Virgin Australia pilots support the Cyrus Capital Partners, bid to fly the airline out of administration.
While the Association for Virgin Australia Group Pilots (VIPA) has told the Australian Financial Review that it is too “soon to deliver a definite verdict on either proposal given final offers had yet to be submitted,” a significant number of VA pilots have contacted AirlineRatigs.com to express their support for the Cyrus Capital Partners’ rescue.
The AFR has reported that the “Flight Attendants Association of Australia, representing cabin crew making up one-third of Virgin’s 9000 staff, expressed its total support for Cyrus, with the union’s secretary Teri O’Toole saying a relative lack of aviation experience at the airline’s other suitor Bain Capital counted against it.”
The AFR also canvassed the Australian Licensed Aircraft Engineers Association, and ALAEA federal secretary Steve Purvinas was quoted as “unequivocally behind Cyrus.”
“I sense a passion from Cyrus about the Virgin brand and a long-term commitment for the airline,” Mr. Purvinas told the AFR. “Cyrus knows the product better to a point where I’m confident their ownership would be the best thing for Virgin.”
These endorsements are a major blow to the other bidder Bain Capital which wants to take the airline further down market.
Ms. O’Toole also told the AFR there was “an apparent understanding of the company’s staff culture at Cyrus.”
“They speak passionately about Virgin. That is going to help them with the employee group – they will rally behind Cyrus,” she said. “They understand the Virgin culture better than Bain.”
The bidders will lodge their final and binding bids Monday, June 22nd with the administrators Deloitte making a selection by the end of the month.
The Qantas Group is preparing for an exit from Jetstar Pacific with that airline re-branding back to its original name of Pacific Airlines.
Vietnam Airlines (VNA) and the Qantas Group have agreed to introduce changes to Jetstar Pacific which will leverage the scale and brand strength of the majority shareholder, VNA, in its home market.
These changes aim to improve the profitability of the low-cost carrier in response to the impact of COVID-19.
In a joint statement, Vietnam Airlines and Jetstar said that “pending government and regulatory approval, the low-cost carrier will return to its original brand name, Pacific Airlines, and feature a new logo and livery inspired by VNA’ brand colors and design. Jetstar Pacific is set to officially operate under the new name Pacific Airlines upon authorities’ approval.”
The airline will also change its reservation system from Navitaire to Sabre, to allow the low-cost carrier to streamline its bookings, network and customer functions with VNA.
Vietnam Airlines Executive Vice President and Pacific Airlines Chairman, Trinh Hong Quang, said the change would unlock economies of scale and help the industry to embark on a post-COVID-19 recovery.
“Low-cost carriers will play a certain role in supporting the return of travel as restrictions ease, and by streamlining functions, Pacific Airlines can remain competitive, inherit many of the efficiencies of Vietnam Airlines, and continue to offer the low fares our customers expect.
We are optimistic that the dual-brand strategy will leverage the brand and resources of Vietnam Airlines, and by undergoing innovation and improvisation, we will continue to see Vietnam Airlines Group maintain its position of leadership in the Vietnamese domestic market now and into the future.”
Qantas Group Executive and Jetstar Group CEO, Gareth Evans, said the impact of COVID-19 has identified opportunities to drive greater efficiencies.
“With a highly competitive domestic market in Vietnam and the disruption caused by the coronavirus, the time is right to take advantage of the strength and scale of Vietnam Airlines in its home market.
“Streamlining customer and booking functions will enable further cost savings and position the airline for a stronger future as international travel restrictions ease.”
VNA and Qantas continue to review the low-cost carrier’s structure and future shareholding arrangements.
Speaking with AirlineRatings.com Mr. Evans added “we’ve been in discussions with Vietnam Airlines for some time about the challenges facing Jetstar Pacific, which have obviously intensified through the COVID crisis. Subject to the necessary approvals, our intention is to cease being a shareholder in the coming months so we can focus on our other airlines, and the changes to the brand in Vietnam announced today are part of that.”
