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Vol. 27 No. 1 February 2020
orientaviation.com
SPICEJET’S
GO-GETTER
BOSS
Chairman and managing director,
Ajay Singh, setting a scorching
pace of expansion at the Indian
budget carrier
Vietnam backers cancel Feud festers Air force leaders
Vinpearl venture citing between Korean Air tighten grip on
increased competition sibling heirs THAI board
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CONTENTS Volume 27, Issue 1
COVER STORY
16
SPICEJET’S
ORIENT AVIATION MEDIA GROUP
17/F Hang Wai Commercial Building,
231-233 Queen’s Road East,
GO-GETTER
Wanchai, Hong Kong
Editorial (852) 2865 1013
BOSS
E-mail: info@orientaviation.com
Website: www.orientaviation.com
Mailing address:
GPO Box 11435 Hong Kong
Chairman and managing director,
Publisher & Editor-in-Chief
Christine McGee
Ajay Singh, is setting a scorching
E-mail: christine@orientaviation.com pace of expansion at the
Associate Editor &
Indian budget carrier
Chief Correspondent
Tom Ballantyne
Tel: (612) 9638 6895
COMMENT 14 Malaysia’s prime minister at odds with MAS
Fax: (612) 9684 2776
5 “Welcome thaw” for Asia-Pacific airlines owners over airline’s sale
E-mail: tomball@ozemail.com.au
14 All Nippon Airways signs code-share with Virgin
North Asia Correspondent ADDENDUM Australia
Geoffrey Tudor 6 Korean Air sibling feud explodes into public view
Tel: (813) 3373 8368 MAIN STORY
E-mail: tudorgeoffrey47@gmail.com 12 Tariff truce boosts region’s air freight prospects
Photographers
Rob Finlayson, Graham Uden,
Ryan Peters
6 Thai generals consolidate board control at flag
Chief Designer
carrier
Chan Ping Kwan
7 New blow to Greater China airlines as Wuhan
Printing virus spreads across Asia
Printing Station(2008)
NEWS BACKGROUNDERS SINGAPORE AEROSPACE SHOWCASE
ADMINISTRATION 8 Vingroup tycoon scraps new carrier citing 24 Singapore aerospace skills outpace regional rivals
competitive pressures 24 AFI KLM E&M seeking new foothold in Asia
General Manager 9 Nimble budget carriers feed Vietnam bull run
Shirley Ho 9 U.S. formally approves extended Vietnam INDUSTRY ADDENDUM
E-mail: shirley@orientaviation.com
Airlines-Delta Air Lines code-share 26 All Nippon Airways launching third A380 Narita-
11 Long road back for Boeing as MAX grounding Honoulu FLYING HONU in July
ADVERTISING drifts into June 26 Amadeus identifies top air traveler trends
11 Boeing boss concedes company’s relationships 26 Collins Aerospace wins pilot training contract
Asia-Pacific, Europe & Middle East are damaged with U.S. regulator
Christine McGee
11 Xiamen Airlines plans A321neo order in blow to
Tel: (852) 6438 3379
Boeing
E-mail: christine@orientaviation.com
13 Boeing plans to open MAX production line
The Americas / Canada before ungrounding commences
Barnes Media Associates 14 Qatar Airways adds Malaysia Airlines to
Ray Barnes partnership fold
Tel: (1 434) 770 4108
Fax: (1 434) 927 5101
E-mail: barnesrv@gmail.com
26 Two Boeing suppliers agree to US$6.4 billion
ray@orientaviation.com
merger
26 Lessor CALC orders 40 A321neo
Follow us on Twitter @orientaviation 26 Magnetic MRO and Crestline Investments form
leasing joint venture
FEBRUARY 2020 / ORIENT AVIATION / 3
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COMMENT
“Welcome thaw” for Asia-Pacific airlines
For airlines in the Asia-Pacific, the signing of a “Phase obligations” and “the date by which each measure will
One” trade deal last month between the U. S. and go into effect”.
China after two years of a tit-for-tat tariff war comes as Phase One keeps in place the bulk of the tariffs
welcome relief. The dispute caused airlines a great deal U.S. president, Donald Trump, has placed on $360
of harm, unsettled global economies, dented business billion of Chinese goods and also maintains the threat
confidence and, in particular, produced a serious of additional punishment if Beijing breaches the terms
decline in a critical sector of operations for the region’s of the deal.
airlines, air freight. For the time being, the tone between the two
Under the agreement, China has committed to countries is conciliatory. In a message conveyed to
purchase US$200 billion more in U.S. goods over the president Trump, China’s leader, Xi Jinping, said the deal
next two years than it did in 2017 – when the trade war was “beneficial to China, the U.S. and the world”.
erupted - including about $78 billion in manufactured It showed the two countries, “based on equality and
goods such as aircraft. mutual respect, through dialogue and consultations”,
If all goes to plan that should give the air cargo can find proper and effective solutions to problems,
business some lift. It also commits China to a crackdown China said.
on intellectual property theft, which is regarded as a The risk is unpredictable Trump. If he wins the U.S.
major problem for U.S. companies operating in China. presidential election in November, the emboldened
China will submit an “Action plan to strengthen leader could revert to a tougher stance on both trade
intellectual property protection” within 30 days of and tariffs with China, especially if the U.S. suspected
the agreement taking effect. The proposal would the Mainland was not living up to its part of the tariff
include “measures that China will take to implement its deal. ■
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”
FEBRUARY 2020 / ORIENT AVIATION / 5
ADDENDUM
Sibling feud at Korean Air explodes into public view
Thai government
It was not the happiest festive
season for the Cho family,
consolidates
shareholders of the Hanjin board control at
Group conglomerate, and its flag carrier
flagship national carrier, Korean
Air (KAL). Once again, the As expected, air chief
siblings hit the headlines in local marshal Chaiyapruk
media after reports emerged of Didyasarin, the acting
a family argument on Christmas when she ordered a KAL plane management of the chaebol chairman of Thai Airways
Day at the home of Lee Myung to return to the gate in New York since the elder Cho died in a U.S. International (THAI),
Hee, the widow of the late KAL after scolding a flight attendant hospital last April. In November, was formally appointed
chairman, Cho Yang-Ho. for the way she was served the siblings inherited their chairman last month.
