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.

Editor’s Comment: Return of the MAX…

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The FAA has formally ungrounded the Boeing 737 MAX but it’s going to be some time before we see the aircraft back in the sky in the numbers we are used to. It’s been 20 months since the grounding occurred and the focus now shifts to airlines, in terms of who will be first? It’s likely to be a US operator, but it’s simply a case of is there the passenger demand to fill the seats on these aircraft returning to the ramp?

If there is, operators are going to have to ensure that each MAX undergoes an Operational Readiness Flight, according to Service Bulletin 737-00-1028. Due to the complex nature of the grounding, this will be far more complicated, than normal with a multitude of additional procedures needing to be signed and certified.

The major work for all operators will be the installation of the updated software that will change how the MCAS works. This controversial system has been the source of attention and debate throughout the MAX crisis.

The ‘new’ MCAS will rely on data from two AoA sensors, as opposed to one. If the data is erroneous and disagrees by 5.5o, the Speed Trim System, including the MCAS, will be disabled for the remainder of the flight. Both pilots will be warned of the disagreement by the AoA DISAGREE alert and the disablement of the STS. Additionally, the MCAS will only be able to fire off once per one event, as opposed to multiple times in the past. The limited magnitude of the nose-down movement will “preserve the pilot’s ability to control the aircraft’s pitch by using only the control column,” stated the FAA’s Airworthiness Directive. An extra layer of redundancy is added by the Flight Control Computers cross-monitoring each other, including the fact it will now detect rogue commands, including trim stabiliser commands.

The FAA has also demanded that operators change the horizontal stabiliser trim wire routing the installations to prevent a short-circuit in the wiring, which could cause a stabiliser trim runaway.

In total, the authority believes that installing the new software on the FCC, the revised MAX Display System and the stabiliser wiring modifications will cost up to US$10,760 per aircraft, including parts and labour.

So, will we likely now watch the rush, as airlines quickly pull their mechanics off furlough and set them to work on the vast stored fleets of MAX aircraft currently parked across the US?

Editor’s Comment: Don’t forget the little guys

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In a dispute with the government of the Netherlands, pilots of KLM Royal Dutch Airlines (KLM) finally reached an agreement on prolonged wage cuts for the next five-year period, until 2025. The agreement cleared the way for the Dutch airline to receive the government’s financial aid package of €2.4 billion.

Speaking to local media, Willem Schmid, the Chairman of the VNV pilots’ union, said that only after the agreement was reached, was the Dutch government able to provide the financial support which was crucial for KLM to deal with the COVID-19 crisis.

“Calm needs to return to our company,” announced Schmid.

The government of the Netherlands froze €3.4 billion-worth of financial aid after the trade unions of the airline refused to sign a five-year agreement related to stricter terms of pilot wage cuts on 31 October.

The trade unions of KLM refused to sign the agreement after the government’s announcement that wage cuts for the company’s employees would be extended to at least 2025.

In early October, after KLM had submitted its restructuring plan, the trade unions of the operator agreed to 20% wage cuts, but only for two years.

In June, the Dutch government provided KLM with a €1 billion governmental loan as a minor part of a €3.4 billion financial package.

After signing the agreement, the airline would receive the other part of €2.4 billion in guarantees for bank loans. To receive the whole aid package, KLM was asked to commit to cut costs by 15% and improve its sustainability.

A report on KLM’s finances for Q3, show a loss of €234 million due to the drop in passenger demand related to the COVID-19 pandemic.

Even though the world’s media are now reporting on a possible cure in the fight against COVID-19, the repercussions of what devastation the pandemic brought to the commercial airline industry are still being felt. When the giants within the industry such as KLM are seeking support, a thought, and assistance has to be provided to the smaller regional carriers as well. They may not compare in size to the likes of British Airways, KLM and American Airlines, but they’re just as vital and we’d be lost without all of them. So, governments dig deep and provide support. We might, just might, be seeing a light at the end of the runway.

Editor’s Comment: Taking a chance, or taking the easy option?

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Mitsubishi Heavy Industries has announced that it is suspending the development of its SpaceJet M90, to reduce financial losses. The Japanese group announced the move as part of a readjustment of its medium-term business plan, revealing it will continue to work on the type certification paperwork with the possible intention to restart the programme at a later date. The reason for the decision had been blamed on the impact of COVID-19 which has devastated the commercial aviation industry.