Passengers are still fearful despite industry confidence.
OAG, the world’s leading airline schedule data source says that passenger confidence is low about air travel while the industry itself is bullish.
The OAG survey found, on passenger’s sentiment, where 1 is fearful and 10 is confident, the average score was 3.8, definitely nearer the fearful end of the scale than the other.
The survey results, authored by Becca Rowland, found that the most confident were those in the Middle East, who provided an average score of 6.2 out of 10, while those in South Asia, South East Asia, and South America all averaged a score of four or more.
OAG said that at the other end of the scale were the Caribbean and Africa.
“Some 35 percent will travel as soon as their work requires them to, and another 11 percent will travel when restrictions are lifted,” OAG said.
“Excluding those who don’t generally fly for work, more than half (56 percent) expect to fly as soon as their work requires them to travel or as soon as restrictions are lifted. A quarter says they will wait until they are convinced flying is safe, with the remainder waiting until there is a vaccine in place or when immunity passports are available.”
OAG said their survey found that “when it comes to traveling for personal reasons, 76 percent of our industry audience say they would take a domestic flight by the end of the year with 38 percent saying they will be prepared to take a domestic flight for personal reasons within two months.”
OAG added that “confidence around international flying for personal reasons was encouraging and 58 percent saying they are willing to take such a flight this year, with 30 percent prepared to fly within 2 months of restrictions or quarantine measures being lifted. Around a fifth say they are looking for a vaccine or immunity passport to be in place before traveling internationally by choice but that only reinforces the sense that this group as a whole is not especially fearful of international flying at the moment.”
The map relies on IATA’s Timatic database which contains comprehensive information on documentation required for international travel.
To keep pace with the dynamic situation with respect to COVID-19, Timatic is updated more than 200 times per day to provide accurate travel restrictions specific to the current pandemic, based on one’s citizenship and country of residence.
‘’As the aviation industry prepares to safely restart, travelers will need to know which countries’ borders are open and what health restrictions exist. Travelers can rely on Timatic for comprehensive and accurate information on travel during the pandemic,’’ said Anish Chand, IATA’s Assistant Director, Timatic.
In a recent survey commissioned by IATA regarding concerns people had about air travel post-crisis, more than 80 percent of travelers said they are as concerned about potential quarantine restrictions as they are about actually catching the virus during travel.
With the uncertainties and quickly changing health restrictions from one country to the next during the pandemic, this new resource for travel planning is timely and important.
‘’We support the International Civil Aviation Organization (ICAO) guidelines to harmonize the measures to keep people safe while traveling and provide the confidence to open borders without quarantine measures. And this Timatic offering will be a vital tool for travelers who need easy access to accurate information on entry requirements,” said Chand.
IATA’s COVID-19 interactive world map, also available for mobile, can be viewed here.
Virgin Australia will increase its domestic flying and introduce new safety and wellbeing measures as state travel restrictions begin to ease and more travellers return to the skies.
The additional services will double capacity by early July, adding approximately 30,000 seats across 320 flights per week to the airline’s domestic schedule.
Virgin Australia will also introduce a comprehensive new set of safety and wellbeing measures including pre-departure eligibility and health screening, contactless check-in, more frequent cleaning onboard and at the airport, and expanded social distancing measures.
The measures, which will be fully implemented by June 12 have been developed in close collaboration with airlines and airports across Australia as part of the Australian Aviation Recovery Coalition. It says that the measures will continue to be reviewed in line with any changes to its schedule, the latest medical advice, government restrictions and guest feedback.
Virgin Australia Group Chief Commercial Officer John MacLeod said “by early July, we will have gradually added approximately 30,000 seats across 320 flights per week to our schedule – more than doubling our capacity and providing more flexibility for guests.
“It’s early days but these services will be a welcome boost to Australia’s tourism industry and help the nation’s economy and aviation sector to rebuild.
Virgin Australia Group Medical Officer Dr Sara Souter said the new measures will ensure that the airline appropriately manages the latest advice from the government and remain vigilant when it comes to hygiene and personal protection.
