2016 - 12 - 01 Air Transport World

2017 GLOBAL FORECAST
Caution in the air
TRAVEL IN THE FUTURE

Technologies that could change how we fly
CEO INTERVIEW
Jetstar Groups Jayne Hrdlicka
december 2016/JANUArY 2017 | www.atwonline.com
Uniteds
Mission
ATW DEC 2016 COVER 2.indd 1
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701ATWpages.indd 2
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Volume 53 / Number 11
December 2016/January 2017
Contents
This issue online atwonline.com/magazine-issues/atwonline
UNITED AIRLINES
16
22
on the cover
16 Solving The UnSolvable
Oscar Munoz and a management
dream team attempt to find the
winning solution at United Airlines
By Aaron Karp
forecast
2017
32
Features
22 eyeS on The ProfiT
Collectively, the worlds airlines expect to remain
profitable in 2017, but it will be a tougher ride
By Karen Walker
36
36 The new Tomorrow

The future of commercial air transport could look
very different if research projects bear fruit
By Graham Warwick
DzyNE TEChNOLOgIES
32 STaying ConneCTed
Airports seek ways to assist passengers
and interface with themvia technology
By Aaron Karp and Anne Paylor
40
AIRBUS gROUP CONCEPT
40 fliP ThaT Cabin

A modular cabin concept might generate additional
revenue for airlines
By Graham Warwick
atwonline.com | December 2016/January 2017 | atw 1
TOC_Dec_2016.indd 1
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701ATWpages.indd 2
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CONTENTS
December 2016/January 2017 | Volume 53/ Number 11
BUSINESS/AUDIENCE
DEVELOPMENT
CONTACT INFORMATION
12
KURT HOFMANN
ALASKA AIR GROUP
PUBLISHER,
AIR TRANSPORT WORLD
MANAGING DIRECTOR,
AMERICAS,
AVIATION WEEK
Beth Wagner
Penton Aviation Week Network
1911 N. Fort Myer Dr.
Arlington, VA 22209
Tel. 703-997-0261
beth.wagner@penton.com
PRESIDENT
AVIATION WEEK
Gregory Hamilton
greg.hamilton@penton.com
47
JETSTAR
AUDIENCE DEVELOPMENT
SENIOR DIRECTOR
Abi Ahrens
TEL: +1 913-967-1686
abi.ahrens@penton.com
AUDIENCE DEVELOPMENT
MANAGER
Tyler Motsinger
TEL +1 913-967-1623
tyler.motsinger@penton.com
14
A. KATZ/SHUTTERSTOCK.COM
EDITORIAL
Priorities for New DOT Chief
By Karen Walker
SUBSCRIPTIONS
15 QUOTABLES
Best quotes heard from
industry leaders
NEWS BRIEFS
44 TRENDS
Alaska Air Group closes

Virgin America acquisition
46 CUSTOMER SERVICES
Trump taps Elaine Chao for

transportation secretary
46 ADVERTISERS INDEX
Lufthansa seals
Brussels Airlines takeover
11
Manufacturers
12
Regulatory/Airline News
46 ADVERTISERS WEBSITES
47 INTERVIEW
Jetstar Group
CEO Jayne Hrdlicka
By Victoria Moores
14 ANALYSIS
Reading Trump
The US president-elect tweets
and the air transport sector
anxiously holds its breath.
By Aaron Karp
Printed in USA Copyright 2016 by

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701ATWpages.indd 4
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EDITORIAL
Priorities for
New DOT
Chief
EDITORIAL STAFF
Editor-in-Chief
Karen Walker
+1 703-656-6300
karen.walker@penton.com
Senior Editor
Aaron Karp
+1 703-997-0285
aaron.karp@penton.com
Americas Editor
Mark Nensel
+1 703-997-0287
mark.nensel@penton.com
Senior Editor/Europe Bureau Chief
Victoria Moores
Tel: +44 (0) 7966 389 339
victoria.moores@penton.com
Editor/ATWonline.com
Linda Blachly
+1 703-997-0288
linda.blachly@penton.com
Contributing Writers
Henry Canaday
Katie Cantle
Alan Dron
Kurt Hofmann
Michele McDonald
Polina Montag-Girmes
Robert W. Moorman
Anne Paylor
Contributing Photographer
Rob Finlayson
Art Direction & Design
Unconformity, LLC.
Air Transport World 2016. All Rights Reserved.

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Karen Walker | Editor-in-Chief

karen.walker@penton.com
S President-elects nomination of Elaine Chao to be

Department of Transportation
Secretary will likely be an uncontentious nominee with the Senate.
Chao has a reputation as a hard
worker who holds everyone to high
standards, but is pragmatic. Heres
how the next DOT Secretary can use
those skills to be a positive influence
for American airlines, their passengers,
the greater air transport industry and
the US economy:
Most critical and potentially most
significant of all, modernize and
transform the US air traffic control
system. Chao probably represents the
single biggest opportunity for the US
ATC system to finally move out of its
analog, antiquated and inefficient trap
and into the 21st century with all the
advantages that airlines want, controllers want, and passengers will benefit
from. What the US air transport system needs is a separate, not-for-profit
ATC system that would boost capacity and the US economy.
Immediately scrap the ridiculous
new competition rules that the
White House and DOT recently
proposed for US airlines. These proposals, which range from defining
what constitutes a delayed bag to
broadening requirements to small and
regional airlines to file huge amounts
of operational data and statistics at
huge cost to them but to no benefit
for the passenger are classic examples of government interference in the
operations of businesses that know

far better than Washington what
their customers want and how best to
deliver.
Revisit and throw out most of the
on-time performance government
fines and threats that hang over airlines. For the most part, these have
only served to force airlines to pad
out their scheduled block times, further adding to the ATC systems inefficiencies. And those fines do nothing
for any of the passengers that were
on a severely delayed flight. Put some
common sense into the system.
Dont micromanage airlines or tax
and fee them to death. High taxes
on air tickets have one effect: they
dampen demand for air travel, which
in turn has a negative effect on GDP,
to which airlines are a significant contributor.
Demonstrate full support for Open
Skies policy, secure but open borders
that permit free movement of people
and trade, and continued momentum
in the restoration of US commercial
relations with Cuba and Iran.
There lies the path to a healthy
US airline and air transport supplier
industry that can grow, compete,
enter new markets and invest in products that will better serve the traveling
public.
atwonline.com | December 2016 | atw 5
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12/16/16 12:34 PM
701ATWpages.indd 6
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The exibility to y as many cycles as you want, to the destinations

you want, as often as you want. LEAP. The architecture of reliability.
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PERFORMANCE | EXECUTION | TECHNOLOGY
701ATWpages.indd 7
MORE TO BELIEVE IN
12/15/2016 3:21:33 PM
701ATWpages.indd 8
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Manufacturers | 10
Regulatory | 11
For daily news stories, go to atwonline.com/dailynews
Airlines | 12-13
NEWSBRIEFS
NEWSBRIEFS
Alaska Air Group closes $4 billion Virgin America acquisition
AlASKA AIR GROUP
Seattle-based Alaska Air Group closed its $4 billion acquisition

of San Francisco-based Virgin America Dec. 14, creating the fifth
largest airline in the US.
Alaska Air Group subsidiary Alaska Airlines and Virgin
America will seek to secure a single operating certificate from
FAA by early 2018. Regional subsidiary Horizon Air will retain its
own operating certificate.
Alaska reached an agreement April 4 to buy Virgin America
for $2.6 billion and additionally take on $1.4 billion in debt and
aircraft lease obligations. The
merger gained antitrust clearance from the US Department
of Justice (DOJ) Dec. 6 after
Alaska agreed to reduce its
codesharing relationship with
American Airlines.
By combining Alaskas
strong presence in the US
Pacific Northwest with Virgin
Americas strong presence
at major California airports,
Alaska believes the combined
carrier can become the leading
domestic services airline on the
US west coast. The combined
company, which will be based
in Seattle, will offer nearly 1,200 daily flights to 118 destinations
while generating more than $7 billion in annual revenue. The
combined fleet comprises 286 aircraft, including more than 150
mainline Alaska Boeing 737s and more than 60 Virgin America
Airbus A320 family aircraft.
Negotiations with DOJ to gain regulatory approval for the
merger lasted longer than Alaska had anticipated, but ultimately
Alaska did not give up any assets to gain antitrust clearance.
Instead, it agreed to reduce its codesharing relationship with
American. According to DOJ, the restrictions on Alaska-American
codesharing will reduce by approximately 50% the volume
of Alaska passengers flying on American flights. Alaska and
American have had a codeshare relationship since 1999.
Although this merger offers hope that a strengthened Alaska

can be an even stronger competitor than before, because of
Alaskas extensive codeshare agreement with the worlds largest
airline, the merger threatened to blunt important competition and
reduce choices for consumers, acting assistant attorney general
Renata Hesse, who heads DOJs antitrust division, said in a statement. [The DOJ-Alaska] settlement ensures that Alaska has the
incentive to take the fight to American and use Virgins assets to
grow its network in ways that benefit competition and consumers.
DOJ noted that Virgin
Americas network extensively
overlaps with Americans network, adding, In particular,
Virgin has vigorously competed
with American on 20 nonstop
routes served by both airlines.
In an effort to maintain that
competition, the Alaska-DOJ
settlement prohibits Alaska
and American from codesharing on routes where Virgin and
American both offer competing
nonstop service today, irrespective of network changes
that either carrier makes in the
future, DOJ stated in a court
filing. By eliminating Alaskas ability to replace Virgins service
with codeshare flights on American, this provision will ensure that
if Alaska wishes to offer its customers service on these routes, it
will need to continue to compete head-to-head with American as
Virgin does today.
Alaska described the concessions it made to gain antitrust
clearance as limited changes to its codeshare agreement with
American Airlines.
Alaska executives have not decided on the future of the Virgin
America brand, and Alaska plans to continue to operate the
Virgin America fleet with its current name and product for a
period of time while it conducts extensive customer research,
Alaska said in a statement.
Trump taps Elaine Chao for transportation secretary

US President-elect Donald Trump said
he will nominate Elaine Chao, who was
labor secretary in President George W.
Bushs administration, to be the next US
transportation secretary.
Chaos selection to head the US
Department of Transportation (DOT), a
department with 55,000 employees that
includes FAA, was widely praised by the
aviation industry. Airlines for America
(A4A) president and CEO Nicholas Calio
said she has the known ability to manage a large organization, adding, Having
served alongside Elaine in two previous
administrations, I believe her wealth of
experience will benefit the millions of
Americans who depend on safe, affordable
and abundant air travel options every day.
Chao, who served as labor secretary for
the entirety of the George W. Bush administration (2001-2009), previously was deputy
transportation secretary (1989-1991), direc-
tor of the Peace Corps (1991-1992), chair of

the Federal Maritime Commission (19881989) and deputy administrator of the US
Maritime Administration (1986-1988). She
was also president and CEO of the United
Way of America from 1992-1996.
Chao, who was born in Taipei, is married to US Senate majority leader Mitch
McConnell (R-Kentucky). Her nomination
will have to be confirmed by the US Senate,
which is widely expected.
Lufthansa seals Brussels Airlines takeover

lufthansa Group completed its acquisition of 100% of SN
Airholding, the parent company of Brussels Airlines, in a deal to
fully integrate the Belgian carrier into lufthansas Eurowings Group
in 2018.
The transaction was set to close by early January 2017.
lufthansa said Brussels Airlines attractive market, established African network and advantageous cost structurewhich
has allowed the airline to compete with low-cost competition in
the Belgian marketwill further strengthen the lufthansa and
Eurowings market position.
ATW Dec16Jan17 NewsBrief_rnd1.indd 9
12/16/16 2:28 PM
NEWSBRIEFS
BOEING
MaNUFaCtURERS Full news coverage at www.atwonline.com
First 787-10 being assembled at Boeings North Charleston, South Carolina

facility.
Boeing will reduce the 777
production rate from seven
per month to five per month
in August 2017. The US manufacturer had previously decided to lower 777 production
from the current rate of 8.3
aircraft per month to seven
monthly starting in January
2017. But 777 program VP
and GM Elizabeth Lund said
in a message to employees
that despite tireless work by
the sales team, [777] orders
have slowed.
The Bombardier CS300
gained type validation by FAA,
meaning both variants of the
CSeries have been certified
by Transport Canada, the
European Aviation Safety
Agency (EASA) and FAA. ,
FAA also granted the CS100
and the CS300 the Same
Type Rating, a designation
that allows pilots to transfer
between the two variants with
minimal training.
Boeing started final assembly
of the first 787-10, the third
and largest variant of the 787,
at its manufacturing facility
in North Charleston, South
Carolina. The 787-10 will be
18 ft. longer than the 787-9.
First delivery is scheduled for
2018 to United airlines, which
selected GE aviation GEnx-1B
engines to power its 787-10.
Rolls-Royces Trent 1000
TEN engine was selected to
power the first test flight of
the Boeing 787-10, which is
expected to take place in 2017.
Rolls said a Trent 1000 TEN
powered an earlier variant 787
during a test flight in Seattle
Dec. 7.
Boeing firmed an MOU signed

with Iran air earlier this year
for 50 narrowbody and 30
widebody aircraft in a deal
valued at $16.6 billion at list
prices. The contract covers 50
737 MAX 8s, powered by CFM
International LEAP-1B engine,
15 777-300ERs and 15 777-9Xs.
The World Trade Organization
(WTO) weighed in on a longrunning subsidy dispute relating
to Boeing aircraft, saying that a
Washington state tax incentive
on the 777X program contravenes WTO subsidy rules,
but dismissing six other complaints made by the European
Union. In its report, WTO said
Washington states tax incentive toward Boeings production
of 777X aircraft in the Seattle
area was inconsistent with
its subsidies and countervailing
measures agreement.
The airbus A350-1000 completed its maiden flight. The
aircraft landed after flying for
4 hours and 18 minutes and
completing a low fly pass. The
Rolls-Royce Trent XWB-97powered widebody flew over
southwestern France for its first
flight, reaching a maximum
height of 27,000 ft. Launch
customer for the A350-1000 is
Qatar airways, which was also
launch customer for the -900.
Embraer is deferring the
E175-E2 entry-into-service
by a year to 2021, citing
ongoing uncertainty over the
settlement of pilot scopeclause agreements at mainline carriers in the US, the
chief market for the variant.
Embraer, which is on or ahead
of schedule in developing
the larger
E190-E2 and
follow-on
E195-E2 versions, said
despite the
decision to
push back
service entry,
development
of the E175-E2
will continue
as planned up
to the start of
flight testing
and certification.
Boeing named GE aviation

Services president and CEO
Kevin McAllister the new
president and CEO of Boeing
Commercial Airplanes, replacing Ray Conner who will
remain as a Boeing vice chairman through 2017 and will
work closely with McAllister
in the months ahead on a purposeful hand-off of customer,
supplier and community and
government relationships,
and to ensure continuity of
operations and customer
support, Boeing said, adding
that Conner also will remain
involved in ongoing product
development strategy at
Commercial Airplanes.
commercial aircraft year-todate.

