Editor’s Comment: Aftershock and adaptability…

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After what has been a horrific year, and with the world potentially on the road to recovery in the fight against COVID-19, it appears that the recovery road might be far rockier for commercial airlines. With some of the big players within the industry, such as Cathay Pacific Airways, introducing new rotation rules for its crew members, which will mean after a 21-day shift, they will then have to self-isolate for two weeks at a designated hotel arranged by the airline, then be medically monitored for seven days, followed by 14 days off work. With a predicted cost of US$52 million per month, how long this will be enforced remains unknown? It’s likely that only the larger airlines will be able to cope with such an onerous financial outlay. Given that many airlines are seeking to reduce costs, Thai Airways has announced that it would be cutting some executive positions as part of its restructuring plan. It will mean that around 240 employees will lose their jobs. However, the airline has sought voluntary redundancies and is currently embroiled with a ‘financial rehabilitation’ process that it has yet to submit to the Central Bankruptcy Court for approval.

While the ‘big boys’ may well be struggling post-pandemic to get their airlines back in the black and operating to a reasonable level, it could be either positive or negative for the smaller regional carriers. The saying ‘size isn’t everything’ may well be appropriate for these LCCs and regional outfits that can be far more responsive and flexible to commercial pressures. With the 737 MAX now cleared to return to service, many operators who struggled to maintain their fleet numbers during the worldwide grounding may well be in the best position of all to return to regular business. With passenger numbers set to increase by the summer, it’s a safe bet that many holidaymakers won’t be going long-haul and may well be relying on regional carriers to get their long-awaited ‘holiday sunshine fix’.

It’s going to be an interesting start to the year to watch the different business plans put into place by the various airline CEOs and discover who will be adaptable enough to finally take advantage of the good times when they finally get here for us all.

Editor’s Comment: Keeping their heads above the clouds

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As we are all patiently waiting to get vaccinated against the COVID-19 virus here in the UK, there are signs of a more positive vibe when taking to people, particularly within the aviation industry. While some may be overly optimistic as to when a ‘new normal’ returns, at least now we know it will.

For those that work within the commercial aviation industry it has been a tough time, with many pilots, cabin crew and airport service workers having to find alternative work and income far removed from their previous careers. Their stories are inspiring and no doubt prove that there’s a common thread that all these people share; that none are sitting around and feeling sorry for themselves.

An example of the strength of character of cabin crew can be demonstrated by Filipino Maurice Maureen Avila, who lost her flight attendant role during the pandemic and has now turned her hand to selling liquefied petroleum gas tanks to her neighbours. With some help from her family, she franchised her business and started delivering the gas tanks on a trolley.

“So instead of my usual trolley as a flight attendant, I started pulling trolleys with gas,” laughs Maurice.

Pilots have also been hit hard by the pandemic as well. Joe Townshend, one of the youngest qualified Captains at Thomas Cook Airlines, lost his job when Thomas Cook Airlines collapsed in 2019. No problem, soon afterwards, he joined Titan Airways. Unfortunately, this was in January 2020, just two months before the COVID-19 crisis struck.

“I remember thinking I can’t believe that this is happening again after such a short period. It had been three months and I was really excited to start a new job. I just couldn’t believe that in such a short time space I would have to look for a new job again. And this time it wasn’t just one company but the whole aviation industry was affected,” Townshend said.

After losing his pilot’s position, Joe still needed to provide for his family. Since the possibility to get back to the cockpit had been significantly curtailed by the travel restrictions, he took a job delivering shopping for a supermarket in the UK.

“I was grateful to have that job and some income.”

However, the former Captain started to look for wider horizons. Alongside the new job as a delivery person, Joe decided to set up his own business in the coffee industry. After nine months of preparation work, he launched his coffee roastery called ‘Altitude Coffee London’ and immediately attracted customers’ attention.

“It was something I had always dreamed of doing for several years and, in the situation when I had no job, I figured why not give myself a try. I spent last year building physical premises and building the brand. Now we are selling to our customers, which has been fantastic. We’ve had a very good response so far, with lots of orders and lots of positive reviews for our products. So, I’m really happy. It’s a fantastic experience,” said Townshend.

We all know the impact that COVID-19 has had on the airline industry and the people within it. I hope that those who loved working within the industry will all be able to return to their ‘dream’ jobs when passengers are allowed back and confidence returns. As many who have found themselves in similar situations to Maurice and Joe, it’s all been character building, and that can only be a benefit to passengers when we next see them in the cabin when all this is over.

Editor’s Comment: Rolls-Royce makes some tough decisions

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Leading UK engine manufacturer Rolls-Royce released a statement on 7 February that it plans to shut down its Civil Aerospace division for two-weeks this summer. The temporary closure is an effort to cut costs within this sector.

