AIR TRANSPORT WORLD - January 2013

Forecast
2013
AIR TRANSPORT WORLD
January 2013 | www.atwonline.com | A Penton Publication
Interview
swiss ceo Harry Hohmeister
Powerplant Planning
New engine technologies shape the future
Winged Ambitions
Pegasus finds low-cost niche opportunities
The Magazine of Global Airline Management
AI R T R ANS P OR T WOR L D
A i r T r a n s p o r t Wo r l d
Another
ChAllengIng
YeAr
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BCA-4572_Air_Transport_World_Jan2012_FP.indd 1 12-12-05 12:21 301ATWpages.indd 2 12/17/2012 9:42:50 AM
atwonline.com
|
January 2013
|
atw 1
Contents
43
51
47
54
29
Volume 50 / Number 1
January 2013
This issue online www.atwonline.com/issue/January-2013
Forecast 2013
24 AnoTher ChAllenging YeAr
Guarded optimism for 2013, but no one believes it
will be easy.
By Karen Walker
27 indusTrY of ConTrAdiCTions
Boom time for aircraft orders, but not for airline profitability.
By Karen Walker
29 norTh AmeriCA: TighT disCipline
Capacity and cost controls help keep US carriers in the black.
By Karen Walker
35 AsiA: sTill hoT
Despite challenges, Asia Pacific remains one of the most
dynamic and positive regions.
By Karen Walker
36 europe: BleAk Times
For European carriers, 2012 was annus horribilis. This year
may prove only marginally better.
By Victoria Moores
38 lATin AmeriCA: lATin pArAdox
Ingredients exist for strong growth in Latin America, but
infrastructure isnt keeping pace.
By Aaron Karp
41 CArgo flATTened
Virtually no growth seen from 2007-2012 for global
air cargo traffic.
By Aaron Karp
Features
43 serviCe ChAnge
Technology and data management are the new drivers of
aircraft maintenance.
By Christine Boynton
47 Winged AmBiTions
Turkish carrier finds low-cost niche opportunities in new markets.
By Alan Dron
51 engineering innovATion
Jumps in aircraft efficiency largely fall on engine manufacturers.
By Aaron Karp
54 eYes on The goAl
Interview with Harry Hohmeister, CEO of Swiss International
Air Lines.
By Kurt Hofmann
24
36

2013
Forecast
TOC_JAN13.indd 1 12/17/12 3:30 PM
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SA 1P ATW.indd 2 12/4/12 10:36 AM
301ATWpages.indd 2 12/17/2012 9:48:05 AM
atwonline.com
|
January 2013
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atw 3
Contents
5 Editorial
Legal Shenanigans
By Karen Walker
9 NEWSBriEFS
9 obama signs law enabling US airlines
to skirt EU EtS
10 american airlines nears US airways
merger decision
12 airasia orders 100 more a320s
13 aviancataca orders 15 atr-72-600s
14 Faa orders Boeing 787 inspections
16 Bombardier confident in new CSeries
schedule
17 Emirates reports strong half-year
profit
18 oneworld eyes asia for new members
20 aNalySiS
transatlantic Manuevering
delta looks to boost its london
Heathrow presence with 49% stake in
Virgin atlantic.
By Aaron Karp
57 trENdS
63 CUStomEr SErViCES
63 adVErtiSErS iNdEx
63 adVErtiSErS WEBSitES
64 CommENtary
legal travesty. the European Court
has abandoned the rule of law with its
passenger rights bill.
By Pablo Mendes de Leon
9 16 10
20 17 57
JaNUary 2013 | Volume 50 / Number 1
A i r T r a n s p o r t Wo r l d A i r T r a n s p o r t Wo r l d
BUSiNESS/aUdiENCE
dEVElopmENt CoNtaCt
iNFormatioN
GroUp pUBliSHEr
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bill.freeman@penton.com
Tel: +1 301-755-0166
Fax: +1 913-514-3909
The Blair Building
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Sr. Vp, StratEGy &
BUSiNESS dEVElopmENt
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SENior dirECtor
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TEL: +1 913-967-1686
abi.ahrens@penton.com
aUdiENCE dEVElopmENt
maNaGEr
Tyler Motsinger
TEL +1 913-967-1623
tyler.motsinger@penton.com
SUBSCriptioNS
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TOC_JAN13.indd 3 12/17/12 1:44 PM
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EDITORIAL
atwonline.com
|
January 2013
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atw 5
Legal
Shenanigans
T
wo important legal decisions were
announced as 2012 drew to a close,
both significant for the airline
industry.
In a New York court, it was decided that
United Airlines was not responsible for
alleged airport security lapses in the lead
up to the 9/11 hijacking of an American
Airlines aircraft that was deliberately crashed
into New Yorks World Trade Center.
US District Judge Alvin Hellerstein
granted a request by United and parent
United Continental Holdings to dis-
miss negligence claims brought by the
leaseholder of the World Trade Center
property (WTCP).
In his determination, the judge wrote
that it was not within Uniteds range of
apprehension that terrorists would slip
through the (Portland, Maine) security
screening checkpoint, fy to [Boston] Lo-
gan, proceed through another air carriers
security screening and board that air carriers
fight, hijack the fight and crash it into 1
World Trade Center, let alone that 1 World
Trade Center would therefore collapse and
cause Tower 7 to collapse.
Te action was brought as part of a wider
suit against United and American Airlines
by WTCP and afliated companies, which
purchased 99-year leases for four World
Trade Center buildings from the Port Au-
thority of New York and New Jersey in July
2001, three months before the attacks.
Separately, in a French appeals court,
Continental Airlines was cleared of criminal
blame for the July 2000 crash of an Air
France Concorde aircraft at Paris Charles de
Gaulle airport.
Te appeals court decision came almost
two years to the day after another French
court found Continental to be criminally
responsible for the crash, in which 113
people died. Tat court had concluded
there was a link between safety failures by
Continental and the fre that brought down
the Concorde. It held the airline and its
mechanic responsible for having manufac-
tured and installed a piece of titanium that
fell from a Continental DC-10 that took
of from the same runway shortly before the
Concordes departure.
While both of these legal decisions
ultimately came down on the right side of
justice, they were painfully long to reach
conclusion and involved cost, time, distrac-
tion and stress that were unnecessary. In
short, these legal shenanigans should never
have been allowed.
Criminalization of aviation accidents
and legal interference in air transportation
issues are growing and disturbing trends
that need to be checked. At the very least,
there should be a common set of ICAO-
led, globally agreed parameters for when
legal pursuit is justifed and when so, the
extent of its reach. Criminalization, or
even its mere potential, runs the risk of
silencing the open reporting culture that
is necessary for full accident investigations
and accident prevention. But this industry
also must do a better job of communicat-
ing that message without sounding like
it assumes aviation safety automatically
trumps justice. Safety and justice are both
important principles; a sound industry
accord would help ensure the latter does
not jeopardize the former.
EDITORIAL STAFF
Editor-in-Chief
Karen Walker
+1 301-755-0165
karen.walker@penton.com
Managing Editor
Kathryn M. Young
+1 301-755-0170
kathy.young@penton.com
Senior Editor
Aaron Karp (North America)
+1 301-755-0167
aaron.karp@penton.com
Senior Editor/Europe Bureau Chief
Victoria Moores
Tel: +44 (0) 7966 389 339
victoria.moores@penton.com
Editor/ATWonline.com
Linda Blachly
+1 301-755-0169
linda.blachly@penton.com
Editor/New Media
Christine M. Boynton
+1 301-755-0163
christine.boynton@penton.com
Contributing Editor
Edvaldo Pereira Lima
Latin America
Tel & Fax: +55 11 37336323
ed.pl@terra.com.br
Contributing Writers
Polina Borodina
Henry Canaday
Katie Cantle
Alan Dron
Kurt Hofmann
Michele McDonald
Robert W. Moorman
Anne Paylor
Art Direction & Design
Unconformity, LLC.
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A i r T r a n s p o r t Wo r l d A i r T r a n s p o r t Wo r l d
Karen Walker | Editor-in-Chief
karen.walker@penton.com
Editorial_JAN13.indd 5 12/18/12 9:23 AM
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Obama signs bill enabling US airlines to skirt EU ETS
US President Barack
Obama signed legislation
that enables the countrys
transportation secretary to
prohibit US airlines from
participating in the European
Unions (EU) Emissions
Trading Scheme (ETS).
After the European
Commission (EC) agreed in
November to temporarily
suspend the ETS for flights to/
from the EU, the US House of
Representatives went ahead
and cleared the anti-ETS bill
already passed by the Senate
in September, moving the leg-
islation to the presidents desk.
Obama signing the bill doesnt
start the international battle
that might have ensued had he
done so before the ECs tem-
porary back down, but the law
theoretically gives the US more
leverage in future negotiations.
Airlines for America (A4A)
president and CEO Nicholas
Calio said in a statement that
Obamas signing of the bill
sent an unequivocal signal to
the EU that the ETS is illegal
and unilaterally imposed. He
reiterated US airlines call for
a global sectoral approach
at the international level to
regulate aircraft carbon diox-
ide emissions.
The law signed by Obama
states that the transportation
secretary can bar US carriers
from participating in the EU
ETS if doing so would be in
the public interest, particu-
larly taking into account the
impacts on US consumers,
US carriers and US operators;
the impacts on the economic,
energy and environmental
security of the United States;
and the impacts on US foreign
relations, including existing
international commitments.
It additionally green lights
the transportation secretary
(currently Ray LaHood) to
take other actions under
existing authorities to hold
operators of civil aircraft of
the United States harmless
from the emissions trading
scheme. The law also gives
the secretary the authority to
reassess a prohibition on
US airlines participation in
the ETS if the EU amends the
scheme or an international
agreement on aircraft emis-
sions is reached.
House Transportation and
Infrastructure Committee
chairman John Mica (R-Fla.)
said, I am pleased that this
measure has been signed by
the president over suggestions
by some environmental groups
to veto the bill. The law is
a clear signal that the United
States will not accept the EUs
go-it-alone attempt to impose
emissions taxes on other
nations for activities far out-
side the EUs own borders.
Major EADS ownership restructuring
agreement reached
Airbus parent EADS unveiled
an agreement to make a far-
reaching change in the way
the companys shareholding is
structured.
An EADS shareholder struc-
ture shakeup had been widely
predicted in recent weeks.
Under terms of the accord,
France and Germany will build
equal ownership positions in
EADS, the company said, add-
ing that the two countries will
have direct stakes of about 12%
each while Spain will hold a
4% share. Meanwhile, German
company Daimler (which now
holds a 15% stake in EADS)
and French company Lagardere
(which now holds 7.5% of
EADS) will largely reduce their
stakes, EADS said.
While the deal will give
France and Germany more
direct ownership stakes
in EADS, it will lower total
French, German and Spanish
holdings in the company from
about 50% today to under
30% under the new structure.
Also, in an attempt at nor-
malizing and simplifying the
governance of EADS, share-
holdersincluding France and
Germanywill give up veto
rights over decision-making.
More of the companys
shares will be floated on the
open market, with EADS plan-
ning to eventually put around
70% of its ownership holdings
on the market.
We are making a big
leap forward in terms of
governance, EADS CEO
Tom Enders said in a state-
ment. Strategy and industrial
projects in the future will be
solely defined and decided
by the board of directors and
the executive team, [and] the
operations will be managed
without any outside interfer-
ence from specific sharehold-
ers or shareholder concerts
The new shareholder structure
allows for a significant increase
in the free float of shares. Our
intention for a major share
buy-back next year, based on
our strong liquidity position,
will benefit all shareholders.
Fitch Ratings said the previ-
ous complex arrangement of
state control at EADS, through
both direct and indirect share-
holdings, was a key factor in
the collapse of EADS attempt-
ed merger with BAE Systems
in September.
atwonline.com
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January 2013
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atw 9 atwonline.com
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January 2013
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atw 9
NEWSBRIEFS
For daily news stories, go to atwonline.com/dailynews
ChinESE COnSOrTiUM AgrEES TO
bUy 80.1% OF iLFC FOr $4.23 biLLiOn
American international group (Aig) has
agreed to sell 80.1% of aircraft leasing
giant international Lease Finance Corp.
(iLFC) to a consortium of Chinese inves-
tors for $4.23 billion in cash.
Under the agreement, detailed in a US Securities and
Exchange Commission filing, the consortium led by
new China Trust Co. chairman Weng Xianding will
also have an option to buy another 9.9% for $522.5
million. The total deal, subject to approval of regula-
tory authorities in both the US and China, values iLFC
at $5.28 billion. iLFC, originally founded by Steven
Udvar-hazy in Los Angeles in 1973, has a portfolio of
1,000 owned or managed aircraft and commitments to
purchase another 233.
The investor group is comprised of new China
Trust Co., China Aviation industrial Fund and
P3 investments. According to Aig, the group is
expected to be expanded to include new China Life
insurance Co. and an investment arm of industrial and
Commercial bank of China international.
in the SEC filing, Aig said the agreement includes a
clause allowing for termination of the transaction on
May 15, 2013, if it has not been finalized. The termina-
tion date could be extended to June 17, 2013.
Recreated LOGO
Decision Nearing | 10
American mulls
US Airways merger.
787 Inspections | 14
FAA cites
fuel leak risk.
Emirates Earns | 17
Dubai airline posts
big half-year profit.
NEWSBRIEFS
Newsbriefs_JAN13_v2.indd 9 12/14/12 3:27 PM
American Airlines says US Airways merger decision nearing
American Airlines chairman,
president and CEO Tom
Horton said AMR Corp. will
soon decide if it will emerge
from bankruptcy protection
as a standalone entity or as
part of a merged carrier with
US Airways.
In a December message
to workers, Horton noted
Americans pilots, represented
by the Allied Pilots Association
(APA), approved a new col-
lective bargaining agreement,
ending a contentious process
of negotiating new labor
deals with unionized employ-
ees. That allows the airline
to prepare to emerge from
Chapter 11, which it entered in
November 2011.
As we bring our restruc-
turing to a close, we are also
completing our review of
strategic alternatives, Horton
told AMR employees. As you
know, we have been evaluating
the merits of a combination
under a non-disclosure agree-
ment with US Airways. While
we are confident the new
American will be very strong,
we are evaluating whether
such a combination could cre-
ate value for our owners and
a positive outcome for our
people and our customers. We
expect to have a conclusion on
this soon.
The Wall Street Journal
reported that US Airways
merger proposal, confiden-
tially sent to AMR and its
creditors last month, would
give AMR creditors 70%
of the merged carrier while
US Airways shareholders
would hold 30%. Also, the
newspaper reported that US
Airways chairman and CEO
Doug Parker would head the
merged carrier under the
proposal.
APA said it continues to
support a merger with US
Airways as the best path to
a stronger, more competitive
American Airlines that will in
turn enhance our pilots long-
term career prospects.
California sues Delta Air Lines over smartphone app
The state of California has filed
a lawsuit against Delta Air
Lines, alleging the airline is in
noncompliance with state laws
regarding online privacy.
Under California law,
companies collecting person-
ally identifiable information
online, including through
mobile devices, must post a
privacy policy informing con-
sumers of what information is
collected and how it is used.
California attorney general
Kamala Harris said the Fly
Delta smartphone app, which
allows passengers to check-
in for flights and make other
transactions, has no posted
privacy policy.
By filing the suit in a San
Francisco court, Harris said
the state is seeking to enjoin
Delta from distributing its app
without a privacy policy and
to impose penalties of up to
$2,500 for each violation.
Harris said in a statement,
California law is clear that
mobile apps collecting per-
sonal information need privacy
policies and that the users of
those apps deserve to know
what is being done with their
personal information.
Delta said it does not make
public statements about pend-
ing litigation.
Lufthansa seLLs
haLf its amadeus
stake
Lufthansa Group (LH)
has raised 307 mil-
lion ($389.7 million)
from the sale of a
3.61% stake in IT firm
Amadeus, reducing
its total shareholding
from 7.61% to 4%.
In a statement, LH
said it sold the 16.2
million shares via an
institutional private
placement to strength-
en its liquidity.
The deal combines with
a recent Air France-
KLM hedging transac-
tion, which involved
the placement of up
to 7.4 million shares,
equivalent to 1.66%
of Amadeus share
capital. Amadeus major
shareholders, LH, Iberia
and AF-KLM, have all
agreed to a lock-up peri-
od of 90 days for their
remaining holdings.
IATAs Tyler: ETS delay puts pressure
on airlines to find common voice
The European Commissions
(EC) decision to suspend its
Emissions Trading Scheme
(ETS) for flights into and out
of the European Union (EU)
for one year shifts the burden
to the air transport industry to
find commonality on control-
ling aircraft carbon dioxide
(CO2) emissions, IATA DG
and CEO Tony Tyler said.
Speaking at the opening ses-
sion of the Latin American and
Caribbean Air Transport Assn.
(ALTA) Airline Leaders Forum
in Panama City, Tyler reiterated
the ECs move creates space
at the ICAO level to forge a
political agreement on how
to control aviation emissions
globally. Airlines that found
unity in opposition to the ETS
must now come together to
push ICAO toward a sensible
agreement, he added.
The [ETS delay] decision
puts pressure on the [airline]
industry, he said. Now we
must find a common posi-
tion No solution is going to
satisfy every airline 100%. We
will need to find the fairest
possible compromise, remain-
ing consistent at global and
regional levels. If we fail or
lose unity, that opens the door
for individual governments
to pick us apart and impose
solutions that will, quite prob-
ably, be more expensive and
less workable for our complex
global industry.
NEWSBRIEFS
10 atw
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January 2013
|
atwonline.com
American preparing for emergence from Chapter 11 protection.
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301ATWpages.indd 11 12/17/2012 10:05:25 AM
AfriqiyAh orders
four more A350 XWBs
Libya-based Afriqiyah Airways has placed a follow-on
order for four Airbus A350 XWBs and converted its ear-
lier order for six A350-800s to the larger A350-900.
The additional order brings to 10 the total number
of A350-900s the carrier has on order. Afriqiyah
plans to configure the type with 314 seats and use
it to open new destinations in the us, the middle
east and Asia. The A350 is scheduled to enter into
service in 2014.
Afriqiyah launched operations from its Tripoli base in
december 2001. it operates three A319s, six A320 and
two A330s, according to the airlines website.
