Airlines add to fleet
to stay competitive

AS air passenger traffic and competition between airlines around the world increases, a number of air carriers are planning to expand their air fleet, with a spate of large orders placed with airline manufacturers this year. Brazil’s TAM, Europe’s Ryanair, Japan Airlines, China Eastern Airlines and China’s Hainan Airlines have all announced high profile plans to buy new aeroplanes over the next two-to-four years in an effort to keep up with customer demand for air travel and stay profitable.

The demand for air travel in China in particular is increasing fast and two airlines there are showing a determination to stay ahead of the game. One of the country’s top three airlines, China Eastern Airlines, announced in June that it had signed a contract to buy 30 A320 passenger jets from Airbus. The planes are scheduled to be delivered between May 2008 and November 2010 and will principally serve the domestic market. Meanwhile, Hainan Airlines recently sold 2.8 billion new shares in order to raise US$700 million, which will help it compete with Air China, China Eastern Airlines and China Southern Airlines. “We will use the proceeds to set up an airline group and acquire new planes to increase our capacity,” said a spokesperson for the carrier.

Japan Airlines has also announced plans to sell off shares in order to raise much needed funds to buy new aircraft. The carrier was due to issue 700 million new shares earlier this year in order to raise Y222.71 billion (US$1.9 billion) for new planes as well as more fuel-efficient equipment.

In Europe and South America, Ryanair announced in July that it had bought 10 Boeing 737-800s for delivery in 2008, while TAM in Brazil agreed to acquire 37 additional Airbus aircraft to be delivered in 2010. A spokesperson for Ryanair said that the new aircraft would allow the carrier to launch more low-cost fare routes to new destinations in 2008.

The latest figures released from the International Air Transport Association (Iata) showed that overall international air traffic in May this year increased by seven per cent over the previous year.

Cathay Pacific makes moves in China

Philip Chen, Cathay Pacific Chief Executive, said that the acquisition of Dragonair would “reinforce Hong Kong’s role as the premier aviation hub in the Asia Pacific region”. The carrier has also strengthened its ties with Air China by doubling its holding in the company to 20 per cent, while Air China has acquired a ten per cent stake in Cathay Pacific. The deal means that Air China will be exclusively responsible for Cathay sales in mainland China and Cathay will carry out the same role for Air China in Hong Kong.

Tourists spent a total of US$682 billion in 2005, an increase of 3.4 per cent on the previous year, according to figures released by the World Tourism Organisation (WTO). This means that tourism spending worldwide now averages US$2 billion a day.

Tourist spending increased across all world regions last year, although growth varied from 7.8 per cent in Africa to 2.3 per cent in Europe. In terms of market share, Europe gains the most from tourist spending, with US$347 billion being spent by visitors to the continent in 2005. Africa was the fastest growing region in terms of tourist arrivals, increasing by 10 per cent last year.

WTO Secretary General, Francesco Frangialli said, “Visitor spending continues its strong overall growth, contributing substantially to global services exports and particularly to the overall trade balances of developing economies. Africa’s 7.8 per cent increase is a significant success story.”

UK carrier British Airways has announced pre-tax profits for the year ending 31 March 2006 of £620 million (US$1,148 million); an increase of 21 per cent on the previous year. The airline slashed many European fares earlier this year, in order to compete effectively with low-cost carriers such as Easyjet and Ryanair, and also added new routes to China and India. Chief Executive, Willie Walsh, said that the company’s short-haul business was in profit for the first time in 10 years.

A report by the European Tour Operators Association shows that countries who host the Olympic Games suffer from a drop in tourism growth in the years surrounding the event. The report highlights that the trend holds true for four out of the last five different Olympic venues, Sydney, Atlanta, Barcelona and Seoul, while official statistics for Athens – the fifth venue – are not available.

New airline Oasis Hong Kong Airlines has launched flights from Gatwick in London to Hong Kong from just £75 (US$139). The flights will be available five times a week from October this year. “We are pleased to announce the first ever low-fare, high-quality long haul flights from London to the Far East and we look forward to launching flights to more destinations in the future,” said Steve Miller, Chief Executive of the airline.

The number of flights between Japan and China are to increase in the future after a deal was struck between Japan’s Transport Minister Kazuo Kitagawa and the civil aviation authorities in Beijing. The deal will increase the number of weekly passenger flights between the two countries by 20 per cent to 547.

New Zealand carrier Air New Zealand is to suspend flights to Singapore from October as well as overhaul some other routes in order to increase profitability. A new service to Shanghai is due to start in November, while the route between Christchurch and Los Angeles will be scrapped. “North Asian routes represent substantially greater growth prospects than Southeast Asia which is already well served with international airline capacity,” said Rob Fyfe, Chief Executive at Air New Zealand.

Two Americans have filed a price fixing lawsuit against British Airways, Virgin Atlantic, American Airlines and United Airlines saying that they used fuel surcharges to wrongfully inflate prices. The travellers claim that British Airways has added six fuel surcharges since May 2004 and have conspired with other airlines to artificially inflate prices.

The Singapore government has extended its air services agreement with Malaysia, enabling low-cost carriers in the region to land in Changi Airport in Singapore. Cheap flights into Changi will help further Singapore’s plans to turn the airport into the region’s premier airline hub.