TRANSPORT WORLD December 2013 editionTRANSCRIPT
AIR TRANSPORT WORLD
LUCRATIVE LEASINGBusiness is on the uptick for lessors
REGIONAL ROUNDABAOUTEurope’s regional carriers find new business models
GULF LEAPQatar Airways joins oneworld alliance
The Magazine of Global Airline Management
December 2013 | www.atwonline.com | A Penton Publication®
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LOGO --->
Latin America’s newest power player
AVIANCA’S ASPIRATIONSAVIANCA’S ASPIRATIONS
Cover December 2013.indd 1 11/14/13 6:00 PM
Five years in the making and change has taken fl ight. Thanks to the collaboration of Bombardier’s dedicated partners, suppliers, and employees, the CSeries aircraft is poised to bring meaningful change to the industry. Here’s how: with 15% cash operating cost advantage, best-in-class cabin comfort, exceptional operational fl exibility and an unmatched environmental scorecard, the CSeries aircraft is the profi table and responsible solution to take passenger experience to a new level. CSeries – a new choice for a changed world.
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All data and specifi cations are estimates, subject to change in family strategy, branding, capacity, performance during the course of the design, manufacture and certifi cation process.Performance has been estimated based on a 500 NM North American operating environment.
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atwonline.com | December 2013 | atw 1
Contents
35
45
20
Volume 50 / Number 12 December 2013This issue online www.atwonline.com/issue/December-2013
27
On the Cover
20 AviAncA’s AspirATions Three years after the Avianca-TACA merger, the airline is a force in Latin America. By Aaron Karp
Features27 LucrATive buT risky As the commercial airline business improves slowly, so does the leasing trade.By Robert Moorman
35 MAinTenAnce incLuded OEM engine support becomes critical to fleet planning.By Henry Canaday
39 MAnAging uncerTAinTy Lufthansa Group’s approach to long-term fleet management is based on building in flexibility for good or bad times. By Karen Walker
45 regionAL roundAbouT The European regional scene is all about adaptation and finding new business models.By Victoria Moores
48 FigHTing bAck An Interview with Peter Davies, CEO of Air Malta.By Victoria Moores
48
39
TOC_DEC2013_FINAL.indd 1 11/14/13 6:09 PM
/
Munich Airport is a dynamic hub with more than 220 destinations around the globe. Passengers enjoy the amazing 30-minute minimum connecting time and many other amenities that have made Munich Airport one of the best airports in Europe. Welcome to a prosperous business region, welcome to Munich Airport! munich-airport.com/brand
Munich Airportis making its markGrowth, dynamism, service – these are the qualities MunichAirport stands for now more than ever with its new logo.
Living ideas – Connecting lives
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atwonline.com | December 2013 | atw 3
Contents
5 Editorial DOJ blinked because it had to By Karen Walker 9 NEwsBriEfs
9 american, Us airways settle doJ lawsuit
10 final airbus a350 XwB test aircraft enters fal
11 Mexican lCC Vivaaerobus orders 52 airbus a320s
12 delta posts $1.37 billion 3Q net profit; on pace for record year 13 lufthansa Group 9-month net profit down 64.6%
14 Qatar airways becomes first major Gulf carrier to join oneworld alliance 15 Juneyao airlines to launch Guangzhou-based lCC
16 aNalysis the New Southwest? as southwest evolves, spirit airlines leads a new breed of Us lCCs. By Aaron Karp
51 trENds
57 CUstoMEr sErViCEs
57 adVErtisErs’ iNdEX
57 adVErtisErs’ wEBsitEs
59 iNtErViEw team Player akbar al Baker, CEo, Qatar airways By Karen Walker
9 12
14
16 51 59
dECEMBEr 2013 | Volume 50 / Number 12
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EDITORIAL
atwonline.com | December 2013 | atw 5
DOJ blinked because it had to
For reasons that may never be publicly acknowledged, the US Department of Justice came dangerously close
to being exposed as a crowd-pleaser with staggeringly little fundamental knowledge of antitrust law when it hovered on the brink of taking American Airlines and US Airways to trial over their merger proposal.
In the end, DOJ blinked because it had to. It settled with the airlines, avoiding what surely would have been a public debacle for the government had the trial it sought gone to court.
There never was an antitrust case. Certainly not in the made-for-public-consumption state-ments issued when DOJ filed its lawsuit in August to stop the merger, which largely focused on such things as ancillary fees, which although unpopular, do not constitute antitrust viola-tions. Even for those who drank the antitrust Kool-Aid, there was a large and ominous hint to DOJ’s shaky legal foundation when it sought to postpone the court hearing until March 2014. If DOJ’s case was so strong, why delay?
Perhaps because DOJ—maybe even the White House—sought primarily to exploit this opportunity and score a popular anti-airline vote? Everyone loves to hate the airlines, right?
There is only one rational explanation for the DOJ lawsuit, which is that Doug Parker’s team may have pushed too hard and arrogantly against divesture of prime slots at Washington DC and New York airports. ATW does not know if this was the case, but American and US Airways must have known going into this merger proposal that slot give-ups would be part of the deal—a diffi-cult but necessary and fair means to an end. And so the onus was on DOJ negotiators to strike that deal, not to fabricate an antitrust case.
The only time such a lawsuit might have made sense was years ago, when the first and sec-ond US airline mega-mergers of Delta-Northwest
and United-Continental were proposed and which sailed through DOJ. This third—and clearly final—mega-merger can only increase competition in an existing and approved consoli-dated market. Even the European Commission—which has a natural tendency to paint any US corporate merger as anti-competitive—approved the AA-US Airways deal, recognizing the con-sumer good it will bring to bear in the transat-lantic market.
By getting this close to a court hearing, the US government exposed two fundamental truths about its highly damaging attitude to the airline industry.
First, it has one rule for other service and transportation industries—including hotels, restaurants and trains—and an entirely different rule for airlines. Second, the concept of the US airline industry being deregulated is laughable. Government has an important role in ensur-ing and regulating air transportation safety and consumer fairness, but it way overplays its hand when it micro-manages how airlines run their businesses. That is what DOJ attempted to do with American and US Airways.
ATW has no interest in promoting one US mega-merged carrier over another, but there is clearly a strong competitive case for allowing the only un-aligned legacy major carriers to join forc-es and balance the marketplace. In competition, three is better than two. And while DOJ said it did not regard the merged Southwest-AirTran as a competitor to AA-US Airways, this was just another telltale sign of DOJ’s ignorance of the industry. In the US, which is the only market DOJ has jurisdiction over, Southwest is a huge and fiercely competitive rival.
For American and US Airways, the hard work of fighting for its share of the market at a price it can afford is just beginning. But in a rare coup for the airline industry, the marketplace will decide if they are worthy of that trust—not the government.
EDITORIAL STAFF
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Contributing Writers Polina Borodina Henry Canaday Katie Cantle Alan Dron Kurt Hofmann Michele McDonald Robert W. Moorman Cuckoo Paul Anne Paylor Edvaldo Pereira Lima
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Editorial_December 2013.indd 5 11/14/13 4:18 PM
We’re writing to confirm a date we made with our customers in 2008. The first LEAP engine began testing September 4, 2013. Right on schedule. Just like our last 21 engines. Adjust your calendars, we’ve made this a LEAP year.
Go to cfmaeroengines.com
CFM International is a 50/50 joint company between Snecma (Safran) and GE.
MORE TO BELIEVE IN
LEAP year
Superior performance | Lower cost of ownership | Greater reliability
C32386.099_CFM_CALENDAR_ATW_Dec13_267x394_DPS_v1.indd All Pages 14/11/2013 12:16DEC13ATWpages.indd 6 11/14/2013 10:37:26 AM
We’re writing to confirm a date we made with our customers in 2008. The first LEAP engine began testing September 4, 2013. Right on schedule. Just like our last 21 engines. Adjust your calendars, we’ve made this a LEAP year.
Go to cfmaeroengines.com
CFM International is a 50/50 joint company between Snecma (Safran) and GE.
MORE TO BELIEVE IN
LEAP year
Superior performance | Lower cost of ownership | Greater reliability
C32386.099_CFM_CALENDAR_ATW_Dec13_267x394_DPS_v1.indd All Pages 14/11/2013 12:16DEC13ATWpages.indd 7 11/14/2013 10:37:27 AM
DEC13ATWpages.indd 8 11/14/2013 10:37:29 AM
NEWSBRIEFS
atwonline.com | December 2013 | atw 9
For daily news stories, go to atwonline.com/dailynews NEWSBRIEFS
For daily news stories, go to atwonline.com/dailynews
A350 XWB | 10Enters final assembly line
Delta 3Q net profit | 12Headed for record year
Qatar Airways | 14Joins oneworld alliance NEWSBRIEFS
American, US Airways settle DOJ lawsuit; merger to close in December
Just 13 days before an antitrust trial was scheduled to start in a US federal court, American Airlines and US Airways set-tled with the US Department of Justice (DOJ) in November, agreeing with DOJ to divest slots and facilities at several airports—including 52 slot pairs at Washington National Airport (DCA)—to enable the mega-merger of the two air-lines to proceed.
DOJ had filed a surprise antitrust lawsuit in August to stop the planned merger, but ultimately backed down and accepted a settlement the department said would “enhance systemwide com-petition in the airline industry resulting in more choices and more competitive airfares for consumers.”
US Attorney General Eric Holder stated, “This agreement has the potential to shift the landscape of the airline indus-try. By guaranteeing a bigger foothold for low-cost carriers at key US airports, this settle-ment ensures airline passen-gers will see more competition on nonstop and connecting routes throughout the country. The department’s ultimate goal has remained steadfast throughout this process—to ensure vigorous competition in airline travel.”
According to American and US Airways, the airlines have agreed to divest 52 slot pairs at DCA and 17 slot pairs at
New York LaGuardia Airport (LGA). The airlines also will divest two gates and related support facilities at each of Boston Logan International Airport (BOS), Chicago O’Hare International Airport (ORD), Dallas Love Field (DAL), Los Angeles International Airport (LAX) and Miami International Airport (MIA).
“The divestitures will occur through a DOJ approved pro-cess following the completion of the merger,” the airlines said. “Despite the divestitures, the new American is still expected to generate more than $1 bil-lion in annual net synergies beginning in 2015, as was esti-mated when the merger was announced in February [2013].”
The divestures were “neces-sary to get on with the merger,” American chairman, president and CEO Tom Horton told ATW during a conference call with journalists. The impact of those divestitures is “mostly going to be regional flying to small markets,” Horton said, adding that the overall network strength of the combined US Airways-American and the merger’s value “are very much intact.” Even at DCA, the new American will have “more fly-ing … than US Airways does now,” where it is the largest carrier, according to Horton.
Though the airlines were “disappointed” by the DOJ lawsuit attempting to block the merger, “We think we’ve made
a very common sense deal here that address-es [DOJ] concerns and allows us to move for-ward with the merger,” Horton said, adding that the airlines did not give up too much. “I don’t think this settle-ment is terribly differ-ent from what I would have anticipated early on,” he explained. “We do [still] expect to be the biggest airline in the world … It’s going to be a great global network.”
US Airways chair-man and CEO Doug Parker, designated as
the CEO of the new American, conceded that the merged airline would “still like to have all of these assets” being divested, but added that “the new American will still have the greatest network in the world.” He said the divestitures “by no means compromise anything we talked about [in terms of overall benefits] when we announced this merger” in February 2013.
Parker said “the overall outpouring of support [for the merger] was phenomenal” after the lawsuit was filed “and it couldn’t help but be noticed … Most noteworthy by far was employee support.”
US Airways president
Scott Kirby said US Airways and American will essentially become “a single airline for customers” by Jan. 7, 2014, with reciprocal frequent flyer benefits put in place. “Then we’ll be in a normal integration process,” he added. “Our labor deals are largely done, so that process will be much smoother than you see in other mergers.”
American and US Airways said the combined carrier will “operate 44 fewer daily depar-tures at DCA and 12 fewer daily departures at LGA than the approximately 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today. The divestitures required by the settlement are not expect-ed to impact total employment at the new American.”
Explaining the settle-ment, DOJ assistant attorney general-antitrust division Bill Baer said, “The extensive slot and gate divestitures at these key airports are groundbreak-ing and they will dramatically enhance the ability of LCCs to compete systemwide. This settlement will disrupt the cozy relationships among the incumbent legacy carriers, increase access to key con-gested airports and provide consumers with more choices and more competitive air-fares on flights all across the country.”
AM
R
US Airways and American Airlines tails
Union rejection means 777X may be built outside Washington state Boeing union workers in Washington state voted to reject a proposed labor contract extension, casting doubt on whether the 777X will be built at Boeing Commercial Airplanes’ facilities in the Seattle area.
The rank-and-file membership of the International Association of Machinists & Aerospace Workers (IAM) District 751 voted by a 67% to 33% margin to reject an eight-year labor contract extension to 2024. Boeing had already won significant tax incentives from Washington state law-makers to build the 777X in the Seattle area, and indicated that a positive vote by IAM workers would cement 777X pro-duction in Washington state.
But after the workers rejected the labor deal, Boeing Commercial Airplanes president and CEO Ray Conner said in a statement that the company is “left with no choice but to open the process competitively and pursue all options for [a location to build] the 777X … We had hoped for a different outcome.”
News Briefs_page 9.indd 9 11/14/13 3:57 PM
NEWSBRIEFS
10 atw | December 2013 | atwonline.com
Air
bus
MSN5, fifth and final A350 XWB test aircraft, enters final assembly line in Toulouse
Fifth and final Airbus A350 XWB test aircraft enters FAL
Airbus announced Nov. 4 that the fifth and final member of its A350 XWB flight test fleet, MSN5, is underway with the fuselage joining process. This follows the recent arrival of the three fuselage sections at the A350 XWB final assembly line in Toulouse, France.
According to Airbus, MSN5 is the second of the A350 flight test aircraft that will feature a passenger cabin.
“This aircraft will fly for the first time in spring 2014 and will be used essentially to perform cabin-related flight tests. It will also participate in the early long flights where the ‘passengers’ are Airbus employees. This allows the cabin and related systems
to be submitted to near realistic operations in order to ensure a mature cabin at entry into service. In addition, MSN5 will carry out route proving flights to demonstrate to the certification authorities that the aircraft performs perfectly in airport opera-tions,” Airbus said.
To date, the two A350 XWB test aircraft—MSN1 and MSN3—have clocked more than 500 flight test hours in more than 100 test flights. The A350 XWB has won more than 760 firm orders from 39 customers worldwide.
First delivery will be to Qatar Airways in the second half of 2014.
MiTSuBiShi ForecASTS deMANd For 5,240 regioNAL jeTS
Mitsubishi is predicting demand for 5,240 regional jets in the 70- to 100-seat range by 2032 in its most recent forecast update.
Over the 20-year period, the Japanese manufacturer sees average annual traffic growth of 4.7%, led by the Middle East (7%), Asia Pacific (6.1%), Latin America (5.7%) and Africa (4.8%), which is expected to outstrip the average.
This will lead to demand for 5,240 new regional jets in the 70- to 100-seat range by 2032, Mitsubishi head of sales Yugo Fukuhara said, speaking at the European Regions Airline Association (ERA) General Assembly in Salzburg.
By 2032, Mitsubishi predicts there will be 2,510 turbo-props in operation, 5,570 regional jets, 20,030 narrow-bodies and 7,230 widebodies. This represents a near-dou-bling of each of these segments, apart from turboprops.
“In 20 years, some current aircraft will remain, but new aircraft will be needed to meet demand. For the regional jet segment, we forecast a need for more than 5,000 air-craft in next 20 years,” Fukuhara said.