Boeing booked firm orders for
13 commercial aircraft from six
customers in November, valued
at approximately $1.7 billion
at list prices. Boeing delivered
61 commercial aircraft to 26
airlines, eight lessors and
one unidentified customer in
November. Through Nov. 30,
2016, Boeing delivered 662
commercial aircraft year-todate.
The fourth Mitsubishi aircraft
Corp. MRJ90 flight test aircraft
made its first flight in Japan.
At the time of the flight, two
MRJ90 flight test aircraft had
already been transferred to the
US, where Mitsubishi Aircraft
is conducting the majority
of flight testing toward the
regional jets certification. Two
more MRJ90s were expected
to be transferred to Mitsubishi
Aircrafts US flight testing base
at Grant County International
Airport in Moses Lake,
Washington, by the end of
2016. A fifth MRJ90 flight test
aircraft will remain in Japan.
airbus detailed plans to

cut 1,164 jobs and transfer another 325 positions
under the restructuring plan
it announced at the end of
September. From Jan. 1, 2017,
the European manufacturer
will merge Airbus Groupformerly known as EADSwith
its largest division, Airbus
Commercial Aircraft.
Russias State transport

Leasing Co. (StLC) ordered
five Let L-410 aircraft with
Russias Ural Works of Civil
Aviation, in a deal valued
at RUB2 billion ($30.7 million) at list prices. Half of
the sum will be subsidized.
STLC also signed a firm order
with Salekhard-based Yamal
airlines to lease 13 Sukhoi
Superjet 100s (SSJ100s).
The deal is part an order for
25 SSJ100s that was first
announced in August 2015.
airbus delivered an A321 to

Atlanta-based Delta air Lines
from its US manufacturing
facility in Mobile, Alabama. It
was the 15th aircraft to airbus
delivered from the Airbus
plant in Mobile.
Russias United Engine Corp.

started the second stage
of PD-14 engine testing for
the Irkut MC-21 aircraft.
The tests are conducted at
Flight Research Institute at
Zhukovsky near Moscow.
airbus reported firm orders

for 14 commercial aircraft in
November, valued at $1.6 billion at list prices, from two
airlines and one undisclosed
customer. Airbus delivered 61
commercial aircraft to 34
airlines and 10 lessors in
November. Through Nov. 30,
2016, Airbus delivered 575
Boom technology expects to

start subsonic flight tests of
its XB-1 supersonic demonstrator in late 2017. Dubbed
Baby Boom, the delta wing
aircraft is a one-third scale
demonstrator for a small
supersonic airliner that Boom
aims to certificate for commercial service by 2023.
10 atw | December 2016/January 2017 | atwonline.com
12/16/16 2:28 PM
NEWSBRIEFS
RegulatoRy/aiRline news Full news coverage at www.atwonline.com

The us Department of
transportation (Dot) proposed that airlines and ticket
agents should be required to
inform prospective customers
in advance if an airline allows
passengers to make mobile
phone calls onboard the aircraft. DOT issued the proposal
as an Advanced Notice of
Proposed Rulemaking, opening up 60 days for public
comments. The proposal
was driven by the increased
prevalence of onboard Wi-Fi
connectivity, which can enable
mobile phone users to make
voice calls without using radio
frequencies currently prohibited for inflight mobile phone
calls.
transportation granted
final approval to norwegian
air international (nai)
to begin flights between
Ireland and the US after a
three-year review process.
The announcement came
just days after the European
Commission said it would
take the US to court over the
application delay. The application was made under the
US-EU Open Skies agreement
and DOT concluded it met
all requirements, although it
was fiercely opposed by some
labor groups, including pilots
union ALPA. NAI will operate
out of Ireland and plans to
begin with routes from Cork
and Shannon to the Boston
and New York areas on the US
east coast.
airlines plans to expand their

alliance on routes between
the US and Australia, saying
it would harm competition in
the US-Australasia market, in
particular the large US-Australia
market. American plans to file
an objection.
the two-class, 86-seat variant.

The deal dates back to a letter
of intent that was originally
announced in October. The
five firm aircraft are valued at
$165 million at list prices, and
are scheduled for delivery in
2017.
The Competition Commission

of singapore approved a proposed joint venture between
lufthansa and singapore
airlines, subject to certain
voluntary conditions. The two
airlines offered to maintain
and increase capacity on both
routes and carry a minimum
number of Singapore passengers. An independent auditor will also be appointed to
monitor compliance with the
conditions.
aircalin, a full-service airline

based on the French Pacific
island of New Caledonia,
signed an MOU to acquire
two Airbus A320neos
and two A330-900s.The
A320neos will be deployed
on existing regional routes
to Australia, New Zealand
and the Pacific Islands,
while Aircalin will use the
A330neos to boost services
to Japan for onward connections and potential new routes
such as China.
The european aviation safety

agency proposed a new set of
flight crew mental health rules,
following lessons learned after
a germanwings pilot deliberately flew an Airbus A320
into the French Alps March
24, 2015, killing all 150 people
aboard. The proposed rules
include mandatory psychological assessment of flight crew
before being hired, as well as
systematic drug and alcohol
testing upon employment.
Substance testing would also
be conducted after a serious accident or incident with
reasonable suspicion, and
randomized after the crew
member returns to work.
asia-PaCifiC
transportation tentatively
denied Australian flag carrier Qantas and Dallas/
Fort Worth-based american
Philippine airlines finalized a

firm order for five Bombardier
Q400s and purchase rights
for another seven, launching
air new Zealand and global

mobile satellite communications provider Inmarsat signed
a contract to provide Global
Xpress (GX) connectivity
GX for Aviationacross the
airlines long- and short-haul
fleets. Under the agreement,
GX for Aviation connectivity will be integrated with
Air New Zealands inflight
entertainment system provided by Panasonic. The first
GX-equipped aircraft are
expected to begin proving
flights in the second half of
2017, with services progressively available on Tasman,
Pacific and long-haul fleets
from the end of next year.
fiji airways committed to
ordering five Boeing 737
MAX 8 aircraft to replace
its narrowbody fleet of four
737-800s and one 737-700.
The first two MAX 8s will be
delivered in 2018; the remaining three in 2019. All will be

powered by CFM International
LEAP-1Bs, the sole-source
engine for the MAX. The
order is valued at $550 million at list prices.
Seoul-based Korean air
expects to take delivery of
seven Bombardier CSeries
300s in 2017, becoming the
first operator of the type in
Asia, Bombardier VP-CSeries
aircraft program Robert Dewar
said.
Hainan airlines low-cost subsidiary (LCC) lucky air plans
to launch a LCC in the Sichuan
Province capital of Chengdu in
an effort to explore the market
potential of Southwest China.
According to a statement
released by Hainan Airlines
through the Shanghai Stock
Exchange, the new venture will
be named Shen Niao Airlines
and is expected to have a registered capital of CNY3 billion
($435 million).
Chinas Juneyao airlines
ordered 10 Boeing 787-9s,
although the order has not
been confirmed by Boeing.
The aircraft will be used to
facilitate the Shanghai-based
carriers rapid expansion.
Deliveries of the first three
aircraft are scheduled for
2018.
Taipei-based transasia
airways shut down operations, citing heavy operating
losses following two major
crashes in 2014 and 2015. The
company posted a NT2 billion
loss ($63 million) in 2015 and
another NT2.7 billion loss as of
Oct. 31, 2016.
for Stowage Bins

Passenger Convenience
Shorten Aircraft Turns
Wide Field of View with Flat Surface

Approved by AIRBUS & BOEING
FAA/EASA Flammability Test Report Available
Obtained AS9100
KomyMirror Search
738BSI
www.facebook.com/komymirror
12/16/16 2:28 PM
NEWSBRIEFS
aIrLINE NEwS Full news coverage at www.atwonline.com
Kurt Hofmann
the Lufthansa Group supervisory board appointed

telecommunications expert
Thorsten Dirks as the
new CEO of low-cost carrier Eurowings and Aviation
Services, effective May 1,
2017. He will succeed Karl
Ulrich Garnadt, who will retire
April 30, 2017.
AirBaltic Bombardier CS300 unveiling in Riga.
EuropE
airBaltic took delivery of its
first Bombardier CS300. The
Latvian flag carrier, which was
the launch operator for the
type, began Riga-Amsterdam
services in December. AirBaltic
has 20 CS300s on order,
which will replace its 12 Boeing
737s. The second CS300 was
scheduled to arrive at the end
of December or early January,
followed by a further six in
2017. Another eight will arrive
in 2018, ahead of the final four
in 2019.
Plans were approved to create a new European leisure
airline in a joint venture with
German travel company tuI
Group. The new airline will
have a fleet of around 60
aircraft, offering a capacity of
15 million seats per year, with
a focus on point-to-point flying to connect key European
tourist markets. The transaction is subject to approvals by
aviation regulatory bodies and
antitrust authorities.
Oneworld carrier airberlin is
set to recruit more than 500
additional flight attendants
related to the airlines growth
plan for long-haul routes,
especially to North America.
The additional cabin crews
will be based in Munich and
Dsseldorf.
Turkish low-cost carrier (LCC)
pegasus airlines will defer
deliveries of three out of five
new Boeing 737-800s, which
were scheduled to arrive in
2017 to 2018. The LCC cited
geopolitical events in Turkey
that have severely affected vital

tourism trade in the country.
Spanish carrier air Europa
and Danish regional aircraft
lessor Nordic aviation Capital
completed a sale and leaseback deal on seven Embraer
E195s, which will be operated
by Air Europas sister company
Aeronova.
air France took delivery of
its first Boeing 787, a 787-9,
leased through Netherlandsbased AerCap. It will be used
on Air Frances Paris-Cairo
route from January 2017. The
Air France-KLM Group has
ordered 18 787-9s and seven
787-10s, with an additional
12 787-9s leased through
AerCap.
Lufthansa Group subsidiary
austrian airlines will recruit
100 new pilots without flight
experience in 2017, and will
train them in the European
Flight Academy. The need
for additional pilots is related
to the retraining drive triggered by the integration of
17 Embraer E195s to replace
21 Fokker 70/100s, as well
as the expansion of the fleet
by two Airbus A320 and one
Boeing 777-200ER, which is
scheduled for deployment
from the 2018 summer flight
schedule.
British airways plans to accelerate its move toward densifying its fleet with changes
to its Boeing 777-200s. The
25 777-200s based at London
Gatwick will see an increase
in capacity from 280 to 332
seats from early 2018.
Irish regional airline CityJet

withdrew from talks to
acquire UK regional Stobart
air, formerly known as aer
arann, saying negotiations
were taking too long. CityJet
was negotiating the potential
acquisition of Stobart Air
and the operation of services from London Southend
Airport. Both the airline and
the airport are owned by UK
logistics company Stobart
Group.
Lufthansa Group LCC subsidiary Eurowings and
German public services trade
union Verdi reached a labor
agreement for cabin crews.
According to the agreement,
flight attendants will see a
2.5% wage increase backdated from Oct. 1, 2016; a
further 2.5% increase Oct.
1, 2017; and another 1.25%
increase Oct. 1, 2018.
Denmark-based charter airline Jet time discontinued
its cargo and ACMI business
units for SaS Scandinavian
airlines in an effort to save
the carrier. As a result, 278
positions will be cut, reducing
staff by 35% over the next
nine months.
UK-based regional carrier
Loganair is to resume services
under its own name in 2017,
following 24 years operating
under franchise arrangements
with larger airlines. The move
follows a split with its current franchisor, UK-based
regional Flybe. Glasgow-based
Loganair will cease to be a
franchisee for Flybe Aug. 31,
2017.
SaS Scandinavian airlines

secured financing of five
Airbus A320neos through a
sale and leaseback agreement
with Jackson Square Aviation.
The aircraft will be delivered
between the end of 2016
and 2018. As the aircraft are
delivered to the tri-national
Scandinavian carrier, they will be
sold to Jackson Square and then
leased back on long-term lease.
UK-based Stobart Group,
which operates a range of
transport companies including regional carrier Stobart
air, is taking complete ownership of leasing company
Propius Holdings, which supplies Stobart with around
half of its fleet of regional
turboprops.
SunExpress, a joint venture
of Lufthansa and turkish
airlines, plans to reduce its
2017 summer schedule to
620 weekly flights, down
from 700 flights for summer 2016. The carrier cited
challenging conditions for
the airline industry in the
tourism sector, including a
series of terrorist bombings
in Turkey. SunExpress also
appointed Lufthansa CCO
Jens Bischof, as CEO, effective
Jan. 1, 2017. Bischof succeeds
Jaan Albrecht who requested
an early termination of his
contract and will step down
at the end of December.
Albrecht will become CEO of
Saudi arabian airlines, effective Jan. 8, 2017.
French carriers XL airways
and La Compagnie are
merging in a bid to create
a sizeable French presence
in the long-haul, low-cost
market. The two companies
will band together under the
umbrella of La Compagnies
holding company, DreamJet
Participations.
12/16/16 2:28 PM
NEWSBRIEFS
AIRLINE NEWS FULL NEWS COVERAGE AT WWW.ATWONLINE.COM

NORTH AMERICA
Air Canada plans to expand
its US transborder network
when it starts its spring
schedule in May 2017, adding
three new destinations. All of
the new services will be operated by Air Canada Express
regional aircraft. San Antonio,
Memphis and Savannah,
Georgia will be new Air
Canada destinations served
from Toronto nonstop. San
Antonio and Memphis will be
daily services while Savannah
will be 6X-weekly. TorontoSavannah will be a seasonal
route while the San Antonio
and Memphis routes will be
served year-round.
Seattle-based Alaska Airlines
made the first commercial
flight utilizing alternate jet fuel
made from forest residuals
the limbs and branches that
remain after a forest harvest
on Nov. 14, with a Boeing 737800 bound for Washington
National Airport carrying 163
passengers.
Hawaiian Airlines agreed to
purchase an additional Airbus
A330-200, bringing its A330
fleet to 24 by the end of the
fourth quarter of 2017. The
Honolulu-based carrier will
also lease two more A321neos.
According to Hawaiian, the
newly ordered aircraft will enable
it to retire its Boeing 767 fleet by
the end of 2018.
American Airlines plans to
cut back flights from Miami
to three outlying Cuban cities
beginning Feb. 16, 2017. The
REDUCE COSTS
Dallas/Fort Worth-based airline, which on Nov. 28, 2016

launched the first scheduled
commercial passenger route
from the US mainland to
Havana, Cuba in 55 years, will
trim its scheduled flights from
Miami to Holguin, Santa Clara
and Varadero from 2X-daily to
1X-daily.
Alaska Airlines and the
Aircraft Mechanics Fraternal
Association approved a
tentative agreement for the
Seattle-based carriers more
than 700 aircraft technicians
and related employees Dec.
13. The proposed five-year
contractwhich, if ratified, will
become amendable in October
2021will include significant
pay increases and added job
protection provisions, the
airline said.
Utah-based SkyWest Inc.,
parent of regional carriers SkyWest Airlines and
ExpressJet Airlines, entered
into a termination agreement
with Bombardier covering
the Canadian manufacturers
residual value guarantee
agreements on 76 CRJ200
aircraft owned by SkyWest
Airlines and American
Airlines.
LATIN AMERICA
Conselho Administrativo de
Defesa Econmica (CADE),
Brazils competition authority, approved Qatar Airways
10% stake in LATAM Airlines
Group, worth more than $600
million.
INCREASE CORPORATE LOYALTY
An Avro RJ85 operated by

Latin American charter airline
LaMia crashed in Colombia
Nov. 28, killing 71 of the77
people onboard. It had been
charted by Brazilian football team Chapecoense. It
originated in Bolivia, and was
on approach to Medelln,
Colombia when it crashed into
a mountain. Initial investigative
reports indicated the aircraft
ran out of fuel and the general director of LaMia Bolivia,
Gustavo Vargas, was formally
indicted by the Bolivian Public
Ministry on charges of manslaughter, serious injuries
and responsibility for an air
disaster.
value of approximately $200

million. Air Tanzania has also
been revealed as the previously
unidentified customer for a
single Boeing 787-8.
A Pakistan International
Airlines (PIA) ATR 42-500,
en route from Chitral to
Islamabad, crashed on a hillside
near Havelian after it lost radio
contact Dec. 7, killing all 48
people aboard. The Pakistan
Civil Aviation Authority is conducting the accident investigation. On Dec. 12, PIA temporarily grounded its remaining 10
ATRs to undergo shakedown
tests.
UAE-based low-cost carrier

(LCC) Air Arabia converted
five options for Airbus A320s
into firm orders. The order, for
the A320ceo version, is worth
$485 million at book value.
The options are in addition to
the airlines original order for
44 A320s. The new aircraft
will enter service from the
2017 second half and delivery
of the original contract plus
the newly converted options
will be completed next year.
RwandAir continues to add

aircraft and expand long-haul
routes even though it faces
challenges in Africas economic climate and in the aviation industry. The Kigali-based
carrier has taken delivery of
new Airbus and Boeing aircraft
in less than three months and
recently received its second
Airbus A330-300, for which
it was the launch customer
in Eastern Africa. It has also
taken delivery of its third
Boeing 737-800Africas
first operator of the type with
onboard connectivityon
lease from Air Lease Corp.
The Tanzanian Government

Flight Agency signed firm
purchase agreements for two
Bombardier CS300 single-aisle
jets and one Q400 turboprop.
The aircraft will be leased to
and operated by national flag
carrier Air Tanzania, based in
Dar-es-Salaam. The combined
contracts have a list price
South African Airways (SAA)

took delivery of its first of five
new leased Airbus A330300s, becoming Airbuss first
Southern African operator
of the aircraft type. SAAs
A330-300s are configured in a
two-class cabin layout with 46
seats in business and 203 in
economy class.
MIDDLE EAST & AFRICA
ITINERARY-LEVEL DATA
12/15/16 4:18 PM
ANALYSIS
Reading Trump
The US president-elect tweets and the air transport
sector anxiously holds its breath. BY AARON KARP
he usual festive atmosphere at the US