The late Cho’s only son, macadamia nuts in first class. As father’s holding in Hanjin KAL in Didyasarin, 62, an
Walter Cho Won-Tae, and his a result of the incident, she was accordance with the law. Walter aeronautical engineer and
mother subsequently issued a convicted of usurping a pilot’s Cho owns 6.52% of Hanjin KAL a graduate of the Royal
formal apology for their conduct authority and spent five months and Heather has 6.49%, it was Thai Air Force Academy
and said they were “deeply sorry in prison. stated in a November filing. Emily has held numerous
for causing concerns to many In an unprecedented Cho, the youngest sibling in the security and intelligence
people over an unsavory incident public statement late last year family, has a 6.47% holding in the leadership roles in
on Christmas Day,” reported the she accused her brother of group and Cho’s widow 5.31%. Thailand and abroad.
Korean news agency Yonhap. running the companies without Korean media reported the They have included
Walter Cho, the 43-year-old adequately consulting the rest of Christmas Day argument erupted Director of Intelligence,
chairman of Hanjin Group the family, violating their father’s when Walter blamed his mother Director of Operations and
and KAL president and chief wishes. for encouraging his older sister Commander-in-Chief of
executive, has been running the “There have not been to question his leadership of the Royal Thai Air Force.
conglomerate since the death sufficient discussions about Hanjin KAL and KAL. Former THAI chairman,
of his father 10 months ago. appointing the head of Hanjin The family dispute comes Ekniti Nitithanprapas,
Apparently Walter’s ascendancy Group. I will listen to various at a difficult time for KAL resigned without public
has created a rift between Walter views of shareholders,” she said as it struggles to overcome explanation in November
and his sister Cho Hyun-ah, or in an emailed statement issued challenging economic along with three other
Heather Cho, the eldest daughter by her lawyers. “Hanjin Group is conditions, including a trade war directors.
of the late patriarch. being managed in a way that goes between Korea and Japan that Other new appointments
Heather has publicly against the previous chairman’s has dented traffic. The airline to the THAI board are vice
expressed her dissatisfaction wishes,” she added. reported a net loss of US$71.8 chairman, air chief marshal
with her brother’s leadership of Her statement was the million in its 2018 year and in Chanyoot Sirithumakul,
Hanjin Group, including KAL. first time any member of the August announced a net loss of and director Chakkrit
Heather, 45, earned global founding family had publicly $362.7 million for the first six Parapuntakul. ■
notoriety in December 2014 voiced discontent about the months of 2019. ■
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6 / ORIENT AVIATION / FEBRUARY 2020
New blow to Hong Kong as Wuhan virus spreads beyond China
Just when it was thought things
could not get any worse for Hong
Kong’s decimated travel industry,
they did.
At press time, the Hong
Kong Special Administrative
Region (HKSAR) had closed its
borders between Hong Kong
and China except at Hong Kong
International Airport, the Hong
Kong-Macau- Zhuhai Bridge,
the Shenzhen Bay-Hong Kong
crossing and Kai Tak Cruise
and Ocean terminals. Cargo
clearance procedures are not
affected.
Visitors to Hong Kong from
the Mainland have dropped by
91% since January, the HKSAR This time around lessons the consequential significant forecast the virus has yet to hit its
government has reported. learned from SARS have been put drop in market demand for outbreak peak.
Hong Kong has recorded into force quickly, including more their flights”. It described the Before the Wuhan crisis
its first death from the virus. isolation wards, one new hospital reductions as temporary. began to unfold, Hong Kong
Within the same 24 hours, dedicated to treatment of victims Analyst Jefferies said International Airport (HKIA)
medical experts warned the virus of novel coronavirus and the “inevitably Hong Kong could reported its biggest passenger
appeared to be spreading from setting up of quarantine camps in face downside pressures to the decline in a decade last year.
“invisible sources” as two Hong Hong Kong and on the Mainland economy after eight months of It processed 71.53 million
Kong patients confirmed with the for patients diagnosed with the political protests have forced travelers, a decline of 3.2 million
virus had not travelled to China. disease along with their families. it into recession”. The listed over the previous 12 months.
Jitters have spread across Cathay Pacific Airways has transport sector – airlines, Travelers, particularly from
the HKSAR and the Mainland announced it would gradually airports and railways – would be China, had turned their backs
as a result of the outbreak. reduce its services between the most impacted followed by on the HKSAR in the last months
Citizens fear a repeat of Severe Hong Kong and China by the retail and hospitality sectors, of 2019 as anti-government and
Acute Respiratory Syndrome 90% in its most recent profit Jefferies said. anti-Mainland protests did not
(SARS), when a Chinese tourist announcement to the Hong Kong China’s Zhong Nanshan, let up.
contracted the virus on the Stock Exchange. Cathay Pacific a specialist in the treatment At the time, Cathay Pacific
Mainland and introduced it Airways regional airline, Cathay of SARS and a director of said it would “reluctantly” reduce
unknowingly into Hong Kong. Dragon, has radically cut back its China’s State Key Laboratory of its overall seat capacity in 2020
Panic ensued, restaurants, network into China. Respiratory Disease, said in late by 1.4% year-on-year “in light
hotels and airplanes almost The airline group said January the key to controlling of the immediate commercial
emptied and the region’s the cancellations would be the spread of the disease was challenges we are facing”. It had
economy took a direct hit to its implemented “in view of the to prevent the emergence planned growth of 3.1% in 2020.
collective bottom line. novel coronavirus outbreak and of super-spreaders, infected For HKIA, the 4.2% fall
patients who quickly spread the in passengers was the largest
virus, especially among medical decline since the global financial
workers. crisis caused a 5% drop in 2009.
