United Airlines steals a march on Singapore Airlines

Courtesy Alamy

Courtesy Alamy

United Airlines has stolen a march on Singapore Airlines (SIA) when it announced its launch of a non-stop service between San Francisco and Singapore in June. This will be the first non-stop service between Singapore and the United States after SIA terminated its services to Los Angeles and New York in 2013. United`s announcement came soon after SIA made known its plans to resume non-stop services in 2018, if not earlier in 2017.

You may wonder why United has moved so quickly to fill the void left by SIA when the poor loads experienced by the latter contributed to its suspension of the non-stop services. Apparently the passenger traffic between the two markets has since improved and is growing by an average of 4 per cent annually. Of course, this is good news for Singapore Changi Airport, which is hoping that United could potentially bring more tourists to Singapore. Understandably, it does not matter which airline brings in the load. And since it is believed that capacity will help grow the traffic, then United has made the right move while SIA waits. The business climate changes so fast that the right time is as good as anybody`s guess.

For SIA, it is an opportunity cost. Or, an opportunity lost. When it terminated its non-stop services to New York, regional rival Cathay Pacific moved in quickly to fill up the void, flying non-stop between Hong Kong and New York. That also pits Hong Kong International Airport, which is only some four hours away from Changi, as an Asian gateway for onward connections. It also provides opportunities for Middle Eastern airlines, notably Emirates, Qatar Airways and Etihad Airways, to better compete to carry more traffic through their Gulf hubs as they expand their connections within Asia and services direct to the US.

Changi`s euphoria over United`s decision is understandable, since connections are key to hub operations. With a non-stop link between Singapore and San Francisco, it will mean more regional traffic feeding into Changi to take advantage of the trans-Pacific connection and the support of United`s extensive network within the US. United vice-president of Atlantic and Pacific sales Marcel Fuchs said: “Those arriving in San Francisco will have dozens of options to connect to other cities across the Americas.” Changi Airport Group senior vice-president for market development Lim Ching Kiat echoed the same sentiment, adding that it will strengthen Changi’s position as the preferred gateway between South=east Asia and North America.

United’s domestic network may be its edge over SIA when the time comes for the latter to mount its planned non-stop services. But SIA can always rely on its partnership links with US carriers such as JetBlue, not excluding too United which is a Star Alliance partner. And SIA has always competed on the strength of its superior service. For the long haul, especially for one that flies such a great distance, it is an important customer consideration.

United’s non-stop flight from San Francisco to Singapore is an estimated 16-hour-20-minute journey. Singapore’s erstwhile non-stop flight in the same direction but from Los Angeles to Singapore clocked 17 hours 30 minutes, and from New York (Newark) non-stop to Singapore, 18 hours or longer. United will be flying the B787 Dreamliner for the new non-stop route. In the past, SIA was operating the Airbus A349-500 but will be converting seven of 63 A350-900s on order to the A350-900ULR variant for the resumed services – the reason for the delayed plan. Referring to the new variant aircraft at the time of its announcement to resume the services, SIA chief executive Goh Choon Phong said: “We are pleased that Airbus was able to offer the right aircraft to do so in a commercially viable manner.”

Perhaps too, little did SIA suspect that United would spring ahead to operate its service using the Dreamliner. According to travel magazine Conde Nast, the Boeing 787 could possibly be the most comfortable aircraft by far to travel the ultra-long distance of 8,446 miles, said to be designed to limit jet lag. Among the reasons cited: the 787 has a better air filtration system and more humidity than comparable planes, so you’re less likely to land with chapped lips or dried skin and nasal passages; the windows are larger so the cabin looks brighter and roomier; and the ride is promised to be smoother and quieter. United vice-president Ron Baur said: “Our passengers will arrive less fatigued, and most experience a significant reduction in jet lag,”

We will have to wait to see what SIA has up its sleeves. There may be surprises yet. SIA’s previous services were configured as an all-business-class flight, and while the target market is still very much corporate and business travellers, SIA is not revealing details about how many seats the new business class cabin will have. However, weight limitations are likely to suggest more leg room, if not fewer seats.

High fuel costs were a major reason why SIA suspended its previous non-stop operations. Fortunately for United, today`s low oil price favours its early move and affords the American carrier precious lead time to consolidate its market. Until SIA resumes its non-stop operations, the game belongs to United.

This article was first published in Aspire Aviation titled “United Airlines vs Singapore Airlines: The race for non-stop US-Singapore connections”.

Will Boeing’s performance continue to surprise?

Courtesy Seattlepi/Associated Press

Courtesy Seattlepi/Associated Press

YET again, Boeing the company has surprised aviation observers with better-than-expected second quarter performance – in spite of recent problems with the B787 Dreamliner jet as many of them are apt to point out. Really, should they even be that surprised?

