Monday, June 30, 2008

High oil price a test of survival for airlines: Lion Air

The Jakarta Post, Jakarta

Celebrating its eighth anniversary on June 30, Lion Air is to expand its business by serving more international routes, in the Asia-Pacific region in particular, and is eying international airlines to acquire.

Lion Air, known as the low-cost carrier trendsetter, is the first airline in the world operating the newest Boeing 737-900ER.

The company, which currently controls almost 35 percent of the Indonesian market, began its domination of the industry when it ordered 178 units of Boeing 737-900ER in 2005.

The first delivery of seven aircraft arrived last year, with eight more expected this year. All aircraft will have been delivered by 2016.

Lion Air's president director Rusdi Kirana, who is also the former chairman of the Indonesia National Air Carriers Association (INACA), shared his company's plans and business strategy with The Jakarta Post's Dian Kuswandini.

Question: What are the reasons behind Lion Air's plan to expand? Answer: Everyone is talking about how globalization will lead to an open-sky market. For some, it's a threat to the local airline industry, but for me, it's an opportunity to expand. I'm not letting Lion Air become only a spectator. That's why we have set plans to go regional and have ordered 178 units of the latest Boeing 737-900ER to support the plans.

Recently, we opened routes to Vietnam and Singapore. By the end of this year or early next year we'll fly to Hong Kong, followed by routes to China, Australia, Saudi Arabia, Jeddah, Riyadh and India. We already obtained the permits for all of the routes from the Transportation Ministry.

We'll also acquire some airline companies in other countries, like Australia, Thailand and Malaysia. But it's still in process.

With Lion Air's strong capital and continually growing human resources of some 5,000 people -- 400 pilots and 700 aircrew members -- I'm positive about our plans.

How will you finance your plans?

We have many options, like banks, sponsors and leasing companies. Some of our aircraft are rented while some are paid in installments. In terms of funding, finance firms will consider the company's reputation and its country of origin.

Lion Air has never been in bad debt and has been one of the most favored airlines here; that's why we get financial support easily. The finance firms see Indonesia as a big and promising market.

Soaring oil prices have hurt the airline industry. How do you deal with price rises, especially when Lion Air is a low-cost carrier?

The soaring oil prices is really a dilemma, but it's not the end of everything. It's like natural selection, and the best will survive. Our strategy is to use new aircraft as they're more efficient in fuel consumption and provide greater capacity. For example, the old Boeing 737-200 only has 110 seats and its fuel consumption is 3,500 liters per hour. The new 737-900ER has 213 seats and its fuel consumption is 3,300 liters per hour.

Before the oil price increases, 30 percent of the company's operational costs went to fuel. Now, it's around 50 percent for new aircraft and 80 percent for the old ones. So, there's a big gap there.

Yes, new aircraft are more expensive, but their maintenance costs are lower compared to the old ones.

The local airline industry has been accused of ignoring safety standards, which has led to many accidents and being blacklisted by the EU. Your comments?

Air transportation is like a celebrity; a little mistake will spark gossip and blame. Even a troubled tire could be a headline. Other modes of transportation, like buses, could have worse accidents, but people pay less attention to them.

There's widespread gossip saying airlines fly with limited fuel in order to save costs. That's very wrong. No airline would want to take the risk of having an accident in fear of being bankrupt.

As for the EU ban, I see it as something unfair. Logically, before you ban something, you should first issue a warning. A ban is imposed when a warning is ignored. So, the EU should give airlines a chance before imposing bans. There should always be room for improvement. We learn form our mistakes.

Has Lion Air also learned from mistakes?

Of course. From past accidents we've learned that good human resources are nothing without good systems and technology. You can have the best pilots, but after all, they're just humans. They can be tired sometimes.

Understanding this, we have supported our employees with the latest systems and technology in our new aircraft. For example, we have FOQA (Flight Operational Quality Assurance) systems that allow us to monitor our pilots while doing their jobs.

Their activities are recorded and if they don't meet the required standards, they have to be trained again.

Another system we use is the Geneva system, which provides data on our employees. For example, if a pilot or an aircrew member tries to work overtime, the system will reject them and they're not allowed to fly. Our rule is, a pilot can't fly more than 80 hours per month.

We also have the Trax system, which allows us to track our maintenance activities and detect locations of our spare parts. The system will warn us when it finds a plane is in poor condition.

We also have the ACARS (Aircraft Communications Addressing and Reporting System), which informs us of our planes' conditions when they're in operation. The system transmits the data to our office, so we always know when our planes are having trouble.

Our other technological device is Radar 4000, a 3-D device. While ordinary radars can detect a mountain, for example, this one can detect what's beyond the mountain.

Mid next year, we'll also use the Stabilizer Approach Monitor (SAM) system. It will give early warnings to pilots with alarms if they are likely to have unstable landings, whether its because they are at too high a speed or to high an altitude.

With these latest systems, we'll start phasing out our old aircraft in September.

Airlines fly into another perfect storm

BOONSONG KOSITCHOTETHANA

The airline industry is in distress and calling Mayday. As oil prices continue to soar beyond imagination and air travel demand is weakening due to global economic slowdown, the industry is bracing for another perfect storm with greater dimension than before.

After reporting their first profit of US$5.6 billion since 2000 last year, the world's airlines are collectively facing a loss of $2.3 billion this year, based on the average expected Brent crude oil price of $107 per barrel in 2008, compared to last year's average of $73 a barrel.

Such a loss could be even be significantly higher, potentially $6.1 billion, if crude oil prices came to an average of $135 a barrel for the rest of the year, warned the International Air Transport Association (IATA).

If oil experts' consensus of an average oil price of $107 a barrel is correct, the airlines' fuel bills will be $176 billion, $40 billion more than in 2007. For every dollar the oil price goes up, their costs rise by $1.6 billion.

IATA director general Giovanni Bisignani described the situation as desperate and ''potentially more destructive than our recent battles with all the Horsemen of the Apocalypse combined''.

In the six years to 2006, the airline industry made cumulative losses of more than $40 billion.

Fuel is either the top or the second-highest single operating cost for network airlines, representing some 34% of of the total cost bases. The share was lower at 13% in 2002 when oil prices were more modest.

Skyrocketing prices forced 24 smaller carriers to cease operation or file for bankruptcy in the fist five months of this year, and more casualties are expected.

Late in May, the UK-based business-class-only carrier Silverjet Plc suspended all flights to obtain emergency funding.

April traffic figures compiled by the IATA clearly showed a slowdown with year-on-year international passenger flow growing by 3%, while capacity growth of 5% saw load factors fall to 75.4%.

Those load factors were a 1.5% drop from the 76.9% recorded during the same period last year and the third consecutive monthly year-on-year decline. International cargo demand growth remained sluggish at 3.7%.

At this time last year, IATA was talking about 6.7% growth for the first four months of this year. This year it's 4%.

GLOBAL PHENOMENON

Another set of statistics provided by the Airports Council International (ACI) showed a similar trend.

Global passenger traffic slowed markedly in April, with modest growth of 2% over the same period last year, while domestic traffic fell by 5.4% compared to April 2007.

The ACI said the drop reflected the impact of slowing economic growth and high fuel prices on airline fares and weakening consumer confidence.

The largest domestic market, North America, was down by 13% as a result of flight cancellations (American Airlines' mandatory groundings), ongoing route reduction and carrier consolidation, and the absence of Easter holiday travel (in March 2008 and April 2007).

But freight traffic growth was steady for April, at 4%, with the strongest growth in international traffic, up by more than 5%. Domestic freight grew more modestly at 1%, with the continuing impact of high fuel prices making other modes of transport more attractive.