“As we continue to manage our cost base in response to the ongoing impact of the COVID-19 pandemic on the whole commercial aviation sector, we are proposing a two-week operational shutdown of Civil Aerospace over the Summer,” Rolls-Royce said in an emailed statement, that was seen by Reuters.

Although the shutdown is still awaiting approval from the company’s unions, Rolls-Royce plans to introduce further cost-cutting measures across its commercial aircraft sector according to the report.

Like many aircraft and engine manufacturers, the company’s profits have been hit hard by the impact of COVID-19, as the demand for new aircraft engines has reduced to a trickle.

The company had previously said that its cash outflow in 2021 would be worse than previously anticipated, as the new COVID-19 variants have prolonged the crisis in the aviation sector.

“More contagious variants of the virus are creating additional uncertainty,” Rolls-Royce said in a trading update published on 26 January. “In this environment, financial forecasts remain highly sensitive to changes in external conditions and, while we are continuing to drive cost reduction, our current forecasts indicate a free cash outflow in the region of £2 billion ($2.7 billion) in 2021.”

However, Rolls-Royce said it had about £9 billion ($9.7 billion) of liquidity it could make use of and that the company was “confident that despite the more challenging near-term market conditions we are well-positioned for the future”.

Despite the global vaccine programmes now taking place, it’s clear that if aerospace giants such as  Rolls-Royce predict that 2021’s recovery is still some way off yet, what does it mean for those myriad of smaller aviation companies – will they be able to survive for another year?

 

 

Editor’s Comment: Bagging a bargain airline…

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British Airways and Iberia is moving ahead with the purchase of Air Europa despite the impact of COVID-19, although the pandemic has cut the purchase price of the airline by 50%. Iberia, which will buy Air Europa on behalf of its parent International Airlines Group (IAG), will now only pay €500 million for its Spanish rival, which is a reduction of €1 billion in cash to which all parties agreed when the deal was first revealed in November 2019. Additionally, Iberia will defer payment until the sixth anniversary of the acquisition’s completion. Sources within IAG state that the contract will be completed by late 2021.

The contract had initially been due to be completed last year, but COVID-19 and a bailout of Air Europa by the Spanish government prompted the IAG to revise its conditions of the planned takeover with Globalia, the tourism conglomerate that owns Air Europa.

“This transaction is a great effort by all of us and is the best way to recover tourism, transport in Spain, and the Madrid hub,” commented Globalia CEO Javier Hidalgo.

According to IAG CEO Luis Gallego, who took over from Willie Walsh in September last year, belonging to a large group is the “best guarantee” to overcome current market challenges. “I am pleased that we have reached agreement with Globalia to defer payment until well into the expected recovery in air travel following the end of the pandemic and when we expect to be realising significant synergies resulting from the transaction,” he said.

IAG said it continues to believe that the Air Europa acquisition remains strategically important for the future of the group and positions the company to benefit from growth opportunities as the industry recovers.

The amended deal remains conditional on what IAG described as the “satisfactory negotiation” between Iberia and Spanish state-owned industrial holding SEPI regarding non-financial terms associated with loans provided by SEPI.  The acquisition also needs the approval of the European Commission.

It is a brave move by IAG, but also shows faith within the industry too. After months of doom and gloom, with the airlines asking for assistance and help from their governments, it appears that for some, its time for them to help themselves. There may well be a few bargain airlines that can be snapped up at a reduced price; it might well be a better alternative than collapsing. For others, such as Norwegian, it’s a major reassessment of their services.

While the opportunity for recovery might now be in sight for the commercial aviation industry, when we get there, it might well be very different with some operators under new management, while others will just be a memory.

Norwegian to focus on a strong European network

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Norwegian’s Board of Directors has today outlined a simplified business structure and dedicated short haul route network. With this plan, Norwegian can build a robust and solid company that will attract investors and continue to serve new and existing customers.

Norwegian has long been recognised as an industry leader in low-cost travel, winning numerous awards. The company will build on this foundation, focusing on its core Nordics business, operating a European short haul network with narrow body aircraft. The airline will continue to meet its customers’ needs by offering competitive fares across a broad range of domestic routes in Norway, across the Nordics and to key European destinations.

“Our short haul network has always been the backbone of Norwegian and will form the basis of a future resilient business model,” said Jacob Schram, CEO of Norwegian.

The current plan is to serve these markets with around 50 narrow body aircraft in operation in 2021 and to increase that number to around 70 narrow body aircraft in 2022. Furthermore, Norwegian targets to reduce its debt significantly to around NOK 20 billion and to raise NOK 4 – 5 billion in new capital through a combination of a rights issue to current shareholders, a private placement, and a hybrid instrument. The company has received concrete interest in participation in the private placement. Norwegian has recently reinitiated a dialogue with the Norwegian government about possible state participation based on the new business plan.

