The Airbus A380

Airbus A380, the world’s largest passenger jet, will be at the 7th China International Aviation and Aerospace Exhibition for three days.

The exhibition takes place in the southern Chinese city of Zhuhai, Guangdong Province starting November 4.

It will be the airplane’s second trip to China; it is coming from France. The A380 carried 2,000 tents this May for people left homeless by the 8.0-magnitude earthquake in Sichuan.

The super-jumbo jet, which is scheduled to arrive in Zhuhai on Nov. 3, will be on static display and will also perform flying demonstrations. Some visitors will be invited aboard.

The double-deck jetliner, developed by French aircraft manufacturer Airbus, can seat 525 passengers. It boasts energy efficiency as less than three liters of fuel consumed to sustain 100 kilometers of flight per passenger.

Five of the planes will be delivered to China Southern Airlines in early 2009.
Source: China View

Air Asia not going to Johor

The state government of Johor in Malaysia said it was not informed by budget airline Air Asia that it was terminating its direct flights from Senai to Macau as of last Sunday.

State Tourism, Domestic Trade and Consumer Affairs Committee chairman Hoo Seong Chang said, ‘I cannot comment on the matter before finding out what prompted the move by Air Asia.’

Hoo said during his recent trip to China, airlines such as the Guangzhou-based China Southern Airlines (CSA), had expressed an interest in starting flights from several Chinese provinces to Senai.

‘We are enthusiastic about this as Senai Airport is gearing up to become an international airport,’ he said. It is possible that at these trying times his enthusiasm is misplaced.
Source: The New Straits Times

Hong Kong airline Cathay Pacific has been ‘hit hard’ by the global financial crisis with a significant drop in the number of first and business class travelers.

Cathay’s chief executive Tony Tyler said that concern had shifted from the sky-high price of oil earlier in the year to weak passenger numbers.

He said, ‘In the first half of the year the problem was very much a cost crisis caused by runaway fuel prices, but now — in the midst of a global financial meltdown —  we are also being hit hard on the demand side.

‘The fact that revenue growth is stalling in our biggest market, Hong Kong, is a serious worry.

‘We are very exposed to the financial industry here and when banks, our biggest corporate customers, cut or even just curtail their travel plans we know we can expect to be in for a rough ride.’

‘I wish I had something more optimistic to say but the truth is that Cathay Pacific — and the airline industry as a whole —  has entered another very troublesome period.’
Source: AFP

In happier, earlier times

Some airlines will not survive the worsening global economic situation and there is an industry association warning that the next 12-18 months will be ‘extremely difficult’ for Asia-Pacific carriers.
The Association of Asia Pacific Airlines (AAPA) said in a statement passenger numbers are falling.

AAPA director-general Andrew Herdman said, ‘The biggest challenges right now are weakening passenger demand, particularly for first and business class travel, and continuing uncertainty about the global economic outlook.

‘The next 12-18 months will be extremely difficult times for airlines and some won’t survive the current crisis.’

He added that the association ‘remains extremely cautious about prospects for the airline industry in 2009′.

The hammer comes at the front end of the aircraft where the profit lies. That is where the numbers are declining the fastest.

An example:

British Airways said first- and business-class travel fell 8.65% last month as the credit crisis and economic slowdown led to job losses and tighter budgets in the City of London and on Wall Street. For an airline the profit is always in the front end.

AAPA is a trade association of international airlines based in the region.
Source: Straits Times

The International Air Transport Association (IATA) warns of a ’significant downward trend’ in travel growth, as the economic environment worsens.

The industry body added the sharp decline in premium travel — those are the poeple who sit in the pointy end of the plane — most likely reflects a fall in business travel driven by the increasing weakness of major economies.

1. According to IATA, the Lehman Brothers’ bankruptcy ‘underlines the shrinkage of M&A and other financial sector activity, leading of course to a reduced number of business travelers from financial services’, while falling air freight volumes and lower business confidence ’suggests that world trade and travel from the manufacturing sector is also in decline’.

Source: Centre for Aviation

American Airlines

In the United States regulators have approved a request by American Airlines to delay launch of new nonstop service between Chicago and Beijing for a year because of high fuel costs and problems in the airline industry.

The brief order from the Transportation Department said the agency approved the airline’s request to delay the service until no later than April 4, 2010.