REACTION TO TURMOIL

Airlines are finding it increasingly more difficult to fully pass on fuel costs to passengers without hurting demand in the wake of slowing economic conditions.

But with jet fuel prices breaking records, carriers are left with no choice but to raise their fuel surcharges more frequently than last year to offset the higher costs.

Airlines last year were able to pass on as much as 40% of the increase in fuel cost to passengers through surcharges when the economy was strong.

Several airlines are shrinking their fleets, decreasing flights by between 10% and 20% and cutting back routes. Worse still, major carriers such as United Airlines and Qantas have grounded aircraft, as well as cut jobs.

American Airlines also announced schedule reductions and a capacity cutback of 12% by the fourth quarter, as it fought to reduce costs in face of the US$130-plus oil prices.

It will only be a matter of days before other similar announcements are made, as more US airlines are grounding some of their geriatric fleets. Reacting to surging fuel costs, Delta Air Lines has cut back on perks offered to passengers.

Airline boardrooms worldwide will now be forced to give serious consideration to capacity cuts, even when they are not yet in the financial danger zone.

Several airlines, including Southwest Airlines, Northwest Airlines and Belgium's Brussels Airlines are slowing speeds and reducing weight on some aircraft in order to reduce fuel costs.

Southwest Airlines started flying at slower speeds a few months ago, projecting it would save $42 million in fuel this year by extending each flight by one to three minutes.

''It's not a dramatic change,'' said Dave Fuller, director of flight operations at JetBlue, which began flying slower two years ago.

Flyers, already beleaguered by higher fares, more delays and long security lines, may not even notice the extra minutes. The extra flight time is added to published flight schedules or absorbed into the extra time already built into schedules for taxiing and traffic delays.

Many airlines, including Thai Airways International (THAI), are looking at nearly 100 ways of cutting fuel use, including more efficient use and load reductions.

Meanwhile, several carriers are quickening the replacement of older fuel-guzzling aircraft with modern, fuel-efficient jetliners in order to reduce oil bills.

SUSTAINABLE SOLUTIONS

At the IATA annual meeting held in Istanbul early in June, airline leaders adopted a resolution calling on governments, airports and industry workers to act promptly to enable the industry to go through the new crisis. They said:

FGovernments must eliminate archaic rules that prevent airlines from restructuring across borders.

FIn view of existing fees and charges, governments must refrain from imposing multiple and additional punitive taxes or other steps that will deepen the crisis.

FState service providers must invest to modernise air-transport infrastructure urgently, eliminating wasteful fuel consumption and emissions.

FBusiness partners, in particular monopoly service providers, must become as efficient as airlines are now. If not, regulators must restrain their appetite with tougher regulation.

FLabour unions must refrain from making irresponsible claims and join the effort to secure jobs in aviation and indeed in other industries.

FIn the interest of the global economy and the flying public, authorities must enforce the integrity of markets so that the cost of energy reflects its true value.

RETRENCHMENT AT THAI

Ballooning fuel prices and slowing traffic have forced THAI to make a prompt and dramatic decision to stay afloat, by rejigging its 10-year business growth plan, including a major fleet modernisation programme which includes the procurement of 65 new aircraft.

Perhaps the most notable measure the THAI board has approved so far was the termination of the high-profile non-stop daily Bangkok-New York flights, which took off on May 1, 2005, starting on July 1, as the prospect of breaking even on the service was dim.

The termination came despite a high cabin factor of as much as 80%, but the percentage of fuel to the total operating costs widens to 55% on this particular route, surpassing the 34% average.

Another crucial decision is to slash the non-stop Bangkok-Los Angeles services from seven flights a week to five, also on July 1, and in October to make a stopover in Osaka before continuing to Los Angeles.

Continuing the New York and Los Angeles routes would result in losses of $120 million a year for THAI.

THAI will also soon terminate another non-stop long-haul flight, Bangkok-Auckland, now at five flights a week. In the future, the flight to Auckland will done through either Sydney or Melbourne, to allow greater operation flexibility.

The flag carrier's 19-point cost-saving plan, which has so far avoided the most sensitive issues such as layoffs and pay cuts, could be upgraded with greater severity if the situation warrants it.

THAI president Apinan Sumanaseni himself was in danger of becoming a casualty. The board attempted to suspend him as the Review went to press but was later overruled. The move was reportedly not related to business performance but had more to do with internal conflicts.

In an earlier interview, Mr Apinan described the impact from oil as far worse than crises in recent years _ 9/11, Sars, bird flu and the tsunami _ in the sense that nobody knew when it would end.

Spiking oil prices have forced THAI's for the near term to focus on survival rather than growth, as it is struggling to break even. Its net profit in the first quarter of this year plunged 48% year-on-year to 2.22 billion baht as its fuel bills jumped 45.4% to 19.56 billion baht from 14.02 billion baht in the same period last year.

AIRPORT TRAFFIC UP

The impact of high oil prices has not yet affected air traffic in Thailand, judging from the first-quarter statistics.

Total passengers through Suvarnanabhumi, Don Mueang, Chiang Mai, Phuket, Hat Yai and Chiang Rai, rose 11.5% over the same period last year to 16.53 million. Combined aircraft movements, both take-offs and landings, increased 6.1% in the first quarter of 2008 to 106,607.

International passenger numbers rose 10.9% to 10.31 million and domestic passengers 12.6% to 6.22 million. Freight increased 7.47% to 343,504 tonnes, 92% of which were inbound and outbound, with the remainder moved domestically.

Thai-Indian consortium lead the race for modernising India's Kolkata airport

A Thai-Indian consortium has emerged the lowest bidder for the Rs2,000-crore Kolkata airport modernisation project.

Thai company ITD, which also shared in the construction of the Suvarnabhumi airport in Bangkok has along with its Indian partner ITD CEM quoted around Rs2,000 crore, according to sources in the ministry of civil aviation. The ministry completed the examination of bid two days ago. The highest bid was around Rs2,400 crore.

The ministry of civil aviation anticipated a three week period before the award of the contract is formally announced, as the bid will first be evaluated by a technical committee that will send its recommendations to the Airports Authority of India (AAI) board for approval. Financial as well as technical experts would be part of the committee.

Three consortiums and one company had submitted technical and financial bids on 16 June, including Pomerleu Inc (Canada)-CCCL, TAV Tepe Akfer Yatirim Insaatva Isleme AS (Turkey)-Punj Lloyd Ltd. Indian infrastructure major Larsen and Toubro was the lone ranger, participating in the bidding process on its own, and not as part of a consortium.

Soaring fuel prices and challenges to air travel

Two thousand eight (2008) can only go down in the annals of the world economy as a year in which a plethora of negative factors such as rapidly rising fuel prices, liquidity tightening policies due to the sub prime crisis and inflation control policies of many emerging economies impacted economies adversely.

When all is over and done, this slackening in growth will in all probability have resulted in a slowing of the pace of traffic growth throughout 2008. Yet, it is encouraging that the continuing steps initiated by the airlines in earlier years to keep controllable costs in check have paid rich dividends for the airlines.

Cost management and forward fuel contracts entered into by major profitable international air carriers over the past years


helped them to manage rising fuel costs, and one can only hope that a similar approach might well help mitigate the fuel price rise to a great extent in 2008.

By June 2008, it was clear that the impact on un-hedged carriers and the domestic airline industry which had to contend with duties and other levies on imports was more severe than that experienced by the major profitable international carriers.

However, there was no doubt that if the uptrend in fuel prices held, hedging would no longer have proved to be a mitigating factor and the industry would have to operate under a substantially high operating cost and breakeven scenario in the days to come.

