CONFUSION Region's risk averse patchwork policies stalling recovery says IATA's Willie Walsh - Orient Aviation
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Vol. 28 No. 4
August-September 2021
orientaviation.com
CONFUSION
Region’s risk averse patchwork
policies stalling recovery
says IATA’s Willie Walsh
China’s “Big Three” Air cargo bonanza Asia-Pacific “richest”
carriers join brand promises profits future airline
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CONTENTS Volume 28, Issue 4
COVER STORY
12
CONFUSION
ORIENT AVIATION MEDIA GROUP Region’s patchwork policies
17/F Hang Wai Commercial Building,
stalling airline recovery says
231-233 Queen’s Road East,
International Air Transport Association
Wanchai, Hong Kong
Editorial: +852 2865 1013
director general, Willie Walsh
E-mail: christine@orientaviation.com
Website: www.orientaviation.com
Publisher & Editor-in-Chief
Christine McGee
E-mail: christine@orientaviation.com
Associate Editor &
Chief Correspondent
Tom Ballantyne
Tel: +61 2 8854 1458
M: +61 4 1463 8689
E-mail: tomball@ozemail.com.au
North Asia Correspondent
Geoffrey Tudor COMMENT TRANSFORMING ASIA-PACIFIC
Tel: +81 3 3373 8368 5 Airline MRO forever changed by pandemic MRO TO DIGITAL UNIVERSE
E-mail: tudorgeoffrey47@gmail.com 17 Asia-Pacific remains “richest” future airline MRO
Photographers
ADDENDUM market
Rob Finlayson, Graham Uden,
6 China’s “Big Three” carriers only top of table
Ryan Peters Asian airlines in brand value survey
Chief Designer
Chan Ping Kwan
Printing
Printing Station (2008)
19 MRO compound growth forecast at 3% annually
ADMINISTRATION
to 2031
General Manager 6 Veteran Asia insider tasked with delivering 20 Airlines shifting to parts repair from component
Shirley Ho Boeing’s expanded Asia ambitions replacement during pandemic
E-mail: shirley@orientaviation.com 7 Final quarter recovery evaporates for region’s
airlines
ADVERTISING
NEWS BACKGROUNDERS
Asia-Pacific, Europe & Middle East 8 Europe’s emissions strategy reverts to increased
Defne Alpay airline taxes
Tel: +44 771 282 9859 10 Air cargo demand promises profits beyond the
E-mail: defne@orientaviation.com
pandemic 20 Fokker Services Asia boss says full recovery “years
The Americas / Canada 16 Asia-Pacific airline priorities for industry re-start away”
Barnes Media Associates
Ray Barnes INDUSTRY ADDENDUM
Tel: +1 434 770 4108 22 ILS recruits Rob Suhs to head global sales
Fax: +1 434 927 5101 22 HAECO Group names leadership team for new
E-mail: ray@orientaviation.com Europe, Middle East and Africa unit
22 China’s largest airline extends Africa partnership
with Magnetic MRO subsidiary
Download our 2021 media planner at: 22 Mainland regulators validate Honeywell JetWave
orientaviation.com/advertising
WiFi system for China’s commercial carriers
Follow us on Twitter @orientaviation 22 Collins Aerospace wins Clark International
Airport passenger processing contract
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 3
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COMMENT
Airline MRO forever changed by pandemic
All sectors of the aviation industry have changed necessary and what is not when it comes to maintenance
dramatically as a result of a global pandemic that has of their fleets.
gone on far longer than anyone expected. The business A good example of such adaption comes from MTU
of providing maintenance, repair and overhaul (MRO) Maintenance Zhuhai. Because of the pandemic, a U.S.
services, either by original equipment manufacturers Federal Aviation Administration (FAA) inspector could
such as Boeing and Airbus or independent operators, not travel to China to conduct an audit on an overhauled
is no exception. Lockdowns, travel restrictions and engine. Instead, it was done online, an efficient and
quarantine measures worldwide have played havoc with successful process that certainly saved money - and not
MRO operations, forcing them to innovate and fast. least in time and travel costs.
They have gone through a steep learning curve but it is To abate a concern that adopting virtual repair and
one that will benefit them and their airline customers. maintenance practices might reduce aircraft and engine
The pace of digitalization has been ramped up. maintenance standards, MTU and its MRO peers stress
MROs have discovered there are many processes that that whatever they are doing on-line or virtually, the end
can be performed online and/or virtually. And while result matches the high standards and product quality
MROs will not reveal details of their financial dealings of pre-pandemic processes. Although it is a time of
with customers, they have had to face a commercial great upheaval, it is anticipated these changes in MRO
landscape where customers have lost billions of dollars processes will be a huge plus for carriers, whether in the
and are deep in debt from the pandemic. Asia-Pacific or elsewhere. In theory, when the recovery
MROs say they recognize the difficulties airlines takes hold, MRO advances in digitalization and a shift to
are facing and are doing all they can to assist their online communications and virtual reality should bring
customers. It is likely that probably has included allowing cost efficiencies to the sector and, in turn, to airline
some of their customers to defer payments. Just as costs. In other words, the cost efficiencies identified as a
important, it has forced airlines into a more detailed result of the pandemic will be completely integrated into
assessment of their priorities - and decide what is the sector's standard operating practices. ■
TOM BALLANTYNE
Associate editor and chief correspondent
Orient Aviation Media Group
A trusted source of Asia-Pacific commercial aviation news and analysis
ORIENT AVIATION
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 5
ADDENDUM AIRLINES AIRPORTS PEOPLE
China’s ‘Big Three” carriers top of Asia-Pacific table for brand value
The coronavirus pandemic a balanced scorecard of
has decimated airline profits metrics that evaluate marketing
and spread red ink across the investment, stakeholder equity
industry’s accounts. It also has and business performance.
seriously damaged the value of Across the rankings flag
their brands, including those of carriers receive higher global
leading carriers in the region. and domestic Brand Strength
In a report from Brand Index (BSI) scores. In Brand
Finance, the world’s leading Finance’s latest Global Brand
brand valuation consultancy, Equity Monitor, flag carriers
the value of the world’s top 50 outperformed non-flag
most valuable airline brands has Air Lines is the world’s leading the outbreak of COVID-19, with carriers on two key metrics:
declined by a third, from $108.6 airline for brand value, although brand values plummeting across recommendation by 16 points
billion in 2020 to $72.9 billion in still down by 37.5%, to $5.7 the board. With recovery closely and reputation by 12 points.
