Aviation News

China Southern A380

PARIS—China is holding back the approvals Chinese airlines need to buy 10 more Airbus A330 jetliners, a person close to the situation said Thursday.

The move is part of an escalating trade row over the European Union’s new levies on aviation greenhouse emissions. The Chinese authorities have already held back approvals for the purchase of 45 Airbus passenger aircraft by airlines based in China and Hong Kong.

Orders worth more than $14 billion are now at risk for the aircraft-making unit of European Aeronautic Defence & Space Co. EAD.FR +0.85% NV. Airbus is a major contributor to French exports.

“There is a hellish battle going on behind the scenes,” a senior French government official said Thursday. “We knew [the emissions levies] would provoke strident protests,” the official said. “Now we’re facing a real threat.”

Chinese officials have denied moving to block new Airbus orders. A spokeswoman for the Civil Aviation Administration of China said on Monday that the government “will respect the views of the airlines” in ordering planes. She added that the Chinese government hopes to reach a resolution through negotiation.

Under the EU program, any airline operating at an EU airport must hold special credits to offset its carbon-dioxide emissions since the start of this year. Airlines have said their inclusion in what is known as the Emissions Trading Scheme (ETS), which already covered many EU industries, will cost them billions of dollars annually.

European airlines as well as Airbus may soon bear the brunt of a trade war, particularly if Russia retaliates, the person close to the situation said. “If Russia imposes [additional] overflight charges, that could turn out to be very expensive for European airlines, [considering] Russia’s airspace is huge,” the person said. Overflight charges are fees imposed by some countries for flying through their airspace.

Last week, Airbus and European aviation-related companies sent letters to the leaders of France, Germany, Spain and the U.K., warning of consequences of retaliatory action by foreign governments. India had warned that European airlines face the suspension or nonextension of traffic rights or overflights, and Russia has threatened additional overflight charges, they said.

European law makers Thursday backed the inclusion of all airlines in the ETS in a vote in the European Parliament in the French city of Strasbourg.

“If Europe would decide not to implement the legislation just because of the pressure from third countries, that would set a very negative precedent also for other fields of politics such as regulation of the financial market or trade policy,” said Matthias Groote and Peter Liese, two members of the assembly who have followed the ETS closely.

Even though the vote is only a political indication with no legal implications, it is significant because the Parliament is throwing its weight behind legislation that has pitted the EU against 23 other countries angry about the carbon-dioxide trading plan. In a joint declaration statement last month after a meeting in Moscow, the countries argued that the EU’s unilateral imposition of the ETS program will lead to market distortions and unfair competition.

“The threat of retaliation creates uncertainty in the business environment,” said Victoria Moores, spokeswoman for the Association of European Airlines in Brussels. “We want to see concrete steps toward de-escalating this” through the International Civil Aviation Organization, Ms. Moores said. The ICAO is the specialized aviation agency of the United Nations.

The EU is “fighting hard” to get results at ICAO, said a spokesman for EU climate commissioner Connie Hedegaard. “If countries criticizing our system have the necessary political will to make it happen, then let’s get it done. In the light of an ambitious global agreement in force, we will review our legislation.”

Bertrand Lebel, Executive Vice President of Air France-KLM, said in an interview: “We’re caught in the middle. We don’t dispute that airlines should contribute to offsetting their emissions, but it has to be done through international negotiation, preferably through the ICAO.” He observed that Gulf carriers will benefit most from the ETS, as they will be able to bypass Europe and build up traffic between east and west through their hubs in the Gulf.

EADS said last week the Chinese authorities were holding back approvals for 35 A330s ordered by Chinese airlines as well as 10 A380 super jumbos that are destined for Hong Kong-based airlines. Last month, China banned its airlines from taking part in the ETS plan.

Airbus has already started cutting metal for some of the A330s that are scheduled for delivery to Chinese airlines starting in 2013.

The Chinese customers have made down payments on the aircraft and stand to forfeit these sums if they cancel the orders. Airbus has warned that the loss of the Chinese orders puts 1,000 jobs at risk as well as a similar number at its suppliers.

Industry analysts say Airbus would be able to find airlines willing to take the Chinese delivery slots without any difficulty, provided the manufacturing process isn’t too far advanced as airlines require a certain degree of customization of the planes they need.

Retaliatory action against the EU would intensify the pressure on European airlines with long-haul operations, as they struggle to cope with high fuel costs and growing competition.