In this equation, the most disturbing factor is that aviation fuel is generally 15-30 per cent more expensive than the crude oil prices. This make the issue even more serious for air carriers.

Soaring oil price

At the time of writing the price of a barrel of crude oil was soaring past US$140 Airlines in the United States were staggering just to keep operations going, and the 10 largest carriers of the country had posted a cumulative net loss of $11.76 billion.

Although the price may decline in the short term, the prognosis among economists was that in the long term, prices would continue to climb. In response to the surge in fuel prices, airlines were cutting costs, reducing fleets and domestic capacity and retrenching staff.

CNN has reported that US Airways will be charging passengers $15 to stow just one bag in the cargo hold for tickets booked on or after July 9, 2008 and that the airline will be the third major carrier to add such a charge. This is not all: the free beverages in coach are on their way out, too. Passengers in the back will be charged $2 per non-alcoholic drink, starting August 1, 2008.

In addition, US Airways was reportedly planning to cut domestic mainline capacity by 6% to 8% in the fourth quarter. In mid 2008, it had also planned to return 10 planes, cancel leases on two more and was discussing plans to park more through 2010. Earlier, it was reported that United Airlines had commenced charging $15 for the first checked bag. American Airlines was to follow immediately thereafter.

Houston based Continental Airlines announced in early June 2008 that it would cut 3,000 jobs and reduce capacity by 11 per cent in view of the record fuel costs. The pull back of operations was to take place in September 2008.

The soaring fuel prices was serious enough for aviation industry leaders to convene a summit in New Orleans July 2008 to brainstorm how best to respond to the fuel costs, which were expected to rise to $150 per barrel in the United States in Summer 2008.

Increase in prices

Elsewhere in Europe, the same effect was being observed. British Airways Chief Executive Willie Walsh was reported to have said that with the increase in prices, thee will be some decrease in discretionary travel.

There were similar statements by the Chief Executive Officer of Air France and the Managing Partner of the Oneworld Alliance.

Virgin Atlantic responded to the rising fuel costs in a similar way, by adjusting fares, although the carrier adopted the novel approach of imposing lower fuel surcharges on economy class passengers as compared to its higher premium classes, on the ground that the higher classes took up more space in the cabin and that their baggage allowance was higher, which made the aircraft burn more fuel.

This practice is a deviation from standard airline protocol which applies the same surcharge to all passenger tickets.

In the Asia-Pacific region, Thai Airways International grounded an entire fleet of four engine aircraft and stopped operating its Bangkok-New York flights in early June 2008, while announcing that it would be selling its four long haul Airbus A 340-500 aircraft which were bought in 2005 to operate air Services from Bangkok to New York.

In addition, it has been reported that the airline was adjusting its fuel surcharge on international and domestic flights, effective June 25, 2008, due to the massive increases in the price of jet fuel.

It was also reported that China Airlines and Eva Airways of Taiwan were also planning stringent cuts, with the former reducing its US operations by 10 per cent and Eva planning an overall 5 per cent cutback commencing September 2008.

Summit

Speaking for the airlines of the world, Giovanni Bisignani, Director General of the International Air Transport Association (IATA) said at the 2008 IATA World Air Transport Summit held in Istanbul from 1-3 June 2008 that IATA predicts the global industry faces losses as high as $US6.1 billion if crude prices stay at their current level of $US135 a barrel, and $US2.3 billion if they fall to a predicted price of $US106.50.

The new estimate is a reduction of $US6.8 billion on IATA’s previous forecast in March of a profit of $US4.5 billion. Much of that comes from the troubled US industry. Airlines in other parts of the world, while preparing for difficult times, say they are better placed to ride out the storm.

Bisignani also stated that by the time the industry switched to the northern winter schedule later in 2008 the full impact of rocketing fuel prices was expected to prompt airlines around the world to follow Australian carrier Qantas in cutting routes, grounding planes and laying off staff.

Already in the region, Air New Zealand had raised its fares by 4% and planned to cut its Hamilton to Sydney route in September 2008 from three to two frequencies a week as well as its Dunedin to Sydney route.

As for the manufacturers, at the IATA Summit, Boeing stated that although the fuel crisis could not be underrated, it was manageable.

Scott Carson, President and Chief Executive of Boeing Commercial Airplanes was of the view that the industry has seen patterns such as the current crisis and that Boeing had taken adequate measures to respond to such situations in the past.

Current crisis

However, what was of concern to Carson was the plight of the airlines. Although in their preliminary estimates, both major manufacturers of aircraft- Boeing and Airbus Industries - had agreed that the fuel crisis will not adversely affect the market for new aircraft as airlines will need replacements to their ageing fleets, more recent reports indicate that the fuel crisis is proving to be worrisome to the manufacturers.

A corollary to the crisis is that air-traffic growth is starting to cool in some of the world’s hottest markets: the Middle East; India and China.

In the overall scheme of things therefore, by mid 2008 it seemed that a combination of reduction in traffic and rising fuel costs was adversely affecting the profitability of air carriers.

Some were forced to further hike fuel surcharges and this negatively impacted traffic growth further. Slowing growth in traffic as well as real yields and the limited scope available to achieve further reductions in costs proved a major challenge for most air carriers.

The only way to mitigate these negative trends seemed to be to achieve consolidation of major air carriers within the United States and intra US-Europe and to replicate this approach in other regions, especially in the emerging economies burdened with overcapacity.

In this regard, it is submitted that consolidation would certainly help airlines manage the expected excess capacity more effectively and give them tighter control over pricing decisions.

This and the expected positive impact of the open skies agreement between the US and Europe, India and China and other open skies and liberalization agreements should see the industry ride the difficult times expected in 2008.

Consumption and traffic levels

The first issue concerns rising consumption levels of fuel and the corresponding demand on producers. It is claimed that the world now consumes 85 million barrels of oil per day, or 40,000 gallons per second, and demand is growing exponentially.

It is also claimed that the problem of soaring fuel prices is not predicated by depletion of the world’s oil reserves but rather by the fact that the ability of the oil producing nations to produce high-quality, cheap and economically extractable oil on demand is slowing down, mostly because of highly increasing demand.

After more than fifty years of research and analysis on the subject by the most widely respected and rational scientists, it is now clear that the rate at which world oil producers can extract oil is reaching the maximum level possible, or peak oil levels.

The picture is somewhat ominous, since although with great effort and expenditure, the current level of oil production can possibly be maintained for a few more years, beyond that oil production must begin a permanent and irreversible decline.

Fuel surcharges imposed by the airlines would make travel more expensive and may impact demand. A recessionary environment in the United States and the adverse liquidity impact of the sub prime crisis could spread to other regions, especially to the emerging economies of Asia, thereby adversely impacting growth.

With regard to non scheduled operations, it is estimated that, in 2007, the total international non-scheduled passenger-kilometres decreased by about 3% compared with 2006, with the non-scheduled share of overall international air passenger traffic decreasing some 1 percentage point to about 9%.

Domestic non-scheduled passenger traffic represents about 8% of total non-scheduled passenger traffic and around 1% of total domestic passenger traffic worldwide.

Economic contribution of aviation

The second issue is whether carriers can cut back on air services to reduce costs despite the exponential and fast growing demand for more capacity. The demand for more capacity is inevitably linked to the importance of aviation to the global economy and the contribution of air transport to the world.

The Air Transport Action Group (ATAG) of the International Air transport Association (IATA) has reported that aviation transports globally 2 billion passengers every year and 40% of the inter-regional goods by value. 40% of tourists now travel by air and the air transport industry generates a total of 29 million jobs annually through direct, indirect and catalytic impacts.