Boeing reported a 13-per-cent increase in March-to-June profit (US$1.09 billion) on the back of growing sales of commercial airplanes and military equipment, fuelled by demands from Asia and the Middle East. Following the lift of the global order that grounded the Dreamliner pending investigations of the fire hazard posed by the plane’s lithium-ion batteries, Boeing delivered 16 of the jet in the second quarter. This, together with the growing sales of the B737s and B777s along with military equipment – again, in spite of cuts by the Pentagon on military spending – has contributed to large inflow of cash.

Consider nevertheless how the sizeable jet business is almost one duopolized by Boeing and Airbus Industries. For many major airlines, it is often a choice of either Boeing or Airbus for an aircraft that boasts similar range and capacity. Also, commitment by airlines to an order is usually made months and years in advance, and so long as the economic climate holds up, default on orders is not expected. Airlines such as British Airways and Virgin Atlantic have openly declared their support of Boeing.

In fact, airlines are known to jostle to be the “first to operate” as an added not just marketing edge but also PR hoopla, as in the case of Singapore Airlines launching the Airbus A380 jet and All Nippon Airways, the Dreamliner. So, with the Dreamliner back up in the sky, the immediate and short-term prospects for Boeing is not going to look any worse – and, as it turned out, better in fact – as the company fulfills its obligation. Boeing has an order for 930 Dreamliner jets to date, and only 66 have been delivered so far.

Early observers had said compensation for the grounding of the Dreamliner in January until late April this year would run into millions and impact negatively on Boeing’s bottom-line. Boeing chief executive W James McNerney Jr said such details of the compensation had been finalized but that the payout would not have a material impact on the plane-maker’s earnings. Referring to the more recent incident when smoke was detected in the Ethiopian Airlines’ Dreamliner jet parked at London Heathrow Airport, Mr McNerney reiterated that the downtime cost of repairing the aircraft would have “very little” financial impact on either Boeing or Ethiopian since the tab would be picked up insurance.

Now, that should take out any more surprise in the near term, and investors might reconsider picking up the Boeing stock before it is too late. If it does surprise yet again, it may not be in spite of but because of the Dreamliner.

More B747-Dreamliner blues for Boeing

Courtesy Associated Press

Courtesy Associated Press

BOEING shares tumbled Friday by seven per cent following reports of a fire on board an Ethiopian Airlines B787-Dreamliner aircraft at London Heathrow. That pretty much sums up the kind of reaction that Boeing should be concerned about, even as investigations have yet to determine the cause of the fire and initial findings have said it was not related to the battery problems that resulted in the entire world fleet of 50 jets owned by different airlines being grounded in January.

The Ethiopian aircraft was on ground for eight hours before smoke was spotted. There were no passengers on board. Any number of things could have caused the fire, including external factors such as careless handling or smoking by ground staff. But the fact remains that as unrelated the cause may be to the earlier problems or to the aircraft per se, it happened all too soon as the aircraft retakes to the sky. It was the first commercial flight for the Ethiopian Airline jet, christened Queen of Sheba, since the grounding.

Public reactions are apt to be more emotional than rational. This was not helped by another airline, Thompson Airways – which became the first British carrier to operate the B747-Dreamliner while compatriots British Airways and Virgin Atlantic delivery of their orders – aborting a flight from Manchester to Florida as a precautionary measure. The aircraft returned to base because of technical issues. United Airlines has also reported technical issues encountered by its fleet of the B787-Dreamliner, which in the lead-up to its introduction has been touted as the jet of the century for its quietness and fuel-efficiency.

Experts will point out that new aircraft models are expected to experience teething problems. However, public perception of these problems may take a different dimension. The battery problem experienced by Japan Airlines and All Nippon Airways was serious enough to warrant the grounding of the entire jet fleet. The good news is that Boeing had resolved the issue – with new batteries and protective casings – and Boeing shares bounced back, rising more than 40 per cent subsequently.

The latest incident involving Ethiopian Airlines is unlikely to be deemed more serious than or as serious as the earlier incidents that triggered the global grounding. It was unfortunate that it should happen so soon after. Ethiopian Airlines said it would continue operating its fleet of the aircraft model. It would be superfluous to even suspect other airlines, whether present owners or awaiting delivery, would think otherwise. It behooves Boeing to act even quicker to quell suspicion, allay concerns of safety, check misleading speculation and restore confidence. The B747-Dreamliner may yet live up to its name of being a dream jet of the industry.