Aerospace Industries Associations (AIA)
annual media luncheon in December was
infused by a general anxiety about the incoming US
presidential administration. Just hours before the
luncheon, President-elect Donald Trump caused
a media restorm by suggesting on Twitter that
Boeings contract to build the next version of Air
Force One, the presidential aircraft, be canceled
because it was too costly.
AIA president and CEO David Melcher, asked to
react during a press conference, said responding to
every Trump tweet might not be the best policy for
industry players. Tis is a relatively new phenomenon, he said, referring to a US president-elect having a
provocative Twitter feed. I know that the right answer
is not going to be to tweet back.
But Boeing, aircraft engine manufacturers GE Aviation and Pratt & Whitney
and the US airline industry are
struggling to determine what the right answer to the

Trump years will be. Given his hardline protectionist
stance in the US election campaign, the new president
presents a great deal of uncertainty for the air transport
business, which thrives on global connectivity and
open trade.
From Boeings lucrative business in China to its
sale of aircraft to Iran to US airlines new scheduled
commercial ights to Cuba, there is a lot of guesswork
taking place to determine where the Trump administration will stand.
And foreign airlines serving the US are casting a
guarded eye as well. Will Trump move to overturn
Norwegian Air Internationals recently approved foreign carrier permit to y to the US from Ireland? Will
he be receptive to US major airlines push to restrict
Gulf carriers access to the US market? Will he rescind
the USs commitment to global environmental pacts,
including the aviation emissions agreement recently
adopted by ICAO?
Melcher said AIA was determined to counter antitrade sentiments that are harming eorts to expand
our industrys trade competitiveness, adding, Well
continue to make a compelling case for positive engagement in global trade.
Melcher said the incoming administration would
have to make a number of decisions about the practical
consequences of Trumps trade rhetoric. For example,
Trump has repeatedly knocked US companies that
oshore manufacturing work. But companies such as
Boeing, which has a large customer base in China, plan
to conduct some manufacturing work abroad to better serve local customers and to seal important deals
that ultimately also secure or create American jobs.
Boeing has entered into an agreement with the
Commercial Aircraft Corp. of China (COMAC) to
open a joint venture facility in China for interiors
completion, painting and delivery of 737 aircraft
to Chinese customers. Te airframes will still be
built in Washington state before being own to
China for the completion work.
Melcher said a legitimate question that has
to be addressed by the Trump administration is
A. KATZ/SHUTTERSTOCK.COM
14 ATW | December 2016/January 2017 | atwonline.com
ATW JAN V2 2016 ANALYSIS copy.indd 14
To comment on this article, contact the editor at karen.walker@penton.com
12/16/16 5:52 PM
QUOTABLES
whether manufacturing that is oshored principally to

serve oshore markets is a good thing or a bad thing.
Boeings anxiety goes beyond the Chinese facility, on which construction has not yet started. As
president-elect, Trump quickly moved to question
key foundations of the overall US-China relationship, including the status of Taiwan and Chinese
actions across a number of fronts, particularly
regarding trade with the US. If Trump has a falling
out with Beijing, could retaliation include canceling
massive orders for Boeing commercial aircraft by
state-owned Chinese airlines?
Concern is not limited to China policy. Boeing
in December rmed its agreement with Iran Air to
sell the carrier 50 737 MAX 8s, 15 777-300ERs and
15 777-9Xs valued at $16.6 billion. But Trump and
a number of his surrogates have been critical of the
nuclear accord with Iran that made the commercial aircraft deal possible, and it is unclear how the
Trump administration will handle the US fragile
relations with Iran. Losing the Iran Air order would
not only be a blow to Boeing because it would likely
see the business go to Airbus, but the US manufacturer is already planning two production rate cuts to
the 777 line in 2017 and can ill-aord further 777
sales setbacks.
I think everybody is a little bit nervous about
what the future holds for the Boeing-Iran Air contract, Melcher conceded.
US airlines, for their part, will be watching closely
to see what Trump does regarding President Barack
Obamas historic opening to the Cuban market.
Trump has spoken skeptically about Obamas Cuba
policy, and the new president will have the power to
undo much of what Obama has initiated. American
Airlines, Delta Air Lines, United Airlines, JetBlue
Airways, Southwest Airlines, Frontier Airlines, Spirit
Airlines and Silver Airways all launched ights to
Cuba in the second half of 2016, and Alaska Airlines
will serve the island nation starting in January.
But, come Jan. 20, Trump will have the power to
cancel the agreement signed in February 2016 by the
US and Cuba to restart scheduled ights between the
countries. Trump, in fact, has threatened to scuttle
the entire US-Cuba reopening if Cuba is unwilling
to make a better deal, he wrote on Twitter in late
November.
Te air transport world is waiting to see if
President Trumps tweets and deal-making force
turbulent course corrections.
We have six A380s. They are not

really aircraft. I describe them as
spaceships.
Malaysia Airlines CEO Peter Bellew
Someone said you should never

watch laws or sausages being made
because it would put you off for
life. CORSIA [the ICAO emissions
agreement] is really a sausage made
with many components.
AAPA director general Andrew Herdman
Airlines are a risk management

business. Once you decide to buy
an aircraft you are stuck with it
for 12 to 17 years or more. But the
business environment changes
every month.
Thai Airways president and CEO Charamporn Jotikasthira
It surprised me. Ive been waiting

three years; it shouldnt have come
as a surprise.
Norwegian CEO Bjorn Kjos on the US DOT clearance to begin
ights from Ireland.
Michael [OLeary] was asked once

why there were so many Irish
people in the airline industry
and he said because the airline
industry is full of liars, bullshitters
and drunks, and in Ireland we excel
at all three.
IAG CEO Willie Walsh, speaking at the International Aviation
Club luncheon in Washington DC
The future of Avianca is a digital

company ying planes.
Avianca Holdings CEO Hernn Rincn, referring to the
statement from Avianca ofcials that persuaded him to leave
Microsoft to become Avianca CEO.
| May2017
atwonline.com | December
atwonline.com
2016/January
2015| |ATW
ATW1515
ATW JAN V2 2016 ANALYSIS copy.indd 15
12/16/16 5:52 PM
United Airlines
solving the
Unsolvable
Oscar Munoz and a management dream team attempt

to find the winning solution at United Airlines. By aaron Karp
t seemed appropriate when United Airlines

CEO Oscar Munoz ended the carriers annual
investors day in November by quoting Miguel
de Cervantes. Referencing the Spanish writers
classic Don Quixote de la Mancha, Munoz said,
Tell me the company you keep and Ill tell you
who you are. Munoz was talking about the management team he has assembled and the 86,000 United
employees with whom he has forged a labor peace that
eluded his predecessor.

But it is hard not to see a little of Don Quixotes
indefatigable spirit in Munoz, who became Uniteds
top executive in September 2015. After all, restoring
Chicago-based United to the status of a top-tier global
carrier has long been the impossible dream of airline
management. United, Munoz conceded, has been the
unsolvable puzzle.
For many years, United struggled fnancially, opera-
ATW JAN 17 COVER STORY.indd 16
12/16/16 2:49 PM
United Airlines
tionally and from a customer-service perspective. But

there was always a great premise of a promise for the
future, Munoz said. Everyones always understood that
theres something there, but somehow that unsolvable
puzzle wasnt being fxed or aligned Te global networkthats the unsolvable puzzle. Everyone knows its
there. Everyone knows the damn footprint is incredible.
How do you absolutely optimize and maximize the value
of that?
It was the networkwhich includes hubs in the fve
largest US markets (New York Newark, Los Angeles, San
Francisco, Chicago OHare and Washington Dulles) and
robust international connectivity (assisted by membership in the Star Alliance) to 339 airports across fve
continentsthat was the biggest enticement for Munoz
to leave his post as president of intermodal freight giant
CSX Corp. in September 2015 to replace former United
CEO Jef Smisek, who had abruptly resigned. Tat
route network has helped Munoz recruit what he calls
an incredible dream team to Uniteds executive suite,
including former American Airlines president Scott
Kirby (now Uniteds president) and former Allegiant Air
president Andrew Levy (now Uniteds CFO). Both men,
widely considered prime candidates to be future airline
CEOs, joined United in August 2016.
We have an incredible network potential, Kirby
said. When I say this in a room, everyone nods their
heads All you have to do is look at a route map to
know we have the best network potential of any airline
in the world. We just have to go out and realize it.
Levy added, When you talk about the network
structure and the hubs and the potential that we have,
I think most people would argue that we probably have
some better assets to play with than Delta [Air Lines],
or American for that matter, and if we do manage the
business appropriately and unlock the potential of those
assets, we should be a little bit better than Delta.
Fixing labor
To unlock that potential, Munoz decided soon after he
became Uniteds CEO that some foundational changes
were needed. In a 15-month period that included a
four-month leave when Munoz underwent a heart
transplant, the new CEO made it a priority to repair ties
with Uniteds workforce. Many of Uniteds employees
remained disgruntled about the problematic aftermath
of the 2010 United-Continental Airlines merger on top
of a more than three-year Chapter 11 restructuring that
United went through in the previous decade.
Te ratifcation of a new labor pact by the airlines
9,000 mechanics in December concluded a banner

year in labor relations for United. As 2017 dawns, all of
Uniteds work groups have labor contracts in place for
the frst time in nearly a decade.
In January 2016, Uniteds pilots ratifed a contract
extension through Jan. 31, 2019. In August, the airlines
fight attendants ratifed a fve-year contract. United
ground workers and dispatchers also inked new labor
deals with the airline in 2016. Except for the pilots
contract, all of the collective bargaining agreements will
last until at least 2020.
I continue to fall on the premise that without
86,000 people sort of pulling in the same direction all
All you have to do is look at a route

map to know we have the best network
potential of any airline in the world.
Scott Kirby, United president
the time and doing the right thing, we really have nothing, Munoz told investors. Were a people business. If
we dont engage with our own people, we cant possibly
engage with our customers.
Negotiating the labor deals was a difcult process
and an expensive process in some cases, Munoz said.
United acknowledges that its labor costs will rise signifcantly starting in 2017.
But its just part of the business, Munoz explained.
You can look at it in one of two ways. You can look at
is as a cost or you can look at as an investment in the
future. A lot of [shareholders] have asked, What the hell
do you get back? Whats the return on it? And I think
youre beginning to see it. Teres a momentum, theres a
spirit at United thats diferent.
Part of the process involved Munoz making a point of
visiting with, talking to and, most importantly, listening
to rank-and-fle workers, something that Smisek was
not known for. We get our asses out there and talk to
people, Munoz said of himself and his management
team. Tere is a simple smile factor that we have to
worry about and manage When you fy, ask whoever
you see from United how theyre feeling about life. I
guarantee you youre going to get a smile.
Kirby said he has noticed the employees positive attitude since arriving in Chicago after making the surprise
12/16/16 2:49 PM
jump from American. If youre an airline employee,

whether at United or anywhere else, the last 10-15 years
have been tough, he said. Ever since 9/11, its been
difcult with bankruptcies and concessions and losing
pensions So its been a tough 15 years. And theres
a lot of history that our people are saddled with. But
theyre optimistic about our future. Tey think weve
turned the corner. I certainly think weve turned the
United Fleet 2016

Model
Boeing 747-400
Boeing 777-200/300
Boeing 787-8/9
Boeing 767-300/400
Boeing 757-200/300
Boeing 737-700/800/900
Airbus A319-A320
Total Mainline Aircraft
Bombardier Q400
Bombardier Q300
Bombardier Q200
Embraer ERJ 145
Embraer ERJ 135
Embraer E170
Embraer E175
CRJ200
CRJ700
Total Regional Aircraft
Total Fleet
Aircraft at
Year-End
2016*
20
75
30
51
77
325
158
736
0
5
16
183
5
38
114
50
79
490
1,226
Chg. YOY
-2
1
5
0
-4
15
6
21
-13
0
0
-16
0
0
34
0
-36
-31
-10
*According to United Airlines company feet plan as of Oct. 17, 2016

Source: United Airlines
corner and that the road is nothing but up from here.

Closing the gap
Te labor peace has given United the space to pursue
an aggressive series of revenue and cost initiatives that
the airline believes will generate $3.8 billion in annual
revenue gains and $1 billion in yearly savings by 2020.
While United has what Munoz calls a damn healthy
balance sheetearning net income of $1.9 billion for
the frst nine months of 2016, building on a $4.5 billion
net proft in 2015its performance falls behind rivals
American and Delta by a number of metrics. Munozs
goal is to close the gap to become more proftable, have a
higher operating margin and be better operationally than
American or Delta by 2020.
Proof not promise, Munoz emphasized. Im not
ceding anything. I know we have potential.
Munoz has unleashed Kirby, Levy and Julia Haywood, formerly the managing director of Te Boston
Consulting Group and now Uniteds EVP and chief
commercial ofcer, to do what is necessary to achieve his
stated objective of making United the worlds best airline. And he does not appear intimidated by the sterling
credentials of his deputies. I dont know half the stuf
Scott does, he candidly acknowledged.
Kirbys assessment of United is clear-cut: Because of
its network and long-haul feet, which includes 30 Boeing 787s and 75 777s, United has the best international
network among US carriers. United is more proftable
than American or Delta on international fights, and in
fact did relatively well on international fying even in its
more difcult years. But United is well behind American
and Delta domestically, he noted.
Our real opportunity is to improve in the domestic
market while maintaining our incredible international
operations, Kirby explained. If you went back a decade
or more, what you would fnd at United is that there was
United 9-MOntH Financials 2012-2016

Financial
year
9 month
% Chg.
9 month
Operating
Year Over
Operating
Revenue ($,000)
Year
Expense ($,000)
%
Chg.
9 month
Operating
Income ($,000)
% Chg.
Year Over
Year
9 month Net
Income/Loss
Chg. Year
($,000)
Over Year
2016
27,504,000
-4.6
24,171,000
-2.3
3,333,000
-18.4
1,866,000
-71.4
2015
28,828,000
-2.6
24,743,000
-11.1
4,085,000
133.7
6,517,000
490.3
2014
29,588,000
2.2
27,840,000
-0.3
1,748,000
72.4
1,104,000
156.1
2013
28,950,000
1.8
27,936,000
0.0
1,014,000
101.2
431,000
NM
2012*
28,450,000
1.0
27,946,000
5.8
504,000
-71.6
-103,000
NM
NM = not meaningful
*Uniteds 2012 nine-month net loss was $1.08 billion decrease YOY
Source: United Airlines
12/16/16 2:49 PM
a really good international network and it was proftable.