Aviation’s global economic impact is valued at US$ 2.960 billion which is equivalent to 8% of the world’s gross domestic product.

In addition to its total output and employment impacts, civil aviation has a broader influence on overall economic growth, deriving from non-quantifiable benefits for the users of air transport, businesses and individuals alike. Air transport acts as a facilitator for the development of markets and trading of goods as well as service.

ICAO has estimated that in the year 1998 (a year taken as a benchmark that reflects current trends), the direct contribution of civil aviation, in terms of the consolidated output of air carriers, other commercial operators and their affiliates, was 370 billion US dollars.

Direct employment on site at airports and by air navigation services providers generated 1.9 million jobs while production by aerospace and other manufacturing industries employed another 1.8 million people. Overall, the aviation industry directly employed no less than 6 million persons in 1998.

Legal Issues

The legal issues concerning measures taken by airlines to counter the rising fuel prices broadly hinge on the imposition of a surcharge on the passenger ticket as well as the baggage allowance. Do airlines have the right to impose such surcharges? The answer is a clear yes, inasmuch as a restaurateur has the right to increase prices on his menu in response to rising prices of ingredients.

However, such actions should, at common law, accord with the principles of contract law, particularly with regard to the fundamental notion of offer and acceptance.

Admittedly, where there is a passenger rights charter in any jurisdiction, courts would be inclined to determine whether the airline acted with prudence and in conformity of such a charter, although this would be only in terms of trade practices and not in terms of contract law.

The most fundamental legal premise that would impose liability on the carrier for imposing a surcharge on the ticket or baggage carried is that there is a compelling need for clear and adequate notice be given to the customer of the price and the pricing policy of the carrier.

This is particularly so in the case of electronic ticketing where the originator of the communication usually clearly indicates the price of the ticket offered and a mere quotation of a ticket that will be sold would not amount to an offer but a mere invitation for the buyer to make an offer.

It is quite evident that, irrespective of a carrier’s right to impose surcharges on a passenger ticket and the baggage allowance, in the ultimate analysis, it is the carrier’s dedication to efficiency that would largely assist the carrier in cutting fuel costs which are at least 40% of operating costs of most carriers. There are certain measures, if efficiently adopted would greatly assist in this regard.

Efficient method

One such measure is to maximise load factors and optimise the position of the centre of gravity of the aircraft when loading.

Another is to reduce taxi time wherever possible. This could be done by using fewer engines while taxing or minimising the distance between the gate and the runway. The replacement of on board power generators with electrically operated ground support equipment would be another efficient method of minimizing fuel consumption.

An enhanced and more fuel efficient aircraft maintenance programme would also be beneficial. Reduction, to the extent possible, of such consumables as water and ice and obviating the carriage of heavy trays and ovens in flights that do not serve hot food would also assist in this endeavour.

The use, wherever possible of small jet aircraft instead of higher fuel consuming turboprops is yet another example of fuel conservation. Additionally, the reduction of non-revenue generating flights and use of flight simulators in place of test flights would also add to lessening the operational costs of an airline in the context of fuel consumption.

The writer is Coordinator, Air Transport Programmes, International Civil Aviation Organisation Montreal, Canada.

China's new turboprop to roll out Sunday

Thursday June 26, 2008

China's new turboprop aircraft, the MA600 (an enhanced version of the MA60), is scheduled to roll out in Xi'an on Sunday.

The MA600 was designed to optimize the MA60's structure and avionics system as well as improve its cabin interior. To date, the 50/60-seat MA60 has received 122 orders from Asia, Latin America and Africa, with seven aircraft delivered since 2005.

Xi'an Aircraft Industry Co. VP and Chief Designer He Shengqiang said the MA600 is expected to enter service next year, with the first delivery to the Civil Aviation Flight University of China in Sichuan Province.

XAIC, a subsidiary of AVIC I, forecasts a demand for 300 MA600s over the next 10 years, mainly from operators in the Asia/Pacific, Middle East, Latin America, Africa and CIS, according to AVIC I Civil Aircraft Dept. Deputy Director Chen Fusheng. It plans to produce 10-15 of the new aircraft per year by 2012.

XAIC Marketing Director Zhang Xiaohong said some Chinese carriers also are considering the MA600. She predicted that 120 MA600s will be delivered domestically in the next decade.

AVIC I has ambitious plans for the MA series, which will include the MA60, MA600 and an MA700. The series "will become the main focus of AVIC's civil aircraft production after AVIC I's integration with AVIC II," AVIC I VP Hu Wenming told ATWOnline (ATWOnline, June 18). Hu said research and development already have begun on the 70-seat MA700. "Our goal is to grab a 40% share of the global [regional aircraft] market by 2017," Chen said.

by Katie Cantle

Other headlines:

Apinan back in the pilot's seat

Thai Airways International's board of directors yesterday officially reinstated Apinan Sumanaseni as its president, reversing its decision on Thursday, when Apinan was demoted to an inactive post.

Chaisawat Kittipornpai-boon, permanent secretary for transport and THAI chairman, said the reinstatement would lessen the internal conflict within the national flag carrier.

However, Rachanee Tripipatkul, a board member, tendered her resignation yesterday in protest at the change.

Supporters of Apinan also protested against the board's Thursday decision, reportedly backed by Transport Minister Santi Prompat.

Sources close to the minister and former transport minister Pongsak Ratapongpaisarn said the board wanted to name a new president because of Apinan's mismanagement. In addition, he was alleged to have failed to comply with the transport minister's requests about unspecified projects concerning the national flag carrier.

"Over the past four months, Santi could not do anything about the airline. He's upset - so was former transport minister Pongsak," said an adviser, who asked not to be named.

The airline's board on Thursday demoted Apinan to the post of co-president, while naming executive vice president Norahat Phloiyai as another co-president, in charge of the airline's top management.

Porpong Sanpakit, a vice president, said staff who supported Norahat as the new chief executive would continue to press for the top-level change, even though Apinan was already reinstated. "If the chairman and the minister cannot do that, we will ask the prime minister to intervene," he said.

THAI staff are apparently split into two camps: one supporting the board's reinstatement of Apinan, the other wanting Norahat as president.

Under Thursday decision, Apinan would have been stripped of management power, even though he would have remained a co-president. Based on that same decision, Norahat, also a co-president, would take over the top management.

THAI labour-union leader, Chamsri Sukchotrat, said the union had opposed Norahat as heis closely connected to former PM Thaksin Shinwatra.

Friday, June 27, 2008

Indonesian air force plane missing with 18 people onboard

An Indonesian air force plane went missing with five crew and 13 passengers on board, including at least two foreigners, a military spokesman said Friday.

The Casa-212 military aircraft disappeared during an aerial surveillance mission Thursday after taking off from an airstrip just east of the capital, Jakarta, said air force spokesman Chaeruddin Ray.

A search was under way at Salak Mountain, about 60 miles (100 kilometers) south of Jakarta, but Ray said "nothing has been found yet."

An Indian and Singaporean were on the passenger list, he said.

Indonesia has seen a spate of airline accidents in recent years, including an Adam Air crash that killed 102 and another by national carrier Garuda that killed 21, leading the European Union to ban all Indonesian airlines.

It was the second incident involving a Casa-212 plane this year in Indonesia after a flight operated by the private Dirgantara Air Service crashed in January with three people aboard.

Thai Airway's chief's suspension overruled

Thai Airways made an abrupt about-face last night and scrapped a decision made earlier yesterday to suspend president Apinan Sumanaseni. Protests by the THAI union and pilots forced THAI chairman Chaisawasd Kittipornpaiboon to announce late yesterday that no management change would be made at the national carrier.

