U.S. Remains Committed To Open Skies Despite Calls To Limit Access

WASHINGTON—The U.S. government is not wavering from its open skies policy and will negotiate open skies deals with any friendly country that is interested, despite calls for the government to roll back liberalization in order to protect the U.S. airline industry, a senior State Dept. official said.

The U.S. government has no plans to change its policy, Thomas Engle, deputy assistant secretary of State for transportation affairs, said at the Airports Council International-North America international aviation issues seminar. Since the first open skies treaty was struck with the Netherlands in 1992, the U.S. has signed open skies agreements with 114 countries, including the EU. 

This has resulted in explosive growth of travel and tourism, up 68% since the first deal and responsible now for 2.8% of U.S. gross domestic product. In 1995, 19 million U.S. citizens traveled abroad, versus 29 million last year. “None of this would have happened without open skies,” Engle said. “It remains U.S. policy to pursue open skies.”

Organized labor and several legacy carriers on both sides of the Atlantic are pushing for the U.S. and the EU to limit some liberalizations offered by open skies, and rather opt for what the European Cockpit Association (ECA) and other groups call “Fair Skies.” This would allow governments to limit some traffic rights to carriers thought to benefit from unfair state subsidies, a proposal aimed squarely at the three big Persian Gulf carriers: Emirates, Etihad Airways and Qatar Airways.

The rise of these Middle Eastern airlines is among the “unintended consequences” of liberalization, the ECA said, a position echoed by the Air Line Pilots Association (ALPA) and several European and U.S. carriers. The Gulf carriers enjoy state subsidies, including having airport infrastructure built for them, that create “insurmountable competition” for U.S. carriers, Russell Bailey, ALPA senior attorney, said. 

Moreover, Gulf carriers—among others—benefit from lower-than-market financing for aircraft, both from Airbus and Boeing, thanks to export-credit agency financing from the Export-Import Bank of the U.S. and European agencies, labor and legacy airlines say. In fact, U.S. carriers have had to scale back some routes—including to India—due to this and other competitive advantages, Bailey said.

The cargo industry has been among the main beneficiaries of open skies, Cargo Airlines Association CEO Stephen Alterman added. “We absolutely need open skies,” he said. “We don’t want protectionism and we don’t want to pull back from open skies agreements.” Alterman warned that rolling back open skies would bring the cargo airline industry to its knees and harm U.S. trade and competitiveness.

Allowing governments to “unilaterally” limit traffic rights based on perceived unfair competition is an “absolutely horrible, dangerous and ridiculous idea,” said John Byerly, a former State Dept. official during whose tenure dozens of open skies agreements—including with the EU—were negotiated. Introducing “fair skies” provisions would undermine open skies and could allow other countries to retaliate by also limiting traffic rights. This would undo the last two decades’ gains, Byerly said.

Moreover, open skies deals are a necessary counterbalance to prevailing trends in the airline industry. With the consolidation of the U.S. industry into three major carriers—and the global industry into three major alliances—open skies deals allow for new entrants to challenge legacy carriers for market share. Consolidation has been good for the industry, Byerly said, but, “what is worrisome is when these carriers try to lobby governments to roll back access.”

Woman gives birth aboard airliner

LOS ANGELES — A Southwest Airlines flight landed in Los Angeles with one more passenger than when it took off.

A passenger gave birth shortly after Flight 623 took off from San Francisco on Tuesday and the Phoenix-bound jet diverted to Los Angeles International Airport.

The woman was assisted by the flight crew and a doctor and nurse who were aboard, airline spokeswoman Emily Samuels said. She said hopefully the airline has a new customer for life.

Paramedics boarded the aircraft and the mother and newborn, whose names have not been released, were taken to a hospital in good condition, Los Angeles Fire Department spokesman Erik Scott said.

The aircraft was taken out of service for cleaning and the other passengers went on to Phoenix aboard another plane, arriving more than two hours behind schedule.

Passenger Julie Dafoe said she and Kurt Reed were sitting next to the woman.

"One of the nurses that helped she said she was like walking around pacing in the airport so they were thinking she was having contractions," Dafoe told Phoenix TV station KTVK.

