Thursday, November 03, 2011

Nok left up in the air about new planes. Domestic travel has become a flood casualty.

Nok Air executives are scratching their heads wondering how to use the airline's new Boeing 737 jets in the face of shrinking domestic air travel demand caused by Thailand's worst flooding in 69 years.

The budget airline last Saturday took delivery of the first of 12 leased Boeing 737-800 jets. The plane has since been parked at the Royal Thai Navy-managed U-Tapao Pattaya airport instead of being deployed quickly as planned.

The second 737-800 is due next Friday and the third on Nov 24, joining Nok Air's current fleet of 10 older B737-400s and two ATR 72 turboprops.

"We've yet to decide how to use these early B737-800s," chief executive Patee Sarasin told the Bangkok Post yesterday.

The carrier is facing a short-term capacity surplus due to the market downturn, while relocation of its base from the inundated Don Mueang airport to Suvarnabhumi airport has complicated the issue.

Nok Air earlier planned to have the first B737-800 in service by now on the Bangkok-Chang Mai route.

Specific dates for the nine other B737-800 have yet to be set, but deliveries will be from 2012-13.

The first batch of B737-800s will be used for expansion, while the later deliveries will replace the B737-400s, all of which are leased.

The replacements will markedly increase capacity, as the smaller B737-400s are configured with only 150 seats and have a relatively low utilisation rate, while the B737-800s have 189 seats and are more fuel-efficient.

The airline will gradually return its 10 B737-400s, four of which are leased from Thai Airways International, a 49% stakeholder in Nok Air, from mid-2012 to 2015.

Nok Air has been acquiring second-hand B737-800s as part of its fleet renewal to take advantage of lower maintenance costs, raise its average utilisation to more than 11 hours a day and increase seat capacity.

Nok Air is seeing contrasting passenger traffic flows, with flights leaving Bangkok at near capacity and incoming flights at only 40%.

"We're seeing more people fleeing the flooding in Bangkok than are coming in," said Mr Patee.

Like the authorities, Nok Air is in the dark as to when it can return to its home base at Don Mueang, because when the floodwaters will subside, the extent of damage to the airport and how long it will take to revive airport operations all remain unclear.

"But obviously, it's impossible to go back by Nov 10 like we originally anticipated," said Mr Patee.

"My best guesstimate now is the end of December."

Nok Air's operations at Suvarnabhumi this past week have not been smooth.

Its forced evacuation from Don Mueang has resulted in flight delays, changes in flight times and computer system problems.

"We've had a hard time addressing these issues, but we're getting back to pre-crisis service levels," said Mr Patee.

Boeing Orders to Top Output Through 2013 on 737

Boeing Co. expects orders to exceed deliveries each year through 2013 after commitments for the new 737 MAX jet climbed past 600 in four months, the planemaker’s commercial-jet president said.

The company is boosting output of its current 737 by about a third through 2014, to 42 a month, as it tries to whittle down a seven-year backlog that is deterring customers. Boeing will “take a hard look” in late 2013 at whether to lift production even higher, Jim Albaugh said today at a Goldman Sachs Group Inc. conference in Boston.

Boeing decided in July to offer the 737 MAX, an upgrade with more fuel-efficient engines, to fend off a challenge from Airbus SAS’s A320neo and help capture half of a $2 trillion market in the next 20 years. Before today, Boeing’s most recent tally for 737 MAX commitments was 496.

John Hamilton, the 737 chief program engineer, said on a separate conference call that there may be “several hundred more commitments soon.” He said it would be up to airlines to decide when to sign the orders, as Boeing gets closer to finalizing the configuration and writing performance guarantees. Until then, they won’t appear in Boeing’s backlog.

Boeing has won 428 firm aircraft orders this year, after 110 cancellations, and has delivered 387 jets, according to its website. The 737 makes up the majority of both.

Fan Size

The company is working with CFM International, a partnership of General Electric Co. (GE) and Safran SA, to finish plans for a customized Leap engine after deciding that a 68-inch fan hits the “sweet spot” in terms of fuel burn, Albaugh said. The current 737 has a 61-inch fan.

