CATA to adjust EU ETS lawsuit strategy following CJEU ruling

The China Air Transport Assn. (CATA) is rethinking its lawsuit strategy against the European Union Emissions Trading System (EU ETS) in the wake of this week’s Court of Justice of the EU (CJEU) ruling.

Four Chinese carriers—Air China (CA), China Eastern Airlines, China Southern Airlines and Hainan Airlines—had planned to file a lawsuit against EU ETS with the support of CATA.

“We won’t change our clear-cut stance of opposing to EU ETS, although we have to adjust our lawsuit strategy owing to CJEU dismissal of Airlines for America’s argument,” CATA deputy DG Chai Haibo said, without giving details. 

But CATA did say that it would seek to ensure that including international aviation in the EU ETS would not infringe upon the principles of customary international law or the open skies agreement between the EU and the US.

Haibo said the Civil Aviation Administration of China and other Chinese government organizations are uniting to decide “how to confront with EU ETS or even take possible counter measures.” Local industry experts are calling on Beijing to put pressure on EU by reducing, or even canceling, Airbus aircraft orders.  

China Foreign Ministry spokesperson Liu Weimin told reporters Thursday that China opposes EU’s action of unilaterally implementing ETS from Jan. 1. Liu said that China has made its position “quite clear” many times and also expressed concerns through bilateral channels to EU. “In fact, many countries are opposed to EU ETS. So we hope EU can take no risks and settle this issue with China properly with a positive and pragmatic attitude.”

IATA estimates the initial cost of the ETS in 2012 could be €900 million (1.2 billion), rising to €2.8 billion in 2020. According to CATA, EU ETS will cost Chinese carriers CNY800 million ($123.6 million) annually. CATA said costs would keep rising to CNY3 billion in 2020 as flights increase between China and Europe.

Lufthansa sells bmi to British Airways parent IAG

British Airways (BA) owner International Airlines Group (IAG) reached a binding agreement with Lufthansa Group (LH) to buy British Midland Ltd. (bmi), the companies announced Thursday.

IAG, the parent company of BA and Iberia, will pay €207 million ($271 million) in cash for the loss making UK carrier, although the price is subject to significant reductions if LH decides not to sell bmi subsidiary bmibaby before completion, IAG said.

The deal is subject to regulatory clearance from competition authorities, including the European Commission. 

The companies said they aim to complete the transaction during the first quarter of 2012. 

LH has the option to sell bmibaby and bmi regional before the deal is completed. IAG CEO Willie Walsh said bmi regional and bmibaby “are not part” of the company’s plans. “Buying bmi’s mainline business gives IAG a unique opportunity to grow at Heathrow, one of our key hub airports. Using the slot portfolio more efficiently provides the option to launch new long-haul routes to key trading nations while supporting our broad domestic and short-haul network,” he said.

The deal follows an agreement in principle signed in early November.LH also held negotiations with Virgin Atlantic Airways (VS),which on Thursday said it would ask anti-trust regulators to block the deal.

“Claiming that this deal is about new markets from Heathrow is a smoke screen. This deal simply cuts consumer choice,” VS president Richard Branson said. “BA is already dominant at Heathrow and their removal of bmi just tightens their stranglehold at the world’s busiest international airport. We will fight this monopoly every step of the way as we think it is bad for the consumer, bad for the industry and bad for Britain,” he said.

The purchase of bmi will increase IAG’s number of slots at Heathrow by up to 56 daily pairsat an airport where it already holds about 43% of slots.

Walsh warned that “there is an urgent need to restructure” bmi, but he said “IAG’s purchase of bmi will protect more British jobs than if the airline had been closed and had its Heathrow slots sold off.” 

LH CEO and chairman Christoph Franz said, “As part of Lufthansa’s strategic development, the sale means that our customers, shareholders and employees will benefit from a sharpened corporate profile and a stronger financial position of the group.”

 LH will remain responsible for bmi staff pension liabilities.

UPS pilots mount legal challenge to FAA's pilot fatigue rule

The Independent Pilots Assn. (IPA), representing about 2,700 United Parcel Service (UPS) pilots, petitioned a US federal court in Washington Thursday, challenging cargo carriers' exemption from new pilot flight time, duty and rest regulations finalized by FAA Wednesday (ATW Daily News, Dec. 22).

FAA's Notice of Proposed Rulemaking (NPRM) on pilot fatigue issued in September 2010 did include airfreight airlines (ATW Daily News, Sept. 13, 2010). But FAA chose to exclude cargo carriers from the final rule, instead giving them the option to opt into the new requirements "Covering cargo operators under the new rule would be too costly compared to the benefits generated in this portion of the industry," FAA stated.