Domestically, sort of break evenish. [Domestic fying
has made] money in the last few years when things [have
been] really good [for the broader US industry]. But
[Uniteds] domestic margins are well below where they
are in the international arena. At American, it was exactly the opposite. American has done really well in the
domestic market and has had a challenged international
market. Delta has also done well domestically and has
done pretty well internationally, but not as well, I dont
think, as United has done [internationally].
United, Kirby said, long ago got lulled into a mindset
of fying just enough domestic [fights] to feed our
good, proftable international fying. He added, We
built everything around focusing on international, which
we do really well. But we let the domestic slide because
it wasnt historically proftable. Well, guess what? A few
years ago, that changed. After consolidation, that equation actually fipped. In the international arena now
we have a fair bit of growth from all kinds of carriers.
Tose markets are now Open Skies markets Te
international markets are actually getting more challenging than the domestic market, and the [US] domestic
market has probably become the most proftable market
in the entire world.
United must now compete domestically, Kirby said.
Te airlines plan is to revamp its scheduling at domestic
hubs to encourage connectivity, aggressively compete
against ultra low-cost carriers (ULCCs) on routes to/
from its hubs and upgauge from 50-seat regional jets to
76-seat regional jets, or from 76-seat aircraft to 737s or
Airbus A320 family aircraft on as many domestic routes
as possible.
Teres no reason United cant look a lot closer to
United Airlines
The first
airport
lounge
revamped
under
Uniteds
new Polaris
businessclass brand
opened at
Chicago
OHare in
December
12/16/16 2:49 PM
what American and Delta do on domestic protability

than we do today, Kirby said. And over a course of
several years, I think we will get there and its a huge opportunity for us here at United.
Making the connection
United has not geared its scheduling to attracting
connecting trac. Historically people in the airline
business have looked at [connecting trac] and thought,
Well its always low yield and we dont want to have a lot
of connecting trac. We want the high-value local trafc. But nothing could be further from the truth, Kirby
said. Te most protable hubs in the country have the
highest percentage of connecting revenues. Te reason
is its a huge competitive advantage. Its actually not low
yield. A lot of these customers who are ying through a
hub like Newark are ying from Erie, Pennsylvania and
on to the rest of the world Te best revenues that we
can carry a lot of times are these connecting passengers.
But youve got to have a hub structure thats designed to
do that.
Kirby noted that 45% of Americans trac at its Philadelphia hub is connecting passengers, while Uniteds
connecting trac at Newark stands at just 35%. Teres
no reason we cant make Newark look a lot like Philadelphia, he said. Just look at the power of that. You put
10 more connecting percentage points of revenue [at
Newark] and look at what that does to the protability
of Newark. Its an incredible increase in revenues. We
can do it without having to have more ights and more
capacity, just by timing the ights correctly.
Instead of having 15 arrivals and 15 departures in a
given 30-minute window at a hub, United will move
toward having 30 arrivals in one half-hour and 30
departures in the next half-hour, driving connecting
opportunities.
New fares structure
In the rst half of 2017, United will roll out a basic
economy fare oering as part of an eort to compete
against ULCCs such as Florida-based Spirit Airlines and
Frontier Airlines, which has a large presence in Denver,
Uniteds most protable hub. One of the big opportunities we see is segmentation, Haywood said, adding
that the basic economy fare will be targeted at very price
sensitive customers who want to only purchase the core
product.
Tese passengers will get no seat assignment until
the day of the ight, board in the last group of passengers and not be permitted to carry any overhead
bin luggage on board. Haywood noted that this means
by the time the last group of passengers boards, all
overhead bags will have been placed, creating a much
smoother boarding process.
Once on board, basic economy passengers will be able
to pay extra for snacks or Wi-Fi just as other economy

passengers can. Even though the ticket price will be the
same as those charged by ULCCs, we all know [the onboard experience will be] much better than our ULCC
competitors, Haywood said.
Regarding the basic economy fare and competition
against LCCs, Kirby added, Were choosing to ght on a
battleeld where we have an advantage: our hubs Were
not going to try to y from Akron [Ohio] to Orlando
because we wouldnt have the advantage. But from any
point to our hubs, we have the advantage.
At the other end of the aircraft, the airline has launched
the United Polaris business-class product. Te rst
United Polaris lounge opened at Chicago OHare at the
beginning of December.
Aboard aircraft, the new business class will feature
designer bedding, duvets, multiple pillows, cushions,
slippers, Polaris-branded pajamas, ergonomic eye shades,
calming pillow mist and a relaxation-oriented IFE channel. Meal service will also be shorter so passengers can have
undisturbed sleep times. United said its new business-class
seats will debut in 2017, rst on 777-300ERs.
All of this is focused around sleep, which is what our
customers have asked for and what were delivering,
Haywood said.
Cost control
Levy, meanwhile, has been tasked with cost control,
which has been complicated by higher labor costs and
rising fuel prices. Via operational eciencies and cost
reducing initiatives, he believes United can achieve $1
billion in annual savings by 2020. Levy has projected
less than 1% [annual] CASM growth over the next
several years. He has promised an intense focus
on driving operating margin and return on invested
capital.
Levys rst major move as CFO was to reduce
Uniteds capital expenditures for 2017 and 2018 by
$1.6 billion by deferring 61 of 65 737s United has on
order. United will take delivery of four new 737-800s
in 2017, but the rest of the Boeing narrowbodies have
been switched to 737 MAX models to be delivered at an
undetermined time after 2018. We just dont need these
aircraft right now, he said.
Munoz believes he and his management team have
established a platform on which United can build toward
a bright future. Its been an interesting and somewhat
arduous and long year for our company, Munoz
conceded in November. What Ive been telling our
team over the last few months is that the view of United,
the perception of United, the way people think about
United has evolved from what I heard a year ago, God,
whats wrong? Everything was, Whats wrong with
United? Its evolved from whats wrong to kind of an
exciting whats next.
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701ATWpages.indd 21
12/15/2016 3:21:55 PM
forecast
2017
Eyes
Profit
on
the
Collectively, the worlds airlines expect to remain

profitable in 2017, but it will be a tougher ride.
By Karen walKer
he worlds airlines will continue their

streak of collective profitability in 2017,
but anticipated higher costs coupled with
a sluggish global economy lead IATA
forecasters to believe 2017s industry
net profit will be almost $6 billion lower than 2016s
expected profit.
If the global airline industry posts a net proft of $29.8
billion in 2017, as IATA said it expects in its forecast released in December, then it would break a three-year run
in which the worlds airlines have posted record profts
year-over-year.
IATA also revised downward its outlook for 2016
airline proftability to $35.6 billion from a June projection of $39.4 billion owing to slower global GDP growth
and rising costs. Tat will still make 2016 the year the
industry made its highest absolute proft and highest net
proft margin at 5.1%.
But that record-setting streak is expected to end next
year as airline unit costs continue to go up, mostly because of rising oil costs but also because of increased labor
costs, IATA chief economist Brian Pearce said during a
forecast briefng in Geneva.
IATA believes the global airline industry will make a
net proft of $29.8 billion in 2017 on revenues of $736
billion, for a 4.1% net proft margin. Although down

on 2016s expected proft and margin, it will still be the
industrys third consecutive year in which airlines will
make a return on invested capital (7.9%) that is above the
weighted average cost of capital (6.9%).
Tat is a sign that airline restructuring and better business management is making the industry more resilient
to outside factors like oil price hikes. But stronger, more
consistent fnancial performance remains a regional story,
with North American airlines dominating industry totals
with the majority of its airlines generating above-cost-ofcapital returns. Outside of North America, its a much
more mixed picture: some European and Asian carriers
are performing well, but others are doing considerably
worse. In Latin America, where countries like Argentina,
Brazil and Peru are reeling from a variety of social, economic and political issues, the environment for airlines is
harsh and, in IATAs opinion, exacerbated by some of the
worlds highest aviation taxes and fees as well as onerous
regulation.
By region, North American carriers are expected to
post a net proft of $20.3 billion for 2016 and $18.1
billion for 2017. European carriers are forecast to post
a 2016 proft of $7.5 billion and a 2017 proft of $5.6
billion. For Asia-Pacifc carriers, the 2016 and 2017 proft
ATW JAN 17 Forecast.indd 22
12/16/16 5:38 PM
forecasts are $7.3 billion and $6.3 billion; for Middle

East airlines, $900 million and $300 million; for Latin
American airlines $300 million and $200 million; while
African carriers are expected to make a loss of $800 million in each year.
On average, airlines are expected to make an average
of $7.54 for every passenger carried in 2017, when passenger numbers are expected to reach a fraction below 4
billion, which will be a record.
Despite the still-slow global economy,
demand for air travel continues to grow
and airlines increased the number of
unique city-pair connections in 2016 by
more than 700 to over 18,000. At the
same time, strong competition drove
down air fares by an average of 8%.
Pearce noted that oil prices had
increased by about $10 a barrel at the
end of the year, taking it to about $55 a
barrel, but there was a mindset change
in the industry that was allowing it to
stay proftable despite oil price increases.
Higher utilization of airline assets and
ancillary fees were contributors to this.
Te conversation has changed, he said.
Its now about how to deliver a good
return; thats a step change behaviorally
and structurally and that will stay that
way this industry lived for a long time
with oil at $20 a barrel and it still lost
money, so oil is not the magic key to proftability.
Key trends
Among key trends that IATA anticipates for 2017 are
lower real travel costs; continued growth in the number
of new city pairs, which have doubled over the past 20
years; a dipping of load factors as demand slows faster
than capacity; a rise in average breakeven points as unit
costs rise more than unit revenues; but despite all the
years pressures, airlines will keep a frm eye on maintaining proftability and returns to investors.
New unique city-pair connections are forecast to rise
by 4.1% or by 700 new pairs compared with 2016
to over 18,000 in 2017, with frequencies also up. Tis
is largely the result of new-generation aircraft that can
do long, thin routes proftably and open up ultra-long
haul destinations combined with liberalization and the
opening of new markets. At the same time, the average
roundtrip fare will be $351 before taxes and fees down
8%, or 12% after infation and 63% lower than 22
years earlier after infation.

IATAs forecast is based on Brent oil prices of around
$55 per barrel, a rise of just over $10 per barrel. Tat
means airlines total fuel will rise to $129 billion, representing 18.7% of average operating costs. Still, airlines are
in a better place than ever before to handle the increase
with new, more efcient aircraft, and better operations
and asset utilization; in short, smarter management. In
turn, that also means that airlines will continue to be
better placed to deliver a return on invested capital even

as oil prices rise.
Proftability does seems to have run out of steam a bit
and we are seeing that trend continue into 2017, Pearce
noted. Essentially, unit costs are no longer falling so they
have crossed over unit revenues and thats where there is
pressure. But what has changed is that a GDP drop does
not deliver the shock to the airline industry that it used
to do since 2010 the global economy has not been
performing well but the airline industry has continued to
improve because of restructuring.
Similarly, because of restructuring and a new mindset
among airline executives, oil price fuctuations are no
longer the boom-or-bust factors in airline performance
that they once were.
Put together, airlines are becoming businesses in a way
that is historically unprecedented; 2017 may be a tougher
challenge, but a $30 billion proft in a more difcult
environment will, if anything, be a more remarkable
achievement than 2016s $35.6 billion proft.
12/16/16 5:38 PM
CHAPTER 1
The Digital Airline: Getting Started
Introduction
As aircraft become more technologically ad-
vanced and computing power more capable

and accessible, datas infuence on how airlines run their operations is rapidly evolving.
Opportunities are emerging for operators
with the right set of tools and partnerships in
place to capture their data, understand what
it means, andmost importantly--how it can
be used to help tomorrows operations become more effcient.
But getting from streams of inbound data collected in disparate places to an actionable,
integrated, closed-loop process that drives
measurable improvement across an airline
doesnt happen overnight.
Its a big changeone that often

requires big changes in how
airlines see themselves.
Much like an aircraft contains many different parts that work together to form an advanced machine, every airline depends on
different internal departments that serve very

specifc, highly specialized functions. Crew
schedulers, fight operations planners, and
technical operations are examples of functions with clearly defned roles that must
work together to keep an airline operating at
peak effciency.
Along with each departments specifc focus
area comes different needs for data analytics. In the past, many larger operators developed their own, proprietary systems to
meet their needs. In recent years, service
providers have helped fll the gap with purpose-built systems designed to meet an airlines needs.
Today, however, the emphasis is increasingly shifting to integration. Just like an airlines
results are determined by the collective
success of its individual departments, a
strong data analytics function must seamlessly create synergies within an organization while allowing for business units to
function independently.
Sponsored by
701ATWpages.indd 24
12/19/2016 8:07:08 AM
Implementation: Where to start?

If youre an operator relying on a disparate set of data systems or are just getting started with
analytics, whats the easiest way to transition to an integrated, results-generating digital airline?
The frst step is understanding what you have in place. Here are three steps that will help you
determine what your next steps should be in pursuit of an intelligent data analytics programs.
Step 1: Evaluate your current

status
Start with the specifc tools youre using, and
perform the digital airline equivalent of gap
analysis. Are your tools delivering benefts
today? Can they be integrated? And once integrated, are they robust enough to support
a true digital airline?
Once you have a detailed understanding of
what you have in place, youll be prepared
to match your needs with potential partners.
Step 2: Scrutinize potential

partnerships
There is no shortage of suppliers ready
to step in and sell you solutions. But you
shouldnt be looking for productswhat
CONTINUE
READING
youll need is partners.
TO READ THE REST OF CHAPTER 1

Delivering
a superior intelligent
data analytics
AND
DOWNLOAD
CHAPTERS
2-4
effort
isnt
something
thats
done
once
in
AS THEY ARE RELEASED, VISIT a
set-it-and-forget-it approach. It requires continuous innovation and collaboration between

you and your vendor-partners. Therefore,
evaluating potential solutions providers on
the basis of both their technical abilities and
their track records as partners is paramount.
Theres also the experience factor. Aviation is
a complex business, and an airline, a sophisticated collection of related functions. While
an MRO provider may have insights into the
aftermarket world that give its maintenance
software an edge, how does such a product
ft into the rest of your suite?
One thing to keep in mind: the center of every airline operation is a sophisticated feet
of aircraft. Making those aircraft perform
more effciently is at the center of every intelligent data analytics strategy. Make sure the
analytics partners you pick have a deep understanding of how aircraft performtheyre
the ones with the knowledge to wring more
effciency out of your fying machines.
http://atwonline.com/fight-optimization-ebook
701ATWpages.indd 25
12/19/2016 8:07:21 AM
forecast
2017
he major North American airlines will enter 2017

in a cautionary stance as softer yields, driven by
falling air fares and increased competition, are
creating the weakest revenue environment in recent
memory, according to Delta Air Lines CEO Ed Bastian.
Bastian said a lack of pricing power, not weak demand,
was causing the weak revenue environment. Since late
2014, airline unit revenue has consistently declined on a
year-over-year basis quarter after quarter, which worries
airline shareholders. Corporate leaders at the major US
airlines are therefore making the call: 2017 will be all
about returning to posinorth
tive unit revenue growth.
america
Capacity growth at
the major US carriers,
by and large, will be
on the downswing in
2017. If the airlines stop
growing, the thinking
goes, a relatively strong
Still the worlds leaders in
demand environment
proftability, North American
should lead to increased
carriers nonetheless are
pricing power, leading
up against a weak revenue
to higher fares and rising
environment.
unit revenue.
By Mark Nensel
Lower capacity also
acts as a restraint on labor
needs and associated costs. With the recent furry of labor
settlements among the US majors, airlines will need to
adjust to the terms of those contracts accordingly in 2017
and beyond. Keeping capcity growth low will help airlines
to balance the allotment of capital, and may be a necessary
step considering that full-time-equivalent employment
as US passenger airlines has grown 8.2% 31,174 positions since the 2010 depths of the recession.
Fuel costs are not expected to drop much in 2017
compared to 2016, and may well increase. If the carriers
keep capacity growth to a minimum, the proftability
enjoyed by the US majors during the present relatively
low fuel-cost environment will persist.
American Airlines management said the company
expects quarterly RASM growth to turn positive in the
frst half of 2017, and keeping capacity growth low will
help to make that happen. American Airlines CFO Derek
Kerr said the company expects system capacity to grow
just 1% for the full year 2017, including fat domestic
capacity and a 3.5% rise in international capacity driven
by transpacifc fying.
Delta aims at a similar capacity cap. Bastian said the
company will be taking a cautious approach to 2017 by
Holding
Strong
keeping our capacity in line with the December quarters

