THE RULES OF FLYING POST COVID-19 - Orient Aviation
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Vol. 27 No. 5 June 2020
orientaviation.com
THE
RULES OF
FLYING POST
COVID-19
Asia-Pacific carriers are gradually
welcoming passengers back
on board while scrambling
for funds to remain
in the air
THAI hauled Cyber assault at Qantas Group stockpiles
back from U.S. subsidiary of funds to December
financial precipice ST Engineering 2021 – and beyond
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CONTENTS Volume 27, Issue 5
MAIN STORY
8
ORIENT AVIATION MEDIA GROUP
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Editorial (852) 2865 1013
E-mail: info@orientaviation.com
Website: www.orientaviation.com
Publisher & Editor-in-Chief
Christine McGee
E-mail: christine@orientaviation.com
Associate Editor &
Cover illustrations: Singapore Airlines’ caring for
WELCOME BACK
Chief Correspondent
your well-being health and safety initiatives e-brochure
Tom Ballantyne
Tel: (612) 9638 6895
Fax: (612) 9684 2776 Asia-Pacific airlines gradually restart networks but scramble to fund their
E-mail: tomball@ozemail.com.au flights continues
North Asia Correspondent
Geoffrey Tudor COMMENT 14 The strength of numbers: Qantas Group
Tel: (813) 3373 8368
5 A dream of an aircraft defeated by market forces stockpiles funds to December 2021 - and beyond
E-mail: tudorgeoffrey47@gmail.com
if necessary
Photographers ADDENDUM 14 New Zealand says Australia’s border closures
Rob Finlayson, Graham Uden, 6 Hong Kong extends lifeline to iconic Asia-Pacific delaying introduction of “travel bubble”
Ryan Peters carrier to ward off collapse 16 THAI hauled back from financial precipice
Chief Designer
6 Star performer promoted to Airbus Asia-Pacific’s
Chan Ping Kwan top job INDUSTRY ADDENDUM
17 CANSO accepts free access to Metron Aviation’s
Printing
Horizon flight prediction software
Printing Station(2008)
17 Baggage worries eased with Korean Air tracking
system at Seoul Incheon airport
ADMINISTRATION 17 Groundstar optimization software updating
IndiGo’s manpower and equipment systems
General Manager
17 Global IT provider SITA reshuffles management
Shirley Ho
at SITA FOR AIRCRAFT and SITA AT AIRPORTS
E-mail: shirley@orientaviation.com
7 Malaysia Airlines announces oil and gas CEO as AND BORDERS
new non-executive chairman.
ADVERTISING 7 THAI’s CEO of the century returns to the flag
carrier as a board director
Asia-Pacific, Europe & Middle East
Defne Alpay
7 Australia equivocates in supporting Virgin
Tel: +44 7712 829859 Australia
E-mail: defne@orientaviation.com
NEWS BACKGROUNDERS
The Americas / Canada
12 No silver linings ahead for India’s airlines despite 17 Sabre Corporation axes more jobs in two-year
Barnes Media Associates
easing of coronavirus strictures transformation program
Ray Barnes
Tel: +1 434 770 4108
18 Japanese-controlled SMBC Aviation Capital
Fax: +1 434 927 5101 defers orders for 68 MAXs to 2025-2027
E-mail: barnesrv@gmail.com 18 Nordic Aviation Capital, leading lessor of
ray@orientaviation.com regional aircraft, seeks debt standstill and
deferral ruling from Ireland’s High Court
18 CPaT wins pilot distance learning contract from
Download our 2020 media planner at: Korean Air
orientaviation.com/advertising
18 Singapore’s global engineering unit, ST
Follow us on Twitter @orientaviation Engineering, suffers cyber assault at U.S.
subsidiary
JUNE 2020 / ORIENT AVIATION / 3
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COMMENT
Dream of an aircraft defeated by market forces
As the COVID-19 pandemic wreaks havoc across the globe A380s will be retired and Air France is doing the same with
it will have one very sad outcome for the aviation industry. nine of the type.
With passenger numbers forecast to remain well below pre- In reality, it is very likely not a single new A380 will be
crisis levels for several years, a flagship commercial aircraft delivered to a customer and that Airbus will be left with half
of the last two decades is set for a premature demise. finished aircraft on its production line.
We already know deliveries of the giant A380 were The A380 was an expensive program. It began life full
scheduled to end in 2021. The decision was announced last of promise as a giant that would connect the world’s major
year when Airbus was faced with non-existent new orders hubs, carrying 500 or more passengers at a time. In the end,
for the type. It would not have lasted that long without a final it was an expensive bet that went wrong. The plane became
commitment fling from Emirates Airline. Now, as the industry more costly to operate, especially when oil prices rocketed,
fights to overcome COVID-19, the writing is on the wall for the and Airbus refused to invest in a neo version, or New Engine
very large passenger jet. Option.
Although not officially announced, it is understood It fell victim to airline strategies dominated by the
Emirates is seeking to scrap its last five A380 orders, but belief, rightly, that smaller new generation, fuel efficient and
Emirates president, Sir Tim Clark, did say he was keeping the long-range wide-bodies, capable of circumventing hubs,
current fleet, all of which are now grounded only weeks after was the future. For passengers, the story was often different.
declaring “the A380 is over”. They loved to fly aboard the aircraft and reveled in its comfort
Abu Dhabi’s Etihad Airways also is reportedly considering levels, cabin and silence when in flight.
retirement of its 10 A380s. Singapore Airlines, first to enter No doubt some A380s will fly for many years to come
the plane into service in October 2007, has several A380s as the current crisis passes and travellers return to flying in
parked at a storage facility in Central Australia. Qantas substantial numbers. But COVID-19 will be seen as the final nail
Airways has hinted strongly most, if not all, of its A380s may in the A380 coffin and one that prematurely ended the aircraft's
not return to service. Lufthansa has announced six of its 14 reign as the flagship of many of the world’s major airlines. ■
TOM BALLANTYNE
Associate editor and chief correspondent
Orient Aviation Media Group
The most trusted source of Asia-Pacific commercial aviation news and analysis
ORIENT AVIATION ORIENT AVIATION CHINA
“It has established itself as the primary source of information on industry topics in the Asia-Pacific region”
JUNE 2020 / ORIENT AVIATION / 5
ADDENDUM AIRLINES AIRPORTS PEOPLE
Cathay Pacific too important to fail decides Hong Kong government
A year ago, they would have rights issue.
