Jetstar Hong Kong sells 3 aircraft as it awaits approval

New budget airline Jetstar Hong Kong said on Friday (Aug 22) it has sold a total of six of its aircraft because it is taking longer than expected to get a licence to operate. The airline, which is a joint venture between Australia's Qantas, China Eastern Airlines and Hong Kong-based Shun Tak Holdings applied for regulatory approval in 2012 in the southern Chinese city.

An airline will only be given a operation license if its principle place of business and centre of its decision-making is in Hong Kong, according to local laws. "Jetstar Hong Kong can confirm the sale of a further three aircraft, now a total of six Airbus 320s, with three remaining in the fleet for launch," the airline's chief executive officer Edward Lau told AFP in an email.

The airline sold three A320s this month, and three in April. "This has been an unfortunate but prudent business decision made by the Jetstar Hong Kong board as the regulatory approvals are taking longer than initially expected," Lau said, adding that the sale doesn't affect the firm's readiness once approval is given.

Lau said Jetstar is working "closely" with the government and is "confident of gaining all the necessary approvals". The catalogue price of the latest sale of three A320s this month is US$281.7 million (S$352 million), according to Dow Jones Newswires.

The regulatory approval for the airline has also faced opposition from the city's flag carrier Cathay Pacific, which says the airline is not based in Hong Kong. "The whole Jetstar network is part of an Australian entity and certainly can't pass the test of being principally based here in Hong Kong," Cathay's chairman John Slosar had said earlier this month, Dow Jones reported.

Qantas owns the Jetstar brand and has other joint ventures in Japan, Singapore and Vietnam. Shipping and property giant Shun Tak Holdings, founded by Hong Kong tycoon Stanley Ho, bought a third of Jetstar Hong Kong for US$66 million in June of last year, helping its bid to set up locally.

Hong Kong-listed Shun Tak is run by managing director Pansy Ho, daughter of Stanley, who is also a Macau casino mogul. The low-cost carrier plans to fly to destinations in China, Japan, South Korea and Southeast Asia.

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Snoozing China air traffic controllers force jet to delay landing

A Chinese aircraft was forced to delay its landing after two air traffic controllers nodded off, reports said on Tuesday (Aug 19), sparking a wave of online anger about airline safety.

The Boeing 737 was preparing to land at Wuhan airport in central China but had no response from the air traffic control tower for 12 minutes, reports said. Contact was eventually made and China Eastern Airlines flight MU2528 from Sanya landed safely, the Sina.com news portal said.

"Because air traffic control was asleep on duty, (the plane) called many times," civil aviation authorities said in a statement quoted by Chinese business magazine Caijing. "But there was no reply, and no contact could be made with the control tower."

A separate investigation report cited by Caijing said two controllers had fallen asleep. The incident happened on July 8 and the statement was dated July 29. There was no explanation for the delay in making it public.

"Air control work is truly exhausting, but it is unforgivable to sleep on duty," a post on Sina Weibo, China's version of Twitter, said on Tuesday. "Hundreds of people's lives depend on the actions of flight tower controllers. We entrust our lives to you," the post continued.

Another netizen added: "Such serious consequences. Should let him sleep as much as he wants in prison."

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China Eastern Airlines to launch budget carrier

China Eastern Airlines said Wednesday it would transform one of its units into a budget airline, the first Chinese state carrier to do so.

China's second biggest airline by passenger volume said its Beijing-based domestic carrier China United Airlines would become a low-cost flyer as the country liberalises its commercial aviation market.

"We believe the low-cost carrier market has enormous growth potential in China given its low penetration rate," the airline's company secretary James Wang said.

Ticket prices may be reduced by up to 40 per cent, the company said according to the official Xinhua news agency, as it seeks to compete with several private budget carriers already operating there, including Spring Airlines and Juneyao Airlines.

Last year, the government lifted a six-year ban on establishing new airlines as it deals with growing air-traffic demand.

China United Airlines, which operates 26 Boeing 737 aircraft flying to around 70 locations in China, plans to triple the size of its fleet to 80 aircraft by 2019.

China's airlines carried 350 million passengers last year, up nearly 11 per cent from 2012, according to official figures.

The country's civil aviation authorities said it will have more than 230 airports by 2015, up from 193 last year.

China's huge and growing high-speed rail network, however, has resulted in some shorter flight routes being terminated.