2021 as the sector was battered billion, followed by American tied to vaccination rates, we will In general, flag carriers have
by COVID-19. Airlines with a fall-off of 39.9%, to likely witness short-haul flights benefitted from greater state
In its Brand Finance Airlines $5.4 billion, and United Airlines, and their airline carriers rebound support than their non-flag carrier
50 2021 airline list only three sitting at $5 billion or 39.2% lower quicker compared with long- counterparts. They have received
Asian carriers appear in the top than before the outbreak of the haul,” Brand Finance’s valuation large allocations of direct financial
ten table for brand values. pandemic. director, Savio D’Souza, said. support and indirect support
They are mainland airlines Emirates Airline comes in at “Airlines that successfully fly from furlough schemes and tax
Air China (6), whose brand value number four, down 31.9% to $4.7 through the economic storm of deferral concessions. They also
is estimated to have fallen 34.1% billion. the pandemic and protect their have kept flying on essential
to $2.9 billion, China Southern There are three new entrants brands are likely to be more routes during the pandemic,
Airlines (7) down 35.8%, to into the rankings in 2021: Saudia resilient and perform better as we an option not available to lower
$2.6 billion, and China Eastern (brand value $506 million) in return to normality.” cost peers who had to suspend
Airlines (8) with a brand value 39th place, Jetstar (brand value In addition to measuring routes. The visible presence of
decline of 32.5%, to $2.2 billion. $360 million) at 49 and Avianca at overall brand value, Brand flag carriers during COVID has
The top three most valuable 50. “As predicted, airline brands Finance determines the relative boosted trust and the reputations
brands are U.S. carriers. Delta have had a turbulent ride since strength of brands through of their brands. ■
Veteran Asia insider tasked with delivery of Boeing’s expanded ambitions for Asia
The Boeing Company has Feldman’s responsibilities has represented 170 businesses, George H. W. Bush and George
appointed Alexander Feldman also span the roles of director and including Boeing, the OEM said. W. Bush, said: “With more than
as Southeast Asia president, chairman of Boeing Singapore “We are really sorry to see 380 million people under the age
succeeding Ralph “Skip” Boyce, Pte. Ltd and president director of Skip leave and thank him for of 35, Southeast Asia will bolster
a trilingual U.S. State Department PT Boeing Indonesia. having done such a tremendous Boeing’s growth for decades to
officer and a former U.S. Feldman’s CV most recently job leading and growing the come and support hundreds of
ambassador to both Thailand and includes 12 years as president Boeing operation and presence thousands of American jobs as
Indonesia. Boyce, who joined and CEO of the US-ASEAN across the region, which now well as countless others across
Boeing in 2008 after 31 years with Business Council (US-ABC), includes newly opened offices the region.”
the U.S. State Department, has including the chairmanship in in Jakarta and Hanoi,” Boeing In the statement, which also
retired. 2020-2021. International president, Sir highlighted the expansion of
An International Relations Michael Arthur, said. Boeing’s presence in Indonesia
graduate from the Ivy League’s “We are excited to have and Vietnam, the company said
University of Pennsylvania, Alex join Boeing. He brings to Feldman helped assemble a
Feldman has held senior roles the team a strong combination government and industry coalition
at the U.S. State and Commerce of diplomatic and business skills that provided financial and
Departments and a number of garnered during his more than medical support for Indonesia and
Asia-based businesses. 30 years in the private and public the broader region, to contain the
At the US-ABC, the sectors of the region.” 2021 surge in COVID-19 cases.
Eisenhower Fellow and Council Feldman, who served in the His appointment takes effect
of Foreign Relations member administrations of U.S. presidents, on August 27. ■
6 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021
Hopes of a late 2021 recovery “evaporate” for region’s airlines
Even if plans for travel bubbles testing to quarantine,” he said. in the next few months. That is
are on the shelf because of While the International Civil what we are talking to them about
the new Delta variant in the Aviation Organization (ICAO) is as well asking them to speed up
ongoing pandemic, Asia-Pacific planning a high-level conference these agreements,” Menon said.
governments should be talking to towards the end of 2021 to seek In the meantime, airlines
each other to ensure coordinated clarity and co-ordination on health concede hopes of a beginning of
health measures are in place when issues, Menon told Orient Aviation an industry recovery by year-end
travel markets begin to open up. “we need to start thinking about it have evaporated. “Everyone was
That is the view of the region’s and talking to each other about it looking forward to a recovery
peak airline body, the Association so we put things into motion”. starting by the end of this year, but a bit better off this year, he added.
of Asia Pacific Airlines (AAPA). Historically it has been now it does not look like it because “Their losses have come down.
Persuading governments difficult for countries to concur on of low vaccination rates, especially Their costs have come down
to agree to synchronized health such issues so Menon advocates among young people. They are significantly and most airlines
measures is the “greatest progress based on bilateral the ones we rely on for the supply have restructured their debt or
impediment” to progress, agreements. Each nation knows chain, for tourism, for businesses raised cash in capital markets
AAPA director general, Subhas the countries they want as travel to expand beyond their national backed by their shareholders and
Menon, said. “That is where we bubble partners, he said, “so borders, but unfortunately this is their governments,” he said.