been words a Cathay Pacific Cathay Pacific’s regulatory
chairman would never have filing also said longer term the
expected to utter. So it was airline group’s business model
a shock to many industry would be “re-evaluated”, with
observers to hear the airline management to recommend
group’s chairman, Patrick Healy, to the board the “optimum
say on the public record on June size and shape” to meet the air
9 that a HK$39.billion (US$5 travel needs of Hong Kong while
billion) recapitilisation “was keeping its financial status at
basically the only plan available a healthy level and meeting its
to Cathay Pacific”. responsibilities to shareholders.
“What would the alternative financial assistance. billion through the issuing of More immediately, the board
have been? Quite frankly, without “If this challenge is not preference shares and HK$1.95 will bring in another round of
this plan, the alternative would properly addressed, it will harm billion (subject to adjustments) executive pay cuts and a second
have been the collapse of the Hong Kong’s international hub through warrants to subscribe voluntary special leave scheme
company,” he said during a status and adversely impact on for shares to Aviation 2020 Ltd, for employees,” the company
specially convened webinar other economic activities to the wholly owned by Hong Kong’s said.
to explain the Hong Kong detriment of the overall interest Financial Secretary Incorporated. International Air Transport
government’s support package of Hong Kong.” Aviation 2020 Ltd also will Association director general and
for the airline group. The proposed recapitalisation provide the bridging loan facility CEO, Alexandre de Juniac, said on
“The reality, given the extent package involves the Hong Kong to the group. June 8 that “financially 2020 will
of the global pandemic and its government taking equity in the The government-backed go down as the worst year in the
impact on the aviation industry airline group, providing a HK$7.8 entity would emerge with a history of aviation”.
worldwide, is that the commercial billion bridging loan and a rights 6.08% holding in Cathay Pacific “On average, every day of
debt markets are effectively issue major shareholders have and two “observer” positions on this year will add $230 million
closed to airlines today that do pledged to support. the board. to industry losses, a total of
not have extensive government In a regulatory filing to the For the rights issue, Cathay $84.3 billion based on 2.2 billion
and shareholder support,” Healy Stock Exchange of Hong Kong Pacific shareholders would be passengers for 2020. Revenue
said on June 9, the company said offered seven rights shares for will fall 50%, to $419 billion, from
Cathay Pacific Group CEO, recapitalisation was in response every 11 existing shares at a $838 billion in 2019,” he said.
Augustus Tang, added the airline to a series of unexpected events, subscription price of HK$4.68 “It is why government
had reached out to the Hong including COVID-19, and would a share, a 47% discount to the financial relief was and remains
Kong government for support. ensure it had sufficient liquidity to last traded price of HK$8.81 a crucial as airlines burn through
“We asked for assistance from weather the current crisis. share, to raise HK$11.7 billion cash.”
the government, so we made the Terms of the proposed in fresh equity. Cathay Pacific IATA forecasts Asia-Pacific
request,” he said. recapitalisation, which requires major shareholders - Air China airlines, which were the first to
Hong Kong’s financial the approval of shareholders at (29.99%), Swire Pacific (45%) feel the brunt of the COVID-19
secretary, Paul Chan Mo-po, said: an extraordinary general meeting and Qatar Airways (9.99%) - have outbreak, are expected to post
“Cathay Pacific took the initiative (EGM) on July 13, would allow committed to taking up all their the largest absolute losses
to seek the government’s Cathay Pacific to raise HK$19.5 available entitlements in the worldwide in 2020. ■
6 / ORIENT AVIATION / JUNE 2020
Malaysia Airlines appoints oil and gas boss as non-executive chairman
A Petronas president and CEO, years until he resigned earlier afloat until 2025.
Tan Sri Wan Zulkiflee, is the this month and accepted the MAG CEO, Captain Izham
new non-executive chairman chairmanship of the national Ismail, said in a statement:
of Malaysian Aviation Group airline. “Tan Sri Wan’s leadership and
(MAG). He succeeds Tan Sri Malaysia media recently illustrious career at Petronas
Md Nor Yusof, who resigned in reported the flag carrier, which prove he is the most suitable
March, 2019. has been financially stricken for candidate to lead MAG forward
Until his MAG appointment more than a decade following as a strong player in the aviation
Tan Sri Wan had spent his the departure of Idris Jala to industry and a crucial enabler of
entire career, since 1983, at serve as a minister at large in national development.”
Malaysia’s Petronas. He had been the Malaysian government, The appointment is effective
its president and CEO for five needs US$5.15 billion to keep from July 1. ■
Star performer promoted to president Airbus Asia-Pacific At press time,
Australia’s prime minister,
After less than two years with regional headquarters in lead Airbus in the key Asia- Scott Morrison, said the
Airbus, Anand Stanley, 43, will Singapore and report to Airbus Pacific market. best medicine for Virgin
take up the role of president chief commercial officer and “We know we can count on Australia’s (VA) revival was
Airbus Asia-Pacific on July head of international, Christian him to focus on supporting our to restart flying, shifting
1, succeeding Patrick de Scherer. customers in these challenging the emphasis in the battle
Castlebajac. Stanley, who holds a post times, while developing our to keep the airline alive to
Engineering graduate and graduate degree from prestigious position as the leading partner Queensland, South Australia,
MBA Stanley joined Airbus business school, IMI-Delhi, will of the aerospace sector in the Tasmania and Western
as president and managing be responsible for commercial region.” ■ Australia. “We need to open
director of Airbus India on aircraft sales and customer up these borders,” he said.