Airports across the Despite the present situation,
Asia-Pacific have strengthened HKIA remains the world’s busiest
their detection systems for air cargo hub. It handled 4.8
travelers from China. All carriers million tonnes of air freight in
with networks into Mainland 2019, down 6.1% on 2018. “We
cities have radically decreased went through a challenging year
frequencies and capacity. in 2019,” HKIA executive director
Several major industry of airport operations, Vivien
events in the region have been Cheung Kar-fay, said. By staff
cancelled or cut back as experts writers. ■
FEBRUARY 2020 / ORIENT AVIATION / 7
NEWS BACKGROUNDER
Vingroup tycoon scraps new carrier
citing competitive pressures
T
he launch of airline add 2,000 jobs to the national smartphone company.
Vinpearl Air was one aviation head count and operate a Vingroup has built the
of the most anticipated fleet of 30 aircraft by 2024. world’s third largest vehicle
events of Vietnam’s “Vietnam’s aviation market manufacturing plant, VinFast,
2020 aviation calendar, has a lot of potential and is on an island off Hai Phong and
but it is not to be. developing strongly, but it also is positioning itself to take on
Last month, Vingroup, owned has large companies already in Vietnam consumers preferred
by the country’s richest man, operation. Vingroup’s strong automobile marques, Toyota and
Pham Nhat Vuong, announced investment in aviation could lead Honda.
the establishment of Vinpearl, to an oversupply,” the group’s It launched an electric
Vietnam’s sixth airline, had been said it had informed the Ministry deputy chairman and chief scooter, Klara, last November and
cancelled. The conglomerate of Transport of its withdrawal executive, Nguyen Viet Quang, will set up a network of charging
said it intended to focus on its from the process of launching the said in the statement. and exchange centres across the
investments in the electric vehicle airline, which had been scheduled Instead the group outlined nation where scooter batteries
and communications technology for July. ambitious plans to concentrate can be re-charged or replaced
sectors. It had been widely reported on its US$3.5 billion VinFast very cheaply. The first of the
A company statement Vingroup would invest US$200 car and scooter business and service centres are operating in
announced the shock decision. It million in a Hanoi-based Vinpearl, its recently established Vismart Hanoi and Ho Chi Minh City. ■
8 / ORIENT AVIATION / FEBRUARY 2020
NEWS BACKGROUNDER
Nimble budget carriers
2018, the country’s aviation
sector was being served by 68
foreign airlines from 25 countries
feed Vietnam’s bull run
and territories and five domestic
airlines.
In the last ten years, aircraft
operated by local carriers
increased from 60 to 192. In its
By associate editor and chief correspondent, Tom Ballantyne latest report, IATA ranks Vietnam
V
as the fifth fastest growing
ietnam’s airline aviation market in the world and
sector continues the fastest in Southeast Asia. It is
to boom, with forecast to have a market of 150
privately owned million passengers a year by 2035.
carriers seizing more Domestic carriers in the air
market share from government right now are VNA, Jetstar Pacific,
controlled Vietnam Airlines boisterous budget airline Vietjet,
(VNA), the latest Civil Aviation Bamboo Airways and Vietstar
Authority of Vietnam (CAAV) Airlines. The country’s aviation
statistics reveal. authorities and industry analysts
The full-service flag carrier’s are confident there is room for
market share has declined from plenty more.
34.5% 12 months ago to 33.3% decree raised the ownership $27.1 billion in 2018. The sector Vietnam has a population
in December. Budget Jetstar limits of foreign investment in the accounts for 7.8% of Vietnam’s close to 100 million. It only needs
Pacific, jointly owned by VNA Vietnamese air transport industry Gross Domestic Product (GDP). to look at Thailand to glimpse
and Qantas Airways, also lost from 30% to 34%, with effect Business travel has taken what is possible for its tourism
market share with passenger from January 1. off, which has been a catalyst industry. Despite having 72% of
traffic declining from 14.2% to Vietnam National for airline expansion. Within Vietnam’s population, Thailand
10.6% in 2019. Additionally, Administration of Tourism (VNAT) a decade, the aviation sector has four times more airlines and
another VNA subsidiary, VASCO, data has reported international has expanded by an average of three times more international
experienced a drop in business, visitors to Vietnam have increased 17.4% a year, more than double tourists than its neighbor.
to 1.6% from 2% for the year to from 4.25 million in 2008 to 15.5 the 7.9% average across Asia, The Thai kingdom has 13
December 31. million in 2018. Domestic tourists reported the International Air scheduled airlines and 10 charter
Meanwhile, private sector rose from 20 million in 2009 to Transport Association (IATA). companies in operation. The
carriers have continued their 80 million in 2019. In the last ten The CAAV said Vietnamese number of airlines operating
drive for dominance. Vietjet lifted years, total revenue from tourism airlines transported 50 million in Vietnam is much smaller
its market share from 41.2% has climbed more than ten times, passengers in 2018, five times than Singapore, Malaysia, The
to 42.2% last year, the CAAV from US$2.6 billion in 2008 to more than in 2008. By December Philippines, Cambodia and
said. Start-up Bamboo Airlines, Myanmar and five times less than
launched in January 2019, had Indonesia.
secured 12.4% of the market U.S. approves deeper Vietnam Kite Air, being developed by
by year-end. The hybrid carrier’s Airlines-Delta Airlines relationship big local tourism firm, the Thiên
target is 30% of domestic air Minh Group, has been approved
The U.S. Department of Transport (DoT) has authorized
traffic. an extended code-share agreement between SkyTeam alliance and is expected to be flying next
Vietnam’s aviation industry members, Vietnam Airlines and Delta Air Lines. year, serving domestic routes
recorded growth of 13% in “This decision by DoT again affirms the track record of Vietnam and international flights through
2019, the CAAV said. As a result, Airlines for operational safety, technical excellence and service Indochina, Southeast Asia and
the industry is confronting the quality, further laying the path for flights to the U.S. in the future,” North Asia.
challenges other fast-growing a Vietnam Airlines (VNA) statement said on January 7. While encouraging new
aviation markets are experiencing, In 2010, VNA negotiated a one-way code-share agreement operators Hanoi also has put
particularly airport congestion, with Delta Air Lines on 10 international routes to and from the safeguards in place to assure
U.S. and ten routes within the U.S. It allowed Vietnam Airlines
lack of slots and ATM limitations. sustainable growth. A new carrier
passengers to fly to eight U.S. states via the Atlanta-headquartered
Vietnam’s government is operating up to 10 aircraft will
carrier’s Frankfurt and Tokyo hubs.