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China Eastern to buy 80 Boeing 737s

US aerospace giant Boeing said on Friday that China Eastern Airlines has agreed to buy 80 737 aircraft, its biggest single-aisle purchase to date by a Chinese airline.

The deal, a mix of current 737s and the new 737 MAX model, is worth more than $8 billion deal at list prices, Boeing said. Airlines typically receive discounts on orders.

"We look forward to making history with China Eastern as they are poised to make the largest purchase for single-aisle airplanes by a Chinese airline," said Ihssane Mounir, vice president of Boeing's sales and marketing for Northeast Asia, said in the statement.

Boeing did not provide details on the breakdown of the plane models or delivery dates.

In May, Boeing's arch-rival, European aircraft maker Airbus, won an order from China Southern Airlines for 80 single-aisle A320s with a list value of $7.9 billion.

State-controlled China Eastern, headquartered in Shanghai, operates a fleet of more than 430 aircraft, including Boeing and Airbus jetliners.

In a filing with the Hong Kong stock exchange on Friday, China Eastern said it had agreed to buy 80 Boeing airplanes valued at $7.4 billion, citing Boeing's 2012 list prices.

The airline said it received "substantive price concessions" and as a result it was buying the aircraft significantly below the list price and at even more favourable terms than those under a 2012 deal with Boeing to buy 20 777-300ERs.

China Eastern also did not reveal the breakdown of the airplanes, saying only they were "mainly" the energy-efficient 737 MAX series.

The airline said it decided to buy the Boeing aircraft due to market demand and the company's strategy to build a route network with Shanghai as the core hub and Xi'an and Kunming as the regional hubs.

The Boeing airplanes are expected to be delivered in stages from 2016 to 2020, it said.

As part of the agreement, China Eastern said it would dispose of 20 ageing Boeing aircraft -- 15 737-300s and five 757s -- to the Chicago-based Boeing for an unspecified amount of cash.

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Top airline partners honoured at Changi Airline Awards

Twenty-four awards were presented to the airline community across six categories at the 9th Changi Airline Awards on Tuesday evening.

The annual awards, organised by the Changi Airport Group, celebrate the partnership of airlines operating at Changi Airport and their contributions towards the growth of Singapore's air hub.

China Eastern Airlines received the Partner of the Year Award for its significant contributions to grow and strengthen services between China and Singapore.

China was the fifth largest source of passenger traffic for Changi Airport last year, with a total of 4.64 million passengers travelling between Singapore and China, a 6.4 per cent increase compared with 2012.

China Eastern Airlines is the largest Chinese carrier operating at Changi Airport in terms of passenger traffic.

The airline carried more than 650,000 passengers in 2013, and over the past five years, the number of passengers served by the airline increased at a compounded annual growth rate of more than 10 per cent.

The top five passenger carriers at Changi Airport last year were Singapore Airlines, Tigerair Singapore, SilkAir, Jetstar Asia and AirAsia Berhad.

In the cargo airlines category, Singapore Airlines Cargo continued to top the list, followed by FedEx Express, Cathay Pacific, EVA Airways and Air Hong Kong.

Speaking at the ceremony, Transport Minister Lui Tuck Yew highlighted the need for close partnership within the airport community to adapt to the evolving aviation trends.

Mr Lui said: "To be an effective partnership, we must consult, listen, and work towards win-win solutions. With this close partnership in mind, we will continue to be sensitive to the needs of airlines. In particular, we appreciate the concern that airlines have with costs. We will continue to keep a close eye on it and ensure that Changi Airport remains competitive and offers good value for money."

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Singapore Air May Seek Asia Deals After Virgin Stake Sale

Singapore Airlines Ltd. (SIA) could revisit plans for China or India investments after adding to aviation’s biggest cash pile through the possible sale of a stake in Virgin Atlantic.

The carrier has $3.4 billion of net cash, according to data compiled by Bloomberg, enough to buy eight Airbus SAS A380s at list prices. That means it could use funds from a Virgin stake sale for investments in the world’s two most populous nations or to pay a special dividend, said Paul Yong, director of research at Singapore-based DBS Vickers Securities.

“They’d be looking at mergers and acquisitions with or without this deal,” he said. “But if it does go through, their war chest will be beefed up significantly.”