October 1, 2018, after working affairs, group-wide government The prime minister
in senior positions at aerospace affairs, industrial and joint was responding to a letter
companies UTC, Pratt & Whitney, venture partnerships and local written by VA’s administrator,
Lockheed Martin and Sikorsky operations at the company’s sites Vaughan Strawbridge, to
and industrial gas manufacturer, across the Asia-Pacific, an Airbus lead members of Australia’s
the Linde Group. He has more statement said. cabinet that said the airline
than two decades of experience “Anand has brought a would run out of cash by
in the region, including the M&A wealth of experience to Airbus June 30.
sector. and managed the company’s The Deloitte partner
He will work closely with operations in India with very said the sale of the airline
the head of region for Airbus positive results,” Scherer said. to either Bain Capital or
Helicopters and Defence and “His proven track record Cyrus Capital Partners was
Space at the manufacturer’s makes him the right choice to in the balance and asked
the Morrison government
to guarantee tickets sold to
THAI’s most successful recent president returns as board director date for the remaining period
of the airline’s voluntary
Dr. Piyasvasti Amranand, a honors graduate in mathematics Since then, THAI has had three administration.
former energy minister, arrived from Oxford University, Piyasvasti presidents, most recently Sumeth Other requests in
at Thai Airways International in brought clarity to THAI’s Damrongchaitham. He took over the letter, sent on June 9,
2009 armed with a considerable operations as he attempted to in September 2018 and resigned included extensions of
reputation for mental toughness untangle a large mismatched fleet in mid-March this year. Sumeth Australia’s employment
and political nous. Within months and improve the productivity said he resigned because “those in support scheme and slot
he had made a huge impact at the of a bloated workforce. He was power” told him “his mission was protection measures and
carrier which was confronted by making leaps and bounds in over”, the Bangkok Post reported. redressing the imbalance of
superior Asian flag carriers and turning around the airline when he “Even if there was no government travel business
new competitors in the low-cost suddenly departed THAI because COVID-19, THAI could not afford between VA and the Qantas
sector. A London School of of “communications issues” with to continue as it was as the national Group. ■
Economics PhD and a first class the airline’s board. carrier,” he said. ■
JUNE 2020 / ORIENT AVIATION / 7
MAIN STORY
THE RULES OF FLYING
POST COVID-19
The first shoots of airline regrowth are sprouting in the Asia-Pacific,
but so too are the gnarly weeds of post pandemic debt.
Associate editor and chief correspondent, Tom Ballantyne,
reports on the staggering cost of the industry’s
battle to avoid destruction from COVID-19.
A
s an increasing number of Asia-Pacific airlines degree of control over the spread of the disease. Hopefully, the
announce re-launches of domestic and region can lead the much-needed recovery in air travel,” he
international flights it is becoming clear the said.
region where the coronavirus pandemic The region’s latest traffic statistics, for April, were released
originated is leading the recovery charge. It by the AAPA at press time. They confirmed the dismal traffic
engenders optimism, said International Air Transport numbers being reported by individual Asia-Pacific airlines for
Association (IATA) director general and CEO, Alexandre de the period.
Juniac, last month. “It shows a phased restart plan is the International passenger numbers had plunged 98.8%
most reasonable approach to recovery. It’s a restart plan by year-on-year, to 368,000, compared with 31.9 million
phase, starting with domestic, then regional then passengers in the same month last year. Average international
intercontinental. It’s not surprising Asia, where the passenger load factor slumped to a historical low of 28.0% for
pandemic started a few weeks before other regions, is paving the month. Available seat capacity declined 94.6% in the
the way for the others,” he said. reported 30 days over April 2019.
It is a view endorsed by Association of Asia Pacific Airlines At the same time, there were signs the worst may be over.
(AAPA) director general, Subhas Menon. “Whilst severe travel Several airlines have announced resumption of some services,
restrictions continue to limit the early restart of aviation both domestic and international, for June and July.
activity, there are some encouraging signs in the market,” he Singapore’s Changi airport and Hong Kong International
said. Airport have opened their doors to transit traffic for the first
“A number of airlines are restoring domestic flights. A time since the crisis began. Domestic flying, already resumed
small number of international flights are still being operated significantly in China, has restarted in India and is increasing
with plans to operate additional services as border restrictions in Korea and Japan.
are progressively relaxed.” But a return to significant long-haul flying remains years
At the same time, Menon said patchy, uncoordinated away, said IATA. Global airline RPKs (revenue passenger
measures across countries, including various screening kilometres) in 2021 could be 32% to 41% lower than in 2019.
protocols and often onerous quarantine requirements, are By 2025 they could still be down 10%.
deterring passengers from flying and slowing the process of IATA chief economist, Brian Pearce, said in late May
restarting aviation. government aid to airlines in various forms, from loans to
“Countries in the Asia-Pacific were the first to encounter wage subsidies and cash injections, was $123 billion, far short
COVID-19 and are the first to witness some stabilization and of the $800 billion plus carriers earned in 2019.
8 / ORIENT AVIATION / JUNE 2020
Government financial aid to airlines is US$123 billion to date,
equal to 14% of 2019 total airline revenues of $838 billion
2019 Revenues ($ billion) Aid promised ($ billion) % of 2019 Revenues
Global $838 $123 14%
North America $264 $66 25%
Europe $207 $30 15%
Asia-Pacific $257 $26 10%
Latin America $38 $0.3 0.8%
Africa and ME $72 $0.8 1.1%
Several Asia-Pacific nations have failed have to be spread over fewer travelers. Investments will be
local airlines in COVID-19 crisis needed to meet our environmental targets. On top of all that,
His analysis laid bare that some Asia-Pacific governments had airlines will need to repay massively increased debts arising
failed to provide sufficient relief to their airlines even though from the financial relief. After surviving the crisis, recovering
the industry is a critical contributor to their economies. to financial health will be the next challenge for many
U.S. carriers had received government aid as high as 25% airlines,” de Juniac said.