1% growth level. Te 1% capacity growth level will be
maintained throughout 2017, he said.
Southwest Airlines is planning to trim capacity
growth in 2017 to between 3.5% and 4%, according to
Southwest EVP and CFO Tammy Romo. Our domestic
growth is estimated to account for approximately 2% of
that growth, with the remaining allocated to international, Romo said. Well begin the year with approximately
4% growth in frst quarter 2017, bending down to fat
[and then] to slightly up in fourth quarter 2017, due to
the retirement of the [Boeing 737] classic feet by the end
of the third quarter.
United Airlines, the US major still with the most to do
to achieve performance standards on a par with the other
consolidated carriers, has implemented a strategy it says
will generate $4.8 billion in improved earnings by 2020.
Te company plans to grow 2017 consolidated capacity
by 1%-2%.
Air Canada is so far bucking the capacity trend. In
the 2016 third quarter, Air Canada increased capacity
by 20.9% year-over-year, primarily driven by additional
Boeing 787 aircraft in the mainline Air Canada feet, plus
the growth of Air Canada rouge and additional seats on
Boeing 777 aircraft. Trafc also improved signifcantly,
up 18.9% year-over year, refecting increased global
international-to-international connecting trafc through
Air Canadas Canadian hubs.
JetBlue Airways is also in growth mode. Te New
York-based airline expected its 2016 fourth-quarter
capacity to increase between 3% and 5% and in 2017
intends to launch 5X-daily nonstop service from Boston
to Atlanta as well as increase its total daily fights out of
Boston from 140 to 200.
Te most intriguing question mark on the horizon for
North American airlines in 2017 remains the merger of
Alaska Airlines and Virgin America, which was given the
go-ahead by the US Department of Justice at the end of
2016 on condition Alaska reduces its codeshare arrangement with American Airlines. With the meger deal closing in late 2016, 2017 will be the year of watching how
that new larger player in the market afects the overall
North American competitive environment.
Boeing, meanwhile, plans to build 47 737s per month
in 2017, rising to 52 per month in 2018 and 57 per
month by 2019. Te manufacturer plans to cut 777
production from seven per month to fve in August 2017,
and 747-8 models will continue at a 0.5 aircraft per
month rate. As of Oct. 31, Boeing had a backlog of 5,635
commercial aircraft on order.
12/16/16 3:44 PM
forecast
2017
ncertain is the word that sums up European

aviation as it enters 2017 with the tailwinds of
the UKs decision to exit the European Union
(Brexit), repeated terrorist attacks and continued labor
battles.
Forecast revisions over the past few months demonstrate market volatility. For example, Lufthansa forecast
slightly above previous year full-year EBIT in March,
downgraded it to below previous year in July and then
upgraded it again to approximately on previous years
level in September.
However, this outlook excluded the impact of labor
action and, as 2016 came to a close, Lufthansa encountered a series of pilots strikes that cost 10 million ($10.6
million) per day.
Labor relations continue to be a major issue for
Europes former fag carriers, with further battles likely in
2017.
Despite the terror attacks on airports in 2016, passengers are still fying. Tis year has been particularly
marked by external events and demand shocks. It is quite
amazing how normalized people become quite quickly.
People just move on, easyJet CEO Carolyn McCall
noted. Likewise, Ryanair CEO Michael OLeary noted
the terrorist events cause an immediate dip in demand, but this is quickly
reversed by ofering lower fares
although this puts more pressure
on yields. Indeed, IATA economists
note that breakeven load factors are
highest in Europe, caused by low
yields generated by the competitive
open aviation area and high regulatory costs.
European airlines are benefting
from lower fuel prices, but exchange
rate volatility is dampening this gain.
Cheaper fuel is also intensifying price
competition and overcapacity.
Tings are a bit irrational in
Europe at the moment, McCall
said. A number of diferent factors
make the trading environment more
difcult than has been for some
time. She observed that airlines are adding capacity even
as business contracts. Legacy airlines might keep fabby,
unproftable capacity in the market, but the strong are
getting stronger and the weak are getting weaker, she
said.
Meanwhile, Ryanair is pressing ahead with its load
factor active, yield passive strategy, putting pressure on

its rivals. Weve observed a growing trend of competitors
closing bases and routes and we expect this trend to
continue, especially in markets such as Germany, Italy,
Spain and Belgium, Ryanair said.
OLeary gave a cautious outlook
europe
for 2017, warning that weaker air
fares and Brexit uncertainty will be
dominant features, but adding
that despite the uncertainty of
Brexit, Ryanair believes that we
can deliver proftable growth across
Europe by controlling costs, lowerResilience in a storm of
ing airfares and maximizing load
changes is the story of
factors.
European carriers.
Little is yet known about
post-Brexit UK airline ownership
By Victoria Moores
structures and route rights. Tis is
another hurdle that airlines are trying to surmount, with easyJet already working to secure
an EU air operators certifcate (AOC). Brexit is also likely
to be problematic for International Airlines Group, parent
company of British Airways, Aer Lingus, and Spains Iberia and Vueling. Technically, British Airways is a Spanish
Winds of
Change
company.
All European airlines are working to adapt their strategies to ever-changing market conditions. Notably, Air
France-KLM has launched a plan to counter low-cost and
Gulf carrier competition, including the launch of a new
long-haul airline.
12/16/16 3:45 PM
forecast
2017
n 2017, the Latin American airline industry appears

poised to join other regions of the worldparticularly North America, Europe and Asiain two key
areas: growth in low-cost carrier (LCC) services and the
establishment of international, antitrust-immunized joint
ventures (JVs).
Everything comes to our region fve to 10 years later,
LATAM Airlines Group CEO Enrique Cueto noted in
November at the Latin American and Caribbean Air
Transport Association (ALTA) Airline Leaders Forum in
Mexico City.
Indeed, despite a surge in airline passenger trafc this
decade in Latin Americadriven by a growing middle
class and the emergence of several large, stable airline
companiesLCCs have been
almost entirely absent from the reLatin
america
gion, outside of Brazil and Mexico.
And the regions largest airlines are
now just beginning to attempt to
engage in JVs of the kind that have
become standard for air travel across
both the Atlantic and Pacifc.
Latin American airlines believe
Latin Americas
transnational
JVs are the future of
airlines prepare for a
long-haul
services
to and from Latin
proliferation of LCCs
America. At the same time, they
and the establishment
think domestic and short-haul fyof transnational JVs.
ing in the region will be dominated
By Aaron Karp
by LCCs.
Te twin trends of low-cost
short-haul services and antitrust-immunized, long-haul international fying arrive against the
backdrop of Latin American airlines trying to break free
from a multi-year slump related to sluggish economies
and declining regional currenciesespecially in Brazil.
Speaking at the ALTA conference, Deutsche Bank
analyst Michael Linenberg said the fnancial fortunes of
Latin American airlines are starting to brighten. It does
feel like were seeing a bottom here, he said.
Catching
Up
Low cost
LCCs have transformed the domestic Mexican market
in recent years, and LCCs have a strong foothold in the
Brazilian market, but the model has not yet caught on in
the rest of Latin America. Tat appears to be changing.
Passengers are looking for a low, low price, as they are
in Europe, and that is going to be the fastest growing
segment in our region, Cueto said. We cannot let that
segment be taken by someone else.
LATAM, Latin Americas largest airline company, is
not launching a separate LCC, but in the frst half of

2017 it will start rolling out an unbundled fare structure
in the six domestic markets its afliates serve (Brazil,
Chile, Peru, Argentina, Colombia and Ecuador). Passengers will be able to choose a basic fare up to 20%
lower than current prices, with the option to pay fees for
add-ons such as checking baggage or selecting a seat.
Cueto said he expects to see multiple LCCs emerging
to serve passengers on short-haul routes in Latin America,
and LATAM decided it was necessary to modify its fare
structure to remain competitive on fights of two hours
or less. He acknowledged that LATAMs costs on most of
the short-haul routes will still be 10%-15% higher than a
pure LCCs costs. Tat is acceptable because we want to
keep business passengers, he explained.
Tough at a cost disadvantage, LATAM will have a
revenue advantage on the short-haul routes and will
ofer a product that will be cost competitive enough
to keep business passengers from switching to LCCs
and entice leisure passengers to choose LATAM, Cueto
argued. If business people go to another carrier, youre
doomed, he said. Te challenge is we want to keep
the business passengers ... but we will not give up that
[LCC] segment.
Copa Airlines Holdings CEO Pedro Heilbron conceded the decision to launch Wingo, an LCC subsidiary
of Copa Airlines Colombia that started fying Dec. 1, was
an uncharacteristic move for him. Doing this is like if I
were to arrive at this event with red pants, a yellow checkered shirt and a hat, the impeccably dressed Heilbron
joked during the conference in Mexico City.
Wingo is initially operating four Boeing 737-700s
confgured with 142 seats in a single-class cabin on pointto-point services to 16 destinations in Latin America and
the Caribbean. Wingo is a tool to enable Copa to retain
passengers on short-haul routes where there is a growing
LCC presence, Heilbron said.
Wingo doesnt need to be proftable to be positive
for Copa Holdings, he said. If they break even, it will
be positive for us Of course, we expect them to be
proftable.
Enrique Beltranena, the CEO of Volaris, the ultraLCC credited with leading the low-fares revolution in
Mexico that has moved millions of bus passengers to
airlines, said there has been a transformation of travel
needs in Latin America. Volaris in December took its
model to the Central American market with the launch
of Volaris Costa Rica.
Te proof is here in Mexico that ofering low fares
will create new air travelers in Latin America, Beltranena
12/16/16 3:45 PM
forecast
2017
said. I believe we have proven [the model] and we can
do something similar in the Central American region.
Aeromexico CEO Andrs Conesa said that once passengers get accustomed to air travel, they may eventually
migrate to long-haul services on more traditional carriers.
Tese passengers that used to travel by bus are fying
with low-cost carriers, but in the future they may be fying with us, he said.
Joining forces
Aeromexico and LATAM are the frst two Latin
American airlines to attempt to form JVs with non-Latin
American carriers, and they are trying to overcome regulatory hurdles
to getting the JVs of the ground.
Conesa said Latin American airlines
are trying to take advantage of the
JV model just as airlines have in
Europe and the US. European and
US carriers have gained signifcantly
from a very developed transatlantic
JV structure, he said, adding, What
were asking is to be on the same level
as other airlines.
Cueto added, Either we get into
this [JV] model or well be bought by
others and well disappear.
LATAM is attempting to form
separate JVs with oneworld partners
International Airlines Group
(IAG) and American Airlines. But
Conselho Administrativo de Defesa Econmica (CADE),
Brazils competition authority, has expressed misgivings
about LATAMs proposed JV with IAG. Te delay in
approval of a transatlantic JV with IAG carriers British
Airways and Iberia is concerning to Cueto.
Cueto said competition authorities and labor unions
worried about JVs should understand that JVs will enable
Latin American airlines to guarantee services and jobs
over the long term, while being bought out altogether
would mean nothing is secure. JVs will guarantee a lot
more than people think, he said.
CADE said in a statement issued in November that
a LATAM-IAG JV has the potential to cause harmful efects on competition, particularly on the So
Paulo-London and So Paulo-Madrid routes. LATAMs
application to start the JV with IAG has been forwarded
to CADEs Tribunal, which has fnal say on mergers and
acquisitions in Brazil.
CADE has jurisdiction over the proposed JV because
one of LATAMs primary subsidies, LATAM Brasil

(formerly TAM), is based in Brazil. CADE will review the
LATAM-American JV application separately.
Aeromexico and Delta Air Lines in December
received fnal approval from the US Department of
Transportation (DOT) for an antitrust-immunized
cross-border JV. Delta owns a minority stake in Aeromexico that it has said could rise to as much as 49% once
the JV is cleared.
But Aeromexico and Delta strongly objected to the
conditions imposed by DOT to grant antitrust immunity, and said they will reconsider the JV if DOT does
not change course.

In giving fnal approval for the JV, DOT demanded
that Aeromexico and Delta divest 24 slot pairs for
Mexico-US services at Mexico City International Airport
(MEX) and six slot pairs for US-Mexico services at New
York JFK International Airport. DOT additionally
proposed limiting the antitrust immunity for the JV to
fve years.
Aeromexico and Delta called the conditions unprecedented, arbitrary, and untethered to any potential alleged
harms related to the [JV].
Meanwhile, Copas Heilbron indicated that his
Panama-based company and other major Latin American
airlines, such as Colombias Avianca, will also pursue JVs
with carriers outside of the region. As airlines such as
Aeromexico and LATAM get into JVs, it will put pressure
on the other airlines in the region to do something, he
said. We cant be left out of the game.
12/16/16 3:45 PM
forecast
2017
peaking at the Arab Air Carriers Organization

(AACO) annual meeting in Casablanca, Morocco,
the groups director-general Abdul Wahab Tefaha
recalled the period prior to US liberalization in the
1980s.
Before 1980, airlines and governments agreed
on everything, he said. Tey agreed on seats; they
agreed on the tarifs of those seats, the distance between those seats and the food on
the plane.
Middle east
A variety of protectionist
practices shielded companies
from competition and severely
limited consumer choice as well
as artifcially boosting prices,
which were, in real terms, three
times more expensive than today,
Tefaha said.
Arab carriers, wary of
Liberalization opened up the
protectionist trends,
marketplace, initially in the US and
see profts dip.
Europe, developments that led to
passenger numbers rising from 700
By Alan Dron
million annually before deregulation
to more than 3 billion today.
Tat deregulation was one of the factors that
had allowed Middle East carriers to gain an initial
foothold in the market. Teir share of world passenger
numbers had risen from just 6% as recently as 1996
to 14.3% in 2015, mostly achieved by the big three
Gulf carriers that created hubs in the UAE and Qatar
that benefted from Open Skies and liberalized aviation agreements.
But now, the re-emergence of protectionist tendencies was one of the big threats to this industry, Tefaha
warned.
Most notably those tendencies have been seen in
US President-elect Donald Trumps calls to protect
US workers jobs. Recently, some US airlines have
renewed their calls for the US government to look
at the alleged unfair competition from the Gulf carriers, potentially in the hope that their appeals for
assistance will fnd more resonance with the incoming president.
Regardless of trends or the 2017 political environment, Middle East airlines are maintaining one of the
worlds lower breakeven load factors. Tats because unit
costs are even lower than yields. Nevertheless, the regions
collective net proft is expected to dip from $1.1 billion in
2015 to $900 million for 2016 and then see a sharp drop
in 2017 to $300 million.
Not-sogood
times
he year ahead promises to be a transitional one

for African aviation, as the continent approaches
the deadline for intra-African liberalization and
prepares for the launch of a new intra-African passport
in 2018.
However, things are not easy, with several African countries including Angola, Egypt, Nigeria and Sudan hit
hard by softening oil and commodity prices, making it hard
to repatriate funds. West Africa is almost like a bloodbath;
it is so dependent on commodities, South African Airways
(SAA) COO Aaron Munetsi told delegates at the African
Airlines Association (AFRAA) meeting in Zimbabwe.
Today, I think that Africa is in a worse place than
ever. We have been trying to paint a rosy picture of
growth on the continent, but as a mathematician
in reality Africa is going through a serious recession. I also
believe in a positive timeline, which is why we are not
parking aircraft. Tings will turn around within the next
three years, RwandAir CEO John Mirenge said.
Te downturn has led to routes being cut, at a time
when Africa really needs stronger connectivity. Te African hubs worth speaking about are in Paris, Istabul and
Dubai. We want our hubs to be within Africa, AFRAA
secretary general Elijah Chingosho said.
Ethiopian Airlines is running a good hub and has
continued to stand out as the African leader, but others
lack stability. For example, troubles at Kenya Airways and
SAA have dominated the headlines, while low-cost carrier
Fastjet has been forced to restructure its operations. Fares
are high, costs are high and there is limited demand and
overcapacity, forcing
many African carriers
africa
to look at smaller
aircraft to right-size
their feet. We
need to sweat our
assets more, Kenya
Airways CEO Mbuvi
Africa still struggles to
Ngunze told AFRAA
meet its full potential.
delegates.
By Victoria Moores
Structural stability
is important because
in 2017 the intra-African market is fnally
scheduled to open up to free competition, potentially
making it easier for airlines to invest in one another. To
date, around 15 states have committed to implementing
the long-awaited Yamoussoukro Decision (YD) and this
is expected to quickly grow to cover over 90% of African
trafc as the deadline nears.
Tough
Going
12/16/16 3:45 PM
FORECAST
2017
ervousness and uncertainty about the global

economy and intense competition are giving
leaders of Asia-Pacic carriers cause for concern
even though the region is maintaining a fast-growth track
in terms of passengers carried.
At the Association of Asia Pacic Airlines (AAPA)
60th Assembly of Presidents, director general Andrew
Herdman noted that large, growing middle-class populations in China, India and many Southeast Asia countries
were the driving force behind relentless passenger trac
growth and the delivery of an increasing number of new
Airbus and Boeing airliners.
However, he added that the regions airline leaders were acutely aware of shorter term geopolitical
instabilities, the rise of more cautionary attitudes toward
globalization and free trade, and a potential for oil price
increases.
Low oil prices are helping to keep airfares highly
aordable and demand remains strong in short- and
long-haul markets for both leisure and business travel.
But competition is intense, putting pressure on prices
and protability, Herdman said. Competition among and
from low-cost carriers (LCC) in the region is particularly
intense, with some LCCs essentially passing on all the
benets of their low-cost structure to the passenger, making it questionable how long that business strategy can be
sustained.
On the cargo side an important sector for many
Asian agships it remains a tough business, Herdman said. Cargo volumes remain at year over year, while
revenues are signicantly down. You cannot stimulate
cargo demand like you can stimulate passenger demand,
he noted.
Nevertheless, Herdman sees aircraft capacity being
well-matched with demand and an industry that is
beginning to behave like a normal industry and make a
return on capital.
Herdman highlighted some of the numbers that make
the region the worlds most dynamic.
Asia-Pacic is home to 4 billion people generating
31% of global GDP with a fast-growing middle-class that
is able to buy phones, cars and travel, he said. Air travel
is one of the big beneciaries of this trend.
Asia-Pacic airlines generate annual revenue of $166
billion, carry 860 million domestic and 340 million
international passengers and 20 million tonnes of cargo
on 7,058 aircraft. Te worlds top 10 busiest domestic
and top 10 busiest international routes are all in the
Asia-Pacic region, Herdman pointed out. Te top ve
domestic routes are Jeju-Seoul (11.1 million passen-
gers carried annually); Sapporo-Tokyo (7.8 million);