Singapore Air said this week it’s in talks to sell its 49 percent share of Virgin Atlantic as competition from Middle East carriers and slower growth in Europe and the U.S. hit long-haul travel. The carrier is instead focusing on growth in the Asia- Pacific region, buying a stake in Virgin Australia Holdings Ltd. (VAH) and adding new planes for regional routes.

The Virgin sale “seems to point to some further corporate activity,” said Andrew Orchard, an analyst with CIMB Securities Hong Kong Ltd. “They don’t need the cash.”

China Eastern

The airline could look to raise its stake in Virgin Australia or try to revive plans for an investment in China Eastern Airlines Cop., he said. Singapore Air tried to buy a stake in the carrier with parent Temasek Holdings Pte. about five years ago. The offer was ultimately vetoed by the Shanghai- based airline’s minority shareholders.

Singapore Air, the world’s second-biggest by market value, can’t comment on potential investments while the Virgin stake sale is being discussed, said Germaine Shen, a spokeswoman. The airline is “very open” to investment opportunities in growth areas, including India, China and Southeast Asia, Chief Executive Officer Goh Choon Phong told investors last month.

Delta Air Lines Inc. is interested in buying the Virgin Atlantic stake, possibly with partner Air France-KLM Group, two people familiar with the matter said this week. The U.K. carrier’s billionaire founder Richard Branson will probably retain a majority share, Virgin Atlantic Chief Executive Officer Steve Ridgway said Dec. 3.

Singapore Air may look again at China Eastern or possibly China Southern Airlines Co. because of the country’s travel growth, DBS Vickers’s Yong said. The carrier already has a stake in China Eastern-controlled China Cargo Airlines. China Eastern Chairman Liu Shaoyong has repeatedly said that the carrier is still open to selling a stake to a strategic investor.
India Investments

Singapore Air could also look for a deal in India following a recent loosening of foreign-investment rules, Yong said. The country’s passenger numbers could triple to 452 million a year by 2020, according to a March study by CAPA Centre for Aviation and SITA.

Still, Indian carriers have struggled to turn rising demand into profit because of price wars, high fuel taxes and competition from state-owned Air India. Kingfisher Airlines Ltd., which has said it’s seeking overseas investors, halted flights in October because of a cash shortage.

“You wouldn’t need much cash to be buying your way into India, but you’d probably be buying more trouble than it was worth,” said Peter Harbison, executive chairman of CAPA Centre for Aviation, which advises airlines.

Jet Airways (India) Ltd., the nation’s biggest carrier, is close to selling a 24 percent stake to Abu Dhabi-based Etihad, raising about 16 billion rupees ($290 million), an Indian government official said this week. He declined to be identified, citing rules. Etihad is assessing possible investments in one or two Indian carriers as well as looking at China, CEO James Hogan said in a Dec. 3 interview.

Singapore Air in 2000 made a joint bid with Tata Group for a 40 percent stake in Air India. It abandoned the effort about 10 months later, partly because of political opposition.

Virgin Australia

The Singaporean carrier is more likely to boost its stake in Virgin Australia than investing in India, Harbison said. The airline bought 10 percent of Virgin Australia, the nation’s second-biggest carrier, for A$105 million ($110 million) last month to help provide traffic for its hub.

“I’d be surprised if they didn’t go to 20 percent,” Harbison said. Branson’s Virgin Group holds 24 percent of Brisbane-based Virgin Australia, Air New Zealand Ltd. owns 19 percent and Etihad holds 9 percent, according to data compiled by Bloomberg.

Overseas Failures

Singapore Air’s previous overseas investments have failed to pay off. The airline bought the Virgin stake for 600 million pounds in 1999, or about $970 million at the time. It subsequently wrote off goodwill amounting to about 96 percent of the purchase price, according to spokeswoman Shen.

The carrier bought a 25 percent of Air NZ in 2000. That investment was written down after the New Zealand carrier sought a government bailout following the collapse of Australian unit Ansett Holdings Ltd. The stake was later sold.

Singapore Air has traditionally maintained a net cash position, with more cash in hand than debt. It’s only failed to achieve this in its year-end accounts three times since 1990, according to data compiled by Bloomberg. The last time was in the year ended March 2004. Japan Airlines Co. (9201) has the second- biggest net cash position among carriers worldwide with $775 million, about a quarter of Singapore Air’s tally, the data show.

The size of the cash holding has depressed Singapore Air’s return on equity, a measure of profitability. It had the fourth- lowest among the 27 carriers worth more than $1 billion that made a profit last year, according to data compiled by Bloomberg.