A jet engine’s fan is a key to its fuel use: generally, the larger the fan, the more efficient the engine. A bigger fan saves fuel by increasing the amount of air passing by the core, or hot-section, of the engine and cooling it. Bigger engines also require more tweaks to the body of the plane, though.

Improvements to the 737 will be kept to a minimum, Albaugh and Hamilton said. The fundamental change is the new, heavier engines, which will require new struts for attachment to the aircraft as well as strengthening of parts of the wing and body. The larger power plants will be moved forward, so engineers may lengthen the nose landing gear by about 6 to 8 inches (15 to 20 centimeters), Hamilton said.

Jet Configuration

The company also plans to improve the pneumatic system, reshape the tail cone to make it more aerodynamic, tweak the winglets and add fly-by-wire spoilers that will make the airplane lighter and improve stopping.

Boeing plans to finish configuration plans in 2013, leading to a first flight in 2016 and delivery in 2017, though efforts are under way to accomplish those goals sooner, Hamilton said. Airbus’s A320neo is set to enter service in 2015.

Boeing also is looking at changes that may improve the efficiency of the current 737s prior to the MAX’s entry into service, Hamilton said.

Boeing “de-risked this decade” by deciding to build the 737 MAX instead of developing an all-new single-aisle jet as it had wanted to do, Albaugh said. The development money can now be spent on improving the twin-aisle 777 to better compete against Airbus’s A350-1000 and on stretched versions of the composite plastic 787, he said.

Supply Chain

The supply chain is in “pretty good shape” as the company boosts overall airplane production to records, and suppliers will get a new schedule for rate increases sometime this month, Albaugh said.

Boeing is also considering increasing the output rate of the 777, so that it can offer more delivery slots sooner, Albaugh said.

If the investment needed to do that turns out to be “tens of millions of dollars, then we’d probably do that without thinking very hard about it,” he said. Airlines have to make decisions based on what planes are available, not only which ones are best, he said.

The aircraft-financing capability of European banks amid the sovereign-debt crisis is a “watch item” for Boeing, and the company’s financing arm “may have to play a more strategic role in what we do” going forward, Albaugh said. Boeing Capital Corp. generally prefers to be a lender of last resort and only steps in if an airline can’t get financing elsewhere.

American International Group loses $4 billion on planes, weak markets

American International Group is back in the red. Way in the red.

(Reuters) - Insurer American International Group lost more than $4 billion in the third quarter, as its aircraft leasing unit took an impairment charge on a portion of its fleet and the fair value of the company's one-third stake in Asian insurer AIA fell.

It was the 10th time in the last 15 quarters, dating to 2008, that AIG lost at least $1 billion.

Shares fell 3.2 percent in after-hours trading after the company announced its financial results, then rebounded a bit after AIG said it would launch a $1 billion share buyback.

AIG's core insurance businesses were profitable on an operating basis, and its mortgage insurance unit both raised prices and gained market share amid difficulties in that industry.

But those results were not enough to overcome the charges, which were partially driven by declining equity and debt markets during the quarter.

AIG reported a loss of $4.11 billion, or $2.16 per share, compared with a year-earlier loss of $2.52 billion, or $18.53 per share. In the year-earlier period AIG took a number of charges on asset sales; it also had a smaller share count.

On an operating basis AIG lost $3.04 billion, or $1.60 per share.

Analysts polled by Thomson Reuters I/B/E/S had on average expected a loss of 63 cents per share in the quarter, though the range of estimates was wide, from a loss of 22 cents to a loss of 99 cents.


AIG said that ILFC, its plane leasing business, took a $1.5 billion impairment on 95 planes as customers' appetites shifted toward newer, more fuel-efficient aircraft.

Last February, Chief Executive Bob Benmosche said he did not expect any further large charges for the business this year, after it took roughly $1 billion in write-downs in the last six months of 2010.

AIG said it lost $2.3 billion on the declining fair value of its stake in AIA during the third quarter. AIG took AIA public late last year in Hong Kong. It recently became eligible to start selling AIA shares after the IPO lockup expired.