“We will be adopting contactless check-in, new sequenced boarding and disembarkation process and guests will see more frequent cleaning of high touch surfaces on the aircraft and within the airport. In addition, a new health questionnaire will be rolled out as part of the check-in process to ensure passengers are fit to fly and to assist with contact tracing,” said Dr Souter.
“Everyone has a role to play, which is why we are asking guests to be mindful of their own personal protection and others when moving around the cabin. Team members and guests are being encouraged to regularly wash their hands and avoid touching their face, and hand sanitiser and masks will be available to all guests on request.
“Wherever possible, we will try to do our best to keep an empty seat between guests travelling alone, however, this may not always be available. Families and travelling companions will be able to sit together.”
Singapore Airlines (SIA) and SilkAir customers will be able to transit through Singapore’s Changi Airport on an oneway basis from Australia and New Zealand to the SIA Group’s global network from June 11, 2020.
The one-way transit channel will be subject to a number of requirements and restrictions, say the airlines and these included:
• Connections must be no longer than 48 hours.
• Customers can only travel on SIA Group (Singapore Airlines, SilkAir and Scoot) flights and cannot connect to other carriers once in Singapore.
• Customers must meet all departing and arriving Government requirements and restrictions.
Customers will only be able to transit in Changi via SIA flights departing from Adelaide, Brisbane, Melbourne and Sydney in Australia, and Auckland and Christchurch in New Zealand. Transit will also be available via the Scoot flights departing from Perth, Australia.
Singapore Airlines Regional Vice President southwest Pacific, Mr. Philip Goh, welcomed the opening of the oneway transit channel but cautioned it is a small step in a long and gradual process before international travel can resume without restrictions.
“The decision to allow customers traveling from Australia and New Zealand to destinations in the current SIA Group network via transiting through Singapore’s Changi Airport is a small but welcome step in our journey towards recovery,” Mr. Goh said.
“It is important to remember that Government travel restrictions in Australia and New Zealand as well as in many other countries remain in place, and opening of limited one-way transit is not a sign that international travel is back to normal.
“The one-way transit channel will allow those who wish to return home from Australia or New Zealand to do so, in a COVID-safe manner, both onboard our aircraft and while in transit at Changi Airport.
“Customers who wish to book a flight should ensure they review all of the transit and travel requirements, including whether they can legally depart Australia or New Zealand and whether they will be allowed entry at their country of arrival.
“We know that news of such transit channels will give people cause for excitement and hope. However, these feelings must be tempered at the current time with an understanding that we are still some time away from even considering being able to book an overseas holiday.”
For the latest flight schedules, please refer here.
As part of the approval, customers will be allowed to transfer on flights between any airline within the SIA Group. However, transfers to and from flights operated by other airlines will not be permitted.
Customers should also ensure that they meet the entry requirements for their final destination, as well as the departure requirements from Australia and New Zealand. These requirements can be sourced from:
Boeing has just delivered four commercial aircraft in May, down from only six in April and suffered 18 cancellations but its stock is up roughly 40 percent.
That number according to Reuters is 87 percent lower than at the same time last year. However, on the upside, Boeing did secure nine new orders for widebody aircraft. The company’s backlog fell to 4,744 planes, which is the lowest since 2013.
However, leading New York analysts Bernstein in its latest report “Boeing, Airbus: The rally – Reality or insanity? Top ten things to consider when looking for a next level of upside” see plenty of upside but some challenges as Boeing’s stock rebounds.
It says that while airlines have essentially zero appetites for taking deliveries of aircraft this year the problem is that the number of planned deliveries is huge.
“Still, we see any airplane set for delivery within the next 12 to 18 months as difficult to avoid, unless an airline is truly in financial distress. But, most airlines actually are in financial distress, so the discussions get complicated,” Bernstein says.