Fukuoka-Tokyo (7.8 million); Melbourne-Sydney (7.6
million); and Beijing-Shanghai (6.1 million). Te top ve
international routes are Hong Kong-Taipei (5.1 million);
Jakarta-Singapore (3.4 million); Bangkok-Hong Kong
(3 million); Kuala Lumpur-Singapore (2.7 million); and
Hong Kong-Singapore (2.7 million).
Malaysia Airlines CEO Peter
Bellew, an Assembly panelist,
ASIA
agged China as a market opportunity for Asian carriers as
wonderful as I have never seen
before. He explained that just
4% of the Chinese population
has a passport, but Beijing has
set a target of increasing that
Asian carriers sit in the
to 12% over the next couple
worlds most dynamic
of decades. Tat will equate to
market.
150 million more people being
By Karen Walker
able to travel abroad. Bellew
believes that these new Chinese
passport holders will rst stay within their geographic
region, so Asia-Pacic destinations will see a surge in
travel business.
Te challenge is that we wont be able to get enough
pilots or have enough hotel rooms, Bellew said. Tere
is also a time lag in the development of airport structure.
But the opportunity is wonderful.
Bellew, an Irishman and former executive at low-cost
carrier Ryanair, listed some of the other challenges he
anticipates for Asian carriers. Tere are far too many
low-cost carriers. Tey dont have critical mass and they
will hit the same issues as happened in the US. If you
dont have scale then you are ne for ve, six or seven
years but then you start getting into maintenance issues
and thats very expensive, Bellew said. When fuel price
inevitably goes back up, I think thats when the shake-up
will happen. Lots of airlines in Europe and the US went
bust and I think that will happen here and consolidation
will happen.
Tai Airways president Charamporn Jotikasthira,
another panelist, alluded to some of the problems already
being encountered meeting the regions growing demand
for travel. He explained that when the requirement for
Chinese visitors to have visas to go to Tailand was lifted,
the number of passengers increased from 3 million to 9
million. However, Tai airport immigration facilities have
been overwhelmed. Te infrastructure was not able to
cope with that jump [in passenger numbers], so you are
not able to capture the full opportunity, he said.
Growth &
Challenges
12/19/16 3:32 PM
connecteD airPorts
Staying
connected
Airports seek ways to assist passengers
and interface with themvia technology.
By aaron KarP anD anne Paylor
uring a panel discussion at an industry

conference in Mexico City, LATAM
Airlines Group CEO Enrique Cueto
reached into his pocket and pulled out
his smartphone, which he held up. In
the future airport, everything you need except for luggage will be right here, he said.
For a growing number of airports, the future is
increasingly becoming the present. Airport apps
for smartphones, for example, can help passengers
manuever through the airportfrom the garage to
the gate is the philosophy behind Miami International Airports (MIA) app. (In fact, the benefts begin
before airport arrival: the MIA app can give passengers
the best road route to take to the airport.) Apps can

allow airports to generate added revenue via proximity marketinga passenger looking for cofee can
be directed to the nearest Starbucks and provided
with a 20% discount Starbucks coupon to be scanned
from his or her smartphone. An added beneft of such
technology is that it can help make an airport operate
more efciently.
Te same beacons deployed throughout MIA to
enable the app also monitor temperature, allowing for
precise thermostat adjustments. If I can reduce my
power bill by even 3%-4%, thats huge, MIA information systems and telecommunications director Maurice
Jenkins told ATW. Our power consumption bill is in
excess of $25 million a year, so 3% of that is a game
changer.
Ultimately, airports do not want to fall behind more
general societal trends regarding technology. Referring
to a recent decision to add 77 more access points for
free Wi-Fi in Pittsburgh International Airport, airport
spokesperson Bob Kerlik said, We wanted to make
sure the Wi-Fi was more than adequate for all of the
leisure and business passengers using the airport. Pittsburgh is a high-tech city and we wanted to make sure
the airport is keeping pace.
Passenger demands
At least two passenger surveys published during the past
12 months have shown unequivocally that todays airline passenger is now happier using self-service mobile
and online applications than interfacing with a human
being on their journey to and through the airport.
It is a burgeoning reality that airports ignore at their
peril, and indeed cost, because the revenue potential of
this new reality could be signifcant.
ATWBMDConnectedV6.indd 32
12/14/16 4:43 PM
Te 2016 SITA/ATW Passenger IT Trends Survey

indicated that 91% of passengers using self-service
technology at some stage of their journey will do so
again and again, and that once the conversion has been
made from person-to-person interaction to self-service
technology for travel steps, few people want to revert.
Te survey found that even if a passenger is not
satised with self-service technology, they tend to try an
alternative one rather than revert to human contact.
Te IATA Global Passenger Survey revealed similar
trends, with a signicant 85% of respondents saying
they would be happy to provide more personal data to
speed up checks required by governments and customize their travel experience.
In both surveys, the key weak points in terms of
passenger experience remain government formalities
(security and border control) and baggage. Tese are
points of the journey where technology currently plays
only a limited role and passengers have little control or
choice.
A survey by New York-based business information
company Skift found that, although there appears to be
an innite number of options to reach and engage travelers, and the opportunity for building in-depth buyer
relationships has never been greater, there remains
one major challenge standing in the way. Tere is no
universal way to track people across their many devices,
the survey said, and it concluded that the ability to
build a comprehensive cross-device user picture is an
uphill technical battle.
Relationship building
Tis largely boils down to the lack of a unique identier, which the survey describes as the holy grail of
connecting a person across all devices and channels.
In the absence of that, travel companies are engineering their own creative solutions through loyalty
programs, mobile apps and strategic campaign planning, the Skift survey said. Even though technology
lags behind, companies like these are nding solutions
and forging their own paths toward a closer relationship
with their buyers.
But the lines are blurred at the airport, where the
passenger in eect belongs to the airline, but is spending a considerable amount of time as the guest of the
airport.
Victoria Wallace of UK-based IT solutions and
airport services company Rezcomm told ATW: Airports
have a unique challenge in that most passengers can
simply pass through the terminal without the airport
ever meeting them. Passengers have relationships with

airlines, parking consolidators and [in many cases a]
third-party channel, but [if ] the airport never has access
to their data, these passengers are essentially strangers on
a plane.
Te aim at Rezcomm is to build tools that allow
airports to meet their passengers, understand their
needs, build direct relationships and oer them the
convenience of a one-stop shop for all their travel needs,
Wallace said. Tis allows airports to become brands in
their own right, to own their passenger data, understand
who passengers are and what they need to do to cater to
their needs.
Mobile solutions that can drive incremental revenues across multiple products, services and channels
include car parking and rental, executive lounge access,
security express lanes, retail concessions, ights, hotels
and more. Rezcomm believes that, with eective data
analysis, airports are well placed to optimize revenues
using highly personalized up-selling and cross-selling
techniques.
Most airports targeting enhanced connectivity with
their passengers are focusing on airport-specic apps
using beacons (small transmitters that emit a Bluetooth
signal) and near-eld communication (NFC) as the
main technologies for creating connectivity within the
terminal.
SITAs strategic technology research arm, SITA
Lab, is working with airlines, airports and technology
specialists globally to stimulate technological innovation. It is investing in emerging technologies and
investigating the enhancements they can potentially
bring to passengers and crew. In particular, it is focusing attention on the mobile environment, examining
how geo-location, context awareness, e-wallets, NFC,
video analysis and scanning can best be harvested in
air transport.
SITA Lab has also developed a Common Use Beacon
Registry and is working with airports, airlines and
industry bodies like IATA and Airports Council International to dene standards around how to deploy and
use beacons for maximum interoperability.
SITA acknowledges that beacon technology has
been hailed as a game-changer in retail, but has
warned that piecemeal and proprietary deployment
of beacons at airports could limit the potential of the
technology. Te industry-wide registry for all beacons
should help ensure that any airline will have a single
point of contact to use any beacon deployed by airports around the world, SITA said.
12/14/16 4:43 PM
connected airports
Airport
Case
studies
personalizing Miami
Available in English
and Spanish, Miami
International Airports
(MIA) smartphone app
is poised to enter into
its third version since
debuting in 2014. Te
frst-of-its-kind app in the US market will eventually
evolve to the point where whatever youre trying to
do [at the airport] is in the palm of your hand, MIA
information systems and telecommunications director
Maurice Jenkins told ATW.
As soon as a passenger scans his or her boarding pass
with the app, relevant information become available on
the passengers smartphone. Youll know whether your
fight is on time, Jenkins explained. It will connect to
Google maps and give you the best route to the airport
Once you get to the airport, a welcome to MIA,
how can we help you message pops up. It will help you
fnd parking, which check-in counter to go to and, if
needed, direct you to the nearest bathroom.
In 2017, MIA will launch proximity marketing on
the app. Imagine youre in Miami. You few in [from
Washington DC] because the Washington Wizards are
playing the Miami Heat [in a National Basketball Association game], Jenkins said. If the app is activated, it
will note that the passenger was at the basketball arena.
Since you were at the arena, the app will say, You
can drop into the Heat store [at MIA] and get a 20%
discount, Jenkins said. Its not big brother watching
you. Its catering to your specifc needs.
A passenger can opt out if he or she does not want
the app to track his or her movements. But Jenkins said
he does not want to get to that point: I dont want to
over-inundate you to the point where you eliminate the
app. It will be entirely up to you what you want from
the app.
In the future, Jenkins would like to extend the app
to assist with customs and passport control and to assist
people working at the airport. Right now, its more
customer facing, he said. But we also have over 30,000
badged employees that may be able to leverage the
mobile app. Its a living, breathing application that can
grow and evolve.
He added, I expect the app to grow some more. I
really would like to integrate mobile passport control into
our app. Were talking to [US Customs and Border Protection (CBP)] about this. Te primary purpose would
be to facilitate passengers arriving on international fights
so they can move through the CBP process quickly. If

youve been on a 10-hour fight, I dont want you to land
and be in line for an hour, Jenkins said.
Aaron Karp
Helsinkis Holistic approach
Helsinki Airport uses both digital and non-digital channels for providing primary information, such as fnding
a gate or baggage reclaim belt. However, it recognizes that
some passengers are more receptive to more refned
information, such as personal wayfnding, service
catalogues, and opportunities for customizing their own
passenger experience to cover travel pre-planning and
e-commerce.
Airport operator Finavias service development head
Eero Knuutila explained, in practice, we started with
the defnition of a holistic digital passenger channel
concept which forms an integral component of Finavias
high level passenger communications concept. Te
diferent digital channels are designed to work together
in order to reach all potential passengers at diferent
stages of their travel and comprise a smartphone app
for frequent fyers, a web app for airport free Wi-Fi
users, a full-fedged website for all passenger profles,
semi-physical digital channels (dynamic digital signage
and information terminals) and some segment specifc
channels such as WeChat for Chinese passengers.
Trough the channels, the airport ofers general
airport/service information, context specifc information, and opportunities to buy time or increase travel
convenience through pre-purchasing goods and services
that facilitate travel, such as premium security control.
Although the ofering and information set varies from
channel to channel, the idea is that we produce all the
services and information only once and then publish to
all applicable channels in the right form. All our digital
channels are owned and managed centrally, which helps
make sure that the passenger experience does not become
fragmented and confusing, Knuutila said.
Helsinki has also recently tested the use of advanced
face recognition using Google Glass to identify employees at employee security control points. Te pilot
demonstrated a high level of recognition accuracy and
also highlighted the potential as well as the limitations
of the technology.
Behind the employee-oriented pilot was the motive
to test if the technology could also be applied to passengers for faster travel, personalized services, and true
premium experience, Knuutila said. Now we are looking into this opportunity combined with augmented
12/14/16 4:44 PM
CONNECTED AIRPORTS
reality. We are also working on a number of virtual

reality initiatives, but it is still unclear which of them
will reach piloting stage.
For device positioning in the airports smartphone
app, Helsinki has a network of Bluetooth Low Energy
(BLE) beacons (using tri-lateration), and also oers WiFi signal based positioning for its Wi-Fi based web app.
In addition, more traditional self-service options
such as check-in kiosks, a two-step self-service bag drop
process, boarding pass readers at security and boarding,
and automated border control gates are in heavy use
and play a central part in both customer understanding
[as a source of statistics and intelligence] as well as lay
the basis for more advanced self-service initiatives, such
as boarding pass-free travel through biometrics authentication, Knuutila said.
Anne Paylor
Hong Kongs Self Service
At Hong Kong International Airport (HKIA), selfcheck-in kiosks and mobile boarding passes have been
available for several years, and self-bag drop was introduced in April 2016. By the end of 2017, the number
of these counters will total 120, making it reportedly
the largest scale self-bag drop deployment in the world.
In late 2015, trials of mobile check-in counters began.
Tese are connected wirelessly and are fully mobile so
they can be deployed anywhere and anytime as needs dictate. With a revolutionary user interface and automatic
document check, the mobile counters enable check-in
at an average of 40 seconds per passenger. Tere are currently nine such counters in use at HKIA, and in the next
phase of the program, these counters will be developed
into dual-purpose kiosks facilitating self-check in and
self-tagging for a two-step self-bag drop process.
Te airports HKG My Flight app provides information ranging from real time ight information, status
updates of saved ights, maps, shopping and dining
information and more. Since August 2015, the airport
has used iBeacon technology to connect with passengers via their mobile devices and deliver content based
on their location in the airport. Te iBeacon can send
tailor-made promotional messages from key retail zones
to passengers who have downloaded HKG MyFlight
and activated Bluetooth.
In the future, more personalized notication, including baggage arrival notication and location-based
boarding alerts will be added to HKG My Flight, an
airport spokesperson told ATW. In addition, locationbased way nding solutions with augmented reality,
next generation displays, and customer services with

wearables are in the pipeline for feasibility study and/or
implementation.
An online shopping platform and loyalty program to
facilitate an omni-shopping experience for HKIA users will be launched in phases from mid-2017, allowing
passengers to plan their shopping well before they arrive
at the airport. Tey can place an order, earn shopping
incentives, and redeem attractive gifts or vouchers
online and either pick up their purchases at the airport
or have them delivered to their homes.
To date, more than 200,000 passengers have used the
self-bag drop service since it was launched in April and
the HKG My Flight mobile app has been downloaded more than 771,000 times since its launch in 2013.
Anne Paylor
Automated Dubai
Dubai Airports has launched an airport community app
aimed at giving airport sta (including airlines and control authorities) a unied, real-time view of operations.
Secured and requiring sign-up, the app helps employees
identify any potential problems and trigger quick action
on operational issues as required. It has been a valuable tool particularly during operational disruptions,
an airport spokesperson said.
On the immigration front, Dubai International
(DXB) is rolling out a new service that allows UAE residents to use their Emirates ID cards to pass through the
127 automated smart immigration gates that have now
been installed in all three terminals. More than 234,000
UAE residents have already used the service, which is free
of charge and requires no pre-registration. A collaborative eort with the General Directorate of Residency and
Foreigners Aairs, the Emirates Identity Authority, it
has been made possible by creating a secure and ecient
link between various operational systems and databases
managed by those two government agencies and Dubai
Airports. Te Smart Gate can quickly conrm the identity, travel plans and eligibility of UAE residents to enter
and depart the country.
Dubai Airports CEO Paul Griths said, With a
transaction time that averages 10-15 seconds, this is
clearly a smarter way to travel. It speeds up the immigration process signicantly and shortens queues. Our
focus going forward is to get more residents using it.
DXB was the rst airport in the region and among
the rst globally to introduce automated immigration
gates in 2002.
Anne Paylor
12/15/16 2:20 PM
Dzyne Technologies
The New
Tomorrow
rom single-seat electric air taxis to 45-seat

supersonic transports, researchers see a potential future for air travel that could be significantly more varied than todays uniform fleets
of subsonic airliners.
Behind this vision of diversifcation are drivers that
include desires for more accessible, efcient and environmentally responsible air transport. Researchers at NASA
and elsewhere are looking 20-40 years ahead and seeing
congestion on the ground in sprawling mega-cities,
the need for speed in business travel, and continuing
demands for lower energy consumption and emissions
from air transport.
As a result, from government laboratories to entrepreneurial startups, more efort is being expended on
advanced concepts and confgurations than perhaps at
any time in the last 50 years. But the expected resistance
to change from regulators, established manufacturers, traditional operators and the traveling public will
make it difcult for any dramatically diferent ideas to
establish themselves.
Perhaps the most potentially disruptive concepts are
coming from the convergence of electric propulsion
with autonomous systems on-demand air taxis that

would lift commuters above congested roads. Tinged
with dreams of fying cars, these concepts have been
the province of speculative startups, but now Airbus is
building a prototype and Uber says its customers want
airborne ridesharing.
VtOL air taxis
Interest from such major players, backed with research
by NASA, is giving credence to vertical-takeof-andlanding (VTOL) air taxis. Airbus Groups Silicon Valley
outpost, A3, plans to fy a prototype autonomous
electric VTOL aircraft by the end of 2017. Te tilt-wing
Vahana is designed to carry cargo or a single passenger.
A production-representative demonstrator could follow
by 2020.
Uber believes technology for a battery-electric
VTOL air taxi able to fy 100 miles at 150 mph will be
available within fve years. Te four-seat aircraft would
be piloted at frst, becoming autonomous when enough
data is available to prove it is safe. Long term, Ubers
goal is trip costs comparable with ground transport
and cheaper than owning a car, which will require both
ATW JAN 17 Future Air.indd 36
12/15/16 2:04 PM
The future of
commercial air
transport could
look very different
if research projects
bear fruit.
and mass production.