AIG has also filed to take ILFC public.

Proceeds from the sale of AIA shares and from any ILFC IPO are already earmarked to pay back some of the U.S. Treasury's remaining $50 billion interest in the company.

The government rescued AIG from the brink of bankruptcy in September 2008, at a price tag that exceeded $182 billion. The Treasury still owns a 77 percent stake in what was once the world's largest insurance company.

In the third quarter, AIG also had substantial catastrophe losses totaling $574 million, mostly because of Hurricane Irene and Tropical Storm Lee.

Beyond the charges, though, AIG said its insurance units had posted nearly $900 million in pretax operating income.

Property insurer Chartis saw net premiums written rise nearly 1 percent, though the gain was attributable to foreign exchange benefits. Pricing improved in its U.S. commercial business, echoing similar results from other insurers as the market rebounded.

SunAmerica's life insurance sales rose 14 percent, while assets under management also rose.

Pretoria, South Africa: Mercenaries piloted President Jacob Zuma's plane

Pretoria - The secretary of defence and chief of the air force have both submitted their resignations because of problems with hired aircraft and mercenary pilots for VIPs.

Mpumi Mpofu, who was appointed defence secretary less than two years ago, resigned with immediate effect two weeks ago.

Ndivhuwo Mabaya, spokesperson for Defence Minister Lindiwe Sisulu, confirmed on Thursday that the air force chief, Lieutenant General Carlo Gagiano, has also resigned, but Mabaya said the minister has not yet accepted the resignation as she feels he has to calm down following the stressful and frustrating situation.

Mabaya explained that the frustration stemmed from knowing that money has been allocated to buy proper planes to fly the president and his deputy, but that there is often a delay in the state procurement process.

For Gagiano, the last straw was two weeks ago when Deputy President Kgalema Motlanthe had to take a commercial flight to Scandinavia after technical problems grounded the chartered flight booked for his delegation.

A second chartered plane was sent.

Apart from this issue, Sisulu was livid when she found out that charter pilots, who flew President Jacob Zuma to the UN General Assembly in New York in September this year, had served jail sentences for their involvement in the failed Simon Mann coup attempt in Equatorial Guinea in 2004.

Mabaya said the reasons for Mpofu's resignation were confidential, but confirmed that Sisulu is very frustrated with the delay in buying two new planes to fly VIPs.

The contract for the planes was initially awarded to a company owned by a Nigerian group. This company recently sued the air force for delaying the contract.

No plans have yet been finalised for the two planes.

The presidential plane, Inkwazi, has been grounded for two months for servicing. This is what led to the president being flown by mercenary pilots working for a US charter company.

Two years ago Motlanthe was on a chartered plane that had to make an emergency landing in the dark on an airfield in the Democratic Republic of Congo after a technical problem.

Kenya: Medical Ministry Has No Air Ambulance

THE ministry of medical services does not have a single operational air ambulance in the country, parliament heard yesterday. Assistant medical services minister Kambi Kazungu shocked MPs in admitting that the only air ambulance his ministry had was redeployed to the ministry of internal security for use by police because of "logistical problems."

Kazungu informed the house that the helicopter had been donated to the government by the Germany government. He said the helicopter has since been grounded at Wilson Helicopter and Sh20 million has been allocated to "overhaul" it.

MPs led by Naivasha's John Mututho and William Kabogo, the latter who claimed to have experience in aviation industry, insisted on knowing why a serious government with a trillion budget lacked a single air ambulance. "Mr. Speaker, anybody can be injured in this country and require air evacuation, including the speaker himself and God forbid. With a massive trillion budget, how can this government not have a single air ambulance?" Mututho asked.

Kazungu's answer that this was due to budgetary constraints did not satisfy MPs who insisted that the government was discriminating against the poor. The assistant minister had listed the number of air ambulances in the country all which are owned by private individuals.

Ikolomani MP Bonny Khalwale said there are 37 helicopters in the Kenya Army and demanded that some of the helicopters be converted for civilian use and equipped with ambulance facilities. He said the rich people in the government can afford the private air ambulances but not the poor.