AirAsia orders 100 Airbus A320s
Malaysia-based AirAsia has
placed an order with Airbus
for an additional 100 A320
aircraft. The order is for 64
A320neos and 36 classic
A320 aircraft. The order was
announced during a visit by
British Prime Minister David
Cameron to the Airbus wing
manufacturing facility at
Broughton in the UK.
During the Farnborough
Airshow in July, AirAsia Group
CEO Tony Fernandes said the
carrier was in final negotia-
tions with Airbus for the order.
AirAsia has ordered 475 sin-
gle-aisle aircraft from Airbus,
made up of 264 A320neos
and 211 classic A320 fam-
ily aircraft. More than 100
aircraft have already been
delivered and are operating out
of its bases in Bangkok, Kuala
Lumpur, Jakarta, Manila and
Tokyo to some 70 destinations
in 20 countries across Asia.
Affiliate AirAsia X oper-
ates widebody Airbus A330-
300s on longer services from
Kuala Lumpur to Northern
Asia and Australia.
interjet signs agreement for 40 A320neos
Mexicos Interjet has signed
a purchase agreement for
40 Airbus A320neo aircraft.
Interjets investment in
these new aircraft, at manu-
facturers list price, is over
$3.2 billion, Interjet said in
a statement. It operates an
all-Airbus fleet and has not yet
announced an engine selection
for the neos.
Adding the newest
aircraft technology to our
already young and efficient
A320 fleet will allow us to
operate some of the most
cost-efficient and environ-
mentally friendly equipment
available in aviation, Interjet
chairman Miguel Aleman
Velasco said.
Interjet operates a fleet
of 36 A320s and will take
delivery of one additional
A320 later this month. In
March it will take delivery of
its first Sukhoi Superjet 100.
Including this order it has a
backlog of 45 A320 family
aircraft.
The A320neo will help
Interjet maintain our leading
position in Mexicos airline
business, Interjet president
Miguel Alemn Magnani said.
ComAC wins 50 new orders for C919
Commercial Aircraft Corp.
of China (COMAC) won 50
orders for the 150-seat C919
at the Zhuhai Air Show. The
orders comprise 20 from Hebei
Airlines, 20 from Joy Air and
10 from GECAS.
International Airlines Group
and Ryanair have signed
MOUs for the C919. To date,
COMAC has received 380
orders for the aircraft.
The C919 entered the final
design definition phase last
year. Detailed design will be
completed this year and the
first flight is scheduled for
2014. Type certification is
expected by 2016, followed
by first delivery. By 2020,
COMAC expects to produce
150 C919s annually. According
to the most recent market
forecast released by COMAC,
China will need 4,960 new
commercial aircraft by 2031.
silkAir finalizes order for 54 737s, mAXs
Singapore Airlines regional
affiliate SilkAir finalized an
order for 54 737s and 737
MAX 8s worth $4.9 billion at
list prices.
The previously announced
letter of intent, comprising 23
737-800s and 31 737 MAX 8s,
begins the carriers fleet transi-
tion to Boeing aircraft. This
is the largest aircraft order in
SilkAirs history.
CEO Leslie Thng said the
aircraft will enable the carrier
to fly to more destinations and
increase capacity on existing
routes. SilkAir, which has an
all-Airbus fleet, first announced
a letter-of-intent to place the
Boeing order in August.
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12 atw
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January 2013
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atwonline.com
Passenger Convenience Quicker Aircraft Turns
737NG Stowage Bin
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Wide feld of view with fat surface
AirAsia increases its A320neo orders to 264.
Russias Yakutia commits
to 12 737NGs
Russias Yakutia airline confirmed its commitment
to purchase 12 Boeing 737NGs, comprising three
737-700s and nine 737-800s. Delivery is sched-
uled between 2016 and 2018. airline representa-
tives said the firm order would be signed in three
to four months.
Yakutias current Boeing fleet consists of three 737-
800s, four -700s and five 757-200s. cEo ivan Prostit
said the airline could place more Boeing aircraft
orders although he did not disclose the exact number.
the airline is also increasing its fleet with Bombardier
Q400s, which will replace its antonov an-24s.
in the coming months, the airline will take deliv-
ery of two sukhoi superjet 100s (ssJ100s), which
will be used on routes inside the Yakutia republic
(Eastern siberia), part of the Russian Far North
territories.
aviancataca orders 15 atR 72-600s
AviancaTaca placed a firm order
for 15 ATR 72-600s plus 15
options. Deliveries are sched-
uled to begin in June 2013.
The new aircraft, which will
serve regional routes in Colombia
and Central America, will replace
Fokker 50s and ATR 42s.
Avianca Airlines will operate
the new aircraft to destinations
including Barrancabermeja,
Florence, Manizales, Neiva,
Pasto, Popayn, Tumaco and
Yopal. TACA will operate the
ATRs into Guatemala City,
Flores, Tegucigalpa, Roatn,
San Pedro Sula, San Salvador,
Managua, San Jos and Liberia.
AviancaTaca was formed
by the merger of Colombias
Avianca and El Salvador-based
Grupo TACA under a single
holding company. The carriers
will unify under the Avianca
brand starting in the first half
of 2013.
okay airways orders three ma60s
Tianjin-based Okay Airways
inked an agreement with
Aviation Corp. of China
(AVIC) subsidiary Xian
Aircraft International Corp.
for three MA60s. The order
was announced at the Zhuhai
Air Show.
Okay operates a fleet of
seven MA60s on more than 20
regional routes in Northwest
China. AVIC has received 199
orders for the MA60 series
aircraft, comprising 183 orders
for the MA60 and 16 orders for
the MA600.
NEWSBRIEFS
atwonline.com
|
January 2013
|
atw 13
Airbus completes
Assembly of first
flyAble A350
Airbus completed the
main structural assem-
bly and system connec-
tion of the first A350
XWB flight-test aircraft.
The aircraft will under-
go testing of its hydrau-
lic system, followed
by the full electric and
hydraulic power-on.
After several weeks of
functional system test-
ing, the aircraft will be
painted and have its
engines installed.
The aircraft is one
of the first two to be
assembled at the new
final assembly line in
Toulouse.
FAA orders Boeing 787 inspections, cites fuel leak risk
US FAA issued an airworthi-
ness directive ordering Boeing
787 operators to inspect the
aircraft for improperly assem-
bled engine fuel feed manifold
couplings.
There are currently 38 787s
in service. In a notice published
last month in the USs govern-
ments federal register, FAA
said it has received reports
of fuel leaks on two different
in-service [787s] and the sub-
sequent discovery of several
improperly assembled engine
fuel feed manifold couplings
on in-service and production
airplanes.
FAA did not mention which
operators reported the fuel
leaks, but Ethiopian Airlines
told ATW that it experienced a
fuel leak on a 787 during initial
operations, adding that the
problem is now resolved.
FAA said the improper cou-
pling installations occurred
during production and include
couplings with missing or
improperly installed lockwire,
parts within the couplings
installed in the wrong loca-
tions, incorrect parts installed
in the couplings, and couplings
that have extra parts installed.
The agency added, These
conditions, if not corrected,
could result in fuel leaks, which
could lead to fuel exhaustion,
engine power loss or shut-
down, or leaks on hot engine
parts that could lead to a fire
An unsafe condition exists that
requires the immediate adop-
tion of this AD. The FAA has
found that the risk to the flying
public justifies waiving notice
and comment prior to adoption
of this rule.
Boeing told ATW in an
emailed statement that FAAs
action makes mandatory
inspections Boeing had already
recommended to 787 opera-
tors. The manufacturer said
it made the recommendation
after a determination that two
connectors had been improp-
erly installed on airplanes that
had been delivered.
AIA bullish on US aerospace sales
US aerospace sales are expect-
ed to rise 3.4% year-over-year
to $217.9 billion for 2012 and
increase another 2.6% in 2013
to $223.6 billion.
In its year-end forecast
released in December,
US Aerospace Industries
Association (AIA) said US
civil aircraft sales are expected
to increase 13.9% in 2012 to
$60.6 billion and lift another
11.4% to $67.5 billion in 2013.
Aerospace manufacturing
is an industry that remains
healthy despite the obstacles.
AIA president and CEO Marion
Blakey said at a luncheon in
Washington, DC. The aero-
space business is one of the
bright spots in the US econo-
my, she added.
But Blakey warned that if the
US government fails to forestall
across-the-board spending cuts
set to kick in this yearbudget
sequestrationthe industry
would be negatively affected.
In particular, FAAs program to
implement the satellite-based
NextGen ATC system could
be hit very hard by the budget
cuts, she said.
If sequestration is allowed
to happen, NextGen could get
thrown off track, said Blakey,
formerly an FAA administrator.
We could see that technology
set back by many years.
Even the current level
of ATC services would be
affected, likely leading to less
commercial air service or more
restrictive operating schedules
for airlines, Blakey warned.
Sequestrations approximately
$1 billion cut to [FAAs] budget
is massive, she said.
According to AIA, Boeings
commercial backlog at the end
of 2012 stood at 4,144 aircraft
valued at $305.4 billion.
Separately, Boeing said the
worlds airlines should have
access to reasonable liquidity
and pricing for financing new
aircraft deliveries in 2013.
In a statement, Boeing
Capital Corp. managing
director-capital markets devel-
opment and leasing Kostya
Zolotusky said, We expect
that despite economic and
political challenges, global air
travel will again demonstrate its
remarkable resilience in 2013.
China Southern to buy 10 Airbus A330-300s
China Southern Airlines has
committed to purchase 10
Airbus A330-300s, in a deal
valued at $1.9 billion, according
to Reuters. Deliveries will be
from 2014 to 2016.
China Southern said in a
statement to Reuters that the
new aircraft would be funded
through internal resources and
loans from commercial banks
and that the catalog price of
one Airbus A330-300 aircraft
was $188 million.
NEWSBRIEFS
14 atw
|
January 2013
|
atwonline.com
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Lufthansa to create new Germanwings
Lufthansa will give a new iden-
tity to its low-cost subsidiary
Germanwings this year as it
transfers its non-hub routes
to the LCC from July 1. Such
a move will create a new
Germanwings, with an expand-
ed fleet and a new livery.
Germanwings fleet will
grow from 30 Airbus A319s
and A320s to about 90
aircraft. Thirty Lufthansa
aircraft and 23 Eurowings
aircraft will be transferred to
Germanwings.
From July 1, the new airline
will officially launch, introduc-
ing a new livery.
Lufthansa chairman and
CEO Christoph Franz said
the move will make us able
to return our non-hub trunk
routes to a profitable opera-
tion. He added that costs on
the routes will lower 20%.
Germanwings CEO Thomas
Winkelmann said the changes
will introduce a completely
new low-cost airline. The new
Germanwings will include
Lufthansas decentralized
European routes not operat-
ing out of Frankfurt or Munich
hubs. Lufthansa said 800 flight
attendants and 200 pilots will
be affected by the move.
Delta Air Lines orders 40 CRJ900s valued at $1.85 billion
Delta Air Lines placed a firm
order for 40 Bombardier
CRJ900s valued $1.85 billion
at list prices, and took options
on another 30 CRJ900s.
The regional jets will be
operated by carriers to be
determined by Delta under
the Delta Connection brand,
Bombardier and the airline
said. Deliveries are slated to
start in the second half of 2013.
The aircraft will be configured
in a two-class layout compris-
ing 76 seats.
Delta plans to phase out 60
50-seat CRJ200s as it takes
delivery of the CRJ900s.
Delta Connection carriers
now operate 466 CRJs compris-
ing 286 CRJ200s, 79 CRJ700s
and 101 CRJ900s. Currently,
Pinnacle Airlines operates 57
CRJ900s, ExpressJet Airlines
operates 16 and SkyWest
Airlines flies 28 under the Delta
Connection brand.
NEWSBRIEFS
atwonline.com
|
January 2013
|
atw 15
China EastErn
ordErs 60 a320s
China Eastern Airlines
ordered 60 Airbus
A320s. The aircraft,
valued at $5.4 billion
at list prices, will be
used to expand the air-
lines domestic servic-
es. Delivery is sched-
uled between 2014
and 2017, according
to a China Eastern
statement released
by the Shanghai Stock
Exchange.
Last year, the
Shanghai-based carrier
sealed a $5.94 billion
deal for 20 Boeing
777-300ERs.
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TNT Express agrees to sale of TNT Airways and Pan Air
TNT Express has agreed to sell
its two airlines to ASL Aviation
Group to overcome ownership
restrictions triggered by its
planned merger with United
Parcel Service.
ASL Aviation is par-
ent to Irish cargo airline Air
Contractors as well as French
passenger and cargo operator
Europe Airpost. Under the deal,
ASL will acquire 100% of TNT
Airways and Spanish carrier
Pan Air just before UPS and
TNT merge.
We have found a new
ownership and control struc-
ture that secures the future of
the airlines, ensures service
continuity and safeguards TNT
Express jobs in Liege. This is an
important step towards com-
pletion of the proposed UPS-
TNT Express merger, interim
TNT CEO Bernard Bot said.
The sale of the two airlines
is conditional on UPS and TNT
gaining regulatory approval for
their tie-up. Once the deal is
completed, ASL will take over
all flights performed by TNT
Express airlines and it will act as
a third-party provider to the com-
bined UPS-TNT Express group.
ASL employs 1,200 staff
and has a fleet of around
90 passenger and freighter
aircraft. The European
Commission continues to
investigate the merger.
Bombardier confident in new CSeries schedule
Bombardier has a high degree
of confidence it will be able
to stick to its revised schedule
for the CSeries, a company
official said.
The Canadian manufacturer
this month postponed entry
into service (EIS) of the CSeries
from late 2013 to around the
end of June 2014, and also
pushed back first flight by six
months to the end of June
2013. Speaking to ATW on the
sidelines of the Latin American
and Caribbean Air Transport
Association (ALTA) Airline
Leaders Forum in Panama City,
Bombardier VP-marketing-
commercial aircraft Philippe
Poutissou said the delay was
necessary to ensure all suppli-
ers were operating on a har-
monized schedule.
When you try to bring an
aircraft to first flight, a number
of critical paths have to con-
verge, he explained, declining
to say which supplier or suppli-
ers were found to need more
time. We need to do it right,
he said, adding that the air-
crafts customers understand
the delay and are supportive
of our [revised] plan.
He pointed out that while
the 110-seat CS100 has
been delayed, the 130-seat
CS300 remains on track for
a late 2014 EIS as planned.
Bombardier now has 138 firm
orders for the CSeries with
letters-of-intent, options and
purchase rights for another
214. Nine customers have
made firm commitments for
the CSeries.
Were sold out for the first
few years of the program,
Poutissou said. Were looking at
2016 availability for new orders.
He said the fact that Boeing
and Airbus are now well into
developing and marketing the
re-engined versions of their
narrowbodies should help
CSeries sales going forward.
Whats different now is that
you now have a clear landscape
[for the narrowbody sector]
and carriers know the CSeries
is the one all-new aircraft com-
ing to market, he commented.
In October, Bombardier
started assembly of the
first flight test CSeries at its
Mirabel, Qubec facility. And
Bombardier test pilots have
been conducting virtual flight
system trials on a full-sized
iron bird CSeries mock-up.
Separately, the manufacturer
is considering certifying the
CS300 to have as many as
150-160 seats.
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Bombardier believes the CS100 will enter service in June 2014.
NEWSBRIEFS
16 atw
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January 2013
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atwonline.com
Uniting the Americas in One Event
The route development forum for all the Americas
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RAM13 160x114mm.indd 1 06/12/2012 12:37
Emirates posts strong half-year profit
Emirates Groupparent of
Emirates Airline (EK) and
aircraft-handling-to-inflight-
catering company dnata
earned an AED2.1 billion ($575
million) net profit for the first
six months of its fiscal year that
started April 1, 2012. The result
was up 68% year-over-year.
Group revenue and other
operating income rose to
AED38.2 billion, up 16%
year-over-year, marking the
first time it has passed the
$10 billion mark in a six-
month period.
Emirates Group chairman
and CEO Sheikh Ahmed said
the company has continued to
invest in the infrastructure of
both Emirates and dnata and it
continues to pay off.
EK continued to underscore
the strength of the major Gulf
airlines by recording a first-
half net profit of AED1.7 billion
($464 million), up 104% from
AED836 million year-over-year.
EK said the result was
achieved in the face of continu-
ing challenging market condi-
tions, including high fuel prices.
Fuel accounted for 39% of
costs, although this was down
2% on the same period last year.
ASKs grew 17.3% and RPKs
jumped 17.8%, with load fac-
tors averaging 80%, slightly
above last years 79%. EK
carried 18.7 million passengers
from April 1, up 15.4% for the
same period last year.
Cargo volumes were up by
more than 16%, a significant
growth against the market
trend, EK said.
Mexicos interjet
adds 10 superjet
100 options
Interjet has added
10 options to its firm
order for 20 Sukhoi
Superjet 100 (SSJ100)
aircraft, and Superjet
International increasing-
ly believes the Mexican
carrier holds the key to
the future success of the
regional aircraft.
Interjet will become the
first Western operator
to receive the aircraft
when it takes delivery
of its first of the type in
March 2013. It plans to
take 19 more SSJ100s
through 2014.
Emirates continues profitable ways.
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NEWSBRIEFS
atwonline.com
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January 2013
|
atw 17
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Oneworld alliance eyes Asia for new
members; awaits TAM decision
Oneworld is eyeing new Asian
members, as it waits to hear
TAMs alliance decision and
looks to integrate Malaysia
Airlines, Sri Lankan Airlines
and Qatar Airways.
Bolstering our position
on business cities in Asia is a
focus of our internal discus-
sions, oneworld CEO Bruce
Ashby told ATW in London.
China is an area which is
constantly coming up. We
already have Cathay Pacific,
but China is growing so fast
that we are keeping an eye on
that region.
Ashby said Hong Kong-
based Cathay Pacific Airways
is supportive of these discus-
sions. However, he has not
been approached by Chinese
airlines. We are consider-
ing it and talking through the
options, he said.
Ashby is hoping to welcome
TAM into oneworld following
its merger with LAN Airlines:
We believe we offer a great
solution for TAM. We think we
have a pretty strong case. They
have indicated they are close
to a decision. Its not a done
deal, but I hope it will be final-
ized soon.