"All of a sudden I heard a baby cry like a gurgling sound, like a baby that had too much milk or whatever and I'm like 'There's no babies on this flight,'" Reed said.

Passengers said they had heard the call for a doctor, but nothing about what the medical emergency was.

"The captain announced congratulations for the arrival of this new baby boy," another passenger Aarti Shahani told KTVK. "So we all started applauding, but it was confusing because we thought someone was going to die not be born."

China will need over 5,300 new passenger aircraft and freighters from 2014 to 2033

Airbus forecasts that China will need over 5,300 new passenger aircraft and freighters from 2014 to 2033, with a total market value of $820 billion. It represents 17 percent of the world total demand for over 31,000 new aircraft in the next 20 years.

According to Airbus’ 2014-2033 Global Market Forecast, new deliveries of passenger and freight aircraft for China will be 5,363 over the next 20 years, including 3,567 single aisle aircraft, 1,477 twin-aisles and 319 very large aircraft. 

China will become the leading country for passenger air traffic, for both domestic and international markets as the passenger traffic in China will grow well above the world average.

Domestic air traffic in China will become the world’s number one within 10 years. China will overtake the United States of America in 2023, in terms of the number of passengers and in 2027, in terms of RPK (Revenue Passenger Kilometer). In the next 20 years, the forecast average annual growth rate for the domestic Chinese market is 7.1 per cent but will grow even faster over the next 10 years at 8.3 percent on average per year. By 2033, the domestic Chinese market will remain the largest flow, representing 11.9 percent of world traffic in terms of RPK.

During the period between 2013 and 2023, the average annual growth rate for international traffic from/to mainland China will be 8.1 percent. Four out of the 20 largest flows (RPK) will be from/to PRC. The average annual growth rate for markets between emerging Asian countries and PRC is 7.5 percent, for routes between PRC and the USA is 6.6 percent, while the routes between Western Europe and PRC is 5.6 percent.

“Domestic passenger traffic in Mainland China has more than quadrupled over the last 10 years, and it will become the world’s number one aviation market within the next 10 years,” said John Leahy, Airbus Chief Operating Officer Customers. “Airbus’ share of the in-service fleet of aircraft over 100 seats on the Chinese mainland has reached 50 percent in 2013. In the next 20 years, the greatest demand for passenger aircraft will come from China.” he added.

Drivers of China’s dynamic air transport growth include the country’s long-term economic development. The average annual economic growth in China is forecast at 7.4 per cent between 2013 and 2023. China will become the world’s biggest economy in 2023, with its GDP accounting for 19 per cent of the world’s total.

The urbanization of China is one of the major driving forces for the country’s economic growth. The urban population in China’s mainland was 711 million in 2013, representing 54 percent of the total population. The urban population will grow to 1.014 million in 2033, representing 71 percent of the population.

Average wages in China have increased five-fold in the past decade and they will continue to rise in the years ahead and fuel higher levels of disposable income and private consumption, which is expected to account for 41 percent of Chinese GDP in 2023.

“Airbus has the most complete product line from 100 to over 500 seats and we will contribute to the long-term sustainable development of China’s air transportation by providing Chinese airlines with the right aircraft at the right moment and the strongest support” Leahy said.

EASA Certifies Piaggio Avanti EVO

   EASA has certified the Piaggio Aerospace Avanti EVO after an extensive development and test program carried out under the supervision of the Italian National Civil Aviation Agency , ENAC, on behalf of EASA. US certification from the FAA is expected within the next few weeks as well as the Indian Certification as the first two Avanti EVO aircraft will be delivered to Indian customers.

“The EASA certification for our Avanti EVO marks a red letter day and demonstrates Piaggio Aerospace commitment to business aviation," said Carlo Logli, Chief Executive Officer of Piaggio Aerospace. "The Avanti, which already is an icon for safe, efficiency, and comfortable travel has evolved with improved performance, comfort, reduced emissions and has extended its range. The Avanti EVO is an intelligent solution for business travelers, blending the very best of Italian style and the most advanced aerodynamic concepts giving operators and passengers more efficiency than ever before."