are directing a lot of effort - to you can start talking about the not the case,” Menon said. “Having said that, they don’t
attempt to convince governments issues to make sure you have a While 2020 has been have an indefinite amount of
to make use of current down time recognition framework for testing confirmed as the worst year in cash. It’s going to run out sooner
to mutually agree harmonious centres and vaccination labs as the history of aviation, 2021 is or later if they can’t operate and
measures for travel health well as certificates”. “All of these proving to be worse than last year, earn enough money to cover their
protocols from vaccination to matters need to be worked out he said. Nevertheless, airlines are costs.” ■
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AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 7
NEWS BACKGROUNDER
Europe’s emissions strategy
reverts to new taxes on airlines
By associate editor and chief correspondent, Tom Ballantyne
T
he European Union to fuel-up consistently during EU SAF regulations condemning technology solutions are fully
(EU) is at it again. aircraft turns within the EU so them as counterproductive to developed, IATA said. “The
In the middle of the they cannot avoid fueling at the goal of sustainable aviation. industry supports the Carbon
COVID-19 pandemic airports with SAF, where the fuel “Aviation is committed to Offsetting and Reduction
and the worst crisis price is expected to be higher. decarbonization as a global Scheme for International Aviation
airlines have experienced in the For airlines the issue is industry. We don’t need (CORSIA) as a global measure
history of flying, EU legislators are that SAF is far more expensive persuading or punitive measures for all of international aviation.
proposing new taxes on aviation than normal jet fuel and the like taxes, to motivate change,” It avoids creating a patchwork
fuel and regulations that will infrastructure required to meet said IATA director general, Willie of uncoordinated national or
force carriers flying in European global aviation fuel requirements Walsh. “In fact, taxes siphon regional measures such as the
skies to use increasing amounts is decades away. “Taxes are money from the industry that EU Emissions Trading Scheme,
of sustainable aviation fuel (SAF). unhelpful and usually harmful could support emissions reducing that can undermine international
Airline industry bodies are to consumers. It will be more investments in fleet renewal and cooperation,” the global airline
dismayed by the EU’s plans, body said.
angrily pointing out the last “Overlapping schemes
problem their members need
We should all be worried that the can lead to the same emissions
now is additional fees on bottom EU’s big idea to decarbonize aviation is being paid for more than once.
lines that have been decimated making jet fuel more expensive. That will not IATA is extremely concerned
by the pandemic, not to mention by the Commission’s proposal
the debt they have accumulated
get us to where we need to be. Taxation will that European States would no
and will have to repay for at least destroy jobs. Incentivizing SAF will improve longer implement CORSIA on all
a decade to come. energy independence and create sustainable international flights.”
The policy recommendations “Modernizing European
are part of a sweeping set of jobs. The focus must be on encouraging ATM through the Single
proposals put forward by the the production of SAF and delivering European Sky initiative would
European Commission aimed at
reducing the EU’s net greenhouse
the Single European Sky cut Europe’s aviation emissions
between 6%-10%, but national
gas emissions by at least 55% by Willie Walsh governments continue to delay
2030. International Air Transport Association director general implementation,” IATA said.
Under the ReFuelEU Aviation “Just recently the European
Initiative, fuel suppliers will be productive if governments clean technologies.” A better Council failed to show any
obligated to blend increasing support and incentivize the approach would be tax incentives leadership in cutting emissions
levels of SAF (sustainable aviation accelerated development and to spur SAF production, Walsh through harmonizing European
fuel) in the jet fuel delivered to deployment of sustainable said. air traffic management,” Walsh
EU airports. That number will rise aviation fuels on a cost-effective IATA’s data on SAF in aviation said.
from 5% in 2030 to 20% in 2035 basis,” said Association of Asia underscores the challenge ahead. “The most practical
and ultimately to 63% by 2050. Pacific Airlines (AAPA) director While SAF reduce emissions near-term solution to reducing
A minimum tax for polluting fuels general, Subhas Menon. “All by up to 80% compared to emissions is SAF. But energy
is to be introduced gradually over parts of the aviation ecosystem, traditional jet fuel, insufficient transitions are only successful
a decade, starting in 2023. including fuel suppliers, need to supply and high prices have when production incentives drive
The EU wants to make sure come together to overcome this limited airline uptake to 120 down the price of alternative
carriers flying through Europe, significant challenge which is million litres in 2021, a fraction fuels while driving supplies up.
including Asia-Pacific airlines, beyond the airlines to address on of the 350 billion litres airlines Making jet fuel more expensive
don’t dodge the regulation by their own.” consume in a ‘normal’ year. through taxation scores an
fuelling up outside the EU to The International Air What is required are ‘own goal’ on competitiveness
avoid the new taxes or the SAF Transport Association (IATA) market-based measures that does little to accelerate the
regulation. Instead, they will have reacted strongly to the proposed to manage emissions until commercialization of SAF.” ■
8 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021
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NEWS BACKGROUNDER
Air cargo bonanza
improvement. And while the
pace of growth did slow slightly
in June, air cargo outperformed
promises profits
global goods trade for the sixth
consecutive month.
In June, Asia-Pacific airlines
reported demand for international
beyond the pandemic
air cargo increased 3.8%, a
decrease from the previous month
(5.3%) due to a slight slowdown
in growth in several large trade
routes such as Within Asia.
It is hardly news air cargo is the shining light of Asia-Pacific International capacity remained
aviation amid the gloom of the pandemic. Statistics indicate the constrained in the region, down
sector’s recent growth will endure beyond COVID-19 requiring 16.9% versus May 2019. But as
was the case two months earlier,
the region’s airlines to expand their cargo divisions to keep the region’s airlines reported their
pace with demand. Associate editor and chief correspondent highest international load factor
Tom Ballantyne, reports. at 75.2%.
IATA said underlying
economic conditions and
favourable supply chain dynamics
remain supportive for air cargo,
adding Purchasing Managers
Indices - leading indicators of air
cargo demand - show business
confidence, manufacturing
output and new export orders are
growing at a rapid pace in most
economies.