He said he would take ''personal responsibility'' for his decision to overrule the board decision made earlier yesterday to sideline Mr Apinan and appoint an acting president.

''After discussions with the THAI union and employees, I agree that a change at this time would only create additional confusion and uncertainty,'' said Mr Chaisawasd, also the transport permanent secretary.

He said directors had thought to suspend Mr Apinan pending the president's formal job review in September.

But after consultations with the THAI union and several directors, Mr Chaisawasd said he had reversed yesterday's board decision and would instead raised the issue again at a board meeting next week.

THAI directors yesterday afternoon had agreed to suspend Mr Apinan from his duties for poor performance and his inability to mend internal conflicts at the airline.

Norahuch Ployyai, an executive vice-president for the airline's standards assurance and risk management department, was to be named acting president, otherwise known as ''DD'' under the airline's internal codes. Mr Apinan was to remain in his position, but be shifted to a non-management role, effective today.

The order prompted immediate resistance from line employees, who decried the move as politically motivated, despite denials by Mr Chaisawasd.

Mr Norahuch, a THAI employee since 1978, was a classmate of former prime minister Thaksin Shinawatra in Class 10 at the Armed Forces Academies Preparatory School.

''We need to make a change because THAI is facing a number of problems. Management remains weak and not in line with the board's direction,'' Mr Chaisawasd said yesterday afternoon.

''[The board] needs a neutral party to heal the differences.''

Mr Apinan and Mr Norahuch were unavailable for comment yesterday.

THAI staff expressed dissatisfaction at the sudden change and appointment of Mr Norahuch over more senior executives from the larger operations or commercial departments.

Jamsri Sukchotirat, the chairman of the Thai Airways labour union, said the move was the ''wrong way to tackle the airline's internal problems''.

''This is definitely politically motivated, given that Mr Norahuch is close to [Mr Thaksin]. It will only create greater problems and infighting within the organisation,'' Mrs Jamsri said.

She sharply criticised political interference in the airline's procurement and ticketing operations, including frequent demands made by MPs and senators for free seat upgrades for themselves and their relatives.

''Thai Airways suffers considerably from political interference. A politician may purchase a seat to Europe for 39,000 baht, but demands an upgrade to a 120,000-baht first-class seat for free,'' she said.

''Over the past six years, since the Thaksin Shinawatra government, political interference has only increased, resulting in our problems today.''

Mrs Jamsri said THAI workers were prepared to halt flight operations if a clarification by the board was not made.

But Pravit Sinawatra, the THAI executive vice-president for the operations department, ruled out any work stoppage affecting the airlines flights.

''We will not do anything to hurt our customers or operations,'' he said.

The company, 51% owned by the Finance Ministry, reported first quarter profits of 2.2 billion baht, down 47.6% from the year before due to rising fuel costs and currency fluctuations.

Shares of THAI closed yesterday on the Stock Exchange of Thailand at 22 baht, up 50 satang, in trade worth 48.61 million baht.

Thursday, June 26, 2008

Plane abandoned at Hanoi airport

Officials say the plane could belong to a Cambodian airline

Vietnamese authorities say they are mystified as to who owns a Boeing 727 which has been abandoned at Hanoi's Noi Bai airport.

The plane was flown in from Siem Reap in neighbouring Cambodia in late 2007 and has been unclaimed ever since.

An airport official told the BBC that they believe the owners could be an airline based in Cambodia.

The official said that if it remains unclaimed, the plane will have to be sent for scrap.

The plane has a Cambodian flag on its fuselage and is emblazoned with the name Air Dream, but the authorities say they have no information about the airline.

Earlier, one security official at Noi Bai airport told the BBC's Vietnamese Service that the plane belongs to bankrupt budget Cambodian airline Royal Khmer, but this is not certain.

Permission was originally given for the plane to remain at the airport while essential maintenance was carried out but these repairs have not been done.

Online newspaper VietnamNet reported that the owners could be unable or unwilling to pay the required airport parking fees.

Airline fuel surcharges reach $1000

Flight Centre said Japan Airlines would soon become the first carrier to charge travellers a $1000 fuel surcharge on its popular Sydney to London route when its latest surcharge increases were applied from July 1.

Thai Airways and Malaysian Airlines will increase their fuel surcharge next week, taking the levy nearer to $1000 for their London routes.

Flight Centre managing director Graham Turner said the overseas airlines were defying the Australian trend, led by Qantas Airways and Virgin Blue, of increasing base airfares to reflect fuel price rises.

"At a time when most experts are predicting further fuel price rises, surely the time has come for fuel to once again be included in the base airfare," Mr Turner said.

The fuel surcharge will increase on a return Sydney-UK flight rise from $773 to $1076 on Japan Airlines, from $526 to $892 on Thai Airways and from $588.60 to $829.60 on Malaysian Airlines.

Emirates announced price rises from next month that did not have a fuel surcharge.

Mr Turner said airlines, by announcing price changes in advance, had presented travellers with a small window of opportunity to save.

Bombardier not worried about increased turboprop competition from China

MONTREAL — The market for fuel-efficient turboprop airplanes is getting a little more crowded with this week's launch of a Chinese-made airplane, but Bombardier (TSX:BBD.B) says there's enough demand for its regional aircraft to go around.

Montreal-based Bombardier said it's the only aircraft manufacturer with three distinct families of products: turboprops for short haul, regional jets for mid-range and the proposed CSeries for longer-range and mainline carriers.

"Together, our products offer an unbeatable range for a growth market like China where we believe there is a market for us and indigenous makers," Bombardier spokesman John Arnone said in an e-mail.

Bombardier says it has nearly half of the large turboprop market, led by the Q400. It has orders of 301 aircraft with a backlog of about 110 planes.

The company is studying an extended 90-seat version of the plane.

China Aviation Industry Corp. 1 (AVIC 1) plans to launch on Sunday its latest propeller aircraft, the Modern Ark 600. The fuel-efficient competitor to Bombardier's Q400 and the French ATR will roll off the assembly line in the northern city of Xian, the China Daily reported.

"To assure a bigger slice of the turboprop market, the MA600 is designed to meet demand for the next 10 years," said senior AVIC 1 official Chen Fusheng.

The only MA model on the market is the 50-to 60-seat MA60 that is in service mainly in Africa and Southeast Asia.

The new MA600 will be 300 kilograms lighter, consume less fuel and be equipped with maritime survival functions for island countries, the government-run newspaper said.

Trials are slated to begin in September with the first delivery following next year to a civil aviation university in southwest China.

The company has also started to develop the MA700 followup aircraft mainly targeted for sale in Europe and the United States.

Turboprops have huge potential in the era of increasing oil prices, Chen said.

"We hope to see that 40 per cent of all turboprop aircraft delivered in the world in 2018 are from the MA series."

China's AVIC 1 may not be the only rival that will attempt to muscle in on the turboprop market. Bombardier's Brazilian rival Embraer said it is analyzing a re-entry into the commercial turboprop market to substitute for its small regional jets.

Others may have plans to enter the market, but Bombardier is further advanced and has the advantage of being able to offer product now, says Jacques Kavafian of Research Capital.

"Bombardier is well-positioned to service that market now when the airlines need it," the analyst said Wednesday.

In the face of soaring fuel prices, airlines are delaying capital expenditures until the oil situation and travel demands are clearer.

"Who says that by 2018 that need will be there," he said, adding growing competition is something Bombardier needs to stay on top of.

Over the next 20 years, there will be global demand for 1,900 turboprop planes, representing more than one-third of the demand for regional aircraft, suggested joint research by Bombardier and the Aviation Industry Development Research Centre of China.