Proponents of electric propulsion also see an opportunity to reestablish a long-dormant sector of air transport
small commuter aircraft fying thin routes abandoned
as regional airliners grew larger and more expensive to
operate. With US commuter operator Cape Air, NASA
is developing concepts for an 11-seat aircraft that uses
distributed hybrid-electric propulsion to achieve 30%
lower direct operating costs.
Te frst step toward that vision is the agencys
X-57 Maxwell, which is planned to fy by 2018. With
cruise propellers on the wing tips and a dozen smaller
lift-augmentation props on the wing leading edges, all
battery-driven, the X-57 aims to demonstrate a three- to
fve-fold reduction in energy usage over conventional
aviation piston engines by using distributed electric
propulsion.
Whether pure-electric or hybrid-electric drivetrains
can scale up any further is hotly debated, but future
narrow- and widebody airliners could look dramatically
diferent whichever way the vote goes. Airbus believes
hybrid-electric could be feasible for aircraft with fewer
than 100 seats and has teamed with drive-system developer Siemens to demonstrate the feasibility of hybridelectric propulsion by 2020.
NASA
By Graham warwick
Dzynes Ascent super-regional concept has

twin-aisle seating with skylights for natural
lighting in the economy cabin.
Working with Cape Air, NASA and startup Joby Aviation are
studying 11-seat hybrid-electric commuter aircraft concepts.
12/15/16 2:01 PM
Airbus
Pursuing ultra-effciency
Electrifcation is not essential to achieve signifcant effciency improvements in commercial aircraft that could
enter service by 2035 a likely timescale for future
clean-sheet A320 and 737 replacements. NASA has
awarded contracts to study fve diferent concepts for
X-plane experimental aircraft that would, by the mid2020s, demonstrate unconventional confgurations for
ultra-efcient subsonic transports.
One is Boeings Transonic Truss-Braced Wing concept, with a traditional tube-style fuselage but a long,
slender, glider-like wing that ofers to reduce fuel burn
by 5%-8% over todays 180-seat narrowbodies. Aurora
Flight Sciences double-bubble D8, conceived with the
Massachusetts Institute of Technology, has a broad fuselage that brings twin-aisle convenience to the market and
combines with embedded engines and other technologies
to promise up to 50% higher fuel-efciency than todays
narrowbodies.
Dzyne Technologies Ascent 1000 is a blended wingbody (BWB) concept for a 110- to 130-seat fying-wing
super-regional airliner with twin-aisle seating and a
claimed 20% fuel saving over conventional designs.
NASAs ongoing X-plane studies also include Boeings
long-running BWB and Lockheed Martins emerging
Hybrid Wing Body possible confgurations for future
long-range, fuel-efcient aircraft that could be military
airlifters, commercial freighters or widebody-class passenger airliners.

Ultra-high-bypass geared turbofans look like the
most likely powerplant option for airliners that would
enter service in the 2030s, although Airbus and Safran
continue to study counter-rotating open-rotor engines.
A ground-demonstrator engine is to run in 2017 under
Europes Clean Sky research program.
When Clean Sky was started in 2008, Airbus was expected to launch an all-new narrowbody aircraft. Instead
it reengined the A320, pushing back the need for new
technologies such as open-rotor engines. A fight test is
now planned for around 2020, under Clean Sky 2, but
will depend on an internal Airbus decision on whether
an open-rotor A320 replacement will be economically
viable.
Open rotors promise 30% lower fuel burn than
the CFM56, twice the reduction provided by CFMs
LEAP-1 turbofan on the A320neo, but the exposed
blades, which spin at high speed, present noise, vibration and airworthiness issues that could ofset the
benefts when integrated into an aircraft.
Hybrids
While electric propulsion would dramatically reduce
emissions, it is at best a long-term proposition for
single-aisle and larger aircraft because of the substantial
12/15/16 2:01 PM
(Far left) Airbus A3s Vahana single-passenger autonomous VTOL

air taxi concept.
(Left top) NASAs N3-X superconducting turboelectric airliner
concept.
(Left bottom) Dzyne is one of
four companies studying ultraefficient X-planes for NASA.
AIRBUS
DZYNE TECHNOLOGIES
NASA
NASA has built a facility to

ground-test the full-scale drivetrains
for future 737-size turboelectric
congurations, beginning with the
STARC-ABL. Future plans, for the
early 2020s, include testing distributed turboelectric propulsion
drivetrains, such as that proposed for
the ECO-150.
If there is any prospect for hyperecient, emission-free large airliners,
distributed turboelectric propulsion
may hold the key. NASA has a concept, the N3-X, for a blended wingbody with wingtip turbogenerators
powering electric fans arrayed along
the trailing edge of the wide fuselage.
Studies suggest the long-range
N3-X could reduce energy consumption by 70% compared with a
300-seat 777-200ER, but it requires
superconducting generators, motors
and transmission lines to minimize electrical losses.
Superconductivity requires cryogenic cooling and, while
a concept like the N3-X could use supercold liquid
hydrogen or liqueed natural gas as fuel, technology
compact and light enough to be used in aircraft remains
years in the future.
Accessibility and eciency are not the only drivers of
advanced aircraft research, but whether the current resurgence of interest in supersonic air travel will bear fruit is
another ongoing debate. Lockheed Martin is completing
preliminary design of a low-boom supersonic X-plane
for NASA that could y in 2019 if the agency can
secure funding.
Whether or not NASA is able to y an X-plane,
several privately funded startups continue to pursue the
market for a supersonic business jet or small airliner:
Aerion, Boom Technologies, HyperMach and Spike
Aerospace. Such ventures are highly speculative, but
Airbus is providing engineering assistance to Aerion and
Spanish aerostructures manufacturer Aernnova is working with Spike, lending credence to the projects.
While the backlogs for conventional subsonic
airliners are at record levels, research under way both
inside and outside the traditional commercial
aerospace industry suggests there is a growing
recognition that air transport of the future need not
look the same as it does today.
improvements in battery and motor technology that

would be required. But hybrid turboelectric architectures are being studied that could oer some of the
benets sooner.
One is NASAs 737-sized STARC-ABL concept
for single-aisle turboelectric aircraft with aft boundarylayer propulsion. Tis has underwing turbofans driving
generators that power a ducted fan mounted on the
tail. Tis fan ingests the slow-moving airow over the
fuselage and re-energizes the wake, reducing aircraft drag
and allowing use of smaller turbofans. Studies suggest
fuel-burn savings of 7%-12%.
Another is ESAeros ECO-150 split-wing turboelectric distributed propulsion conguration. Tis 150-seat
design has two turboshafts mounted midspan on the
wing, driving generators that power an array of electric
ducted fans embedded inside the inboard wing sections.
Tis one driving many arrangement dramatically
increases the eective bypass ratio, and therefore fuel
eciency, of the turbine engines.
Among available options for low-carbon propulsion,
turboelectric congurations like these avoid the problem
that, for the foreseeable future, batteries will have poor
energy-storage capacity compared with jet fuel. Renewable biofuels would reduce the emissions from generating electricity onboard using jet engines, rather than
storing it in batteries.
12/15/16 2:04 PM
that
Flip
cabin
A modular cabin
concept might generate
additional revenue for
airlines.
By Graham warwick
ATW JAN 17 Future Cabins.indd 40
12/15/16 2:13 PM
ConCeptual
passenger
sleeping quarters on
a Transpose-enabled
aircraft.
AIRBUS GROUP CONCEPT
ould passengers select one airline over

another if it offered the chance to
dine onboard in a brand-name restaurant or to meet with co-workers in a
Starbucks? Would businesses partner with airlines to put
their gym or spa on the aircraft? Would advertisers pay to
brand a novel passenger experience? Airbus aims to find
out.
Trough its Silicon Valley outpost A3, Airbus plans
to develop and fight-test a cabin architecture that allows
aircraft interiors to be rapidly and fexibly confgured us-
ing modules that are pre-equipped by airlines or partners

with options ranging from sleeping bunks to a soundproofed playroom.
A3s Transpose concept is aimed initially at equipping
widebody freighters with modular interiors as they come
Jason
Chua,
of the assembly line, but future aircraft could have the
reconfgurability designed in, project executive JasonProject
Executive of
Chua believes.
Transpose.
Under Transpose previously codenamed Project
Picard the modular cabin architecture is an enabler
for providing passengers with new in-fight experiences
and airlines with not only new revenue streams, but also
the ability to customize their cabins more easily and
change them more frequently.
Previous attempts to enable reconfgurable interiors
have foundered on the complex integration of the
cabin with the aircrafts systems. Even moving a
bathroom forward or backward a few feet can kick of
extensive structural engineering and testing work
[and] time-intensive regulatory procedures, Chua
explained.
What makes Transpose diferent is that we dont
require a completely new kind of aircraft or the fundamental redesign of airport infrastructure, he said. Large
freighters provide an already modular, spartan platform
that enables passenger support systems to be redesigned
from the ground up to be more fexible, enabling them
to be connected and disconnected easily.
A3 will produce an extensive set of design rules that
module developers must follow to be compatible with
the aircraft, and which envisions galley suppliers developing fight-ready kitchen and restaurant modules, or seat
makers providing bunk modules that are installed for
long-haul fights, but which can be removed for short
trips.
Interchangeability
We are designing for maximum interchangeability,
Chua noted. Te modules shell complies with all
structural and system-integration requirements. Suppliers can equip the inside of the module as desired, with
seats, booths, bunks, a gym or childrens play area just
some examples of what they might select.
Suitable freighter confgurations will retain the exits
and other features required for passenger safety. Preequipped modules will be installed via the cargo door
and locked to the seat rails. Te reinforced cargo foor
carries the loads.
A lack of windows does not concern Chua, who
points to advances in organic light-emitting diode
12/15/16 2:13 PM
CLOCKWISE FROM FAR LEFT: Conceptual cutaway of a Transpose-enabled aircraft, loaded with
modular passenger experiences; Conceptual modular experience for a Transpose-enabled aircraft.
Conceptual modular experience housed within Transpose module core structure; Conceptual
modular experience being loaded onto a Transpose-enabled aircraft. RIGHT: Conceptual restaurant module on a Transpose-enabled aircraft.
displays that can be used to provide video walls in place

of windows.
It can be all modular, or you can mix with a conventional cabin, he said. You can design the aircraft
to be largely modular apart from special sections at the
front for lavs and services. All the modules will meet
requirements for taxi, takeof and landing, with certifed seating for passengers.
Some features will be dual-purpose restaurant
booths that become passenger seats for takeof and
landing while others will be reconfgured in fight.
Chua said A3 was conducting experiments to assess passengers willingness to move once airborne so their seats
could become part of an experience.
Transpose, which has been under way for a year,
has three goals: demonstrate the technical feasibility of
building and operating a modular cabin system; validate passenger enthusiasm for new in-fight experiences
enabled by the concept; and close a business case that
makes the idea appealing in the near term.
A3 is building a 150ft.-long cabin mockup with a
couple of modules inside that will be able to simulate
fight and which will be used to perform system integration and to demonstrate the concept. Te next step
will be to fy the modular interior, which is planned
within the next three years, Chua said.
Widebody freighters allow us to get reconfgurability in a relatively near-term timeline, he pointed out.
Te business case is based on using an existing aircraft
as the basic platform so we can execute the project
without a clean-sheet aircraft development program.
Airline cabins, flled with rows of forward-facing
seats, have not changed much since air travel began,
he explained, because of the complexity of system integration, including segregated electric systems, zoned
temperature controls and bundles of in-fight entertainment wiring.
In Transpose, interfaces with the aircraft are simplifed and the complex routing and distribution are
pre-engineered into the modules.
Tis system allows [interiors] suppliers to focus
their energies on building compelling experiences
rather than on byzantine integration challenges.
With a modular architecture, integration with these
12/15/16 2:13 PM
AIRBUS GROUP CONCEPT PHOTOS
systems and compliance with overall aircraft requirements are built into a set of streamlined module design
rules. We believe this will free existing suppliers to create more diverse oerings, and enable new companies
otherwise unable to enter the commercial ight market
to do so, Chua said.
Revenue generation
While the roll-on/roll-o modules increase weight
and reduce space compared with a specic, ultraoptimized cabin conguration, there is still a positive
business case for modularity, Chua believes. Weight is
not our driver. It is exibility and enabling new business models.
Even with the conservative estimates used for
Transpose, there is still a strong business case, he said,
including opportunities for additional revenues from
in-ight experiences passengers are willing to pay for,
and advertisers to create, and reduced downtime for
cabin changes.
It is a dierent business case to the current model.
Its not just about people sitting on an aircraft. Its about
creating some more-revenue-dense experiences, such

as dining, that harness a willingness to pay comparable
with what they would spend on the ground, Chua said.
A3s charter is disruptive innovation, within Airbus
and across industry. As a consequence, tenets for its
projects are speed, transparency and, demonstration at
scale so, in addition to a ight test within three years, it
plans to openly share details of its concept and thinking
sooner rather than later.
We want to know, are our inputs correct? We
plan to draw from outside aerospace - from consumer
electronics, automotive and immersive [sectors] - to
quantify the willingness to pay, he said. A3 is working
with cabin experts within Airbus, but is also looking
outside for ideas.
We are starting to engage with third-party
manufacturers to make sure our module specications
meet their needs, Chua said. A lot of really cool ideas
are expensive to implement. We want to take away the
burden of cost and time of integration work and lower
the barrier to new types of things entering the aircraft
cabin.
12/15/16 2:13 PM
TRENDS
TRENDS
AIRcRAft VAlueS
Selected AIRPORt tRAffIcWORldWIde

Ytd OctObeR 2016
FBV @ 1.0% Inflation

Aircraft
Year
Built
2016*
2021
2026
2031
Boeing MD-11F
1999
$15.4
$11.9
$6.0
$0.0
Boeing 747-400BCF
1997
$19.4
$16.5
$10.4
$5.1
Boeing 747-400F
2002
$31.6
$26.9
$17.0
$10.5
Boeing 777F
2012
$122.1
$94.9
$68.5
$50.4
Airbus A330-200F
2012
$67.0
$49.8
$33.1
$21.0
Boeing 747-8F
2014
$147.3
$108.5
$79.1
$57.5
Values assume half-life, half-time condition. *Current Market Value - Most likely trading price under current market conditions. 2016=NEW, rounded to nearest $million.
Future Base Value - value in a balanced market, inflated at 1.0% p.a., rounded to
nearest US$million. Source: AVITAS, Inc.
WORld AIRlINe tRAffIc