The region-by-region breakdown for the 70- to 100-seat demand comprises North America (33% or 1,730 air-craft), Europe (20% or 1,040 aircraft), Asia-Pacific (19% or 990 aircraft), Latin America (11% or 600 aircraft), CIS (8% or 400 aircraft) Africa (6% or 300 aircraft) and Middle East (3% or 180 aircraft).
coMAc wins new order for 20 c919s; Arj21 in FALThe Industrial Bank Financial Leasing Co. ordered 20 C919s from the Commercial Aircraft Corp. of China (COMAC). According to the agreement, the Industrial Bank (China) has the option to pur-chase the business jet version of the C919 when COMAC begins production.
The C919, the first Chinese-produced narrowbody aircraft, has delayed the launch of its maiden flight until 2015 owing to “some technical difficulties,” according to an agency insider. First delivery will also be delayed to 2018 or 2019 at the earliest.
COMAC has received 400 orders for the C919, mainly from Chinese airlines or Chinese bank financial leasing companies.
COMAC said its regional ARJ21 is in the final assembly line (FAL); first delivery is scheduled for the end of 2014.
Boeing to build 47 737s per month in 2017
Boeing will boost 737 production to 47 aircraft per month in 2017, the latest build-rate increase the manufacturer has announced on its narrowbody line.
Boeing began producing 38 737NGs per month early this year and the rate is expected to rise to 42 per month in the first half of next year. By 2017, when the company is scheduled to deliver its first re-engined 737 MAX aircraft, the 737 program “will build more than 560 airplanes per year and will have increased output by nearly 50% since 2010,” the manufacturer said.
Boeing VP and GM-737 program Beverly Wyse said the increase will “lay a solid foundation as we bridge into production on the 737 MAX.”
Boeing has more than 3,400 unfilled orders across the 737 family, including more than 1,600 orders for the 737 MAX.
News Briefs.indd 10 11/14/13 3:43 PM
NEWSBRIEFS
atwonline.com | December 2013 | atw 11
For daily news stories, go to atwonline.com/dailynews
Boei
ng
Boeing 787-9 ZB002 test aircraft
Second Boeing 787-9 completes first test flightThe second Boeing 787-9 test aircraft completed its first test flight Nov. 7. The aircraft, ZB002, took off from Paine Field in Everett, Wash., and landed at Boeing Field in Seattle; flight time was 4 hours and 18-minutes.
“As the only 787-9 test aircraft to be fitted with elements of the passenger interior, ZB002 will test systems such as the environ-mental control system in addition to avionics and other aspects of airplane performance,” Boeing said in a statement. The US manu-facturer has conducted a series of ground tests on the second 787-9 since its completion in late September.
Boeing’s first 787-9, which completed its inaugural test flight Sept. 17, is on track, the US manufacturer said in a statement. It has completed 137 flight-test hours.
According to Boeing, the 787-10 development is progressing as planned.
First delivery of the 787-9 to launch customer Air New Zealand is set for mid-2014. Boeing has received 396 orders for the 787-9.
Vivaaerobus orders 52 airbus a320s
Mexican low-cost carrier VivaAerobus signed a purchase agreement for 52 Airbus A320 family aircraft, including 40 A320neos and 12 A320ceos on Oct. 21.
VivaAerobus, part-owned by IAMSA and Irelandia Aviation, will replace its entire fleet of Boeing 737-300s to become an all-Airbus carrier by 2016, Airbus said.
VivaAerobus has been a pioneer in Mexico’s “Bus to Air” model, an initiative to convert
bus passengers to air travelers. VivaAerobus CEO Juan
Carlos Zuazua said the order “will support our growth strategy, as it will allow us to further reduce our industry leading fares, and will increase the cost-per-seat advantage we currently have among our competitors.”
The carrier will make an engine selection later; the CFM International LEAP X and the Pratt & Whitney PW1000G are options on the neo.
Air
bus
Airbus A320neo and A320ceo aircraft
Aerolíneas Argentinas agrees to buy 20 Boeing 737-800s
Aerolíneas Argentinas has signed an agreement to buy 20 Boeing 737-800s, the US manufacturer announced Oct. 21.
The agreement, which Boeing said is worth $1.8 billion at list prices, will expand Aerolíneas’ current fleet of 26 737s.
Aerolíneas president Mariano Gallard said the agreement is
a “key part of a greater plan to renew our fleet and prepare our operations to accommodate growing demand. The Boeing Next-Generation 737-800, which has more seats than our current sin-gle-aisle fleet, will give us more flexibility to operate both domestic and regional routes.”
Air
bus
JetBlue Airways A321
JetBlue orders 35 more A321s, including 20 neos
JetBlue Airways placed a new order Oct. 29 for 20 A321neos and 15 A321ceos and also converted existing orders for eight A320ceo and 10 A320neo aircraft to eight A321ceos and 10 A321neos.
Airbus said the deal marks the 10,000th order for an A320 family aircraft.
JetBlue president and CEO Dave Barger said the A321 is the “ideal aircraft for our high density markets. In addition, a subfleet of the A321s will power our Mint premium service on the New York-Los Angeles and New York-San Francisco mar-kets. It is the right aircraft for JetBlue’s lucrative routes.”
The order also marks the launch of the sharklet retrofit program, which allows airlines operating A320ceos the option of optimizing their aircraft’s performance with the addition of sharklet winglets.
News Briefs.indd 11 11/14/13 3:40 PM
NEWSBRIEFS
12 atw | December 2013 | atwonline.com
Passenger Convenience Quicker Aircraft Turns
737NG Stowage Bin
. [email protected] www.komy.com www.facebook.com/komymirror
Wide field of view with flat surface
Interjet SSJ100
Boei
ng
Delta Air Lines 737-900ER
Delta posts $1.37 billion 3Q net profit; on pace for record year
Delta Air Lines reported net income of $1.37 billion for the third quarter, up 31% over a net profit of $1.05 billion in the 2012 September period, on a 6% year-over-year rise in rev-enue to $10.49 billion.
Delta’s net profit through the first nine months of 2013 was $2.06 billion, more than doubling net income of $1 bil-lion in the first three quarters of 2012, putting the Atlanta-based airline pace to improve on 2012 full-year net income of $1.01 billion and 2011 full-year net income of $854 million.
Delta president Ed Bastian cited a “particularly strong [third-quarter revenue] per-formance in Atlanta, New York and London,” adding, “The revenue environment appears solid through the end of the year, including strong holiday bookings.”
The company’s third-quarter expenses increased 4% year-over-year to $8.93 billion and quarterly operating profit was $1.56 billion, up 19% from operating income of $1.31 bil-lion in the 2012 third quarter.
Delta’s consolidated third-quarter traffic rose 2% year-over-year to 54.94 billion RPMs on a 3% lift in capacity to 63.89 billion ASMs, produc-ing a load factor of 86%, down 0.4 point. Passenger yield increased 5% to 16.85 cents.
The carrier’s mainline third-quarter passenger revenue increased 8.2% year-over-year to $7.57 billion. Breaking down Delta’s third-quarter mainline passenger revenue perfor-mance by region, the biggest improvement came in Latin America, where the carrier’s revenue rose 16% year-over-year to $548 million. Domestic revenue heightened 10.7% to $4.12 billion while transatlantic revenue lifted 9% to $1.85 billion. The one area that expe-rienced a decline was transpa-cific, where passenger revenue fell 5% to $1.04 billion.
Southwest Airlines reports $241 million 3Q net profit
Southwest Airlines reported a third-quarter net income of $241 million, more than doubled from a $97 profit in the year-ago quarter.
Southwest president, chair-man and CEO Gary Kelly said the company is on track with its plan to fully integrate AirTran into Southwest Airlines by the end of next year “and we expect to achieve approximately $400 million in annual net pre-tax synergies in 2013.”
Third-quarter revenue figures increased 4.5% to $4.5 billion year-over-year, as expenses dropped 2.4% to $4.2 billion, producing an operating profit of $390 million, up significantly from a $51 million operating profit in the prior-year quarter.
Traffic was flat at 27 billion RPMs on a 1% increase in capacity to 33 billion ASMs, producing a load factor of 80.8%, down 1.3 points.
Yield increased 6.8% to 15.94 cents as RASM rose 4.5% to 13.60 cents and CASM decreased 3.4% to 12.43 cents. CASM ex-fuel was down 1.9% to 8.09 cents.
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Southwest Airlines 737-800
News Briefs.indd 12 11/14/13 3:47 PM
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All Nippon Airways 787
ANA’s fiscal 1H net profit down 45.7%All Nippon Airways parent ANA Holdings posted a net profit of ¥20 billion ($204.5 million) for the first half of its fiscal year ended Sept. 30, down 45.7% from the prior-year period, as expenses grew at nearly twice the rate of revenue.
ANA projected an operat-ing profit for the full fiscal year ended March 31, 2014, of ¥60 billion, down 45.5% from a pre-vious forecast of a ¥110 billion for the 12-month period.
ANA’s fiscal first-half revenue increased 5.9% year-over-year to ¥8.16 trillion while expenses rose 11.3% to ¥7.72 trillion, producing operating income of ¥43.3 billion, down 42.5. ANA’s fiscal first half domestic traffic
increased 3.4% to 18.95 billion RPKs on a 4.8% lift in capacity to 21.14 billion ASKs, produc-ing a load factor of 60.9%, down 0.8 point. Six-month international traffic rose 5.2%
to 15.09 billion RPKs on a 9.1% heightening of capacity to 20.18 billion ASKs, producing a load factor of 74.8%, down 2.8 points.
“ANA continues to see
growing demand for travel between North America and Asia, via [Tokyo] Narita, and has responded by enhancing its North American route network,” ANA said.
Air
bus
Lufthansa A380
Lufthansa Group 9-month net profit down 64.6%
Lufthansa Group reported a net profit of €247 million ($340 million) for the first nine months ended Sept. 30, down 64.6% from the year-ago period.
Group total revenue for the 9-month period was €22.8 billion, down 0.23% year-over-year. Operating profit was €661 million, down 27.1% from €907 million in the year-ago period. Adjusted operating profit was €859 million, up 48% from €582 million in Sept. 30, 2012. In a statement, the Lufthansa Group said the results were adjusted for restructuring and project costs and positive non-recurring effects.
“We have significantly improved earnings in the passenger business. For the first time in five years, we are in the black with Lufthansa’s European traffic—thanks to the progress with
Germanwings. Austrian Airlines has also returned to profitability. Our progress is confirmation of the fact that, strategically, we are on the right track,” Deutsche Lufthansa AG chairman and CEO Christoph Franz said.
Group traffic revenue was €18.7 billion, down 0.7%. Fuel costs fell 2.9% to €5.4 billion, largely due to lower volumes.
On Oct. 22, the Group adjusted its 2013 forecast and projected a full-year operating profit of €600 to €700 million, up from €524 million in 2012, due to
restructuring costs, volatile exchange rates and tough market conditions. Adjusted for non-recurring restructuring and project costs amounting to €300 million, earnings are forecast to be between €900 million and €1 billion, Lufthansa said. Revenue is expected to be on a par with the previous year.
News Briefs.indd 13 11/14/13 3:41 PM
NEWSBRIEFS
14 atw | December 2013 | atwonline.com
Jet Airways reports 3Q loss of $145 million
India’s Jet Airways reported a net loss of Rs8.91 billion ($145 million) for the quarter ended Sept. 30, widened from a net loss of Rs997 mil-lion in the year-ago period. The Mumbai-based carrier was hurt by depreciating currency, high fuel prices and a sluggish Indian market.
Income from operations rose marginally to Rs37.88 billion in the quarter from Rs37.6 billion a year earlier, Jet Airways said,
while expenses jumped 20% to Rs48.51 billion. Fuel prices increased 8% during the period. Aircraft on the ground accounted for a loss of Rs1.2 billion.
Jet CEO Gary Toomey said, “Indian aviation has witnessed increasing cost challenges, main-ly due to rupee depreciation against US dollar, high fuel prices and increase in airport charges in certain stations putting pressure on the bot-tom line. Jet Airways has managed to remain competitive through series of planned steps, such as discontinuing loss-making routes and stringent cost control. The ongoing initiatives will augment well for the airline’s performance in the quarters to come.”
Jet management hopes the financial position will improve this quarter. The airline will offer more business-class seats and holiday travel trends are looking strong, company sources said. Jet is also looking to replace high-cost debt that will be repaid through equity infusion
and cheaper debt. Surplus aircraft in the system will be either leased out or sold in the next few quarters.
Despite Jet’s financial difficulties, the Indian airline sector con-tinues to attract foreign investors. AirAsia Bhd, Singapore Airlines and Etihad have applied to the government for permission to invest in the industry.
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Jet Airways Boeing 737-800
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Qatar Airways Boeing 777-300ER and Airbus A320
Qatar Airways becomes first major Gulf carrier to join oneworld alliance
Qatar Airways on Oct. 29 became the 13th member of one-world and the first major Gulf carrier to join a global alliance.
In a signing ceremony in Doha, Qatar Airways’ CEO Akbar Al Baker said oneworld membership is a win for the alliance, for Qatar and for the carrier’s customers.
“We are convinced that the time is right to join a global alliance group and oneworld is clearly the best,” Al Baker said.
Qatar, which is just 16 years old, adds 21 new cities to one-world, bringing the alliance’s
number of destinations to more than 900. It will increase one-world’s total RPKs by 3.3% and RPKs in the Middle East region by 90%.
British Airways was the sponsor for Qatar’s membership and the induction process was completed within one year, the quickest ever. IAG CEO Willie Walsh said Qatar’s membership was “without question the most significant and positive event in oneworld for a long time.”
Al Baker said that as a young carrier, he wanted to wait and be sure to select the best alli-
ance for Qatar and the alliance for which Qatar could bring the most benefit. “We wanted to be a part of a high-class alliance so when we were invited [to join oneworld] we very quickly accepted and we assured our oneworld partners that we will never fail them,” he said.
Qatar’s membership comes at an interesting time for oneworld and the major Gulf carriers. Qantas, a oneworld founding member, has formed a five-year alliance with Emirates. Airberlin joined oneworld March 2012 and has a strategic
alliance with Etihad, which has a 29% stake in the German carrier.
Oneworld CEO Bruce Ashby said that one of the reasons the alliance is now growing so fast is because it does not believe in preventing its members from forging their own bilateral relationships. “Oneworld has adopted a flexible approach to bilateral relationships,” he said. “We believe that an alliance that prevents its customers from doing what’s best for their business should go the way of the dinosaur.”
News Briefs.indd 14 11/14/13 3:41 PM
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Aer Lingus reports improved 3Q operating profit Irish carrier Aer Lingus has reported a third-quarter operating profit of €94.9 million ($128.1 million), up 4.4% from €90.9 million in the year-ago period.
The airline said the results were achieved “despite chal-lenging conditions.” Fare revenue in the long-haul sector was up 12.4% to €131.3 million, but short-haul fare revenue was down 5.8% to €259.9 million year-over-year.
Gross cash was also down 5.8% to €933.2 million for the quarter ended Sept. 30. Gross debt decreased by a similar amount—€57.1 million or 10.4%—to €492.6 million from €549.7 million in the same period last year.
Despite a third-quarter capacity increase of 2.9%, operating costs inched up 0.4%, but systemwide load factor fell 0.6 point from 86.1% to 85.5% year-over-year. RPKs rose 2.1% to 4.7 bil-lion during the third quarter.
Aer Lingus CEO Christoph Mueller said: “We do not expect any improvement in the short-haul environment for the rest of 2013, which remains characterized by heavily discounted fare offerings across Europe. The 2013 outlook on long haul remains positive
with the exception of some weakness expected in November, which was previously communicated. We maintain our current guidance for full year 2013 operating profit, before net exceptional items, to be around €60 million.”
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Aer Lingus Airbus A330-300
Juneyao Airlines to launch low-cost carrier
Shanghai-based Juneyao Airlines is planning to launch a Guangzhou-based low-cost carrier (LCC)—initially to be named Jiuyuan Airlines—to tap into the labor market in the Pearl River region.