Bombardier shares gained 25 cents, or 3.43 per cent, in heavy trading to close at $7.54 in trading Wednesday afternoon on the Toronto Stock Exchange.

AirAsia hands out e-vouchers for flight delays

AirAsia is handing out e-vouchers worth 1,800 baht each to passengers if there is a flight delay of more than three hours.

The compensation only covers delays caused by the airline but not problems attributed to bad weather, air traffic control or airport closures.

The airline's CEO Tony Fernandes said the aim was to create a fair and positive experience for passengers and also to improve its service performance.

The e-vouchers, which will be issued to passengers via email, can be used to buy AirAsia tickets and would remain valid for a period of three months from the date of issue.

The campaign launched June 16 is restricted to AirAsia passengers, not AirAsia X that plies longer routes.

In addition, the airline recently introduced a choice of hot meals such as roasted chicken, chicken fired rice and a spicy dish of rice with stir-fried chicken, basil leaves and chillies on all its domestic flights. If passengers place orders for meals in advance when they book via the internet, they will receive 10 percent discount off the normal price.

For more information, visit its web site at www.airasia.com.

THAI board to decide future of Nok Air

Thai Airways International will decide the future of its loss-ridden low-cost airline Nok Air today, but will not increase its holding, THAI president Apinan Sumanaseni said yesterday. At the same time, a Nok Air executive said the airline will not stop flying.

Mr Apinan said the airline will be officially informed of today's decision at a Nok Air board meeting on July 4.

THAI has a 39% stake in Nok Air, which has been hard hit by rising fuel costs and falling traffic.

Some estimate the airline's losses at over one billion baht. However, Nok Air executive vice-president Sehapan Chumsai denied the accumulated loss is that high. The airline will keep flying, he said. Services and ticket sales will continue as normal.

He said Nok Air management had tried to adjust the airline's operations to cope with rising fuel prices, as had other airlines. Nok Air had suffered losses only during the last four to five months.

The airline would be able turn its business around eventually, he said.

Wednesday, June 25, 2008

Oil Surge May Cost Jet Makers Orders

Airbus, Boeing Face the Deferral or Loss
Of Up to a Third of Their Record Bookings
By J. LYNN LUNSFORD and SUSAN CAREY
June 25, 2008; Page B1

As rising oil prices cause even the strongest airlines to struggle, Airbus and Boeing Co. face the possibility that as many as a third of their orders for new jets could be postponed or canceled.

[Boeing 737]
Bloomberg News/Landov
Boeing could see fewer orders for its 737 (above), as airlines scale back purchases.

Driven largely by demand from airlines outside the U.S., the rival manufacturing giants over the past three years have collected almost 7,000 orders for modern fuel-efficient jets. For now, both jet makers say they are sold out for much of the next three years and are continuing with plans to raise production rates to meet demand.

But the landscape is shifting as oil prices rattle the underlying economics of the airline industry. Some airlines, including JetBlue Airways Corp. and Delta Air Lines Inc., are already taking steps to defer deliveries or rid themselves of orders. Others are starting to repeat steps they took after the Sept. 11, 2001, terror attacks, such as permanently parking gas guzzlers and selling newer jets to leasing companies for cash before leasing them back on a monthly basis.

The combined value of the orders for Airbus and Boeing planes exceeds $500 billion at list prices, so large-scale cancellations and deferrals could easily amount to tens of billions of dollars and affect suppliers of engines and other parts in addition to the jet makers.

Officials at Boeing and Airbus, a unit of European Aeronautic Defence & Space Co., say orders for their jets are spread across a diverse group of carriers world-wide, insulating them from regional economic swings. But they acknowledge that they are in almost daily talks with airlines seeking to cancel or defer deliveries. Although most of these discussions involve U.S. carriers, signs of stress have emerged from India to Europe.

"Everything is on the table when an airline is looking for cash," says Steven Udvar-Hazy, chairman and founder of aircraft-leasing giant International Lease Finance Corp., a unit of American International Group Inc. and one of the manufacturers' largest customers.

Mr. Udvar-Hazy predicts that 25% to 30% of the two makers' order books -- roughly equivalent to the number of planes that were intended to accommodate airline growth rather than replace aging planes -- could be subject to what he called the "flake-out factor" if oil prices continue their unprecedented rise.

[chart]

Indeed, with oil at more than $135 a barrel, some analysts, and even the manufacturers themselves, see potential game-changing circumstances on the horizon. Douglas Runte, a strategist with RBS Greenwich Capital who follows the airline industry, says that world-wide, "many airline business models cease to work at $135-a-barrel oil prices."

Airlines -- particularly the big U.S. carriers that withstood years of financial trauma after the 2001 attacks -- are in a quandary: They can't afford to fly their old gas guzzlers, and many of them can't afford to buy lots of new planes. Yet after years of putting off much-needed purchases, they also can't afford to wait to purchase more fuel-efficient replacements.

John Leahy, chief operating officer for customers at Airbus, says the bulk of orders should be safe as long as business travelers continue to fill seats, but that's no certainty as oil prices rise. "I think oil is going to have to go a bit over $150 a barrel before it forces a world-wide recession, which is when you would expect to see business travel start to taper off," he says. If that happens, he adds, "airlines would obviously have to take a closer look at their plans."

Scott Carson, president of Boeing Commercial Airplanes, says the U.S.-based aerospace company has been in close contact with "a number of our customers," particularly as fare increases have failed to keep pace with rising energy costs. "I don't think I've talked to any airline that believes this is a phenomenon that can be sustained given today's business model," he says. "We haven't seen any cancellations," he adds, "but we have had a couple of carriers ask to move their deliveries out of 2008 and into later years."

With demand for fuel-efficient airplanes hitting a record, both manufacturers say that some cancellations or deferrals would give them needed breathing room in their overbooked production schedules. The handful of delivery slots that have opened up are being snapped up by such carriers as AMR Corp.'s American Airlines, which is racing to replace some of its 300 MD-80 aircraft with new Boeing 737s, which are 25% cheaper to operate. The airline has also signaled it may try to accelerate the pace of adding new planes.

Continental Airlines Inc. and US Airways Group Inc. have relatively large numbers of planes on order and say they are committed to taking them. (UAL Corp.'s United Airlines has made a virtue of having not a single new plane on order and is now targeting 100 older aircraft for early retirement from its fleet.)

[chart]

But some other U.S. carriers are beginning to trim around the edges of their orders, even as they accelerate the retirements of their oldest, least-efficient planes. Discounters JetBlue and AirTran Holdings Inc.'s AirTran Airways are both scaling back their once heady growth rates. JetBlue last month said it would defer deliveries of 21 Airbus A320s for about five years. AirTran said in April that it sold two nearly new 737-700s and deferred delivery of 18 more for four years.

Even Southwest Airlines Co., the most financially sound U.S. airline, says it is scaling back its growth rate and deferring some options to buy aircraft. The low-fare airline will take all 29 new planes it committed to this year, but it will accept only 14 in 2009 and similar numbers in subsequent years.

Delta recently disclosed that 34 of the 36 Boeing 737s it had on firm order were sold to third parties, enabling it to cut capital spending by $1.4 billion between now and 2010. A Delta spokeswoman says the airline took the step when it was in bankruptcy-court protection, not because of today's economic environment.

US Airways 18 months ago "in a different economic climate," decided to get rid of its old 737s, 757s and 767s and order new Airbuses, says Andrew Nocella, senior vice president of schedule planning. The airline is now "looking at a few changes to the order with Airbus" involving deferrals, he says, without disclosing details.

Northwest Airlines Corp., which remains eager to receive the 18 Boeing 787s it has on firm order, is nonetheless shrinking. It says it plans to sell 14 757s and A320s that it owns and that are paid off, and it will remove 33 elderly DC-9s from its fleet and try to find buyers, mostly outside the U.S., or sell them for parts.