Malaysia Airlines will join
oneworld this year. Later in
the year, or in early 2014,
Qatar Airways and Sri Lankan
Airlines will also come
onboard. Ashby said these new
members will strengthen the
alliances Indian and African
networks, which remain com-
parative weak points.
Meanwhile, Star Alliance
member AviancaTaca said it is
ready to fill the gap by expand-
ing service in Brazil if TAM
leaves the grouping.
QATAr AirwAys AMends
Airbus A350 Xwb Order
Qatar Airways has altered its order for the forthcom-
ing Airbus A350 Xwb, moving to the larger models in
the range.
The fast-expanding Arab carrier had previously ordered
80 aircraft spread across the three-model range20
A350-800s, 40 -900s and 20 -1000s. Qatars amend-
ed order comprises 43 -900s and 37 -1000s.
Qatar is the latest of several airlines to change its
order from the smaller -800 version to the larger-
capacity models.
we have taken the time necessary to come to todays
decision in favor of the larger A350 Xwb models,
which we believe are best suited to our business
model, CeO Akbar Al baker said.
The move to increase the order for the -1000 is poten-
tially significant for Airbus, as Al baker has previously
been critical of the variants performance.
NEWSBRIEFS
18 atw
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January 2013
|
atwonline.com
AN EXCLUSIVE ATW WEBINAR 23 JANUARY 2013 11:00 Am EST/15:00 GmT
THE ATW 2013 AirlinE indusTry ForEcAsT
WEBINAR PRESENTERS
Karen Walker, ATW Editor-in-Chief
Aaron Karp, ATW Senior Editor
Victoria Moores, European Bureau Chief
ModERAToR
William A. Freeman, III, Group Publisher
What will the year 2013 bring for us in the commercial aviation industry? The experienced ATW
editorial team will discuss 2012 results and expectations for 2013 based on briefs from industry
analysts, forecasters, manufacturers and organizations such as IATA. Presentations will also cover
important topics such as the future of oil prices, traffic growth hotspots, ticket pricing, aircraft sales,
ancillary revenue trends, and regulatory and the environment expectations.
Regional outlooks will also be addressed.
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C31591_PJ_TICKTOCK_ATW_Jan13_267x197_v1 13/12/2012 17:24 Page 1
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AnAlysis
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V
irgin Group chairman Richard
Branson was irked. With
rumors flying last month that
Delta Air Lines was on the verge of buy-
ing Singapore Airlines 49% stake in
Virgin Atlantic Airways (51%-owned by
Virgin Group), there was speculation in
the British media that the carrier would
essentially become Delta UK.
In particular, International Airlines
Group (IAG) CEO Willie Walsh told
Te Telegraph that he cant see Delta
wanting to operate the Virgin brand
because if they do, what does that say
about the Delta brand? Walsh said
Delta wanted Virgin Atlantics London
Heathrow slots.
An annoyed Branson responded on
his blog, Rumors have been spread in
the press that I am planning to give up
control of Virgin Atlantic and accord-
ing to Willie Walshwho runs [British
Airways]that our brand will soon
disappear. Tis is wishful thinking and
totally misguided.
When the Delta-Virgin deal ofcially
became reality shortly thereafter, Delta
executives seemed to back Branson up,
insisting that the well-known Virgin
brand was a main factor in their decision
to purchase Singapore Airlines minor-
ity holding in the UK carrier for $360
million. Speaking to investors, Delta
president Ed Bastian said, Virgin brings
a premier global brand that will enhance
Deltas brand equity through association
and passenger access.
But there is certainly some truth in
Walshs assessment that Deltas pri-
mary interest is increasing its access to
Heathrow. As part of the deal, Delta and
Virgin Atlantic will launch a transatlantic
joint venture (JV).
Metal Neutral Te JV will operate
on a metal neutral basis, the carriers
said, adding that both airlines will share
the costs and revenues from all joint
venture fights. Te carriers have fled
an antitrust-immunity application with
the US Department of Transportation to
gain privileges across the Atlantic similar
to those enjoyed by oneworld partners
American Airlines, British Airways and
Iberia. Delta and Virgin expect both the
share purchase and JV to be in place by
the end of 2013.
According to Delta, its current share
of passenger seats operated on fights
between the US and Heathrow is just
8%, while American and BA have a com-
bined share of 59%. If the Delta-Virgin
JV is approved, it will operate about
24% of the seats between Heathrow and
the US, according to Deltas fgures.
Bastian added, London Heathrow is
the largest international destination for
corporate travelnearly three times larger
than the next destination, Paris Charles
de Gaulle. [New York] JFK-[Heathrow]
Transatlantic
Maneuvering
Delta looks to boost its London Heathrow presence with 49%
stake in Virgin Atlantic. By Aaron Karp
Q Q
To comment on this story or email the author, go to atwonline.com.
ViRGin GROUP chairman
Richard Branson.
Analysis_JAN13.indd 20 12/17/12 9:56 AM
is the largest US-international market
and corporate revenue momentum allows
Delta to maximize this opportunity.
Delta and Virgin Atlantic said they
will operate a total of 31 peak-day
round-trip fights between the UK and
North America, 23 of which operate
at London Heathrow. Te enlarged
network will beneft customers of both
carriers by providing greater access to a
broader network, improved connectivity
and convenient booking options.
For all Bransons pride in the Virgin
Atlantic brand, the carrier has struggled
in its battle against the oneworld airlines
at Heathrow. It incurred an operating
loss of 80.2 million ($129.4 million)
for its fnancial year ended Feb. 29,
2012. While Branson extols Virgin
Atlantics independent spirit, he seems
to have come to peace with the fact that
the airline will soon join a global alliance
(likely to be SkyTeam, of which Delta is
a key member). In the past, he repeatedly
criticized oneworld for having a mon-
ster monopoly on transatlantic fying.
In a recent interview with Bloomberg
Television, Branson said, Virgin Atlan-
tic has always enjoyed its independence,
but since pretty well every competitor
that we have has an alliance, I think we
have fnally decided that to survive we
need to have an alliance.
And Virgin Atlantic will survive with
Branson playing an integral role, he
insisted. Ignore the press speculation
Im not going anywhere, he wrote on his
blog following the announcement of the
Delta deal. I still remember the negotia-
tion with Boeing for the [frst Virgin
Atlantic] 747 and that frst exciting fight
[in 1984] as if it was yesterday. We have
come a long way since then and have
continued doing things diferentlyin-
novating with seat-back entertainment,
limousine services, new classes of travel
and the longest bars in the sky.
Tough happy to be rid of its holding in
Virgin Atlantic, Singapore Airlines execu-
tives may want to have a drink at one of
Bransons bars in the sky: SIA bought the
49% stake in 1999 for 600 million ($968
million); 13 years later, it sold the holding
to Delta for $600 million less.
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EDItORS BLOG
Washington standoff:
Mica vs. Pistole
Outgoing US House of Representa-
tives Transportation and Infrastruc-
ture Committee chairman John Mica
(R-Fla.), a persistent critic of the
Transportation Security Administra-
tion, has scantly acknowledged the
major change in direction administra-
tor John Pistole, formerly the FBIs number two offcial, has made at the agency since
taking over in June 2010. As Mica tells it, TSA is forever frozen in the immediate years
after 9/11, when it did a poor job of dealing with both the commercial aviation industry
and the general public, and unwisely treated all passengers as equal risks.
But under Pistole, TSA has moved decidedly in the direction of risk-based security,
rolling out the trusted traveler Pre-Check screening program, ending intrusive checks
on those over 75 and under 12 and focusing much more on intelligence to guide its
efforts. Airlines and airports say the agency, which took a my-way-or-the-highway ap-
proach with the industry in its initial years, has signifcantly improved its outreach and
now often works in close cooperation with them.
Mica simply refuses to acknowledge most of this, instead highlighting TSAs greatest
miscues through the years and implying these mistakes are examples of standard oper-
ating procedure. Pistole, to him, is no different than previous TSA heads.
Mica, who had a large hand in creating TSA back in 2001, recently told my colleague
Christine Boynton that hed prefer the airport screening function the agency per-
forms be transitioned to private security companies with TSA providing oversight and
focusing on intelligence and connecting the dots rather than hassling millions of
passengers every day.
Pistole, in fact, has repeatedly said that intelligence should guide the agency and that
treating passengers well is important, so the two men arent as far apart as it may appear.
Aaron Karp
Hot topics: REaDER COMMENtS FROM OUR wEBSItE
Obama signs bill enabling US airlines to skirt EU ETS: Good for the US. Airlines have a
vested interest in reducing their own emissions. More carbon equals more fuel. More
fuel means it costs more to produce the product and the proft is reduced. A carbon
tax does not add any additional incentive to reduce the carbon footprintit only raises
costs to the consumer and money for the general fund to be spent on everything but
environmental issues.
Bisignani: London Heathrow Airport loses leading position: Britain will watch more
revenue leave its shore to the beneft of other European nations as well as IST and DXB.
The high airport taxes dont help either, as more people are using lower tax cities to
depart from. AMS has become Heathrows third runway?
Pilot supply a key long-term challenge for regional airlines: Yes, it is sure looking like
there will be an issue in the coming years/decades. With the cost of getting all the
licenses and experience, and the wages at the regional airlines, its not hard to see why
the industry will have a problem. Im sure these young folks thinking of a career in avia-
tion will think twice.
FAA orders Boeing 787 inspections, cites fuel leak risk: I cannot believe that Boeings
and Airbus quality control missed their issues upon inspections and fight tests. For-
get the Boeing vs. Airbus war. They are both in business to sell and deliver as many
aircraft as they can and within time. Both Boeing and Airbus had issues with their
global suppliers. Airbus had issues with their A380 wing structure and Boeings now
caught with a fuel issue. Both companies have to make up time or it will cost them
lots of euros and dollars if they dont deliver on time. Its a good thing that there
havent been catastrophic issues.
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Analysis_JAN13.indd 21 12/17/12 9:57 AM
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2013
Forecast
D
espite a dismal start, a painful set of frst-quarter fnancials, high
fuel prices and a slowing world economy, the worlds airlines
managed to end 2012 on a relative uptick.
In mid-December, IATA revised its total airline net proft for 2012 to
$6.7 billion, up from the $4.1 billion forecast in October and based on an
estimated $637 billion in revenues. Te 2013 outlook was also improved
to an expected $8.4 billion in net proft, up from a previous estimate of
$7.5 billion, based on revenues of $659 billion. Industry net post-tax mar-
gin, however, will remain weak at a paltry 1% in 2012 and a barely better 1.3% in 2013.
Another
Challenging
Year
It certainly looks like 2013 will be another challeng-
ing year, IATA DG and CEO Tony Tyler said.
Te improved prospects for 2012 were driven by
strong airline performance in the second and third
quarters. Airline profts and cash fows held up at
levels similar to 2006 when oil prices were about $45
per barrel lower and world economic growth was 4%.
Historically, when GDP growth has fallen below 2%
the airline industry has returned a collective loss. With
GDP growth close to the stall speed of 2% and oil at
$109.50 a barrel, we expected much weaker perfor-
mance. But airlines have adjusted to this difcult envi-
ronment through improving efciency and restructur-
ing. Tat is protecting cash fows against weak economic
growth and high fuel prices, Tyler said.
Te improved performance is most evident in
large airlines for which earnings before interest, taxes,
depreciation and amortization (EBITDA) aver-
aged between 10% and 15% of revenue in the third
quarter of the year. Its a diverging picture. Econo-
mies of scale are helping larger airlines to cope much
better with the difcult environment than small- and
medium-sized carriers, which continue to struggle,
Tyler noted.
Overall performance was also positively impacted
by strong passenger trafc growth of 5.3% and a 3%
improvement in yields.
But dont pop the champagne yet. Cargo markets
contracted by 2% and cargo yields are down 2% on
2011 levels. Te $6.7 billion expected net proft is a
fall from the $8.8 billion that the industry made in
2011. And, as IATA points out, the 1% net proft
margin is well below the 7%-8% needed to recover
the industrys cost of capital.
Prospects for 2013 are improved, but still not
champagne-worthy and, as IATA chief economist
Guarded optimism for 2013, but no one believes it will be easy.
By Karen WalKer
2013
Forecast
Forecast1_ATW_JAN13.indd 24 12/17/12 2:07 PM
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2013 GROwtH IN BOtH tRaVEL aND CaRGO
Brian Pearce emphasized, there are more downside risks than
upward risks. Its an improving environment but one that
remains very fragile.
Among the biggest concerns for things that could go
wrong are the US fscal clif, the Middle East/Iran situa-
tion and the potential for a partial or full eurozone breakup.
Even if those worst-case scenarios fail to materialize, however,
GDPthe largest driver of industry prospectsis expected to
strengthen only slightly to 2.3% in 2013. And while passenger
demand in 2013 is expected to grow by 4.5%, that will still be
below the 5.3% forecast for 2012 and yields are expected to
deteriorate 0.2%, largely in response to lower fuel costs.
One signifcant milestone is expected to happen next year
airlines are expected to carry 3.1 billion passengers, the frst time
in history that it will break through the 3 billion mark. By 2016,
that number is expected to rise to 3.6 billion, with the majority of
growth taking place in developing markets.
Demand for air travel then continues its climb from
when the frst commercial fight took place on Jan. 1, 1914.
Unfortunately, oil prices, regulatory and infrastructure hurdles,
taxation and fees, and economic challenges also have contin-
ued their upward spiral.
A
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G
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a
p
h
s
:

I
A
T
A
One unusual feature of aviation markets is the strong divergence between a
robust expansion in air travel and the shrinkage of air freight since peaking in
early 2010, after rebounding sharply from the recession
In past cycles weakness in air freight has been a leading indicator of weakness in
air travel. That has not been the case this time.
2
ROBust aIR tRaVEL But sHRINkING fREIGHt
INtERNatIONaL tRaffIC aLsO VaRIEs BY REGION
MODERatELY BEttER PROfIts IN 2013
There is a lot of variation within the aggregate air travel number.
On domestic markets China continues to expand very strongly, after a slowdown
earlier this year.
By contrast Indian markets have gone into sharp reverse in 2012, following the
problems of Kingfisher and the slowdown of the Indian economy
The US market has barely moved, indicating its maturity and the sluggishness of
the economy
In Japan the domestic market has never recovered to pre-earthquake levels and is
currently slowly in decline
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301ATWpages.indd 26 12/17/2012 10:07:12 AM
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SyStemwide Global CommerCial airlineS
EBIT Margin, % Revenues Net Profit, $ Billion
2009 2010 2011 2012F 2013F 2009 2010 2011 2012F 2013F
Global 0.4 4.0 2.9 2.1 2.9 -4.6 19.2 8.8 6.7 8.4
reGionS
North America 1.2 4.7 3.1 3.4 3.8 -2.7 4.1 1.7 2.4 3.4
Europe -2.2 1.9 0.9 0.6 0.6 -4.3 1.9 0.4 0.0 0.0
Asia Pacific 2.8 6.0 5.0 2.9 4.7 2.6 11.4 5.4 3.0 3.2
Middle East -1.5 3.6 3.5 2.7 3.0 -0.6 0.9 1.0 0.8 1.1
Latin America 2.8 5.0 2.3 2.4 3.1 0.5 0.9 0.3 0.4 0.7
Africa -1.2 1.6 0.8 0.3 0.1 -0.1 0.1 0.0 0.0 0.0
Industry of
Contradictions
Aircraft orders boom, but not airline profitability.
By Karen WalKer
2013
Forecast
T
he airline business remains a roller-coaster ride
unsuited for the faint of heart. First the good
news: global airline financial performance
improved in the second and third quarters of
2012 following a sharp deterioration in the first quarter.
In its June forecast, IATA emphasized the down-
side risks to airline industry proftability posed by
the eurozone crisis and the unstable oil market. But
policy actions since then appear to have reduced
though not eliminatedthese risks, according to
IATA, with oil prices easing slightly and some steps
made toward stabilization in Europes most troubled
sectors. Additional monetary easing by the US Federal
Reserve and the Bank of Japan also improved expecta-
tions for economic growth.
As a result, IATA in October revised its 2012
worldwide airline forecast to a combined net proft
of $4.1 billion compared to $3 billion in its previ-
ous forecast. Tis refected a better performance by
airlines despite a difcult economic environment.
During the second quarter, industry-level operating
profts were almost at the levels of the previous year
after high oil prices squeezed frst-quarter results.
Big geographical diferences remained, with Euro-
pean losses unchanged, but North American airlines
improved performance was revised higher. Ten in
December, considerably better-than-expected third-
quarter results prompted IATA forecasters to again
revise their outlooks upward to an overall industry
proft of $6.7 billion.
Te outlook for 2013 is also moderately better
with a forecast proft of $8.4 billion on revenues of
$659 billion. Tis is based on anticipated slightly
faster growth, marginally lower oil prices and im-
proved airline performance on capacity.
But as IATA chief economist Brian Pearce said
in December, more downside risks remain in the
2013 outlook; even allowing for a predicted better
outcome, the worlds collective net proft margin will
be just 1.3%.
And that tender margin will vanish if things go
wrong. Among the most worrisome concerns are the
potential for a eurozone breakup, the US hitting its
fscal clif, the slowing Chinese economy failing to
stabilize, or an Iran crisis.
Te generally more optimistic outlook is also not
evenly shared around the world. It rather depends on
where you look, IATA DG and CEO Tony Tyler said
in December. European airline CEOs are still the
gloomiest bunch among the group for reasons that are
well known. Te frustration that they have with issues
of regulation and taxation are deeply felt and it seems
so hard to do something about it.
And policy risks still persist. We need to make
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2013
Forecast
sure that cash-strapped governments understand that
aviation is a catalyst for economic growth and ensure
that light touch regulation does not become a license
for infrastructure providers to let costs get out of
control. We will also maintain pressure on govern-
ments for important infrastructure improvements,
including the Single European Sky, so that hard-won
cost efciencies are not lost to battles with conges-
tion, Tyler said.
On a regional basis, IATA broke down its anticipated
2012 and 2013 airline fnancial expectations as follows:
North America. A 2012 collective net proft of $2.4
billion, up from 2011s net proft of $1.7 billion. A
2013 combined net proft of $3.4 billion.
