Airbus and Boeing are once again in a war of words over a ruling from the World Trade Organisation (WTO) that appears to show the US manufacturer could not have launched its 787 ‘Dreamliner’ programme without illegal subsidies.
The manufacturer claimed the ruling, issued on 31 January, also suggests that Airbus has lost sales worth at least US$45 billion, because of illegal support for Boeing from NASA, the US Department of Defense and US taxpayers.
“Today’s World Trade Organisation (WTO) decision confirms that Boeing has received massive and illegal government subsidies for many decades, and that they have had a significant and ongoing negative effect on European industry,” Airbus said in a statement.
Details of the ruling remain confidential between the two sides for now, and a final report from the WTO is expected to be published within weeks. Airbus said the report will probably confirm that subsidies benefitting Boeing “have a significantly greater distortive effect” than the reimbursable loans Airbus benefits from, which the US side has fiercely criticised.
The trans-Atlantic dispute dates back to 2004. Six months ago, another ruling was seized on by Boeing as proof that about US$20 billion in launch aid for the A380 programme had been illegal.
“Taking the cases together, the WTO will be seen to now have specifically green-lighted the continued use of loans in Europe and commanded Boeing to end its illegal R&D cash support from NASA, DoD and the US taxpayers,” Airbus said.
Welcoming the ruling, Airbus communications chief Rainer Ohler said: “From today, Boeing can no longer pretend that it doesn’t benefit from generous and illegal state subsidies… We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations.”
Boeing has responded dismissively to Airbus’s claims.
“Today's reports confirm the interim news from last September that the WTO rejected almost all of Europe's claims against the United States, including the vast majority of its R&D claims – except for some US$2.6 billion. This represents a sweeping rejection of the EU's claims,” the US company shot back. “Nothing in today's reports even begins to compare to the US$20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received.”
According to Boeing, the WTO decisions “confirm that European launch aid stands alone as a massive illegal subsidy only available to Airbus, which has seriously harmed Boeing, distorted competition in the aerospace industry for decades, and resulted in the loss of tens of thousands of good-paying US jobs”.
The US manufacturer went on to claim that Airbus would be forced by the June 2010 ruling to “repay or restructure” US$4 billion in outstanding launch aid for the A380, and “remedy the adverse effects of the additional US$16 billion in other illegal subsidies Airbus received”.
The governments of both sides may appeal against the final ruling, once the report is released.
Boeing unveiled its new 747-8 Intercontinental in a 13 February celebration at its plant in Everett, Washington, attended by about 10,000 guests.
Speaking at the roll-out, Boeing Commercial Airplanes President and Chief Executive Jim Albaugh said the latest version of Boeing’s largest aircraft model incorporates technological advancements that enhance its productivity.
“The new 747-8 Intercontinental features the latest in innovative technologies — applying many of the breakthroughs also found on the 787 ‘Dreamliner’,” Albaugh said. “We think our customers will value the low operating costs and passengers will enjoy the comfort of the striking new interior.”
Nico Buchholz, executive vice-president of launch customer Lufthansa, said: “The 747-8 Intercontinental will be a great complement to our fleet, fitting nicely into the 400-seat category, improving our fleet's eco-efficiency even further … We are looking forward to welcoming this new aircraft to our fleet next year.”
BOEING’S fourth-quarter net income fell 8 percent from a year earlier to US$1.16 billion, or US$1.56 per share, on a similar drop in revenue, which fell 8 percent to US$16.55 billion. Profit for the full year 2010, however, surged as much as 152 percent to US$3.31 billion, or US$4.45 per share, even though sales for the period dipped 6 percent to US$64.31 billion. “The results reflect solid performance across the company’s core programmes, a favourable tax settlement and a special one-time contribution to Boeing’s charitable trust,” the company says. The company predicts that earnings per share for 2011 will be at US$3.8-US$4 per share, “reflecting solid core performance, higher pension expense, the revised 787 schedule and the current defence contracting environment”.
Airbus won a double victory in Japan in mid-February, with the announcement of the country’s first firm order for A380s from Skymark Airlines and the selection of the A320 by low-cost start-up carrier A&F Aviation.
Skymark, Japan’s third-largest airline, signed a contract on 17 February for four A380s – the world’s largest airliner – with two options, firming up a Memorandum of Understanding from November 2010.
