Home' Asian Aviation : AAV Feb 2015 Contents 4 AsianAviation | FEBRUARY 2015
he beginning of the year saw ASEAN Open
Skies start in earnest, but headlines were
dominated by yet another airline crash, with
AirAsia flight QZ8501 disappearing over
the Java Sea, enroute from Surabaya to Singapore.
Both black boxes have been discovered and
the exact cause of the crash will no doubt become
clearer in due course. Preliminary reports suggest
the aircraft made a rapid climb, two-to-three times
what would be regarded as normal for a commercial
aircraft, possibly leading to an aerodynamic stall.
The Indonesian Government’s response was, to put
it mildly, confusing. Whatever the eventual outcome
of the investigation, Indonesia’s regulatory apparatus
has been shown to be chaotic.
Although it had no bearing on the crash, there was
confusion about how, or even if, AirAsia had a permit
to fly the route on that particular day. Being Indonesia,
it would not be totally surprising if somewhere along
the line, an exchange of money took place.
As Asian Aviation went to press, the launch
of Indonesia AirAsia X (with flights from Bali to
Melbourne) was being held up by permit issues. This
was partly due to the Australian authorities wanting
to take their time examining safety issues after recent
events, but the service was due to launch a few days
before QZ8501 took off, with the postponement put
down to “an unforeseen delay in getting approvals.”
In the wake of the QZ8501 crash, Indonesia’s
Government implemented a crackdown, suspending
various officials and 61 flights from five airlines.
It also set a minimum price level for airline tickets,
adding yet another regulatory burden that will do
nothing to improve safety. Regardless of the outcome
of the crash investigation, this event should be taken
as a wake up call to the regions governments and
regulators. Infrastructure and resources in areas such
as air traffic management, safety and regulatory
oversight need a much higher priority.
Staying in Indonesia, new Garuda CEO Arif
Wibowo has wasted no time in stamping his mark,
introducing a ‘Quick Wins’ restructuring campaign to
try and revive the carrier’s financial fortunes.
Arif joins from Citylink, the carrier’s LCC arm, and
it will be interesting to see how much budget carrier
mentality he brings to his new role.
Outgoing CEO Emirsayah Satar suggested last
year that, one day, Citilink would operate all the
airline’s domestic routes.
Garuda said the drivers for the restructuring
included the “weakness of the Indonesian Rupiah
against the US dollar, fuel costs which have reached
an all-time high, and regulatory policies that have not
been conducive to the industry’s growth.”
The first and last of these are certainly factors that
are largely beyond the airlines control — although
currency hedging can help mitigate the former. But
high oil prices? At the time of writing, the global
benchmark Brent Crude was trading below US$50
per barrel. Hedging may well mean that Garuda
isn’t seeing the full benefit of this, and of course a
significant proportion of the savings will effectively be
handed back to the passengers in the form of lower
fares. But the overall effect will drive up demand for
air travel — if it persists.
Various commentators at the World Economic
Forum Annual Meeting in Davos in January were
warning that oil prices were below their natural rate,
driven down by hedge funds that were covering long
positions. Many agreed that a more natural level
would be around US$70-to-US$80 per barrel, with
some warning that the drop off in investment caused
by the sudden downward shift could see a return to
three-digit prices by as soon as the end of the year.
Admittedly, these people generally seemed to come
from oil-producing nations.
Elsewhere in this issue, we look at how the
manufacturers performed in the Asia-Pacific in terms
of net firm orders in 2014. Basically, Airbus won
Embraer performed strongly, and at the beginning
of the year made a breakthrough in the potentially
huge Indonesian market, with the sale of two E-195s
to Kalstar Aviation.
Lion Group is known to looking at something to
fill the gap between its narrowbody and ATR fleet,
and VietJet is also looking at regional aircraft for
second and third tier airports. The company sees
the Philippines and Malaysia as other opportunities,
especially given the upheaval at Malaysia Airlines.
The latter has also announced a new CEO,
Christoph Mueller, who recently performed a
miraculous turnaround at Irish flag carrier Aer Lingus.
Mueller had one of the toughest jobs in the airline
industry. He’s now got what many would regard as
the toughest. ✈
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WAY IS UP!
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