Earlier this month, American asked the department for a delay in service that was scheduled to begin next April 9. American, the nation’s largest airline, already flies between Chicago and Shanghai, and last year it won the rights to add the Chicago-Beijing route.

American is the latest carrier to delay China flights, including United Airlines, US Airways and Northwest Airlines.

U.S. carriers are expected to post multibillion-dollar losses this year due to higher fuel costs and a weakening U.S. economy that could undercut demand for travel.
Source: BusinessWeek

Cathay Pacific landing at Hong Kong's old Kai Tak airport

China’s economy face significant threats of a fall-out from the US credit crisis, but business leaders are holding out hopes for a bright future due to abundant opportunities in the region.

This according to speakers at Bloomberg’s 2008 Leadership Forum, held recently in Hong Kong.

Specifically looking at this problem Cathay Pacific, while insulated from the credit crunch due to its minimal debt levels, has had to grapple with the problem of high fuel prices. However, the managing director, Tony Tyler noted that demand for flights ‘remains very strong in our key markets.’

He said, ‘It’s very difficult to make money out of flying long haul. You’re burning more fuel per mile flying long haul than short haul . . . We’re reshaping the network, cutting some Los Angeles, Vancouver routes, but we’re adding flights to Australia, Middle East.’
Source: Insead Knowledge

China Eastern inflight service

Loss-making China Eastern airlines could be sounding a warning most of the rest of the world does not want to hear.

It had operating losses of close to $US1 million ($1.15 million) a day in the first half of 2008.

In a statement, the Shanghai-based airline said it faced an ‘extremely complicated operating environment’ in the second half, with ‘increasing uncertainties in the global economy, while the Chinese economy will probably experience a slowdown under the macroeconomic adjustment policy’.

One could excuse China Eastern for being gloomy about the outlook. After all, it narrowly missed out on securing a white-knight investor in Singapore Airlines (SIA) earlier this year, only to be battered by snow storms, earthquakes and Olympics security clampdowns which, by July, had slashed its international passenger traffic by almost a third.

China Eastern concludes that air travel demand is ‘likely to experience a downturn, while pressure from ever-increasing costs is likely to pose a threat to the development of the air transport industry’.

This is the first official indication by a Chinese airline that the much-hoped-for post-Olympics recovery may not materialise. For China Eastern, the next steps could involve a government bailout, domestic consolidation or both. More on this HERE.
Source: The Australian

Chinese airlines' problems

Shares in airlines, once the darling of the market, have plunged dramatically.

Mutual funds sold RMB12.7 billion  ($1.85 billion) worth of airlines shares in the first quarter of this year and dumped another RMB7.3 billion  of shares in the second quarter.

Shares in China Southern Airlines accounted for about 40% and Air China accounted for 48%.

Ma Xiaoli, an analyst with CITIC Securities, said, ‘A weak economy, tightened visa regulations during the Olympic Games and the devastating earthquake in Sichuan Province all dampened demand for air travel, more than we expected/’

Air China handled 2.98 million passengers last month, dropping 6.8% from a year earlier, with the load factor decreasing 8.1% to 73.3%.
China Southern’s passenger volume dropped 2.3% and the load factor slid 1.4% to 75.1%.

Ma Xiaoli said, ‘The third quarter will still be an off-season for the aviation industry, but we expect that the market will recover in the fourth quarter and grow faster next year since some negative effects were one-off.’
Source: Shanghai Daily

Cathay Pacific’s interim result does not make for encouraging reading. Operating profit margin dropped into negative territory in the first half of 2008, compared to a double-digit margin in the full year of 2007.

Cathay’s earnings report stated the big change in the company’s financial performance ‘was entirely due to the relentless rise in the cost of jet fuel in recent months’. Cathay’s non-fuel unit costs also rose 2.4%.

Overall, the airline’s cost base, including fuel, ballooned by a third, against a 22.6% revenue increase.

Cathay’s total fuel bill rose 94% in the first half year-on-year, due to reduced hedging benefits and the airline’s double-digit capacity increases.

Fuel now accounts for 45.3% of total costs.

Chairman Christopher Pratt said, ‘It is inevitable that fares for passengers and shippers will have to rise to reflect the new cost of operation.’
He added that ‘it is difficult to forecast with any degree of accuracy the extent to which these higher fares will reduce demand, but thus far it has remained robust.’
Source: Centre for Pacific Education