You can expect the public to be forgiving. The operative word is faith – faith in the US Federal Aviation Administration and other national air transport authorities, faith in Boeing and other aircraft manufacturers, and faith in the airlines that travellers book to fly with to not compromise on air safety. I still experience passengers applauding when an aircraft lands, and I like to think it is not so much in relief as in appreciation, pleased that their faith has not been misplaced.

Putting Dreamliner back up in the sky: More than an act of faith

Photo: Elias Asmore/Associated Press

Photo: Elias Asmore/Associated Press

Ethiopian Airlines became the first airline to put the Dreamliner B787 jet back up in the sky following a formal “air worthiness” directive by US Federal Aviation Administration (FAA) to allow resumption of commercial operations.

The Dreamliner was grounded in January over concerns of fire risks resulting from possible malfunctioning of the jet’s lithium-ion batteries. While the actual cause of the sparks experienced by Japan Airlines would never be known, Boeing has refitted the model with new batteries approved by FAA. The new batteries, encased in stainless steel boxes with a ventilation pipe that goes directly to the outside of the plane, run at a much cooler temperature.

The Ethiopian flight took off from Addis Ababa and landed safely in Nairobi, Kenya some two hours later – paving the way for the other operators of the global fleet of 50 aircraft to follow suit. Boeing expects to complete repairs of the entire fleet by May. All Nippon Airways (ANA) which has the largest number of 17 Dreamliners said it would commence retraining of its pilots to resume flying the aircraft in June.

The task at hand now is to convince the travelling public that the revamped B787 is safe for flying. ANA plans to reintroduce the jet for freight only before using it to carry passengers. The Ethiopian flight was full of Boeing executives in an act of faith. All this may in the end prove to be academic since not many people know about the aircraft make and model that they have booked on or make it a necessary condition of their flying. The airline brand (its safety record implicit) and other factors such as schedules and costs are likely to matter more.

Courtesy Reuters

Courtesy Reuters

All said, ANA is probably more concerned about the perception than other airlines. If it is of any comfort, closest rival JAL also operates the B787. But that would be taking a diffident stand for all the hours that Boeing has put in to rectify the problem and the assurance it has given of its improved design. Surely, it must be more than an act of faith.

Happily for Boeing, the scare over, it may again sell on how much more fuel efficient the lightweight Dreamliner is compared with other similar jets. The company reported a 20-per-cent jump in net income to US$1.1 billion for the first three months of the year – in spite of the Dreamliner grounding.

Boeing blues

Three months after the grounding of the B787-Dreamliner and while Boeing struggles to resolve the issue to get the plane back up in the sky, a new problem has landed on its lap – this time, concerning the B737 jets. The US Federal Aviation Administration has issued an airworthiness directive for more than 1,000 B737 planes operating in its airspace (which also applies in Canada) to be inspected for faulty tail pins that may have prematurely corroded, causing pilots to lose control of the plane.

The FAA said: “We are issuing this AD to prevent premature failure of the attach pins, which could cause reduced structural integrity of the horizontal stabilizer to fuselage attachment, resulting in loss of control of the airplane.”

It is a precautionary move, but likely a costly one for the airlines that have a large number of the B737 jets in their fleet, such as WestJet Airlines of Canada. Since the B737 is a short to medium-range aircraft, it is likely that regional airlines including cargo operators are likely to be the most affected. But safety is not something that you can or want to downplay in the business of flying.

This could not have come at a worse time upon the heel of a Lion Air crash into the waters, short landing at Bali’s Ngurah Rai International Airport in Indonesia just this week. Fortunately all passengers survived. There was no connection between the incident and FAA’s directive – the way that the grounding of the B787-Dreamliner was consequent upon sparks aboard a Japan Airlines plane initially suspected to be caused by the lithium-ion battery pack – and investigators have yet to establish the cause. It might even be extraneous to Boeing. Lion Air, which is Indonesia’s second largest airline and one of the fastest growing in the region, is banned from operating within the US and European Union over safety concerns.

Photo: Reuters/Stringer Indonesia

Photo: Reuters/Stringer Indonesia

But what came across as frightfully familiar was how the fuselage of the Lion Air plane broke apart, recalling similar mishaps experienced by four other airlines that include Continental Airlines in 2008, American Airlines in 2009, Aires Airlines (Colombia) in 2010 and Caribbean Airlines in 2011. Mind you, the B737 has been around since the 1960s and is a favourite plane for regional flights. It is in fact the best selling jet in the history of aviation.

Boeing will have much to do to repair its image. The aircraft business is dominated by two players – Boeing itself and Airbus, and the competition is such that for the bigger jets, the decision to buy which make and model usually comes down to either one of them. Aircraft orders can span several years, and timing is important.

