May
03

Japan Airlines is bringing the dream to Sydney.

 

Pushing ahead with it’s 787 expansion, Japan Airlines will be the first international airline to introduce Boeing 787 services to Sydney. Operating the daily JL771/772 service from Tokyo Narita, the Boeing 787-8 will replace the Boeing 777 currently operated from December 1.

Three months after the Boeing 787 Dreamliner was grounded in late-January, the aircraft and programme are back in the air. With safety fixes for the aircraft’s battery system approved by the Federal Aviation Administration, airlines are bursting with renewed confidence in the besieged programme and planning the aircraft’s re-entry into service on routes around the globe.

Both Japan’s All Nippon Airlines (ANA) and JAL each suffered separate fire incidents in the 787′s lithium-ion battery, and are now working to restore the Japanese public’s confidence in the aircraft before they resume services on June 1. Over the next few weeks both carriers plan to undertake more than 200 test flights for pilot training and battery system verification demonstrating to the public the safety of the aircraft.

With the arrival of the 787 into the Australian market imminent, airlines will soon have a host of new operational opportunities into the country. Initially for JAL, the substantial product upgrade, but capacity downgrade of the 787 reduces available seat capacity on the Tokyo – Sydney route by 24%; instantly improving Qantas capacity share and competitiveness on a market that has struggled since its 1997 peak.  However, the economics of the 787-8 provides the potential to introduce new routes and improved schedules to destinations across Asia and beyond, encouraging growth and allowing markets to mature with the potential to increase capacity with the 787-9 from sometime after 2016. Up-gauging to an aircraft with a similar operating cost, but significantly increased capacity also delivers airlines greater pricing flexibility, to stimulate even more demand through lower fares or the ability to extract higher margins from operations.

The unprecedented level of regulatory and developmental scrutiny afforded the 787 will ultimately deliver an exceptionally safe next generation aircraft. There may be some initial tepidness from passengers in booking on the 787, but ultimately the romance of a revolutionary aircraft will draw them back. It’s been a long wait, but the 787 is almost here.

Carry-on is booked to travel on the inaugural Sydney service, and will be bringing you all the excitement of the day. Stay tuned.

Boeing’s full page すみません (apology). Image: Yoshiaki Miura, Japan Times.

Nov
21

British Airways: “Down under’s not over”

There’s a great modernity about British Airways’ simple but stylish Australian newspaper advertisement. Taking a subtle, cheeky swipe at Qantas following the ending of the Joint-Service Agreement in favour of Emirates, British Airways is keeping calm and carrying on.

BA will upgrade all its Australian services to new B777-300ER aircraft from March 30, 2012. Timed to match the commencement of the Qantas Emirates partnership, the introduction of the aircraft with upgraded long-haul product, and BA’s shift of Australian services from London Heathrow’s T3 to its T5 hub marks another competitive upgrade in the fierce Australian international market.

The move is part of BA’s renewed focus on the Asia-Pacific region. BA will commence five weekly services to Seoul from next month, and three weekly services to Chengdu from September 2013. In addition, BA is likely to recommence schedules to Kuala Lumpur and Taipei, markets the carrier exited in 2001, as well as new services to additional cities in mainland China.

British Airways served Taipei from London and Hong Kong as British Asia Airways (英亚航空) until 2001. British Asia Airways was incorporated to overcome a now overturned Chinese Central Government policy prohibiting national carriers serving mainland China from serving Taiwan. Image: Daryl Chapman.

There is also nothing delicate about British Airways’ new oneworld push. For many years oneworld has been quiescent, foundering without a meticulous leader as Star Alliance has in Lufthansa. But the signs are this has changed, limited by expansion options at London Heathrow, British Airways and its parent company International Airlines Group (IAG) are making an active effort to engage and mold oneworld into an entity that supports BA’s sustainable growth and underlying business goals.

British Airways has already formed a comprehensive JV partnership with oneworld member and long-time Qantas partner Japan Airlines, and invited Qatar Airways to join oneworld in 2013/14. Could BA’s Asian focus see the airline engage Malaysia Airlines in place of Qantas to expand in South-East Asia?