of 2019 revenues. European airlines were given 15% of their
2019 revenues. Asia-Pacific carriers received 10%. Airlines in Korean carriers extend restart to regional
India, Thailand, the Philippines, Malaysia, Vietnam and destinations
Indonesia were virtually shunned by their governments. Boosted by government support, South Korean carriers are
Australian airlines received 1.8% in government aid as a leading the return to international and domestic flying.
percentage of their 2019 ticket revenues. Japanese operators on Hanjin-controlled Jin Air is commencing flights from
the other hand, were allocated 22.1% and Korean carriers Incheon Seoul to Bangkok, Hanoi, Taipei, Narita and Osaka
11.6%, respectively, of their revenue last year. The best this month, two months after the LCC suspended the routes
supported airline industry was in Singapore, where the airline when passenger traffic collapsed. Jin Air said the decision was
group received 84.2% of its 2019 revenues in government aid. made after considering demand from Korean residents living
“Many governments have stepped up with financial aid abroad, students and business travelers and increased air cargo
packages that provide a bridge over this most difficult volume to the destinations.
situation, including cash to avoid bankruptcies,” said de Korean Air (KAL) said it was resuming some services to
Juniac. “Where governments have not responded fast enough preemptively react to an increase in passenger numbers as the
or with limited funds, we have seen bankruptcies. Examples pandemic spread slows. It will restart 13 of the 110
include Australia, Italy, Thailand, Turkey and the UK. international routes it had operated pre-COVID-19. Next
Connectivity will be important to the recovery. month, up to 32 international routes connecting Seoul to
“Meaningful financial aid to airlines makes economic Washington D.C., Seattle, Amsterdam, Frankfurt, Kuala
sense. It will ensure they are ready to provide job supporting Lumpur, Yangon, Hanoi and Singapore will be available.
connectivity as economies re-open. Rival Asiana Airlines will operate 27 of its 73 international
“For those governments that have not yet acted, the routes from June, aimed mainly to recover routes to China
message is helping airlines raise equity levels with a focus on including Beijing, Shanghai, Nanjing and Qingdao.
grants and subsidies will place them in a stronger position The major Gulf carriers, with their heavy reliance on
for the recovery. transit traffic, are rapidly restoring their global networks. At
“A tough future is ahead of us. Post-pandemic control the turn of the month, Emirates announced more flights will
measures will make operations more costly. Fixed costs will become available between Dubai and Amsterdam, Bahrain,
JUNE 2020 / ORIENT AVIATION / 9
MAIN STORY
Brisbane, Chicago, Copenhagen, Dublin, Frankfurt, Kuala
Global industry debt to hit Lumpur, Jakarta, London Heathrow, Madrid, Manila,
US$550 billion this year Melbourne, Milan, Paris, Perth, Singapore and Vienna from
June 15. Frequencies to Hong Kong are to be increased three a
IATA’s analysis showed the airline industry’s global week. Travelers from the Asia-Pacific can transit through the
debt could rise to $550 billion by year-end, a $120 billion, Emirate to Europe and The Americas and bookings to
or 28% increase, over January 2020. The $67 billion in Copenhagen, Manchester, Seoul and Taipei soon will be
new debt was made up of government loans ($50 billion),
opened. Travellers must meet all immigration entry
deferred taxes ($5 billion) and loan guarantees ($12 billion).
Approximately $52 billion of the support funding came
requirements of their destination countries.
from commercial sources, including commercial loans Qatar Airways said the gradual rebuilding of its network
($23 billion), capital market debt ($18 billion), debt from is continuing with restoration of flights from Doha to
new operating leases ($5 billion) and access to existing Bangkok. Barcelona, Islamabad, Karachi, Lahore, Peshawar,
credit facilities ($6 billion). Singapore and Vienna and services to Berlin, Dar es Salaam,
“More than half of the relief provided by governments New York, Tunis and Venice to soon follow. Flights from
creates new liabilities. Less than 10% will add to airline Doha to Dublin, Milan and Rome are to be increased or
equity. It changes the financial picture of the industry returned to daily.
completely. Paying off the debt owed to governments and Singapore and Hong Kong have been accepting transit
private lenders will mean the crisis will last a lot longer
passengers from June 1, but their feed is limited by the fact
than the time it takes for passenger demand to recover,”
said de Juniac.
Australian and New Zealand carriers only are operating
domestic networks and have not restarted international flights. ■
Asia-Pacific carriers are gradually welcoming
passengers back on board while scrambling
for funds to remain in the air
As they restart flying, airlines have launched an education campaign to convince
regulators that filling every seat on aircraft will not transmit COVID-19. Not everybody
is listening with some airlines open to keeping passengers happy by leaving the middle
seats of aircraft empty.
T
he International Civil Aviation Organisation Takeoff advocates a phased restart to aviation shaped by
(ICAO) has unveiled Takeoff, its comprehensive risk-based measures that “will mitigate the risk of
blueprint for risk-based temporary measures for transmission of COVID-19 during the travel process”.
air transport operations during COVID-19 and “This layering of measures should give travelers and crew
the restarting of global flying. The next bit, the confidence they need to fly again. We are committed to
persuading 192 countries and their airlines to adopt a working with our partners to continuously improve these
universal set of guidelines to overcome passenger fears of measures as medical science, technology and the pandemic
contracting COVID-19 inflight, will be the hard part evolve,” de Junaic said.
especially as the guidelines are not mandatory. Takeoff is one element of the work of ICAO’s COVID-19
The International Air Transport Association (IATA) Aviation Recovery Task force (CART). CART’s team of
strongly supports Takeoff, but is concerned a worldwide aviation experts also urged governments “to avoid a global
patchwork of regulations will be introduced to the industry patchwork of incompatible health safety measures”.
that will be onerous in application for carriers and irritating Whatever happens, argues the airline body as well as
and inconvenient for passengers. The global airline body has Airports Council International (ACI) World, governments
urged governments to quickly and unilaterally adopt the new must ensure measures introduced for their operations in the
global framework for restoration of air connectivity. wake of COVID-19 are supported by scientific evidence and
Takeoff – ICAO Council approved Guidance for Air are consistent across the world.