Then, of course, as things settle, there is the looming question of compensation for downtime if Boeing is found to be contributory to its customer airlines losing out on opportunities. At least one airline – Qatar Airways – affected by the grounding of the B787-Dreamliner has publicly announced it will seek compensation from Boeing. Qatar chairman Akbar Al Baker said: “Definitely we will demand compensation. We are not buying airplanes from them to put in a museum.”

Dreamliner: Waking from a nightmare

Courtesy AFP

Courtesy AFP

BOEING’s Mike Sinnett, the chief project engineer of the Dreamliner, said: “I get often asked if I think the airplane is still safe. My answer is simple: absolutely.” He was quick to add that the Dreamliner” is among the safest airplanes our company has ever produced”.

Indeed, as Boeing announced its confidence in getting the Dreamliner back up in the sky in a matter of weeks, that must be the question utmost in everyone’s mind – air travellers in particular.

Hailed as one of the most advanced and fuel-efficient planes in aviation history, it is riding out a nightmare of safety concerns that led to the grounding of the entire fleet in operation early in the year. The ion-lithium battery pack was suspected to be the main culprit of sparks on a Japan Airlines flight. All Nippon Airways (ANA), the largest operator of the Dreamliner with 17 of the 50 aircraft in use, also experienced malfunction of the battery pack.

Boeing said it had found a fix for the problem, redesigning the battery to prevent overheating. It is now up to certification by the Federal Aviation Administration (FAA), which has said that it requires “extensive testing and analysis.” It cannot risk another round of accusation that perhaps it had not been thorough in its initial inspection.

Trust that Boeing has done its best under the circumstances because, according to Mr Sinnet, “We may never get to the single root cause, but the process that we’ve applied to understanding what improvements can be made is the most robust process we have ever followed in improving a part in the history.” He added: “So I feel more confident in the performance of the product now, because we’ve addressed many possible things than I would if we had only just addressed one thing.”

The next best thing Boeing can do is to look to time as that great restorer of faith.

ANA’s Dreamliner pain deepens

Courtesy Reuters

Courtesy Reuters

Singapore Airlines (SIA) which sought to be the first to operate the Airbus A380 in 2007 must be heaving a sigh of relief that it had passed over the Boeing 787 Dreamliner. It was All Nippon Airways (ANA) that made the wrong bet.

When the Boeing aircraft was grounded in early January following the unknown cause of a fire that was at first suspected to be caused by the lithium battery (see Dreamliner: Not quite a dream start, Jan 17, 2013; Japanese carriers remain positive despite Dreamliner grounding, Feb 5, 2013), it was widely hopeful that operations would resume by the end of the month as the aircraft maker moves quickly to investigate the cause and fix the problem. Then some of the airlines affected moved the delay to mid-February, and now it all seems but uncertain when this is likely to happen. ANA, the biggest operator of the aircraft – 17 out of the world’s 50 B787 in operations – is cancelling all flights using the aircraft till at least the end of May.

ANA announced its decision even as Boeing said it expected to fix the problem to get the Dreamliners back in the sky by mid-April. The US Federal Aviation Administration (FAA) is reviewing Boeing’s proposal but said: “The safety of the public is our top priority and we won’t allow the 787 to return to commercial service until we’re confident that any proposed solution has addressed the battery failure risks.”

Unfortunately for ANA, Japan’s Golden Week holiday which normally experiences peak travel will fall during the extended period of cancellation of 1,700 flights in April and May.  This will bring the number of flights cancelled to 3,600. As many as 60,000 ANA customers have been affected.

The cost to ANA has so far been US$15.4 million (January), and it remains an open question as to how much more this will affect the airline’s profitability. While ANA may be protected by compensation that it will seek from Boeing, the bigger issue in the long term is one of opportunity cost and the loss of customers to competitors. Boeing itself recognizes this, saying it would take “every necessary step to assure our customers and the travelling public of the integrity of the 787.” (See Prolonged Dreamliner grounding is not good news for Boeing and its customers, Jan 28, 2013).

Singapore Airlines expects challenging times ahead

Courtesy Singapore Airlines

Courtesy Singapore Airlines

Singapore Airlines (SIA) reported a third quarter (Oct-Dec) operating profit of S$87m (US$702m) compared to S$137m a year ago – down 36 per cent, in spite of improved passenger numbers because of lower yield. Passenger carriage increased by 7.4 per cent, outstripping capacity increase of 4.6 per cent.

The last quarter is not expected to be much better as the airline expects challenging times ahead in light of the troubled European economy, weak recovery in the United States and the high price of jet fuel. Apart from some promotional activities to boost ticket sale, there is an obvious lack of excitement, whether externally driven or internally generated. In the current and last quarter (Jan-Mar), SIA is reducing frequencies to weaker markets.

