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.

Editor’s Comment: Never say never to Norway

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As Norwegian Air Shuttle struggles to remain a viable carrier, a team led by Erik G. Braathen, who was one of the original investors of the airline, intends to launch a new carrier based in Norway.

According to a press release dated 7 October, the airline is due to start operations in 2021.

“We are passionate about Norwegian aviation. However, we do not believe that the market will return to its previous state before the corona pandemic hit. We are using all our experience and knowledge to build a new Norwegian airline, adapted to the new economic reality and the passengers’ demand,” said Braathen, the leader of the new air carrier management team.

It’s not mentioned what type of aircraft will equip new airline’s fleet. According to the statement, the new Norwegian carrier will operate either five Boeing 737-800s or five Airbus A320s.

The airline plans to expand up to 400 employees by 2022 – all the onboard crew will be covered by Norwegian collective labour agreements, stated the press release.

“We believe it is the right time to start a new airline. We will be able to lease modern aircraft for a reasonable price, hire top-tier staff, and build a digital company with less complexity to lower cost and achieve profitability with fewer aeroplanes. We will be offering passengers competitive prices and an efficient and easy digital journey from ticket purchase to destination arrival,” added Braathen.

Braathen had been a Board Member of Norwegian Air Shuttle from 2002–2009. He had also been a Chairman of the Board from 2004–2009.

At a time when airlines are struggling and falling by the wayside, the news of the new airline, not rising from the ashes of a failed operator but adding to a nation’s home fleet can only be seen as a positive sign for the future.

Editor’s Comment: Do you really CARE?

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The US Congress failed to get an extension of the Coronavirus Aid, Relief and Economic Security (CARES) Act which will result in the involuntary furlough of around 32,000 employees from United and American Airlines which is due to take effect on Thursday.

A letter presented to employees of American Airlines by CEO Doug Parker expressed hope that lawmakers would be able to negotiate a deal “within the next few days” and said efforts were underway within the Senate and House of Representatives to pass a standalone CARES Act’s Payroll Support Program (PSP).

The fate of those working for United Airlines was little better, although pilots had already agreed a deal to avert an immediate furlough of 1,747 aircrew on Thursday. Originally, it was intended to furlough around 2,850 pilots by 30 November. It was in early September that United management informed employees of its intentions within a memo that outlines the breakdown of the impact on various employee groups. It was clear that flight attendants were to suffer the greatest impact with the loss of 6,920 positions. Flight operations, which includes pilots, will see the loss of 2,850 jobs, while airport and technical operations will suffer around 4,300 losses. United plans to furlough some 1,400 managers and administrative personnel, 430 contact centre employees, 320 catering staff and 180 network operations personnel.

So far, around 12,500 American Airlines staff have taken voluntary departure packages and a further 11,000 will take involuntary leaves of absence later this month. Of the additional 19,000 involuntary layoffs, 17,500 involve furloughs. Of the 27,000 flight attendants American employed prior to COVID-19, 2,700 have left the company, 4,500 will take voluntary leave this month, and 8,100 will be on furlough. Of the 15,000 pilots the company employed before the pandemic, 1,200 have quit, 700 will take voluntary leave this month, and 1,600 will be on furlough.

TrueNoord acquires two Embraer E195s from Azul with leases attached to Portugália

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TrueNoord, the specialist regional aircraft lessor, continues its growth path with the addition of two Embraer E195 aircraft on lease to Portugália. Both aircraft, MSN19000407 and MSN19000429, were purchased with leases attached from Brazilian operator Azul.

The project was financed by TrueNoord’s revolving warehouse facility underwritten by Citibank, Société Générale and Royal Bank of Canada. Legal counsel for TrueNoord on the acquisition was CMS, with Milbank advising on the financing. With this acquisition, TrueNoord completes another significant milestone and reaches a fleet of 50 modern regional aircraft.

Garry Topp, Sales Director for TrueNoord responsible for the Americas, said of the project: “This was a complex transaction carried out during the COVID-19 crisis.  It was conceived, negotiated and executed by people working remotely on all sides. There was a real commitment to get it done and everyone involved showed great creativity, patience, discipline and teamwork to achieve success.”

Anne-Bart Tieleman, CEO of TrueNoord, added: “Considering the market disruption caused by the COVID-19 crisis and the pressures this has created across the aviation industry, it is a credit to the team at TrueNoord, Azul and Portugália that they remained focused and worked together to close this multifaceted transaction. We appreciate the support of our shareholders and banks in these difficult times as we plan for the future, and we are proud to welcome Portugália to our business as a new lessee.

On behalf of Azul, its CFO, Alex Malfitani, said: “This transaction shows that there is interest in the market for assets such as the Embraer E195 even with the challenges that the aviation industry is facing amidst the pandemic. We feel fortunate to have valuable partners to count on while facing such an unprecedented crisis. Truenoord has come to us with creative and practical alternatives that generate value to our business, and we look forward to continuing to develop our relationship with them.”

Valter Fernandes, Managing Director of Portugália, commented: “These have been extremely challenging times for the aviation industry and due to a great deal of effort and endurance from all involved, we are delighted to join TrueNoord with two ERJ195s and look forward to building our relationship at the highest level. It is with great pleasure and enthusiasm that we embrace this new venture.”

Portugália Airlines is a Portuguese regional airline. It is a subsidiary of TAP Air Portugal and operates scheduled international and domestic services from its bases at Lisbon Airport and Porto Airport under the brand TAP Express. Renovation of its regional fleet has been a major initiative for the past five years and TAP Express operates the Embraer 190 and 195, as well as the ATR 72-600, across its route network. These aircraft benefit from low emission characteristics and provide the airline with significant savings in fuel consumption.

Boeing 737 MAX gains first order for 2020 from Enter Air

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Boeing and Enter Air have announced the Polish airline is expanding its commitment to the 737 family with a new order for two 737-8 planes plus options for two more jets.

An all-Boeing operator and Poland’s biggest charter carrier, Enter Air began operations in 2010 with a single 737 aeroplane. Today, the airline’s fleet includes 22 737 NGs and two 737 MAX aircraft. When this new purchase agreement is finalised it will mean Enter Air’s 737 MAX fleet will rise to ten airframes.

Enter Air and Boeing have also finalised a settlement to address the commercial impacts stemming from the grounding of the 737 MAX fleet.

Editor’s Comment: Ryanair’s ready to adapt and remain

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Ryanair, the Dublin-based LCC, has revealed that its bookings had “weakened over the last ten days” which it claims has been due to the uncertainty over the current advice given about COVID-19. The carrier revealed that due to the drop in bookings, at what would normally be one of its busiest periods, it has decided to cut flight capacity by a fifth in September and October, as it believes further travel restrictions will be introduced in some European countries.

While the drop in forward bookings is disappointing for any airline, given the current confusion across Europe, with each respective government offering differing advice as to how to deal with the pandemic and, a growing number of nations requiring holidaymakers to undergo a two-week quarantine when they return home, it’s no wonder people are apprehensive about travelling.

What could be looked upon by some observers as Ryanair overreacting, I view as a precautionary and prudent move by the airline? The LCC has proved itself flexible enough to react to any challenge it has faced of late, from the delayed delivery of its massive 737 MAX order, through to a Europe-wide ban on air travel at the start of the pandemic.

Contrary to many other airlines, Ryanair has publicly stated that the reductions in the frequency of flights will not impact any jobs.

The 20% reduction will be focused on Spain, France and Sweden but it’s anticipated that further countries may be added to this list.

Ryanair is proving that it can adapt to what is an extremely difficult time for the industry, let’s just hope that others can too.