Juneyao chairman Wang Junjin said it has submitted an application to the Civil Aviation Administration of China (CAAC) and is awaiting approval. Wang said Juneyao would hold more than a 70% stake in the new entity, which will be operated separately.
Juneyao operates a fleet of 33 aircraft, which is expected to expand to 50 by 2015. Juneyao Airlines Airbus A320
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News Briefs.indd 15 11/14/13 3:49 PM
AnAlysis
Are the US’s new, fast-growing “ultra” low-cost carriers (LCCs)—in par-
ticular Spirit Airlines and Allegiant Air—stealing customers from the godfather of LCCs, Southwest Airlines?
ATW asked Spirit, Allegiant and Southwest in November at the Boyd Group International Aviation Forecast Summit in Baltimore about competition between the new LCCs and Southwest. “Our biggest com-petitor is Amazon.com or Best Buy,” Spirit CEO Ben Baldanza said.
Allegiant VP-network affairs Lukas Johnson seconded, “We actu-ally don’t really compete with anyone … We’re flying surplus, stimulate-able traffic that no one [including Southwest] is going after … We’re taking away traf-fic from Home Depot or taking people away from their couch.”
Southwest agrees. “It appears that it is new customers entering the market [on Spirit and Allegiant] as opposed to [those carriers] stealing [from Southwest or other airlines]. Certainly they are bringing new customers into the mar-ket,” Southwest VP and chief marketing officer Kevin Krone said.
For much of its history, Southwest was the carrier targeting passengers who otherwise likely wouldn’t fly. What “cata-pulted Southwest to success” was “a very simple, one-size-fits-all product,” Krone explained. But Southwest, founded in 1971, is now the US’s largest domestic carrier and a big part of its business has become competing directly against lega-cy airlines such as American Airlines and Delta Air Lines for premium passengers.
“Today when you fly on Southwest Airlines, we offer you a lot of services,” Krone said. “Now we offer things like
our ‘business select’ premium product … We’ve had to be smarter and think about segmenting [passengers] a little differently.” Southwest, he said, is selling “a more segmented, thoughtful product offering” compared to during its strong growth years of the 1980s and 1990s.
Allegiant’s Johnson noted, “Southwest has really cut out a lot of the short-haul flying [for which the carrier was once well known]. They decided they needed to start reaching out to more and more business clients.”
Southwest soon will embark on inter-national expansion for the first time, initially by transferring AirTran-branded international flights to Southwest-branded flying in 2014. In late 2015, the Dallas-based LCC will open a new, $156 million international terminal at Houston Hobby Airport (financed by Southwest) to accommodate flights to the Caribbean, Mexico and northern South American cities.
Krone acknowledged that beyond-US flying means the carrier will have to engage in “a lot more complex” opera-tions than before.
It also means that Southwest now looks more like Delta than Spirit or Allegiant. “In the past, you’d never mix up Delta’s and Southwest’s financial metrics,” JP Morgan airline analyst Jamie Baker said. “Today, the fact of the matter is Delta has better metrics in most cat-egories … Southwest seems to be going through somewhat of an identity crisis right now.”
Cheap Seats Spirit, which has become famous (or infamous) for packing passengers into its Airbus A320 family aircraft as tightly as possible and charging low base fares with fees added for nearly all services, doesn’t shy away from what it is offering pas-sengers. “A cheap seat for a cheap ass,” Baldanza joked.
More seriously, he added, “We’re the Ryanair of North America, if you will. The reality is we’re seeing a growing acceptance of what we do. Customers are choosing to nickel and dime them-selves … We’re actually very similar to the original Southwest. We’re positioned where Southwest was in 1985 or so.”
The New Southwest?As Southwest evolves, Spirit Airlines leads a new breed of US low-cost carriers
By Aaron Karp
16 atw | December 2013 | atwonline.com QQ To comment on this story or email the author, go to atwonline.com.
Analysis.indd 16 11/15/13 9:28 AM
There are differences between the business models of Fort Lauderdale, Fla.-based Spirit and Las Vegas-based Allegiant—the former’s fleet is comprised of leased, newer A320 family aircraft while the latter’s consists mostly of owned, aging MD-80s—but there are a number of commonalities. Both are consistently profitable, are operating at a cost level well below the rest of the US industry and are growing aggressively in a mature market in which most airlines, including Southwest, have barely grown for years aside from mergers.
Spirit had a 20.3% operating mar-gin in the 2013 third quarter and its September quarter traffic rose 27% year-over-year to 3.24 billion RPMs. Load factor was 89.1%. Spirit plans to continue the fast pace of growth going forward predicting a 15% capacity boost in 2014 over 2013 and an average annual capacity increase of 22% for the two-year period spanning 2014 and 2015.
“We feel good about our growth because we think there are a lot of places we can grow,” Baldanza said, noting that Spirit currently has just a 1.2% share of the US market. “The absorption rate for our kind of business model is much, much greater than we have today … Ryanair has 11% of Europe. Why not the same [market share] in the US” for ultra LCCs?
Allegiant plans to grow capacity 13%-15% year-over-year for 2013 and 10%-14% in the first quarter of 2014. Johnson pointed out that Allegiant’s third quarter fuel-cost per passenger was $54, the same as Southwest even though Allegiant operates much less efficient air-craft. “Really, really high load factors and high-density aircraft in a single configu-ration” lead to a low per-passenger fuel cost, Johnson said. Spirit’s third-quarter per passenger fuel cost led the US indus-try at a mere $45.
Perhaps most importantly, say Spirit and Allegiant, is not promising passengers anything more than a safe, cheap trip. “When you survey custom-ers and ask them what they care about, price is by far the number one thing,” Baldanza said.
FROM ATWONLINE.COM
HOT TOPICS: READER COMMENTS FROM OUR WEBSITEWhich is better: A380 or 747I? Maybe both: With 650 passengers, there will be little or no room for cargo on the A380; the 747 should be able to accommodate significant cargo even with a full passenger load, particularly in a mixed-class configuration.
Ryanair rolls out customer service improvements: In the meantime, Ryanair made huge profits out of lucrative charges at the cost of irritating millions of customers. I would say it is now too late that Ryanair has started to take care of its customers.
Interjet Superjet 100s operating at 100% dispatch reliability: This is an interesting statement. Russian flag carrier Aeroflot with its 12-strong Superjet fleet still is able to achieve only 4.5 hours per aircraft a day, though the reason could be the airline’s network.
US DOT fines United Airlines $1.1 million for storm-related delays in 2012: To adopt workable plans to protect passengers from lengthy tarmac delays should be submit-ted quickly to the authorities concerned. But why did a big carrier like UA not do this important step?
EC’s Hedegaard gives ICAO emissions agreement a poke in the eye: That is sure the problem with the EC. They seem to be hell-bent on poking the eyes of the aviation community at any opportunity. It is a shame, if then the rest of the countries will go all out for war against this new tax. It must be an indication of how dire the financial coffers of the EU are.
Korean Air finalizes Boeing deal, orders one 787: Korean has made good choices considering its considerable freight business to US. This may suggest future 747-400F replacements will be 747-8Fs and perhaps a few 777-XFs?
IAM members reject Boeing deal: 777X may be built outside Washington state: I think the workers get it very well...it’s the same circus that happened with the airlines … staff salaries and benefits and pensions beaten into the ground so that the employer can get an advantage over the competition. There are states in the south where minimum salaries of $5-an-hour prevail. How can anybody make a decent life? Unions arose to try to protect against this type of exploitation, to improve the lot of the workers. Boeing in Washington wanted an eight-year contract extension, which would have effectively been a pay freeze. But they are a successful company, which has the means to pay its workers a decent wage. Better to work on plant efficiencies than make the employees suffer.
American, US Airways plan to close merger in first half of December: This will be definitely beneficial for both the airlines. This will help them to establish a good market.
Qantas, JAL up stakes in Jetstar Japan to boost growth: A move in line with Qantas Group board objectives. Qantas Airways is reported not to return to a profitable status until FY14/15. The projection is that the long-awaited fleet renewal investment will occur for the older less fuel efficient aircraft. This Qantas & JAL equity injection secures a promising future in the Japanese domestic market. This JV expands on the Qantas Group pioneering success as the first major legacy airline to establish and maintain its own profitable LLCs.
Quote of the month
“The 777X is a paper aircraft and the A350 will be here from next year [on the market] … I like to choose a stable, robust aircraft.”—Japan Airlines chairman Masaru Onishi
atwonline.com | December 2013 | ATW 17
Analysis.indd 17 11/15/13 11:04 AM
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The Trent XWB-97 adds further capability for the A350-1000 while maintaining the same commonality and world-leading efficiency as the baseline Trent XWB. Little surprise the Trent XWB is the world’s fastest-selling widebody engine.
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ATW_XWB-97_AB_161013_Final.indd 1 04/11/2013 13:05DEC13ATWpages.indd 19 11/14/2013 10:37:30 AM
20 atw | December 2013 | atwonline.com
Avianca’s AspirationsThere were two moments in 2013 signaling
Avianca’s arrival as a formidable player in the global airline industry. The first came in June at the Paris Air Show, where the
Colombian carrier’s first ATR 72-600—emblazoned with Avianca’s livery—was prominently displayed throughout the event. The airline formally took delivery of the aircraft in a champagne-soaked handover ceremo-ny under sunny skies at Le Bourget.
The second moment came in November in New
York, where CEO Fabio Villegas and other members of Avianca’s management team gathered on the floor of the New York Stock Exchange (NYSE) to mark the company’s initial public offering (IPO) and the begin-ning of Avianca’s stock trading on the NYSE.
High-profile appearances covered by international media in places like Paris and New York weren’t even far-fetched dreams for the Bogota-based airline back in 2004, when Avianca was rescued from bankruptcy restructuring by Bolivian-born Brazilian entrepreneur
Avianca Dec 2013.indd 20 11/14/13 4:48 PM
atwonline.com | December 2013 | atw 21
✈ ✈ ✈
Avianca’s AspirationsThree years after the Avianca-TACA merger, the airline is a force in Latin America By aaron Karp
Avianca Dec 2013.indd 21 11/14/13 4:48 PM
22 atw | December 2013 | atwonline.com
German Efromovich, whose involvement in aviation was then limited to his Rio de Janeiro-based Synergy Group conglomerate owning the small Brazilian regional carrier OceanAir.
When it entered bankruptcy restructuring in March 2003 after years of heavy losses, Avianca was in default on aircraft payments and lessors were begin-ning to repossess aircraft. It was fast running out of money, holding less than $500,000 in cash on hand, according to Seabury Group, which served as the airline’s financial adviser during the reorganization.
Little known in international aviation circles, Efromovich put together a $63 million bid for Avi-anca, winning out over a $60 million bid by Panama’s Copa Airlines—a more significant development than was understood at the time in 2004 and one that continues to shape the contours of the Latin Ameri-can airline market. (Copa countered by acquiring AeroRepublica, the second largest carrier in Colombia after Avianca. That airline now operates as Copa affili-ate Copa Airlines Colombia.)
Synergy became majority owners of Avianca in 2004 and assumed more than $200 million in debt. Efromovich then boldly predicted—mostly to skeptic shrugs—that he would turn the loss-making Colom-bian flag carrier into an airline that would reach far beyond its borders and be one of Latin America’s top carriers.
Three years after the merger of Avianca and El Sal-
vador’s Grupo TACA and nine years after the bank-ruptcy rescue, the Avianca Holdings parent company (about 70%-owned by Efromovich’s Synergy Group) has a string of airlines, making it Latin America’s second biggest airline company after TAM and LAN Airlines parent LATAM Airlines Group.
Brand unityIn addition to Avianca, one of the world’s oldest airlines with roots dating back to 1919, and San Salvador-based TACA, Avianca Holdings also controls Costa Rica’s LACSA, Taca Peru, Guatemala’s Aviateca, Ecuador’s Aerogal, Brazil’s OceanAir (a Synergy holdover), Taca de Honduras and Colombian freight carrier Tampa Cargo (now known as Avianca Cargo). What had been called “AviancaTaca Holdings” since the 2010 merger formally rebranded earlier this year to “Avianca Holdings” and announced its intention to integrate TACA and the other airline subsidiaries un-der a single brand, “Avianca.” OceanAir, for example, is now known as Avianca Brazil.
When looked at as a unified brand, Avianca offers an extensive network that makes it a powerful com-petitor to LATAM.
“Our strategically located hubs in Bogota, Lima and San Salvador provide coverage of the domestic markets in Colombia, Peru and Central America, which is unique for a single airline, and support a broad international network connecting the Andean
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atwonline.com | December 2013 | atw 23
Region, Central America, the Caribbean, North America and Europe,” Avianca Holdings said in a fil-ing with the US Securities and Exchange Commission (SEC) made in advance of its IPO. “Our strong pres-ence within the Andean region and Central America enables us to consolidate regional passenger traffic in our hubs and provide connectivity to international destinations, making us a leader in terms of interna-tional air passengers carried from our home markets to both North America and South America.”
Avianca Holdings carriers operate more than 730 daily scheduled flights to over 100 destinations in Latin America, North America and Europe. Avianca joined Star Alliance in 2012, giving its passengers access to a global network comprised of 27 airlines. Avianca has formal codesharing arrangements with Aeromexico, United Airlines, US Airways, Air Canada, Iberia, Lufthansa, Satena and Sky Airline.
Avianca’s combined fleet totals 151 aircraft, includ-ing six freighters. The passenger fleet is dominated by 95 Airbus A320 family aircraft and the group carriers also have nine A330s, 12 Embraer E-190s and 29 turboprops in the fold. Avianca began taking delivery of ATR 72-600s, of which it has 15 on firm order, this year.
Profitable growth Growth has been steady. In the 11 months after the Avianca/TACA merger was finalized Feb. 1, 2010, the airline group operated 21.07 billion RPKs. In 2011, RPKs totaled 26.37 billion and, in 2012, grew another 10.2% to 29.07 billion. The growth is expected to continue with a robust order book of new aircraft coming on board over the next six years. In addition to the ATR 72-600s, it has 15 Boeing 787s, 37 A320ceo family aircraft and 33 A320neo family aircraft on order. The first three 787s will arrive in 2014 and the last three of the 15 Dreamliners are slated for delivery in 2019.
“I think we’ll continue to grow because all of the countries we’re serving are growing,” Alexander Bialer, a member of the Avianca board of directors, told ATW at the ATR 72-600 handover ceremony in Paris.
“Latin America is one of the fastest-growing air traffic regions in the world and I think we’re playing our role and taking our share of it, and hopefully improv-ing our share as we go. But there’s room for everyone in this market. We just want to be focused on being seen as the airline of choice.”
He noted the decision to add ATR next-generation turboprops to its fleet was driven by rising expecta-tions among the passengers Avianca is targeting. “We have been expanding the company over the last few years,” he said. “Latin America is a devel-oping area now and customers are expecting more from airlines. So we have provided them with more comfort, more reliable service and more capacity … [The ATR 72-600] is the perfect aircraft to serve all these [short-haul] markets that, because of distance, are inappropriate for a jet, yet people demand the comfort of a jet.”
One of Avianca’s primary planks is providing “premier customer service,” which it believes can serve as a differentiator in a region where top service is far from standard. “Superior customer service is a
“Latin America is a developing area now and customers are expecting more from airlines.”