China to develop aviation support system in Antarctica

Chinese expedition teams in Antarctica will soon have better logistical support as the country plans to build an aviation support and emergency response system for its scientific research activities in this area, Xinhua News Agency reported Thursday.

"The first step in building such a system is to buy an aircraft that has a range of 3,000 kilometers and can fly in Antarctica," Li Yuansheng, head of China's exploration team told Xinhua before they left Tianjin for a 160-day trip to the South Pole region.

An earlier report in China Aviation News confirmed that the Basler BT-67 is China's choice. This type of plane is retrofitted from Douglas DC-3 airframe and has been used by many countries in Antarctic expeditions such as the United States and South Africa.

Onboard the Xuelong (Snow Dragon) icebreaker that carries the Chinese expedition team is a Russian-made Ka-32 helicopter that can lift equipment. The ship can also carry a home-made Z-9 copter to take aerial photos and conduct surveillance.

Li said an aviation support system can transport personnel and facilities faster so as to save more time. It is also an indication of the country's ability to better carry out polar scientific research, Xinhua reported.

Protesting Air India pilots meet Civil Aviation Minister Vayalar Ravi, assure full cooperation

NEW DELHI: Adopting a conciliatory approach, protesting Air India pilots, owing allegiance to the Indian Pilots' Guild (IPG), today met Civil Aviation Minister Vayalar Ravi and assured "full cooperation" for smooth operations of the airline.

After the meeting here, the pilots' representatives said, "IPG has assured the hon'ble minister full cooperation for the smooth operations of Air India and Air India Express."

They said Ravi assured the delegation that "all issues raised by the IPG will be viewed in a fair and unbiased manner."

The IPG, which represents about 200 pilots belonging to the pre-merger Air India, has been protesting alleged discrimination in career progression by the AI management vis -a-vis their counterparts from the erstwhile Indian Airlines.

Following their protest and a threat to quit, Air India decided to defer a training programme for pilots to fly the Boeing 787 Dreamliners by a month and recalled the first batch of pilots which had left for Singapore and Gatwick in the UK for training. The first Dreamliner is scheduled to be inducted in Air India by late December or early January.

The IPG contention was, however, challenged by the Indian Commercial Pilots Association (ICPA) which termed it as "unreasonable" and contrary to the agreement reached between the two unions and the management in early October. ICPA represents about 1,400 pilots of erstwhile Indian Airlines.

The IPG has so far held two rounds of talks with the management, one each in Delhi and Mumbai, demanding that a comprehensive training plan should be drawn up for all pilots of the national carrier.

Ireland: Airport study a bid to sweeten very bitter pill

Cork Airport lumbered with crippling €113m debt for  unwanted passenger terminal that DAA foisted on it

LAST week Transport Minister Leo Varadkar announced he was setting up yet another study to determine the commercial future of Ireland’s major airports – Dublin, Cork and Shannon.

For Leesiders, the writing is in the sky. Many believe the task for the authors of the study, the quaintly-named Booz and Company, is to sweeten a very bitter privatisation pill that the Real Capital will be forced to swallow. Cork Airport, a commercial basket case, will be sold to the highest bidder – assuming there are bidders.

The Booz Company report comes in the wake of Colm McCarthy’ Review Group on State Assets. McCarthy favoured the sale of Cork, Shannon and Dublin airports. The current situation is that the Dublin Airport Authority, (DAA), owns the three airports and has financial and legal responsibility for them, although Shannon and Cork have a limited degree of autonomy.

As well, there is the Cassells Report into Cork Airport, which did not advocate privatisation. Instead it proposed the sale of the airport’s development land and business park in order to generate income.

Problems for Cork

In all, the omens do not look good. Last year, Cork’s operating losses were ten million euros. Irish Aviation Authority figures show commercial traffic fell by 11.8%, and, to top it all, the airport is lumbered with a crippling €113m debt for an unwanted passenger terminal that the DAA foisted on it.

When in government, Fianna Fail swore blindly that Cork would get debt free independence from the DAA. Sadly the political promise had absolutely no substance and was little more than a gigantic porkie that Corkonians foolishly swallowed.