The EVO has a number of significant modifications, approved by EASA , that are intended to improve the Avanti design to boost efficiency, reduce operating costs, provide greater levels of comfort for passengers, and finally be more environmentally friendly.

Among those modifications are:

• A Low Noise power plant where the PT6-66B turbines are fitted with patented exhaust stacks and Hartzell low rpm counter-rotating 5-blades scimitar propellers to reduce community noise at takeoff (minus 3dB(A)- 50%) and fly over (minus 5 dB(A) - 68% ) making the Avanti EVO a better neighbor;
• An innovative combination of Main Wing winglets coupled with new Front Wing wingtips to improve the already sophisticated Avanti aerodynamics and strengthen cruise and climb performance: max cruise range is further extended to 1770 nm (+3%) and climbing to FL 350 is faster by 10%
• The more efficient wing combination increase the service ceiling to FL410, equal to the certified ceiling, which further improves the EVO margin over the competition as the faster and higher flying turboprop on the market. This design improves low speed performance, reducing landing distance by 5% (3300 ft) and take off distance by 2% ( 3190 ft)
• A new higher comfort standard for passenger and crew with a whisper-like internal noise with further reduction of 1 dB(A) (i.e. -20%) thanks to the low noise power plant, a digitally controlled two zone environmental control system for maximum comfort and passenger control and all-new Italian style seating experience with VIP seats developed by design specialists Iacobucci HF and finished with top class leather by luxury outfitters Poltrona Frau.

The Avanti EVO design will shortly include anti-skid braking, new low-maintenance landing gear, new digital steering, to both improve performance, reliability and cut maintenance requirements.

Indian aviation

The Indian government has acknowledged problems in the aviation sector this week by stating: “Kingfisher is crashing and right now SpiceJet seems to be giving us harder times as far as airlines are concerned. We have somehow restricted the growth of airlines in the country. We have developed regulations that do not allow Indians to perform. We have to work ahead in this direction,” Minister for Civil Aviation Ashok Gajapathi Raju said as Air India was “selling off” land to Navratna company NBCC in what was actually a non-binding/non-exclusive  MOU. It is hoped the MOU will lead to the identifying and sale of land in Chennai and Vasant Kunj in Delhi that Air India owns.

SpiceJet is being helped greatly by lower fuel costs but after delaying the salaries of its employees by a few days, the airline now has India’s airport authority putting the airline on cash-and-carry mode at airports with the carrier required to pay upfront for the use of facilities from today. This is a big blow to the business but a move that should protect leased assets from the claws of the AAI as happened with Kingfisher aircraft should the worst happen to SpiceJet. Even so the move by the AAI will be seen as a serious blow to the fortunes of SpiceJet as it no doubt means that the AAI credit lines already run-up by SpiceJet have got out of hand. We must now look to see if services will be affected by this move. If they are then cashflow problems are indeed coming to a head at SpiceJet, but of course on the flip-side if services are unaffected then the airline is surviving on forward bookings that are providing immediate cashflow to allow aircraft to fly as Jet Airways managed when it was put on cash-and-carry by the AAI some time ago.

As lessors take back their assets from SpiceJet as they go in for maintenance, the airline is contracting rapidly. In November 2014 cancellations have gone from 40 a day to some 68 per day today, which one hopes might actually improve the airline’s ability to turn a profit.

But consider this: as Indian taxes on fuel reduce and fuel prices before tax tumble one wonders if SpiceJet is not a very good investment option for anyone aiming to gain a serious foothold in the Indian market?

2014 saw the launch of AirCosta and AirAsia India and 2015 will see Air Pegasus, Air One, Vistara, Flyeasy, Premier Airways in the Indian domestic market and one wonders if the passengers will come out to fill these aircraft at a profit to their operators. But as these airline launch, the Indian government is looking to offload Air India – Its panel for getting this off the ground is close to completion with Deepak Parekh, chairman of India’s oldest mortgage lender; E. Sreedharan, former chairman of Delhi Metro Rail Corp.; M. Damodaran, former head of the Securities and Exchange Board of India (Sebi), Naresh Chandra and former Reserve Bank of India (RBI) governor Y.V. Reddy all named on the committee that needs to formulate a report on what the government should do with the airline by March 2015.