In October, Mitsubishi Aircraft announced that it had suspended plans to conduct flight testing of the 88-seat M90 twinjet at Moses Lake, Washington, and had also stopped its development work on the 76-seat M100. At the time, MHI did not reveal a revised schedule for the completing certification on the M90, which was already behind schedule since its launch in 2008.

“Given the current development status and market conditions, we have no choice but to temporarily pause the majority of SpaceJet activities, except for type certification documentation,” said MHI in its ‘2021 Medium-Term Business Plan’ running through 2023. “We will work to review where we stand, make improvements, and assess a possible program restart,” it stated.

MHI predicts that the commercial aviation industry will only begin to recover in late 2024. It said it will remain active in the aerostructures sector through a plan to “increase production efficiency and drive forward new technology development to participate in future global aircraft programs.”

In contrast to MHI, during a podcast interview this week with Air Finance Journal, Embraer’s Rodrigo Silva e Souza, who is Marketing Vice President of the Brazilian manufacturer’s Commercial Aviation division, has plans to introduce a new twin-turboprop aircraft to respond to airlines’ need to reduce operating costs during pandemic conditions. He said that the new design could be ready to enter service in 2027.

On 29 October, Embraer released conceptual images of what initially looked like a revised 78-seat E175, with turboprops in place of turbofans. In a personal tweet referencing the same design, Embraer Commercial Aviation CEO Arjan Meijer referenced it in terms of “check out how we intend to emerge from the pandemic.”  Embraer had stated that it has plans to develop and introduce a new turboprop to its airliner range. In a later interview, Silva revealed that work on the new design will be given greater priority next year and that Embraer is already in talks with several undisclosed business partners, who he implied would have a risk-sharing role in the venture. Silva believes that domestic routes may recover by 2023, so bolstering the case for turboprop aircraft within its product range.

It’s a gamble for both aircraft manufacturers with each taking a different path, we’ll only know once the ‘world is back to normal’ who’s made the wiser decision?

Editor’s Comment: A far longer road to recovery?

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Europe’s commercial aviation leaders have urgently requested governments to ensure a consistent and coordinated approach to dealing with COVID-19 safety measures, and to replace the 14-day quarantine requirements with a more effective process for testing passengers and crews. Speaking at the Flight Safety Foundation’s International Air Safety Summit, they revealed the sector is facing a critical struggle for survival which is being exacerbated by the confusing variations in national polices which are continuing to undermine plans agreed by the European Commission.

“We’re in a very complex environment with high political tensions as the EC tries to enforce leadership and [European] states continue to do their own thing with unilateral quarantines,” said Montserrat Barriga, Director-General of the European Regions Airline Association (ERA). Along with Thomas Rynaert, Managing Director of the Airlines for Europe group and Eurocontrol Director-General Eamonn Brennan, she complained that the regulatory fragmentation has continued despite an agreement made on 13 October by European Union (EU) governments to accept a European Council recommendation for a coordinated approach to cross-border travel restrictions.

Brennan stated that the announcement was “a good first step”. But he acknowledged that airlines and airports are not satisfied, fearing that confusing and constantly changing restrictions will continue to deter passenger numbers. “They are not happy because the agreement doesn’t go far enough,” he told the summit. “It’s a typical European decision that recommends and advises. The industry wanted a strong role for the EC, quicker change, and with a stronger emphasis for states to make changes. We’re very disappointed by the reaction of some governments because they are not seeing that the risk of COVID stems from community transmission [within countries]. They still see aviation as the enemy, and you see the same thing in the US.”

Europe’s air transport sector is now not expected to recover until 2024 according to Eurocontrol. Although ERA Association has reported that traffic levels and load factors had improved slightly during early summer, the unilateral restrictions put in place later in the year and at short notice ruined any customer confidence. Rynaert stated that, “just one day after the European Council decided to take a coordinated approach to opening borders, national governments decided to do things differently and so we had a patchwork of national travel restrictions.”

Eurocontrol has complained that a lack of political leadership in Europe is stopping any significant recovery within the commercial aviation sector which could be achieved in light of the agreement over the next steps between EASA and the European Centre for Disease Prevention and Control.

“Some politicians are just not taking this seriously,” Rynaert complained. “The crisis is having a much wider impact than just on the aviation sector. It’s hitting tourism and local economies hard, and yet some politicians just don’t seem to get that. Our main problems are political and social issues, not technical issues.”

Barriga has stressed the situation could get worse before any sort of recovery. She revealed that several ERA member airlines are “in pre-receivership situations,” meaning that they are at risk of going bankrupt. “Some are waiting for new capital injections, but investors are very cautious because they don’t think recovery is around the corner,” she said.