fast tracking modernization The new agreement means passengers only have to book and need minimum capital, including
and expansion of airports and fulfill flight formalities once, either with VNA or Delta, for their ownership capital and loans, of
aviation regulatory reform. Last entire journeys between the two countries. $13 million. Those with 11 to 30
November, a prime minister’s aircraft will need $26 million. ■
FEBRUARY 2020 / ORIENT AVIATION / 9
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Long road back for Boeing as
MAX grounding drifts into June
will be listening closely to you,
our customers, our partners
Boeing boss concedes company’s
and our regulators to ensure we
understand the expectations of
relationships are damaged
our stakeholders and are on a New Boeing president and CEO, David Calhoun, admitted
path to meeting them. In doing to staff in a January email many stakeholders were rightly disap-
so, we’ll become stronger as a pointed and it was vital to repair these relationships.
company and as an industry.” “We’ll do so through a recommitment to transparency and
by meeting and exceeding their expectations. We will listen, seek
A Boeing director since 2009
feedback and respond appropriately, urgently and respectfully,”
and board chairman from October
he said.
to December last year, Calhoun
has held senior leadership roles at
GE, the private equity Blackstone continue to meet our customer become safer and more efficient
I
Group and most recently Nielsen commitments. We will get it done as we define the future of
mmediately after new Holdings. During his 26 years at and we will get it done right.” aerospace.
president and chief executive, GE, he led GE Transportation and Calhoun continued: “We “This work includes preparing
62-year-old David L. Calhoun, GE Aircraft Engines. will keep taking steps to maintain for the first CST-100 Starliner
moved into the hot seat at Calhoun’s email said putting our supply chain and workforce crewed mission, first flights of
Boeing last month, he outlined the MAX back in the air must be expertise so we’re ready to the 777X and 737 MAX 10,
plans for rebuilding the company’s the primary focus of the company. restart production and increase expansion of our Global Services
flagging fortunes and damaged “This includes following the lead rate safely, smartly and with the business and finalization of our
reputation. of our regulators and working highest standards of quality. Embraer partnership. This is our
In an email on January 13, with them to ensure they are “We’ll continue to invest path forward. I am excited to be
Calhoun said: “This company has satisfied completely with the in our global workforce and part of it with you. My sleeves are
a tremendous legacy of aerospace airplane and our work so we can processes and technologies to rolled up. I know yours are too.”
achievement, which is thanks to Ten days later, Boeing
your efforts and the contributions announced it was informing
of generations before you. I Xiamen Airlines plans A321neo customers and suppliers it
honor that legacy and I appreciate order in blow to Boeing estimates the ungrounding of
your tireless commitment. I the MAX would not begin until
Xiamen Airlines, until recently an exclusive Boeing customer,
also recognize the learnings, mid-2020.
has invited bids from leasing companies to supply it with 10
many of them painful, from the A321neo. Majority-owned by China Southern Airlines, Xiamen Some U.S. airlines already had
experiences of the last 18 months said it was planning for deliveries of the Airbus airplanes from said they would not be including
that you are bringing to the way the second half of 2021 to 2023. The Mainland airline has been the MAX in their flight schedules
we do business. in talks with Airbus as the Sino/U.S. trade war played out and the before June.
“I see greatness in this grounding of the MAX continued. Boeing also has revealed
company, but I also see The Civil Aviation Administration of China (CAAC) said China’s it had notified the U.S. Federal
opportunities to be better. Much aviation industry reported revenue of US$154.27 billion in 2019, Aviation Administration (FAA)
better. It includes engaging one a 5.4% increase over 2018. about another MAX issue
Commercial airlines operated 600 million passenger flights
another and our stakeholders concerning software that verifies
and transported 7.52 million tonnes of cargo for the 12 months to
with greater transparency, holding whether key tracking systems
December 31, increases of 7.9% and 1.9%, respectively.
ourselves accountable to the on board the aircraft type are
highest standards of safety and operating properly.
quality and incorporating an “We are making necessary
outside-in perspective on what updates and working with the FAA
we do and how we do it. on the submission of this change
“In my first few days and and keeping our customers and
weeks as president and CEO, I suppliers informed,” Boeing said. ■
FEBRUARY 2020 / ORIENT AVIATION / 11MAIN STORY
TARIFF TRUCE
BOOSTS REGION’S
FREIGHT PROSPECTS
The U.S./Sino trade deal, signed in January, is easing global
economic tensions and boosting business prospects for
hard-hit Asia-Pacific air cargo operators. Associate editor
and chief correspondent, Tom Ballantyne, reports.
N
ew Boeing boss, David Calhoun, needed some trade war started. It also must include $78 billion in
good news when he took charge of the crisis hit manufactured goods such as aircraft.
aircraft manufacturer last month. He certainly The International Air Transport Association (IATA) told
got it when the U.S. and China reached a truce Orient Aviation the agreement between the U.S. and China
in their two-year trade war mid-month. More represented a “welcome thawing” in trade relations between
surprisingly, as he has been a critic of Boeing, U.S. president the two countries and removes some of the uncertainty that
Trump gave Calhoun and Boeing a shoutout at the trade deal’s has weighed upon businesses and financial markets globally.
signing ceremony. “The Phase One agreement is consistent with that.
Calling Boeing “a great company”, he identified Calhoun However, we should not lose sight of the fact a significant level
among guests at the White House announcement of the Phase of trade restrictions remain in place between the two
One deal. Calhoun was a board director of the company from countries,” IATA said.
2009 and acting chairman of Boeing in the final months of The question is when and how the new deal will translate
2019, but had only been CEO for a few days before the into an order boost not only for airlines but for Boeing. The
Washington D. C. reception. U.S. manufacturer has significant businesses in China ranging
Trump said: “He has a very easy company to run. He just from training and maintenance to manufacturing and aircraft
took over Boeing. Where’s David. Stand up David. Let me tell completion.
you it’s not your fault. You just got here. You will straighten it Boeing has delivered nearly 1,600 planes to Chinese
out quickly please.” “We will,” said Calhoun. carriers and has scores of unfilled orders for aircraft, including
Under the Phase One agreement, China must buy B737 MAXs.