As this panel gets going Air India is considering leasing at least 14 A320neo aircraft. The aircraft leasing committee of Air India is evaluating options and will RFP shortly, Air India hopes to lease the A320neo aircraft with the earliest possible delivery schedule with a delivery schedule from 2015-2018.

But as fuel prices dip, Air India might wish to consider A320ceo aircraft…..Indeed as oil prices fall, Singapore Airlines is starting to look like it will post a serious hedging loss as it is hedged at an average of $116 a barrel of jet fuel for 65.3% of requirement in the six months to March 2015, when spot market rates are about $85. Will they move to unwind their contracts?

Staff levels at Ethiopian Airlines and FastJet

     In this latest post in the Ethiopian Airlines and FastJet series, the staff levels of these respective airlines will be discussed. As already shown in previous articles, labour costs in Africa are low and it is interesting to see if this also has an influence on the amount of staff employed by African airlines per 10,000 passengers and per aircraft. Of course it has to be taken into account that airlines have different levels of outsourcing influencing the total staff numbers. Previous articles on Ethiopian Airlines and FastJet in relation to the ‘Airline Management’ courses at Özyeğin University (Istanbul, Turkey) can be found here.

  

Ethiopian Airlines employed 6,559 people in June 2012 while operating 48 aircraft that year. The Eastern African airline transported a total of 4.64 million passengers in 2012. That means that Ethiopian Airlines had 14.14 employees per 10,000 passengers and 136.65 per aircraft in its fleet. To understand these numbers it is also important to know that in Ethiopia, the airline does their own maintenance & engineering, catering and ground handling, besides the core flight and ground operations. The fleet and staff numbers also include the cargo division of the airline, which means that staff per 10,000 passengers is a bit higher than in reality.

Data for 2013 is incomplete, but Ethiopian Airlines had a fleet of about 55 aircraft that year and 7,642 employees, transporting 5.23 million passengers. Taking into account that the fleet number is an average towards the year-end, that shows that there is a small increase in staff per 10,000 employees (14.61) and per aircraft (138.95). Data for 2014 is not available yet, but with a fleet of already 72 aircraft, the number of staff must have increased beyond 8,500 if the same level of employees per passengers and aircraft is maintained. Especially the long haul fleet has grown significantly over the past two years, mainly due to the introduction of the Boeing 787 of which the African airline already operates 10. But also the fleet of Bombardier Q400’s and Boeing 737’s has been expanded.

The distribution of employees for the largest departments can be seen in the graph below, showing that ‘marketing & sales’ and ‘maintenance & engineering’ are the two main departments in terms of number of employees.

 When we look at FastJet, this is just a very small airline which had 3 aircraft in its fleet in 2013. It transported only 370,000 passengers with a total of 433 employees. That comes down to 11.70 employees per 10,000 passengers and 144.33 per aircraft. Also for FastJet the breakdown of employees per department can be seen below, showing that ‘sales & marketing’ and ‘flight crew’  are the two main departments in terms of employees. In this case both cockpit and cabin crew are combined in ‘Flight Crew’. This category is responsible for 30% of the total number of staff, while at Ethiopian Airlines this is just 18%. This can be explained through the importance of primary and secondary activities. For example the maintenance department of Ethiopian Airlines which does most of its maintenance in house and is responsible for 28% of the employees compared to just 7% at FastJet which only does its line and base maintenance in-house and has a single fleet type.

When comparing the numbers of Ethiopian Airlines and FastJet, we see that FastJet has less staff per 10,000 passengers (11.70 versus 14.14). Though FastJet has more staff per aircraft (144.33 versus 136.65), but this can be explained because of the very small fleet of FastJet. Departments such as administration, management and marketing and sales tend to have a large number of employees per aircraft compared to larger airlines, but will experience a lower growth when expanding the fleet compared to flight crew, maintenance and flight operations.