Europe: A breakeven situation for 2012, which is
$400 million worse than for 2011 but $1.2 billion
better than IATAs October forecast, thanks to ef-
fciency programs and stronger trafc growth. 2013 is
expected to be a second consecutive year at breakeven
with the EBIT margin remaining unchanged at 0.6%.
Asia Pacifc. A 2012 combined net proft of $3
billion, the largest regional proft and the most
signifcant contributor to IATAs upward revised 2012
forecast. Profts are expected to grow to $3.2 billion
in 2013.
Middle East. A 2012 collective proft of $800 mil-
lion, below the $1 billion Middle East carriers made
in 2011. Te Arab Spring and lingering instability
continues to impact performance. 2013 profts are
expected to rise to $1.1 billion as airlines in the
region continue to expand their share of international
markets.
Latin America. A 2012 combined proft of $400
million, making it the only region to see an improve-
ment on 201l when the regions carriers posted a $300
million proft. IATA sees net profts rising further
to $700 million in 2013 as strong trade fows and
economic growth continue.
Africa. Carriers in the region are expected to end
2012 at breakeven, the same as 2011. Te continents
economy is expanding, but its carriers sufer from
strong competition on long-haul routes, high-cost
structures and regulatory restrictions, IATA said.
Teir breakeven status is expected to be maintained
in 2013.
traffc Growth
Trafc volumes are expected to grow slightly faster in
2013, driven by growth of cargo after its decline in
2012. Capacity growth will be kept lower, sustaining
load factors.
A feature of the past two years, IATA notes, has
been divergent passenger and cargo markets. Dur-
ing the frst part of 2012 both markets expanded.
However, falling business confdence in many major
economies caused both markets to fatten with very
little growth at all over the mid-year months.
Consolidation and restructuring in the US and
Europe, including joint ventures on many long-haul
markets, is starting to make a diference to proftabil-
ity, IATA said.
Tings are moving in the right direction, Tyler
said. But the positive shift is not moving airlines
anywhere near the 7-8% that would be needed to
cover the industrys cost of capital. Its a tough busi-
ness working hard to make it through tough times.
More planes, please
Despite the highly guarded optimismand contin-
ued precarious state of airline proftabilityairlines
are expected to continue their spending spree on new
aircraft. In particular, more large orders are expected
for new fuel- and emissions-efcient aircraft.
According to a market forecast released by
COMAC in November, China will need 4,960 aircraft
by 2031 in which 3,405 will be narrowbody aircraft.
Airbus said its commercial backlog stood at
4,414 aircraft valued at 482 billion ($616 billion),
representing seven years of production, as of Sept.
30. Airbus expected to deliver about 580 commercial
aircraft in 2012, including 30 A380s. Gross orders for
2012 were anticipated to reach 600-650 aircraft.
Boeing projects a $4.5 trillion market for 34,000
new airplanes over the next 20 years as the world feet
doubles in size, according to the Boeings 2012 Cur-
rent Market Outlook. Te worlds aviation market is
broader, deeper and more diverse than weve ever seen
it, said Randy Tinseth, VP marketing, Boeing Com-
mercial Airplanes. It has proven to be resilient even
during some very challenging years and is driving
production rate increases across the board.
Between 2012 and 2031, Boeing expects a total of
23,240 single-aisle, 7,950 twin-aisle, 790 large and
2,020 regional jet aircraft to be delivered.
Robust growth in China, India and other
emerging markets is a major factor in the increased
deliveries over the next 20 years. Low-cost carriers,
with their ability to stimulate trafc with low fares,
are growing faster than the market as a whole. Tere
is also a strong demand to replace older, less fuel-
efcient airplanes. Replacement accounts for 41% of
new deliveries in the forecast, Boeing said.
Boeing anticipates that of those 34,000 total new
aircraft deliveries, 12,030 will go to Asia Pacifc carri-
ers; 7,760 to Europe; 7,290 to North America; 2,510
to Latin America; 2,370 to the Middle East; 1,140 to
the Commonwealth of Independent States; and 900
to Africa.
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2013
Forecast
Tight Discipline
Capacity and cost controls help keep US carriers
in the black
BY KAREN WALKER
2013
Forecast
A
rash of mostly positive third-quarter
results across US and Canadian carriers
helped underscore the general feeling that
North American airlines are climbing out
of the abyss of red and into a more stable era of sus-
tained profitability.
By making dramatic improvements in aircraft
utilization, labor productivity and fuel efciency, US
airlines have been able to reduce unit operating costs
by more than 35% in real terms since deregulation
in 1978, even when surging fuel prices are included,
Peter Belobaba, principal research scientist at the MIT
International Center for Air Transportation, said dur-
ing an Airlines for America (A4A) association briefng.
When combined with innovations in schedule opti-
mization and capacity planning, these cost reductions
have allowed real airfares to remain about 50% lower
than before deregulation.
Among the good third-quarter earnings news:

Delta Air Lines nearly doubled its net income
to $1.05 billion. Our solid revenue perfor-
mance refects the benefts of capacity disci-
pline, strong operational performance and the
investments we have made in our products
and service, DL president Ed Bastian said.

US Airways more than tripled its net income
to $245 million, its highest-ever earnings for
the quarter.

Air Canada reported net income of C$429
million ($432.2 million), reversed from a net
loss of C$124 million in the year-ago quarter.

Calgary-based carrier WestJet reported
income of C$70.6 million ($70.96 million),
up 79.9% from a C$39.3 net proft in the
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2013
Forecast
year-ago quarter.

Utah-based SkyWest Inc., parent company of
SkyWest Airlines and ExpressJet, saw net in-
come jump from $116,000 to $20.9 million.

Alaska Air Group, parent of Alaska Airlines and
Horizon Air, more than doubled its net income
year-over-year, earning $163.4 million.

United Continental Holdings posted a net
income of $6 million, down 99.1% from a
net proft of $653 million in the prior-year
period, though it pointed out that the results
were afected by $514 million in special
charges related to the integration of United
Airlines and Continental Airlines.

Hawaiian Airlines reported net income of
$45.5 million, up 77.6% from a $25.6 mil-
lion proft in the year-ago period.

Southwest Airlines reported a net proft of
$16 million, reversed from a $140 million net
loss in the prior-year period.

Atlas Air Worldwide Holdings, parent of
Atlas Air and Polar Air Cargo, posted net
income of $33.9 million, up 20.2% despite a
tough cargo market.
Not all US airlines were spared the pain. Virgin
Americas third-quarter net loss widened to $12.6
million from a $3.3 million a year ago. United Parcel
Service posted net income of $469 million, down
56.3% from a $1.07 billion net proft in the 2011
September quarter. And American Airlines parent
AMR Corp., which operated through the year under
Chapter 11, incurred a third-quarter net loss of $238
million, deepened by 46.8%.
Overall, IATA forecasters expect North American
carriers to end 2012 with a collective net proft of
$2.4 billion, stronger than the $1.7 billion proft of
2011. Earnings before interest and taxes margin of
3.4% is the strongest among regions, IATA points
out. For 2013, IATA estimates North American air-
lines will grow that proft to $3.4 billion, the largest
absolute proft of all regions with an EBIT margin of
3.8%. Te US economy is forecast to be the stron-
gest growing among the developed economies and
further benefts are expected from earlier consolida-
tion, IATA noted in its December forecast.
But it is hard-won success based on tight capacity
control, strong cost discipline and, in most cases, heavy
reliance on ancillary fees to ofset high fuel prices, rising
taxes and regulatory fees. A4A points out that the oper-
ating environment for North American airlines does not
get easier. While companies like Apple are not chastised
for margins north of 25%, pending and proposed new
regulations and fees will pile an estimated $3.3 billion of
costs on US airlines, A4A says.
And there remain two major threats to proftability
that are uniquely of American making: the fscal clif
and sequestration, a US congressional law in which
widespread government cuts will become mandatory
to deal with the federal debt. In her year-end address
in Washington DC in December, US Aerospace
Industries Association (AIA) CEO Marion Blakey
warned, were getting closer to a Telma and Louise
moment, when we careen of into the void.
She pointed out it was extremely difcult to forecast
the 2013 outlook for the US aerospace and defense
industry, given the cloud of fscal clif uncertainties.
Te specter of sequestration cuts could signif-
cantly impact the implementation of NextGen ATM
system modernization, she pointed out. Tat could
mean the cost efciencies implemented by US carriers
are negated by unnecessary air trafc delays.
But frst, in the short term, we must avoid the
fscal clif, Blakey said.
Boeing, meanwhile, forecasts air carriers in North
America will take delivery of 7,290 new airplanes over
the next 20 years at a market value of $820 billion.
Taking retirements of airplanes into account, the
North America feet will grow from 6,650 airplanes
today to about 8,830 airplanes by 2031.
Te North American commercial aviation
market is about to record a third consecutive year of
proft, with modest passenger trafc growth, said
Randy Tinseth, VP Marketing, Boeing Commercial
Airplanes. Te long-term outlook for the North
American airline industry is approximately 3% annual
trafc growth through the forecast period. Te market
is shaped by aggressive growth of low-cost carriers and
the need to replace aging airplanes in the feets of the
established network carriers.
Network carriers are expected to maintain strict
capacity discipline, Boeing said. Low-cost carriers will
continue to outpace network carrier growth to accom-
modate increased demand and fll some markets aban-
doned by network carriers. Financial stability will also
be a key indicator of future growth. Several airlines have
indicated growth planning to be executed when returns
are sufcient to fund their strategic goals.
Boeing noted that the continents airlines are
operating more cautiously than in the past. In
response to market pressures, airlines are deploy-
ing capacity more strategically to help boost yields
and cover higher fuel expenses, it said. Airlines
are optimizing airplane utilization more closely to
seasonal demand fuctuations, and passenger load
factors remain near historic highs. Te number
of new-generation airplanes in the parked feet
remains low, indicating that airlines are shifting
utilization to their most efcient assets.
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atwonline.com
|
January 2013
|
atw 35
A
sk any European airline CEO about their
top challenge for 2013 and their answer is
unanimous: making money. All are facing a
constant struggle to maximize revenues and
control costs in the face of spiraling fuel prices, but on
top of these global issues Europe has found itself in the
eye of the economic storm.
Te turbulence includes exchange rate uncertainty,
market volatility, the sovereign debt crisis, uncer-
tainty over the future of the eurozone, mature market
syndrome, constraints on much-needed consolidation
and a hefty dose of labor unrest. And the strains are
beginning to show.
It is impossible to read the macro environment, or
to predict how long it will last for. We just dont know
what is around the corner, easyJet CEO Carolyn Mc-
Call said. We have removed the word high from
fuel prices because, quite frankly, these are the fuel
prices, was the grim observation from Alex Cruz,
CEO of Spanish budget carrier Vueling.
During 2012 some well-known European airlines
disappeared from the aviation landscape, including
bmibaby in the UK, Cimber Sterling in Denmark,
Malev in Hungary, Spanair in Spain and Italian
carrier Windjet. With other big names like SAS
Scandinavian Airlines teetering on the brink and
4,500 jobs under threat at Iberia, calmer days seem a
long way of.
Were likely to see some more consolidation in
2013, e2consult principal Patrick Edmond told ATW.
Iberias at a fork in the roadwill it still exist in its
current form a year from now? SAS is struggling, but
ironically its multi-national model may be replicated a
little further east: Air Baltic and Estonian may ultimately
settle on an arranged marriage and perhaps even invite
Lithuania to the party. CSA [Czech Airlines] needs some
help, and may well fnd an external partner. I think 2013
is also going to be a tough year for some of the larger
European regional carriers like fybe and Air Nostrum.
John Strickland from JLS Consulting agrees Eastern
Europe is an area to watch. It is difcult to say who
might fail in 2013, but certainly a number of Eastern
European carriers are weak, as seen with the failure
of Malev in 2012, and their governments are not in a
position to prop them up. Legacy carriers will take some
pain as they wrestle with their loss-making short-haul
networks and Iberia, in particular, is likely to sufer from
industrial action and see signifcant shrinkage of its
operations. We may get a clearer picture of TAPs [Por-
tugals] future as
the Portuguese
government is
forced to sell it
of and it seems
that a future in-
vestor may come
from Brazil.
Te problem
is that Europe-
an carriers have
already lost
their short-haul
market to low-
cost carriers and
they are facing a
major onslaught
from Gulf
carriers, which
are ofering a
quality product
for an extremely
competitive
price on long-
haul routes.
Te former fag
carriers have been left as middle-seat airlines as they
weather one of the worst crises yet.
For most airlines in Europe, improved results are
only going to arise from structural changes, which in
some cases will be substantial. While some draconian
restructuring plans have been announced, implemen-
tation challenges remain, and even then the outcomes
Bleak Times
For European carriers, 2012 was annus horribilis.
This year may prove only marginally better.
BY Victoria Moores
2013
Forecast
36 atw
|
January 2013
|
atwonline.com
2013
Forecast
may be more to do with catching up rather than
getting ahead of the competition, said Chris Tarry
from consultancy frm CTAIRA. We have already
seen in 2012 a number of instances where sustaining
the unsustainable is no longer an option and this will
be the case in 2013, too.
Te big European carriers are in big danger if they
dont change, said APG Network president Jean-
Louis Baroux. What is wrong is the management.
Everyone thinks the same. If an American airline guy
makes a big mistake, everyone else does the same.
Into the Red
Te fact is that Europe, once-buoyant, has sunk to
the bottom of the leaderboard in terms of industry
proftabilitybehind Africa and the rest of the world.
Whats more, the Europe-specifc outlook has become
progressively worse throughout the year, with projected
2012 losses widening from $0.6 billion at the start of the
year to $1.2 billion in IATAs September forecast. Europe
is the only region expected to end 2012 in the red, while
China, Latin America and the Middle East zoom ahead
in terms of growth.
On the plus side, prospects for 2013 look slightly
brighter, with IATA forecasting that European losses will
slim to $0.2 billion. Also, political tensions around the
European Unions controversial Emissions Trading Sys-
tem (EU ETS) have calmed a little since climate action
commissioner Connie Hedegaard agreed to create the
space for an ICAO-led solution. In 2013, ICAOs prog-
ress on market-based measures and the EUs reaction will
no doubt take center stage. However, other regulatory
developments are also waiting in the wings.
One of the early topics for 2013 will be consumer
protection. Building on plans frst announced in
2011, the European Commission (EC) is taking
another look at the workings of its controversial
Regulation 261. Te outcome could be a simple
communication or a full-blown regulatory proposal,
which would need to clear the European Council and
Parliament. Airlines will be watching this process like
hawks, hoping that their burden of liability in uncon-
trollable situationssuch as volcanic ash cloudsis
lightened. ICAO is also planning to take a look at
consumer protection at its March meeting.
External relations is another area to watch. Te EC
has committed to push forward its route right nego-
tiations to boost the competitiveness of its airlines. It
now needs the EU member states, represented by the
European Council, to grant comprehensive mandates
so it can secure better access to countries such as
Brazil, China and Japan.
2013 could also see Europe revise its state aid
guidelines, with potential impact for both airlines and
airports, and there will be key political discussions in
the European Parliament about the Better Airports
Package, which covers ground handling, noise and
slots. I dont believe the Better Airports Package will
go through in one go, said Athar Husain Khan, act-
ing secretary general of the Association of European
Airlines. Tere is too much controversy over the slots
and ground handling elements.
a tough winter
Turning to airports, the outlook for 2013 is also
fragile. What we are seeing is a tough winter ahead
because it makes more sense for airlines to keep their
aircraft grounded, especially the low-cost carriers,
said ACI Europe DG Olivier Jankovec.
European airports are now fghting harder to get
business, with 64% cutting or freezing their charges.
We are now facing the new challenges of lower
growth and increased network volatility. An airline ex-
pects a route to be perfect within six months or they
go away. Growth is no longer a given for all. Tere
will be winners and losers, and more competition
between airports.
Jankovec warns that for smaller airports, which de-
pend on one or two airlines, the prospects are bleak.
Airports with under a million passengers cant come
in at the end of the month without public support
and there is huge pressure on government spending,
so their funding is under pressure. Tey lack critical
mass, so they have no exposure to capital markets.
Tis really puts them in a difcult position.
Te situation could be further exacerbated by the
revised state aid guidelines, which could limit public
authority funding. Its going to be a tough year.
Already European airport proftability has gone down
and now 48% of airports are loss-making, up from
41% in 2009. Tere is a risk for some airports to go
bust and close. Tis is a new situation.
t
if they dont change. what is wrong is the
management. Everyone thinks the same. If
an a
everyone else does the same.
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January 2013
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atw 37
Still Hot
Despite challenges, Asia Pacific remains one
of the most dynamic and positive regions.
By Karen WalKer
2013
Forecast
A
lthough hurt by the deterioration in cargo
markets, Asia Pacific airlines are expected to
see net profits grow by $200 million to $3.2
billion in 2013, according to IATA. Earnings
before interest, taxes, depreciation and amortization for
Asia Pacific carriers are expected to grow significantly to
4.7%, the strongest of the regions, and Asia Pacific air-
lines account for over half of the industrys global profits.
IATA also estimates that by 2016, 39% of global
air travel will focus on routes to, from or within Asia
Pacifc, up from 34% in 2011.
As Association of Asia Pacifc Airlines DG Andrew
Herdman said in November at the associations
annual assembly in Kuala Lumpur, the
past 12 months were pivotal for carriers
in the region, several of which have forged
groundbreaking deals that would have been
unimaginable just a year earlier. Previous
rivals have turned into long-term strate-
gic partners. A year ago, some may have
questioned whether the Japanese market was
ready to embrace diferent airline business
models. But those new ventures, Japan
Airlines together with Jetstar, and All Nip-
pon Airways together with Air Asia, are now
operating successfully, giving consumers
more choices of service, Herdman said.
In other deals, Singapore Airlines took
a strategic stake, alongside Etihad, in
Virgin Australia, also involving a tie up
with Tiger Airways Australia. Qantas
ended its decades long joint service agreement
with British Airways in favor of a wide-ranging
new partnership deal with Emirates.
We welcome this new competitive landscapea
landscape that provides consumers with a vast array of
new travel options. A landscape that adds additional
momentum to the heightened stature and infuence of
Asian carriers in the global industry, Herdman said.