US$200 billion additional U.S. goods over two years The Phase One agreement preserves the bulk of the tariffs
compared with 2017, the year the the U.S. president has placed on $360 billion of Chinese
goods. It retains the option of additional punishment if Beijing
does not live up to the deal.
China’s leader, Xi Jinping, conveyed to Trump the deal
was “beneficial to China, the U.S. and the world”. Xi said it
showed the two countries, “based on equality and mutual
respect, through dialogue and consultations”, could find
proper and effective solutions to problems.
Trump declared at the White House: “Today we take a
momentous step, one that has never been taken with China
towards 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 consumer
confidence and re-boot Asia-Pacific air cargo, which is
responsible for carrying 35% of the world’s air freight traffic.
The latest IATA data, for November, revealed demand
12 / ORIENT AVIATION / FEBRUARY 2020measured in freight tonne kilometers (FTKs) decreased by
1.1% for the month compared with the same period in 2018. The Sino-U.S. agreement is good
The figures marked the thirteenth consecutive month of
year-on-year declines in air freight volumes. For Asia-Pacific
news for air transport, especially air
airlines the news was worse. Air cargo custom contracted 3.7% cargo operators. It is particularly good
for the month over November 2018, the sharpest drop in news for airlines in the Asia-Pacific,
freight business of any region in the world for the month.
The U.S./Sino trade war cut demand between the large one of the world’s leading
Asia-North America market by 6.5% year-on-year in October, manufacturing and distribution hubs
the latest available data shows. and where air cargo generally
It was a “big disappointment” considering the fourth
quarter typically is the peak of the air cargo cycle, said IATA accounts for a larger share of airline
director general, Alexandre de Juniac, when the figures were operations than elsewhere
released. Looking forward, signs of a thawing in U.S.-China
trade tensions were good news, he added, but cautioned International Air Transport Association
trading conditions remained “very challenging”.
While the Phase One deal is a breakthrough, it is by no United Nations said U.S. orders for goods from Mexico,
means the end of the matter. It halves tariff rates on $120 Taiwan and Vietnam increased last year.
billion worth of goods, but most of the higher duties remain in Boeing has reported a decline in commercial airplane
place. orders in 2019 and much lower deliveries going forward as the
Economists have calculated the trade dispute has cost protracted MAX crisis weighed heavily on operations. It
American companies and consumers more than $40 billion, a reported a net drop of 87 orders for the year after cancellations
figure that does not attempt to measure lost business from and a few new orders for the MAX. Besides cancellations,
retaliatory action. U.S. manufacturers exposed to tariffs have some of the fall-off was the result of conversions by customers
been hurt, with the dispute shaving 0.3% off U.S. economic from the MAX to a smaller number of the 787 family.
growth and reducing household income by an average of $580 Boeing delivered 380 aircraft in 2019, less than half the
a year since 2018. number of the previous year. It has halted production of the
The U.S. Federal Reserve estimated China’s economy has MAX but still has to maintain an estimated 400 MAXs that
taken a 0.25% hit, as U.S. demand for its goods fell about a cannot be delivered to customers because of the grounding.
third. Analysts said it was unlikely the new deal would produce It has been widely reported Boeing is in discussions with
gains sufficient to outweigh the losses suffered by both sides. several banks for loans of $10 billion amid rising costs at the
But some countries have benefited from the fight, which manufacturer. CNBC said Boeing has secured $6 million in
is estimated to have diverted an estimated $165 billion in new loans and was seeking more funds.
trade from China. Nomura analysts identified Vietnam as Ballpark figures from analysts calculate Boeing has lost $1
the country most likely to benefit from the trade war. The billion a month since the MAX was grounded last March. ■
Boeing boss promises to open MAX production line “slowly,
steadily” before the aircraft is cleared to fly
Boeing CEO, David Calhoun, told reporters in the third the ungrounding of the MAX until mid-year, 15 months after
week of January the manufacturer would resume production the type was banned from flying worldwide following two
of the MAX well before the type’s expected clearance to fly fatal crashes.
in June. “The updated estimate is informed by our experience to
BCA halted MAX output last December. Calhoun gave date with the certification process,” Boeing said.
no date for the re-opening of the MAX production line. “It is subject to our ongoing attempts to address known
“I am all in on it and the company is all in on it,” Calhoun schedule risks and further developments that may arise in
said in a Reuters report of the January media briefing. He the certification process.
added Boeing believed the plane would continue to fly for a “It also accounts for the rigorous scrutiny regulatory
generation. authorities are rightly applying at every step of their review
He said BCA would “slowly, steadily bring our production of the 737 MAX’s flight control system and the Joint
rate up a few months before that date in the middle of the Operations Evaluation Board process which determines pilot
year” and conceded the manufacturer should not have training requirements.”
repeatedly revised the plane’s forecast return. “It was hard A critical factor in setting a new date to begin returning
for anybody to trust us,” he said. MAXs to the skies is BCA’s recent agreement that pilots must
Earlier in the same week, Boeing said it did not expect undergo simulator training on the upgraded MAX, a reversal
the U.S. Federal Aviation Administration (FAA) to approve of company policy.
FEBRUARY 2020 / ORIENT AVIATION / 13NEWS BACKGROUNDER
Qatar Airways adds Malaysia
Airlines to its partnership list
airport for Daxing in the northern added transfer traffic from China
summer. was growing fast.