The lower number of staff per 10,000 passengers is more interesting. FastJet as a low-cost carrier focusses more on its core activities and outsources processes such as ground handling and catering (which is only a buy-on-board offer). But also its own staff has to achieve a higher productivity and flexibility. Still the number of 11.70 is high and also the 14.14 of Ethiopian Airlines seems to be high, even for a full service airline. When we compare with for example easyJet (see graph below), there is a huge difference. Still Ethiopian Airlines is a profitable airline. This can be explained by the extremely low labor costs in Africa compared to western Europe. Ethiopian Airlines had only slightly more than US$ 110 million staff costs (in 2012) and FastJet US$ 12 million (2013). In comparison, Brussels Airlines (Belgium) with only 3,500 employees (compared to more than 6,500 at Ethiopian Airlines) had labor costs of almost 220 million US Dollar in 2013. That’s double the cost for almost half the amount of employees. This makes that African airlines push less for higher productivity and flexibility because employees are so cheap.

 Ethiopian Airlines (2011/2012) and FastJet (2013) annual reports

Aviation Industry Updates

Aviation Industry Updates – Week 40

Date: October 5, 2014 Author: MaximRoelen

After a quiet period on this website, I will make sure frequent new additions will be made in the future. Part of this commitment is a returning item with various small new features concerning the aviation industry in general. This will complement more extensive news articles and analyses, press releases and a new item concerning my four month stay in Istanbul, more information on the latest will follow soon. – This week includes first A350 for Qatar Airways, first 777-300ER’s for China Eastern and China Airlines, Boeing increases 737 production and more.

Adria Airways to phase out Bombardier CRJ-200’s

CEO Mark Anzur confirmed that Adria Airways plans to operate its final scheduled flights with the Bombardier CRJ-200 in March 2015. One of the two remaining aircraft will be used for charter operations afterwards, while the other one will be scrapped. The Slovenian airline will replace the aircraft with additional CRJ-900’s of which the airline already operates six. The CRJ-900 has, depending on the configuration, 84 or 86 seats compared to just 48 in the CRJ-200’s. This is part of Adria’s strategy to operate less frequencies with bigger aircraft, this enables them to offer lower, more competitive prices. Adria will also wet-lease an extra Airbus A320 in 2015 and expects to add five to six aircraft to its fleet by 2016 with aircraft potentially bigger than the A320 (180 seats).

Boeing will increase 737 production to 52 per month in 2018

Boeing announced its plans to further increase monthly 737 production to 52 in 2018, that brings the yearly delivery target to 624 per year. Boeing already announced that it would increase production from the current 42 per month to 47 in 2017, coinciding with the 737MAX introduction in the third quarter of that year. In 2015 Boeing will launch a third 737 final assembly line in Renton (Washington State, USA) to support assembly of the 737MAX test fleet which will start halfway through 2015. The current generation of 737’s, the 737NG, will be produced until the second quarter of 2019 with the last delivery to Ryanair. When all three available production lines will run at maximum capacity, Boeing could produce up to 63 737’s per month in the future. The aircraft manufacturer currently holds a backlog of 4,000 737NG and 737MAX aircraft. — Flightglobal –

Xiamen Airlines considers Nice, France

Chinese company Xiamen Airlines considers launching flights to Nice (France) as its first long haul route, later this year. In September Xiamen government functionaries paid a visit to Europe. The new route will probably be operated by the new Boeing 787-8, of which Xiamen Airlines received the first one in late August. It would be only the second European destination served from Xiamen, in addition to the 3-weekly flights to Amsterdam, operated by KLM Royal Dutch Airlines, this route is operated by Boeing 777-200ER aircraft. — CH-Aviation –

China Airlines and China Eastern take delivery of their first Boeing 777-300ER

In late September China Eastern took delivery of its first of twenty Boeing 777-300ER’s, in a new paint scheme. The Chinese airline will use the new aircraft on routes to North America, starting with Shanghai (Pudong) to New York (JFK) on November 15th, replacing Airbus A340-600 aircraft. The new 777’s are fitted with six First Class suites, 52 Business Class seats (1-2-1 configuration) and 258 Economy seats (3-4-3 configuration). This 777-300ER was also the first aircraft on which China Eastern introduced its new