China and India remain the key drivers of the shift
eastwards, but Indonesia, Korea, Malaysia, Philippines
and Tailand also have dynamic and increasingly im-
portant economies that are fuelling rising incomes and
driving sustained growth in travel demand.
Asias major challenges in 2012 have been a very
weak cargo market and high fuel prices. Asian carriers
operate large freighter feets and account for approxi-
mately 40% of global air cargo trafc, so they have
been particularly hard hit by the current cargo market
weakness. International air cargo demand, expressed
in freight tonne kilometer terms, declined by 5.8%
year-over-year in October, according to AAPA, a
refection of the continued overall weakness in air
cargo markets. Ofered freight capacity was reduced
by 6.1%, leaving the average international air cargo
load factor almost unchanged at 67.4%.
Global air cargo markets are still depressed, with
volumes for the frst ten months of the year 4.0%
down on last years levels. Overall, the air cargo
market is characterized by weak demand and excess
capacity, maintaining downward pressure on rates,
Herdman said.
But 2013 is expected to see, if not an upturn in
cargo, then at least an end to the deterioration.
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atwonline.com
Latin Paradox
Ingredients exist for strong growth in Latin
America, but infrastructure isnt keeping pace.
By AAron KArp
2013
Forecast
T
here is a paradox related to air passenger
growth in Latin America that threatens the
robust rate of airline traffic expansion pre-
dicted as a natural consequence of more people
in the region ascending to the middle class. Yes, a host
of economic trends point toward muscular passenger
growth in the region for the foreseeable future. But air-
lines say airport and ATC infrastructure shortcomings
could seriously curtail that potential for expansion.
One sign of the explosive growth in airline passen-
gers occurring in Latin America: Te regions busiest
city-pair, Rio de Janeiro-So Paulo, was traveled by
1.5 million more passengers in 2011 compared to
2010. Tat 13% year-over-year growth occurred even
though more than 12 million passengers were already
fying between the Brazilian cities in 2010 (See chart,
opposite page).
Latin American and Caribbean Air Transport Asso-
ciation (ALTA) member airlines passenger trafc rose
8% year-over-year for the frst 10 months of 2012 to
187.9 billion RPKs on a 6.3% increase in capacity to
245.9 billion ASKs, pushing up load factor 1.2 points
to 76.4%. According to IATA, only Middle Eastern
airlines are growing passenger numbers faster. (One of
South Americas most developed countries, Chile, saw
800,000 people fy for the frst time in 2010, accord-
ing to LAN Airlines.)
Boeing predicts Latin American passenger trafc,
in terms of RPKs, will grow at an annual rate of 6.6%
over the next two decades, while Airbus forecasts
atwonline.com
|
January 2013
|
atw 39
2013
Forecast
annual passenger trafc growth of 5.3% in the region
over the next 20 years. Our experience has been that
you put a new route in and passengers fll the aircraft.
You dont know where they came from, LAN senior
VP-corporate afairs Pablo Querol told ATW in 2012.
Keeping Pace
Speaking at the recent ALTA Airline Leaders Forum
in Panama City, LAN and TAM parent LATAM
Airlines Group CEO Enrique Cueto said, When you
talk to authorities, they say by law they cant plan for
growth rates of more than 6% [annually], but the in-
dustry is growing at 15%. Te industry in the region
has grown faster than elsewhere in the world.
Fast growth achieved over the last decade by car-
riers such as Brazils TAM and GOL was unthink-
able for aviation planners 10 years ago and we have
to catch up, Cueto commented. He added that
the regions airlines are also forced to operate in
highly fragmented airspace that further decreases
efciency.
ALTA executive director Alex de Gunten last year
amplifed his recurring call for airport and ATC
modernization in Latin America. We cant stress
enough the need to address the infrastructure issues
faced by our industry, he said. Speaking at an IATA
conference in Santiago de Chile, he added, We cant
aford to wait until we have a crisis to take action.
Infrastructure projects take years to complete, so the
time to act is now.
De Gunten said that Latin American airlines
placed around $50 billion worth of aircraft orders
between 2006 and 2011. Unfortunately, this
investment has not been matched by an equivalent
commitment by governments to build airport and air
navigation support infrastructure to meet the trafc
growth, he asserted. As a result, the encouraging
economic outlook for Latin America and the Carib-
bean is at risk from the constraints and economic
inefciencies imposed by an aging and inadequate
aviation infrastructure Governments have not kept
up their required investment to reduce the gaps in
infrastructure.
IATA DG and CEO Tony Tyler said, It is no
secret that Latin American infrastructure develop-
ment has not kept pace with growing demand. Only
one stateBarbadosranks in the top 25 for quality
of air transport infrastructure, according to the World
Economic Forums 2011 Travel and Tourism Compet-
itiveness Report of 139 countries Of the regions
largest economies, Chile ranks 26. But Mexico is 65,
Brazil 93 and Argentina stands at 115.
AviancaTaca chairman and ALTA president Ro-
berto Kriete noted that infrastructure is not always
favorable for air transportation in Latin America.
Approximately one-third of fights in the region
depart from an airport that is congested or very con-
gested, he said, adding that aviation infrastructure
is actually going backwards in some parts of Latin
America. We cannot continue to patch the infra-
structure and maintain the current pace of growth,
he cautioned.
An example of infrastructure issues squeezing
growth is occurring in Colombia. We still have ma-
jor limitations at Bogota El Dorado Airport, Avianca
CEO Fabio Villegas said. Avianca has its main opera-
tions center in Bogota and our main limitation to
growth is the Bogota airport Te management of
air trafc is truly inefcient.
Kriete said, Te most expensive airport in Latin
America is the airport you dont have Its a key
issuehow do we develop airports rapidly? Not 4-5
years behind [passenger demand] Its an issue of
political will.
Te regions airlines say some markets airport
charges and government taxes on fights are prohibi-
tive. Venezuela is an impressive market. We would
like to be there, Villegas said. But the regulatory en-
vironment makes it impossible. Total fights handled
The Top 20 CiTy pairs in LaTin ameriCa/Caribbean
added seats % chg.
City pair Total seats 2011 vs. 2010
Rio de Janeiro-Sao Paulo 12,292,194 1,455,144 13.0
Brasilia-Sao Paulo 5,488,701 690,288 14.0
Belo Horizonte-Sao Paulo 4,705,915 590,732 14.0
Porto Alegre-Sao Paulo 4,584,800 685,772 18.0
Curitiba-Sao Paulo 4,465,467 457,842 11.0
Salvador-Sao Paulo 3,835,474 499,430 15.0
Mexico City-Monterrey 3,444,448 214,310 7.0
Bogota-Medellin 3,299,373 -98,004 -3.0
Guadalajara-Mexico City 3,084,792 263,448 9.0
Cancun-Mexico City 3,065,692 76,698 3.0
Brasilia-Rio de Janeiro 2,959,052 563,630 24.0
Bogota-Cali 2,935,874 -55,125 -2.0
Guayaquil-Quito 2,742,090 -89,073 -3.0
Buenos Aires-Sao Paulo 2,659,348 77,754 3.0
Florianopolis-Sao Paulo 2,608,682 95,522 4.0
Recife-Sao Paulo 2,473,496 442,254 22.0
Rio de Janeiro-Salvador 2,311,570 377,774 20.0
Belo Horizonte-Rio de Janeiro 2,111,364 316,930 18.0
Cuzco-Lima 2,087,442 347,967 20.0
Bogota-Cartagena 1,992,798 122,009 7.0
Source: ALTA
40 atw
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January 2013
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atwonline.com
2013
Forecast
at Caracas Bolivar Airport decreased 7% year-over-
year in 2011, in stark contrast to growth at most of
the regions top airports.
Bullish Boeing & airbus
Despite the concerns over infrastructure, Boeing
and Airbus both see strong demand for commercial
aircraft in Latin America over the next two decades,
with Boeing slightly more bullish on the region. Boe-
ing is forecasting demand for 2,510 new aircraft in
Latin America through 2031 valued at $260 billon,
while Airbus is projecting demand in the region for
2,120 new aircraft valued at $242 billion over the
same timeframe.
Boeing Commercial Airplanes VP-marketing
Randy Tinseth said Latin America is a market that
has really taken of We expect 2012 [was] a year
of record orders for this market. He noted that 83%
of demand for new aircraft in the region will be for
single-aisle planes.
Airbus executive VP-Latin America and the Carib-
bean Rafael Alonso added, As long as the infrastruc-
ture is there, the market is going to continue to grow.
You cannot grow an economy of a country if you
dont grow aviation.
Alonso said carriers are partly getting around the
infrastructure problem by ordering larger aircraft: One
way of [generating] growth is operating bigger-size
aircraft so that with the same air trafc control slot you
can carry more passengers [Latin American airlines]
are looking for bigger aircraft. Te aircraft being
ordered now [by the regions carriers] are about 30%
bigger than they were in the year 2000.
And orders keep coming from the regions airlines.
Avianca revealed in November it had ordered three
additional Boeing 787s, bringing the total number of
Dreamliners it has on order to 15. It originally placed
an order for 10 787s in 2007, becoming the frst
South American carrier to order the aircraft. LAN last
year became the frst Latin American carrier to put
the 787 into service.
Non-Latin American airlines are taking notice
of the regions potential. In the past 18 months,
Lufthansa has increased ASKs to/from Latin America
by 40%; in Brazilits most important market in the
regioncapacity grew 70% over the period.
Delta Air Lines on Jan. 1 relocated its commercial
headquarters for Latin America and the Caribbean
from Atlanta to So Paulo. Nicolas Ferri, the VP
heading the airlines new Brazilian ofce, said the
move allows us to participate in the day-to-day af-
fairs of the aviation industry in the region and be part
of its evolution.
Edvaldo Pereira Lima contributed to this report.
Latin america is a market that has really taken
off we expect 2012 [was] a year of record
orders for this market. Some 83% of demand
for new aircraft in the region will be for single-
aisle planes.
Boeing Commercial Airplanes VP-marketing Randy Tinseth
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atw 41
A
fter decades of reliable, continuous
growth, air cargo traffic has completely
stagnated over the last five years. The level
of international airfreight traffic was essen-
tially the same in 2012 as 2007.
From a statistical standpoint, this fact contin-
ues to amaze: Global air cargo trafc only fell on a
year-over-year basis once until 2008 (in 2001) but,
barring an unexpected late turnaround in last years
fourth-quarter, air cargo trafc has now dropped on
an annual basis four times in fve years.
Weve had 12 years [of data dating back to 2000],
almost two-thirds of a 20-year forecast period, where
air cargo has only averaged 3% annual trafc growth,
Air Cargo Management Group (ACMG) managing
director Robert Dahl told ATW. Tats about half of
the 6% annual growth rate experienced by the indus-
try until the middle part of the last decade.
Its reasonable to expect that 3% could be what
the new-normal will be, Dahl said. After rebounding
from back-to-back down years with a 20% uptick in
2010, global air cargo trafc fell 0.7% in 2011 and
was down 1.9% through the frst nine months of
2012, according to IATA.
Shippers shift down
Weve had fve years with very little net growth and
thats unprecedented in this industry, Dahl said.
Shippers have choices and airfreight has always
been the high-price option. Shippers are now willing
to trade of some of that [air] speed In the last few
years, the cost deferential between air and surface has
actually gotten higher [Teres a] widening gap
between air and surface transportation [prices], and
that has worked to the detriment of the air transpor-
tation industry. At the same time, those providing
surface transportationboth ocean and truckhave
improved their service level.
United Parcel Services 2012 third-quarter revenue
was down 0.7% year-over-year to $13.07 billion as
the delivery giant contended with what chairman and
CEO Scott Davis characterized as an environment of
slowing global trade. CFO Kurt Kuehn told analysts
that UPS customers continue to migrate to less
premium products.
Similarly, FedEx chairman, president and CEO
Fred Smith said in recent public comments that some
customers are trading of speed for cost savings, adding
the trend will continue for the foreseeable future, likely
even when economic conditions improve.
IATA analysts, at the organizations outlook brief-
ing in mid-December, confrmed a gloomy forecast
for the cargo business, with asset utilization continu-
ing to decline. But IATA chief economist Brian Pearce
noted there were signs of US consumers becoming
more confdent, which could help put a foor under
goods migrating to surface transport.
Air cargo yields are going down and capacity is
ample theres overcapacity, Accenture senior man-
ager Marcus Fromm said. Teres very little appetite
and courage in [the air cargo] industry to really do the
next step of innovation. Little increases in fuel prices
have a huge impact [on whether an air cargo route is
proftable. Airfreight operators need to be] applying
more intelligence on how you sell and what you sell.
Te industry needs to come of this kind of attitude
about complaining about the volatility and provide a
higher value proposition to shippers.
Dahl added, One of the issues that operators of
freighters face today is the high price of fuel. Teres only
one revenue streamfrom the cargo you carryand
theres downward pressure on yields. Te airlines are
sort of caught in a bind. Its difcult to generate enough
revenue with a freighter to make it proftable.
Prospects are not expected to improve soon, he
warned: With all the economic uncertainty that the
world faces, its hard to see how well establish [sus-
tained, positive air cargo growth in the near-term].
Our expectation is that the frst part of 2013 is likely
to carry on like the second half of 2012. Most of us
who look at the market would say the early part of
2013 is not going to be great.
Cargo Flattened
Virtually no growth seen from 2007-2012
for global air cargo traffic.
By AAron KArp
2013
Forecast
The future and us: a perfect match.
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www.lufthansa-technik.com/787
Call us: +49-40-5070-5553
More mobility for the world
022_197x267+A_Matches+QR_ATW_ICv2_RZ01.indd 1 12.12.12 19:21
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atw 43
I
n its services market outlook, Boeing identifies a
total market of almost $2.4 trillion over the next
20 years. The market for services is projected to
grow by approximately 4% annually over the term
of the outlook.
Airlines are looking for every possible advantage
to succeed, from efciencies in maintenance services
to breakthroughs in fight operations and information
technology, Boeing SVP-commercial aviation ser-
vices Lou Mancini said at the Farnborough Airshow
in July. Demand for this kind of support and services
is only going to grow as fuel prices remain high, feet
size increases and airlines look for ways to improve
their overall operations and reduce costs.
As the industry moves increasingly toward a
digital airline with e-Enabled aircraft such as the
Airbus A380 and Boeing 787 demand is growing
for information integration with airline maintenance
engineering, fight operations and information tech-
nology departments.
Boeing has the ability to create unparalleled
integrated solutions, Mancini said. We know the
airplane better than anyone; we have the resources to
bring innovations to market.
Customer Pain Points
Boeing has around 340 feld service representatives
stationed in nearly 60 countries as part of its support
package for customers, and a 24/7 operations center
at Boeing Field that mirrors the way airplanes actu-
Q Q
Service
Change
Technology and data management are the new
drivers of aircraft maintenance. By Christine Boynton
MRO_ATW_JAN13.indd 43 12/14/12 2:39 PM
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ally operate in a real-time environment, Boeing
VP-information services Per Norn told ATW. In line
with this, the manufacturer has reorganized its services
business, creating a process it calls the Boeing Edge.
When we created this strategy, we spent the frst
six to eight months just talking to customers about
their key pain points, Norn said. Ten we went
back and said if these are the key pain points for our
customers, where are our strategic priorities? Where
do we start? Boeing Edge is foremost a way for us
to get our people to think through every day, every
minute, every second, 24/7, 365 how we can give our
customers a competitive advantage.
As the 787 enters service with more airlines and at
a time when more aircraft are becoming connected,
data-rich environments, Boeing sees Information
Services as a growth area and key priority.
Information management plays an essential role
because you dont need all data at all times. Informa-
tion services had to do with the realization that we
had a lot of very smart tools in the information space,
but the airlines needed more than tools, they needed
an integrated portfolio of products and services to
capture the explosion of data and to connect dots
that had not been connected before, to deploy those
analytics and create new decision support solutions,
Norn said. We did that and then we launched the
Boeing Edge to really try to help our customers take
advantage of the large portfolio of services and sup-
port and solutions that we can ofer.
Norn notes that the companys Information
Services unit is a pretty big deal for Boeing. As a
strategic priority, it is a signifcant efort, he said.
an Explosion of Data
Te 777 was really designed to be e-Enabled,
information enabled, Norn said. It has technology
on the airplane that allowed it to be both connected
to the ground and send and receive data in real time.
With that airplane, we realized that wed started to
innovate some pretty groundbreaking products like
airplane health management, which monitors the
airplane in real time to predict and prevent failures.
Te 777 transmitted about 1 megabyte a fight
from the air. Today the 787, with more advanced sys-
tems, transmits about 28 megabytes of data a fight.
Looking at Boeings Current Market Outlook that
calls for approximately 33,500 new airplanes in 2013,
Airline heAlth mAnAgement
in Action
Boeing estimates the cost to an airline for an airplane
delay of between one and two hours can be conserva-
tively put at between $10,000 and $150,000. One of
its operations solutions that help customers avoid these
costly delays, Airline Health Management (AHM), has
three types of support available: real-time fault manage-
ment; performance monitoring; and custom alerting
and analysis. Its real-time fault monitoring collects and
analyzes data in real time, making it available to ground
operations so that teams can have solutions ready for an
aircraft even before it arrives at the gate. Performance
monitoring analyzes airplane cruise performance data,
including fuel efficiency and emission levels. The custom
alerting and analysis support provides customer-specified
alerts from the airplane about developing system issues.
Things such as tire pressure, hydraulic fluid, APU and
engine oil levels are automatically monitored, collected
and transmitted using ACARS. AHM was tested first
in trials with Japan Airlines, Air France and American
Airlines in 2003 on 777s and 747-400s. Currently, a
total of 52 airlines use AHM below are some recent
examples of the solution in action.
OCTOBeR 2012: A customer picked up an AHM
alert during monitoring for a right-hand wing gear door
operation. Although there were no crew reports of
defects, the AHM prognostic alert indicated that the
fault was a telltale indicator of a more serious problem
in the early stages of development. An analysis was
subsequently done, a faulty part replaced, and the air-
plane was returned to service.
NOveMBeR 2012: AHM detected that an aircrafts
air-conditioning system was demonstrating abnormal
behavior. Using AHMs prognostics, the customer was
able to preemptively remove debris from a clogged
line, avoiding a potential delay.