He said the carrier is Fourteen months ago, Qatar
actively expanding flights into acquired 5% of China Southern
China because of strong travel Airlines (CSA), Asia’s largest
demand. As well as Hong Kong, carrier by fleet numbers, and
Qatar flies to six Mainland cities: said at the time of the purchase
M
Beijing, Chengdu, Chongqing, announcement it hoped to develop
alaysia Airlines Qatar flies three times a day Guangzhou, Hangzhou and a deeper relationship with the
(MAS), reported to Kuala Lumpur and five a week Shanghai. Guangzhou headquartered group.
to be discussing flights to Penang, with services More than 90% of passengers It is expected the partnership
a 49% sale to onward to Langkawi. who fly to Doha are transit will develop as CSA moves more of
Air France KLM, Code-share destinations for customers, the airline said, and its flights to Daxing. ■
began operating an expanded MAS passengers via Doha include
code-share with Qatar Airways last all major European cities. MAS
month. serves 59 destinations from its hub, Malaysia’s Mahathir at odds with
Since 2001, MAS and Kuala Lumpur. wealth fund over MAS sale
Qatar Airways have operated a Earlier in January, Qatar
Malaysia’s prime minister, Mahathir Mohamad, who also is
code-share on 10 routes. The new announced it would move to chairman of Malaysia Airlines owner, Khazanah Nasional Bhd,
agreement adds 20 routes for MAS Beijing’s Daxing airport from is “not completely happy” with the way the sovereign wealth
passengers to Europe, America Beijing Capital airport and would fund managers have been evaluating investment proposals for
and Africa, via Qatar’s home hub continue to expand its network in the carrier.
in Doha. Both airlines are oneworld China. Reported interested parties are Air France KLM, which is
alliance members. Announcing an additional offering to buy 49% of the carrier as well as build an MRO hub
Four new destinations in 500,000 yuan donation to the in Malaysia, Japan Airlines via its joint venture partnership with
Southeast Asia will be available Qatar Airways Hope School in MAS, Lion Air via Malindo Air and a three-way merger between
AirAsia, Malaysia Airlines and AirAsia X.
to Qatar under the expanded Sichuan province, the airline’s
“Unfortunately, Khazanah has its own agenda so I have to
agreement: Sibu and Alor Setary in Asia-Pacific senior vice president,
check them,“ Mahathir said. No date has been set for a decision
Malaysia, and Indonesia’s Medan Marwan Koleilat, said the carrier on new investors in the flag carrier and oneworld member.
and Surabaya. would vacate Beijing’s downtown
All Nippon Airways expands “down
by providing greater choice
and flexibility through shared
under” with Virgin Australia partnership resources and furthering ANA’s
commitment to expanding the
A
Japan-Australia network,” ANA
ll Nippon Airways of several global sporting events share routes will be announced executive vice president, Shuichi
(ANA) and Virgin taking place in Japan, particularly by April. Fujimura, said.
Australia (VA) the 2020 Summer Olympics and Australian routes available Star alliance member ANA
have established ParaOlympics. to ANA passengers from January also has joint venture partnerships
a code-share for ANA launched Narita-Perth 30 are: Sydney-Adelaide, Sydney- with Austrian Airlines, Lufthansa
flights within Japan and Australia last September and intends to Brisbane, Sydney-Melbourne, Airlines, Swiss International and
and agreed to share frequent commence flying Haneda-Sydney Sydney-Cairns, Sydney-Canberra United Airlines.
flyer benefits for travelers on both from the 2020 northern and Sydney-Gold Coast. VA has alliance relationships with
carriers. hemisphere summer. VA is now “This collaborative effort Delta Air Lines, Etihad Airways and
The new code-share is marketing its Brisbane-Haneda will allow us to meet growing Singapore Airlines. The latter two
planned to take full advantage service. Additional ANA-VA code- passenger demand in the region carriers are large investors in VA. ■
14 / ORIENT AVIATION / FEBRUARY 2020AV I AT I O N
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SPICEJET’S
GO-GETTER
BOSS
Chairman and managing director,
Ajay Singh, is setting a scorching pace of
expansion at the Indian low-cost carrier.
Anjuli Bhargava reports
16 / ORIENT AVIATION / FEBRUARY 2020I
n March 2019, a month before the collapse of Jet If the grounding of the MAX was not enough to manage
Airways and in the midst of the frenzy of the country’s for Boeing customers, another factor had gripped the Indian
general election, a high level meeting of government aviation sector even as it dealt with the exit of Jet Airways.
ministers and officials was held in New Delhi. It was Traffic growth had been in double digits since the
evident to those in charge that little could be done to beginning of the decade but it had hit an unexpected speed
keep full-service Jet flying. The meeting was to examine breaker. As the overall slowdown of the economy revealed
ways to minimize the damage caused by the failing carrier itself, air traffic - like car sales - virtually stopped expanding.
and ensure fares did not shoot up in the middle of the Until November 2019, domestic passengers grew by 3.86
election season. per cent, with the first half of the year recording hardly any
Pressure from the industry also was building on the rise. Demand is improving for the second half of the
government to take a call on Jet’s slots. Several were at the financial year, from April 2019 to March 2020, but it is
massively constrained Mumbai airport and were not being forecast traffic growth for the year will remain in single
utilized as Jet’s problems had steadily mounted from August digits for the first time in a decade.
2017. It is yet to be revealed whether the gambit taken by
It was decided the slots would be offered to other airlines SpiceJet’s chairman and managing director, Ajay Singh, 54,
and preference would be given to carriers that could bring in post Jet’s demise was a calculated or a reckless risk.
additional capacity the quickest. In its first quarter, SpiceJet had performed well. The
All the airlines jumped in as slots at Mumbai were LCC, like almost all the other airlines in India had reported
invaluable and were not available for love or money. At least a profit. In the second quarter, capacity rose by 51 per cent
two airlines, LCC SpiceJet and full-service Vistara, decided over the same month a year ago. Revenue was up, aircraft
to deviate from business as usual and take a big gamble, were full and yields and even fares went up.
turning a blind eye to the possible downside of their But two unanticipated developments ensured the airline
decision. reported a deeper than expected loss that led to a sharp fall
SpiceJet, which flies an all-Boeing fleet, was best in the value of the carrier. The Jet aircraft SpiceJet had
positioned to take full advantage of the situation. It took 33 acquired were in far worse shape than expected.
of Jet’s aircraft, which were fitted with a two-class Sources at SpiceJet said in some cases substandard parts
configuration. It also received many new slots out of had been used on the aircraft and many records of
Mumbai. Before Jet’s grounding, SpiceJet had 32 departures maintenance and checks were missing or not accessible to
a day from Mumbai. This increased to more than 80. SpiceJet.