“Propelled by strong
economic growth in trade and
A
manufacturing, demand for air
ir freight traffic the world and that growth is While there continues to be a cargo is 9.4% above pre-crisis
is solidly back to expected to continue after the cargo capacity shortfall because levels. As economies unlock, we
pre-pandemic levels. recovery because online retailing of lost belly space from a depleted can expect a shift in consumption
And there is more and express home deliveries have passenger jet fleet, airlines from goods to services. This could
good news on the become part of daily life. are lifting cargo capacity. The slow growth for cargo in general,
horizon. The International Air For example, in the first half of passenger-to-cargo conversion but improved competitiveness
Transport Association (IATA) has 2021 Chinese commercial airlines business is booming. Cargo Facts compared to sea shipping should
reported air cargo is now much carried 3.74 million metric tonnes Consulting has reported active and continue to make air cargo a
more competitive with ocean of cargo and mail, an increase planned passenger-to-freighter bright spot for airlines while
shipping. At press time, air freight of 6.4% over the same period in conversion sites across all jet passenger demand struggles
was only six times more expensive 2019. International cargo flights aircraft types have increased to 25 with continued border closures
than ocean transport compared increased by 7.8%. worldwide. and travel restrictions,” said IATA
with 12 times more costly pre- Global air cargo is forecast The cargo sector’s latest director general, Willie Walsh.
COVID-19. to increase by 4.9% annually, statistics, for June this year, reveal Association of Asia Pacific
At the same time, rapid to around $144 billion, by 2027. a continued upward trend even Airlines (AAPA) director general,
growth in e-commerce, But given market indicators, the though comparisons between Subhas Menon, echoed these
accelerated by stay-at-home projections may be conservative. 2020 and 2021 are distorted sentiments and said air cargo
orders, lockdowns and demand Differing predictions aside, it is “by the extraordinary impact volumes carried by Asia-Pacific
for transport of temperature generally agreed the Asia-Pacific of COVID-19”, IATA said. But airlines have largely recovered to
sensitive drugs, chemicals and will remain the fastest growing air global demand in June this year pre-pandemic volumes in response
medicines are propelling air cargo market in the world, rising in was up on 2019. Global demand to strong demand. “This contrasts
freight growth to bigger profits. excess of 5% a year and achieving this year, it reported, increased starkly with the depressed state
Air cargo has become crucial to a value of more than $60 billion 9.9% compared with June 2019, of international passenger traffic,
moving medical supplies around by 2027. the 14th consecutive month of which has remained largely
10 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021“To provide additional lift the country and Cambodia are
we are converting two more reviving with business from Europe
of our B777 passenger aircraft and the U.S. Cargo volumes in
into cargo-only ‘preighters’ by Myanmar continue to be adversely
removing seats from the Economy affected by the political situation.
Class cabin, bringing our total to Imports will see longer transit
six ‘preighters’. These aircraft will times and space constraints as
provide support to our general demand remains high in hub
cargo and post shipments around airports.
Asia.” In Australia and New Zealand,
In all of this, the shift from COVID-19-related cancellations
seaborne freight to air cargo is on some direct flights between
very significant for the future Australia and New Zealand have
of the sector. Interestingly, it put pressure on export capacity,
has been acknowledged by the but there is an increased appetite
world’s biggest shipping company, for space from New Zealand to
Denmark-based Maersk, which Australia as ocean shipments
has subsidiaries and offices in 130 are affected by delays and port
countries and around 83,000 congestion.
employees worldwide. It also has In Indonesia and the
an air freight division. Its analysis is Philippines, air freight is driven by
air cargo demand remains strong strong export demand for retail,
as shippers “seek alternatives to garment and electronics products
stagnant with no improvements in following the high uptake of the ocean” ahead of the peak to the U.S and Europe. “In the
over a year,” he said. vaccination among our aircrew, season. Philippines, air cargo capacity to
In May, international air we were able to further reinstate The company has published its European destinations is higher
cargo demand in Asia measured our freighter capacity, especially assessment of Asia-Pacific freight than to the U.S., but remains tight
in freight tonne kilometres on our long-haul routes. markets. In Greater China, it said, to both markets. In Japan and
(FTK) saw 23.1% year-on-year “We also were able to mount shippers should rebuild inventories Korea, rates have declined slightly,
growth compared with a year considerably more cargo-only to beat the peak season rush. except to U.S. destinations. Space
earlier, significantly outpacing passenger flights compared with It wrote there is a shift from remains tight and demand is high,
the 3.6% increase in offered the previous month, especially ocean to air and a commitment which requires longer lead times,”
freight capacity, as belly hold on short-haul routes, to meet to longer term charters. Maersk Maersk said.
space remained constrained due the reasonably strong regional Airfreight has added routes As the more contagious
to limited commercial passenger demand,” the airline said. and service options in China to Delta variant of COVID continues
operations. As a result, the “Regarding cargo, we are help its customers adapt to the to wreak havoc on international
average international freight load cautiously optimistic that overall ever-changing market situation. passenger operations, indicating
factor rose by 11.7 percentage demand will be strong for the Demand is predicated to there is no immediate end in sight
points to 73.7%. remainder of the year. Gradual strengthen in Thailand, Malaysia to the global pandemic, air freight
Some cargo operators are resumption of passenger services and Singapore in the coming appears certain to continue to
doing even better. Singapore will provide us with greater belly months. Prospects in Vietnam play a more significant role in
Airlines Cargo, for example, saw capacity and should coincide with remain weak from the impact of the operations of Asia-Pacific
its cargo load factor in June rise to the usual cargo peak season. COVID-19, although exports from airlines. ■
87.6%, which was 5.1 percentage
points higher year-on-year, as
cargo traffic rose by 52.0% on the
back of a capacity expansion of
43.3%.
