SPICEJET’S GO-GETTER BOSS - Orient Aviation

New blow to Hong Kong as Wuhan virus spreads beyond ChinaJust when it was thought thingscould not get any worse for HongKong’s decimated travel industry,they did.At press time, the HongKong Special AdministrativeRegion (HKSAR) had closed itsborders between Hong Kongand China except at Hong KongInternational Airport, the HongKong-Macau- Zhuhai Bridge,the Shenzhen Bay-Hong Kongcrossing and Kai Tak Cruiseand Ocean terminals. Cargoclearance procedures are notaffected.Visitors to Hong Kong fromthe Mainland have dropped by91% since January, the HKSARgovernment has reported.Hong Kong has recordedits first death from the virus.Within the same 24 hours,medical experts warned the virusappeared to be spreading from“invisible sources” as two HongKong patients confirmed with thevirus had not travelled to China.Jitters have spread acrossthe HKSAR and the Mainlandas a result of the outbreak.Citizens fear a repeat of SevereAcute Respiratory Syndrome(SARS), when a Chinese touristcontracted the virus on theMainland and introduced itunknowingly into Hong Kong.Panic ensued, restaurants,hotels and airplanes almostemptied and the region’seconomy took a direct hit to itscollective bottom line.This time around lessonslearned from SARS have been putinto force quickly, including moreisolation wards, one new hospitaldedicated to treatment of victimsof novel coronavirus and thesetting up of quarantine camps inHong Kong and on the Mainlandfor patients diagnosed with thedisease along with their families.Cathay Pacific Airways hasannounced it would graduallyreduce its services betweenHong Kong and China by90% in its most recent profitannouncement to the Hong KongStock Exchange. Cathay PacificAirways regional airline, CathayDragon, has radically cut back itsnetwork into China.The airline group saidthe cancellations would beimplemented “in view of thenovel coronavirus outbreak andthe consequential significantdrop in market demand fortheir flights”. It described thereductions as temporary.Analyst Jefferies said“inevitably Hong Kong couldface downside pressures to theeconomy after eight months ofpolitical protests have forcedit into recession”. The listedtransport sector – airlines,airports and railways – would bethe most impacted followed bythe retail and hospitality sectors,Jefferies said.China’s Zhong Nanshan,a specialist in the treatmentof SARS and a director ofChina’s State Key Laboratory ofRespiratory Disease, said in lateJanuary the key to controllingthe spread of the disease wasto prevent the emergenceof super-spreaders, infectedpatients who quickly spread thevirus, especially among medicalworkers.Airports across theAsia-Pacific have strengthenedtheir detection systems fortravelers from China. All carrierswith networks into Mainlandcities have radically decreasedfrequencies and capacity.Several major industryevents in the region have beencancelled or cut back as expertsforecast the virus has yet to hit itsoutbreak peak.Before the Wuhan crisisbegan to unfold, Hong KongInternational Airport (HKIA)reported its biggest passengerdecline in a decade last year.It processed 71.53 milliontravelers, a decline of 3.2 millionover the previous 12 months.Travelers, particularly fromChina, had turned their backson the HKSAR in the last monthsof 2019 as anti-government andanti-Mainland protests did notlet up.At the time, Cathay Pacificsaid it would “reluctantly” reduceits overall seat capacity in 2020by 1.4% year-on-year “in lightof the immediate commercialchallenges we are facing”. It hadplanned growth of 3.1% in 2020.For HKIA, the 4.2% fallin passengers was the largestdecline since the global financialcrisis caused a 5% drop in 2009.Despite the present situation,HKIA remains the world’s busiestair cargo hub. It handled 4.8million tonnes of air freight in2019, down 6.1% on 2018. “Wewent through a challenging yearin 2019,” HKIA executive directorof airport operations, VivienCheung Kar-fay, said. By staffwriters. FEBRUARY 2020/ORIENT AVIATION/ 7