A British Airways led quadruple entente would secure a network between Australia and Asia to Europe covering all major traffic paths via Northern and South-East Asia and through the Middle East. Image: GCMapper and Carry-ON.

Malaysia Airlines has much to offer BA, with a South-East Asian network, services to every major Australian city, and code sharing agreements with Japan Airlines, as well as oneworld members-to-be Qatar Airways and SriLankan Airlines already in place. To leverage this through an alliance or a comprehensive JV between the three carriers opens up incredible network and traffic flow options as the map shows. The grouping would be well placed to gain a formidable position in the growing high yield markets driven by Asia’s growing middle class, and provide substantial traffic feed into BA’s long haul network in Asia, and connections to BA short haul services across Europe.

oneworld is on the brink of change, and British Airways is now firmly at the helm. Tally ho.

Nov
18

Australia’s obsession with engaging Asia: Can aviation play a role?

爱国 àiguó: to loves ones country/patriotism. Image: AP

It’s been awhile since I’ve written a post, and to kick things off again I thought I’d take a look at Australia’s renewed obsession with Asia, triggered by the Australian Government’s recently released Asian White Paper.

I went to a fascinating forum last week on Australia’s Engagement in Asia through Future Foreign Policy. Hosted by AsiaLink at Melbourne University, and to be broadcast on newsline this Thursday November 22, the Q&A style event saw Liberal MP Kelly O’Dwyer and Labor MP Richard Marles answer audience questions on Asia and what we as a country are trying to do with/about it. I say fascinating because it became clear during the course of the forum from the disconnected and vague responses that past the fact it’s there, good for foreign investment, and we should be doing something about it, neither Kelly or Richard have much clue about Asia.

The audience for this event were a culturally diverse bunch. Over 150 people who from the various questions, were already very ‘engaged’ with clear personal interest or involvement with Asia. Most of the people seemed to emigrated from, or lived, studied, worked overseas and at the very least the majority spoke an Asian language or had a son/daughter learning one. So why was Richard’s best answer to a question on how should young Australian’s engage with Asia, to “go out and make friends, just go overseas study, make friends”. Clearly sir, we’ve already done that.

The introductions were centred on reeling off growth statistics from what I like to call the ‘Asian Wheel of Fortune’, as the reason we need to engage. We were told how Australia is an activist middle power, great at managing countries smaller than us, or acting as a go between. We don’t need to choose between America and China, yet we aren’t willing to accommodate China unless it sticks to the rules based international system. Forgetting that America isn’t the best country to follow on that one.

Another audience member wanted to know if Asia wanted to engage with Australia. Do they really? An emphatic “Yes!”, apparently they do, because as we have seen, they want to buy our mineral resources. But I really don’t think we can consider buying iron ore engaging across multiple sectors.

An important cultural question popped up, Korea and Japan are great at using their soft cultural power overseas to promote design, art, music. “Why doesn’t Australia move out of sport and do that to?” Luckily, both Kelly and Richard agreed this would be great! The Japanese went wild for the Australian Ballet, but when they wanted to go to China last year to tour, there was no funding so they went to New York instead. Apparently it’s cheaper to fly twice the distance.

The Australian Government has been there and done this before in the 1980s and early 1990s never to follow through. From the crowd of people gathered at Melbourne University there is clearly a growing population in Australia that wants us to be involved with something greater than Bali and Phuket. The intention of both parties is right, but everyone seems to blindly fumbling when it comes to what to do.

As opaque as China’s leadership is, behind Thursday’s unveiling of a new China management team we saw a government fully aware that’s economy is slowing and needs to do something else. An economy in which Australia has placed the good majority of its eggs. If the Chinese government can see it needs to diversify, why can’t Australia’s?

How does aviation fit in?