DeCeMBeR 2012: Based on an AHM, alert which
showed an abnormal trend on an aircrafts spoiler,
Boeing contacted the spoilers manufacturer. They dis-
cussed the issue and made a joint recommendation to
the customer to carry out a precautionary removal of
the spoiler.
ONgOINg: AHM is being used to monitor oil con-
sumption of the auxiliary power units on over 500 777
airplanes worldwide. When oil consumption reaches
unacceptable levels, airline maintenance crews are
automatically alerted. This allows the airlines to ana-
lyze pending system problems during scheduled main-
tenance, rather than having to react to problems when
fault conditions have fully developedwhich might
result in delays or turnbacks.
Christine Boynton
atwonline.com
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atw 45
the potential data load is tremendous.
If you take the 28 megabytes and calculate how
much that would be with those new airplanes youre
going from 6.9 terabytes a year in data generation to
about a petabyte [1,000 terabytes], Norn said. Its
a 14,000% increase in data that you can use. Its an
explosion in data.
Te issue the industry faces is not about technol-
ogy. On an average day, Google reportedly processes
over 20 petabytes of data. Te issue becomes how to
sort and select relevant items from the pile how to
use this data in an intelligent, constructive way.
Information management plays an essential role
because you dont need all data at all times, you need
a certain piece of data to create the right intelligence
and the right decisions at a certain time, Norn said.
And thats really what were working on that we call
the digital airline. How do you create suites and plat-
forms on the ground and in the air that connect the
dots of data so you can connect everything from
how you fy, maintain and operate the airplane on the
ground and how that connects into better passenger
service and efciency in the end?
Tis is a really big play. Its the play of saying
its a digital airline that is totally connected from
the ground to the air with whomever uses the data,
whether its a passenger, a mechanic, an engineer, the
CEO or an air trafc controller. Tats the vision of
the digital airline.
Data Management
Faced with this growing mountain of data, Boeing
is focused on leveraging the knowledge it has in the
airplane and then building an architecture on the
ground to connect the dots.
Were doing that right now, Norn said. What
we want to build are smart, connected information
platforms not big monolithic systems which we
had in the old world using cloud technologies so
you can actually store the data and use the data when
you need it.
For 12 years, Boeing has ofered a portal for data,
information and manuals called MyBoeingFleet
which is visited over 19,000 times a day by customers.
Te portal has about 180 stored applications, includ-
ing airplane health management and maintenance
performance toolbox.
We did cloud before cloud was a word, Norn said.
Now cloud is an industry driver. Weve done cloud
for many years but to do it in the new paradigm, a safe
way of storing data, accessing data, weve been going
at that for the last couple of years and were building a
prototype for our new information platform that were
starting to test in the marketplace.
Te new information platform will allow, for
example, an airline CEO to see at a glance the airlines
ontime performance, feet reliability and number
and length of air trafc delays. Today, those informa-
tion points are provided from diferent sources, but
were working on building more of an aggregated
visualization a dashboard of all those things,
Norn said. By doing so, you also drive the need for
integrating more data into new applications, which is
another strategic move were making.
Te company is also watching how mobile tech-
nologies are driving change for how data is used and
is moving a lot of its applications into the mobile
space, such as its Electronic Flight Bag Solution.
Tere are new technologies being developed at
the speed of light, from Apple, from Microsoft, from
the bigger software and services houses ... and we
are partnering with some of them, Norn said. Te
industry change needs to include more than ourselves
and our customers. I think the key thing for us is
that it takes more than great technology to create an
advantage for our customers.
Source: Mozy.com, 2009
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AirportData_ad_atw_DEC12.indd 2 11/6/12 9:18 AM 301ATWpages.indd 46 12/17/2012 10:08:50 AM
atwonline.com
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atw 47
Fast-growing turkish low-cost carrier (LCC) Pegasus airlines is seeking new ways
to expand into Russia and Central asia as it tries to combat restrictive regulatory
regimes in the region.
Pegasus, which just placed frm orders for 58 Airbus A320neos and 17 A321neos, is
already seeing a compound growth rate of around 40% for domestic services and 26% for
international sectors.
Te carrier believes it could do even better if the regions civil aviation authorities would
embrace liberalization of air services.
Chairman Ali Sabani sees Russia and the Central Asian republics, colloquially known as
the Stans, as ideal areas in which to grow. Russia is a vast market that has yet to really experi-
ence the LCC phenomenon, while the Stans have relatively few (or no) air links to regions
such as Europe and the Middle East and often have small, loss-making national carriers.
Turkey, historically the crossroads of East and West, ofers the ideal transit hub for the
Stans, Sabani said, and Istanbul is a major attraction for businessmen and tourists from
Central Asia, particularly since Turkey eliminated visa requirements for visitors from around
the region.
Passenger numbers between the Stans and Turkey are extremely small, given the total
populations involved, Sabani said. For example, the combined populations of Turkey and
Uzbekistan amount to 102 million people, yet just 151,000 people few between the two
nations in 2011.
Much of the reason is cost: currently, the average round-trip cost between Istanbul and
Q Q
Winged Ambitions
Turkish carrier
finds low-cost niche
opportunities in new
markets. Alan Dron
Pegasus Chairman Ali Sabani
Pegasus_ATW_JAN13.indd 47 12/18/12 10:09 AM
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the Uzbek capital Tashkent, a fve-hour and 20-min-
ute fight, is roughly the equivalent of $660. Pegasus
fies from Istanbul to London, a four-hour fight, for
the equivalent of $170. Tose high costs to Uzbeki-
stan are the result of insufcient competition, and
similar situations exist in several other Central Asian
and Middle East nations.
Te key is liberalizing the fight regulatory regime
between nations, Sabani told ATW, but while Turkey
is keen to proceed, several Central Asian nations want
to protect their fag carriers: Its more important [for
them] to have those fag carriers rather than to have
more tourists and business coming into the country.
While Sabani remains hopeful of liberaliza-
tion in the longer term, Pegasus is trying another
tack in Kyrgyzstan. Teres almost no fying there,
never mind no LCCs, Sabani noted. Te carrier is
developing a local airline in which it will be a large
minority shareholder and pass on its know-how to
local managers. An announcement is expected around
the turn of the year.
It would be wonderful to use this as a pattern for
other Stans, Sabani said. Tis part of the world is
virgin territory.
From Charter to Low-Cost
Pegasus Airlines began life in 1990 as a charter airline,
effectively owned by major tour operators. In 2005 it
was bought and the new management team, including
Ali Sabani, the US-educated scion of one of Turkeys
best-known industrial families, realized the time was
ripe for change.
Turkeys economy was booming and liberalization
of domestic air services had taken place in 2003.
However, Turkeys airline landscape had been domi-
nated for decades by national carrier Turkish Airlines
and no private airlines had stepped up to the plate to
create a domestic network.
We realized that whenever theres a dominant
national player and a country liberalizes, the nimble
players will prosper, Sabani said. Pegasus aimed for
the gap in the domestic market and within two years
had the biggest market share of all the countrys pri-
vately owned carriers.
Whenever there is a protected market sector [that
is liberalized], that market explodes, he noted.
Pegasus embarked on a twin migration strategy
from charters to scheduled services and from mid-cost
to low-cost. The biggest initial barrier turned out to be
internal, with personnel resistant to change. To get them
to buy into the new strategy, the airline set up a profit-
sharing scheme that he says was unheard of in Turkish
industry, in which 10% of pre-tax profits went to staff.
There was also initially some pushback from pas-
sengers. They liked the lower fares, but disliked paying
for onboard services such as food and drink. The car-
rier pointed out they had previously been paying for
those services upfront in Turkish Airliness headline
price. Customers now understand they have a choice
in whether they have a drink or sandwich (or even pre-
order hot meals), Sabani said.
With the exception of someone who pays to fly
first-class on a route like Frankfurt to Rio de Janeiro,
this is a commodity business. People dont want to
spend their money on their travel, they want to spend
it at their destination.
Pegasus currently operates a fleet of 40 Boeing
737-800s and two 737-400s. Its home base is Istanbul
Sabiha Gken International, the citys second airport.
It serves 20 points within Turkey and more than 30
internationally.
Alan Dron
Pegasus_ATW_JAN13.indd 48 12/14/12 2:16 PM
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atw 49
Russian Market
Russia is also seen as fertile ground for Pegasus, but
there are particular problems to operating there.
Around four years ago we realized that to be
able to be in Russia we needed to have a partner. We
met one person who was presented to us as the owner
of a portfolio of airlines, including one called Sky
Express. It looked very much like an LCC, operating
Boeing 737-400s. Te only problem was, it turned
out that he didnt own the company he was trying to
sell to us.
Despite such pitfalls Pegasus is starting to get use-
ful trafc fows between Istanbul and major Russian
regional centers such as Krasnodar, near the Black Sea
and Omsk, in southwest Siberia. Te service from
Omsk to Istanbul, with its onward connections, is
currently the only route for citizens of the Siberian
city to travel to Europe.
But Pegasus remains blocked from both Moscow
and St. Petersburg because the current bilateral desig-
nates only a single carrier from either nation can fy
between them and Istanbul. National carriers Turkish
Airlines and Aerofot take those roles.
However, Sabani anticipates that the growth of
public pressure will eventually force nations to open
up their airspace to more competition: Te customer
always wins.
Te same situation applies to increasing fights
between Turkey and the Arabian peninsula, where
Pegasus is pushing for fight rights: As people get
more sophisticated, they realize low-cost fying isnt a
threat, its a beneft to the population.
Meanwhile, as it lobbies for more fights, Pegasus
remains interested in an IPO. Tis has been mooted
for some time and the carrier actually pulled back
from such a development around 18 months ago, but
now, all the stars seem to be aligning and an ofer-
ing is anticipated sometime within the next two years.
Despite earlier pronouncements, one development
that is defnitely of the table is long-haul, low-cost
fights. New York and Bangkok had been mooted as
potential early destinations, but Sabani says that only
one such carrier, Air Asia X, has successfully adopted
this model, and he remains unsure of exactly how suc-
cessful it has been.
Long-haul services are currently not even in our
fve-year plan, although the possibility of tap-
ping into the long-haul market through codeshares
remains. Te potential from Russia, Central Asia and
the Middle East will be more than enough to keep
Pegasus busy, he believes.
As people get
more sophisticated, they realize
low-cost fying isnt a threat, its a
beneft to the population.
Pegasus chairman Ali Sabani
Pegasus_ATW_JAN13.indd 49 12/14/12 2:16 PM
A Penton Publication
The Magazine of Global Airline Management www.atwonline.com November 2006
ATWs 2013 Classic
Airliner Calendar
www.atwonline.com
Order online now at www.ATWOnline.com
Or complete the order form and mail or fax to:
Penton Media
24653 Network Place
Chicago, IL 60673
Fax: : +1 913-514-3893
The ATW 2013 calendar features original photos,
suitable for framing, of some of the worlds most
fascinating classic aircraft including:
n Pan Am DC-7
n Aer Lingus Viscount
n American 720Bs
n CAAC 707
n Guest DC-6
n PSA/USAir & China 747SP
n Mohawk BAC-111
n British Airtours 707
n Air France 747
n TCA Vanguard
n TMA 747F
n TWA Constellation
ADDITIONAL FeATUreS INCLUDe:
n Descriptive text and history for each photo
n Key industry dates
n roll out and first flight dates
for historical aircraft
n International holidays
n Size: 14 x 10 (36 x 25cm)
Classic Airliners 2013
Febru
ary 2013
SundAy
MondAy
TueSdAy
WedneSdAy
ThurSdAy
FridAy
SATurdAy
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9 10
11
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16 17
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20
21
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23 24
25
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27
28
Airbus A320-100 rollout 1987
Boeing B-247 frst fight 1933 Tupolev TU-334 frst fight 1999 Boeing 747-8 Freighter frst fight 2010
Boeing 747-100 frst fight 1969 Boeing 737-700 frst fight 1997 Embraer E-190 rollout 2004
Douglas DC-4 (C-54) frst fight 1942 Douglas XC-112A (DC-6) frst fight 1946
Airbus A310-200 rollout 1982
Boeing 757-200 frst fight 1982 Embraer E-170 frst fight 2002
Douglas DC-5 frst fight 1939 McDonnell Douglas MD-90 frst fight 1993 Airbus A320 frst fight 1987 Lockheed L-10 Electra frst fight 1934 McDonnell Douglas DC-9 frst fight 1965
Aer Lingus Viscount
photo by Mel Lawrence
This sharp-looking airliner portrait taken at
This sharp-looking airliner
This sharp-looking airliner London Heathrow in June of 1962 displays the
lines of this Aer Lingus/Irish Air Lines Viscount
800 to good advantage. The aircraft is in the
carriers Green Top livery (you were expecting
some other color?), and if you need further
visual evidence of nationality, take a look at th
visual evidence of
visual evidence of
e
shamrock on the tail. EI-AJK, St. Cillian (Aer
Lingus aircraft have long been named for saints),
is four years old here, having been delivered in
February 1958.
The Vickers Viscount was one of a number
of aircraft types developed by the Brabazon
Committee in the UK during the late 1940s.
It was designed from the outset for turboprop
propulsion, a major technological advance
versus the large number of piston-powered
designs originating elsewhere, including the US.
Initially targeted at the requirements of British
European Airlines (which was the first to order
the type), the proposed capacity was expanded
considerably to the 40-seat range, which
enhanced global sales prospects considerably.
The Viscount proved to be a success in the
marketplace, with over 400 sold worldwide. US
carriers Capital, Continental and Northeast all
operated fleets of Viscounts. Aer Lingus operated
both the earlier Series 700 and the later and
larger Series 800 Viscounts on its European
network, including frequent service to principal
UK points, in particula
January 2013 S m T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
march 2013 S m T W T F S
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
July 2013
SundAy
MondAy
TueSdAy WedneSdAy ThurSdAy
FridAy
SATurdAy
June 2013
S m T W T F S
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30
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2
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auguST 2013
S m T W
4 5 6
11 12 13
18 19
25 26 27
Douglas DC-1 frst fight 1933
First Douglas mail plane, the
M-1, starts manufacturers
fight trials 1926
Boeing Model 40 mail plane
frst fight 1925
Convair 110prototype of
the Convair 240 frst
few 1946
Boeing 787 rollout 2007
Vickers Viscount
frst fight 1948
Boeing 737-900 rollout 2000
Louis Bleriot piloted the
Bleriot XI across the English
Channel 1909
Boeings Model 80, a
12-passenger trimotor
biplane, frst fight 1928
deHavilland DH-106 Comet 1
frst fight 1949
Bombardier CRJ1000 frst
production fight 2009
Embraer EMB 120 Brasilia
rollout 1983
Mohawk BAC-111
photo by George Hamlin
Prior to the opening of Newark, New Jerseys new
terminal facilities in 1973, the observation decks
on what would come to be called the North
terminal was an excellent place to observe and
photograph airline operations. Portions of both
concourses (to be replaced by three complete
terminals) could be accessed, providing close-
up views of much of the operation, as well as
Newarks earlier terminal building, at the left
above the Texaco fuel truck.
Mohawk Airlines, one of the Local Service
airlines launched after World War II, served all
three main NYC airports, and, for that matter,
was effectively the only airline service at this
point (January 23, 1972) at the White Plains/
Westchester County Airport, located to the north
of the city. Here, MO is showing off two examples
of the city. Here, MO is showing
of the city. Here, MO is showing
of its jet aircraft, in the form of the BAC-111
twin-jet.
The British-built aircraft was ordered by several
US carriers, including American Airlines, which
used what it called 400 Astrojets (the number
referring to the series designation of their
aircraft), and in some cases competed directly
Please send me ATWs 2013 Classic Airliner Calendar
(ID: ATWCAC1312)
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and handling). All credit card and internet orders will be
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Boeings Model 80, a
deHavilland DH-106 Comet 1
frst fight 1949
20
scounts on its European
scounts on its European ervice to principal
network, including frequent s
network, including frequent s
UK points, in particula
UK points, in particula ases competed directly
ases competed directly
referring to the series design
referring to the series design
SPeCIAL OFFer
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212ATWpages.indd 62 11/13/12 2:13 PM
atwonline.com
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atw 51
I
t was the aviation news of 2012 that received far too
little attention. Airbuss top brass acknowledged pub-
licly, to a room full of reporters at the Farnborough
Airshow no less, that there will be no all-new narrow-
body commercial aircraft entering the market for at least
another 18 years.
Why 2030? Because thats when the new engine
technology will be coming forward, Airbus COO-
customers John Leahy explained.
Indeed, aircraft engine manufacturers GE Avia-
tion, Pratt & Whitney and Rolls-Royceand the
joint ventures in which they participatehave
taken center stage. It is they, not the airframe
manufacturers, who are driving both near-term
orders and future aircraft development.
Engine technology since the beginning of the jet
age has driven sales, Leahy said. Maybe so, but since
Airbus and Boeing decided to re-engine the A320 and
737, respectively, rather than launch a new single-aisle
jet aircraft, that notion has never been truer.
Te A320neo, to be powered either by the GE/
Q Q
Jumps in aircraft efficiency largely fall on
engine manufacturers. By aaron Karp
Engineering
Innovation
FIRST
PW1100G-JM
engine being
assembled in
West Palm
Beach. Photo
courtesy
Pratt &
Whitney.
Engine_ATWJAN13.indd 51 12/17/12 9:46 AM
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Snecma joint venture CFM International LEAP-
1A powerplant or the Pratt & Whitney PW1100G
engine, has secured nearly 1,600 frm orders since
the program was launched in late 2010. It is slated to
enter service in 2015. Te 737 MAX, to be powered
exclusively by the CFM LEAP-1B, has tallied nearly
1,000 frm orders since its launch in the 2011 sum-
mer. It is scheduled to enter service in 2017.
Both Airbus and Boeing appear content to transi-
tion from the current variants of their workhorse
narrowbodies to the re-engined versions later this
decade, and then ride those models through the end
of the 2020s. Tat means the 737, which originally
entered service in 1968, and the A320, which frst
few commercially in 1988, will have signifcant,
extended runs.
Airbus, in fact, tried to limit the changes between
the classic A320 and the neo, leaving the engine
manufacturers to provide the vast majority of the
promised improvement in efciency. When we
brought out the neo, we were proud that it had 95%
commonality with the [classic A320], Leahy said.