NEWSBACKGROUNDERVingroup tycoon scraps new carrierciting competitive pressuresThe launch of airlineVinpearl Air was oneof the most anticipatedevents of Vietnam’s2020 aviation calendar,but it is not to be.Last month, Vingroup, ownedby the country’s richest man,Pham Nhat Vuong, announcedthe establishment of Vinpearl,Vietnam’s sixth airline, had beencancelled. The conglomeratesaid it intended to focus on itsinvestments in the electric vehicleand communications technologysectors.A company statementannounced the shock decision. Itsaid it had informed the Ministryof Transport of its withdrawalfrom the process of launching theairline, which had been scheduledfor July.It had been widely reportedVingroup would invest US 200million in a Hanoi-based Vinpearl,8 / ORIENT AVIATION / FEBRUARY 2020add 2,000 jobs to the nationalaviation head count and operate afleet of 30 aircraft by 2024.“Vietnam’s aviation markethas a lot of potential and isdeveloping strongly, but it alsohas large companies already inoperation. Vingroup’s stronginvestment in aviation could leadto an oversupply,” the group’sdeputy chairman and chiefexecutive, Nguyen Viet Quang,said in the statement.Instead the group outlinedambitious plans to concentrateon its US 3.5 billion VinFastcar and scooter business andits recently established Vismartsmartphone company.Vingroup has built theworld’s third largest vehiclemanufacturing plant, VinFast,on an island off Hai Phong andis positioning itself to take onVietnam consumers preferredautomobile marques, Toyota andHonda.It launched an electricscooter, Klara, last November andwill set up a network of chargingand exchange centres across thenation where scooter batteriescan be re-charged or replacedvery cheaply. The first of theservice centres are operating inHanoi and Ho Chi Minh City.

NEWSBACKGROUNDERNimble budget carriersfeed Vietnam’s bull runBy associate editor and chief correspondent, Tom BallantyneVietnam’s airlinesector continuesto boom, withprivately ownedcarriers seizing moremarket share from governmentcontrolled Vietnam Airlines(VNA), the latest Civil AviationAuthority of Vietnam (CAAV)statistics reveal.The full-service flag carrier’smarket share has declined from34.5% 12 months ago to 33.3%in December. Budget JetstarPacific, jointly owned by VNAand Qantas Airways, also lostmarket share with passengertraffic declining from 14.2% to10.6% in 2019. Additionally,another VNA subsidiary, VASCO,experienced a drop in business,to 1.6% from 2% for the year toDecember 31.Meanwhile, private sectorcarriers have continued theirdrive for dominance. Vietjet liftedits market share from 41.2%to 42.2% last year, the CAAVsaid. Start-up Bamboo Airlines,launched in January 2019, hadsecured 12.4% of the marketby year-end. The hybrid carrier’starget is 30% of domestic airtraffic.Vietnam’s aviation industryrecorded growth of 13% in2019, the CAAV said. As a result,the industry is confronting thechallenges other fast-growingaviation markets are experiencing,particularly airport congestion,lack of slots and ATM limitations.Vietnam’s government isfast tracking modernizationand expansion of airports andaviation regulatory reform. LastNovember, a prime minister’sdecree raised the ownershiplimits of foreign investment in theVietnamese air transport industryfrom 30% to 34%, with effectfrom January 1.Vietnam NationalAdministration of Tourism (VNAT)data has reported internationalvisitors to Vietnam have increasedfrom 4.25 million in 2008 to 15.5million in 2018. Domestic touristsrose from 20 million in 2009 to80 million in 2019. In the last tenyears, total revenue from tourismhas climbed more than ten times,from US 2.6 billion in 2008 to 27.1 billion in 2018. The sectoraccounts for 7.8% of Vietnam’sGross Domestic Product (GDP).Business travel has takenoff, which has been a catalystfor airline expansion. Withina decade, the aviation sectorhas expanded by an average of17.4% a year, more than doublethe 7.9% average across Asia,reported the International AirTransport Association (IATA).The CAAV said Vietnameseairlines transported 50 millionpassengers in 2018, five timesmore than in 2008. By DecemberU.S. approves deeper VietnamAirlines-Delta Airlines relationshipThe U.S. Department of Transport (DoT) has authorizedan extended code-share agreement between SkyTeam alliancemembers, Vietnam Airlines and Delta Air Lines.“This decision by DoT again affirms the track record of VietnamAirlines for operational safety, technical excellence and servicequality, further laying the path for flights to the U.S. in the future,”a Vietnam Airlines (VNA) statement said on January 7.In 2010, VNA negotiated a one-way code-share agreementwith Delta Air Lines on 10 international routes to and from theU.S. and ten routes within the U.S. It allowed Vietnam Airlinespassengers to fly to eight U.S. states via the Atlanta-headquarteredcarrier’s Frankfurt and Tokyo hubs.The new agreement means passengers only have to book andfulfill flight formalities once, either with VNA or Delta, for theirentire journeys between the two countries.2018, the country’s aviationsector was being served by 68foreign airlines from 25 countriesand territories and five domesticairlines.In the last ten years, aircraftoperated by local carriersincreased from 60 to 192. In itslatest report, IATA ranks Vietnamas the fifth fastest growingaviation market in the world andthe fastest in Southeast Asia. It isforecast to have a market of 150million passengers a year by 2035.Domestic carriers in the airright now are VNA, Jetstar Pacific,boisterous budget airline Vietjet,Bamboo Airways and VietstarAirlines. The country’s aviationauthorities and industry analystsare confident there is room forplenty more.Vietnam has a populationclose to 100 million. It only needsto look at Thailand to glimpsewhat is possible for its tourismindustry. Despite having 72% ofVietnam’s population, Thailandhas four times more airlines andthree times more internationaltourists than its neighbor.The Thai kingdom has 13scheduled airlines and 10 chartercompanies in operation. Thenumber of airlines operatingin Vietnam is much smallerthan Singapore, Malaysia, ThePhilippines, Cambodia andMyanmar and five times less thanIndonesia.Kite Air, being developed bybig local tourism firm, the ThiênMinh Group, has been approvedand is expected to be flying nextyear, serving domestic routesand international flights throughIndochina, Southeast Asia andNorth Asia.While encouraging newoperators Hanoi also has putsafeguards in place to assuresustainable growth. A new carrieroperating up to 10 aircraft willneed minimum capital, includingownership capital and loans, of 13 million. Those with 11 to 30aircraft will need 26 million. FEBRUARY 2020/ORIENT AVIATION/ 9