Aviation featured vaguely in the Asian Century White Paper, with a small case study into Indian Investment into Gippsland Aero, and the failings of Sydney Airport. That was it. Australia’s aviation industry is growing, we can boast of one of the world’s safest aviation regimes, with a mass of incredibly talented people across airlines, air traffic control, training, safety, regulation. Combining this with perhaps the world’s most globalised industry, the aviation industry seems to be the perfect vestibule through which to engage with our northern neighbours. If the government and the general population are truly serious that is. Are you onboard?

The Australian Government’s Australia in the Asian Century White Paper

Sep
07

While distracted by partnerships, Qantas sneakily changes their traffic stat reports.

Turning away from the giddy heights of Qantas’ new global focus for just a few moments, and back home it seems Qantas’ is a bit sore.

Qantas has been publishing monthly yield and traffic statistics for all Group business since 2000. However, yesterday while everyone was distracted by Qantas-Emirates announcement speculation, the airline released its July traffic statistics, and for the first time published only qualitative, not quantitative yield data.

Why is this important? Yield is the amount of profit an airline makes per passenger after all costs have been attributed for.

Australian Domestic yields (comprising Qantas Domestic, QantasLink and Jetstar Domestic) were lower than the prior period (July ’11), and Qantas mainline Domestic passenger numbers were also down 2.6% with seat factor down 4.3% to 77.7%. A fare war looms large as all four domestic Australian carriers increase capacity in the market, and as competition between Qantas and a ‘game on’ Virgin Australia escalates both carriers profitability will suffer.

Qantas says “going forward, yield commentary in the monthly traffic statistics will be qualitative in line with international and domestic peers”, the airline is playing coy. Competition in the Australian domestic market has not been this intense since prior to the collapse of Ansett.

Sep
06

“A momentous day in aviation”

This is the label Tim Clark gave to today’s announcement of the partnership between Qantas and Emirates. For Emirates, it is merely an endorsement that its strategy and positioning has worked. For Qantas, the agreement represents a considerable strategic shift, forcing the airline to finally acknowledge many of the operational issues that should have been acknowledged up to a decade ago.

From 1 April 2013, Qantas’ services to London will operate ‘The Falcon Route’ via Dubai. Subject to regulatory approval, the centerpiece of this strategic is an 10 year operational partnership with Emirates Airlines which includes integrated network collaboration with coordinated pricing, sales and scheduling as well as a benefit-sharing model. Akin to having fully metal-neutral Anti-Trust Immunity, the agreement also provides scope for further expansion, Alan Joyce saying “the two airlines can do a lot more together into the future.”

The partnership “representing a step-change for the aviation industry” while true, is ironic. Qantas has essentially endorsed Emirates strategy and positioning, something it has vehemently fought against and accused of everything from receiving subsidies to capacity dumping for years. Even after the Qantas rhetoric, will passengers buy this sudden strategic shift? Perhaps.

Why? Sure, it doesn’t deliver Qantas operated services to passengers outside Melbourne or Sydney. What it does represents a fundamental change in airline thinking, that Qantas recognises the importance of the mature and continuously developing expectations passengers have of airline alliances. It recognises that passengers will fly if the alliance can take you where you want to go, with the benefits you deserve with full reciprocity. Something which has become murky in the wider world of airline alliances.

The alliance is risk averse, it allows Qantas to minimise its exposure to the European market and the trans-Tasman market, where Emirates with its much lower margins and cost structure is more competitive. The association with a brand considered to be one of the world’s best, will also dramatically enhance Qantas’ international exposure.

“It’s not you, it’s me”. On 31 March 2013 Qantas will end the 17-year Joint Services Agreement with British Airways, the breakup an indication that in today’s operational environment the alliance wasn’t delivering from an operational, passenger experience or yield perspective. Qantas will also cease to fly the Kangaroo Route to Europe, just over 65 years after the airline first started flying the route on 1 December 1947. Services to Frankfurt will also be suspended, a route that has long not been profitable because of high jetfuel prices, the Boeing 747-400s full burn and high-aircraft weight.