“In each downturn, we have witnessed, the OEMs knew they needed to work with airlines that are on the brink of bankruptcy and often allow cancellations. But, for airlines that have solid balance sheets (e.g. Ryanair, Wizz) or are receiving government support (e.g. Qatar, Air France), we expect Boeing and Airbus to be much tougher in their negotiations.”
However, both Boeing and Airbus are being supported.
It adds that “Airbus CEO, Guillaume Faury, said that the company would sue airlines that would not take contracted deliveries.”
And the war of words has already started with the Kuwaiti leasing company, ALAFCO, recently announcing that it would sue Boeing to get its money back on 737MAX orders while Qatar Airways CEO, Akbar al Baker, said that Boeing and Airbus should not make them take any deliveries until 2022 or else it would stop doing business with them.
“While we have not seen public comments like this before, it underscores the position that Airbus and Boeing find themselves in. Airlines are obligated to take deliveries. But, the reality is that Airbus and Boeing need to work with each airline,” says Bernstein.
Bernstein says “Boeing and Airbus will need to work with any airline that it expects to be in existence after the pandemic, as these are long term relationships. Similarly, the airlines will ultimately depend on Boeing and Airbus for their fleets – there are zero credible alternatives.”
Bernstein adds that it still expects fleet renewal to happen and has heard positive messages this week. “Nearly every airline has stressed its intent to retire older aircraft through this downturn and emerge with a modern fleet. We heard that again from American Airlines at our Strategic Decisions Conference. On the Boeing side, Ryanair CEO, Michael O’Leary, spoke positively about Boeing and the 737MAX and their desire to take even more airplanes. On the Airbus side, last week, Wizz, IndiGo, and GoAir described their desire to replace A320ceos with A320neo family airplanes in order to come out of the pandemic with the most competitive fleets in their regions,” it reports.
Airline Industry is expected to lose US$84 billion in 2020 according to the International Air Transport Association (IATA) which has just released its financial outlook for the global air transport industry.
The net profit margin will plummet to -20.1 percent with revenues crashing 50 percent to $419 billion from $838 billion in 2019.
In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion.
“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,” said Alexandre de Juniac, IATA’s Director General and CEO.
“Provided there is not a second and more damaging wave of COVID-19, the worst of the collapse in traffic is likely behind us. A key to the recovery is the universal implementation of the re-start measures agreed through the International Civil Aviation Organization (ICAO) to keep passengers and crew safe. And, with the help of effective contact tracing, these measures should give governments the confidence to open borders without quarantine measures. That’s an important part of the economic recovery because about 10% of the world’s GDP is from tourism and much of that depends on air travel. Getting people safely flying again will be a powerful economic boost,” said de Juniac.
IATA says passenger demand has evaporated as international borders closed and countries locked down to prevent the spread of the virus. This is the biggest driver of industry losses. At the low point in April, global air travel was roughly 95 percent below 2019 levels.
Overall traffic levels (in Revenue Passenger Kilometer) for 2020 are expected to fall by 54.7 percent compared to 2019 with passenger numbers roughly halve to 2.25 billion, approximately equal to 2006 levels.
Capacity, however, cannot be adjusted quickly enough with a 40.4 percent decline expected for the year.
The problem for airlines is made worse as passenger revenues are expected to fall to $241 billion (down from $612 billion in 2019). This is greater than the fall in demand, reflecting an expected 18 percent fall in passenger yields as airlines try to encourage people to fly again through price stimulation. Load factors are expected to average 62.7 percent for 2020, some 20 percentage points below the record high of 82.5 percent achieved in 2019.
And costs are not falling as fast as demand. Forecast total expenses of $517 billion are 34.9 percent below 2019 levels but revenues will see a 50 percent drop. Non-fuel unit costs will rise sharply by 14.1%, as fixed costs are spread over fewer passengers. Lower utilization of aircraft and seats as a result of restrictions will also add to rising costs.
Singapore Airlines and Cathay Pacific Airways have both secured multi-billion dollar lifelines to fly through the impacts of COVID-19.