Speaking at the signing ceremony at Airbus’s headquarters in Toulouse, France, Skymark President Shinichi Nishikubo said: “We believe that the A380 … will provide us with a strong competitive advantage and safe operation. We will become the very first Japanese airline to offer our passengers a unique and new experience of flying – more space, more comfort and a quieter cabin. With the four-engined A380, we are free from ETOPS [extended-range twin-engine operational performance standards] constraints and can provide flexible operations.”
Airbus President and Chief Executive Officer Tom Enders said: “The A380 is the most eco-efficient solution to allow Japan's air traffic to grow in a capacity constrained environment.”
Japan suffers from overcrowding at its main hubs, favouring larger aircraft that offer operators increased capacity while taking up fewer airport take-off and landing slots than smaller types.
Singapore Airlines (SIA), Lufthansa, and Air France now operate the A380 daily to Tokyo’s Narita Airport. Starting from 27 March, SIA will extend its service from Narita to Los Angeles, while Korean Air’s first A380 route to Narita is scheduled to begin operation in June.
Including the Skymark announcement, total A380 firm orders stand at 244 aircraft from 19 customers worldwide, with 43 already delivered to five carriers. Other Asia-Pacific A380 customers include: Asiana Airlines, China Southern Airlines, Malaysia Airlines, Qantas Airways, and Thai Airways International.
A&F Aviation, the new carrier established by All Nippon Airways (ANA) and First Eastern Investment Group, selected Airbus’s single-aisle A320 to start low-cost services from Osaka’s Kansai International Airport in the second half of the 2011 fiscal year. A fleet of ten A320s, leased from GE Capital Aviation Services (GECAS), will be configured to seat 180 passengers in a single-class layout. The aircraft will be powered by CFM International CFM56 engines.
ANA became Airbus' second customer in Japan when it ordered ten A320s in 1987. The aircraft entered service in early 1991.
Gulfstream’s is carrying out icing trials on its G250 flight-test aircraft in the run-up to certification of the super mid-size business jet later this year.
Aircraft serial number (S/N? 2001 has flown with simulated ice shapes applied to non-heated areas of the aircraft, including the nose, tail, winglets and engine pylon. These tests were used to evaluate the aircraft’s handling, stability and control characteristics in icing conditions.
S/N 2002 has dry-air testing of its anti-ice system, clearing the path to flight-testing in known icing conditions. As of early February, the second test aircraft was poised to visit the USA in search of natural icing conditions.
According to Gulfstream, the G250 has an anti-ice system similar to Gulfstream’s large-cabin aircraft, routing heated bleed-air from the engines to the wing leading edges to prevent ice formation.
The manufacturer says its three test aircraft have completed more than 220 test flights, accumulating more than 700 hours in the air. The longest of these flights exceeded seven hours in duration. The maximum speed achieved has been Mach 0.85, with a maximum altitude of 45,000ft.
Since its first flight on 11 December 2009, S/N 2011 has been used to gather data on minimum control air speeds, initial cruise performance and flight control system performance. S/N 2002, which joined the test programme in March 2010, has been used for smoke evacuation, auxiliary power unit, system functionality and cabin pressure control system testing, as well as for checking overall aircraft loads and stall characteristics.
S/N 2003, the last aircraft to join the programme, has been used for avionics certification testing and various systems checks. The aircraft also made its first trans-Atlantic crossing in 2010 and has performed far-field noise and high-field elevation tests.
Gulfstream says that additional ground tests are also continuing at the company’s Integration Test Facility (ITF) in Savannah, Georgia, where engineers are evaluating the jet’s PlaneView 250 avionics system. Also under development are the procedures to be used in the Airplane Flight Manual, while testing is being carried out on optional systems such as the head-up display and Gulfstream’s Enhanced Vision System II.
Helped by sharp growth in its international passenger and cargo business, Korean Air (KAL) returned to profitability in 2010, with annual net income of 468.4 billion won (US$656.8 million), The result reversed the airline’s 98.9 billion won loss a year earlier.
KAL attributes the result to the recovery of the global aviation industry and a strong rebound in international passenger demand. The airline posted revenue of 11.46 billion won, up 22 percent.
According to the airline, the South-East Asia, Japan and China markets all showed robust growth last year. KAL says it will stay now focused on its expansion strategy, while remaining vigilant to spot unexpected challenges in the market. It remains optimistic that 2011 will see higher growth in international passenger and cargo traffic.
KAL adds that it aims by 2019 to increase the proportion of revenue it gains from premium first- and business-class passengers to 50 percent.