The following slide from the Qantas presentation gives an idea of the significant markets the Qantas-Emirates partnership will open up:

“Qantas alone can’t take pax everywhere – but together Qantas & Emirates can take Australians just about anywhere. With style.” Alan Joyce, Qantas Airways CEO

The partnership doesn’t extend across Asia, with QF/EK connections only available to Emirates services through Singapore and Bangkok. In addition, Qantas codeshare services with Cathay Pacific and Air France to Rome and Paris respectively will also be cancelled. Changes have also failed to address Qantas’ neglected international markets from Perth, Adelaide and Brisbane.

Perhaps more important than the partnership, is Qantas acknowledgement that its Asian services need to be transformed. For many years Qantas has neglected the region home to our biggest trading partners and inbound tourism markets. Services to the region will be enhanced, with new flights and changes to schedules in recognition of a need to be more business friendly. Will Qantas actually receive a portion of the 15 Boeing 787-8s it subsequently directed to Jetstar in support of this? Time will tell.

Back in 1996, Qantas entered into a partnership with an emerging carrier, Emirates. When it ended, no one noticed. How things change in 15 years. Now the world is watching, and it seems everyone else, especially John Borghetti, was right.

The Qantas-Emirates partnership website can be found here. And, Qantas’ full statement here.

Sep
01

Australia-EU ETS link should deliver savings to Australia’s aviation industry.

The ETS link induced reduction in carbon price to $10 mt should reduce the impact on REX’s operating costs by close to $1.5 million. REX’s current CO2 output is approx. 115,000 mt p.a.

The air transport industry, so governments are convinced, is slowly destroying the environment. Unfortunately, aeroplanes are also big, leave easy-to-spot contrails in the sky, and have become a fundamental factor in global trade and travel. This puts the industry smack in the middle of the ETS bullseye of Connie Hedegaard, European Commissioner for Climate Action, and the global air transport industry’s number one archenemy.

The problem is airlines are limited in their ability to reduce fuel consumption or CO2 without significant capital investment to operate fuel-efficient aircraft or restricting demand. The ETS also provides little incentive for operators to reduce their usage. As Dr Elena Ares noted in a briefing paper to British Parliament, this price “is a significant amount for power plants, steel mills and the like, but translates into an insignificant 3.8 cents per liter of aviation kerosene”.

A European Commission Impact Assessment has already acknowledged that the EU ETS will only reduce aviation emissions by about 3%, in reality offsetting one year of industry emissions growth. Still the EU perseveres.

In a political and PR coup for their ETS programmes, the European Union and the Australian Government will hitch their schemes together under an interim link that will synchronise carbon pricing from 1 July 2015.

Australia’s current Government has done little to support the industry selectively applying the ETS to the regional aviation sector but not international operations, on top of an increase the Federal Government’s decision to increase fuel excises, new security charges, and end the Enroute Charges Payment Scheme.

So what does this ETS link mean for Australia’s aviation industry operators? Relatively good news actually, the scheme integration likely to deliver a short-term cost reprieve.

“No later than 1 July 2018” both ETS schemes will be fully linked permitting full trading of carbon permits and allowing Australia’s airlines to purchase EU emissions permits and use them in Australia. In addition, Australia will abandon its own pricing scheme, adopting the EU price of less than $10 per tonne.

This cheaper price, will translate into a lower excise added to the cost of aviation fuel. It could also see Australia’s regional airlines heading to Europe to purchase cheaper credits in the EU market to use back home. Eventually system prices will rise to €15 per tonne, but this will still be cheaper than the initial carbon price of $23 per tonne at current exchange rates.

Gillard is also treading a fine geopolitical line. Her move has also reversed Australia’s opposition to the EU ETS on aviation, effectively endorsing its obscure legality. Many countries still see charging for extraterritorial emissions on foreign aircraft as an invasion of sovereignty. Not the right line to be treading when our biggest trading partner is China, is already demonstrating to the European Union how far it is willing to go to protect its interests.

Aug
26

Too little, too late for Perth Airport’s lacklustre redevelopment?

This article is a supplement to last month’s Perth Airport, best in airport design? Unlikely.

Perth Airport’s $750 million redevelopment is resonating well with a public that laments current facilities, but will the terminal redevelopment actually provide ample space to handle growth?