Subsidiary regional carrier SilkAir also registered declining operating profit from S$32m last year to S$34m.

With Qatar reporting astronomical profits and Japanese carriers – Japan Airlines and All Nippon Airways – expecting better performance results in spite of the Dreamliner problem, SIA seems to be at best floating comfortably but not making waves.

Japanese carriers remain positive despite Dreamliner grounding

Japanese carriers All Nippon Airways (ANA) and Japan Airlines (JAL) affected by the Dreamliner grounding remain positive about their full-year profit forecasts ending March 2013. (See Dreamliner: Not quite a dream start, Jan 17, 2013)

Courtesy AFP

Courtesy AFP

ANA reported higher earnings at 52bn yen (US$561m) for the first nine months to December 2012, up 55 per cent, boosted by low-priced fares promotion and new routes domestically and internationally. It is sticking to its forecast of 40bn yen for the full year.

JAL, despite a 5.6 per cent drop in earnings for the April to December period, has raised its profit forecast to 163bn yen for the full year, up from 140bn yen, boosted by travel demand to Europe, North America and South-East Asia.

Both airlines play down the impact of the Dreamliner grounding. JAL, which owns seven of the Dreamliner jet, said: “While there are concerns of the impact of the suspended use of the Boeing 787 aircraft since January 2013, business has been robust. Various measures including new products and services, which were steadily promoted, are also expected to uplift revenue.”

Courtesy AP Photo/Kyodo News

Courtesy AP Photo/Kyodo News

JAL said the Dreamliner grounding has cost it 693m yen and would be seeking compensation from Boeing. The pain should be greater for ANA, which owns 17 of the Boeing aircraft. It has said the company would be hit to the tune of 1.4bn yen from the cancellation of 450 international and domestic flights, but it does not expect that to drastically affect the full-year profits.

It remains uncertain as to when Dreamliner operations would resume, in light of the inconclusive investigations into the suspected problem posed by the use of lithium-ion batteries. The current year’s profits may remain intact on the back of a strong first three quarters, but any prolonged Dreamliner grounding will be felt in the coming year. (See Prolonged Dreamliner grounding is not good news for Boeing and its customers, Jan 28, 2013)

Prolonged Dreamliner grounding is not good news for Boeing and its customers

Courtesy Wikipedia Commons

Courtesy Wikipedia Commons

ACCORDING to Japan’s transport ministry, airline safety inspectors have found no faults with the battery used on Boeing 787 Dreamliner.

The new aircraft experienced a string of issues, culminating in a fire incident aboard a Japan Airlines aircraft at Boston’s Logan International Airport (USA) that led to the fleet’s grounding by the Federal Aviation Administration (FAA). (See Dreamliner: Not quite a dream start, Jan 17, 2013).

With the latest findings that put to rest the initial suspicion that the Dreamliner’s problems had to do with the battery, it opens up new concerns that can only suggest that the problem may be all that more serious because of its uncertainty. For now, attention has shifted to the electrical system that monitors battery voltage, charging and temperature.

Japanese transport ministry official Shigeru Takano said: “We have found no major quality or technical problem (with the lithium-ion batteries). We are looking into affiliated parts makers.”

This is not good news for Boeing as it may mean going back to the drawing board, delays in aircraft deliveries even though Boeing has said it would not stop making the planes pending outcome of the investigations, and loss of potential, even actual, orders. It may be pressed into making higher compensatory payments to the affected airlines.

Neither is it good news for airline owners of the Dreamliner, including potential owners. The grounding will now be longer than expected – longer than what most of the airlines have originally foreseen in their schedule adjustment to last end-January. While the operations of most of them are not expected to be widely affected in the short term, a longer delay can means lost opportunities, reduced clientele and delayed launches of new routes and destinations. For now, most of them may easily replace the Dreamliner operations with other aircraft still within their fleet, and for many of them it is comparatively a small number.

However, All Nippon Airways which owns 24 of the world’s 50 operating Dreamliner aircraft is likely to be the most hurt even as it insisted – for now – the impact on its profits so far is minimal and did not foresee a significant dent in its bottom line. ANA senior vice president Shinzo Shimizu said “we think the impact isn’t so big” that it required the airline to undertake a review of its strategies. The airline said it already has a contingency plan to deal with a potential prolonged grounding. The Japanese carrier has cancelled its newly launched flight from Tokyo to San Jose along with some flights to Seattle in the USA.

So often has it been said that the longer an aircraft sits on the ground, the more money an airline loses.