IPA attorney William Trent said the union does not seek to delay implementation of the rule (US airlines must comply with the new regulations by Dec. 21, 2013), but wants cargo airlines included within the scope of the rule. FAA made clear in the that cargo was excluded based on a cost-benefit analysis, saying that cargo "compliance costs significantly exceed the quantified societal benefits."

Implementation of the rule is expected to cost airlines $297 million. FAA contended that including cargo carriers would add another $306 million in costs for the airline industry. In a footnote to the rule, the agency explained why it believes imposing such costs on airfreight operators are not worth it: "The projected benefit of avoiding one fatal all-cargo accident ranges between $20.35 million and $32.55 million, depending on the number of crewmembers on board the aircraft."

Trent said in a statement that FAA's new rule is plagued by "internal inconsistency," adding, "For example, the FAA states that current regulations do not adequately address the risk of fatigue and that the maintenance of the status quo presents an 'unacceptably high aviation accident risk.' Yet two of the very factors that the FAA cites as exacerbating the risk of pilot fatigue—operating at night and crossing multiple time zones—are more present in cargo operations than in passenger operations."

He accused FAA of providing insufficient information on how it conducted the cost-benefit analysis that led to cargo's exemption. "The rule is wholly and utterly opaque when it comes to providing any factual support for the cost-benefit conclusions reached," Trent said.

Saab Aircraft Leasing completes five aircraft transactions

Saab Aircraft Leasing (SAL) has completed the sale of an undisclosed number of aircraft from its European portfolio to four companies and agreed a lease with a fifth company.

In what SAL described as “five transactions,” while declining to provide the number of aircraft, Saab 340s were sold to U.S.-based lessor AeroCentury, Finnish regional Alandia Air, Swedish aviation company Rockton Aviation, and regional airlineSilver Airways.Rockton also acquired an unannounced number of Saab 2000 aircraft, SAL told ATW.

Siam General Aviation Co., parent company of Thai carrier Nok Mini Airlines, leased a third Saab 340 under a long-term agreement.

Fort Lauderdale, Fla.-based Gulfstream International Airlines rebranded recently under the name Silver Airways.The airline announced earlier this month that it would be acquiring six Saab 340s.

The five transactions are worth approximately MSEK400 ($58 million), SALsaid, adding that it expects these transactions to generate a capital gain of approximately MSEK100.

“The intention to divest the leasing portfolio has been ongoing for a number of years,” SAL president Michael Magnusson said. “This is a natural step and the sale of these aircraft will make Saab focus on core business issues.”

Aircraft deliveries have begun, and will be completed in the first half of 2012. The lessor is based in Sterling, Va., and has offices in Linköping and Tokyo. Including these five transactions, it manages a fleet of 67 aircraft..

FAA finalizes new pilot fatigue rule; cargo carriers exempted

FAA issued a long-anticipated final rule Wednesday on pilot flight time, duty and rest that imposes tighter restrictions on airlines and flight deck crew, though it also softened some of the provisions contained in the Notice of Proposed Rulemaking (NPRM) released on pilot fatigue 15 months ago .

A major change in the compared to the is that cargo carriers are exempted, though they will be allowed to opt in; US Transportation Secretary Ray LaHood said he will encourage them to do so.

Also, the rest time allotment was liberalized from the NPRM, which had called for pilots to be required to have "9 hrs. for the opportunity to rest" before reporting for flight duty, with former FAA administrator Randy Babbitt emphasizing in September 2010 that the clock would not start ticking until the pilot was "behind closed doors" in a hotel or other designated rest place. Under the regulations as they have been, flight crew members were required to have a minimum of 8 hrs. of rest time between flight duty periods, but that could include transit time from an airport to a hotel.

Under the final rule adopted Wednesday, which airlines will be required to implement by Dec. 21, 2013, there will be a 10-hr. minimum rest period. However, transit time can be counted. The pilot would need to have at least 8 hrs. in a hotel room or designated sleep area, not 9 hrs. as had been proposed.

Regarding the new rule's treatment of flight duty time, "the allowable length … depends on when the pilot's day begins and the number of flight segments he or she is expected to fly, and ranges from 9-14 hrs. for single crew operations," according to FAA. 

The agency noted an important change from current regulations (which just count duty time as actual time in the cockpit): "Flight duty [under the new rule] includes deadhead transportation, training in an aircraft or flight simulator, and airport standby or reserve duty if these tasks occur before a flight or between flights without an intervening required rest period." 

In addition, the length of continuous time-off mandated during a 7-day period is being extended from 24 to 30 hrs.

"This is a major safety achievement," LaHood said, noting that the US Dept. of Transportation had "identified the issue of pilot fatigue as a top priority … following the crash of Colgan Air flight 3407".