In April, the carrier plans to launch daily flights between Cheongju, South Korea and Hangzhou, China, using Boeing 737-800 aircraft. The Chinese city is the capital of Zhejiang province and will be the carrier’s 28th destination in the fast-expanding Chinese market.
KAL will also increase frequencies to Zhengzhou, Jinan and Kunming later this year, while plans are underway to expand the airline’s presence in the second-tier Chinese cities of Wuhan and Xi’an. The Seoul-based national carrier currently offers 190 passenger and 36 cargo flights a week to China.
The airline is to take delivery of the first of its ten Airbus 380-800 aircraft, the world’s largest airliner, in May this year, with additional aircraft arriving one-by-one in June, July and August. The fifth will be delivered in the fourth quarter of the year, while the remaining five will be delivered on a staggered basis from 2012 through to 2014.
The aircraft will be configured to seat 407 passengers in a three-class layout, with 12 first class seats, 94 in business, or ‘prestige’ class and 301 in economy class. The entire upper deck will be a dedicated prestige class section.
The first A380 will initially be utilised for flights to Tokyo and Hong Kong, starting 1 June. Bangkok flights will be introduced from 1 July, followed by services to New York in August, using the airline’s third aircraft, and Los Angeles in October, using the fourth.
KAL says the introduction of A380 services will probably significantly boost the number of passengers travelling from China, Japan and East Asia to Europe and the US.
Korean Air will be the sixth A380 operator to date. The airline now has a fleet of 131 aircraft, serving 114 cities in 39 countries.
The International Civil Aviation Organisation (ICAO) has suspended safety audits on airlines in the Philippines indefinitely, due to alleged political interference in the management of the country’s regulatory body.
The organisation called off an audit scheduled for 7-8 December and another set for the second quarter of this year.
The new management of Civil Aviation Authority of the Philippines (CAAP) is seen as politicised and unable to get private airlines to implement reforms. Airlines are also not being monitored according to international standards.
The administration of President Benigno Aquino has removed Alfonso Cusi as the director general of CAAP, replacing him with Ramon S Gutierrez. Six other executives were also appointed to the management by the Philippines government.
ICAO’s audit suspension will hamper the removal of the Philippines from European Union (EU) blacklist, banning the country’s airlines from operating to Europe, and the US watchdog Federal Aviation Administration (FAA) category 1 safety ranking for the country’s aviation industry.
The FAA in November 2007 downgraded Philippines civil aviation safety to Category 2, citing safety concerns in airport and airline operations. The EU imposed its ban in March 2008 affecting all the country’s carriers: Philippine Airlines, Cebu Pacific Air, Zest Airways, Spirit of Manila Airlines, Philippine Airline Express and Southeast Asian Airlines.
The country’s industry passed an audit carried out by EU in October 2010, but without the ICAO audit, it remains blacklisted.
An FAA audit, scheduled to take place by mid-year, is also like to be called off. The US aviation authority had planned to do the audit in September 2009, but was asked by Philippine officials to postpone it.
Bombardier Aerospace announced on 17 February that deliveries for the business year ended 31 January fell to 19 percent to 244 aircraft, from 302 a year earlier. However, the Canadian manufacturer received 201 net aircraft orders in the same period, compared with just 11 for the previous fiscal year.
The fourth quarter was especially strong for business aircraft, with 74 net aircraft orders, the company says. Bombardier describes the figures as “solid performance, despite the continued impact of the economic environment on the aviation industry and the slower-than-anticipated recovery from the global financial crisis”.
Bombardier delivered 143 business jets in the past fiscal year, compared with 176 for the year-earlier period. Commercial aircraft deliveries in the period totalled 97, compared with 121 the previous year.
“These delivery results are essentially in line with the previously announced guidance to deliver approximately 15 percent less business aircraft and 20 percent fewer commercial aircraft in fiscal year 2010/11,” the company says.
“We believe our fundamentals are strong in the long term for both the business and commercial aircraft markets,” says Guy Hachey, Bombardier Aerospace’s president and chief operating officer.
Bombardier, which plans to release its annual financial results on 31 March, adds that it will also request permission from its Board of Directors in December to redefine its business year from the current 31 January year-end, to end in future on 31 December.
“If this change of year-end reporting is accepted, Bombardier Aerospace’s fourth quarter would end on December 31, 2011, covering only two months (November and December), and result in a fiscal year of 11 months rather than a 12-month reporting period,” the company says.