—Alexander Bialer, Avianca board member
FACT FILE
Avianca Holdings Selected Financial and Operating Results
Financial (US $, 000)
2013 1st Half
2012 Full Year
2011 Full Year
Operating Revenue 2,223,100 4,269,656 3,794,428
Operating Profit 138,000 280,898 202,383
Net Profit 147,506 38,257 99,876
Operating
Passengers (000) 11,924 22,425 19,909
ASKs (000) 18,858,000 36,545,000 33,136,000
RPKs (000) 14,995,000 29,072,000 26,368,000
Load Factor (%) 79.5 79.6 79.6
ATKs (cargo) (000) 654,000 1,198,000 1,087,000
RTKs (cargo) (000) 375,000 748,000 695,000
Source: Avianca Holdings
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24 atw | December 2013 | atwonline.com
cornerstone,” Avianca said in the SEC filing. “We believe we can differentiate ourselves from our competitors by combining world-class operating performance with a warm, Latin American service culture … We also intend to leverage our LifeMiles frequent flyer program to increase customer loyalty and attract new customers by providing top quality benefits, including priority seat availability, check-in and baggage handling and VIP lounge access.”
Avianca Holdings has been profitable since the merger, earning net income of $38.3 million in 2011 and $99.9 million in 2012. Net profit through the first half of 2013 was $147.5 million. Revenue grew 12.7% year-over-year in 2012 to $4.27 billion. Revenue for the first six months of 2013 totaled $2.22 billion.
Avianca Holdings, which remains majority-controlled by Synergy Group, raised $409 million in the November IPO by offering 27.2 million shares priced at $15 each. Villegas said the funds will be put toward fleet modernization, calling Avianca trading on the NYSE “a key milestone in the [Avianca Holdings group of ] airlines’ consolidation and globalization process. We have no doubt that this capitalization will drive our intended modernization and growth plans, while simultaneously reassur-ing the reliability the investment communi-ty expects as a result of our company’s value and strength.”
Future plansAvianca noted in its pre-IPO SEC filing that it has “grown significantly” post-merger. “We believe we have already achieved many revenue-enhancing synergies from the integration of Avianca’s and Taca’s networks, which was the initial focus of the combina-tion,” Avianca stated. “We are now ready to implement a second stage of our integration plan focused primarily on achieving cost-oriented synergies from greater operating and administrative efficiencies and econo-mies of scale.”
Avianca will seek cost synergies by “consolidating maintenance procedures across the regions we serve and optimizing our flight operations, increasing aircraft utilization through interchangeability of aircraft, better crew planning and more
efficient use of our regional hubs. We also intend to achieve synergies by unifying our IT platforms in finance, maintenance and operations.”
The company cites its position on the map as a big strength going forward. “We have a leading presence in the Colombian domestic market and also in the market for international passenger service within the Andean region and Central America, a region with approximately 136 million inhabitants as of Dec. 31, 2012, and what we believe to be dynamic and growing economies,” it said. “Our passengers carried increased 27.4% in 2011 and 12.9% in 2012, outperforming Latin America average growth … We believe our strong presence in the regions in which we operate positions us well to benefit from economies of scale and grow from a position of strength.”
Avianca said it expects “to add new destinations, routes and flight frequen-cies in Latin America to meet or stimulate demand for our services, in particular by adding new long-haul and other inter-national destinations to be served from our Bogota and Lima hubs … We also expect to continue to evaluate selectively additional growth opportunities through strategic alliances with other airlines as well as potential acquisitions and strategic opportunities that would complement our existing operations.”
The airline group is also planning to grow its cargo business. It now operates one Airbus A330F and five Boeing 767Fs.
Avianca has “a significant opportunity to increase our footprint in the cargo business by leveraging our leadership position in Colombia to grow in other Latin American markets,” the company told prospective investors. “We plan to enhance our com-petitiveness in the cargo sector by adding three new Airbus A330-200 freighters [by the end of 2013] dedicated exclusively to cargo transport. In addition, our modern-ized passenger fleet will have greater cargo capacity and allow us to continue to earn incremental revenues by complementing our cargo routes with cargo transported in the bellies of our passenger flights.”
—Edvaldo Pereira Lima contributed to this article.
FACT FILE
Avianca Fleet On OrderType On Order
Boeing 787 15
Airbus A319 14
Airbus A320 17
Airbus A321 6
Airbus A320neo 10
Airbus A319neo 19
Airbus A321neo 4
Airbus A330 1
Airbus A330F 3
ATR 72 15
Total On Order 104
Source: Avianca Holdings
FACT FILE
Avianca Current Fleet
TypeOperating
Fleet
Airbus A318 10
Airbus A319 29
Airbus A320 51
Airbus A321 5
Airbus A330 9
Embraer E-190 12
ATR 42 8
Cessna 208 12
Fokker F27 9
Airbus A330F 1
Boeing 767-300 1
Boeing 767-200 4
Total Fleet 151
Source: Avianca Holdings
Avianca Dec 2013.indd 24 11/14/13 4:50 PM
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atwonline.com | December 2013 | atw 27
An improving economy worldwide, record orders for new commercial airliners, plus an emerging market for used equipment is for now improving the aircraft leasing business.
But industry analysts worry about overcapacity of new aircraft with marginal airline growth expected in some areas for the foreseeable future.
“On the demand side, the developing economies are slow, but things appear to be getting better,” Norman C.T. Liu, president and CEO of GE Capital Aviation Services (GECAS) said. “On the emerging side, things are slower than before.”
GECAS has just under $50 billion in assets. Operating leases account for $35 billion roughly; debt financing, $8 billion; and around $3 billion in spare engine leasing.
One reason for the improving fortunes of leasing companies is the growth of operating leases, even among legacy airlines. For years, operating leases were
the financing vehicle of choice for undercapitalized new starts.
How much of a legacy airline’s or lessor’s fleet is on operating leases today depends largely on who you ask. Anywhere between 35% and 50% is what ATW is hearing.
“Operating leases represent about 40% of the [commercial aircraft] market and it is trending toward 50%,” CIT Aerospace president Tony Diaz said. CIT had 161 commercial aircraft on order as of March 31, 2013, with deliveries scheduled through 2029.
Legacy carriers in the US have not done a lot of operating leases historically, in part, because the capital markets are stronger in the US. That is still true in some cases, Diaz said, but major airlines like the flexibility of operating leases, which don’t appear as debt on the balance sheet. Operating leases are not a panacea, but they enable a carrier to grow without assuming more debt.
Lucrative but Risky
Boeing announced from the 2013 Paris Air Show that CIT Aerospace has placed an order for 30 737 MAX 8s.
By Robert w. Moorman
✈ ✈ ✈F L E E T S
As the commercial airline business improves slowly, so does the leasing trade
28 atw | December 2013 | atwonline.com
“If you want to grow at 8% per year, you can probably do pure equity purchases, but if you want to grow 15%-20%, you’d better do some leasing,” said John Feren, EVP Aviation Capital Group (ACG), the aircraft leasing arm of Pacific Life Insurance Co. ACG has over 250 owned and managed commercial aircraft leased to 90 airlines in 40 countries.
In late October, the US 10-year lease rate stood at around 2.7%, which is higher than it was six months ago, but still a very good rate, said Steve Fortune, founder of Fortune Aviation, a commercial aircraft trading and leasing firm.
“The jet leasing business is strong thanks to a happy combination of eager customers and eager cash providers,” said Richard Aboulafia, VP analysis at The Teal Group. “Financiers have access to money at very lower rates, and there aren’t a lot of other great investment opportunities.”
Most of the growth in the leasing business is in blue chip narrowbodies, such as the Airbus A320/A321 and Boeing 737-800, and will likely continue for the next generation A320neo and 737 MAX aircraft. Narrowbodies represent around 40% of GECAS’ fleet value. Widebodies represent around 20% of GECAS’ leasing portfolio, Liu said.
While operating leases are gaining in popularity among airlines, it is unlikely they will supplant debt financing anytime soon.
“Some of my peers might say there is a massive shift to operating leasing,” Liu said. “I don’t see that much change at major carriers, particularly with the
airlines availing themselves to the bond market.”Others agree. “The capital markets have come back
very nicely, with the number of Enhanced Equipment Trust Certificate (EETC) transactions on the rise,” Feren said.
EETC transactions, in which a trust certificate is sold to investors to finance an aircraft purchase, had been the province of US major carriers. “But now, a number of international airlines have done EETC transactions quite successfully,” Feren said. Those companies include the International Airlines Group—parent of British Airways and Iberia—Air Canada, Emirates and Virgin Atlantic Airways.
Overcapacity ConcernsThe record number of orders for new equipment has lessors excited, but some industry analysts worry about aircraft overcapacity in light of some legacy carriers’ current strategy of shrinking capacity to maintain profitability.
“Orders and deliveries are growing quite substantially, but I am not positive that the demand will be there,” said Adam Pilarski, SVP at Avitas, an aviation consulting firm. “We’re already in a bubble environment.” There are a number of potential problems on the macro level and, if they occur, “it could cause the bubble to burst,” he said.
Aboulafia took another view. “Despite the potential risk of overcapacity, jet finance returns are still higher than most other investment opportunities,” Aboulafia said. “This dynamic has
Doric orDereD 20 Airbus A380s at Paris.
ATW DEC_FLEETS Leasing.indd 28 11/13/13 3:20 PM
atwonline.com | December 2013 | atw 29
helped boost the jetliner market to a new peak, with a record level of transactions funded by third-party financiers.”
Domestic capacity of Airlines for America (A4A) member airlines rose just .8% from January to September 2013 versus the same period in 2012, according to figures compiled by A4A. Capacity over the Atlantic and Pacific oceans dipped -1.7% and -0.8%, respectively, while Latin America rose 7.1%.
For 2012, worldwide ASKs rose 4.2% over 2011 to 6.9 trillion, according to IATA. For North America (US and Canada), ASKs rose 0.5% to 1.77 trillion.
Most lessors doubt there will be a surplus of ‘white tails’ hanging about or put on the used market once the initial lease has expired.
From the airline perspective, “the orders seem sized sensibly,” Liu said. For many network carriers, the orders will replace existing aircraft. In emerging markets, the new aircraft will support growth, he added.
Another point: airlines seem more deliberate and conservative in their order patterns these days. “The biggest thing that has changed is the balance between growth and replacement,” Feren said.
Diaz shares this view. “The US airlines have been able to sustain profitability because they have showed capacity discipline in controlling growth. Yet the overall pie of aircraft needed is still growing,” primarily because of tremendous demand in Asia, China in particular, and India, he said. [Boeing announced in late October 2013 it had secured commitments for up to 200 MAX aircraft from numerous Chinese customers.]
Ten years ago, 70% of the airline orders were for growth and 30% were to replace aircraft, Feren said. By 2008, the numbers were 60%/40%, respectively, and the replacement figures continue to rise.
There is another factor that could help reduce the possibility of overcapacity of new commercial aircraft. Leasing companies have a tremendous amount of power within the aircraft manufacturing and sales market. They own a sizable portion of the backlog for Boeing and Airbus aircraft. Over 50% of the Boeing 737-800s and Aibus A320 family of aircraft are owned by leasing companies, according to ACG. Consequently, input from lessors will help balance scales to help prevent against over-ordering.
But what could turn the leasing market onto a more traditional track of debt financing over operating leases is for interest rates to spike and fuel prices to go down.
“Then you will see a shift of second and third-tiered carriers taking older aircraft again because they would lose the advantage of low-cost financing and the better fuel economy of new airplanes,” Fortune said.
New OpportunitiesLeasing companies have found revenue opportunities in the slightly used aircraft market. Some airlines are looking at used equipment as a bridge vehicle until their “Neos and MAXs arrive,” Liu said. So larger car-riers are willing to have five- to seven-year operating leases. Pockets of demand exist for this type of equip-ment, several lessors said.
✈ ✈ ✈F L E E T S
Slow FreighterS
Steve Fortune is brief and blunt on the state of the freight-er leasing business: “There isn’t one. The freighter market is in the worse shape I have ever seen it,” said the founder of Fortune Aviation, which specializes in aircraft acquisi-tion and passenger-to-freighter-conversion management.
“The number of widebody conversions is “extremely small,” he said. “Many widebody aircraft are parked today, including various Boeing 747 models and Airbus A300s.”
Fortune cites the less-than-stellar world economy as the principal reason for the lack of freighter lift, which adversely affects leasing.
Another problem for the all-freighter trade is that pas-senger airlines are putting additional, larger aircraft on long-haul routes.
“I think this is contributing to the glut in capacity,” said Brandon Fried, executive director at the Airforwarders Association. “The reality is that the passenger fleet is get-ting bigger and putting a dent in the all-freighter market.”
The passenger aircraft with ample belly cargo space include the Boeing 747-400s, 777s and 787 Dreamliners. The ultra-large Airbus A380 is not considered ideal for belly cargo, Fried said. The wing-box is so large that it constricts the belly cargo. The 787 is considered an ideal aircraft for carrying belly cargo on very long, thin routes, he added.
On the narrowbody side, the picture is slightly better, Fortune said. A number of narrowbody aircraft, such as Boeing 757s and McDonnell Douglas MD-80s are being converted to freighters, but the numbers are smaller than in years past.
Lease rates are steady for freighters, but higher than for passenger aircraft because freighters fly fewer hours per year. Fortune is working on financing an MD-80 freighter, which logs around 11,000 flight hours per year. Compare that to Delta Air Lines’ [passenger] MD-80s/90s, which record twice as much flight time annually, Fortune said.
—Robert W. Moorman
ATW DEC_FLEETS Leasing.indd 29 11/13/13 3:20 PM
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32 atw | December 2013 | atwonline.com
Take the case of American Airlines. American has sold and leased back several of its new aircraft orders to leasing companies. Part of the reason was American’s desire to horde cash as it goes through a period of uncertainty. But American and other legacy carriers also like the flexibility of operating leases, according to leaders of several leasing companies.
If an airline is transitioning from one aircraft type to another, and wants to eliminate the residual risk, the carrier can engage in a sale-leaseback agreement and let the lessor absorb the risk.
Southwest Airlines is another carrier that will engage in a sale-leaseback arrangement to achieve better fleet management, Diaz said. Southwest will lease used aircraft to add capacity because it can’t get new equipment from the aircraft manufacturer fast enough. It takes four- to five-years lead-time to order and receive a new Boeing airliner, Diaz said.
“What we’re seeing is perfectly good 10-year-old A320s and 737s coming off lease because carriers are being offered new equipment by manufacturers at rates lower than the aircraft they were leasing presently,” Fortune said, which further seeds the used aircraft leasing market.
Financing vehiclesBanks are starting to lend money for the acquisi-tion of new aircraft. “But there is a lack of financing available for aircraft that are four and five years old,” Diaz said. And there is still the prevalent problem that banks don’t understand the airline business.
Another new financing vehicle is being offered. Doric Lease Corp., an asset management company, is attracting retail investors for financing Airbus A380s. Doric has worked on a number of transactions in which investors buy a piece of an A380. The financing vehicle remains untested, but lessors consider this a novel approach for airlines to secure financing for their equipment.
In conjunction with Nimrod, an investment fund specialist, Doric sold shares to investors, who get quarterly dividends tied to A380 lease revenues, providing the airlines pay. Once the A380 comes off lease, the investors get the proceeds when the A380s are sold.
Not everyone is buying into this concept. “A380 residual values are likely to be hugely disappointing to these investors,” said Aboulafia. “Doric is a financial lessor, with little experience in remarketing aircraft. There’s no guarantee of any kind of secondary market, which would be devastating for a lessor.”
ATW could not reach Doric for comment on its new financing vehicle.
At the 2013 Paris Air Show, Doric announced an MOU to acquire 20 A380s in a deal valued at $8 billion.
Airbus is projecting a need for 29,220 new passenger aircraft, according to its Global Market Forecast 2013-2032, a 4.7% growth per year. And Boeing’s forecast is equally rosy. If these projections are correct, lessors too will benefit for many years to come, provided airlines balance capacity between growth and replacement.
ILFC’s FIRM contract for 50 addi-tional Airbus A320neo Family aircraft—announced at Paris—increases its total firm neo order tally to 150.