Westralia Airports Corporation (WAC) Perth Airport’s is known for underestimating traffic forecasts. Master planning is based on a prediction of 3.5 per cent compound annual growth, with total passenger traffic of 18.9 million per annum by 2028-29. Unsurprisingly redevelopment plans provide no terminal passenger capacity forecast, stating only that the consolidated development will ensure the already under-capacity terminal is capable of handling passenger growth to 2020.

Australian Government BITRE statistics show between FY1991 and FY2011 Perth Airport recorded:

  • 20-year compound growth rate of 7.6 per cent p.a.; and
  • an increase in aircraft movements of 260 per cent.
  • Passenger growth between FY2006 and FY2011 was 9.2 per cent p.a.

In FY2012 passenger traffic will pass the 12 million mark for the first time. If growth continues at current rates passenger traffic will reach 24.8 million to 40.7 million passengers p.a. by 2028/29.

My math tells me it’s unlikely.

Perth Airport’s current international terminal. Royal Brunei no longer serves Perth. Image: Stuart Sevastos

Is airline resistance to blame?

When WAC reduced its commitment from a ‘world-class’ facility, its main reason for not investing more was “any attempt to design to a higher standard would be met with resistance by airlines, reflected in a refusal to support resulting investment plans”. Perth’s smallest international operator Qatar Airways is ‘the world’s best airline’, and the majority of Perth’s largest international operators are based at airports designed to IATA Level of Service (LOS) A standard, and others such as China Southern, Virgin Australia and Garuda are moving upmarket. Wouldn’t these carriers want facilities at a standard higher than simply average?

Further proselytizing its decision, WAC ‘recognised’ “that lower airport operating costs relative to other airports enhances the viability of air services to Perth and therefore increases the prospect of attracting new services”. True for all airports, particularly those in high competition areas, but Perth Airport’s nearest major competitors are Adelaide, South Australia; Darwin, Northern Territory; and Denpasar, Bali, all over 2,000km away.

What about new operators and LCC traffic?

  • Air China will likely be the next Chinese airline serving Beijing and/or Shanghai, China Eastern focused on growing North American services;
  • Vietnam Airlines to Ho Chi Minh City is a possibility given Perth’s growing Vietnamese population and outbound Australian tourism;
  • Etihad and Virgin Australia to Abu Dhabi;
  • Kenya Airways has confirmed Boeing 787 services to Nairobi from 2016; and
  • Long-term potentials: Korean Air (KE) to Seoul, and Hawaiian Airlines (HA) to Honolulu. HA has made significant strides in developing HNL into a Pacific hub. KE is aggressively targeting in-transit traffic and serves many small-low traffic cities with less than weekly frequency using convenient connections to high-frequency heavy traffic destinations to attract custom.

Air Asia’s largest Australian operation is to Perth with 31 return services a week from KUL and DPS.

In 2007, Low-Cost Carriers (LCCs) accounted for just four per cent of Perth’s international seats. By 2010 they accounted for 27 per cent. While LCCs have increased the ratio of outbound trips per person, frustratingly WAC believes this is over as “there is a limit to the number of outbound trips from residents that can occur”. Pardon? Correct me if I’m wrong, but LCCs:

  • do actually carry inbound passenger traffic;
  • have a substantial stimulation effect on markets; and
  • operators serving Perth will increase. Batavia Air and Lion Air may serve Perth from Indonesia. Jetstar may introduce new Asian destinations, including perhaps resuming QF Group services to Tokyo. Not to mention IndiGo in India, and more services by Air Asia.

WAC highlighted the differentiated basic service needs of LCCs noting only “some LCCs are unlikely to support the redevelopment…because it will increase airport charges”. If it was only ‘some’ LCCs that opposed a ‘world-class’ terminal, why didn’t WAC plan a fully independent LCC terminal allowing the airport to offer diversified services through distinct airline products? Dedicated terminals only enhance an airports value proposition for both LCCs and full service carriers.

Is this development too little, too late? Perth Airport doesn’t think so, but it’s not going to take the public long to realise they weren’t given the best in airport design.

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