Cathay Pacific Airways has
reported its freight load factor
increased by 5.6 percentage
points to 80.6% and capacity, or
available freight tonne kilometres
(AFTKs), was up by 2.7%
year-on-year, although down
44.4% versus June 2019. “With
quarantine restrictions easing
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 11COVER STORY RISK AVERSE GOVERNMENTS HOLDING BACK AIRLINE RECOVERY When Willie Walsh took charge of the International Air Transport Association earlier this year, airlines worldwide were in the midst of their worst crisis in the history of aviation. The former airline boss is determined to see the industry through the pandemic, but he has a special message for Asia-Pacific governments, reports associate editor and chief correspondent, Tom Ballantyne. 12 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021
I
rish-born Willie Walsh, the 59-year-old airline veteran International Airline Group (IAG), stepped down from IAG a
who heads the airline peak body, the International Air year ago. He accepted the position of IATA director general,
Transport Association, has a warning for the region: as successor to Alexandre de Juniac, two months later. Some
recovery for Asia-Pacific carriers is likely to be delayed may have said “no thanks” to taking charge of the global
because of the risk averse approach of Asian airline association enduring an unprecedented crisis, but
governments and the slow take-up of COVID-19 vaccines Walsh did not hesitate in accepting the job.
among their citizens. “I felt the industry needed to have a strong voice at this
In Asia, he explained to Orient Aviation last month, stage. I believe, and always have believed, IATA is important
around 25% of the population has been vaccinated, which is to the industry. Given my background, the knowledge I have
comparable with global numbers. “But that is significantly of the industry, the fact I know how airlines operate and also
behind countries such as the UK, Israel, the U.S. and the that I know most of the players in the industry, I felt I could
UAE. All of them are in the 60% - 70% range. contribute and could hit the ground running. I felt bad
Singapore is obviously doing very well with leaving the industry when I did. You don’t want to leave [at
vaccination but most of Asia is lagging behind. I this time] so when I was approached about this I had
think it will suggest the recovery [in the region] absolutely no hesitation in saying yes,” Walsh said.
will take longer,” he said. Having spent 13 years as an IATA Board of Governors
Part of the problem, Walsh believed, is member, Walsh is well versed in the modus operandi of the
Asia-Pacific restrictions on travel and quarantine association. “I am really happy to make a contribution, play
that do not look like ending any time soon. “Once my part and support all of the former competitors who I really
the restrictions are removed the demand is there. feel sorry for at a time like this. It’s a horrible time to be an
In fact, it is very strong. All of the evidence airline CEO, but I have great faith and confidence in them
supports that. The recovery will be quick once and the industry. I am looking forward to getting through
the restrictions are removed, but given what we this and enjoying the recovery phase that is clearly going to be
are seeing in Asia, and the risk appetite those an exciting time,” he said.
Asian countries have, it is going to take Walsh has not been slow to make changes at the
longer for the restrictions to be removed in association. He has appointed a deputy director general, the
Asia than it will in other parts of the first IATA has had. The group’s Asia-Pacific chief, Conrad
world,” he said. Clifford, has moved from Singapore to Geneva to take up the
Walsh, who started his career as a post. A search is underway for Clifford’s successor.
pilot with Aer Lingus, rose to “It has been an issue debated for many years. When I was
chief executive of the Irish on the [IATA] board the DG was often encouraged to
carrier, moved to running appoint a deputy because the role comes with a lot of external
British Airways and commitments and travel. The view was it might be sensible to
then the have somebody to deputize, either to travel on behalf of the
DG to represent the DG or run the shop at home when the
DG is travelling,” he said.
Part of Walsh’s restructuring is making Geneva the
centre of operations. Until now, IATA has had two principal
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 13COVER STORY
“Not comfortable” politicians
fear backlash from relaxed
travel restrictions
Walsh makes one issue clear. IATA will continue to
fight long and hard to convince governments being aboard
a plane is one of the safest places you can be during the
pandemic and that restrictions such as border closures and
quarantine should be eased.
“We have to continue to put the data in front of people.
Most people want to be informed and make reasonable
decisions based on their own risk assessment and their
own risk appetite. We are not saying there is zero risk. There
is risk in everything. I think that’s the difference. In our
industry we manage risk. That’s the very basis of the
industry and how successful and secure it is,” Walsh said.
“We understand the nature of risk. We are all the time
assessing it and ensuring the measures we have in place
are sufficient to mitigate against the risk that we have
identified.
“Politicians are less comfortable with risk. They don’t
like being accused of making the wrong decisions. We have
to keep putting the data out there and keep showing the
evidence. We have to be challenging the restrictions.”
Willie Walsh
International Air Transport Association director general
offices: Geneva and Montreal. “In any organization it is co-ordinate responses to the pandemic, particularly testing.
difficult to justify two principal offices,” Walsh said. “At a “You have agencies like the WHO (World Health
time of crisis like this you have to focus on your cost base so Organization) and ICAO. They come out with measures they
we are going to rationalize the focus on Geneva as the believe should be applied on a global basis yet governments are
principal office. The main focus of the Montreal office will be looking at them and then doing the wrong thing,” he said.
engagement with ICAO (International Civil Aviation “I keep highlighting the EU (European Union), 27
Organization) and other aviation parties that are based there. countries you would have thought could co-ordinate testing
We will continue to have a strong presence in Montreal, but regimes. Instead, there is every combination of testing you
the executive function of the business will be in Geneva.” could imagine.
As for the pandemic, Walsh does not think it is going on “Some require PCRs (the test used to detect a person has
longer than airlines expected. “What is going on longer than COVID-19), within 24 hours of travel, others 48 hours and
expected are the restrictions on international travel. Like all even 72 hours. Ten countries think it is safe to do a PCR
sorts of viruses I assumed we would end up living with this within 72 hours. What do the the other 17 see that makes
one as we live with other viruses. I think governments have them do something different? This is extremely frustrating
continued to take an extremely risk averse approach to this, and very confusing for travellers.
particularly in the Asia-Pacific,” he said. “People read the restrictions applicable to their country
He pointed to seven-day averages of daily COVID cases. and assume, rationally so, there will be similar if not the
“Mid last month, the world was at 57.6. Yet Australia, before same measures in other countries. They are often frustrated
the recent outbreaks of the Delta variant, particularly in to find a completely different regime. It has been not just
Sydney and Melbourne, was a mere 3.18. “Yet the UK is disappointing but one of the issues we really do have to
removing all restrictions. What we are seeing is a completely challenge.