"In the current environment, capacity has to come out of the industry," says Dave Davis, Northwest's chief financial officer. "That comes from retiring planes in the fleet and not taking delivery of new planes."

Write to J. Lynn Lunsford at lynn.lunsford@wsj.com and Susan Carey at susan.carey@wsj.com

GE Aviation to invest US$30m to expand S'pore facility


By Karamjit Kaur, Aviation Correspondent
GE Aviation Service Operation (Geasco) - an operating unit of United States technology and services conglomerate General Electric Company - has embarked on a US$30 million expansion of its Singapore facility.

Located at Loyang Way, the company which repairs and maintains aircraft engines, aims to increase work space by 20 per cent to 250,000 sq feet by June next year.

Geasco which reported a turnover of more than US$250 million last year and employs 915 people, expects to increase revenue by about 80 per cent over the next five years and create 500 more new jobs.

Started in 1981, Geasco repairs and refurbishes turbine blades and vanes, combustors, rotating parts, and seals for aircraft engines for more than 100 customers around the world.

The company broke ground for its facility extension on Tuesday afternoon.

Vice-president and general manager (global operations) Bill Fitzgerald, said: 'GE's investment clearly recognises Geasco's great reputation for delivering on customer and shareholder value and our commitment on expanding our product offerings in Singapore.'

'We are also very pleased with the partnership we have with the Singapore Economic Development Board who has been a huge supporter of this expansion plan, and we look forward to working even closer going forward.'

EDB chairman Lim Siong Guan, said: 'We are pleased to celebrate this significant milestone with GE as the company expands its maintenance, repair and overhaul capacity and capabilities in Singapore.'

'The growth of GE's operations here is clear testament of Singapore being an ideal location for business and investment.'

'GE's new facility underscores the company's strong relationship of more than 35 years with Singapore, and also reinforces our status as Asia's leading aerospace hub.'

Mr Fitzgerald said the fuel crisis that has hit airlines has not affected GE so far.

400,000 Americans visit Vietnam in 2007

Lively links between Vietnam and the US
07:04' 24/06/2008 (GMT+7)

US visitors in HCM City.

Busy East-West trips

Last year more than 400,000 Americans visited Vietnam, a rise of nearly 6 percent from 2006 and doubling the number in 2000. But the arrivals represent less than 10 percent of the total foreign visitors to Vietnam in 2007 and also a fraction when compared with about 60 million American tourists going on overseas trips each year.

"As Americans continue to travel, the United States, with its development capacity and potential, will remain a significant source of investment capacity, which Vietnam needs to tap into," said Hoang Tuan Anh, former Head of the Vietnam National Administration of Tourism and now Minister of Culture and Communications.

But the economic slowdown in the United States so far this year has prompted many to tighten their pocket and keep more at home. Figures published by the General Statistics Office showed 133,000 Americans came to Vietnam in the first quarter of 2008, 7.9 percent higher than the same period last year but which is slowing from a growth of 12 percent in the first quarter of 2007 from a year earlier period.

Tourism industry officials believe the decline in U.S. tourist arrivals would be short-lived. They say a long coast line, friendly people and an economic and political stability in Vietnam remain stimulus to attract foreign tourists.

In tour business, the BTA allowed U.S. companies to establish joint ventures with Vietnamese partners with no limitation on the foreign ownership and do business with hotels and travel agents.

Vietnam's tourism has projected to target the United States as a major supplier of tourists under its 2001-2010 plan but apart from obstacles rising from political relations and the geographical distance, the country's tourism sector faces shortages of experience and budget to fund promotional activities in the U.S. market.

Foreign investment in hotels, resorts and leisure projects are still modest, or around 10 percent of the total foreign investment in Vietnam worth $104 billion.

Several major projects have been licensed in the first quarter of 2008, especially in HCMC, Da Nang, Quang Nam Province, Hue and in the central provinces of Khanh Hoa and Binh Thuan.

Most of these locations have historical attraction as they are all more or less related to sites of the past conflict which is an attraction since a large number of U.S. tourists coming to Vietnam are veterans, their relatives or simply those who are interested in learning about the war.

In January 2008 California-based Good Choice received an investment licence to invest $1.3 billion in a Disneyland-style theme park in the southern coastal town of Vung Tau.

The affiliate of leading U.S. real estate and investment firm Platinum Dragon Empire Incorporated (PDE) would build a 80-storey tower and a "Wonders of the World" site in the complex.

Other U.S. investors also eyed on Vietnam's developing tourism industry, such as Winvest Investment LLC which is working on a $300 million, hotel and casino complex in Ba Ria-Vung Tau Province.

In regard to outbound tours, several domestic tourist companies have started offering trips to the United States.

Saigontourist Holding Company, a major tour operator established since 1975 as the first company dealing with tourism in Ho Chi Minh City, has been dealing with travel agencies of 36 countries worldwide including the United States.

Similarly Vietravel and Hoan My Tour Co also run tours to New York, Washington DC, Las Vegas and Los Angeles.

Vietnam Airlines, the national flag carrier, said it has projected to open its direct air service between Vietnam and the United States in late 2008.

It has already been operating code-share flights with China Airlines and American Airlines to take passengers to 12 cities, including Los Angeles, San Francisco, New York, Chicago and Washington.

Cultural platform

In September, 2003 Raymond F. Burghardt, U.S. Ambassador to Vietnam, said the success in the two countries' relation should not only be limited in commercial progress.

In the field of culture exchange, music performance, fine arts, literature and exhibitions have all been used to help convey ideas and cultural values.

The United States has demonstrated its respect for Vietnam's culture by financing restoration at several pagodas such as the Dau Pagoda in Bac Ninh Province and the preservation of music of the Tay people in the northeastern region.

In late May 2008, the Museum of Vietnamese History in Ho Chi Minh City put on display 18 restored Buddha statues originally sculpted by Vietnamese artists in the 17th and 19th centuries.

The project involving Vietnamese craft-men repainting the statue and applied a gild on them received more than $27,000 from the U.S. Ambassador's Fund for Cultural Preservation which helps countries worldwide preserve disappearing cultural traditions.

The fund has also extended grants to restore artifacts and other items from the Cham exhibits at the Cham Museum in the central city of Da Nang.

U.S. Ambassador Michael Michalak said the grants have been in place since Buddhism plays an important role in Vietnamese life and the joint effort represents good will between the two countries.

The State Department has also funded America singers and jazz groups who have held master classes and given performances throughout Vietnam. Other U.S. fundings have also gone to an exchange of dancers and art managers organised by the dance theatre workshop of New York.

The American Museum of Natural History and Vietnam's Museum of Ethnology opened in March 2003 the exhibition "Vietnam: A Journey of Body, Mind, and Spirit" in New York and the footage of the exhibition was aired on Vietnam Television.

Besides, the U.S. Government supports the Asia Foundation in its work stocking the libraries of Vietnam with useful works. They organised U.S. visit for American Studies professors from Vietnam and conferences on American Studies in Vietnam.

In May 2007 a U.S. Film Week was held in Hanoi and HCMC.

In June 2007 Vietnam sent a delegation of 39 folk artists and artisans to participate in the Smithsonian Folklife Festival in the United States.

In recent months American singers toured Vietnam and gave public performances in many cities across the country.

Sister cities

In September 1950 U.S. President Dwight D. Eisenhower initiated the sister city programme as he proposed a people-to-people, citizen diplomacy initiative during a White House Summit on Citizen Diplomacy.