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NEWSBACKGROUNDERLong road back for Boeing asMAX grounding drifts into JuneImmediately after newpresident and chief executive,62-year-old David L. Calhoun,moved into the hot seat atBoeing last month, he outlinedplans for rebuilding the company’sflagging fortunes and damagedreputation.In an email on January 13,Calhoun said: “This company hasa tremendous legacy of aerospaceachievement, which is thanks toyour efforts and the contributionsof generations before you. Ihonor that legacy and I appreciateyour tireless commitment. Ialso recognize the learnings,many of them painful, from theexperiences of the last 18 monthsthat you are bringing to the waywe do business.“I see greatness in thiscompany, but I also seeopportunities to be better. Muchbetter. It includes engaging oneanother and our stakeholderswith greater transparency, holdingourselves accountable to thehighest standards of safety andquality and incorporating anoutside-in perspective on whatwe do and how we do it.“In my first few days andweeks as president and CEO, Iwill be listening closely to you,our customers, our partnersand our regulators to ensure weunderstand the expectations ofour stakeholders and are on apath to meeting them. In doingso, we’ll become stronger as acompany and as an industry.”A Boeing director since 2009and board chairman from Octoberto December last year, Calhounhas held senior leadership roles atGE, the private equity BlackstoneGroup and most recently NielsenHoldings. During his 26 years atGE, he led GE Transportation andGE Aircraft Engines.Calhoun’s email said puttingthe MAX back in the air must bethe primary focus of the company.“This includes following the leadof our regulators and workingwith them to ensure they aresatisfied completely with theairplane and our work so we canBoeing boss concedes company’srelationships are damagedNew Boeing president and CEO, David Calhoun, admittedto staff in a January email many stakeholders were rightly disappointed and it was vital to repair these relationships.“We’ll do so through a recommitment to transparency andby meeting and exceeding their expectations. We will listen, seekfeedback and respond appropriately, urgently and respectfully,”he said.continue to meet our customercommitments. We will get it doneand we will get it done right.”Calhoun continued: “Wewill keep taking steps to maintainour supply chain and workforceexpertise so we’re ready torestart production and increaserate safely, smartly and with thehighest standards of quality.“We’ll continue to investin our global workforce andprocesses and technologies toXiamen Airlines plans A321neoorder in blow to BoeingXiamen Airlines, until recently an exclusive Boeing customer,has invited bids from leasing companies to supply it with 10A321neo. Majority-owned by China Southern Airlines, Xiamensaid it was planning for deliveries of the Airbus airplanes fromthe second half of 2021 to 2023. The Mainland airline has beenin talks with Airbus as the Sino/U.S. trade war played out and thegrounding of the MAX continued.The Civil Aviation Administration of China (CAAC) said China’saviation industry reported revenue of US 154.27 billion in 2019,a 5.4% increase over 2018.Commercial airlines operated 600 million passenger flightsand transported 7.52 million tonnes of cargo for the 12 months toDecember 31, increases of 7.9% and 1.9%, respectively.become safer and more efficientas we define the future ofaerospace.“This work includes preparingfor the first CST-100 Starlinercrewed mission, first flights ofthe 777X and 737 MAX 10,expansion of our Global Servicesbusiness and finalization of ourEmbraer partnership. This is ourpath forward. I am excited to bepart of it with you. My sleeves arerolled up. I know yours are too.”Ten days later, Boeingannounced it was informingcustomers and suppliers itestimates the ungrounding ofthe MAX would not begin untilmid-2020.Some U.S. airlines already hadsaid they would not be includingthe MAX in their flight schedulesbefore June.Boeing also has revealedit had notified the U.S. FederalAviation Administration (FAA)about another MAX issueconcerning software that verifieswhether key tracking systemson board the aircraft type areoperating properly.“We are making necessaryupdates and working with the FAAon the submission of this changeand keeping our customers andsuppliers informed,” Boeing said. FEBRUARY 2020 /ORIENT AVIATION/ 11