Special Dividend

The airline may use some of its cash for a special dividend. It gave shareholders an 80 Singaporean cents extra payout last year, and one of 54 cents in 2007, according to data compiled by Bloomberg. It also span off its ground-handling unit by giving stock to investors in 2009.

“If they have excess cash flow it should go back to the shareholders,” said Kelvin Lau, an analyst at Daiwa Capital Markets HK Ltd. “They are not really running out.”

Singapore Air may also decide to use its money to help fund existing growth plans rather than for overseas deals, said CIMB’s Orchard. It provisionally ordered five A380s and 20 A350-900s, worth $7.5 billion at list prices in October. Regional arm SilkAir agreed to order 54 Boeing Co. 737 planes in August to more than double the size of its fleet.

Long-haul budget arm Scoot Pte., which began flights this year, is also holding orders for 20 Boeing 787s. The unit joined regional low-cost affiliate Tiger Airways Holdings Ltd., SilkAir and the main Singapore Air business in the company’s portfolio.

“They’ve got four carriers as it is, so their hands are pretty full,” Orchard said. “Do they really want another transaction at this time?”

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The big headache here for SIA is to decide how to use that extra cash after selling their stake in Virgin Atlantic. Reinvest in India and China, or mind its own business, literally, and focus on its own portfolio in Scoot, SilkAir and Tiger Airways?

Airbus Wins 60-Plane China Order After EU Retreat on CO2 Charges

Airbus SAS won an order for 60 A320 planes from state-backed China Eastern Airlines Corp. (670), less than two weeks after the European Union backed down in a dispute with the government in Beijing over jetliner-emission levies.

China Eastern received a “substantive” discount to the list price of $5.4 billion for the single-aisle planes, it said in a statement from Shanghai yesterday, adding that Toulouse, France-based Airbus also agreed to take 18 regional jets off its hands.

EU plans to impose carbon dioxide-emission fees on flights in and out of the bloc were suspended on Nov. 12 after countries including China, India and Russia threatened retaliatory steps. Airbus parent European Aeronautic, Defence & Space Co. (EAD) had said the levies might cause China to refuse to take its planes.

“I suspect there’s a message there,” said Sandy Morris, an analyst at Jefferies International in London with a “buy” rating on EADS. “China has been light on A320 orders for a while now and it looks like Airbus held some production slots back until this was resolved. It’s called looking after your customer.”

The A320s, due to arrive from 2014 to 2017, will be used mainly on domestic routes, according to China Eastern, which last year switched an order for 24 Boeing Co. (BA) 787s wide-body planes to 45 smaller 737s because of waning long-haul demand.

Regional Deal

The airline will sell eight Bombardier Inc. (BBD/B) CRJ planes and 10 Embraer SA regional jets with a book value of 1.5 billion yuan ($241 million) to Airbus, it said in the statement.

China was pleased with the EU move to suspend the plan for emissions charges, Xia Xinghua, deputy director of its aviation regulator, said Nov. 13. The Asian country’s airline association said in June that carriers would snub a deadline for filing emissions data and that the government would support them.

Three calls to China Eastern’s offices outside regular office hours yesterday went unanswered.

Airbus Chief Executive Officer Fabrice Bregier said in September that China was withholding signature on 35 to 45 wide- body A330 planes because of the emissions dispute. A contract for those aircraft would have given a “bigger signal” regarding current Chinese attitudes, Jefferies’ Morris said.

Airbus, which has an A320 assembly plant in China, won an order for 50 of the planes from the leasing arm of state- controlled Industrial & Commercial Bank of China Ltd. in August.

China and other nations had said the EU should wait for a global emissions program being drawn up by the United Nations’ aviation agency rather than push ahead with a regional plan.

The levies are designed to curb C02 output associated with global warming.

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Airlines in China are pretty strong in their stand about the carbon tax EU is intending to implement. I guess the most vulnerable victim to this new ruling is probably Airbus. China being a huge market with massive demands in their domestic aviation sector, nobody will want to miss out on such a big pie of business. Imagine Airbus losing all orders to Boeing, it's going to be unthinkable.

But what do you make out of the EU wanting to charge the carbon tax? Personally I feel it is redundant. "Fining" airlines for pollution isn't going to help much in global warming. The direction in which we should proceed to is to make more efficient engines to reduce emissions, just like what hybrid cars are doing on the road.