“The jet leasing business is strong, thanks to a happy combination of eager customers and eager cash providers.”
—Richard Aboulafia, VP analysis at The Teal Group
ATW DEC_FLEETS Leasing.indd 32 11/13/13 3:21 PM
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Long-term support of engines costs far more than the initial purchase, and engine maintenance is the largest element in aircraft maintenance costs. Engine support options are a critical consider-
ation in fleet planning.Engine manufacturers lead the way in offering
maintenance and overhaul packages, charged per flight hour, commonly referred to as power-by-the-hour. These arrangements convert some fixed infrastructure costs into variable costs per revenue-
earning flying. But they come at a price and must be examined against alternatives: all or partial in-house maintenance; flight-hour contracts with independent providers; and one-off repairs.
Rolls-Royce pioneered power-by-hour support. GE Aviation, Snecma, CFM International and Pratt & Whitney offer similar deals, with more flexibility. GE and Pratt have developed long-term support plans aimed at increasingly important leased aircraft and engines.
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✈ ✈ ✈F L E E T S
Engines.indd 35 11/15/13 9:40 AM
36 atw | December 2013 | atwonline.com
Rolls-Royce head of customer marketing services Mark Kerr divides customers into those that manage and perform maintenance themselves and those that use providers to plan and deliver engine maintenance.
Self-managers obtain Rolls’ foundation services, some free and some not. These include customer support, technical support and readiness planning. Self-managers also get operational support, techni-cal knowledge and basic tools to manage fleets. For example, self-managers get an Engine Management Program to create best-practice overhaul work-scopes. If they transmit Engine Health Monitoring data, they receive basic EHM service from Rolls’ OSyS unit to plan engine management and maintenance. They get online access to Aeromanager to order parts and re-quest training or overhaul slots, plus service bulletins and airworthiness directives. And they get answers to technical queries, troubleshooting and technical solutions.
Under TotalCare, Rolls absorbs all the costs and risks of engine management and maintenance, for which operators pay additional charges. Custom-ers pay when engines fly a fixed rate per flying hour. TotalCare monitors and looks after engine condition and includes full EHM, deployed non-routine line maintenance, engine-shop maintenance and engine durability and reliability improvements.
High totalCare uptakeAbout 90% of operators with Trent engines use To-talCare. Kerr expects the program will be as popular on newer engines. TotalCare allows operators to exploit Rolls’ engineering knowledge and fleet-wide data. Kerr estimates it would take an airline 90 years to accumulate the flying hours Rolls monitors each year. One result: “Customers with TotalCare have engines that stay on-wing longer, about 25%, than those choosing to self-manage.”
For engines on leased aircraft, Kerr says Rolls foundational services typically satisfy the lessor, and operators can add optional services, such as line replaceable unit (LRU) management, transportation, and non-dedicated spare engine service, to customize TotalCare for specific needs.
As with Rolls, if an airline chooses to buy a GE engine without a maintenance package, it receives a minimum level of service, guarantees and warranties and access to GE’s operating center. At overhaul time, it can choose any shop certified by regulators and licensed by GE.
GE’s OnPoint covers basic engine overhauls, including parts, labor, repairs, tests, fleet management and remote diagnostics. OnPoint general manager Mahendra Nair said, “customers can choose one or
more of these services.” The package can also include OnPoint’s maintenance cost per hour (MCPH) pro-gram, one- or two-way transportation, upfront or a la carte on-wing support, coverage of life limited parts, LRUs and foreign object damage. Customers that do overhauls in-house can also choose material-by-hour support, sending all or a portion of materials to GE for repair.
Of 27,000 GE engines operating, 9,000 are under OnPoint and 80-85% of these are MCPH. These portions are increasing as CFM LEAP and GEnx
Engines.indd 36 11/15/13 9:40 AM
atwonline.com | December 2013 | atw 37
engines are ordered.GE’s support has worked slightly differently for
engines on leased aircraft, as eventual operators are not known at the time of sale, and operating condi-tions affect the flight-hour rate GE can charge. Brian Ovington, principal market manager for engine services, said GE has begun to offer lessors a product that integrates the interests of their lease contract with GE’s OnPoint agreements made directly with airlines.
CFM has also introduced a Portable Mainte-nance for Lessors (PML) program. The lessor pays a
relatively small portion of the PML flight-hour charges monthly and then pays the rest at shop-visit time, accommodating a lessor’s preference to hold maintenance reserves. The base prices are fixed up front by a table in the PML contract that takes into account operating conditions of each airline lessee: leg length, thrust ratings, am-bient temperature and so forth. CFM can then sign an activation agreement with each airline lessee to authorize maintenance be performed under the PML agreement.
CFM has already signed a master PML agreement with GE Capital Aviation Services and hopes to get a couple of airlines signed up under this contract by year end. It is in discussions with two other major aircraft leasing companies, plus engine lessor ELFC.
Snecma also offers a flexible set of rate-per-flight-hour contracts as well as Time & Materials support.
Pratt & Whitney’s primary offer is its fleet management program (FMP) for airlines or leasing companies that want overhauls done in Pratt’s network, Pratt director of service pro-grams Jim Pennito said. The manufacturer also offers materials management (MMP) to carriers that want to do overhaul disassembly, assembly and testing in their own shops.
FMP and MMP, charged per hour, repre-sent 95% of Pratt’s long-term support. FMP and MMP have been offered mostly for Pratt PW4000s and IAE V2500s, engines that cus-tomers plan to operate for a while. They cover half of flight hours flown by PW4000s, evenly split between FMP and MMP, and 60% of V2500 hours, all FMP. For older JT8Ds, JT9Ds and PW2000s, Pratt offers material-repair agree-ments.
Variations are allowed under FMP and MMP. Some customers pay monthly, others at time of shop visits. Agreements can cover different time periods or numbers of shop visits.
GtF support programPratt offers FMP and MMP on geared turbofan engines, typically with a 15-year term. The programs have captured almost all of the 80% of GTF custom-ers that are airlines, but not the 20% that are lessors.
So, like GE, Pratt has been developing a program for leasing companies that puts operating conditions in a matrix and will adjust the hourly rate according to how engines are eventually flown. Pennito says he is close to a deal on these terms with one leasing company.
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atwonline.com | December 2013 | atw 39
The head of Lufthansa Group’s fleet manage-ment team takes a highly analytical approach to filling the future new aircraft requirements of the airlines that make up the Group.
Looking out to 2025, Lufthansa has crunched all the numbers, calculated the best and worst case scenarios, and has planned for a fleet that will give the Group the most flexibility regardless of circumstance.
Lufthansa Group EVP fleet management Nico Buchholz told journalists in a New York briefing in November that the Group’s strategy for new aircraft acquisitions is based on firm orders that will enable 3% growth through 2025.
“We see three scenarios of growth through that time—1%, 3% or 5%,” Buchholz said. “Our basic scenario assumes a growth path of 3%, but at the same time we have the flexibility to adapt if things go bad or good. So we have the flexibility for 1% or 5%.
We can do that through either retiring more aircraft or doing more roll-over. More growth will be covered by new aircraft options and also keeping aircraft in service longer. We have a completely breathing pro-duction system through 2025.”
Lufthansa Group has 295 new aircraft on order for delivery between 2015 and 2025. They include four Airbus A380s, 25 A350s, three A330s, 15 Boeing 747-8s and 45 777s. Also in that total, valued at ap-proximately €36 billion ($48.3 billion) at list prices, is a mix of Airbus A320s, Bombardier CSeries and Embraer E-195s.
“The goal is to have fewer aircraft types and a more homogenous fleet structure across the Group,” Buch-holz said. He also pointed out that the key drivers for airlines in their fleet choices have changed. “Speed, range and size were the historic drivers of the indus-try,” he said. “Today’s airline focuses on economic and
Managing uncertaintyBy Karen walker
✈ ✈ ✈F L E E T S
Lufthansa Group’s approach to long-term fleet management is based on building in flexibility for good or bad times.
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40 atw | December 2013 | atwonline.com
ecologic awareness. You need low seat-mile costs and high performance. It is a much more complex and much more complicated market. Lufthansa Group focuses on having the best class cost position over the life cycle of the aircraft and continuous, sustain-able aircraft procurement. Those are the two key topics for us.”
That focus on continuous, sustainable aircraft pro-curement was part of the reason behind Lufthansa’s decision to buy the CSeries jetliner. Buchholz said the CSeries order was part of Lufthansa Group’s wider determination to maintain a competitive airframe OEM environment. “We had a requirement in that market segment but we also knew that we would get a significantly better product from Airbus and Boeing [if we bought the CSeries],” he said. However, Buch-holz also acknowledged he would like to see Bombar-dier log more CSeries sales. “We are not worried yet, but we need to see it happen and we are focused a lot on the entry into service date for that,” he said. “So we want Bombardier to deliver [CSeries] -100s and -200s and to get a couple more sales. We think there is potential to stretch it further.”
Bombardier’s maiden CSeries airliner flight was conducted from Montreal-Mirabel Sept. 16. First flight was originally planned for the end of 2012, but in November that year Bombardier announced a six-month postponement to the end of June 2013, citing delays in final assembly of the aircraft. First
flight was subsequently delayed to the end of July, but Bombardier missed that deadline because of software upgrades and additional integration work.
Firm orders for the CSeries stand at around 177 against Bombardier’s goal of 300 by entry into ser-vice; 63 of the 110-seat CS100 variant and 114 of the 135/160-seat CS300 variant.
Lufthansa Group has a firm order for 30 CSeries jets plus 30 options. The aircraft are planned to be used by Swiss International Air Lines as replacements for its RJ100s. The aircraft will be powered by Pratt & Whitney’s new PW1000 geared turbofan.
Buchholz said that for Lufthansa, evaluation of the CSeries’ engine performance was a critical part of their review. “We evaluated the engine of the CSeries for two years before we evaluated the aircraft because we felt the engine was a crucial technology,” he said.
Forward thinkingBeyond maintaining a competitive OEM landscape, however, Lufthansa Group focuses on life cycle costs and adaptability.
“We work to understand the merits of our aircraft over the long term. We play the ‘what ifs?’, which include what if fuel prices double? Load factors of 65% used to be good. Now, an airline with 65% load factors would be dead. So we get involved with the manufacturers very early on because once an aircraft is being produced you can’t change much and you certainly can’t change the big things, including life cycle costs. It becomes a bit like buying a car. The only way you can reduce your fuel burn is to lift your foot.”
Lufthansa has a unique quick-change policy for its aircraft cabins. It can shrink or grow its business class cabins in one day at its Frankfurt hub, enabling it to react rapidly to market changes. The system comes out of its Lufthansa Technik unit and it is important to Group operations, but it’s another factor in the emphasis on close and early talks with OEMs on new aircraft. It also requires a lot of forward thinking and sometime means spending more upfront for the right long-term costs. For example, the quick-change system is more difficult to accomplish and is less cost-effective if aircraft floors have to be reinforced before adding seats.
“We have to think forward and maybe put a dollar more in at the front to save in the future,” Buchholz said. “We also focus a lot of reliability. Every single unit has to work because otherwise you get disrup-tion and that is costly. We have to evaluate all criteria, including flight performance and operating costs.”
Buchholz added that for Lufthansa, dispatch reli-ability is expected to be above 99%.
In its fleet procurement decisions, Lufthansa also factors in the knowledge that its customer products will probably change three times over the life of the aircraft—another reason why in-built flexibility is important. “We also look at engine flexibility. Engine choice can be decisive for flexibility,” Buchholz said. “With the A330 engine, two out of the three choices had the profitability we needed. Even when there is no engine choice, there is choice because we can choose another aircraft.”
Buchholz also dismisses the idea that older aircraft are more expensive to operate. “The technical reli-ability of our 747-400 fleet has increased slightly over time and there is hardly any capital cost against them,” he said. “There is no dispatch reliability/age correlation. The -400 works very well on reliability. If you maintain them properly, there is no reason why they should not be a reliable operation.”
✈ ✈ ✈F L E E T S
“Even when there is no engine choice, there is choice because we can choose another aircraft.”
—Nico Buchholz, Lufthansa Group EVP fleet management
Fleets_Lufthansa.indd 40 11/14/13 5:18 PM
DEC13ATWpages.indd 41 11/14/2013 10:37:36 AM
So why would you accept this?You’d never accept this.
Air
bus
, its
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ames
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reg
iste
red
trad
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Personal space isn’t any less personal on a twelve hour long-haul fl ight. Yet some aircraft manufacturers are dreaming about matching our economics by reducing the width of their standard economy class seat – in many cases less than the seat width found on many commuter aircraft. This shouldn’t be the standard for personal space. Thankfully, these days you have a choice. Demand the Airbus standard for personal space. With the 18 inch standard economy class seat on the A330 and A350 XWB and the 18.5 inch economy class seat offered standard on the A380, it’ll make a massive difference. So, the next time you’re feeling squeezed on a plane, at least now you’ll know why: It’s not you, it’s the seat.@Airbus #AirbusComfort
Airbus_AirTransportWorld_Dec.indd Pg1 Mundocom UK 14/11/2013 15:55DEC13ATWpages.indd 42 11/14/2013 1:20:20 PM
So why would you accept this?You’d never accept this.
Air
bus
, its
log
o an
d th
e p
rod
uct n
ames
are
reg
iste
red
trad
emar
ks.
Personal space isn’t any less personal on a twelve hour long-haul fl ight. Yet some aircraft manufacturers are dreaming about matching our economics by reducing the width of their standard economy class seat – in many cases less than the seat width found on many commuter aircraft. This shouldn’t be the standard for personal space. Thankfully, these days you have a choice. Demand the Airbus standard for personal space. With the 18 inch standard economy class seat on the A330 and A350 XWB and the 18.5 inch economy class seat offered standard on the A380, it’ll make a massive difference. So, the next time you’re feeling squeezed on a plane, at least now you’ll know why: It’s not you, it’s the seat.@Airbus #AirbusComfort
Airbus_AirTransportWorld_Dec.indd Pg1 Mundocom UK 14/11/2013 15:55DEC13ATWpages.indd 43 11/14/2013 1:20:30 PM
The SaM146 integrated propulsion system sets the new benchmark for regional jets. Now into its third year of service with the Sukhoi Superjet 100, the SaM146 combines excellent reliability, outstanding performance, a strong heritage and ‘Powerlife’ – our dedicated maintenance service. Designed from the ground up to meet
the challenges faced by airlines, isn’t it time you took a look at our class-leading engine? To find out more visit www.powerjet.aero
The SaM146. Reliability. Time and again.
PowerJet is a joint company of Snecma (Safran group, France) and NPO Saturn (Russia).
C32843_Powerjet_TICKTOCK_AirlineBizALTADaily_Nov13_267x197_v1.indd 1 05/11/2013 15:31DEC13ATWpages.indd 44 11/14/2013 10:37:38 AM
atwonline.com | December 2013 | atw 45
Over the last 12 months there has been a shake-up among Europe’s regional car-riers. SAS has sold Wideroe, Air France has created the amalgamated regional
brand HOP! and put CityJet on the auction block, bmi regional has completed its first year as an independent, and UK regional Flybe has hit hard times. What is driv-ing this change?
SAS was forced to sell Norwegian regional Wideroe as a pure cash-generation exercise follow-ing its near-collapse late in 2012. It was a matter of survival. “If we had been in a different financial position, we wouldn’t have gone down this path, but we need to demonstrate to the bank consortium that we can reduce our cost base and build cash quickly,” SAS CEO Rickard Gustafson told ATW in February. A group of Norwegian investors has now acquired 80% of Wideroe and SAS is planning to divest the remaining 20% in 2016.
This reluctant disposal formed part of SAS’ 4XNG plan, which is one of the many Restructuring Plan 2.0s being rolled out, placing regionals under further scrutiny.