Meanwhile, the Dublin Airport Authority (DAA) appears to have little confidence in the future for Cork Airport. For instance, last September, the DAA told Varadkar that the separation of the three airports would not be financially viable and complained that it was ‘expending valuable management time and incurring costs in servicing the authorities at Cork and Shannon airports’.

It takes the line (which is also Varadkar’s) that to continue with the current situation of having three airports operating under DAA control is not tenable because of the losses Cork and Shannon are sustaining.

Up to now, profits from Dublin Airport and Aer Rianta International covered the losses – but, according to Varadkar, that is going to stop. Pronto.

All options open

The minister recently told RTE radio that his preference was a separation of Cork and Shannon airports from Dublin. Ominously he did not rule out the privatisation option. ‘There are going to have to be big changes at both airports because we cannot continue to have them losing the money they are losing now,’ he growled.

The Shannon Airport Authority has already submitted to the DAA a proposal that the airport should be leased to a private company for a period of 15 to 35 years. Cork hasn’t gone down that path, yet.

Indeed, it seems Leesiders are horrified at the prospect of a sell-off. The airport’s reaction to the announcement that the Booz Company was about to investigate all aspects of its activities was limited to a cryptic statement that read: ‘A spokesman for DAA at Cork Airport said the company would engage fully with the Department’s consultants.’

Privately, the Cork Airport Authority is in favour of the three airports operating as subsidiaries of a CIE-style holding company. However, whatever recommendations the Booz people make to Varadkar, the coalition message is clear – there will be no State aid for Cork Airport and, without State aid, the future is grim.

Interestingly, the Fine Gael-Labour Programme for Government does not mention the privatisation of airports, confining itself to a bland statement about the Government ‘working with the Aviation Regulator to cut airport charges in order to increase routes and passenger numbers’.

Bottom of the barrel

For many private enterprise hawks within Fine Gael and Labour, there is no doubt that the sale of Cork Airport is on the cards. In view of the fact that the Coalition has to meet a €2 billion target set by its German and French masters, flogging the place as part of the off-loading of State assets is an attractive proposition.

But, Kenny and the boyos will have to be careful about the way they hand over State-owned businesses to the private sector. The trade unions will oppose the sale of Cork Airport on the grounds that the measure is predicated on bottom-of-the-barrel terms of employment.

Unease will also manifest itself within old Labour, while Sinn Fein will have a field day denouncing the government. Even Micheál Martin, the leader of a party that did so much to damage Cork Airport with false promises, declared he was opposed to a sale.

But, then, it’s difficult to take seriously comments by Fianna Fáil in relation to the airport. In a recent one-paragraph statement, Cork TD, Michael McGrath said that privatisation would focus on profits and would not be ‘a wider view on the airport’s benefits to the region’s economy and tourism.’ And that was it. No analysis, no argument, just a throwaway remark.

Behind the scenes

Of course, the intriguing question is whether Ryanair is twisting Varadkar’s arm. The company has always argued that Cork and Shannon should be sold on the open market, claiming that while the performance of Dublin Airport is poor, the traffic decline in Cork and Shannon has been frightening. Ryanair says Cork suffered a 33% drop in passengers this year.

Ryanair also alleges that the DAA deliberately hides monthly traffic figures at Cork Airport in the hope that no one will notice the collapse that has taken place under what it terms ‘DAA mismanagement.’

For all its guff, Ryanair cannot be considered a friend to Cork Airport. It has its own agenda for wanting the place privatised, namely that the airport would be at the mercy of the low cost airline, with O’Leary playing off Cork against Shannon.

Ryanair already dangled the carrot of new flights into Cork on condition the company got access to the abandoned passenger terminal instead of having to use the new terminal. It is a proposal that Cork Fine Gael TD Dara Murphy enthusiastically supports.

However, Ryanair’s recent decision to abolish its daily flight to Dublin just ahead of the airport’s 50th anniversary hoopla really stuck in the Cork lads’ craw, while the thought of Michael O’Leary playing a major role in the future of the airport –or even owning it – sends shivers up their spines!

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