Travel through the COVID-19 Public Health Crisis – has CART is working with States and regional bodies on the
delivered an important victory for airlines in the debate about industry’s recovery from the coronavirus and is informed by
the empty middle seat onboard. Takeoff said there should be advice from the World Health Organisation and supported
“physical distancing to the extent feasible and by IATA, Airports Council International, the Civil Air
implementation of adequate risk-based measures where Navigation Services Organisation and the International
distancing is not feasible, for example aircraft cabins”. Coordinating Council of Aerospace Industries Associations.
10 / ORIENT AVIATION / JUNE 2020Critical to the return to the “new normal” of with on the ground. Given the low
flying will be social distancing on onboard, transmission risk on board, we don’t
including empty middle seats. Empty middle believe it [empty middle seat] is
seats reduce the maximum load factor for a necessary in order to be safe.”
flight to 62%, well below the average industry Association of Asia Pacific Airlines
breakeven load factor of 77%. (AAPA) director general, Subhas Menon,
With fewer seats to sell, unit costs would said: “Departure screening procedures to
rise sharply. Compared with 2019, airfares mitigate the spread of COVID-19 should
would need to increase by 43% to 54% preferably be applied before travellers
depending on the region to break even. board their flights. Other measures such as
Already, in India, the Directorate leaving the middle seat empty have been
General of Civil Aviation (DGCA) has ordered domestic suggested, but would make air travel much
and international airlines to keep the middle seat empty if more costly without any meaningful public benefit in terms
passenger load factor and capacity allow it. Members of the of risk reduction.”
same family can sit together but free masks and face coverings Even before any globally harmonized rules have been
must be worn onboard, the DGCA said. If a seat between decided, individual airlines are introducing their own health
two passengers is occupied, the person in the seat must be safety regulations to convince passengers it will be safe to
provided with additional safety garments such as a travel once flights resume in a meaningful way.
“wraparound” gown. Leading Asia-Pacific carriers, All Nippon Airways,
IATA’s medical advisor, New Zealander, Dr David Cathay Pacific Airways, Qantas Airways and Singapore
Powell, said the association’s stance against leaving the Airlines have developed detailed procedures, digitally
middle seat empty inflight is based on scientific evidence. accessed if preferred, to inform passengers of new travel
Powell, a specialist occupational physician who was chief procedures while COVID-19 remains a threat to public
medical officer of Air New Zealand for 12 years, said the air health.
circulated on passenger jets was not a cause for concern. Generally similar, they included deeper disinfecting and
Recycled air on modern aircraft is treated by the same cleaning of aircraft cabins, compulsory face masks and health
filtering system used in operating theatres, High Efficiency self-declarations. ANA has gone as far as warning that anyone
Particulate Air (HEPA). Dr Powell also pointed out air in an without a mask may be refused boarding.
aircraft cabin does not flow horizontally along the cabin but In the meantime, IATA is strongly urging governments
vertically, from ceiling to floor, again reducing the chance of to find alternatives to maintaining or introducing arrival
germs being spread. quarantine measures as part of post-pandemic travel
Dr Powell is supported by Qantas Group medical restrictions. An April survey it conducted showed 86% of
director, Dr Ian Hosegood, who said data showed the risk of travelers were somewhat or very concerned about being
catching the coronavirus on an aircraft was already extremely quarantined while traveling and 69% of recent travelers
low. “That’s due to a combination of factors, including the would not consider travelling if it involved a 14-day
cabin air filtration system, the fact people don’t sit quarantine period.
face-to-face and the high backs of aircraft seats acting as a “We need a solution for safe travel that addresses two
physical barrier,” Dr Hosegood said. challenges. It must give passengers confidence to travel safely
“As far as the virus goes, an aircraft cabin is a very and without undue hassle. And it must give governments
different environment to other forms of public transport. confidence that they are protected from importing the virus,”
Social distancing on an aircraft is not practical compared the IATA boss said. ■
ICAO’s commonsense COVID-19 management measures
The International Civil Aviation Organisation (ICAO) has produced a set of guidelines,
Takeoff, to contain the risk of contracting COVID-19 inflight. Major measures are:
• Wearing of face coverings and masks by passengers and aviation workers
• Routine sanitation and disinfection of all areas with potential for human contact and
transmission
• Health screening, which could include pre and post flights, self-declarations, temperature
screening and visual observation “conducted by health professionals”
• Contact tracing for passengers and aviation employees with updated contact information
requested in the self-declaration form and interaction between passengers and governments
be done through government portals.
• Passenger health declarations be in line with relevant health authorities and electronic
tools be encouraged for declarations
• Testing if and when real-time, rapid and reliable testing becomes available
JUNE 2020 / ORIENT AVIATION / 11NEWS BACKGROUNDER
No silver linings for India’s
airlines beyond the virus
By Anjuli Bhargava
T
his year opened on a stable senior leadership ensured throughout 2019, buoyed by airlines sought support from the
grim note for India’s the carrier stayed more or less on Jet’s collapse. But none of Indian government, petitions
airlines. As the Indian course. them was able to strengthen that so far have failed to result in
economy slowed in The year also was not their balance sheets, despite any targeted cash relief for the
2019, there was a particularly kind to the big reasonable expansion, due to industry.
sharp drop in passenger traffic elephant in the room - Air heavy pressure on fares and Meanwhile, the problems
for the year. After expanding by India. The airline’s net loss for lower traffic as a result of the faced by different airlines
double digits for many years, 2018-2019 was Rs 8,400 crore economic slowdown. Margins continued to grow with the
2019 was the first year of the (US$111.11 million) against total remained wafer thin and most passing weeks.
previous decade when air traffic revenue of Rs 26,400 crore. of the country’s carriers were Perhaps the biggest
dropped into single figures. The Throughout the year, the airline unable to add to their surpluses. challenge faced by the Indian
only silver lining for many of the had 20 to 25 aircraft on the It was against this shaky authorities is how to keep Air
airlines was the closure of Jet ground. At some stage during backdrop that India’s airlines India’s head above water in the
Airways in April 2019, which 2018 and after Jet’s demise, Air faced the unforeseen tsunami present circumstances of global
provided some reprieve for all India had hoped to lower its that 2020 had in store for aviation. The big elephant in the
other carriers as the slots vacated losses for the year and even post them: a complete shut down room has now become a noose
by Jet were filled by the rest. a small operating profit. It did of operations at midnight on around the government’s neck.