JANuARY-SePteMbeR 2016
Middle eAst/
north AfricA (excl. iran)
2016 Ytd*
2015 Ytd
% chg
rPKs (mil.)
448,198
407,169
10.1
AsKs (mil.)
674,599
599,251
12.6
Pass. (000)
164,135
151,903
8.1
66.4
67.9
-1.8 pp
Pass. lf (%)
* Figures are estimated. Source: AACO
eUroPe
rPKs (mil.)
2016 Ytd
512,509
2015 Ytd
496,068
% chg
3.3
AsKs (mil)
639,458
607,796
5.2
Pass. (000)
219,797
212,535
3.4
80.1
81.6
-1.5 pp
19,427
18,698
3.9
Pass. lf (%)
ftKs (mil.)
Source: AEA
AsiA-PAcific
2016 Ytd
2015 Ytd
% chg
rPKs (mil.)
798,885
746,836
7.0
AsKs (mil.)
1,013,768
948,520
6.9
Pass. (000)
219,773
206,274
6.5
78.8
78.7
0.1 pp
47,993
48,008
0.0
Pass. lf (%)
ftKs (mil.)
Note: International scheduled traffc only. Source: AAPA
Us
2016 Ytd
2015 Ytd
% chg
rPKs (mil.)
1,466,594
1,403,374
4.5
AsKs (mil.)
1,773,990
1,689,398
5.0
Pass. (000)
622,961
600,715
3.7
82.7
83.1
-0.4 pp
61,933
63,317
-2.2
Pass. lf (%)
ftKs (mil.)
Source: US Bureau of Transportation Statistics
lAtin AMericA
2016 Ytd
2015 Ytd
rPKs (mil.)
218,008
210,438
AsKs (mil.)
268,901
263,540
2.0
Pass. (000)
138,226
139,852
-1.2
81.1
79.9
1.2 pp
3,311
3,497
-5.3
Pass. lf (%)
ftKs (mil.)
Source: ALTA
% chg
3.6
AIRPORt cItY
Atlanta, georgia, Us
Beijing, china
dubai, UAe
los Angeles, california, Us
chicago, illinois, Us
london, UK
hong Kong, china
Paris, france
dallas/ft. Worth, texas, Us
Amsterdam, netherlands
frankfurt, germany
istanbul, turkey
denver, colorado, Us
singapore
incheon, south Korea
Bangkok, thailand
delhi, india
new York, new York, Us *
san francisco, california, Us
Madrid, spain
las Vegas, nevada, Us
seattle-tacoma, Washington, Us
Barcelona, spain
london, UK
Miami, florida, Us
Phoenix, Arizona, Us
Munich, germany
rome, italy
taipei, taiwan
orlando, florida, Us
houston, texas, Us
Mexico city, Mexico
toronto, canada *
charlotte, north carolina, Us *
Mumbai, india
tokyo, Japan
Minneapolis-st. Paul, Minnesota, Us
sydney, Australia *
Xi'an, china
Boston, Massachusetts, Us
sao Paulo, Brazil
newark, new Jersey *
Bangkok, thailand
detroit, Michigan, Us
Paris, france
Philadelphia, Pennsylvania, Us
Moscow, russia *
Melbourne, Australia *
Palma de Mallorca, spain
fort lauderdale, florida, Us
AIRPORt
cOde
PASS.
Atl
PeK
dXB
lAX
ord
lhr
hKg
cdg
dfW
AMs
frA
ist
diA
sin
icn
BKK
del
JfK
sfo
MAd
lAs
seA
Bcn
lgW
MiA
PhX
MUc
fco
tPe
Mco
iAh
MeX
YYZ
clt
BoM
nrt
MsP
sYd
XiY
Bos
grU
eWr
dMK
dtW
orY
Phl
sVo
Mel
PMi
fll
87,132,190
79,038,000
69,366,094
67,553,139
66,248,795
63,791,694
58,946,000
55,902,344
55,160,623
54,164,131
52,392,181
51,218,072
48,745,394
48,237,000
48,102,422
46,349,150
45,512,218
44,760,238
44,498,880
42,439,576
39,863,092
38,652,316
38,108,443
37,203,869
37,035,439
36,169,193
36,143,280
35,939,761
35,178,395
34,807,916
34,772,449
34,153,911
33,858,336
33,550,667
32,978,203
32,730,427
31,760,802
30,980,690
30,963,484
30,569,232
30,390,326
30,085,952
29,210,627
28,922,739
26,487,533
25,584,820
25,550,127
25,321,986
24,722,936
23,903,789
*January-September only. Source: ATW Research. For a more detailed look at

airport traffc, go to ATWonline, Data & Financials.
Trends_dec/jan2016.indd 44
12/15/16 11:55 AM
TRENDS
AiRLine TRAFFiC by Region 2016

Airline
Pass.
(000)
% Chg.
RPks
(000)
% Chg.
Load
Factor
%
FTks
(000)
%
Chg.
Jan. Thru
AFRICA/MIDDLE EAST
4,315
45,841
12.7
7.6
16,436,000
224,578,858
8.8
7.3
84.0
73.6
365,400
10,058,177
0.0
0.5
September
October
80,946
42,914
28,727
85,222
95,859
28,767
33,089
33,764
NA
19,648
10,100
NA
15,645
14,997
14,967
7.2
1.2
1.3
8.1
3.4
5.7
28.5
1.2
NA
10.5
NA
NA
0.3
-1.9
1.9
157,471,500
67,720,936
103,224,479
140,075,100
171,746,050
35,585,863
35,302,470
53,421,196
57,683,000
25,824,000
22,983,565
59,394,903
76,666,800
49,154,000
23,641,000
9.6
4.9
1.4
14.2
7.7
7.6
25.8
3.1
7.5
18.4
N
4.2
-1.5
6.7
-1.2
81.0
69.3
84.6
81.6
80.7
73.4
83.5
74.9
78.7
86.6
72.3
78.6
78.2
73.4
78.6
5,702,300
NA
8,700,690
3,976,840
4,976,120
NA
178,114
NA
5,959,000
NA
NA
NA
5,603,003
1,715,000
NA
5.6
NA
0.4
-0.5
9.3
NA
18.3
NA
-3.5
NA
NA
NA
5.7
-0.6
NA
October
October
October
October
October
October
October
October
September
September
September
September
October
October
September
EUROPE
Aeroflot Russian Airlines
Air France and HOP!
airberlin
British Airways
easyJet
Iberia
KLM
Lufthansa Airlines
Norwegian Air Shuttle
Ryanair
SAS
SWISS
Turkish Airlines
Wizz Air
24,312
41,853
25,466
NA
63,926
NA
25,614
53,663
24,891
98,980
24,604
15,160
53,777
19,137
10.5
-2.1
-4.4
NA
6.2
NA
6.1
-22.0
13.1
14.8
3.8
1.0
3.7
16.3
69,442,200
118,162,000
39,979,000
122,802,000
NA
43,113,000
82,077,000
126,049,000
42,557,000
NA
31,525,664
35,677,000
108,130,422
30,025,850
11.1
-2.2
-2.5
2.4
NA
5.4
4.3
-10.9
18.3
NA
10.6
5.0
7.8
21.0
82.0
84.3
85.0
81.7
91.9
82.3
87.5
79.5
88.4
93.8
76.7
80.5
74.6
89.7
639,300
2,929,000
NA
3,493,000
NA
894,000
4,064,000
NA
NA
NA
NA
NA
NA
NA
30.0
-1.4
NA
0.8
NA
5.1
-10.2
NA
NA
NA
NA
NA
NA
NA
October
October
October
October
October
October
October
October
October
October
October
October
October
October
LATIN AMERICA/CARIBBEAN
Avianca Holdings
Copa Airlines
GOL
Grupo Aeromexico
LATAM Airlines Group
Volaris
24,360
NA
27,082
16,272
55,628
12,254
4.1
NA
-16.4
4.8
-1.4
26.2
31,429,777
23,531,303
29,651,000
28,725,000
94,432,000
18,805,992
7.3
8.1
-7.3
7.8
2.0
24.9
80.5
80.3
77.4
80.2
84.2
86.1
NA
NA
NA
NA
2,537,000
NA
NA
NA
NA
NA
-9.6
NA
October
October
October
October
October
October
34,130
20,382
9,287
121,628
NA
9,253
31,766
45,132
121,434
17,999
84,246
6,713
18,300
8.6
7.0
17.8
-1.2
NA
3.7
13.2
-4.8
5.1
21.7
4.6
15.6
8.2
94,670,342
44,019,022
13,860,989
270,265,068
262,019,981
20,767,078
61,152,112
37,947,495
167,190,741
28,876,873
251,453,789
16,300,066
32,226,661
12.6
11.7
16.1
0.0
1.8
6.9
10.1
-5.5
4.0
21.2
1.1
17.5
11.3
83.3
84.8
83.9
82.5
85.0
84.1
85.2
82.0
84.0
85.5
83.0
84.1
82.1
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
September
October
October
October
October
October
October
October
October
October
October
October
October
El Al Israel Airlines
Emirates
ASIA-PACIFIC
Air China
ANA Group
Cathay Pacific Airways
China Eastern Airlines
China Southern Airlines
Garuda Indonesia Group
IndiGo
JAL Group
Korean Air
Malaysia AirAsia
Malaysia Airlines
Qantas Airways
Singapore Airlines
Thai Airways
Virgin Australia
NORTH AMERICA
Air Canada
Alaska Airlines
Allegiant Travel Co.
American Airlines
Delta Air Lines
Hawaiian Airlines
JetBlue Airways
SkyWest Inc.
Southwest Airlines
Spirit Airlines
United Airlines
Virgin America
WestJet
NA - data not available. To submit your airline traffic data to ATW, please contact mark.nensel@penton.com.
For more airline traffic, visit ATWOnline, Data & Financials. Source: ATW Research and direct airline reports.
Trends_dec/jan2016.indd 45
12/15/16 11:55 AM
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INDEX OF CoMPanies AND advertisers
ANA Portugal Airports ..........................8

www.ana.pt/en/business/home
Jeppesen...................................... 24, 25
ww1.jeppesen.com
Teledyne Controls ................................4

teledynecontrols.com
CAE ................................................... IFC

cae.com
Komy ...................................................11
www.komy.com
UATP ...................................................13
www.uatp.com
CFM.................................................. 6, 7
www.cfmaeroengines.com
Mitsubishi Regional Jet ........................2

www.flythemrj.com
Xian Aircraft Intl Corporation ..........IBC

www.modernark.cc
Engine Alliance ................................. BC

EngineAlliance.com
Pratt & Whitney..................................21

www.pw.utc.com
612ATW46.indd 46
12/16/2016 7:50:41 AM
interview:
JETSTAR
Jetstar Group
CEO Jayne Hrdlicka
Star
Player
Its important not to

under-recognize the role
that China will play in
the growth of Vietnam
and Japan, as well as
Singapore, Australia and
New Zealand.
Jetstar was founded by Qantas in Australia in 2004 and has since grown into a $4 billion pan-Asian
low-fares airline group, with joint-venture airlines in Australia, Japan, New Zealand, Singapore and
Vietnam. After a period of rapid growth, the Jetstar-branded carriers have one of the Asia Pacifcs
largest low-fares networks by revenue, handling 34 million passengers a year and contributing 32% of
Qantas profts. IntervIew by vIctorIa Moores
How important is the groups common branding?
For us, it is really important that the Jetstar brand is
on every aircraft and that theres one look and feel for
customers. Its a common experience, so you know what
you can expect when you buy tickets with Jetstar.
You recently introduced a new bundled short-haul
business product. Hows that going? We recognized
that roughly 20% of our passengers are traveling for business purposes. Were not changing the structure of our seat
products today. Were just adding a new portal that you
can only access if youve got a registered business. Demand
is well beyond our expectations, which tells us that in
certain markets the percentage of people traveling for business is probably much higher than we thought.
What is Jetstar Group going to look like in fve
years? Tere will be continued growth for us in Aus-
tralia and New Zealand, but they are relatively mature

markets. On the surface Japan looks mature, but its a
very young market for low-fares airlines with just 7.7%
of total passenger volumes. Te Japanese government
has acknowledged that this should be 30%, so there is
signifcant growth to come for us in Japan. Today, we
have 20 aircraft there and weve recently announced that
were going to 28. For the government to deliver on its
ambition of 30%, I would say over a 10-year period,
means signifcant growth beyond the 28 aircraft. Japan
is a big and important market for us, for both domestic
and international travel.
Are there any other markets where youre looking
to expand rapidly? Vietnam has the fastest growth
currently within the region, so our opportunity there
is pretty signifcant. Te airline will grow from 12 to
30 aircraft over the next several years. Tats huge and
ATW DEC 2016 INTERVIEW.indd 47
12/16/16 3:33 PM
GROUP MEMBERS
Jetstar Airways in Australia and New Zealand,
wholly owned by the Qantas Group.
ness is short-range opportunities, connecting people in

the region.
Jetstar Asia Airways, based in Singapore and

managed by Newstar Holdings, majority-owned by
Singapore company Westbrook Investments (51%),
with the Qantas Group holding the remaining 49%.
Do you have centralized aircraft purchasing

across the whole group, or does each airline buy
its own aircraft? Each airline has the capacity to
choose whether it buys aircraft leveraging the scale of
the group, whether it wants to leverage the scale of one
of its investors, or whether it opportunistically buys
aircraft on the open market at a much better rate than
a long-term purchase with big numbers. Tis is an
important part of the model, so we can ensure that at
every moment in time were getting the best prices.
Jetstar Pacic Airlines, based in Vietnam and

majority-owned by Vietnam Airlines with the Qantas
Group holding 30%.
Jetstar Japan, a partnership between the Qantas
Group, Japan Airlines, Mitsubishi Corporation and
Century Tokyo Leasing Corporation.
Source: Jetstar Group
it will be a combination of domestic and international

growth. Its important not to under-recognize the role
that China will play in the growth of Vietnam and
Japan, as well as Singapore, Australia and New Zealand,
because the tourist volumes coming out of China into
the region are signicant and the growing middle class
is very ambitious. Tey want to have life experiences
outside of China and having low fares infrastructure to
make that possible is a key part of that equation.
How many aircraft do you operate across the
group and how do you see that developing over the
next ve years? We are at 127 aircraft today and, at
the end of next year, we will have 141 aircraft. I wont
go into specics about how big were going to be ve
years from now, but you can look at the trajectory and
draw your own conclusions. Weve already announced
that were going to 30 in Vietnam and were going to 28
in Japan over the course of the next three years, while
Australia, New Zealand and Singapore will grow in line
with underlying market demand.
What is your split between short- and long-haul
aircraft and is that balance likely to change? Out of
those 127 aircraft, 11 are Boeing 787s, so the majority
116 aircraft are narrowbodies. Tat proportion
will not change dramatically. We will add long-haul
capacity, but we wont be adding it at the same pace that
were adding Airbus A320s. Te backbone of our busi-
Are there likely to be any changes in your jointventure shareholdings, or are they pretty stable?
Its very stable. Our investors are quite like-minded.
Were making long-term investments; nobody is looking to do something short term and then get out. Tat
was an important part of bringing investors in for us;
we ensure that were all together, like-minded in what
we want to achieve and the timeframes it will take to
do that.
Youre already present in quite a few markets. Are
you considering setting up airlines anywhere else?
Today we have 85 destinations across 18 countries, with
ve dierent airline bases. Australia and New Zealand
share an air operators certicate (AOC), but they are
eectively separate operations. Te opportunity for us
to grow new routes is signicant with what we already
have. Will we add another AOC? Maybe, but adding
new joint ventures to the portfolio will be driven by opportunity. We dont see gaps in what we want to achieve
which must only be solved by a new AOC.
What is the toughest part of your job? Gee, thats
hard to pin down! I think, with my job, the most
important thing is to never get stuck in the way that
you think about things. When opportunities arise,
we look at everything from the standpoint of why
not? and, if there are obstacles and people say that
its too hard, my job is to ask what it would take to
make it work. Tats actually a really important
aspect of being in the region, because were in a very
dynamic part of the world. Building on the
opportunities that we have and fully taking advantage of the brand strength and the infrastructure that
weve already built requires us to constantly rethink
how we do what we do.
ATW DEC 2016 INTERVIEW.indd 48
12/14/16 3:04 PM
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12/15/2016 3:20:41 PM
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ALASKA AIR GROUP

Alaska Air Group closes

Trump taps Elaine Chao for

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Alaska Air Group closes $4 billion Virgin America acquisition

AlASKA AIR GROUP

Seattle-based Alaska Air Group closed its $4 billion acquisition

Although this merger offers hope that a strengthened Alaska

Trump taps Elaine Chao for transportation secretary

tor of the Peace Corps (1991-1992), chair of

Lufthansa seals Brussels Airlines takeover

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First 787-10 being assembled at Boeings North Charleston, South Carolina

Boeing firmed an MOU signed

Boeing named GE aviation

commercial aircraft year-todate.

airbus detailed plans to

Russias State transport

airbus delivered an A321 to

Russias United Engine Corp.

airbus reported firm orders

Boom technology expects to

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airlines plans to expand their

the two-class, 86-seat variant.

The Competition Commission

aircalin, a full-service airline

The european aviation safety

Philippine airlines finalized a

air new Zealand and global

delivered in 2018; the remaining three in 2019. All will be

for Stowage Bins