FAA said the estimated cost to airlines of implementing the rule will be $297 million. US airlines had warned that implementing the NPRM would lead to significant job cuts.

ECJ decision isolates Europe from the rest of the world, says A4A

Wednesday’s ruling to include aviation in the Emissions Trading Scheme (ETS) by the Court of Justice of the European Union (CJEU) “further isolates the EU from the rest of the world and will keep in place a unilateral scheme that is counterproductive to concerted global action on aviation and climate change,” Airlines for America (A4A) said in an initial reaction (ATW Daily News, Dec. 21). 

A4A said  the CJEU “did not fully address legal issues raised and has established a damaging and questionable precedent by ruling that the European Union can ignore the Chicago Convention and other longstanding international provisions that have enabled governments around the world to work cooperatively to make flying safer and more secure, and to reduce aviation’s environmental footprint.”

A4A, together with two of its members—United Continental and American Airlines—initiated the legal challenge to the EU’s inclusion of aviation in its ETS in 2009 and said it will review its options to pursue in the English High Court. The legal action was initially brought in a UK court, which referred the case to EU’s Court of Justice. 

IATA said it was disappointed at the CJEU’ ruling to uphold EU plans to include international aviation in its ETS from 2012 and noted the decision represents a “European legal interpretation of EU ETS.”

“The CJEU decision may reflect European confidence in European plans. But that confidence is by no means shared by the outside world where opposition is growing,” IATA’s DG and CEO Tony Tyler said.

EU’s climate commissioner Connie Hedegaard said Wednesday she was “very satisfied” with the ruling of Europe’s highest court. “A number of American airlines decided to challenge our legislation in court and thus abide by the rule of law. So now we expect them to respect European law,” she said.

Also the European Low Fares Airline Assn. (ELFAA) welcomed today’s judgment and urged its colleagues in the industry “to halt their resistance and lend their constructive support to the implementation of EU ETS” from January.

“The European Commission has rightly preferred EU ETS over all other options, including taxation, and views it as the MBM [market based measures] which will achieve the greatest environmental benefit at the lowest cost to society. Airlines are not being forced to change behavior but are rather incentivized to do so,” it said.

High fuel prices hit Virgin America’s 3Q profit, despite revenue growth

Virgin America (VX) saw strong revenue growth for the 2011 third quarter, but higher fuel costs brought operating profit down by $4.8 million to $16.2 million and resulted in a $3.3million net loss.

The San Francisco-based low cost carrier released its third-quarter results Wednesday, reporting a 44% increase in operating revenue over the same period in 2010 and a 6% operating margin. 

The airline's RASM improved by 9% year-over-year, on a 32% increase in capacity. Excluding new routes added in the past 12 months, RASM in the carrier's established markets improved by 17% year-over-year. However, total fuel costs for the quarter increased by 86% and the company's average price per gallon of fuel increased by 43% year-over-year. The increase in fuel costs was the primary factor in a $4.8 million decrease in VX operating income, the airline said.

VX also said it had raised an additional $150 million in a new four-and-a-half year debt facility funded in December, further improving the company's cash position. The company has also obtained lease financing commitments for 13 Airbus A320 family aircraft slated for delivery between October 2011 and September 2013. In addition, the company has closed on a financing facility for the majority of its pre-delivery payment obligations due on the first 20 aircraft within its order of 60 Airbus A320s, scheduled to begin delivery in the summer of 2013.

In January, VX announced a major fleet order that included 30 A320 neos 

"This increase in liquidity supports our long-term vision and growth plans for Virgin America. In addition, we have fully funded our aircraft capital requirements through the third quarter of 2013," VX president and CEO David Cush said. 

Had fuel prices remained flat year-over-year, VX said its operating profit would have been $33 million higher in the third quarter. 

Non-fuel CASM increased by 2% over the year-earlier quarter as the carrier continued to invest in new aircraft and infrastructure to support its growth.

Tanzania’s Precision Air signs contract for five ATR-600s

Tanzanian carrier Precision Air Services (PW) signed a contract for four ATR 42-600s and one ATR 72-600 aircraft, in a deal valued at $98 million. Delivery of the 50-seat ATR 42-600s will begin in late 2012; the ATR 72-600 will be delivered in 2014, according to ATR.

With this acquisition, PW will bring its fleet of ATRs up to 14 aircraft, making it the largest operator of ATR aircraft in Africa. PW currently operates five ATR 72-500s, two ATR 42-500s and two ATR 42-300s.

The carrier will utilize the new aircraft to further develop its regional network by adding new routes and frequencies to its domestic market.

PW CEO and group managing director Alfonse Kioko said the “very low fuel burn and the high dispatch reliability of the ATR aircraft are helping us to maintain the level of ticket price necessary for the very strong competition in our market.”

