Air Transport World - March 2009

NewsBriefs

Airline heavyweights look
to lead on emissions

Air France KLM, British Airways, Cathay Pacific Airways, Virgin Atlantic Airways and UK airports operator BAA announced formation of the Aviation Global Deal Group, which expressed its support for inclusion of carbon dioxide emissions in a “new global climate deal” scheduled to be discussed at December’s UN climate summit in Copenhagen.

Meeting in Hong Kong on Feb. 12, AGD argued for a “fair and effective global policy solution” on aviation emissions, which were not included in the 1997 Kyoto Protocol and are not managed under any current global agreement. ICAO, which the group supports, is working on its own cap-and-trade plan while the EU plans to include aviation in its ETS from 2012

The four airlines and BAA said any global emissions policy must “offer genuine environmental benefits . . . be operationally and economically sound . . . maintain competitiveness between airlines and avoid market distortions . . .

[and] balance the social and economic benefits of flying with the industry’s responsibility to cut global emissions.”

EC has ‘doubts’ on
Austrian-LH deal

The European Commission
opened its formal investiga-
tion into the privatization
and restructuring of Austrian
Airlines Group, including its
sale to Lufthansa, expressing
“doubts that the price to be
paid by Lufthansa reflects the
market price for what is being
sold.” Its “doubts” also cen-
tered on whether “the Austrian
state has acted as private inves-
tor and whether the restructur-
ing plan . . . is in accordance
with the [EU] framework for
rescue and restructuring of
firms in difficulty.”
Air France KLM, which was
interested in acquiring AAG,
confirmed it filed a complaint
with the EC over the terms of
the deal under which state
holding company OIAG agreed
to sell its 41.6% share to LH.

Meanwhile, in early February
OIAG CEO Peter Michaelis said
he could not “rule out that
possibility” that AAG could
become insolvent if the deal
is disapproved. In late January
the EC authorized what it
called “rescue aid” for AAG in
the form of a €200 million loan
facility guaranteed by OIAG.

Also in January, Alfred Oetsch resigned from the CEO post at Austrian. COO Peter Malanik and CCO Andreas Bierwirth are sharing CEO duties until a successor is named.

In related news, the EC opened an in-depth investigation into LH’s proposed take-over of Brussels Airlines parent SN Airholding because of competition concerns on several routes between Belgium, Germany and Switzerland.

Lufthansa proposed remedies but they were not “sufficiently clear-cut” to alleviate its doubts, the EC said.

Aircraft deferrals,
cancellations rise

The industry downturn and credit crunch are nibbling into manufacturers’ record backlogs and causing them to ponder production cuts. Boeing has lost orders for at least 31 787s so far in 2009, while Airbus reported 12 cancellations for A320 family aircraft against four orders in January.

According to Boeing CFO James Bell, the company has seen cancellations and deferrals “pick up significantly in the first month of this year.” Boeing also is paying a price for Dreamliner delays. Last month LCAL, the Dubai-based lessor established in 2004 to buy and lease 787s, cut its order from 21 units to five.

The 16 cancellations, valued at $2.8 billion, followed on an earlier announcement by Russia’ S7 that it had cancelled its order for 15.

Speaking at a financial
conference in New York last
month, Bell said the manufac-
turer is still planning for “sta-
ble production rates as a base-
line” in 2009 and beyond. But
he added that there is a risk
“that we might have to make
modest production cuts begin-
ning in 2010.”
With capital scarce, the
French government report-
edly is set to lend French banks
€ 5 billion ($6.5 billion) with
the understanding that the
funds will be used to finance
aircraft purchases. Airbus said
it welcomed the move (see
related article, p. 35).

UK ponders limiting
leisure flying

The UK’s so-called “ environment czar” in February raised the possibility of rationing air travel, limiting UK citizens to just “a few vacation trips” abroad by air per year in order to reduce CO2 emissions.

Adair Turner, chairman of the independent Committee on Climate Change that advises UK Prime Minister Gordon Brown, made the proposal before Parliament’s Environmental Audit Select Committee on Feb. 5. In remarks widely reported by UK media, Turner said, “We will have to constrain demand in an absolute sense with people not allowed to make as many journeys as they could in an unconstrained manner.”

Alliances draw concern
in Congress

Stating that he was “increas-
ingly concerned with the
decline of competition in
international markets,” US
House of Representatives
Transportation and
Infrastructure Committee
Chairman James Oberstar
(D-Minn.) last month intro-
duced legislation to require
the US Dept. of Transportation
to review and renew airline
alliances’ antitrust immunity
every three years. The measure
also would mandate a govern-
ment study to determine how
much consumers benefit from
immunized alliances.

Sky Team and Star Alliance currently enjoy immunity, while oneworld members American Airlines, British Airways and Iberia are seeking it. In addition, Continental Airlines, which plans to jump from Sky Team to Star later this year, is seeking immunity for its dealings with Star carriers.

But Oberstar complained that transatlantic competition will be “largely reduced” to just the three alliances if immunity is granted to oneworld.

ASIA/PACIFIC
Report

» Japan Airlines parent JAL Group reported a net loss of ¥ 38. 5 billion ($428 million) for its fiscal third quarter ended Dec. 31, reversed from a ¥ 13. 1 billion net profit in the year-ago period, citing a “downward slide” in demand driven by yen appreciation and “volatile” fuel prices.

Revenue declined 13% to ¥485.7 billion while expenses lowered 1.4% to ¥524.7 billion, leading to an operating loss of ¥ 39 billion, reversed from an operating profit of ¥ 25.9 billion in the year-ago period. JAL projects a ¥ 34 billion net loss for the fiscal year ending March 31.

Ahead of the results

FINANCIAL RESULTS, NEW DEALS, AND REPORTS FROM EVERY CORNER OF THE GLOBE

First 777-300ER for V Australia Airlines was delivered in early February. It is leased from ILFC. V Australia was set to launch service between Sydney and Los Angeles Feb. 27.