The president's hope was that personal relationships, fostered through sister city, county, and state affiliations, would lessen the chance of future world conflicts.

Since then Sister Cities International the international membership association headquartered in Washington, DC represents over 2,500 communities in 126 countries around the world.

Five pairs have been established between Vietnamese and U.S. cities so far, namely Hai Phong - Seattle, Ho Chi Minh City - San Francisco, Hue - New Haven, Da Nang - Oakland and Vung Tau - Newport Beach.

In 1994 New Heaven became the first U.S. city to enter the Sister City partnership with Vietnam's central city of Hue. The Sister City Project members went to Vietnam to help deliver medical supplies and computers to institutions with which the project has ties, among the clinics and schools.

Seattle said its work with Hai Phong focused on four areas: improving access to public health services, developing a plan to attract tourism, building a web site, and helping with urban planning.

On December 10, 2004 the first United Airlines flight left San Francisco and landed in Ho Chi Minh City for the first time since the war ended, opening opportunities for increased trade, investment and tourism between the two sister cities as well as the two nations.

In May 2005 a delegation from the Bay Area visited Hanoi to celebrate the "10th Anniversary" of the normalisation of relations between the United States and Vietnam.

The group was formed by members of the San Francisco - HCMC Sister City Committee and others who joined to celebrate "San Francisco Week" in Ho Chi Minh City.

San Francisco Mayor Gavin Newsom said that the "activities of the visit are focused on recognizing the important role the Sister City relationship has played in improving the relations between the countries over the past ten years and also strengthening and deepening the friendship between our two great cities."

(Source: VN-US Society & Vietnam-US Magazine)

Vietnamese airline employees charged with gold smuggling to Russia

Trio face charges for gold smuggling attempt
Police are pressing charges against three people who allegedly attempted to smuggle around 1.5 kilograms of gold to Russia two years ago.

The trio, Nguyen Xuan Hao, Dang To Hai, and Le Trung Hieu, are being charged with “smuggling goods and currencies,” police announced Monday.

Nguyen Xuan Hao was caught red-handed at HCMC’s Tan Son Nhat Airport in October 2006 carrying some 1.5 kilograms of gold jewelry hidden in a pilot’s headphones.

He was about to board flight VN527 to Russia.

Hao was an employee of Vietnam Airlines’ A75 Airplane Enterprise which specializes in repairing and maintaining the carrier’s aircrafts.

In order to board the plane without being detected with the gold, Hao used his staff card to cross the tarmac as if he was working, though he was not on shift at the time, the police said.

During questioning, Hao said the owner of the contraband was Dang To Hai from the southern province of Ba Ria-Vung Tau.

Hai had allegedly hired Hao and Le Trung Hieu, another airport employee, to smuggle the gold to Russia for his associate.

RP-Cambodia air talks yield 8 flights for Clark

By Reynaldo G. Navales

CLARK FREEPORT -- About 32 flights a week have been granted to the Philippines during the recently concluded RP-Cambodia Air Talks held in Manila.

Eight of the 32 flight entitlements have been allocated to the Diosdado Macapagal International Airport (DMIA), which is now becoming the country's premier gateway.

The Philippine and Cambodia air panels met last June 19-20 in Manila. The Philippine Panel was represented by Department of Transportation and Communication (DOTC) Undersecretary for Civil Aviation Doroteo Reyes II, while Cambodia was represented by Secretariat of State Civil Aviation (SSCA) Deputy Director General Rumchek Sovary.

Clark International Airport Corporation (Ciac) officials who sat along with the Philippine Air Panel during the review of existing Air Services Agreement (ASAs) were successful in negotiating for entitlements in Clark.

The entitlements will prepare the DMIA to become the main international airport.

Ciac president and chief executive officer (CEO) Victor Jose Luciano said this is a welcome development.

"These new entitlements will further boost the ongoing developments taking place at the airport as more flights are being mounted so as to accommodate more passengers," said Luciano.

Ciac executive vice president (EVP) and chief operating officer (COO) Alexander Cauguiran sat as a member of the RP panel that represented Ciac in the RP-Cambodia Air Talks held in Metro Manila.

Cauguiran said the air talks were aimed at strengthening mutual trade in economic, tourism and aviation relations between the Philippines and Cambodia.

Tuesday, June 24, 2008

Asian airlines in better shape than global peers

Fuel costs hurt but big players can cope

Many Asian airlines are expected to fly through the current turmoil caused by high fuel costs and slowing traffic with fewer casualties than their counterparts in other regions, particularly in the United States.

But chances are that better-established Asian airlines including Thai Airways International will see their profits squeezed in the short term, with some losing money, while some smaller carriers in the region could possibly be closed.

This is the most likely scenario for Andrew Herdman, director-general of the Association of Asia Pacific Airlines (AAPA), a grouping of 17 leading Asian airlines and a New Zealand carrier.

With their strong balance sheets, performance records, good reputation for services and diverse markets, Asian airlines are in much better shape than US and European carriers to weather the violent storms, Mr Herdman said.

''But on the other hand, the challenge is fuel is rising very fast, so how quickly you can hedge, and how quickly you can pass on the costs are important,'' he pointed out.

High jet fuel prices, which have gone above $160 a barrel, are causing major headaches for the airline industry in terms of costs and significantly weakening air travel demand both for both business and leisure sectors.

The International Air Transport Association (IATA), which represents 230 airlines, warned recently that the industry may face a collective loss of $6.1 billion this year, if crude oil prices stayed at an average of $135 a barrel for the rest of the year.

Soaring fuel costs are consuming about 40% of each airline's total operating costs, up from about 30% previously, the AAPA said.

Asian airlines get some relief in the form of respectable economic growth in many countries, though they are not entirely insulated from the US downturn and a potential slowdown in Europe.

The Kuala Lumpur-based AAPA anticipates slower growth for Asian carriers than they had experienced.

Smaller carriers in Asia are prone to feel the pinch of a hostile environment, but the extent of potential shutdowns would be smaller than in other regions, the AAPA director-general said.

Signs of a slowdown began to show in April when AAPA member airlines, such as THAI, Singapore Airlines and Cathay Pacific, recorded modest growth.

The member airlines in April carried a total of 11.9 million international passengers, up only 2.2% year-on-year in terms of revenue passenger kilometres (RPK), while growth in international passenger traffic was similarly modest, registering a year-on-year increase of 2.6%.

The growth in demand failed to keep pace with the 3.7% growth in capacity, leading to a decline of 0.8 percentage points in the average passenger load factor to 75.2%, according to AAPA statistics.

Demand for air freight also remained subdued in April, with AAPA international freight traffic growing by 2.1% in FTK (freight tonne kilometre) terms. However, the average cargo load factor for the month gained 1.6 percentage points to 67.2%, on a 0.3% reduction in offered capacity.

In any case, Mr Herdman said, AAPA airlines would not be able to repeat the profitability they achieved last year. They had aggregate profits of $5.2 billion in 2007, representing a 5% net margin, a marked improvement on the 3% margin recorded in 2006. Combined revenues reached $103 billion, 11% higher than in 2006.

International passenger traffic volume set a record, growing by 4.2%, and the passenger load factor rose to a record high of 77.1%. The volume of international air cargo also set a record, although the growth rate was a more modest 2.7%.

Over the long term, he said, Asian carriers could increase their share of global air travel because of their ability to deliver what passengers want.

But the AAPA chief added a word of caution: ''The fact that you are through a downturn does not mean the long-term growth story is intact. The future is bright for those people who can manage through this downturn.''

For a full copy of the report, see:

http://www.aapairlines.org/

resourcecentre/AAPAPRIssue10

-AprilTrafficResults-29May08.pdf