In some ways, the timing for taking on Jet’s aircraft was The Jet airplanes were ageing and fuel burn was
ideal for SpiceJet as it had suffered a blow from the correspondingly high. As a result, costs, including
grounding in March last year of the 13 MAXs it had in maintenance, shot up. The airline’s CASK (Cost per
operation. Available Seat Kilometre) in US cents went up to 5.96
It also meant there would be a delay in replacing its older against rival, IndiGo’s 5.12, CAPA data reported.
planes and reduced new capacity planned for last year and in In addition, the eight Jet planes taken on by SpiceJet,
2020. The double whammy could hit the airline’s revenues over and above the 33 B737NGs, were MAXs, Four of them
through no fault of its own. were grounded and four were stuck after deliveries from
FEBRUARY 2020 / ORIENT AVIATION / 17COVER STORY
Boeing were put on hold.
SpiceJet also hired close to 1900 Jet
workers, a decision that proved to be a
mixed bag. Although Jet staff were better
trained and more professional than most
airline employees in India, cultural
differences surfaced on occasion and it took
some time for people to adjust to their new
working environment.
Close to 150 of the new hires either
resigned or were asked to leave SpiceJet
because they did not fit with the culture of
their new owner.
Perhaps the biggest issue for Singh and his
LCC to navigate was that Jet’s aircraft were
fitted with business class. minutes from Dubai, where he sees “great
As an LCC, SpiceJet operated an potential”. His critics argue the project is “unrealistic”.
all-economy class fleet. Although fares rose slightly during There are bilateral flying rights available and Ras Al
the period of integration of the two fleets, yields did not rise Khaima can be a proxy for Dubai. The plan is to explore the
commensurately, reflecting a failure on SpiceJet’s part to option of introducing some flights to Eastern Europe and
charge a premium for its business class offering. the Middle East from Ras Al Khaima. A demand analysis is
In the next six months, the LCC plans to phase out its being done company sources said.
Jet aircraft as MAX planes begin arriving at the airline now From a SpiceJet perspective, there was no reason to reject
expected after June. investigating the establishment of an offshore base that was
An MBA from Cornell University in the U.S. Singh has close to its Gurugram (formerly Gurgaon) home.
maintained he would do it all again “if the same opportunity But aviation analyst and former IndiGo chief of
was to represent itself, I’d grab it”, when asked about adding operations, Shakti Lumba, said “it may be a good idea, but it
Jet planes to his fleet. does not appear to be thought through as of now”.
A second concern for SpiceJet has been safety. In 2019, Setting up a base for an Indian carrier in foreign
the airline had many small incidents and one “accident”, territory runs into many regulatory issues and unless they
spooking passengers. The airline said it had beefed up its can be managed the project may remain more of a
safety oversight and removed underperforming employees. pipedream than a reality, Lumba said.
But in a country where commercial considerations often When the announcement was made, it was claimed four
outweigh safety concerns, SpiceJet’s assurances have not to five aircraft would be operating six to seven hour
convinced everyone. Many passengers only fly SpiceJet if medium-haul routes by last December, but this is yet to
they have no alternative. happen.
The airline’s customers also complain the LCC’s Singh seems to be homing in on the Middle East. Since
airplanes have a tired feel. SpiceJet said it was aware of the November, the airline has committed to an interline
issue and blamed it partly on the age of its fleet. It hoped to agreement and code-share with Emirates Airlines. A
improve its product image after re-fleeting commenced, the Memorandum of Understanding with Gulf Air has been
airline has said. signed.
Industry observers argued Singh should be cautious
A FINGER IN MANY PIES about starting new businesses because he runs the risk of
Even as he steers his rocky ship through choppy waters, spreading himself too thinly across seveal enterprises.
Singh has his fingers in many other pies. Last year, he was A B2B cargo delivery service was launched in 2016 and
elected president of the Founding Board for Better Boxing, is running for select corporate clients. In 2017, Singh
set up by the AIBA, a world body for boxing. He also has surprised observers and industry watchers by opening
been president of the Indian Boxing Federation since 2016. SpiceStyle stores, including one in Gurugram’s Galleria
In January 2019, he became the first Indian to chair the market, one of the more expensive retail centres [in India], to
Aviation, Travel and Tourism (ATT) Governor’s Meeting at sell designer and other lifestyle products. The Galleria store
the World Economic Forum in Davos. At home, he chairs has closed, but two stores in Hyderabad and Delhi,
the CII National Committee on Civil Aviation and is respectively, are still trading.
chairman of the World Travel & Tourism Council, India In 2018, the airline launched SpiceStar, a training
Initiative (WTTCII). In June, he was voted onto the board academy for youngsters interested in a career in aviation.
of governors of the International Air Transport Association. Established in partnership with Amity University in Noida,
More recently, Singh announced plans to launch an it is a homegrown hiring ground for the airline.
international hub operation out of Ras Al Khaima, 40 SpiceJet, which earns 17% of its income from ancillary
18 / ORIENT AVIATION / FEBRUARY 2020COVER STORY
paid two to three times the rate rivals did for the
same job. In many positions, Jet had three people
doing work that could have been be tackled by
one staffer.
Its senior management was overpaid by
industry standards with more than 20 of the
airline’s executives drawing very high salaries.
Singh believes “too many cooks spoil the broth”
and the fact his senior team and employees maintain
a low profile in the industry did not mean they were
not contributing or were absent on the job.
“We have grown by 50% in Available Seat
Kilometres (ASK) and the airline has added to its
employee count in keeping with this growth,” he said.
Management bandwidth will be augmented as
revenue, is aiming to increase that number to and when the need arises. Singh has no intention of
25% and is exploring all avenues to this end. A broadband adding layers of management for the sake of it. He said
and Internet-on-board service is planned for the airline’s many airlines in India have had too many people working on
fleet as soon as deliveries of its ordered airplanes commence. the same task, which has led to executives spending all their
time “protecting their turfs”.