different approach from governments. Some are basing their “It’s the same virus everywhere. This is a common virus.
decisions on the data, but others have adopted a zero COVID There should be common measures taken to address it. The
approach, including probably most of Asia and Australia and world has to learn because this virus is not going to go away,
New Zealand in particular,” Walsh said. the same way as the flu has not gone away. Flu mutates every
“In countries with high levels of vaccinations, year. We take measures to address that every year.
governments are more willing to acknowledge the pandemic “When we get through this, looking back on it, there is a
is just part of our lives and vaccination is the key to enabling lot not just the industry needs to learn, but governments need
people to return to a more normal environment.” to learn. You would expect global organizations like WHO,
Walsh also is disappointed at the failure of governments to the United Nations and ICAO would pull together and
14 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021global airline industry revenues fell by 6.4% compared with
2000. In 2009, revenue collapsed by 16.5% versus 2008. In
the current pandemic, 2020 revenues were down 56% against
2019. Despite these disastrous numbers, Walsh said carriers
have done an incredible job in the face of massive losses by
simply surviving the crisis and maintaining their
commitment to sustainability goals.
“Airlines have demonstrated resilience from a financial
point of view. Still, there are challenges for a lot of airlines,” he
said. “They have to be careful because there is this disconnect
between cash flow of sales in advance of carriage. People are
not booking in advance at the moment. And naturally,
because they don’t know when markets will open,” he said.
“So, you are going to see the traditional cash in and cash out
dynamic change in the short-term.
“But the factor that is really positive is the focus on the
environment has not in any way waned. It reflects the external
reality that a focus on the environment has, if anything,
increased as we have gone through this pandemic. The
industry recognizes we have a job to do. I have been really
impressed with the continuing investment by airlines in
support of their environmental measures as we go through
this crisis.” ■
Asia-Pacific priorities
for recovery
address this situation in a co-ordinated fashion.”
When recovery does come, Walsh believes re-establishing • Acceptance by governments that COVID-19 is part of
daily living in the same way as the common flu is
networks will be challenging for airlines. “We are used to
accepted
dealing with challenges. We are used to managing rapidly • Bringing governments together to establish global
changing requirements when it comes to security or safety standardised testing and “vaccine passport” travel
issues,” he said. documents for travel worldwide
“We can cope with it. We would prefer not to have to, but
there are a number of factors that will be on the minds of
CEOs. All airline balance sheets have been very much
stressed. The level of debt for the industry globally we
estimate to be more than $650 billion, up from $220 billion
since the pandemic started. That will increase,” Walsh said.
“People will have been shocked as they saw liquidity
significantly tighten during the first three or four months of
the pandemic. We had all been hoping things would start
relaxing and airlines could start building up cash reserves
again.
“You will see a cautious approach being adopted by many
airlines because the key for a lot of carriers is their costs have
significantly reduced, principally because they are not flying.
We are avoiding fuel costs, which is the single biggest cost.
Labor costs have been significantly reduced with a lot of • C hallenge of re-establishing pre-pandemic route
networks especially if air passenger demand takes off
countries providing employee support.
at faster levels than airlines can accommodate
“These costs will come back very quickly as airlines build • Managing repayment of global airline debt, estimated
up their networks. I expect a lot of them will be very cautious to be US$650 billion at present and still to stabilise
about how they re-establish their networks, which suggests • C ash flow curtailed as airline customers are not
there will be parts of the global network that will be lost and booking ahead fearing sudden flight cancellations or
lost for some time.” new imposition of border closures and unanticipated
Walsh cites a comparison between the current crisis and or sudden extended quarantine regulations at borders
previous global economic crises in 2001 and 2009. In 2001,
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 15ORIENT AVIATION
OCTOBER-NOVEMBER 2021
COVER STORY:
MALAYSIA AIRLINES GROUP
CEO CAPT. IZHAM ISMAIL
Malaysia Airlines Group (MAG) boss and commercial
aviator, Izham Ismail, has thrown out the traditional
playbook of an Asia-Pacific flag carrier.
Realising the survival of the airline group and its
dependent subsidiaries could no longer depend on
air traffic alone, he is diversifying the brand and its
Kuala Lumpur headquartered hub into an aerospace
services centre and using the status of the much
loved brand to build new loyalty and entertainment
subsidiaries, the charming and impassioned MAG
boss told chief correspondent, Tom Ballantyne, in our
October-November 2021 cover story.
Also in Orient Aviation in October-November 2021:
the definitive story of the region’s airline and engine
leasing businesses as told to chief correspondent,
Tom Ballantyne, by the major Asia-Pacific players in
the sector.
ORIENT AVIATION DECEMBER 2021-JANUARY 2022
COVER STORY: Not so long ago, no news was good news industry animal than pundits had forecast,
KOREAN AIR CHAIRMAN AND at Korean Air. Two of the three children of largely due to the leadership of the
CEO WALTER CHO WAN-TAE the late founder of Korean Air, Choi Yang- younger Cho and his new executive team.
ho, were behaving like spoilt brats and In our final Orient Aviation of the year
their brother, Walter Cho, faced constant we profile Cho and his achievements in
questions about his ability to hold together keeping the family business together while
a feuding family in the politically charged capitalising on the group’s regional location
atmosphere of the Korean Air group. to build a profitable cargo business that
has increased the airline group’s financial
Fast forward to mid-2021 and Korean Air health compared with its regional peers
is a different - and much more profitable - during the pandemic.
ORIENT AVIATION MEDIA GROUP SALES DIRECTORS:
The Americas / Canada Europe, the Middle East & the Asia-Pacific
RAY BARNES DEFNE ALPAY
E-mail: ray@orientaviation.com E-mail: defne@orientaviation.com
T: +1 (434) 770 4108 T: +44 7712 829859
ORIENT AV IATION MEDIA GROUP: ORIENT AV IAT ION • ORIENT AV IAT ION DA I LY DIGEST • W W W.ORI EN TAV I AT I O N.COMMRO ASIA-PACIFIC UPDATE
Asia-Pacific remains “richest”
future airline MRO market
Asia-Pacific aircraft MRO companies rapidly adjusted their business models as
COVID-19 hit the industry hard. When a recovery commences the sector will
have undergone significant change, leading MROs told associate editor and chief
correspondent, Tom Ballantyne.