By January, airlines were not happen. At the same time, March 24, 2020. Faced with The airline needs almost Rs
hurting from the lower traffic government efforts to sell off its parking 670 aircraft (40 aircraft 10,000 crore to survive the next
numbers from April to December flag carrier made no progress. are expected to be added to few months, according to Center
2019. So the last thing they India’s other major carriers, the country’s fleet in the next for Asia Pacific Aviation (CAPA)
needed was the COVID-19 Vistara, GoAir, SpiceJet and Air two years), while paying more India estimates and by analysts in
outbreak that brought flights to Asia India continued to expand than 70,000 employees, the the sector.
a halt by the end of March. This situation has developed
Last year was challenging for as pressure on government
many individual Indian carriers in finances from the COVID-19
spite of Jet’s collapse. In June-July pandemic has been more
2019, the country’s largest and severe. There is debate about a
most successful airline, IndiGo, government using its funds to
was wracked by an internal fend keep an airline going rather than
between its founders, a spat ugly supplying essentials and food
enough to batter its stock and to a large part of the country’s
distract management attention population, many who run the
for a while, but a reasonably risk of starvation.
12 / ORIENT AVIATION / JUNE 2020Air India the age of the top team reflects
The Air India sale, which has the inability of Indian carriers to
seen one failure in the BJP-led find the right homegrown talent
NDA’s tenure, is also one of the even today.
“spotlight” sales in the country’s The other senior team
disinvestment program. The members include president
government has upped the and chief operating officer,
ante for the sale by putting key Wolfgang Prock-Schauer, and
people in charge. According to a chief commercial officer, William
former aviation secretary: ”This Boulter. The Indian senior
government has staked a lot on management is a bit younger,
the sale by putting the country’s running the show. “While the behalf of the government and including a recently appointed
second most important person father-son duo are keen to earn a paid from the tax payer purse. chief financial officer, Aditya
in charge of the sale, the home return on their investment, time It also has introduced pay cuts Pande, chief strategy and revenue
minister Amit Shah”. If the sale and effort, neither is particularly across grades. Industry observers officer, Sanjay Kumar, who
fails despite Mr Shah being in the interested in running the airline”, however feel SpiceJet’s chances recently returned to the airline
cockpit, “the government will says a former CEO of the carrier, of survival are higher than after a short stint with AirAsia
have egg all over its face”. on condition of anonymity. With GoAir’s, mainly on account of the India and Sanjeev Ramdas, EVP,
In the absence of any CEOs and HR heads of the airline committed of the management. customer services, among a few
buyers, the government has changing with unerring regularity, others. IndiGo had put in place
been exerting pressure on Tata the airline is rudderless. In the IndiGo a robust international expansion
group – which runs both Vistara lockdown it stopped paying While IndiGo remains the plan pre-COVID, which will now
and AirAsia India - to take it over. virtually all employees barring a strongest player in terms of its have to be revised dramatically.
In fact this pressure has subtly few engineers required to keep its deeper pockets and steadier
been applied since 2014, when aircraft in running condition. management than most of Vistara and AirAsia India
the then minister of state for civil its rivals, the airline has had The two Tata ventures in the
aviation, Jayant Sinha, met Tata SpiceJet the worst two years since its aviation space operate as chalk
senior management in Mumbai In a relentless pursuit of growth inception. The spat that erupted and cheese although they often
and suggested they take charge post the demise of Jet Airways, between the airline’s two chief end up competing in a domestic
of the national carrier. SpiceJet’s Ajay Singh finds himself corporate pilots – Rahul Bhatia market that remains entirely fare
with more aircraft than ever. and its U.S. promoter, Rakesh driven. Within a few weeks of
GoAir SpiceJet has 112 planes in its fleet. Gangwal – continues to eat into lockdown, rumours were rife
On May 25, when all Indian The airline is living hand to mouth the mind space of the founders that the Tatas may abandon the
airlines resumed operations, with cash balances running at all at a time when international rockier of the two ships – AirAsia
Mumbai-headquartered GoAir time lows. The airline also had its arbitration is underway. In India – a venture that has
decided to adopt a wait and own share of problems with the addition, the airline lost one of appeared jinxed from the word
watch policy. The airline has MAX grounding pre-pandemic. its two wings so to speak, as go. Both airlines started flights on
been reeling from its own woes Many argue the turnaround Gangwal remains distanced from May 25, the day the resumption
for a while. Problems with the king is in serious trouble this the running of the carrier. began and had also introduced
A320neo continued to persist time around and he too will find The airline is in the hands of graded pay cuts. Analysts have
as did its eternal difficulty of it hard to pull out rabbits from a competent but ageing team. bet their money on Vistara over
retaining talent. his magician’s hat. During the CEO Rono Datta, primarily is a full AirAsia India in terms of survival
But analysts feel that GoAir’s lockdown and post it, SpiceJet service airline expert, with little and success, based almost
crisis runs deeper with the has been relying more and more hands on experience with low- entirely on the maxim slow and
promoters barely interested in on cargo operations, some on fare carriers. In fact many argue steady wins the race. ■
JUNE 2020 / ORIENT AVIATION / 13NEWS BACKGROUNDER
Strength of numbers
Is there a masterplan for carriers to successfully navigate the COVID-19 crisis? In a
frank briefing last month, Qantas Group CEO, Alan Joyce, outlined the company’s
strategy to return to corporate health post the pandemic. Associate editor and chief
correspondent, Tom Ballantyne, reports.