Similarly, Air France is demanding an 18% cost reduction from its regionals under its Transform 2015 program. Its three French regionals—Brit Air, Regional and Airlinair—were unified under the HOP! brand in March. They retained their individual air operators’ certificates (AOCs), but have essen-tially become fully owned wet-lease suppliers. HOP! provides the airlines with pooled-back office functions and also has its own AOC so it can sell tickets under
its A5 designator.“We needed to find a solution to adapt our fleet
and labor [costs] to the real size of the market,” HOP! EVP restructuring and strategy Philippe Micouleau told ATW in Salzburg. “We are close to our objective of reducing our capacity and global costs. We just leave it to the management [of each airline]. They have to be profitable while selling to us at a defined transfer price per flight hour.”
By creating HOP! Air France has dodged the thorny issue of integrating the diverging labor agree-ments, fleets and bases of its regionals. It has also stripped out three veteran brands and turned them into production platforms. But is this enough?
“I respect where Air France is coming from, but this is a bit like trying to get an elephant to ballet dance,” said Patrick Edmond, principal at strategic
regionalroundabout
The European regional scene is all about adaptation and finding new business models
By Victoria Moores
Regional.indd 45 11/14/13 5:33 PM
46 atw | December 2013 | atwonline.com
aviation advisory firm e2consult. “If all you have is an elephant and you know you’re going to have a ballet performance, you will do your best to teach the elephant to ballet dance, but that doesn’t necessarily mean it’s going to be an elegant performance of Swan Lake. On one hand, you have the market saying is this too little, too late. On the other you have the Air France Group, which I greatly respect, but it is quite slow moving. I think HOP! is Air France and its subsidiaries moving pretty much as fast as they can at the moment.”
Things are also moving slowly for Air France’s Irish regional, CityJet, which was put up for sale last summer. Germany’s Intro Group emerged as a likely buyer, although exclusive negotiations ended in September without a deal. That said, CityJet CEO Christine Ourmieres was seen speaking with Intro executives at the ERA General Assembly in October, indicating they could still be in the frame. “I am hoping the sale will be concluded as soon as possible, for the team, and ahead of the 2014 summer season. I think the end of the calendar year could be possible,” Ourmieres told ATW in Salzburg.
Regional IndependenceWhile waiting news of its potential new owners,
CityJet has reinvented itself as an independent carrier. From April 1, 2014, it will operate scheduled flights under its own WX code for the first time since it was acquired by Air France. With guidance from consul-tancy firm Conztanze, Ourmieres is also overseeing the roll-out of new revenue management, account-ing and departure control systems. “This has been a fantastic opportunity to reinvent ourselves as we move out of the Air France cocoon,” Ourmieres said. “We have done it now so that by the [2014] summer season we can take a more independent approach to the market.”
CityJet is following a similar path to that of bmi regional, which became independent when bmi’s mainline business was acquired by British Airways. “Last year was a bit of a haze of activity,” bmi regional CEO Cathal O’Connell told ATW. “We had to create all of our infrastructure from scratch. It was like need-ing an engine change in flight.”
O’Connell believes the secret to success as an independent regional lies in providing high-frequency links for the business market, taking passengers directly from A to C, avoiding a connecting hub. “The biggest challenge is making sure regional carri-ers recognize what they are. You have to respect the operating economics of regional aircraft and find ways
“I respect where Air France is coming from, but this is a bit like trying to get an elephant to ballet dance.”
—Patrick Edmond, e2consult principal.
Regional.indd 46 11/14/13 5:33 PM
atwonline.com | December 2013 | atw 47
✈ ✈ ✈F L E E T S
to compete with what your aircraft allows you to do that your competition can’t.” This gets to the heart of the regional model, serving niche business routes on a high-frequency, point-to-point basis when the total traffic cannot justify a larger aircraft. However, suc-cessfully identifying these routes is a challenge.
“That is the sweet spot for regionals and it is com-plimented by hub feed, which regionals have a big part in. Those are the focus niches the regionals have to chase. The days when regional carriers were isolated from low-cost carrier driven market realities are over. A regional carrier can’t charge €200 ($268) a seat on a market that is anywhere close to a low-cost carrier, charging fares from €30. Low-cost carriers have dura-bly set price expectations. The value proposition for regionals, which was always a little bit challenging, is getting even more challenging,” Edmond said.
While regionals may not be able to match a low-cost carrier fare, business travelers will pay a premium to avoid an overnight stay, but this does not work for a low frequency, high price service. “Getting home that evening is a real influencer,” said O’Connell.
Flybe restructuresDemand-led pricing pressure means regionals are under increasing pressure to optimize their cost base,
so could someone step in to become the regional version of easyJet or Ryanair, akin to Azul in Brazil, setting up a country-agnostic brand and gaining the scale needed to offer low regional fares? Regional heavyweight Flybe is the only one to have come close, but recently it has demonstrated that scale is not a magic remedy.
With its acquisition of BA Connect, coupled with an ambitious aircraft order book, Flybe became the poster child for regional low-cost operations. But this year it has been forced to cut 300 jobs, roll out a £35 million ($46.8 million) re-structuring plan, sell its Gatwick slots and overhaul its senior management team.
“Flybe has had a bit of a stumble more recently and I hope and believe they will get their act together,” Edmond said. “My personal take at the moment is that if a meteorite were to wipe out 20 aircraft on flight line at Southampton, they’d probably open the champagne. They are just a little bit over-dimensioned at the moment. They could subsequently sell tickets to the crater as a tourist attraction.”
Flybe has set up a franchise operation for Finnair. Likewise, Aer Arann is franchise flying for Aer Lin-gus. Europe’s majors seem to be increasingly looking for franchise partners where the regional is willing to take on some of the risk. “They need feed and this still hinges on a number of routes in Europe which only suit regional carriers,” O’Connell said. “The model I see is an evolution where the regional carri-ers continue to take commercial risk, but they have a close feeder relationship with the network carrier that mitigates that risk.”
“I was talking with one regional airline CEO and his comment was that the majors are desperate to have us feed them,” Edmond said. “That suggests to me there is scope for a little bit of negotiation on who takes the risk. If regionals are suffering and closing down, it’s a risk for the European network carriers because if they can’t get feed into their hubs, the giant sucking sound of passengers being sucked into the Middle East will just get louder.”
The fight for survival and cost containment is undoubtedly the common denominator linking all the changes the regional sector has seen over the last 12 months. It is undisputed that regionals play an essential role linking Europe’s regions and econo-mies, but they also have to be sustainable in today’s market place. “Unfortunately regional airlines have to operate in the world we have, rather than the world they would like it to be. Virtue tends not to be lucrative, otherwise social workers would be paid more than bankers,” Edmond noted.
Rob
Fin
lays
on
Regional.indd 47 11/14/13 5:33 PM
48 atw | December 2013 | atwonline.com
How is the turnaround progressing?We are half way through the restructuring plan and on track financially, in terms of reducing the losses. For the year ending March 31, 2013, we had a €13 million [operating] loss ($17.5 million), the previous year was -€30 million and the year before that was over -€35 million, so we are headed in the right direction. We have achieved this by losing 500 people out of a staff of 1,300, changing really outdated processes and procedures, and we’ve got a new pricing policy in place. The first half of this year is looking pretty good. We’ve got some big hurdles to jump in the future and we have every confidence that will be achieved.
What are the main items that still need to be addressed?We need to start looking at the fleet. Our leases begin to run out in 2016-19, so we’re in the process of de-ciding on our future network and that will determine the fleet. We have five A319s and five A320s at the
moment, but we’re talking to Airbus, Boeing, Bom-bardier and Embraer to see what the options are. At the moment the gauge is about right, but Malta and Air Malta have ambitions that might not necessarily be met by the type of aircraft we currently have. We are looking at larger aircraft because of distances and the sort of loads that we carry, but we are too small to have a mixed fleet. However, if we grow, which is naturally what we want to do, then at some point a mixed fleet becomes financially justifiable. I would say the range we’re looking at is 120- to 220-seat narrowbodies.
You operate 10 Airbus A320 family aircraft now. How many aircraft do you see in the future Air Malta fleet?If you take the total number of aircraft we’ll need in three or four years’ time, with the sort of network I think we can build as a company, then you’re look-ing at 18 to 21 aircraft. Our issue is that Malta is a very seasonal destination and you have to be very
interview: Peter Davies, CEO Air Malta
Fighting Back
When Peter Davies joined Air Malta in March 2011, the airline was technically insolvent and in dire need of a rescue loan, which the European Commission had just approved. Drawing on his experience as CEO of UK regional Air Southwest, Caribbean Airlines and SN Brussels Airlines, Davies has already made significant headway in narrowing Air Malta’s losses. by victoria moores
ATW DEC_INTERVIEW.indd 48 11/14/13 5:42 PM
atwonline.com | December 2013 | atw 49
conscious of what you do with those aircraft during the winter. I’ve got some good ideas about how you could use that equipment during that time.
What are the timelines for the order?We’ve been working on the network for some time now and we have started conversations with aircraft manufacturers over the last nine months, so we are some way into that process. Certainly by April next year we’ll be in a position to make a recommendation to the board in terms of the short- and long-term view. It’s then up to the shareholder—the govern-ment—to decide how they want to go. Certainly by this time next year the company should be in a position where it knows what it is doing and will have started, if not concluded, negotiations. Some of these airplanes are not available until 2016, when our first leases come up, so there’s a two-step approach. As far as I am concerned you would be looking at [deliveries in] 2017, 2018 onwards. If there’s a need to supple-ment our fleet with aircraft that can give us immedi-ate commercial advantage, then obviously we’ll take those. We really can’t afford to make a mistake, so we want to make sure we get it right and take our time.
How do you see Air Malta’s network developing?The EU-approved restructuring plan restricts how many ASKs we are allowed to operate until we break even. The message is simple: as soon as we get to profit, we are under our own control, and I can’t wait for that to happen. Then we will become ambitious in terms of new routes. We’ve just started flying to Algeria and we are looking at Egypt and Casablanca. I think there are some sub-Saharan Africa opportuni-ties, too. Huge volumes of commodities that go into Chinese manufacturing come out of West Africa. Malta could therefore be a fantastic distribution and
logistics point. It’s not just about going north to people who want to go on holiday. We also ought to be able to sell Malta as a country [to] middle-income India, middle-income China, and other parts of Asia. There are millions of people who have the opportu-nity to fly now, and therefore connections over the Middle East will become important for us, so we’re certainly looking at that.
Your contract ends in six months. What have been your greatest successes and disappoint-ments during your time with Air Malta?My own contract ends on March 31 and there’s a number of interesting opportunities on the horizon I’m looking at. I have achieved what I wanted to achieve, in terms of making sure we are on track with the business plan and financially. I am particularly pleased we have created a new management team involving Maltese people and established Air Malta more firmly in the international market. We have initiated a cultural revolu-tion in the company, which has gained some traction, but not enough as far as I am concerned. I still maintain that the biggest competitor to Air Malta is Air Malta. We need to get over this feeling internally that life owes us a living. This is a hard-nosed business and competitors are trying to get rid of us, so we have got to fight back.
If you were king of aviation for one day, what would you change?I would create a law that allows us to operate as a business, lifting the rules and regulations that apply to aviation but not to other industries like the electron-ics industry. I think too many people still see airlines as instruments for raising taxes. Aviation has now replaced the tobacco industry. We are now seen as the [industry on which taxes should be raised], instead of cigarette smokers.
“THe MessAge Is sIMple: As soon As We geT To profIT, We Are under our oWn conTrol, And I cAn’T WAIT for THAT To HAppen. ”
ATW DEC_INTERVIEW.indd 49 11/15/13 9:49 AM
A Penton Publication The Magazine of Global Airline Management www.atwonline.com November 2006ATW’s 2014 Classic
Airliner Calendar
www.atwonline.com
Order online now at www.ATWOnline.comOr complete the order form and mail or fax to:
Penton Media24653 Network PlaceChicago, IL 60673Fax: +1 913-514-3893
The ATW 2014 calendar features original photos, suitable for framing, of some of the world’s most fascinating classic aircraft including:
■ de Havilland DH-104 Dove Channel Airways
■ Avro York Dan-Air
■ Nord 262 Lake Central
■ 1049E Super Constellation Air India
■ Douglas DC-7 Spantax
■ McDonnell Douglas DC-9 Allegheny
■ Douglas C-54 Air France
■ British Aerospace 146 American
■ Boeing 377 Stratocruiser Transocean
■ Nihon Aircraft Manufacturing Company YS-11 ANA
■ Tupolev TU-104 Aeroflot
■ McDonnell Douglas DC-9-30 Southern Airways
■ Convair 600 Texas International
ADDITIONAL FEATURES INCLUDE:
■ Descriptive text and history for each photo■ Key industry dates■ Roll out and first flight dates
for historical aircraft■ Size: 14 x 10 (36 x 25cm)
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Classic Airliners 2014
ATW2014-Cal_v2.indd 10
April 2014SundAyMondAy
TueSdAyWedneSdAy
ThurSdAyFridAy
SATurdAy
12
34
567
89
1011
121314
1516
1718
192021
2223
2425
262728
2930
MArCH 2014S M T W T F S12 3 4 5 6 7 89 10 11 12 13 14 1516 17 18 19 20 21 2223 24 25 26 27 28 2930 31
MAy 2014S M T W T F S1 2 34 5 6 7 8 9 1011 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30 31
Speednews 2nd Annual Aerospace Manufacturing Conference, Charleston Place Hotel, Charleston, SC, April 1-2
Fokker 70 first flight 1993
Airbus A310 first flight 1982
Boeing 737 first flight 1967Boeing 777 rollout 1994
Armstrong Whitworth Apollo first flew 1949
Douglas DC-8 Super 63 first flight 1967
William e. Boeing buys the prototype DC-5, names it rover 1940
Airbus A380 first flight 2005deHavilland DH-106 Comet 4 first flight 1958
Speednews 12th Annual Aerospace & Defense Industry Suppliers Conference, The Jonathan
Club, Los Angeles, CA
Spantax DC-7 Photo: Harry Sievers collection In the words of transportation writer David P.
Morgan, the Douglas DC-7 and the latter versions
of the Lockheed Constellation were “Doyens of
the sky one moment, and dinosaurs the next.”
This was due to the fact that their key attributes
when new, in the form of superior speed and
range, were obviated by the jet aircraft that
entered widespread service only a few years after
these piston-powered types had come onto the
market. Since their economics were not suitable
for shorter-haul services, many DC-7s (and
Constellations) were either converted to freighters
or sold to secondary airlines for non-traditional
uses such as inclusive tour charters.Founded in 1959, Spantax (originally Spanish
Air Taxi) fit this category, and was a significant
participant in what became a burgeoning market
for package holidays in Spain, including trips
to the Canary Islands for residents of the UK
and other points in northern Europe. Beginning
with Douglas DC-3s, Spantax upgraded to larger
equipment, in the form of Douglas DC-6s and
DC-7s as its business grew. Interestingly, the
story of its first jet, the Convair 990, bore some
resemblance to that of the DC-7, in terms of not
lasting long in its primary intended service.EC-BSQ was a DC-7C delivered originally to
Belgium’s SABENA in 1956. It is seen here
in November 1970 at what is now known as
the EuroAirport Basel-Mulhouse-Freiburg.
Physically located in France, it is operated
by both the French and the Swiss, although
the terminal has separate sections for each
country. The security personnel at the left
(above the fire extinguisher) appear to be
giving the photographer a thorough inspection.
