What's Happening Now? -February 2012

Asia’s largest aerospace show-Singapore Airshow 2012 has just drawn their curtains. As many industry experts had predicted, due to the European financial crisis, not many airlines are willing to commit any further orders. As the European crisis keeps worsening, it seems to me that this year won’t be a very good year for most European carriers. Star Alliance member Spanair and Oneworld member Malev Hungarian Airlines have ceased their operation. While there are 3 other airlines around Europe were forced to stop flying. Carriers across Europe like TAROM, LOT Polish Airlines, JAT Airways, TAP Portugal are now finding strategic investors as these carrier struggle to survive in the current market. Competition from low-cost carrier especially Ryanair and easyjet, high fuel cost are part of the causes. Governments across Europe had pumped in lots of money to make these carriers flying. But based on the current situation in Europe, it doesn’t allow the government to do that anymore. Instead, finding a suitable investor in order to ensure long-term survival and a brighter future. Recently, Etihad Airways of UAE just finish acquired a 40% stake at Germany’s second largest carrier-Air Berlin. Turkish Airlines and Qatar Airways are rumoured to be investors that are interested to support these ailing carriers.

During the Singapore Airshow, Lion Air of Indonesia confirmed an order of 380 planes that they announced last year with Boeing, making this the largest order in terms of aircraft ordered as well the cost of the order. The deal included a purchase of 230 aircraft and a option for a further 150 more planes. Among these 230 aircraft, 201 will be the yet-developed Boeing 737 MAX 9, 29 would be the Boeing 737-900ER. Lion Air has always been a great customer for Boeing. The airline was the launch customer for the Boeing 737-900ER and currently operated 57 of it with an order of 119 more(Excluding the new order). Currently, the airline operate a fleet of 71 aircraft with plans to operate medium and long-haul travel in 2013 to compete with likes of Scoot, JetStar and Air Asia X. Not only Lion Air place an order for aircraft. Indonesia’s national carrier Garuda Indonesia also makes an order for aircraft during the Singapore Airshow for 18 Bombardier CRJ1000 aircraft and a further option of 18 aircraft to cater for the regional growth of the airline’s 3rd and 4th hub in Makassar and Medan. Garuda Indonesia still have orders for Airbus 330-300 and Boeing 777-300ER that is going to cater for medium and long-haul destinations. Garuda currently only connects the Dutch Capital of Amsterdam in the carrier’s long-haul network. Apart from that, Indonesia AirAsia, the Indonesia subsidiary of Asia’s largest low-cost carrier AirAsia has also has a huge share of the 200 Airbus 320 that was order by AirAsia Group last year. The aviation future in Indonesia looks bright by looking at the massive order from each airline in the country. The new orders can help erase the long known image of low safety record among foreigners as several Indonesian carriers were removed from the blacklist of the European Union two years back. During the first quarter of 2011, passenger growth rose nearly 18%, with domestic passenger numbers rose about 23% from 2009 to 2010 makes Indonesia currently is the 12th largest aviation market. For me, Indonesia has a huge amount of population at around 240 million, so the large number of population are able to support the large amount of aircraft ordered by airlines. Certainly, aviation future in Indonesia looks bright in the years to come. With strict rules and government enforcement, it looks to me that the confidence in flying in Indonesia has been restored among Indonesians.

Another news that caught my eye was an order of extra 10 Boeing 787-9s aircraft from Japan Airlines, which totalled the airlines order of Boeing 787s to 45. Besides, Japan Airlines are in line to be the second operator of the aircraft in the coming months. Previously, Japan Airlines has an order of 35 Boeing 787-8s. Under the current new deal, 10 of the Boeing 787-8 will be upgraded into the larger Boeing 787-9. With 3 new low cost carrier coming into the Japanese market, Japan Airlines certainly have shifted their focus to regional, medium and long-haul route with the orders of these Boeing “Dreamliners”. Japan Airlines have recently announced plans to open new routes to Helsinki of Finland, Boston and San Diego of USA in the coming months operating by the brand new Boeing 787s. Japan Airlines rival, All Nippon Airways too has also announced that a series of cost-cutting measure and putting their focus on international expansion. Kansai-based Peach Aviation, a subsidary of All Nippon Airways will be the first low-cost carrier to take to the skies this March. This will be followed by Jetstar Japan, a joint-venture of Qantas Airways, Japan Airlines and Mitsubishi Corp in July that will operate out of Tokyo-Narita. The last will be AirAsia Japan, a joint-venture between AirAsia and All Nippon Airways which will also be based at Tokyo-Narita in August. The entrace of low cost carrier will certainly increase the competition in the country. Japan which has a large domestic market, but surprisingly has a low low-cost carrier(LCC) penetration. The only LCC in the country currently is Skymark Airlines. But the airline’s recent announcement of an all-premium seats in the airline’s upcoming 6 Airbus 380-800 raises question mark on whether the airline’s business model has been shifted from low-cost to premium market. With the entrance of these 3 new low-cost carriers, fares are expected to be slashed; competition among airlines will be much more stiffer. Overall, the Japan market have recovered pretty quick since last year’s horrific tsunami and earthquake.So it’s interesting to see what will happen in Japan aviation market in the upcoming years.

Finally, after 5 years of service, it seems to me Airbus is still struggling with their “superjumbo” A380. Recently, Qantas Airways of Australia found cracks on the aircraft wings. For me, it may look a small crack but any small technical issue is big enough to bring down a plane, so zero tolerance should be implement to find the reason of the crack. Hopefully, Airbus will solve the issue properly to restore confidence among passenger that flew the jumbo plane.

By,
The Editor
23/2/2012

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