SIA has raised S$10 billion of liquidity through its recent Rights Issue, as well as a mix of secured and unsecured credit facilities. This puts SIA on a steady footing as it tackles the challenges posed by the global Covid-19 outbreak.
SIA secured S$8.8 billion in liquidity through the successful completion of the rights issue on 5 June 2020. A further S$900 million was raised through long term loans secured on some of SIA’s Airbus A350-900 and Boeing 787-10 aircraft.
In addition, the Company has also arranged new committed lines of credit and a short-term unsecured loan with several banks, which provide further fresh liquidity amounting to more than S$500 million.
Separately, the airline has rolled over all existing committed lines of credit that were due to mature during the course of 2020 to 2021 or later, thus ensuring continued access to more than S$1.7 billion in liquidity.
For the period up to July 2021 as a backstop, the airline also retains the option to raise up to a further S$6.2 billion in additional mandatory convertible bonds, which will provide additional liquidity if necessary.
Singapore Airlines Chief Executive Goh Choon Phong said. “We are grateful for the strong support of our shareholders for our successful rights issue, which has secured the company’s future amid unprecedented global health and economic crisis. We are also grateful to our relationship banks for their support in extending additional secured and unsecured loans, as well as committed lines of credit.”
Just to the north, Hong Kong will lead a US$5 billion rescue of Cathay Pacific Airways with a recapitalization.
Under the plan, the Hong Kong government will be issued HK$19.5 billion of dividend-paying preference shares and HK$1.95 billion of warrants, giving it a 6 percent stake.
As well, it will provide a HK$7.8 billion bridging loan.
The Hong Kong government will get two non-voting observers at board meetings.
Cathay Chairman Patrick Healy told media that while the Hong Kong government does not intend to hold Cathay Pacific stake long-term the support was critical to the airline’s survival.
“The alternative would have been a collapse of the company. Commercial debt markets are effectively closed to airlines today who do not have extensive government shareholder support,” Mr. Healy said.
Perth could become the Australian entry port for El Al according to a new report from Linus Benjamin Bauer, Managing Consultant at Bauer Aviation Advisory and Visiting Lecturer in Air Transport Management at the City University of London and Daniel Bloch, Principal at Bloch Aviation Advisory, IE University.
We publish the report in full.
Author: Linus Benjamin Bauer (Managing Consultant at Bauer Aviation Advisory and Visiting Lecturer in Air Transport Management at the City University of London) and Daniel Bloch, Principal at Bloch Aviation Advisory, IE University.
The COVID-19 crisis provided a foundation for airlines around the world to test out their operational and logistical capacity to deliver ultra-long-haul services. As such, a myriad of carriers like EL AL Israel Airlines conducted a range of special repatriation and cargo flights, of which comfortably fell into the Ultra-Long-Haul bracket. In late March 2020, the Israeli flag carrier El Al Israel Airlines made its debut in Australia with a non-stop flight from Tel Aviv to Perth, followed by an ultra-long-haul flight from Tel Aviv to Melbourne on 2 April 2020. It was the longest-ever flight El Al has completed (MEL-TLV: 17h15m). Several hundred Australians and 500 Israelis were brought home on both special flights between Tel Aviv, Perth and Melbourne.
In December 2019, El Al announced the intention to test the viability of the ultra-long-haul link between Tel Aviv and Melbourne with several trial flights on its Boeing 787-9 between March and May 2020. However, due to the current COVID-19 pandemic, those plans have been put on hold until further notice. According to Israel’s ambassador to Australia, Mark Sofer, Israel wants to introduce direct flights to Sydney or Melbourne and waive quarantine requirements for travelers by December 2020, as countries that have so far successfully contained COVID-19 jostle to be the next destination added to the currently establishing Australia-New Zealand air travel bubble.