 On 3 October, China Airlines (Taiwan) celebrated delivery of its first of ten 777-300ER’s. The airline launches 777-300ER operations to Hong Kong this month and will later introduce the type on North American routes such as Los Angeles, San Francisco and New York (JFK). The new type is fitted with 40 Business Class seats, 62 Premium Economy seats, 30 Economy Family Couch seats and 226 regular Economy Class seats. The Family Couch seats are a version of the Skycouch seats introduced by Air New Zealand, also on the 777-300ER. — China Airlines/Boeing –

Alitalia retired Air One brand

Part of the new Alitalia, after the strategic deal with Etihad Airways, is the closure of Air One, which happened on September 30th. Air One was once the second largest airline in Italy, when it merged with Alitalia in early 2009, part of a deal to save the biggest Italian carrier. Air One was transformed into a low-cost subsidiary as Air One “Smart Carrier”, operating 10 Airbus A320 aircraft with 180 seats. Air One had bases at Milan-Malpensa, Venice Marco Polo, Catania, Palermo, Pisa and Verona. By the end of October, Alitalia will resume several Air One routes with Alitalia-branded aircraft. — Alitalia –

Air China takes delivery of first Boeing 747-8i

After Lufthansa, Air China is only the second airline to take delivery of the latest passenger version of the iconic Boeing 747. The new 747’s are fitted with a total of 365 seats, 12 in First Class, 54 in Business Class and 299 Economy Class seats. On October 26 the first of seven 747-8i’s will start operating from Beijing Capital (PEK) to Guangzhou and Shanghai Hongqiao, followed by Chengdu in December. International flights will begin in early January, flying daily between Beijing and Frankfurt (Germany). — Air China –

More revenue for easyJet thanks to Air France strike and expects higher profit

While Air France lost tens of millions due to a two-week pilot strike, easyJet received 6.4 million Euro, or 5 million Pound of additional revenue thanks to this strike. Combined with lower fuel costs and beneficial currency effects, this is one of the reasons why easyJet now expects a higher profit for the financial year which ended on September 30, the British low-cost airline now expects between 575 and 580 million Pounds of profit (EBT) compared to 545 to 570 million Pounds before. EasyJet will present its annual results on November 4. — easyJet –

Cimber will cease operations from April 2015

Danish ACMI operator Cimber will cease to exist as from April 2015 as SAS Scandinavian Airlines decided to terminate its ACMI contract with the carrier. Cimber wet-leases five Bombardier CRJ-200’s and one ATR72 to SAS, the only customer and foundation of Cimber’s existence. Cimber was born from the ashes of low-cost airline Cimber Sterling in May 2012. 150 jobs will be lost, though the management is looking for alternatives for the company and its staff, the future doesn’t look bright. Cimber experiences the same fate as Contact Air (2012) and Augsburg Airways (2013) when Lufthansa stopped its wet-lease contracts with these operators. Conact Air was taken over by OLT Express Germany, but that company ceased to exist only a few months later in January 2013. — Cimber –

Airbus rolls out first delivery A350-900 for Qatar Airways

Airbus unveiled the first A350-900 (MSN006) for its launch customer Qatar Airways in Toulouse (France). Qatar Airways expects to take delivery of its first A350 XWB in December 2014. Airbus recently received Type Certification from EASA for its newest aircraft type, powered by Rolls Royce XWB engines. Qatar Airways and Airbus are now working closely together towards delivery, finishing the cabin interior and executing ground and flight tests. Airbus currently holds 750 orders from 39 customers for the A350XWB, competing with the 787 and 777(X) of Boeing. — Airbus –

JAL Express merged with JAL Japan Airlines

JAL Express was a fully owned subsidiary of JAL, but is now fully integrated in its parent company since October 1. It was decided during a directors meeting in March 2014 that JAL Express would be integrated in JAL in the form of a simplified merger, with JAL absorbing JAL Express’ assets and liabilities. JAL took this decision to stabilise its domestic network, having better control over its capacity and product offer. JAL Express operated 41 Boeing 737-800 aircraft on its domestic network as well as under wet-lease operation for parent company JAL. All aircraft will be repainted by 2016 — JAL Japan Airlines –