Deutsche Lufthansa AG LHA.XE -0.90% said Thursday it might have to sell more assets to bolster its margins as it detailed plans to save €1.5 billion ($1.95 billion) in costs over three years after reporting a net loss in 2011. Franco-Dutch Air France-KLM AF.FR +0.36% has also embarked on a wide-ranging cost-saving plan to try to restore its profitability, as are smaller flag carriers such as SAS AB SAS.SK +14.02% and Finnair Oyj FIA1S.HE +1.73% .

Source: http://online.wsj.com/article/SB10001424052702304459804577283694062314830.html?mod=googlenews_wsj

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Cathay Pacific

HONG KONG — Cathay Pacific Airways, Hong Kong’s biggest airline, said Wednesday that profit fell 61 percent last year, hurt by persistently high jet fuel prices and weakness in the world’s major economies.

The airline warned of a challenging outlook for 2012 as it posted a profit of 5.5 billion Hong Kong dollars ($709 million) for 2011, down from 2010’s record HK$14 billion. The 2010 profit which was boosted by some one-time gains. Earnings per share fell to HK$1.40 from HK$3.57.

A “double whammy” of steep fuel prices and slumping cargo demand hit profits, Chairman Christopher Pratt said. He said 2012 is “looking even more challenging” than 2011 because of uncertainties including weakness in Europe and the United States, an unsettled Middle East and a forecast slowdown in China.

Cathay said high prices for jet fuel — its biggest expense at more than 40 percent of total costs — had a “significant effect” on operating results.

Fuel costs rose by HK$12.5 billion, or 44 percent, in 2011 from the year before, reflecting both higher jet fuel prices, which rose to an average of $130 a barrel, and that it flew more routes. The airline managed to offset some of that with a HK$1.8 billion profit from fuel hedging contracts, which cover about 20 percent of its fuel costs.

“We worry about high oil prices,” said Pratt. “Any increase in the cost of fuel eats into our profitability in a very, very direct way.”

Cathay executives said fuel prices have risen further but said that deliveries of new, more efficient aircraft over the next few years will help bring down the fuel bill.

High fuel costs also hurt profitability at its air cargo division, as fuel surcharges weren’t enough to cover the gap.

The air cargo division, which accounts for 26 percent of revenue, shipped 8.6 percent less freight last year. Demand for air cargo shipments from Cathay’s two biggest markets, Hong Kong and mainland China, started falling in April and remained weak for the rest of 2011, buffeted by the slumping global economy that cut consumer demand for electronics and other Asian manufactured goods.

The company said European demand was particularly weak. The division also faced increased competition from Shanghai-based airlines.

Air cargo shipments through Hong Kong were also hit by the devastating earthquake and tsunami that struck Japan in March 2011. The tsunami destroyed a swath of factories producing auto and high-tech components in northern Japan, disrupting manufacturers that relied on shipping those parts through the city for use in China.

Natural disasters and political instability cut travel demand to some of Cathay’s major destinations. Demand for travel to Japan was “heavily affected” by the tsunami and subsequent nuclear crisis, although it recovered by October. Flooding in Thailand and unrest in the Middle East also hurt demand for travel.

Cathay and its subsidiary Dragonair carried 27.6 million passengers last year, 2.9 percent more than in 2010, but the amount of seats filled fell by 3 percent as passenger growth failed to keep pace with added capacity.

source: http://www.washingtonpost.com/business/economy/hong-kong-airline-cathay-pacifics-2011-profit-dives-on-high-fuel-prices-weak-cargo-demand/2012/03/14/gIQAtTgxAS_story.html

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Uruguay airline evacuates passengers twice

AN Uruguayan airline says that passengers on an international flight had to be evacuated from planes twice on the same trip.

The Pluna airline says in a statement that passengers had boarded a flight from Montevideo from Buenos Aires early Wednesday, but had to disembark when a technical problem involving the fuel system was found. Firefighters also were summoned.

Passengers were put aboard another plane, but the pilot aborted his takeoff because of a strange smell. The airline says the odor may have resulted from recent maintenance.

Finally the passengers were put aboard another flight and reached their destination.

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New Thai airline PC Air has taken off on its first proving flight from Bangkok to Surat Thani province after it recruited four transsexual flight attendants last year.

With her crisp uniform, immaculate make-up and hair swept up, Mew looks like any other air hostess, but she’s one of a handful of Thai transsexuals blazing a trail in the skies.

Fledgling Thailand-based carrier PC Air has hired four transgender cabin crew in a highly publicised recruitment drive that has divided opinion over whether the move is in the spirit of equality or exploitation.

“I like a job where I can show my ability and I love to wear beautiful suits,” said Phuntakarn Sringern, better known by her nickname Mew, embarking on Friday on the airline’s first commercial flight from Bangkok to Hong Kong.