“I am pleased to present a robust business plan today, which will provide a new start for the company. By focusing our operation on a short haul network, we aim to attract existing and new investors, serve our customers and support the wider infrastructure and travel industry in Norway and across the Nordics and Europe,” said Schram.

The COVID-19 pandemic has profoundly affected the entire aviation industry. Travel restrictions and changing government advice continue to negatively influence demand for long haul travel, and Norwegian’s entire Boeing 787 Dreamliner fleet has been grounded since March 2020. Future demand remains highly uncertain. Under these circumstances a long-haul operation is not viable for Norwegian and these operations will not continue. The consequence of this decision is that the board of directors of the legal entities employing primarily long-haul staff in Italy, France, the UK and the US have contacted insolvency practitioners. Norwegian will continue to assess profitable opportunities as the world adapts and recovers from the impact of COVID-19.

“Our focus is to rebuild a strong, profitable Norwegian so that we can safeguard as many jobs as possible. We do not expect customer demand in the long-haul sector to recover in the near future, and our focus will be on developing our short haul network as we emerge from the reorganisation process, said Schram. “It is with a heavy heart that we must accept that this will impact dedicated colleagues from across the company. I would like to thank each one of our affected colleagues for their tireless dedication and contribution to Norwegian over the years.”

Editor’s Comment: Revise, rethink and adapt for 2021

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A recent announcement by Airbus stated that the aircraft manufacturer delivered just 556 commercial aircraft in 2020 – that’s 34% fewer aircraft than in 2019.

Inevitably, the impact of COVID-19 took a significant toll on planned deliveries, but Airbus said that the lower figure was in line with what it called an ‘adaptation plan’ set in place soon after the COVID crisis took hold. Airbus received new orders for 383 aircraft last year and registered a net order count of 268 after a number of operators cancelled their orders.

The current star of the Airbus family, the A220, saw deliveries drop from 48 to 38 in 2020 while A320-family deliveries dropped from 642 to 446 and A330 orders fell from 53 to just 19. The larger models within the Airbus fleet faired little better.

In an effort to continue supplying aircraft, last year Airbus adopted an e-delivery system that allows customers to take aircraft while reducing the need for acceptance teams to travel. A number of aircraft manufacturers have introduced this process to keep revenue coming in and completed airframes going out. Airbus said that e-deliveries accounted for 25% of all aircraft shipments across its commercial catalogue in 2020.

“Working hand-in-hand with our customers allowed us to navigate a difficult year,” said Airbus CEO Guillaume Faury. “The Airbus teams, customers and suppliers truly pulled together in the face of adversity to deliver this result. We also thank our partners and governments for their strong support to the sector. Based on our 2020 deliveries, we are cautiously optimistic as we look into 2021, although challenges and uncertainties remain high in the short term.”

It’s clear that Airbus along with other aircraft manufacturers will have to continue to adapt the way it supplies its aircraft to customers, but at least it has adapted despite the technical challenges. For all manufacturers, as they enter 2021, it is still clear that they must constantly revise and adapt their ways of doing business.

Editor’s Comment: Has the turning point arrived…?

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The New Year began with media outlets in the UK hailing the approval of two vaccines in the fight against COVID-19 and the widespread introduction of an immunisation programme for the British population. While it’s still early days it may well be the start of the long road to getting back to a new ‘normal’ not just here in the UK but globally.

Perhaps mirroring this new positive outlook, Boeing’s 737 MAX returned to service after its grounding in March 2019 with the first commercial flight on 29 December, from Miami to New York LaGuardia Airport, performed by American Airlines. This flight followed the return of the MAX into service with Aeromexico and Brazil’s Gol airlines.

Surprisingly, the American Airlines flight was performed with little fanfare and was sparsely covered across the wider media, which is perhaps how it should have been, given the sensitivity of the tragedy that occurred in 2019.

It’s now a case of watching how other operators around the world re-introduce the MAX back into their ranks and how long this will take given the reduced passenger numbers and the need for MAX pilots to undergo an FAA-mandated and approved training. This will include computer-based training, classroom briefings and time on a 737 MAX simulator. It’s a long list that all MAX pilots will have to undergo prior to getting back into the cockpit. How many pilots will complete the training remains to be seen, given that more than one airline slashed its flight crew numbers in order to reduce salary costs so they could remain afloat in 2020.

The first quarter of 2021 looks set to be extremely busy for those airlines who currently have a fleet of Boeing 737 MAX aircraft stored on taxiways. It’s a case of CEO’s deciding when the time is right to get the jets back into the air and ensure that they are full of passengers when they do. But there’s the need to get each aircraft certified, which the FAA is retaining the authority to issue airworthiness certificates for all new build MAX aircraft that have been manufactured since the grounding. Those that were built prior to the accidents are currently undergoing modification and upgrading of their software systems. It’s going to be a fine balancing act and a challenge but hasn’t the last year away from commercial aviation been the same for everyone?