By launching non-stop flights between Tel Aviv and Melbourne, they are trying to tap into the large Israeli diaspora at the East Coast of Australia (Melbourne, Sydney and Brisbane). The lack of connectivity options to Israel from Australia for the Jewish diaspora and business travelers (e.g. start-up scene, natural resources, diamond trading, etc.) has been recognized by the Israeli carrier. To date, the passengers have to fly from Sydney to Tel Aviv either via Johannesburg, Bangkok or Hong Kong (from SYD on codesharing partner Qantas and then from Bangkok or Hong Kong onwards to Tel Aviv on its own 777/787 metal), adding up to 8 extra hours to the total travel time than potential non-stop flights between the East Coast of Australia and Israel.
The addition of up to 8 extra hours to the total travel time from Sydney to Tel Aviv via any of the above-mentioned hubs is partly due to the restrictions and no permissions to overfly Arab countries on its way from Bangkok or Hong Kong to Tel Aviv. The airspace exclusion (e.g. Saudi Arabia) restricts the operational performance of ultra-long-haul flights between Tel Aviv and Melbourne and it has to be considered as one of the key challenges and threats to the viability of potential ultra-long-haul services between Israel and Australia nowadays and in the future.
Due to political, geopolitical and security-related reasons, El Al operates in an almost entirely point-to-point market, leading to an entire absence of hub-and-spoke traffic at Tel Aviv (e.g. Europe – Israel – Asia/Australia). It leads to another key challenge for El Al to “cherry-pick” demand between two cities throughout the whole year. From the economical point of view, the increasing security-related costs in Israel has to be considered as one of the additional threats to the economic feasibility of such cost-intensive ultra-long-haul services between both countries: El Al spends up to US$110m a year to conform with the airline’s security measures required by Israel’s Shin Bet security service. In other words, the security-related costs per passenger are approximately 10 times higher than in the United States of America (post 9/11). El Al’s constant struggle to be profitable in the airline business is partly caused by operating in a very costly environment.
The restriction on flying during the Jewish Shabbat has to be also considered as another operational challenge for El Al with the intention to operate ultra-long-haul flights to Australia. During Shabbat, El Al flights have to land by sunset on Fridays and are not allowed to depart on a Saturday. Technical delays or events (e.g. AOG) that have run into Shabbat would force El Al to cancel flights. It would have a negative impact on the premium customer experience and thus decrease in demand for such direct services with the Israeli carrier.
From airspace bans by Arab countries to its ‘self-imposed’ Shabbat restrictions and its entire point-to-point network (no feeder traffic at any end), the national carrier of Israel would face a unique set of challenges if they intend to operate ultra-long-haul flights from Tel Aviv to Sydney or Melbourne. However, the environment could change in the post-COVID-19 era (e.g. driven by the harmonization of relationships between Israel and Arab countries, and the increasing demand for direct non-stop services to bypass hubs across the globe).
With respect to the above-mentioned key findings, the author comes to the conclusion that Perth could be also considered as one of the potential alternatives for El Al to break into the Israel-Australia market for tourists, VFR and business travelers in the meantime (near future). The existing codeshare partnership deal between El Al and Qantas could be extended in this case. In this scenario, El Al would operate Tel Aviv – Perth on its own metal (e.g. 787-9) and offer feeder flights from Perth to 14 different destinations in Australia by its codesharing partner Qantas.
Such a new routing could reduce the total travel time between Tel Aviv and Sydney by up to 5-6 hours. The replacement for the existing ‘odyssey trips’ (e.g. Sydney – Hong Kong / Bangkok – Tel Aviv) could also boost additional demand for travels between Israel and Australia (business, leisure and VFR).
Based on various analysis conducted by the author in collaboration with Daniel Bloch and Dr Rico Merkert, Perth acts as a primary candidate to become a hub for ultra-long-haul and long-haul flights, given its relative proximity to Europe and the Middle East in comparison to that of the cities on the East Coast of Australia (e.g. Sydney, Melbourne and Brisbane). The West Australian capital’s airport could look to position itself as Australia’s primary gateway for Europeans and people from the Middle East including Israel, offering direct services into Perth by Qantas or El Al, for instance, serving both point-to-point and connecting traffic with its access to a large and diverse domestic market.
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