ATW2014-Cal_v2.indd 11
ANA
April 2014SundAyAyyAMondAyAyyA
67
1314
2021
22
2728
29
MArCH 2014S M T W T F S12 3 4 5 6 7 89 10 11 12 13 14 1516 17 18 19 20 21 2223 24 25 26 27 28 2930 31
MAy 2014Ay 2014y 2014AS M T W T F S1 2 34 5 6 7 8 9 1011 12 13 14 15 16 1718 19 20 21 22 23 2425 26 27 28 29 30 31
Speednews 2nd Annual Aerospace Manufacturing Conference, Charleston Place Hotel, Charleston, SC,
April 1-2Fokker 70 first flight 1993
Airbus A380 first flight 2005deHavilland DH-106 Comet 4 first flight 1958
SpeedAerospace & Defense Industry Suppliers Conference, The Jonathan
Club, Los Angeles, CA
5/9/13 4:56 PM
February 2014SundAy
MondAyTueSdAy
WedneSdAy ThurSdAyFridAy
SATurdAy
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28
Airbus A320-100 rollout 1987
Boeing B-247 first flight 1933
Tupolev TU-334 first flight
1999
Boeing 747-8 Freighter first
flight 2010
Boeing 747-100 first flight
1969
Boeing 737-700 first flight
1997
embraer e-190 rollout 2004
ATW Industry Achievement
Awards, Pan Pacific Hotel,
Singapore
Singapore Airshow
Feb. 11-16
Douglas DC-4 (C-54)
first flight 1942
Douglas XC-112A (DC-6)
first flight 1946
Airbus A310-200 rollout 1982
Boeing 757-200 first flight
1982
embraer e-170 first flight
2002Douglas DC-5 first flight 1939
McDonnell Douglas MD-90
first flight 1993
Airbus A320 first flight 1987
Lockheed L-10 electra
first flight 1934
McDonnell Douglas DC-9 first
flight 1965
Lake Central Nord 262
Photo by Roger Bentley
Following World War II, a new class of airlines,
the local service carriers, were certificated in
the US. Their main purpose was to bring airline
service to smaller cities, and, in the process,
to allow the trunk airlines to exit a number
of smaller points on their route systems by
transferring them to the local service airlines.
Each had a relatively exclusive geographic service
area that typically connected trunk carriers with
territories beyond their own route systems.
Lake Central, headquartered in Indianapolis,
Indiana, was the smallest of these carriers. As
an example of the type of service it provided,
LC was authorized to serve 14 points in Ohio
(not a particularly large state), including many
cities such as Findlay, Portsmouth and Zanesville
that have not seen scheduled airline service in
decades. As was the case with most of the new
carriers, their initial aircraft was the Douglas
DC-3, which was available in large quantities
following the massive production of the type for
the military during World War II.
As these carriers grew and matured, there was
a desire to replace the venerable “Three” with
more modern equipment with better economics.
One entrant in this was the French-built Nord
262, which Lake Central selected for its smaller
routes. N26211 is seen here at Akron-Canton in
April 1968, wearing the airline’s later livery; the
heart on the tail reflects Lake Central’s slogan
“The Airline with a Heart.” On July 1, 1968, LC
merged into Allegheny. The Nords then acquired
a unique purple livery, along with names (such as
“Claudette d’Allegheny”) reflecting their French
heritage.
JAnUAry 2014
S M T W T F S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31
MArCH 2014
S M T W T F S1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31
5/9/13 4:56 PMPlease send me ATW’s 2014 Classic Airliner Calendar (ID: ATWCAC1413)
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Calendar_Ad_2014_Ltr.indd 1 6/10/13 2:31 PMDEC13ATWpages.indd 50 11/14/2013 10:37:40 AM
TRENDSAircraft Values | 52 Deliveries | 53 Traffic | 54 TRENDS
atwonline.com | December 2013 | atw 51
Aircraft Data | 58 Deliveries | 59 Traffic | 60 TRENDS
US * 2013 2012 % chg
RPKs (mil.) 790,180 778,756 1.7
ASKs (mil.) 950,275 943,035 0.8
Pass. (000) 435,000 433,000 0.4
Pass. LF (%) 83.3 82.6 0.7
FTKs (mil.) 51,052 52,686 -3.1
* January-July. Source: US DOT BTS.
1. July . 2. June *Includes Regional operations. Source: ATW Research, direct airline reports.
EURoPE 2013 2012 % chg
RPKs (mil.) 668,139 650,574 2.7
ASKs (mil.) 828,109 815,067 1.6
Pass. (000) 280,537 275,847 1.7
Pass. LF (%) 80.7 79.1 0.9
FTKs (mil.) 24,501 24,283 0.9
Source: AEA
ASiA-PAciFic 2013 2012 % chg
RPKs (mil.) 606,421 578,676 4.8
ASKs (mil.) 771,729 740,607 4.2
Pass. (000) 163,496 154,983 5.5
Pass. LF (%) 78.6 78.1 0.5
FTKs (mil.) 43,242 43,984 -1.7
Source: AAPA
LATin AmERicA 2013 2012 % chg
RPKs (mil.) 181,110 169,042 7.1
ASKs (mil.) 234,392 221,199 6.0
Pass. (000) 118,495 111,530 6.2
Pass. LF (%) 77.3 76.4 0.8
FTKs (mil.) 3,703 3,555 4.2
Source: ALTA
WORLD AIRLINE TRAFFIC JANuARy-SEpTEmbER 2013
RANK AIRLINE RpKs (000)
1 United Airlines 278,283,650
2 Delta * 265,557,347
3 Air France KLm 192,941,000
4 AmR corp. 187,398,292
5 Emirates 1 155,954,721
6 Southwest Airlines 140,475,896
7 Lufthansa 131,697,000
8 china Southern Airlines 124,714,590
9 British Airways 110,344,000
10 Air china 1 106,659,200
11 china Eastern Airlines 1 91,233,380
12 US Airways 89,155,924
13 LATAm Airlines group 88,512,000
14 Qantas group 1 81,962,000
15 Air canada 77,981,794
16 cathay Pacific 1 77,939,709
17 Turkish Airlines 76,985,220
18 Singapore Airlines 71,465,800
19 JetBlue 48,108,000
20 Thai Airways 1 47,683,000
TOp 20 REpORTING AIRLINES SySTEm TRAFFIC/JANuARy-OCTObER 2013
1. January-September 2013. * Includes Regional operations. Source: ATW Research, direct airline reports.
AIRLINE INvOLuNTARy DbS* pER 10,000 pASS.
JAN.-SEpT. 2013 JAN.-SEpT. 2012
JetBlue 0.01 0.01
Virgin America 0.05 0.06
Hawaiian 0.17 0.18
Alaska 0.42 0.61
American 0.45 0.73
Delta 0.59 0.42
US Airways 0.63 0.73
Endeavor Air * 0.86
American Eagle 1.07 1.12
United 1.10 1.92
Southwest 1.19 0.87
Frontier 1.24 0.90
AirTran 1.28 0.83
ExpressJet 1.91 2.11
SkyWest 2.29 2.15
Mesa 2.67 2.49
Totals 0.92 0.98
* Denied Boardings. Source: US DOT
uS DENIED bOARDINGS 2013
Trends_December 2013.indd 51 11/15/13 10:28 AM
TRENDS
52 atw | December 2013 | atwonline.com
AIRCRAFT VALUES
Values assume half-life, half-time condition. * Current Market Value—Most likely trading price under current market, 2013=new conditions, rounded to nearest US$ million. ** Future Base Value—value in a balanced market, inflated at 1.5% p.a., rounded to nearest US$ million. Source: AVITAS, Inc.
Aircraft
Year Built
2013*
2018**
2023**
2028**
ATR 42-300 1992 $2.5 $1.1 $0.1 $0.0
ATR 42-500 2004 $6.8 $4.4 $2.9 $1.5
ATR 72-200 1992 $3.5 $1.5 $0.1 $0.0
ATR 72-500 2004 $8.9 $5.9 $3.9 $2.1
DHC-8-300 2000 $7.3 $4.3 $2.6 $1.0
DHC-8-Q400 2009 $14.0 $9.7 $6.7 $4.3
FBV @ 1.5% Inflation
Ranked by complaints per 100,000 passengers. Source: US DOT. * Endeavor Air, formerly Pinnacle Airlines, was ranked for the first time in January 2013.
US ConSUmER CompLAInTS SEpTEmbER 2013
0.0 0.5 1.0 1.5 2.0 2.5 3.0
FrontierUnited
AmericanUS Airways
Virgin AmericaSkyWest
American EagleJetBlue
HawaiianAirTran
Endeavor *MesaDelta
AlaskaExpressJetSouthwest
2013
2012
n.a.
11.27
mAnUFAC-TURER
TYpE oRdEREd bY ToTAL
AIRBUS A319 OHA CENTRE STREET AIRCRAFT HOLDCO
1
AIRBUS A320 EASYJET 6
AIRBUS A320 VIVAAEROBUS 52
AIRBUS A321 JETBLUE 35
AIRBUS A330 AIR CHINA 6
AIRBUS A330 CHINA EASTERN 7
AIRBUS A330 CHINA SOUTHERN 1
AIRBUS A330 HAINAN AIRLINES 2
AIRBUS A330 SAS 4
AIRBUS A350 JAPAN AIRLINES 31
AIRBUS A350 SAS 8
ATR ATR 42 NORDIC AVIATION CAPITAL 10
ATR ATR 72 NORDIC AVIATION CAPITAL 5
BOEING 737 AEROLINEAS ARGENTINAS 20
BOEING 737 BOEING BUSINESS JET 1
BOEING 737 EL AL 2
BOEING 737 UNDISCLOSED 42
BOEING 747 KOREAN AIR 5
BOEING 777 KOREAN AIR 6
BOEING 787 KOREAN AIR 1
BOEING 787 UNDISCLOSED 2
BOMBARDIER DHC8 LUXAIR 1
BOMBARDIER CS100 CDB LEASING 5
BOMBARDIER CS300 CDB LEASING 10
COMAC C919 INDUSTRIAL BANK FINAN-CIAL LEASING
20
EMBRAER E-195 AURIGNY AIRLINES 1
EMBRAER E-195 BELAVIA 2
VIKING DHC6 AIR SEYCHELLES 3
GRAND TOTAL 289
AIRCRAFT oRdERS oCTobER 2013
Source: AerData. Visit aerdata.com. IATA pASSEngER TRAFFIC gRowTh bY REgIon JAnUARY-SEpTEmbER 2013
RpK (%)
ASK (%)
pLF (%)
Africa 6.8 4.8 70.7
Asia Pacific 7.2 6.7 78.1
Europe 3.5 2.1 81.0
Latin America 6.1 4.8 77.7
Middle East 11.0 11.5 78.3
North America 2.0 1.5 83.8
Industry 5.0 4.3 80.1
Source: IATA
Trends_December 2013.indd 52 11/15/13 10:16 AM
TRENDS
atwonline.com | December 2013 | atw 53
AIRCRAFT DELIVERIESOCTOBER 2013
Source: AerData. Visit aerdata.com.
CURRENT OPERATOR TYPE MODEL ENGINE
DELTA 737 900ER CFM56-7B27EDELTA 737 900ER CFM56-7B27EDELTA 737 900ER CFM56-7B27EALL NIPPON AIRWAYS 737 800 CFM56-7B24/3AIR EUROPA 737 800 CFM56-7BSPICEJET 737 800 CFM56-7BGARUDA INDONESIA 737 800 CFM56-7BSHANGHAI AIRLINES 737 800 CFM56-7BTHAI LION AIR 737 900ER CFM56-7BTHAI LION AIR 737 900ER CFM56-7BCHINA SOUTHERN 737 800 CFM56-7BCHINA SOUTHERN 737 800 CFM56-7BJET AIRWAYS 737 800 CFM56-7B24ESHANDONG AIRLINES 737 800 CFM56-7BSHENZHEN AIRLINES 737 800 CFM56-7BHAINAN AIRLINES 737 800 CFM56-7BMALAYSIA AIRLINES 737 800 CFM56-7BQANTAS 737 800 CFM56-7B24EXIAMEN AIRLINES 737 800 CFM56-7BMALAYSIA AIRLINES 737 800 CFM56-7BFLYDUBAI 737 800 CFM56-7B27ECOPA 737 800 CFM56-7B26EAIR CHINA 737 700 CFM56-7BAEROFLOT 737 800 CFM56-7BOKAY AIRWAYS 737 800 CFM56-7BSKYMARK AIRLINES 737 800 CFM56-7BCHINA EASTERN 737 800 CFM56-7BAIR CHINA 737 800 CFM56-7BEL AL 737 900ER CFM56-7BALASKA AIRLINES 737 900ER CFM56-7B27EUTAIR 737 800 CFM56-7BUNITED AIRLINES 737 900ER CFM56-7BUNITED AIRLINES 737 900ER CFM56-7B27EALASKA AIRLINES 737 900ER CFM56-7B27ENIPPON CARGO AIRLINES 747 8F GEnx2B67BAIR ASTANA 767 300ER PW4060FEDEX 767 300F CF6-80C2B6FGARUDA INDONESIA 777 300ER GE90-115BL2GARUDA INDONESIA 777 300ER GE90-115BL2BRITISH AIRWAYS 777 300ER GE90-115BL2SAUDI ARABIAN 777 300ER GE90-115BL2THAI AIRWAYS Int'l. 777 300ER GE90-115BL2CATHAY PACIFIC AIRWAYS 777 300ER GE90-115BL2KENYA AIRWAYS 777 300ER GE90-115BL2EMIRATES 777 200F GE90-110B1ROYAL BRUNEI AIRLINES 787 8 Trent 1000ROYAL BRUNEI AIRLINES 787 8 Trent 1000CHINA SOUTHERN 787 8 GEnx-1B64CHINA SOUTHERN 787 8 GEnx-1B64AEROMEXICO 787 8 GEnx-1B70AEROMEXICO 787 8 GEnx-1B70AIR INDIA 787 8 GEnx-1B67QATAR AIRWAYS 787 8 GEnx-1B64LAN 787 8 Trent 1000-ACHINA EASTERN A319 100 V2527M-A5CORPORATE OWNER A319 100CJ CFM56-5B7/3AMERICAN AIRLINES A319 100 CFM56-5B6/3AMERICAN AIRLINES A319 100 CFM56-5B6/3CHINA WEST AIR A320 200 CFM56-5B4/3JETSTAR HONG KONG A320 200 V2527-A5AIR CHINA A320 200 CFM56-5B4/3JETSTAR HONG KONG A320 200 V2527-A5JETSTAR HONG KONG A320 200 V2527-A5BRITISH AIRWAYS A320 200 V2527-A5ETIHAD AIRWAYS A320 200 V2527-A5VOLARIS A320 200 V2527E-A5
CURRENT OPERATOR TYPE MODEL ENGINE
SILKAIR A320 200 V2527E-A5JETSTAR JAPAN A320 200 V2527-A5TIANJIN AIRLINES A320 200 CFM56-5B4/3LAN A320 200 CFM56-5B4/3AIR FRANCE A320 200 CFM56-5B4/3SPIRIT AIRLINES A320 200 V2527-A5TIGERAIR A320 200 V2527-A5THAI SMILE A320 200 V2527-A5INDIGO A320 200 V2527-A5GOAIR A320 200 CFM56-5B4/3GOAIR A320 200 CFM56-5B4/3THAI AIRASIA A320 200 CFM56-5B6/3JETSTAR ASIA A320 200 V2527-A5JETSTAR A320 200 V2527-A5IBERIA EXPRESS A320 200 CFM56-5B4/3LAN A320 200 CFM56-5B4/3ETIHAD AIRWAYS A320 200 V2527-A5VIETJET AIR A320 200 CFM56-5B4/3CHINA EASTERN A320 200 V2527-A5AIRASIA A320 200 CFM56-5B6/3THAI SMILE A320 200 V2527-A5INDIGO A320 200 V2527-A5CHINA SOUTHERN A320 200 V2527-A5JAZEERA AIRWAYS A320 200 CFM56-5B4/3CHINA EASTERN A321 200 V2533-A5ASIANA A321 200 V2533-A5UTAIR A321 200 CFM56-5B3/3JETBLUE A321 200 V2533-A5AEROFLOT A321 200 CFM56-5B3/3US AIRWAYS A321 200 V2533-A5US AIRWAYS A321 200 V2533-A5FINNAIR A321 200 V2533-A5EVA AIR A321 200 CFM56-5B3/3PHILIPPINE AIRLINES A321 200 V2533-A5PHILIPPINE AIRLINES A321 200 V2533-A5AVIANCA CARGO A330 200F Trent 772B-60SAUDI ARABIAN A330 300 Trent 772B-60US AIRWAYS A330 200 Trent 772B-60PHILIPPINE AIRLINES A330 300 Trent 772B-60DRAGONAIR A330 300 Trent 772B-60AIR CHINA A330 200 Trent 772C-60PHILIPPINE AIRLINES A330 300 Trent 772B-60CHINA EASTERN A330 200 Trent 772C-60BRITISH AIRWAYS A380 800 Trent 970-84THAI AIRWAYS Int'l. A380 800 Trent 970-84KOREAN AIR A380 800 GP7270EMIRATES A380 800 GP7270AZUL LINHAS AEREAS ATR7 600 PW127MWINGS AIR ATR7 600 PW127MFLYME ATR7 600 PW127MJET TIME ATR7 600 PW127MLIAT ATR7 600 PW127MAVIANCA ATR7 600 PW127MENDEAVOR AIR CRJ9 900 CF34-8C5ENDEAVOR AIR CRJ9 900 CF34-8C5ENDEAVOR AIR CRJ9 900 CF34-8C5MASWINGS DHC6 400 PT6A-34HORIZON AIR DHC8 400 PW150AWESTJET ENCORE DHC8 400 PW150ADONGHAI AIRLINES E135 135BJ AE 3007A2CORPORATE OWNER E135 135BJ AE 3007A2AIR CHARTER SCOTLAND E135 135BJ AE 3007A2REPUBLIC AIRLINES E175 200LR CF34-8EREPUBLIC AIRLINES E175 200LR CF34-8EREPUBLIC AIRLINES E175 200LR CF34-8EJETBLUE E190 100AR CF34-10E6
Trends_December 2013.indd 53 11/15/13 10:16 AM
TRENDS
54 atw | December 2013 | atwonline.com
Airline
Pass.(000)
% Chg.