I
n January, when the having a schedule in place by
coronavirus pandemic began September, she said.
to spread beyond China, the At his webinar briefing in
International Air Transport May, Joyce said the group’s
Association (IATA) quickly cash balance was in a very
warned that most airlines strong position. “Under the
would run out of cash within circumstances, we absolutely
two months. For many, that have to be. We don’t know how
has become reality. Without long domestic and international
government-backed aid or loans travel restrictions will last or
the industry would be littered what demand will look like as
with casualties. For some airlines, they are gradually lifted. Our
however, a solid balance sheet ability to withstand this crisis
and clever planning bodes and its aftermath is only possible
well for their future beyond because we are tapping into a
COVID-19. balance sheet that has taken
An example is the Qantas years to build,” he said.
Group. Although CEO, Alan Qantas is operating 5% of
Joyce, said carriers under the its pre-crisis domestic passenger
company’s umbrella would network and around 1% of its
be burning through US$25.8 international schedule, based on
million a week until travel Available Seat Kilometres (ASK).
demand picked up, he added At press time it had risen to 15%.
the group could sustain the cash As COVID-19 spread, 25,000 of
drain until December next year. the group’s 30,000 employees
Joyce’s forecast also included were stood down without pay.
an optimistic assessment that At the start of the crisis,
domestic flying could gradually We see the potential for operating the group quickly wound down
resume from July given
40%-50% of our pre-COVID-19 [domestic] cash burn, including a pause on
Australia’s success in combating virtually all capital and operating
the virus outbreak. network in July if demand is there. expenditure and a revision of
Joyce also sees an opportunity As long as all states are comfortable agreements with key suppliers.
with New Zealand if both Joyce said a strong balance
governments are comfortable
with opening their borders sheet and its aircraft assets had
with a proposed travel bubble. Alan Joyce strengthened its bottom line.
“It’s a very big tourism market. Qantas Group CEO In March, it raised $678 million
It’s the second largest tourism against seven wholly-owned
market into Australia and the we see substantial operations Last month, New Zealand prime B787-9s. In May, it secured
largest tourism market into New into the U.S. and into Europe the minister, Jacinda Ardern, said another $355 million in funding
Zealand,” he said. way things are at the moment.” a cross-Tasman committee against three B787-9s.
“It would be great if we got An approved travel bubble was working to open air travel Additionally, the group has
that by the end of the year, but between Australia and New between the two countries. A $1.74 billion in unencumbered
with the rest of the operation it Zealand could be closer to plan is expected to be completed aircraft assets that can be used
could be well into 2021 before fruition than Joyce thought. this month with the aim of to raise more funds if required.
14 / ORIENT AVIATION / JUNE 2020the end of this year, will not fly
Pre-COVID-1, two-thirds of all Qantas again. The future of its A380
fleet also is being assessed.
frequent flyer points were earned on There will be a sweeping review
the ground, meaning opportunities of the entire international
for engaging the program’s 13 million fleet as the industry enters the
post-coronavirus period.
members remained high despite Like everyone else, Qantas
the pause in flying activity has no idea when the crisis New Zealand
will end, but it is in a better foreign minister says
With net debt in the middle Qantas Freight has position than most of its rivals to border closures in
of the target range, at $3.75 experienced high volume and overcome the global pandemic. Australia delaying
billion, Qantas has no financial strong revenue inflow in March “Australia has done an amazing “travel bubble”
covenants on any existing or new and April. Its 12 dedicated job of flattening the curve and New Zealand foreign
debt facilities and no significant freighters are heavily utilized we’re optimistic domestic travel minister, Winston Peters,
debt maturities until June 2021. and passenger A330s and 787s will start returning earlier than w a n t s Au s t r alia n s t at e s
At close of business for May have been used to move cargo first thought, but we clearly keeping their borders closed
2020, total short-term liquidity to Shanghai, Hong Kong and won’t be back to pre-coronavirus to change their minds so the
stood at $2.3 billion, including a Tokyo, facilitating the export of levels anytime soon,” said Joyce. proposed trans-Tasman travel
bubble can go ahead.
$1 billion undrawn facility. Australian produce and import of “With the possible exception
“Basically, we are asking
medical supplies. The domestic of New Zealand, international
for the handbrake to come off,
Fuel hedging positions freighter network has seen high travel demand could take years but it has to be organized out
revised volumes, due to e-commerce, to return to what it was. of Australia,“said Peters, who
Qantas Group’s fuel requirements with demand above the peak “We are expecting demand also is the country’s deputy
are 100% hedged for most of levels normally associated with recovery to be gradual. It will be prime minister.
fiscal year 2020. The strategy Christmas. some time before total demand Au s t r alia’s isla n d o f
delivered significant benefits in Qantas has told Airbus and reaches pre-crisis levels. That Tasmania, where tourism is a
the first half of the year, but has Boeing it won’t accept new means we need to think about major source of employment,
resulted in hedging losses as fuel capacity until the crisis is over. what the Qantas Group should has been a keen supporter
of a Tasmania-New Zealand
consumption dropped and oil Three B787-9s, due to arrive at look like on the other side of
travel bubble, but some other
prices fell in recent months. the airline this year, have been this crisis to succeed. Fleet,
Australian states are keeping
In early April, the group deferred. Eighteen 18 A320neos, network and capital expenditure their borders shut.
closed out its over-hedged earmarked for LCC offshoot, will have to be reviewed, but N e w Z e ala n d p r im e
position to September 2020. Jetstar, and previously scheduled our commitment to serve minister, Jacinda Ardern, said
“This avoided the precipitous for arrival at Qantas between communities across Australia will in early June “Australia must
falls in oil prices that occurred August this year and 2022, are to not change.” decide whether the proposed
in the second half of April and be delayed. What may change, however, travel bubble would be with
significantly lowered the group’s is the competitive landscape in some states and New Zealand
exposure to further hedging Project Sunrise on hold Australia. Unless a deal intended or if all internal restrictions
had to be lifted first”.
losses,” Qantas said. Twelve A350s, earmarked to revitalize Virgin Australia is
“We have said it is for
The group’s remaining Brent for Qantas’ ambitious Project derailed in coming weeks, the
Australia to determine. We
crude oil hedging, to September Sunrise – non-stop flights from rival carrier to Qantas will again are not necessarily here
2020, is in outright options with Sydney to London and New be snapping at the heels of a determining it has to be
no risk of more hedge losses. York – are in limbo. “We do think dominant Qantas. country-wide,” she said.