Fueling demand
Over the next 20 years, 75% of the airplanes that
will be delivered will be in that [narrowbody] seg-
ment, Pratt president David Hess told ATW last
year. Tats why weve decided to focus the next-
generation product family in that 10,000-40,000 lbs.
thrust segment.
He noted that commercial aircraft and engine sales
remain robust despite global economic uncertainty:
Te price of jet fuel is proving to be a two-edged
sword. On the one hand, its challenging the airlines
in terms of preserving their proftability. On the other
hand, its stimulating a recapitalization of their feets
so they can replace older aircraft with newer, more
fuel-efcient, re-engined aircraft. Were seeing a very
robust order stream.
Te worlds airlines have become increasingly fo-
cused on fuel, concerned both by its persistently high
cost and the emissions produced by burning it. While
aircraft manufacturers can and do produce innova-
tions to increase operating efciency, the big leaps in
fuel burn improvement being sought by airlines are
primarily dependent on the engine manufacturers.
It is undeniable that, behind the scenes, there was
a push by some at Boeing to develop an all-new nar-
rowbody that would have entered service in the 2019-
2020 timeframe. But the manufacturer ultimately
decided that re-engining was a low risk, low capital
way to tap into market demand for more fuel ef-
fcient aircraft, as was explained by Boeing chairman,
president and CEO Jim McNerney when the decision
was made in 2011.
Rolls-Royce RepoRts coRRuption
conceRns to uK authoRties
Rolls-Royce in December contacted the UKs Serious
Fraud Office (SFO) over concerns that some overseas
intermediaries have been involved in bribery and
corruption.
The move followed a request earlier in 2012
from the SFO for information about allegations of
malpractice in Indonesia and China. In a statement,
Rolls-Royce said its own investigations had identi-
fied matters of concern in these and in other over-
seas markets.
While it is too early to predict the outcomes of
regulators inquiries, they could include the prosecu-
tion of individuals or of the company itself. It pledged
to cooperate fully in any official investigations.
The company added it had significantly
strengthened its compliance procedures in recent
years, including a new global ethics code and a
new intermediaries policy, and has also expanded
its compliance activities. As a further measure, it
appointed an independent senior figure to lead a
review of current procedures and deliver a report to
the boards ethics committee.
I want to make it crystal clear that neither I nor
the board will tolerate improper business conduct
of any sort and will take all necessary action to
ensure compliance, Rolls-Royce CEO John Rishton
said. This is a company with exceptional prospects
and I will not accept any behavior that undermines
its future success. Alan Dron
While aircraft manufacturers
can and do produce innovations
to increase operating effciency,
the big leaps in fuel burn
improvement being sought by
airlines are primarily dependent
on the engine manufacturers.
atwonline.com
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January 2013
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atw 53
Boeing executives determined, he said, that
getting a massive production system up and run-
ning by 2019 for an all-new aircraft could prove
problematic. Airbus and Boeing essentially made
a calculation that the 12%-15% fuel efficiency
improvement promised by the re-engined models
couldnt significantly be topped by an all-new
modelespecially considering the production
costs involved. As Leahy said, the aircraft manu-
facturers will now wait on the engine producers
to make the next big technological jump, one
that would justify the production costs associated
with a new narrowbody program. And that leap in
engine technology is likely at least 15 years away,
Airbus and Boeing believe.
Investing in technology
Te engine manufacturers, on the other hand, have
not been reluctant to invest in new technology. Pratt,
which has spent over $1 billion developing its geared
turbofan (GTF) PW1000 series of engines, is at
various stages of testing four versions of the GTF. In
addition to being a choice to power the A320neo,
PW1000 series engines also will be afxed to
Bombardiers CSeries, Mitsubishi Aircraft Corp.s
MRJ and the Irkut MC-21.
In recent remarks delivered at a ceremony signify-
ing completion of the frst PW1100 A320neo test
engine, Pratt commercial development chief engineer
Graham Webb noted that the East Hartford, Conn.-
based company has worked for over 20 years to
develop and mature the revolutionary gear turbofan
architecture [and] we are all now able to provide game
changing benefts to airline customers in terms of re-
duced fuel burn, emissions, noise and operating cost.
He said the engines fan drive gear system is the
fundamental enabler for the architecture which drives
unprecedented gains in propulsive and also transfer
efciency Our hybrid metallic fan blades, coupled
with the composite fan case and fan exit guide vanes
enables signifcant weight savings while providing world-
class performance Te advanced high efciency core
contains the latest in aerodynamic technologies.
Pratt estimates there is a global market for 45,000
engines over the next two decades to power commercial
aircraft in the 120-230 seat range. While last year it
bought out Rolls-Royces shares in the International Aero
Engines joint venture that builds V2500s to power A320
family aircraft, Pratt and Rolls have formed a new JV to
explore the development of a next-generation engine for
mid-size aircraft.
Te companies have said the JV will focus on high
bypass ratio geared turbofan technology and collabo-
rate on future studies for next generation propulsion
systems, including advanced geared engines, open rotor
technology and other advanced confgurations.
Rolls has probably been the most optimistic in terms
of the potential of an open rotor design to power new
narrowbody aircraft likely to be launched by Airbus and
Boeing in 15 or more years.
CFMs LEAP program, in addition to powering
the 737 MAX and being an option on the A320neo,
is also the sole Western engine for COMACs 150-seat
C919, Chinas attempt at manufacturing a narrowbody
competitor to the 737 and the A320. With orders for 50
new engines at the recent Zhuhai Air Show, the LEAP
program has secured orders for 4,352 engines valued at
more than $52 billion at list prices.
GE/CFM also continues research on future designs,
including an open rotor. CFM will investigate innova-
tive architectures, building a robust portfolio that will
support a variety of new aircraft designs, it said.
I
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54 atw
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atwonline.com
Every major carrier in Europe is suffering. How
would you sum up Swiss International Air Lines
position? Basically, Swiss has to question itself
about its current position. We are expecting a proft
for 2012, but this proft will be signifcantly lower
compared to 2011. Tis means that for two years,
Swiss has shown a negative trend in earning results.
Tis is something we have to worry about. In other
words, we didnt reach our goal to change that [nega-
tive] trend direction. We have to work hard to be able
to again make substantial earnings. Currently, we are
far away from that point. Tere is a lot of work for
Swiss to do.
What are your fnancial expectations for 2012?
Swiss announced a CHF124 million proft ($135
million) for the third quarter, down 22% on the same
period last year. Compared to last year, we are not
performing as well. It is important for Swiss to reach
an 8% margin. But for 2012 we are expecting just
a 5% margin and that means we are far away from
our target. Tese results do not keep us on track to
remain sufciently proftable to fnance our future
investments in the longer term.
Again, this 24-month negative trend is worrying.
How you can turn things around? Te strong Swiss
franc creates a special situation for our airline, giving
us a disadvantage in terms of cost of about 30% com-
pared to other European Union carriers. Swiss there-
fore has to work much more efciently and must be
more focused on its costs than other airlines. We have
made a lot of headway in the past. Our overhead costs
are nearly 25% lower nowadays than they were three
years ago. But there is still potential for improvement.
Efciency management of the feet could be better.
Tere is no alternative other than to work very
hard on our cost management. What that means in
detail will be worked out within many projects as
part of the Lufthansa earnings-improvement program
SCORE. Everyone in our company will be involved.
Do you expect to have to cut salaries? No, I dont
think we are in that position now. But improving
productivity, for example getting more fying hours,
would be a good idea.
Are you talking with your employees about
Swiss International Air Lines, which is owned by Star
Alliances Lufthansa Group, was for the longest time a
benchmark in the European airline industry in terms of
proftability, service and setting new trends. But a tough
operating environment has resulted in Swiss losing its lead
position regarding cost competitiveness within the group.
Harry Hohmeister has been with Swiss International Air
Lines CEO since July 2009. He joined Lufthansa in 1985 and
held a number of executive positions within the company,
initially with co-responsibility for European feet and
schedule planning and development. In February 2000 he
moved to Thomas Cook Airlines, joining Swiss as a member
of the management board and head of network in 2005.
Eyes on
the Goal
IntervIew
Harry HoHmeister
CEO, SWISS IntErnAtIOnAL AIr LInES
by Kurt Hofmann
QA_ ATWJAN13.indd 54 12/17/12 11:50 AM
atwonline.com
|
January 2013
|
atw 55
these cost-cutting ideas? Tere have
been no concrete talks yet. But our
employee representatives know that Swiss
cannot continue the way as it has done
in the past. Our employees realize that
we have to return to stronger profts and
change the cost structure to make Swiss
ready for the future. I believe we can work
on these issues very constructively in 2013
and perhaps we can also stop the negative
trend this year.
How does your cost structure compare
to other Lufthansa Group airlines like
Brussels or Austrian? Our position has
been afected by the strong Swiss franc.
Comparing our position within the group
against Brussels Airlines and Vienna (Aus-
trian Airlines), we switched into a negative
direction. We used to hold the top position
(within Lufthansa Group airlines). Today,
if you look at Swiss from the international
perspective, we are just somewhere in the
middle feld. Tats why we have to work on
our cost structure.
Swiss operates the Airbus A340-300.
When will you replace them? It is clear that
there will be a replacement decision regarding
the A340-300. But we have to be realistic. We
can only order new aircraft when we can aford them.
First, we have to make good money. Swiss is involved in
all feet orders made by the Lufthansa Group. But at the
end of the day, we take the risk and the responsibility for
our own decisions.
Easyjet has a strong position in Geneva. Swiss
now bases its crews there, offering more fexible
fares, installing a separate management struc-
ture. Is this a competitive move against Easyjet?
Personally, I am not that interested in Easyjet. Im
much more focused on serving our customers in Ge-
neva better and on expanding our presence there. In
Geneva you see two types of passenger needs. Easyjet
serves a diferent clientele from Swiss, although of
course there are some overlaps.
Since 2006, we have tripled our passenger numbers
in Geneva and reached a size that warrants its own
management team.
Lufthansa and Germanwings are changing their
business models in Europe to make their continen-
tal businesses proftable. What does that mean for
Swiss? We will talk with Germanwings about that in
January with CEO Tomas Winkelmann.
You are a member of the Austrian Airlines board.
How do you see their restructuring progressing
over the past 12 months? Te measures Austrian
implemented created the turnaround and Austrian
became a leader for the industry in terms of restruc-
turing. What other carrier can demonstrate that in
this tough environment? Te carrier set new standards
in terms of improving efciency, reducing costs, and
also improving results and operating routes so that
Austrian can make money.
So there is a lot of similar work for Swiss to
do? As with all carriers, an airline is a permanent
construction site.
Our EmpLOYEE rEprESEntAtIvES knOW tHAt SWISS
cannot continue the way as it has done in the past.
QA_ ATWJAN13.indd 55 12/17/12 11:50 AM
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TRENDS Aircraft Data | 58 Deliveries | 59 Traffic | 60 TRENDS
atwonline.com
|
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atw 57
TRENDS
US * 2012 2011 % chg
RPKs (mil.) 778,756 767,976 1.4
ASKs (mil.) 943,035 940,621 0.3
Pass. (000) 433,000 427,900 1.2
Pass. LF (%) 82.6 81.7 0.9
FTKs (mil.) 52,408 54,860 -4.5
* January-July. Source: US DOT BTS.
1. July . 2. June *Includes Regional operations.
Source: ATW Research, direct airline reports.
RANK AiRliNe RPKs (000)
1 Delta * 23,300,872
2 United Continental 21,170,844
3 Air France KLM 17,216,000
4 AMR Corp. 15,830,503
5 Emirates
1
15,281,756
6 Lufthansa 15,145,000
7 Southwest 13,111,308
8 British Airways 9,767,000
9 Qantas Group
1
9,597,000
10 LATAM Airlines Group 8,659,000
11 Cathay Pacific 8,110,404
12 US Airways 7,795,798
13 Singapore Airlines 7,468,000
14 Air Canada 5,923,000
15 ANA
1
5,421,909
16 Korean Air
2
5,329,450
17 Turkish Airlines 5,167,000
18 Thai Airways
2
4,690,000
19 JetBlue 4,309,494
20 Japan Airlines 4,010,456
toP 20 RePoRtiNg AiRliNeS
SYSteM tRAFFic/NoveMbeR 2012
eURoPe 2012 2011 % chg
RPKs (mil.) 736,514 704,124 4.6
ASKs (mil.) 926,333 903,739 2.5
Pass. (000) 315,565 306,671 2.9
Pass. LF (%) 79.5 77.8 1.7
FTKs (mil.) 27,195 28,299 -3.9
Source: AEA
ASiA PAciFic 2012 2011 % chg
RPKs (mil.) 643,008 608,862 5.6
ASKs (mil.) 824,474 792,769 4.0
Pass. (000) 171,824 160,780 6.9
Pass. LF (%) 78.0 76.8 1.2
FTKs (mil.) 49,036 51,104 -4.0
Source: AAPA
lAtiN AMeRicA 2012 2011 % chg
RPKs (mil.) 187,909 173,960 8.0
ASKs (mil.) 245,902 231,286 6.3
Pass. (000) 123,958 115,597 7.2
Pass. LF (%) 76.4 75.2 1.2
FTKs (mil.) 3,518 3,445 5.2
Source: ALTA
WoRlD AiRliNe tRAFFic
JANUARY-octobeR 2012
1. .October. 2, September. * Includes Regional operations.
Source: ATW Research, direct airline reports.
iAtA tRAFFic gRoWth bY RegioN (%)
octobeR 2012
RPK ASK PASS lF FtK AFtK
october 2012 vs. october 2011
Africa 3.3 2.4 68.4 -0.5 2.7
Asia Pacific 2.9 3.4 76.7 -6.8 -4.6
Europe 2.3 1.5 80.0 -4.3 -1.7
Latin America 8.7 6.0 75.3 0.9 8.6
Middle East 11.6 10.9 75.3 13.4 8.6
North America -0.3 -1.5 83.3 -5.3 -5.4
Industry 2.8 2.3 78.8 -3.5 -2.2
YtD 2012 vs. 2011
Africa 7.4 6.9 67. 7 5.9 10.3
Asia/Pacific 5.9 5.2 77.6 -6.0 -2.3
Europe 5.4 3.3 80.1 -3.3 0.9
Latin America 10.0 8.2 76.2 -1.8 8.0
Middle East 16.0 12.5 77.9 14.3 12.0
North America 0.8 -0.2 83.1 -1.2 -2.2
Industry 5.3 4.0 79.4 -2.0 0.5
Source: IATA
R
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Trends_Jan13.indd 57 12/18/12 10:01 AM
TRENDS
58 atw
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atwonline.com
SHARE IN
WORLD
INDEX
CTS/
GAL.
$/BBL $/MT INDEX
VALUE
2000=100
VS.
1 MONTH
AGO
VS.
1 YR.
AGO
Jet Fuel Price 100.0% 305.5 128.3 1011.3 350.8 0.1% 2.1%
Asia & Oceania 22% 300.6 126.2 997.3 360.7 -1.0% -0.1%
Europe & CIS 28% 310.0 130.2 1026.1 350.8 0.1% 2.8%
Middle East & Africa 7% 296.9 124.7 983.9 372.4 -0.6% 0.6%
North America 39.0% 305.4 128.3 1012.0 341.0 0.8% 2.8%
Latin & Central America 4% 316.1 132.7 1022.2 367.7 1.7% 3.2%
Impact on the global airline industry's fuel bill this year:
New fuel price average for 2012 $129.8/b
Impact on 2012 fuel bill +33 billion
JET FUEL PRICE MONITOR
NOVEMBER 30, 2012
US ONTIME PERFORMANCE
OCTOBER 2012
Ranked by % of arrivals ontime at all reported airports. Source: US DOT.
AIRCRAFT DATA
Demographics as of September 2012. Source: Aviation Specialists Group, Inc.
777 FREIGHTER A330-200F 747-8F
MTOW,
000#s
766.8 500.4 - 513.7 975
Engine
Types
GE90-110B1 64;
GE90-110B1L 1
PW4170A 4;
Trent 772B-60 10
Genx-2B67 25
# in Fleet 65 14 25
# of
Operators
13 6 7
# on Order 62 38 48
Geographic Distribution
Europe 13 3 10
Africa-
Mid East
10 2
Asia-
Pacific
14 9 10
North
America
25 5
South
America
3
Avg. Age
of Fleet
1.9 1.3 0.9
Source: US DOT Form 41 flings. Costs do not include taxes, into-plane
fees, or expenses associated with hedging programs. Based on last
carrier submissions, the gallons used above represents 99.9% of the total
consumption by Major, National and Large Regional carriers.
US FUEL COST AND CONSUMPTION
OCTOBER 2012
Operation Total
gallons
(000)
Cost/
gallon
(cents)
Chg.
month
(cents)
Chg.
year
(cents)
Total
Domestic 853,157 309.0 5.0 27.0
Total
International 521,055 299.0 16.0 16.0
System
Total 1,374,212 305.0 9.0 23.0
Aircraft Year Built
2013*

2018** 2023** 2028**
777F 2010 $140.2 $114.6 $92.2 $73.1
A330-200F 2010 $78.5 $63.8 $51.4 $40.8
747-8F 2011 $173.5 $137.1 $109.5 $86.7
AIRCRAFT VALUES
Values assume half-life, half-time condition. * Current Market ValueMost likely trading price under
current market conditions, rounded to nearest US$ million. ** Future Base Valuevalue in a balanced
market, infated at 1.5% p.a., rounded to nearest US$ million. Source: AVITAS, Inc.
FBV @ 1.5% Inflation
0 20 40 60 80 100
American
JetBlue
United
ExpressJet
Frontier
SkyWest
American Eagle
Virgin America
Southwest
US Airways
Mesa
Delta
AirTran
Alaska
Hawaiian
0.0
0.2
0.4
0.6
0.8
1.0
n.a.