It appears that there’s finally a light at the end of the runway and we’re all now making our way towards it.

Boeing 737 MAX returns to service in the US

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On 29 December American Airlines became the first operator to resume service with the Boeing 737 Max since its grounding in early 2019. The flight occurred between Miami to New York LaGuardia Airport. This flight flight followed the return of the MAX to service with Aeromexico on 18 December and Brazil’s Gol on 9 December.

American Airlines stated that it would be taking a phased approach to return to service all 25 of the MAX jets so far delivered. The airline’s flight schedules show two flights a day—consisting of the round trip between Miami and New York—through 4 January. The airline added that it expects to gradually return more aircraft into revenue service this month, reaching 36 departures from its Miami hub depending on the day of the week.

American has 25 MAX 8s of an order for 100 placed in 2013.

“We’ve implemented rigorous processes to ensure that every plane in the air is safe and our pilots, flight attendants, team members, and customers are confident in the return of the 737 Max,” the company said in a statement. “This includes investing in extensive training and plans to fly the aircraft before it returns to commercial use. Our approximately 2,600 Boeing 737 pilots will complete the FAA-mandated and approved training, which includes computer-based training, classroom briefings, and dedicated return to service training in a 737 Max simulator.”

The US FAA will retain its authority to issue airworthiness certificates and export certificates for all new 737 MAX aircraft that have been manufactured since the grounding and will perform in-person, individual reviews of each aircraft.

Editor’s Comment: A crisis brings out the best in people and nations…

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It’s a familiar idea, but it’s true. In a crisis, some individuals will do nothing while others will step up and take action. On a grand scale, this applies to how COVID-19 has impacted the world.

As well-deserved praise is heaped upon those individuals working in hospitals, the crisis has also made some long-term foes reassess their ingrained distrust of their neighbours and the pandemic has, in some ways, brought us closer together.

Nowhere has this been more apparent than in the Middle East with the announcement that Bahrain’s Gulf Air has become the latest airline to signal an intention to forge ties with Israel’s El Al.

The signing of another memorandum of understanding in the region between airline operators during an official visit by Bahraini representatives to Israel will allow discussion to begin on codeshare and other co-operation possibilities. Although starting small with the launch of twice-weekly Gulf Air flights to Tel Aviv beginning on 7 January, the potential to expand regional routes between the two countries and neighbouring nations is now a real possibility.

It’s been a long hard road in the Middle East after decades of hatred and war but as situations between countries normalise and political, commercial and civil aviation agreements are reached between Bahrain and Israel then there’s potential that others will see the opportunities and benefits that come with improving regional commercial travel in the Middle East.

As 2020 draws to a close and 2021 hopefully puts one of the world’s worst pandemics behind us, it might also give nations time to reflect and perhaps adopt a more positive attitude towards their neighbours. If or when this does occur, air travel will take the first tentative flights to destinations that would have seemed unthinkable a few years ago.

Editor’s Comment: Counterfeit COVID – playing a dangerous game

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Russian airline Pegas Fly recently cancelled a flight from Moscow to China after COVID-19 tests of almost 200 passengers were found to be identical.
Chinese officials raised the issue through their embassy in Russia. “On 25 November, when our embassy checked the results of nucleic acid tests and serological tests for antibodies on passengers on Moscow–Zhengzhou flight EO429, Pegas Fly, it was found that the results of a serological test for antibodies in more than 190 passengers on the flight are completely the same,” the Chinese authorities revealed on WeChat. “There is no way to guarantee the reliability of these tests, and as a result, passengers were not able to get a ‘health code’ to board.”
When questioned, the laboratory in charge of the tests was unable to explain the identical test results. Pegas Fly was asked by the authorities to run new tests and accommodate the passengers stranded in the meantime.
China’s CAA had already suspended flights from Moscow to Zhengzhou operated by Pegus Fly, formerly known as Ikar, due to passengers found with coronavirus. China’s embassy also warned that some passengers were able to forge negative COVID-19 results to fly home from Russia, according to the Moscow Times.
As Europe’s airlines such as Wizz Air slowly begin implementing their own tests to kick-start the travel industry, and as governments across Europe struggle to come up with a unified plan, is the Pegas Fly incident a sign of potential challenges that we are all going to face. While it’s easy to look on Russia’s and China’s industry as potentially lacking the ‘medical security blanket’ that many in the West believe is infallible, there are always those that will always seek to abuse the rules to seek a profit. It’s going to be a highly competitive airline market out there in 2021, it’s a case of whether there are enough measures in place to ensure that such incidents don’t occur in the West.