RPks (000)
% Chg.
Load Factor%
FTks (000)
% Chg.
Jan. thru
AFRICAEl Al 5,906 -0.6 13,808,000 3.7 83.2 68,900 -2.0 Sept.Emirates 32,298 16.0 155,954,721 16.7 NA 7,639,430 12.9 Sept.Tunisair 2,875 -4.4 4,057,961 -7.8 70.2 NA NA Sept.
ASIA-PACIFICAir China 58,451 7.4 106,659,200 9.5 81.7 3,676,000 1.7 Sept.
Air New Zealand 8,736 -10.0 20,718,000 1.7 84.1 NA NA Sept.ANA 32,708 -0.8 47,267,664 5.0 66.0 NA NA Sept.China Southern Airlines 77,480 6.6 124,714,590 10.1 80.3 3,494,200 3.0 Oct.Japan Airlines 28,612 14.6 42,795,995 1.2 66.8 NA NA Sept.Malaysia Airlines 12,459 28.8 34,586,700 27.9 80.8 1,471,400 6.8 Sept.Qantas Group 35,830 1.9 81,962,000 -1.9 76.0 NA NA Sept.Silkair 2,763 2.6 4,452,400 6.4 69.3 NA NA Oct.Singapore Airlines 14,895 3.8 71,465,800 3.2 79.2 5,383,029 -5.4 Oct.
EuROPE
Adria Airways 894 2.9 933,434 -0.2 NA 1,024 -16.7 Oct.Aer Lingus 9,276 1.2 12,885,000 2.5 79.1 NA NA Oct.Airberlin 27,709 -5.8 42,378,300 -4.3 85.5 NA NA Oct.Air France KLM 66,245 1.2 192,941,000 2.2 84.2 8,348,000 -5.2 Oct.Austrian Airlines 9,643 -1.5 15,029,000 -2.3 78.9 NA NA Oct.British Airways 4 NA NA 110,344,000 3.4 81.9 3,825,000 -6.3 Oct.Brussels Airlines 4,998 1.0 8,293,830 5.5 70.0 139,886 11.0 Oct.
Croatia Airlines 1,589 -8.0 1,184,294 -8.2 69.3 1,326 -7.2 Oct.Finnair 7,921 6.4 21,260,800 7.0 80.6 740,100 -4.3 Oct.Iberia 4 NA NA 35,245,000 -17.0 79.7 817,000 -15.9 Oct.Lufthansa 65,254 1.2 131,697,000 2.5 79.6 NA NA Oct.Lufthansa Cargo NA NA NA NA NA 7,219,000 -0.8 Oct.SAS 22,848 1.0 28,276,659 5.0 74.3 4,661,731 11.0 Oct.SWISS 14,554 0.7 32,667,000 4.0 84.0 1,285,000 2.9 Oct.Turkish Airlines 40,597 24.0 76,985,220 23.7 79.6 NA NA Oct.utair 8,243 13.7 15,723,199 16.5 78.2 NA NA Oct.Vueling 4 NA NA 11,189,000 NA 81.8 NA NA Oct.
LATIN AMERICACopa Airlines NA NA 19,301,081 17.4 76.5 NA NA Oct.Gol NA NA 25,198,900 -9.3 68.2 NA NA Sept.Grupo Aeromexico 8,940 -0.4 20,269,000 4.1 73.4 NA NA Oct.LATAM Airlines Group 55,279 4.1 88,512,000 3.3 80.6 3,663,000 0.5 Oct.Volaris 7,337 21.8 11,867 18.2 83.2 NA NA Oct.
NORTh AMERICA
Air Canada NA NA 77,981,794 1.9 83.4 NA NA Oct.Alaska Airlines 16,536 6.8 35,209,747 7.8 86.3 NA NA Oct.Allegiant 5,950 5.8 9,017,517 11.7 89.1 NA NA Oct.AMR Corp. 1 91,153 0.9 187,398,292 1.6 82.8 2,187,795 2.2 Oct.Delta 3 138,768 -0.3 265,557,347 0.8 84.0 2,862,178 -1.9 Oct.Frontier Airlines 8,912 -1.0 13,217,299 -8.0 91.0 NA NA Oct.hawaiian Airlines 8,350 6.0 18,442,995 14.0 81.8 NA NA Oct.JetBlue 25,444 5.4 48,108,000 6.7 84.3 NA NA Oct.Republic Airways 26,755 4.0 26,935,332 -4.0 83.0 NA NA Oct.SkyWest Inc. 2 50,963 3.6 42,913,692 5.8 81.0 NA NA Oct.Southwest Airlines 90,205 -1.8 140,475,896 0.9 79.9 NA NA Oct.
Spirit Airlines NA NA 15,844,241 24.1 86.8 NA NA Oct.united Airlines 116,804 -1.5 278,283,650 -0.6 83.8 2,643,822 -12.3 Oct.uS Airways 47,485 4.6 89,155,924 5.3 85.2 NA NA Oct.WestJet NA NA 26,225,000 7.4 81.9 NA NA Oct.
AiRLine TRAFFiC BY ReGiOn
1. Combined American Eagle, Executive Airlines and American Connection. 2. Combined traffic for SkyWest Airlines, Atlantic Southeast Airlines and ExpressJet Airlines. 3. Includes Regional operations. 4. Subsidiary of IAG. To submit your airline traffic data to ATW, please contact Kathy Young at [email protected]. For more airline traffic, visit ATWOnline, Data & Research. Source: ATW Research and direct airline reports.
Trends_December 2013.indd 54 11/15/13 10:15 AM
TRENDS
atwonline.com | December 2013 | atw 55
Ranked by reports per 1,000 passengers. Source: US DOT. * Endeavor Air, formerly Pinnacle Airlines, was ranked for the first time in January 2013.
US MiShandled Baggage SepteMBer 2013
0 1 2 3 4 5 6
SkyWestAmerican Eagle
AirTranExpressJetSouthwest
MesaUnitedAlaska
HawaiianAmerican
US AirwaysFrontier
Endeavor *Delta
JetBlueVirgin America
2013
2012
n.a.
US OntiMe perfOrManceSepteMBer 2013
Ranked by % of arrivals ontime at all reported airports. Source: US DOT. * Formerly Pinnacle Airlines.
0 20 40 60 80 100
SouthwestFrontier
American EagleJetBlue
SkyWestExpressJetAmerican
MesaUnited
Virgin AmericaAirTranAlaska
US AirwaysEndeavor *
DeltaHawaiian
0.0
0.2
0.4
0.6
0.8
1.0
2013
2012
n.a.
SHARE IN WORLD INDEX
CTS/ GAL.
$/BBL $/MT INDEX VALUE
2000=100
VS. 1 WEEK
AGO
VS. 1 MONTH
AGO
VS. 1 YR.AGO
Jet Fuel Price 100% 285.2 119.8 944.1 327.5 -1.7 -3.3 -4.3
Asia & Oceania 22% 285.6 119.9 947.5 342.7 -3.7 -3.3 -3.2
Europe & CIS 28% 290.1 121.8 960.0 328.2 -1.9 -3.3 -4.0
Middle East & Africa 7% 282.5 118.7 936.2 354.4 -2.7 -3.0 -2.8
North America 39% 281.6 118.3 933.2 314.4 -0.3 -3.3 -5.2
Latin & Central America
4% 289.2 121.4 935.2 336.4 -1.0 -4.2 -5.0
Impact on the global airline industry's fuel bill this year:
New fuel price average for 2013 $124.3/b
Impact on 2013 fuel bill -$3 billion
Jet fUel price MOnitOrnOveMBer 8, 2013
Source: IATA
NOV. 4, 2013
NOV. 5, 2012
NOV. 4, 2011
NOV. 4, 2010
NOV. 4, 2009
NOV. 4, 2008
NOV. 5, 2007
NOV. 6, 2006
NOV. 4, 2005
NOV. 4,2004
NOV. 4,2003
2.779 2.888 3.067 2.346 2.02 2.14 2.641 1.722 1.766 1.319 0.764
SpOt caSh MarketS - a ten-year cOMpariSOn price per gallOn in US $
US Gulf Coast Kerosene-Type Jet Fuel Spot Price. Source: U.S. Energy Information Administration.
Trends_December 2013.indd 55 11/13/13 1:30 PM
CLASSIFIED
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Access the ATWOnline Maintenance Directory.
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28th AnnualSpeedNews Commercial Aviation Industry Suppliers Conference
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What was Qatar’s thinking behind joining a global alliance and selecting oneworld?We are convinced that the time is right to join a global alliance group and oneworld is clearly the best. We wanted to wait and be sure to select the best alliance for Qatar and the alliance for which Qatar could bring the most benefit. It is a win for oneworld, for Qatar and par-ticularly for our customers. It gives them a wider range of point-to-point connectivity. We wanted to be a part of a high-class alliance so when we were invited [to join oneworld] we very quickly accepted and we assured our oneworld partners that we will never fail them.
Is Qatar interested in ordering the Boeing 777X?The answer is X. We have to wait for when the time is
right. We will place an order [at the Dubai Air Show in November], but I won’t tell you what. What about Qatar’s interest in the Boeing 787-10, the largest version of the Dreamliner?We are not interested. The size and economics of the -10 are very similar to the [Airbus] A350-9, plus it sits slightly over.
Qatar is the launch customer for the Airbus A350 with 80 A350s on order—43 -900s and 37 -1000s. How confident are you on the first delivery happening next year?The first A350 is contractually scheduled to be delivered in the second half of 2014. I think [Airbus] will surely
interview: Akbar Al Baker, CEO Qatar Airways
Team PlayerQatar Airways became the 13th airline to join oneworld in October, making it the first of the major Gulf carriers to join a global alliance. In a signing ceremony in Doha, Qatar Airways’ CEO Akbar Al Baker said oneworld membership was a win for the alliance, for Qatar and for the carrier’s customers.
Qatar, which is just 16 years old, adds 21 new cities to oneworld, bringing the alliance’s number of destinations to more than 900. It will increase oneworld’s total RPKs by 3.3% and RPKs in the Middle East region by 90%.
British Airways was the sponsor for Qatar’s membership and the induction process was completed within one year, the quickest ever. IAG CEO Willie Walsh said Qatar’s membership was “without question the most significant and positive event in oneworld for a long time.”
Qatar’s membership comes at an interesting time for oneworld and the major Gulf carriers. Qantas, a oneworld founding member, has formed a five-year alliance with Emirates. Airberlin joined oneworld March 2012 and has a strategic alliance with Etihad, which has a 29% stake in the German carrier.
Karen Walker attended the oneworld event and recorded key comments by Al Baker to a group of journalists, delivering his unique combination of shrewd observation and sharp wit.
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deliver it at that time. They don’t have any lithium bat-teries on their plane.
The first A380 is scheduled to be delivered in April 2014.
Do you see more partnerships between [British Airways parent] IAG and Qatar?The alliance is exactly about serving its partners so that we complement each other and serve each other’s pas-sengers and this will provide a huge expansion to the alliance.
What is your observation on Emirates forging a five-year alliance with oneworld founding mem-ber Qantas and the possible implications?You never know. Maybe Emirates will one day join oneworld.
What are your views on the China market?China is going to be the biggest aviation market in the world and also the largest economy in the world. All airlines look at China as a strategic region and so does oneworld and Qatar. Chinese tourists are coming to Qatar in a big way and the numbers are growing. Our government has a very strong strategy to grow tourism in Qatar.
Is Qatar concerned about low-cost carrier competition?You can see what happened to [Japan’s] AirAsia X; they were very upbeat but they didn’t take off. I think the low-cost carrier model on long-haul does not work and even for many short-haul markets it does not work. Long-haul LCCs do not work because the costs to oper-ate are higher and you need the yield. You have to pack people in like [in] a sardine can.
Does Qatar expect other Gulf carriers to join global alliances?There will be alliances knocking on doors of the Gulf carriers, but they have missed the best one. People who first were shunning us now want us, but I cannot sleep in the same bed with two wives. We have a very close relationship with Emirates and we interline with Etihad.
So we have many synergies and we can work as a team. But we also compete. It’s not an issue for us at all [what Emirates and Etihad do]. This is a global industry and you cannot isolate pockets of it. There is a saying: “If you cannot beat them, join them.”
Is the market large enough for three Gulf hubs and all its airline players?The world population is growing and the middle-class populations are growing in places like India, Brazil and China. I was discounted when I relaunched Qatar in 1997, and one CEO said he had no time for an airline that had a goat for its logo. But that just showed his igno-rance because our logo is the most beautiful antelope and we have outstripped him big time. There is room for all.
What about the rumors that you may soon retire as Qatar CEO?I am a soldier of my government and as long as my ruler wants me to be here, I will be. There are people who would like Qatar Airways to disappear by spreading these rumors.
Is Qatar Airways profitable?We have always been profitable as a Group, and as an airline we have been profitable for three years now.
What about the timing for an IPO?We are delaying the IPO until our growth strategy is delivered.
In 2014, Qatar Airways will host the IATA AGM in Doha. Are there particular issues you would like to see focused on at that meeting?I am on the board of governors of IATA now and we have joined oneworld. I used to have to shout to be heard when I was on the outside, but now I will raise my issues internally. But at the AGM, we would like carriers that are part of IATA to stop criticizing other airlines and concentrate instead on making our business strategies as an industry. It’s about efficiencies and inefficiencies; it’s not about Gulf carriers.
“ThErE WIll BE AllIAnCEs knOCkInG On
DOOrs Of ThE Gulf CArrIErs, BuT ThEy
hAvE MIssED ThE BEsT OnE.”
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