Bombardier Aerospace’s revenue recognition policy will also in future be aligned for all its aircraft programs, with revenues recognized only upon delivery of completed aircraft to the customer. This change in reporting impacts the company’s medium and large business-jet families, the Challenger and Global range.
Under current Canadian Generally Accepted Accounting Principles (GAAP), Bombardier recognizes deliveries of these business aircraft programs partly at the ‘green’ stage of production (before exterior painting and installation of interiors and optional avionics) and partly on delivery of the completed aircraft. Under the new International Financial Reporting Standards (IFRS) rules, revenues will be recognized only when the completed aircraft is delivered.
Bombardier’s business aircraft deliveries for the expected 11-month business year 2011 are expected to total approximately 150 units. Commercial aircraft deliveries for the same period are expected to be approximately 90 units.
Investigations are continuing into the 10 January incident at Kuching International Airport (KIA), Malaysia, when an AirAsia A320 departed the runway on landing, injuring four passengers.
Unofficial information now suggests visibility may have been below accepted minima at the time. The aircraft, operating as flight number AK5218 from Kuala Lumpur, was carrying 124 passengers and landed in heavy rain at 10.02pm local time.
According to an air traffic controller at KIA, the ground weather report released at 10pm on the day of the accident puts visibility at the airport at 800m, or 400m short of the required minimum.
“Weather conditions could not have changed drastically within two minutes,” the controller says. “It is surprising that the aircraft did not have sufficient runway length to roll and turn into the taxiway despite the long runway.”
The runway at the airport was extended by 1,280ft to 3,780ft in 2009, to accommodate aircraft up to the size of the Airbus A380, the world’s largest jetliner.
“ATC gives weather report to the pilots, but the decision whether to land or divert to another airport is at the discretion of the pilots,” the controller adds.
The aircraft veered off the runway to the right and came to rest on soft ground with a collapsed nose wheel and damage to the cowling of both engines. The airport was closed for 23 hours as rain hampered the removal of the aircraft, resulting in the cancellation of 30 domestic and international flights.
Minister of Transport Kong Cho Ha says ‘heavy rain caused the aircraft to skid’, declining to comment further.
A Balai Ringan district assemblyman in the state of Sarawak, Snowdan Lawan, who was aboard the flight, said passengers were left out in the cold for more than an hour after evacuating the aircraft, before Malaysian air force buses arrived to ferry them to the airport terminal.
“The airline staff at the site seemed lost as to what had to be done, despite seeing the elderly and children shivering in the rain,” Lawan says.
Several other passengers have made similar complaints.
AirAsia officials in Kuala Lumpur declined comment. The airline and the Department of Civil Aviation are still investigating the cause of the accident.
Indonesia’s Mandala Airlines, which suspended operations in January citing financial problems, has returned five of its aircraft – three Airbus A320s and two A319s – to their European lessors.
Even so, the carrier’s President and Director Diono Nurjadin remains confident that the carrier will find new investors within the time period allowed by law.
The Jakarta-based company blamed cutthroat competition in the low-cost segment of the Indonesian aviation market and rising operating costs for its problems. Spiralling debt prompted the airline’s board to request a restructuring exercise that would pave the way for new investors.
Local aviation laws require the airline to complete its restructuring within 45 days – although it may extend that period for as much as another 135 days, in 45-day blocks– or face the possibility of having its air operating certificate (AOC) revoked.
Mandala has outstanding debt of 800 billion rupiah (US$94.12 million) with local and international creditors.
The airline’s network covered 17 domestic destinations and two international routes – Jakarta-Singapore and Balikpapan-Singapore. It was one of the four Indonesian carriers removed from the European Commission’s airline safety blacklist in July 2010.
The Ministry of Transport in Jakarta has ordered the airline to give full refunds to passengers who purchased tickets for flights within 42 days of the suspension of operations.
Despite everything, Diono remains optimistic. “We are not finished yet but we will come back stronger as there is huge demand for air travel in Indonesia,” he says. The airline chief adds that he is confident of securing new investors but declines to elaborate.
The airline had ambitious plans for a major expansion to tap the growing low-fare market in South-East Asia and Australia. It placed an order for 30 A320s in January 2009 with deliveries scheduled to commence in March.
Indonesia’s domestic aviation market is now being served by 34 airlines in fierce competition. Lion Air, with a network of 62 destinations in the domestic market has overshadowed main rivals Garuda Indonesia, Merpati Nusantara Airlines and Indonesia AirAsia. Lion Air now has 45 percent market share.