I
n September last year, as we want to be part of it,” MTU
the COVID-19 pandemic Maintenance Zhuhai president
persisted, Boeing’s Global and CEO, Jaap Beijer, said of
Services modification team the joint venture between
commenced an assignment MTU Aero Engines and China
they had never undertaken: Southern Airlines. “For sure we
supporting the complete nose have expansion plans and I am
to tail interior and connectivity very happy both shareholders in
modification of a big passenger Zhuhai have decided to go on
jet in an entirely virtual setting with expansion plans,” he said.
while keeping the work on “We have announced we
schedule. The aircraft was an will have a second plant coming
All Nippon Airways (ANA) B777 in soon. We will still build the
parked in China at HAECO second plant because we think
Xiamen, the U.S. planemaker’s the growth will come back. There
MRO partner. will be a kick back in later years.
Facing daily COVID-19 We have to be prepared for that.”
related challenges, including turnaround cycle on issues that with a product we have as much The second facility, with an initial
fast changing local conditions, returned the aircraft to service confidence in as a non-pandemic annual capacity of 250 shop visits,
lockdowns and the virtual work on time. environment.” is expected to enter operations
environment, to meet customer Boeing Commercial Services The Boeing case study is only in 2024. “We also invested in
commitments Boeing created Programs vice president, Mike one example of the changes the new engine types - (CFM) Leap
a global support team on-line, Doellefeld, told Orient Aviation entire aviation MRO ecosystem 1A and Leap 1B. Already we are
bringing together design and earlier this month: “For example, has undergone during the working on that. It is there we
liaison talent in Long Beach, we utilized technology during pandemic. While digitisation see the next three, four, five years
California and Puget Sound, the pandemic to change the and advances in IT systems were growth. That is why we decided
Washington, as well as Boeing way we do a modification. We well underway pre-pandemic, to invest now and hopefully have
engineering experts in Moscow have gone to a full nose-to-tail MRO providers are agreed the good flexibility in the next two or
and Kiev to ensure the necessary modification using technology COVID-19 crisis has accelerated three years for customers when
round-the-clock support needed without necessarily having to the process. Limitations on travel, businesses are picking up again.”
to deliver the Japanese carrier’s be first-hand on the product, created by border restrictions and Beijer said a major digitisation
specifications. doing a certification lock. quarantine measures, have forced program has been launched at
Working closely with That’s an example of exercising business on line and encouraged the Zhuhai joint venture and at
ANA and HAECO, using video, the portfolio with traditional them to innovate. And despite other facilities. “This is a chance
detailed photographs and 3-D communication supplemented the downturn, most sector to get it done. All these things are
drawing markups to troubleshoot by increased photos, videos, real- participants have not held back on now moving forward. The same
issues and keep the complex time cross share, virtual walks and investment and research and have applies to automation of deliveries
modification on schedule through measures by analytics. Then we pushed ahead with expansion and logistics. The same will apply
constant communication, they take all that to draw conclusions plans. to scoping in data, analysing it
were able to support their that will conform to the “We see the Asian market and bringing it on a platform to
commitment to a 24-hour regulations and ultimately end up as growing significantly and show to the customer,” he said.
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 17MRO ASIA-PACIFIC UPDATE
“We do a lot there. We have time to do an audit for the
a process where they can tell us authorities,” he said.
online their problems and we can “The FAA (U.S.Federal
quickly support the customers Aviation Administration) cannot
there. There is a big program come here now [during the
coming to Zhuhai to automate pandemic]) so they do it online.
and it is speeding up.” All these factors will change our
Boeing also is committed business and they will change the
to expansion. One example, trust in data. It will be different in
Doellefeld said, is the opening the future.”
of two lines for passenger to P&W’s Cormier said the
freighter conversions of B737s and impact of digital transformation
B767s in response to a strong air on advanced manufacturing
cargo market. The services arm of technology is even more dramatic
the OEM also is investing in sub with robotics, automated
sectors of airline MRO. testing, augmented reality,
Pratt & Whitney vice parked and travel restricted, if I have to admit my team already additive manufacturing, business
president aftermarket operations communication channels is very keen to go back and visit intelligence and data insights.
Asia-Pacific, Tim Cormier, said emerged as one of the key customers physically. I don’t think “It is part of a framework for
the engine maker is developing survival mechanisms for the this is the end of business travel.” connecting the various flows
technologies for its MRO shops in MRO business, Airbus head of Like other MROs battling of data and will provide an
the region. “We are introducing scheduled maintenance services, the pandemic, Airbus has been all-inclusive view across the life
advances in automation and Claire Kauffman, told Orient conducting frequent webinars cycle of a product from design
non-destructive testing (NDT). Aviation. with customers across the globe, and development and service
Embracing digital transformation The new digital answering questions about and support. It is influencing all
moves industry leaders like Pratt communication systems were aircraft parking, storage and operations. Such an end-to-end
& Whitney (P&W) further into basically in place, but maybe not return to service among other digital infrastructure connects
the future, where the customer embraced as much by people. MRO issues. Kauffmann said that the stakeholders throughout the
experience can be integrated “During the pandemic, it actually while protocols are contained life cycle using data and models,
with our products in flight and became one of the key tools to in official manuals many aircraft driving dramatic improvements in
not only our own operations. continue running our business as were parked away from their productivity, quality and customer
It also assimilates [us] with a efficiently as possible. We realised home bases. Some carriers are satisfaction,” he said.
comprehensive supply chain at the they were actually very efficient. accustomed to storing aircraft, but Magellan Aviation Group
back end.” We could work remotely and we others were not and they needed senior sales and marketing
Companies such as P&W, could work using these digital to be assisted with the process. director, Mohammad Ali Dawood,
MTU, Boeing, Airbus and others tools,” she said. MTU’s Beijer agreed the said the pandemic will bring
also are training their workforce “Yes, definitely it was a real- business will be forever changed. about change in other areas of
to rapidly incorporate augmented life example that it was working. “The trust about doing things on the industry. Its aircraft parts and
reality in aircraft MRO checks. We will continue having the line will increase. So, customers engine leasing business, which
With thousands of aircraft benefits of those capabilities even won’t have to come here every has bases in Singapore, North
Hunting for Spare Parts?