2012
2011
Trends_Jan13.indd 58 12/14/12 4:15 PM
TRENDS
atwonline.com
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January 2013
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atw 59
AIRLINE MODEL ENGINE DELIVERY
BOEING DELIVERIES
AIRCRAFT DELIVERIES
NoVEmbER 2012
Source: Airbus
AIRLINE MODEL DELIVERY
AIRBUS DELIVERIES
Source: Boeing
Aviation Capital Group 737-800 CF 1-Nov
Norwegian 737-800 CF 1-Nov
Southwest Airlines 737-800 CF 1-Nov
United Airlines 737-900ER CF 2-Nov
Lion Air 737-800 CF 5-Nov
American Airlines 737-800 CF 6-Nov
BBAM 737-800 CF 6-Nov
Philippine Airlines 777-300ER GE 6-Nov
Qatar Airways 787-8 GE 6-Nov
Alaska Airlines 737-900ER CF 7-Nov
BOC Aviation 737-800 CF 8-Nov
China Southern Airlines 737-800 CF 8-Nov
Turkish Airlines 737-900ER CF 8-Nov
FedEx 777F GE 9-Nov
ILFC 737-800 CF 9-Nov
LOT Polish Airlines 787-8 RR 9-Nov
Malaysia Airlines 737-800 CF 9-Nov
ALC 737-800 CF 13-Nov
flydubai 737-800 CF 13-Nov
GOL Airlines 737-800 CF 13-Nov
LAN Airlines 767-300ER GE 13-Nov
Ethiopian Airlines 737-800 CF 14-Nov
Comair Ltd. 737-800 CF 15-Nov
Air China 737-800 CF 16-Nov
Emirates 777-300ER GE 16-Nov
Lion Air 737-900ER CF 16-Nov
Cargolux Airlines 747-8F GE 19-Nov
TUI Travel PLC 737-800 CF 19-Nov
BBAM 737-800 CF 20-Nov
Ethiopian Airlines 787-8 GE 20-Nov
TAM 777-300ER GE 20-Nov
DHL Int'l. 767-300F GE 21-Nov
Qatar Airways 787-8 GE 21-Nov
United Air Lines 787-8 GE 21-Nov
Volga-Dnepr UK Ltd. 747-8F GE 26-Nov
Air Berlin 737-800 CF 29-Nov
Air China 737-800 CF 29-Nov
China Eastern 737-700 CF 29-Nov
Dubai Aerospace Enterprise 777F GE 29-Nov
Emirates 777-300ER GE 30-Nov
Pegasus Airlines 737-800 CF 30-Nov
Avianca (TACA Int'l. Airlines) A320 3-Nov
Juneyao Airlines A320 3-Nov
CIT (Asiana Airlines) A321 7-Nov
TAM A319 7-Nov
EasyJet A320 8-Nov
JetBlue Airways A320 8-Nov
China Southern Airlines A321 9-Nov
AirAsia A320 10-Nov
AirAsia (Thai AirAsia) A320 10-Nov
Emirates A380 10-Nov
Interjet A320 10-Nov
SMBC Aviation Capital (Garuda) A320 10-Nov
AirAsia (Indonesia AirAsia) A320 14-Nov
Etihad Airways A320 14-Nov
LATAM Airlines Group A320 14-Nov
Qantas Airways (JetStar Japan) A320 14-Nov
Sichuan Airlines A320 14-Nov
BOC Aviation (Jetstar) A320 15-Nov
Air Berlin A320 16-Nov
Indigo A320 16-Nov
Spirit Airlines A320 16-Nov
Virgin Atlantic A330-300 16-Nov
BOC Aviation (Dragonair) A320 17-Nov
TUI Travel Aviation Finance Co.
(Corsair Int'l.) A330-300 17-Nov
China Eastern Airlines A319 20-Nov
Volaris A320 20-Nov
Avianca A320 21-Nov
AWAS (Royal Jordanian Airlines) A320 21-Nov
China Eastern Airlines A320 21-Nov
Interjet A320 21-Nov
CIT (Qantas Airways) A330-200 24-Nov
Qatar Airways A320 24-Nov
Tibet Airlines A319 24-Nov
Air Astana A321 27-Nov
Cathay Pacific A330-300 27-Nov
CIT (Garuda Indonesia Airways) A320 27-Nov
Transasia Airways A330-300 27-Nov
Volaris A320 27-Nov
AWAS (Philippine Airlines) A320 28-Nov
GECAS (Peach Aviation) A320 28-Nov
Thai Airways Int'l. A380 29-Nov
Tiger Airways (Mandala Airlines) A320 29-Nov
Cebu Air A320 30-Nov
US Airways A321 30-Nov
Vietnam Airlines A321 30-Nov
TRENDS
60 atw
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Source: IATA
Airline Pass.
(000)
% Chg. RPks (000) % Chg. Load Factor
%
Change Month
ASIA
Air New Zealand 1,054 10.2 2,134,000 2.2 81 . 7 -0.6 Oct.
ANA 4,041 0.4 5,421,909 2.7 68.3 -1.2 Oct.
Asiana
1
886 5.2 2,415,759 5.2 71 .1 -3.1 Sept.
Bangkok Airways
1
63 12.5 70,616 16.6 50.9 -5.5 Sept.
Cathay Pacific 2,361 3.8 8,110,404 -3.5 79.2 0.7 Nov.
China Airlines
1
949 2.9 2,584,317 0.3 76. 7 2.2 Sept.
EVA Air
1
587 9.3 1,996,776 2.5 75.7 -1.3 Sept.
Garuda
1
282 4.3 965,720 -0.5 75.6 0.6 Sept.
Japan Airlines 2,041 -24.1 4,010,456 -8.0 74.7 4. 6 Nov.
Korean Air
1
1,346 4.1 5,329,450 3.9 78.0 3.6 Sept.
Malaysia Airlines
1
677 -5.2 2,777,304 -7.8 75.4 -2.6 Sept.
Philippine Airlines
1
266 -3.4 968,161 -8.7 57.2 -6.0 Sept.
Qantas Group 4,220 7.4 9,597,000 3.4 79.8 -1.6 Oct.
Royal Brunei
1
77 -30.1 294,787 -33.5 71 . 3 -1. 5 Sept.
Silkair
1
250 5.8 393,138 13.9 68.9 -2. 7 Sept.
Singapore Airlines 1,531 9.7 7,468,000 9.1 77.7 2. 5 Nov.
Thai Airways 1,578 6.5 4,690,000 4.1 71.7 2.5 Sept.
Vietnam Airlines
1
390 3.3 1,254,950 8.0 79.0 6.8 Sept.
1. International only.
EUROPE
Adria 66 -1.0 70,637 11.0 56.8 -2.0 Nov.
Aer Lingus 680 -0.4 1,014,000 0.9 76.6 1.5 Nov.
Air Baltic 176 -13.0 179,679 -18.7 61.0 -13.0 Nov..
Air France KLM 6,005 2.3 17,216,000 2.2 81 . 2 1.5 Nov.
Austrian Airlines 863 2.3 1,295,000 -1.2 75. 3 5.3 Nov.
British Airways 9,767,000 7.6 77.7 3.3 Nov.
Brussels Airlines 518 -2.3 806,260 5.4 68.6 0.6 Oct.
Croatia 119 6.1 80,473 7.0 63.3 -3.8 Nov.
Czech 213 -19.9 267,064 -13.4 67.0 6.9 Nov.
easyJet 4,117 7.7 89.6 1.3 Nov.
Finnair 663 10.1 1,793,200 10.5 73.0 4.5 Nov.
Iberia 3,598,000 -5.8 75.7 -1.9 Nov.
Lufthansa
2
7,691 -1.3 15,145,000 -0.5 75.5 1.4 Nov.
Lufthansa Cargo
4
770,000 -1.7 72.4 2.6 Nov.
Norwegian 1,459 12.0 1,458,872 12.0 76.0 -1.0 Nov.
Ryanair 4,680 5.0 80.0 0.0 Nov.
Scandinavian Airlines 2,142 1.7 2,149,000 6. 2 69.1 -0.1 Nov.
Swiss
3
1,245 -0.2 2,823,000 4.5 79.6 1.6 Nov.
Turkish Airlines 3,177 17.8 5,167,000 4.6 63.4 -7.4 Nov..
Vueling 964 17.0 892,000 26.4 77.1 0.6 Nov.
Wideroe 252 12.6 74,000 11.8 58.5 0.8 Nov.
1. International only. 2. Includes Lufthansa Regional and Lufthansa Italia. 3. Includes Edelweiss Air. 4. RPKs are FTKs; LF is Cargo LF, for Cargo only airlines.
LATIN AMERICA
AviancaTaca 1,983 12.2 Oct.
Copa Airlines* 1, 767,165 26.5 76.7 1.9 Nov.
Gol 3,029,900 4.0 69.1 3.3 Oct.
Grupo Aeromexico 1,242 0.6 1,948,000 2.6 76.1 -1.7 Nov.
LATAM Airlines Group 5,573 11.6 8,659,000 10.1 76.9 2.5 Nov.
MIddLE EAST/AFRICA
Emirates 3,240 16.6 15,281,756 17.1 76.8 -0.7 Oct.
NORTH AMERICA
ABX Air
3, 4
71,366 4.1 Aug.
Alaska 1,495 4.3 3,242,000 9.4 86.4 0.0 Nov.
Allegiant 524 15.4 802,387 23.0 85. 7 -4.0 Nov.
Air Canada 5,923,000 4.6 78.1 2.2 Nov.
AIRLINE TRAFFIC BY REGION
Trends_Jan13.indd 60 12/18/12 10:18 AM
TRENDS
atwonline.com
|
January 2013
|
atw 61
Airline TrAffic BY reGiOn
Source: IATA
Airline Pass.
(000)
% chg. rPks (000) % chg. load factor
%
change Month
Air Wisconsin
4
562 9.8 191,579 18.8 77.6 2.7 Aug.
AMR Corp.
1
6,881 1.1 15,830,503 1.0 81.2 -1.1 Nov.
Atlas
3, 4
435,625 10.3 Aug.
Comair
4
284 -41.2 250,217 -29.3 83.6 4.4 Aug.
Compass Airlines
4
377 12.5 444,800 10.3 82.4 0.1 Aug.
Delta * 12,999 0.6 23,300,872 1.2 82.5 1.1 Nov.
Evergreen Int'l
. 3, 4
71,270 -36.9 Aug.
FedEx
3, 4
1,381,310 2.7 Aug.
Frontier Airlines
4
949 -10.1 1,555,494 -3.8 93.1 2.5 Aug.
Hawaiian Airlines 791 11.8 1,719,197 24.9 82.4 -2.0 Nov.
Horizon Air 569 8.2 279,966 8.1 79.8 0.5 Nov.
JetBlue 2,340 6.5 4,309,494 5.7 81.5 -1.8 Nov.
Kalitta Air 148,264 -5.1 Aug.
Mesa Airlines
4
676 -9.5 511,088 -8.7 86.3 6.5 Aug.
Polar Air Cargo
3, 4
146,767 -2.8 Aug.
Porter Airlines 110,860 -11.9 54.5 -11.4 Nov.
PSA Airlines
4
447 8.0 290,093 20.1 80.1 6. 0 Aug.
Republic Airlines
4
880 -5.4 724,100 -9.9 83.3 2. 8 Aug.
Shuttle America
4
544 19.8 554,804 17.0 77.8 9. 2 Aug.
SkyWest Inc.
2
4,808 8.0 3,968,235 4.8 81.0 0. 7 Nov.
Southern Air
3, 4
204,572 39.5 Aug.
Southwest 8,850 -3.3 13,111,308 -1.5 80.0 -1.6 Nov.
Spirit Airlines
4
947 23.5 1,409,481 18.1 86.5 -1.4 Aug.
United Continental 7,035 -4.2 21,170,844 -2.9 81. 6 0.0 Nov.
UPS
3, 4
910,849 -2.1 Aug.
US Airways 4,487 2.9 7,795,798 4.0 85.1 1.3 Nov.
Virgin America
4
600 28.5 1,548,188 31.0 82.3 -3.4 Aug.
WestJet 2,335,000 8.3 82.6 5.0 Nov.
World Airways
3, 4
62,649 -52.1 Aug.
* Includes Regional operations. Includes AirTran. 1. Combined American Eagle, Executive Airlines and American Connection. 2. Combined traffc for SkyWest Airlines, Atlantic Southeast
Airlines and ExpressJet Airlines. 3. FTKs in place of RPKs. 4. DOT data. To submit your airline traffc data to ATW, please contact Kathy Young at kathy.young@penton.com.
US MiShAndled BAGGAGe
OcTOBer 2012
0 1 2 3 4 5 6
American Eagle
Mesa
SkyWest
ExpressJet
United
Hawaiian
Southwest
Alaska
American
Frontier
US Airways
Delta
AirTran
JetBlue
Virgin America
Ranked by reports per 1,000 passengers. Source: US DOT.
n.a.
2012
2011
Ranked by complaints per 100,000 passengers. Source: US DOT.
US cOnSUMer cOMPlAinTS
OcTOBer 2012
0.0 0.5 1.0 1.5 2.0 2.5 3.0
United
American
Hawaiian
Virgin America
Frontier
US Airways
American Eagle
SkyWest
JetBlue
Alaska
Delta
Mesa
ExpressJet
AirTran
Southwest
2012
2011
n.a.
Trends_Jan13.indd 61 12/17/12 1:47 PM
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th
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Market Forecasts &
Industry Briefngs
SpeedNews 17383 W. Sunset Blvd., Suite A220 Pacifc Palisades, CA 90272, USA Tel: 310-595-9403 E-mail: jspeed@speednews.com www.speednews.com
Who should attend?
This Conference is designed for equipment
manufacturers, marketing representatives,
analysts and raw material suppliers. Aircraft and
engine manufacturers will present status reports
on their programs, and industry experts will
ofer delivery and retirement forecasts, review
the fnancial status of airlines, and analyze the
condition of the industry; maintenance and
subcontractor issues will also be addressed.
Delegates can update their business plans based
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Save the Date
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Erie Aviation .......................................................62
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Harco ..................................................................13
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IAE ..................................................................... C3
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Kelowna ..............................................................17
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Komy ...................................................................12
www.komy.com
Lufthansa Technik ..............................................42
www.lufthansa-technik.com
PowerJet .............................................................19
www.powerjet.aero
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pw.utc.com
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JAN13ATW63.indd 63 12/17/12 4:18 PM
64 atw
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atwonline.com
COMMENTARY
I
n 2005 European Union
Regulation 261/2004 on passen-
ger rights in aviation came into
force. Its main objective was to dissuade
airlines from excessive overbooking
(leading to denied boarding) or cancel-
lations for commercial reasons. When
passengers fall victim to this and are left
stranded, airlines see commercial gains.
The regulation provided an incentive for
airlines to change their behavior in this
respect by compelling them to provide
care and assistance and to pay passengers
financial compensation of between 250
and 600 ($325 and $780), depending
on the distance of the flight.
In November 2009, however, the
European Court of Justice expanded
this EU regulation by extending this
entitlement to financial compensation
to passengers whose flights are delayed
by three hours or more. This came as an
unwelcome shock because by doing so
the court went against the explicit choice
of the legislators and was effectively act-
ing as legislator itself. Moreover, such an
extension seemed contrary to the basic
purpose of the regulation because, unlike
denied boarding and cancellation, flights
are rarely if ever delayed on the decision
of the airline and there is no commercial
gain involved, only costs.
The court was given an opportunity
to reconsider its position in two further
referred cases, but in its judgment on these
references delivered Oct.
23, it confirmed its previ-
ous ruling.
While this may seem
good news for passen-
gers, it has serious con-
sequences for the bal-
ance of the relationship
between passengers and
airlines. A high level of
protection of passengers
interests must have a limit, and must not
be to the detriment of economic viabil-
ity and safe operation of airlines.
Moreover, the ruling is demonstrably
incorrect from a legal point of view. The
main basis on which the court justified
its extraordinary decision was that it
was required by the EU law principle
of equal treatment, in that passengers
who suffer a delay should be treated in
the same way as those passengers whose
flights are cancelled and are entitled to
compensation. However, if such pre-
cisely equal treatment is really required
by the law (which is highly question-
able) then the proper legal solution is
for the court to declare the cancellation
provisions invalid not rewrite the
legislation.
Moreover, the court held that this
principle took priority over the principle
of legal certainty, without giving any justi-
fication for this astounding preference.
The court did not agree with argu-
ments that such an interpretation is con-
trary to the obligations of the EU and
its member states as parties to the 1999
Montreal Convention. The court also
rejected arguments that such a remedy
is disproportionate, largely because it
was not convinced by the evidence that
the financial effect on airlines would be
very significant, or that fares would rise
or services be reduced as
a result. However, the
financial consequences
for airlines (and passen-
gers in the longer term)
remain to be seen. It is
ivory tower thinking
not to consider it dis-
proportionate that a pas-
senger who arrives at his
destination three hours
late should in some cases fly at no cost
and in others actually make a profit.
The court did confirm that passengers
are not entitled to compensation if the
airline can show the delay was caused
by extraordinary circumstances which
could not have been avoided even if all
reasonable measures had been taken.
The court adequately uses the phrase
beyond the actual control of the air
carrier. While this seems self evident
where delays are caused by weather,
strikes and ATC, there may be a need
for clarification with respect to unex-
pected flight safety shortcomings in the
regulation. As to unforeseeable technical
failures occurring while the aircraft is in
operation, it should be noted that the
aviation industry focuses on their avoid-
ance in the interests of safety.
This decision can only be understood
from a policy perspective. From a legal
perspective it is a disgrace.
The Commission will shortly propose
a revision of the regulation. This may
well include provisions on compensa-
tion for delay. If such provisions are
proposed and then adopted, it will be
after they have been properly debated
and subjected to the democratic legisla-
tive procedures, and not as a result of
the courts unjustified interference in the
legislative process.
Legal Travesty
The European Court has abandoned the rule of law with its
passenger rights bill. Pablo Mendes de Leon
Pablo Mendes de Leon
is a professor of air and
space law and director
of the International
Institute of Air and
Space Law at Leiden
University in The
Netherlands and John
Balfour, Consultant,
Clyde & Co.
Q Q
The views expressed here are the
authors own.
ATW welcomes commentary submissions
by experts on issues of interest to the
global air transportation industry.
To submit a commentary or get
information on submission guidelines,
contact Editor-in-Chief Karen Walker
at karen.walker@penton.com or call
1 301 755 0165.
Commentary_JAN13.indd 64 12/14/12 1:56 PM
Worldcolor-FULL PAGE-BLEED.indd 1 1/17/12 10:21 AM
301ATWpages.indd 3 12/17/2012 9:43:26 AM
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Anytime.
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