MAINSTORYTARIFF TRUCEBOOSTS REGION’SFREIGHT PROSPECTSThe U.S./Sino trade deal, signed in January, is easing globaleconomic tensions and boosting business prospects forhard-hit Asia-Pacific air cargo operators. Associate editorand chief correspondent, Tom Ballantyne, reports.New Boeing boss, David Calhoun, needed somegood news when he took charge of the crisis hitaircraft manufacturer last month. He certainlygot it when the U.S. and China reached a trucein their two-year trade war mid-month. Moresurprisingly, as he has been a critic of Boeing, U.S. presidentTrump gave Calhoun and Boeing a shoutout at the trade deal’ssigning ceremony.Calling Boeing “a great company”, he identified Calhounamong guests at the White House announcement of the PhaseOne deal. Calhoun was a board director of the company from2009 and acting chairman of Boeing in the final months of2019, but had only been CEO for a few days before theWashington D. C. reception.Trump said: “He has a very easy company to run. He justtook over Boeing. Where’s David. Stand up David. Let me tellyou it’s not your fault. You just got here. You will straighten itout quickly please.” “We will,” said Calhoun.Under the Phase One agreement, China must buyUS 200 billion additional U.S. goods over two yearscompared with 2017, the year the12 / ORIENT AVIATION / FEBRUARY 2020trade war started. It also must include 78 billion inmanufactured goods such as aircraft.The International Air Transport Association (IATA) toldOrient Aviation the agreement between the U.S. and Chinarepresented a “welcome thawing” in trade relations betweenthe two countries and removes some of the uncertainty thathas weighed upon businesses and financial markets globally.“The Phase One agreement is consistent with that.However, we should not lose sight of the fact a significant levelof trade restrictions remain in place between the twocountries,” IATA said.The question is when and how the new deal will translateinto an order boost not only for airlines but for Boeing. TheU.S. manufacturer has significant businesses in China rangingfrom training and maintenance to manufacturing and aircraftcompletion.Boeing has delivered nearly 1,600 planes to Chinesecarriers and has scores of unfilled orders for aircraft, includingB737 MAXs.The Phase One agreement preserves the bulk of the tariffsthe U.S. president has placed on 360 billion of Chinesegoods. It retains the option of additional punishment if Beijingdoes not live up to the deal.China’s leader, Xi Jinping, conveyed to Trump the dealwas “beneficial to China, the U.S. and the world”. Xi said itshowed the two countries, “based on equality and mutualrespect, through dialogue and consultations”, could findproper and effective solutions to problems.Trump declared at the White House: “Today we take amomentous step, one that has never been taken with Chinatowards a future of fair and reciprocal trade with China.Together we are righting the wrongs of the past.”For Asian airlines the deal could improve consumerconfidence and re-boot Asia-Pacific air cargo, which isresponsible for carrying 35% of the world’s air freight traffic.The latest IATA data, for November, revealed demand

measured in freight tonne kilometers (FTKs) decreased by1.1% for the month compared with the same period in 2018.The figures marked the thirteenth consecutive month ofyear-on-year declines in air freight volumes. For Asia-Pacificairlines the news was worse. Air cargo custom contracted 3.7%for the month over November 2018, the sharpest drop infreight business of any region in the world for the month.The U.S./Sino trade war cut demand between the largeAsia-North America market by 6.5% year-on-year in October,the latest available data shows.It was a “big disappointment” considering the fourthquarter typically is the peak of the air cargo cycle, said IATAdirector general, Alexandre de Juniac, when the figures werereleased. Looking forward, signs of a thawing in U.S.-Chinatrade tensions were good news, he added, but cautionedtrading conditions remained “very challenging”.While the Phase One deal is a breakthrough, it is by nomeans the end of the matter. It halves tariff rates on 120billion worth of goods, but most of the higher duties remain inplace.Economists have calculated the trade dispute has costAmerican companies and consumers more than 40 billion, afigure that does not attempt to measure lost business fromretaliatory action. U.S. manufacturers exposed to tariffs havebeen hurt, with the dispute shaving 0.3% off U.S. economicgrowth and reducing household income by an average of 580a year since 2018.The U.S. Federal Reserve estimated China’s economy hastaken a 0.25% hit, as U.S. demand for its goods fell about athird. Analysts said it was unlikely the new deal would produc

65.6220.7877 Thai government consolidates board control at flag carrier As expected, air chief marshal Chaiyapruk Didyasarin, the acting chairman of Thai Airways International (THAI), was formally appointed chairman last month. Didyasarin, 62, an aeronautical engineer and a graduate of the Royal Thai Air Force Academy has held numerous