18 / ORIENT AVIATION / AUGUST-SEPTEMBER 2021Carolina, Florida and Ireland, and in confidence. They did, into specifics, due to commercial will resume that position when
has found that as passenger however, make it clear everything confidentiality, but we are recovery comes. “We view the
demand has declined during the possible was being done to assist staying close to our customers market as strong,” Doellefeld said.
pandemic airlines and lessors financially hard-pressed airlines. during these difficult times and “We know the Asia-Pacific
have consolidated their fleets “We keep in close contact helping airlines when we can. will be one of the richest parts of
and retired some mature aircraft with all our customers. When We recognize that when people our world for growth in the next
sooner than expected. you are running a business it’s encounter difficulties, it is how 20 years. Our expansion plans
“As a result of these early the full spectrum of the value you respond that will determine are not disrupted by COVID-19 in
retirements, we anticipate an stream which includes the the nature of the relationship in staying focused on that.
increased volume of aircraft and commercials and the financials. future,” he said. “We see continued growth in
engines to begin being parted That’s a conversation we will For some MROs, while the the region for additional capacity
out to the point where we see a keep between ourselves and pandemic brought new pressures and we see our aircraft in that
flood of USM (Used Serviceable our customers, but we have to their businesses, the direct area. We know our airline market
Materials) materials entering had proper conversations to impact on their operations was will recover with time so we will
the marketplace in coming address their needs and have short-lived. Engine shops like stay focused on the initiatives
months and years. We expect the done everything possible in the MTU Zhuhai and P&W saw some and the needs and growth of
USM market will be even more spirit of help and forward looking recovery come quite quickly technology and services. It is
competitive,” he said. involvement,” Doellefeld said. because most of their MRO exactly what we are doing and
“At the same time, older that’s inclusive of MRO capacity
aircraft platforms converting to and capability in the Asia-Pacific.”
freighters have been a bright spot MRO compound growth forecast Magellan’s Ali Dawood said
in our industry. With demand
for conversions increasing these
at 3% a year to 2031 the current outlook for recovery
in the Asia-Pacific is much longer
conversions will see a substantial The International Air Transport Association (IATA) has calcu- than anticipated, possibly starting
increase in MRO work as well.” lated the global aviation industry lost more than US$118 billion in in the last quarter of this year and
Boeing’s Doellefeld believes 2020 with dozens of airlines either seeking bankruptcy protection extending through the first and
or ceasing flying as a result of the pandemic. During the crisis,
MRO tools will change. “We are second quarters of 2022. “This
cash preservation and cost control remained a priority for airlines,
moving more and more towards timeline is due to an unfortunate
which also resulted in bad news for aerospace manufacturers and
technology or virtual reality. We MRO providers. combination of reasons;
are looking at measuring airplanes The COVID-19 crisis is estimated to have lowered spending vaccinations rates continue to
with more technology. Scanning on commercial MRO by about $40 billion in 2020, according to be very low, while international
is another technique. We can do analysis conducted by U.S. consultancy Oliver Wyman, published travel restrictions remain largely in
a quick survey, infra-red systems in its Global Fleet and MRO Market Forecast 2021-2031. It place,” he said.
and i-bars on parts or inventory estimated spending on commercial MRO in 2021 will reach $68 “It will be difficult to estimate
components rather than physical billion and that demand is unlikely to return to pre-pandemic levels and the timeline could change
inspections,” he said. until year-end 2022. as Asia-Pacific countries struggle
Despite lower predicted MRO industry expansion, compound
“Going beyond the MRO is to deal with the virus situation.
annual growth of the sector from 2019 to 2031 is expected to be
how we train mechanics servicing Although China’s domestic
at least 3% per year.
the airplanes. We have been market has surpassed 2019
shifting to virtual sessions and levels, it does not benefit others
competency-based training for MTU’s Beijer underscored work was on engines powering in the region as China does not
the certification and accreditation the importance of talking to narrow-body fleets. In MTU’s case expect to open its borders in
of pilots and technicians. They all customers. “We tried to limit their its Shanghai lines work on engines any significant way before the
have a network or a relationship financial burden. I think this is for B737 and A320 types while for February 2022 Winter Olympics.
to the maintenance, repair the biggest topic. How did we do P&W in the Asia-Pacific it primarily “For the rest of Asia, we
and overhaul sections of our it? We try to help the customer overhauls the V2500 and GTF, the can expect countries like India,
business.” in need. The most important engine types on several A320ceo Indonesia, Vietnam, Japan and
As the pandemic worsened, factor is flexible work scoping. and neo, Embraer E2 and Airbus Thailand to bounce back quicker
there was something else MROs So reducing the cost as much as A220. These airplanes fly short- than others once herd immunity
have had to worry about. Their possible but making sure they still haul and domestic services which is established due to their vast
customers were losing billions of have engines to fly. Try to limit not began returning to service well domestic market presence.
dollars and needed to radically only our own costs, but the cost before wide-bodies. However, as borders continue
cut costs. MROs approached by to the customer to help them in One undisputed belief is held to be closed and governments
Orient Aviation would not detail these difficult times,” he said. by all the MROs Orient Aviation continue to impose more
how they approached this subject Cormier said P&W interviewed: that the Asia-Pacific, lockdown measures, we do
as financial arrangements with understood airlines need to the growth engine of aviation not see a fast recovery on the
their customers are commercial manage cash flow. “I can’t go before the pandemic outbreak, horizon.” ■
AUGUST-SEPTEMBER 2021 / ORIENT AVIATION / 19You can also read