GOING IT ALONE IN THE COCKPIT
What spooks some observers is the new ventures and
strategies are being concluded or explored largely by Singh SpiceJet’s turnaround king
alone because he operates one of the leanest senior Ajay Singh is the principal shareholder of SpiceJet,
management structures in the industry. India’s second largest airline, which he helped start in
The lack of a second line of command makes them 2005. He took a break from the carrier in 2010, but
jittery. Less charitable rivals said Singh is “a control freak”, a returned to lead the carrier as it veered towards closure in
charge he dismisses with a laugh. 2015.
While the airline has tripled in size since 2014, it has From imminent collapse, the low-cost carrier has
hardly added heft at the top. Singh, who holds equity of become the second biggest airline in India, after another
59.13% in the airline group, is its highest paid employee, budget carrier, IndiGo.
averaging an annual pay package worth 304 times that of a Singh is a first generation entrepreneur who is fre-
quently described as the father of India’s aviation industry.
median employee’s remuneration. The only other highly
After the LCC recovered from near bankruptcy, Singh
paid SpiceJet executives are the CFO and the company ordered 205 aircraft, one of the largest orders for new
secretary. airplanes in Boeing’s history. Singh followed up his Boeing
No one denies Singh has executed a remarkable commitment with the purchase of Bombardier Q400
turnaround at the LCC after he returned to the carrier he planes, the single largest order for the Q400 in
co-founded in 2005 a decade later. Although his critics are Bombardier’s history.
reluctant to give him full credit for the achievement. They Singh is a political animal who played an important
said he has had government support and a bit of luck, but role in the rise to power of the Modi-led Bharatiya Janata
grudgingly respect his success. Party. He is credited with conceiving the popular campaign
In December 2014, the airline had 32 aircraft and its slogan ‘Abki Baar Modi Sarkar - now is the time for a Modi
Government’ - in Modi’s first election win in 2014.
5,400 employees were staring at closure of the carrier. Five
Before SpiceJet, Singh helped turn around the
years later, even if the LLC’s future may not appear to be loss-making Delhi Transport Corporation (DTC) and the
hunky dory, the airline has 119 aircraft and 15,300 national Television Broadcast network, Doordarshan. In
employees with secure jobs. the two and a half years Singh spent at the DTC, the cor-
Present and past staff praise Singh for his temperament poration experienced a spectacular revival and a run of
and his ability to face crises without losing his composure. profits.
As a boss, he’s considered amiable and generally unruffled, He also has been an advisor to the Ministry of
characteristics not shared by many others in similar Telecommunications and Information Technology where
leadership roles in India. he was a leader in drafting the National Telecom Policy
Nonetheless, investors and market analysts remain and the Information Technology Policy and was influential
in modernizing India’s telecom and IT industries.
nervous about Singh’s single man army approach. SpiceJet is
Singh graduated in engineering from the prestigious
a medium-sized airline with almost as many aircraft as Jet Indian Institute of Technology, Delhi, holds an MBA from
had when it collapsed, even if the comparison is not strictly Cornell University in the U.S. and received his law degree
fair. from the University of Delhi.
Jet had a fleet of 116 aircraft when it began to falter. It
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The appointment of a new SpiceJet chief commercial the practice with the unbundling of services globally, from
officer is on the cards, but at a macro level Singh sees no baggage carried. India’s Directorate General Civil Aviation
reason to add “fat cats” and mess with a structure that has mandates all tickets must include a free 15 kilogram baggage
worked until now just because others may be uncomfortable allowance, a regulation low-fare airlines resent.
with it. Looking ahead, SpiceJet is anticipating a hefty
His view is disputed in some industry quarters because compensation payout from Boeing for the MAX grounding
the SpiceJet board is largely of his choosing and senior and its delayed deliveries of the type. SpiceJet was expecting
executives are perceived as his “yes men” by critics. to receive 28 new aircraft from 2019 to this year at its home
Jet Airways went under with a similar “captive” board hub.
that failed to act when the airline was in trouble because of In his negotiations with the U.S. manufacturer, Singh is
the influence wielded by its co-founder and chairman, pushing for a US$500 million settlement. It is speculated the
Naresh Goyal. final payout will range from $300 million and Singh’s $500
“Unless he fixes this, SpiceJet runs the risks Jet did and a million target. Recently, Boeing concluded MAX
similar fate to Jet cannot be ruled out. This is no longer a compensation agreements with Turkish Airlines and
mom and pop store,” Lumba said. Southwest Airlines.
The MAX grounding could be converted into a future
THE FUTURE REMAINS UP IN THE AIR opportunity for SpiceJet if it sticks with the MAX by
Running a low-fare airline almost anywhere in the world pushing for lower acquisition costs for future expansion of
can be a bit of a mug’s game. There are many variables to its fleet.
constantly juggle to keep an LCC above water, be it volatile Whether the airline will remain with Boeing is a
fuel prices, agitating pilots, unhappy passengers, yo-yoing question yet to be answered. Airbus has been aggressively
ancillary revenue, currency fluctuations and rivals pursuing SpiceJet, which is the only Boeing dominated
undercutting you with unsustainable fares. carrier in India, The LCC also flies Q-400s.
Despite every efficiency being exploited, there is almost The European manufacturer wants to add another
no guarantee an LCC can make money in any given year feather in its sales cap by persuading SpiceJet to replace its
because so many operating factors are beyond its control. Boeing fleet with A330s and A321neos. If Airbus succeeds,
In India, the situation is worse than in most countries. it will enjoy a monopoly in a country with a population of
As well as the usual variables, the costs of operation in India 1.3 billion.
are higher by almost 25% because of higher aviation turbine In the meantime, SpiceJet hopes to control costs that
fuel prices and airport charges. went haywire in the second quarter of the year after the new
Additionally, LCCs in India do not operate on a level MAXs were incorporated into its fleet.
playing field compared with their non-Indian headquartered A substantial sector of its expansion is based on having
rivals. The Indian regulator sets its own parameters for the MAXs delivering better performance, fuel efficiency and
carriers. cabin comfort. In other words, the airline’s future is closely
For instance, airlines cannot earn ancillary revenue, as is linked to the future of Boeing, its aircraft supplier. ■
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