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September 2022, Virtual
September 29 2022, Virtual
It”s not often that 17 airline CEOs from across the globe find themselves in the same room, but this week”s celebration of Star Alliance”s tenth birthday in Copenhagen, was reason enough for them to clear hectic diaries and provide squadrons of PR representatives with months of planning work.
It was a rare chance too for the world”s press to pick some of the industry”s top brains and, after a photocall in front of a Star Alliance aircraft featuring the CEOs and their respective hostesses, the media embarked on a sort of rapido dating exercise, rushing from table to table in an interview feeding frenzy.
But what was on the bosses minds? Well, for the Asian delegations in particular, it was future aircraft acquisitions that seemed to be top of the agenda, forced to the head of the queue by rocketing fuel prices.
Operating extremely long routes to Europe and the US, as well obviously as their regional network, fuel cost has become very much front of mind for the Asians, with manufacturers and engine suppliers coming under ever greater pressure to squeeze the last drop of efficiency from their products.
But twinned with economic volatility is the seemingly exponential rise in Asian air travel, that simply shows no sign of applying the brakes and which is creating a benevolent headache in terms of manufacturing slot availability.
”Sooner or later we should go to next generation aircraft, from for example, the Boeing 767 and the Airbus A330 to the 787 or A350,” Asiana CEO, Chan-Bup Park, told ABTN.
”The slot situation at both Boeing and Airbus is fully occupied, caused by the A380 and which means the soonest we can have availability with the A350 for example, would be 2014 [but] Japanese, Korean and Chinese traffic is increasing between 10%-15% per year.”
And Thai Airways flies vast distances such as Bangkok-New York ” a 17h marathon that crosses ten time zones ” but despite the popularity of the route, its huge fuel consumption needs, actually make it currently unprofitable. New aircraft are therefore crucial.
”We are getting rid of some of our older aircraft such as four MD-11s, two Airbus A300-600s and two Boeing 747-300s,” Thai executive vice president commercial affairs, Wallop Bhukkansut, said, ”as we want to eliminate ”uncommanality” and concentrate on the A330 and 777.”
But Thailand recently underwent a military coup and the Thai Airways business model and aircraft evaluation programme, as well as wider issues such as Open Skies, have more in common with a Chinese-style command economy philosophy. ”Being a government enterprise, we have to look at both Boeing and Airbus and as for Open Skies, that”s good but we have a problem with it ”we”re not big enough to compete with everybody on a worldwide basis ” we have a difficulty with fifth freedom, but not with third or fourth freedom,” noted Bhukkansut.
So all the liberalisation in the world, Open Skies, multi-lateral negotiations, WTO talks, alliances et al, isn”t worth a hill of beans if a good old-fashioned political system deems it incompatible with the interests of his home carrier. Thai is lucky that it is such an extraordinarily popular tourist destination, but is aware that it must create more of a business hub at Bangkok, involved as it is in a ”colossal fight” with Singapore that has ”all the tricks in the book.”
And the new Asian partners, Air China and Shanghai Airlines, are straining at the leash to take advantage of Star Alliance”s economy of scale, as Shanghai Airlines president, Fan Hongxi, outlined to ABTN. ”Star gives us the chance for international co-operation, with the frequent flyer programmes for example.
”We are a new carrier to the European and North American markets and are looking to modify our [current 53] aircraft on international routes such as Korea and Japan. Each year we will have around ten new aircraft such as the 767, 757 and 737 New Generation, while we will receive nine 787 aircraft by 2012.”
Crucially, many Star members are evaluating ways to come together in airports using the ”Under One Roof” principle, a development that Shanghai Airlines will implement at its shiny new Pudong terminal.
And the leviathan that is Air China with around 100 of its 200-strong fleet widebodies, also has the 787 on order as well as 50 new aircraft, including 777s, as it gradually phases out its 747 fleet, while the carrier is convinced of Star”s worth. ”Star Alliance offers our business travellers convenience,” said executive vice president international relations, Keisuke Okaoa.”
From the far side of the world, Air New Zealand has possibly the most to gain from the Alliance as several of its partners feed through to its services. ”We obviously benefit a lot more from the Alliance than a cluster of airlines in Europe, for example on services from Auckland to San Francisco that go directly into the United Airlines hub,” said Air New Zealand CEO, Rob Fyfe.
”Alliances may morph, with Lufthansa for instance, having a number of equity stakes in other carriers, but I have absolutely no doubt that Star will continue to exist.”
As the green agenda continues its remorseless assault on the aviation industry, airlines have to be seen to be whiter than white on the environmental agenda. New aircraft purchase is therefore clearly key to winning the PR battle. But as Lufthansa chairman and chief executive, Wolfgang Mayrhuber, pointed out this week, it was also in airlines” best selfish interests to buy the most efficient machines possible.
Asian carriers have the greatest potential for growth and they are driving future world demand and future aircraft agenda. The region is booming again.