The cash impact of all foreign there is huge potential for Project Elsewhere, in a surprise Recommendations for
exchange and fuel hedging Sunrise, but the time is not right, announcement, regional the introduction of the travel
between now and the end of given the impact COVID-19 has turboprop operator, REX, said it bubble bet ween the t wo
September 2020 is a US$93.6 had on world travel. But there planned to lease 10 narrow-body Pacific nations have been
million cash outflow,” said the still is a good business case for it jets - either B737s or A320s – to submitted to both govern-
ments, with forecasts it could
company in a statement. and a good opportunity,” Joyce launch flights between the
be operating from September.
Another asset for the group said. country’s capital cities, probably
The travel bubble would
is its loyalty program. It is a He has made it clear “the early in 2021. If REX receives remove the requirement for
major contributor to profitability, Qantas of 2021 and 2022 will not approval to extend its domestic quarantine after qualified
with external billings flowing be the Qantas of 2019”. While network, Qantas will have two Australian and New Zealand
from Frequent Flyer partners final decisions have yet to be local rivals instead of one. travelers arrive in each other’s
that include financial services made, it is likely it’s remaining But right now, its biggest countries.
and retailers. five B747s, due to be retired at competitor is COVID-19. ■
JUNE 2020 / ORIENT AVIATION / 15NEWS BACKGROUNDER
THAI hauled back from
financial precipice
It’s what you do to avoid bankruptcy when you are on the
verge of bankruptcy. Thai Airways International (THAI) could
have been the second major victim of the COVID-19 crisis in
the Asia-Pacific, but it refused to raise the white flag. Associate
editor and chief correspondent, Tom Ballantyne, reports. that caused delays and often
a readjustment of plans. Also
inhibiting recovery efforts
L
was THAI’s board of directors
awyers representing Thai go into liquidation or be declared “It was a difficult decision,” and management who were
Airways International bankrupt,” he declared. Thailand’s prime minister, Prayut heavily weighted towards air
(THAI) will make their He was right - in a manner of Chan-o-cha, told reporters at a force officers inexperienced in
first appearance before speaking. news briefing last month. commercial airline operations.
Thailand’s Bankruptcy Shortly afterwards, the The plan replaced THAI’s Prayut said THAI would be
Court on August 17 to plead the country’s cabinet approved a request for a government protected by the courts and “a
carrier’s case for rehabilitation. reform plan being implemented guaranteed loan of US$1.5 billion professional” would be appointed
If the application is approved, “through the business to help it survive COVID-19. to oversee the restructuring.
the high profile team charged reorganization chapter under “The government has The airline’s 21,000 employees
with keeping THAI alive could the auspices of the Central reviewed all dimensions. would keep their jobs, he added,
take up a to a year to formulate a Bankruptcy Court of Thailand and We decided to petition for despite overstaffing at the carrier
transformation plan of the airline, the Bankruptcy Act”, Chakkrit restructuring and not let Thai clearly being an issue. THAI has 75
a process already attempted, explained. Officially, it is not Airways go bankrupt. The airline aircraft while Singapore Airlines,
without success, several times in actually bankruptcy. Unofficially, it will continue to operate,” Prayut for example, has 136 aircraft and
recent decades. showed just how close THAI came said. only 15,000 staff.
THAI’s legal advisor, Kitipong to going under. THAI was in trouble long Chakkrit said: “This is an
Urapeepatanapong, told media In essence, the solution is before COVID-19 imploded the important step for THAI to
in a briefing at press time it could similar to regulations in the U.S., global airline industry. Majority- change and become a stronger
take five months to a year to which allow a financially barren owned by Thailand’s Finance and more sustainable entity.
draw up the turnaround plan airline to enter Chapter 11, a Ministry, it has posted losses every THAI expressed its gratitude to
and from five to seven years to bankruptcy clause that permits year since 2012, except for 2016. all concerned in every sector
implement it. a carrier to continue operating Last year it lost US$377.3 of the economy, shareholders,
Focuses for reform are major while protecting it from creditors million and is now carrying $3 partners, alliances, customers and
debt reconstruction, sweeping as it attempts recovery. billion in debt. Its debt-to-equity in particular all THAI passengers
cost reductions, transformation In THAI’s case, under local ratio rose to 21 times in 2019 from for their continued support and
of the company’s operating bankruptcy laws, it will be able 12 in 2018 and 7.8 in 2017. Over confidence in the airline. THAI will
structure and culture, flight to strive for its reform objectives the years, several rehabilitation resume full operations once the
network and fleet review and “even more effectively step by plans have failed to turn around COVID-19 situation subsides.”
identification of new revenue step as required by the law”, the THAI’s performance. The office of In the meantime, the Civil
sources. prime minister said. the president has seen a revolving Aviation Authority of Thailand
Before the Bankruptcy Court “It will provide equitable door of aspirants who fell out (CAAT) last month announced
option for THAI was announced, protection to all relevant of favour with the government the ban on international flights
rumours had been circulating for stakeholders while THAI conducts especially when they delivered into Thailand would be extended
months that THAI was about to its normal business operations news the country’s leadership did to June 30 at the earliest, with
go bankrupt and the speculation including passenger and cargo not want to hear. more delays possible if the crisis
extended beyond Thailand. transportation. The business will Making significant capital persisted. At present, THAI can
The carrier’s acting be operated in parallel with the decisions, such as fleet renewal, operate some domestic flights,
president, Chakkrit Parapuntakul, reform plan to increase efficiency were hampered because but internationally it is limited to
was quick to respond. “Thai and improve product and service clearance required the approval of repatriation flights bringing Thais
Airways will not be dissolved or quality,” THAI said. several government committees home from abroad. ■
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