Etihad to increase Air Berlin holding to 29.21%

Etihad Airways (EY) will increase its shareholding in Air Berlin Plc (AB) to 29.21% for €72.9 million ($95 million) as part of an agreement that includes far-reaching commercial cooperation and debt financing.

EY built up a 2.99% holding in the Berlin-based carrier between January and August and will become AB’s largest single shareholder upon completion of the deal. As of Sept. 30, the company’s largest shareholder was Turkey’s ESAS Holding, owner of Pegasus Airlines.

The Abu Dhabi-based airline will augment its shareholding through a new share issue by AB. It will subscribe to 31.6 million new shares issued under exclusion of the pre-emptive rights of AB’s existing shareholders on the basis of a set share price of €2.31, AB said in a statement. EY will also provide financing of up to $255 million to support fleet development and future network growth through Dec. 31, 2016. 

The commercial cooperation includes integrating the carrier’s frequent flyer programs an extensive codeshare agreement, with EY initially adding its code on 36 of the German carrier’s 171 destinations and AB adding its code on 24 of EY’s destinations.

AB stressed it “further continues to plan joining oneworld alliance by spring 2012.”

AB CEO Hartmut Mehdorn said the deal opens up “enormous opportunities for the future of our company. This applies especially to future market development and the realization of synergies.”

AB will move its operation from Dubai airport to Abu Dhabi to connect to EY’s network to Asia and Australia. It will operate four weekly flights using an Airbus A330-200 between Berlin and Abu Dhabi from Jan. 15.

The companies will seek anti-trust immunity to allow greater coordination of route networks and of sales and marketing activities. They will also set up a joint procurement task force to look for cost efficiencies across the two companies, including areas such as fleet procurement and deployment, maintenance, repair and overhaul and general procurement.

The transaction closing is planned for the first quarter of 2012.

Qantas, union reach agreement

Qantas (QF) and the Australian Licensed Aircraft Engineers Assn. (ALAEA) have reached an agreement, bringing to a close one of the most bitter disputes in Australian aviation history.

The deal, which has been submitted to Fair Work Australia, gives QF the flexibility to have heavy maintenance work performed overseas for aircraft such as the Airbus A380.

Another key win for QF is the adoption of new, updated maintenance regulations without restriction  that have been introduced by Australia’s Civil Aviation Safety Authority, bringing the country into line with other nations.

Engineers will get a 3% pay increase, which is on par with other QF staff. ALAEA federal secretary Steve Purvinas said engineers had locked in job security despite missing out on A380 work.

“The main issue all along for us was job security and what we wanted was an A380 hangar in this country. We’ve missed out on that,” said Purvinas. “But what we have done is we’ve secured all of our existing job functions in a job security clause, which is good news for our members.”

QF said the agreement was a good deal.

“It does not include any of the claims that would have restricted Qantas in making the changes needed to compete in the global aviation industry,” said a QF spokesperson.

Australia’s transport minister Anthony Albanese and workplace relations minister Bill Shorten said the truce was good news for the traveling public.

“The government is hopeful that transport workers and pilots can now come to an agreement with Qantas,” the ministers said in a joint statement Monday.

Qatar moves to five daily flights at London Heathrow

Qatar Airways (QR) has secured another slot pair at London Heathrow (LHR) and will add a fifth daily flight between Doha and LHR from March 25, lifting capacity on the route from 28 to 35 flights each week. The Doha-based carrier will deploy a Boeing 777 configured with 42 seats in business class and 217 seats in economy.

QR CEO Akbar Al Baker said that LHR has been one of the carrier’s “best-performing routes and it was only a matter of time before we could look at increasing frequency to meet the high demand.” Demand is expected to further increase owing to the Olympics taking place in the British capital next summer, he said. 

QR operates scheduled flights to 110 destinations across Europe, Middle East, Africa, Asia Pacific, North America and South America with a fleet of 102 aircraft.

Incorrect data input led to Emirates A340 tailstrike reports ATSB

Human factors were to blame for a tail strike suffered by an Emirates A340 at Melbourne in March 2009, concluded a report by the Australian Transport Safety Bureau (ATSB)issued yesterday.

It also called for pilots to reconsider the old “rule of thumb” mental calculation to help spot potential errors in results from the flight management system.

In the case of the Emirates flight EK407 (aircraft reg: A6-ERG) on March 20, 2009 investigators found that a simple mis-keying of the aircraft’s correct weight was failed to be spotted due to activity in the flight deck prior to departure when the captain and first officer ran through the checks.

An incorrect weight of 100 tonnes difference led to the aircraft failing to accelerate correctly before over rotating close to the end of the runway and striking the tail several times before becoming airbourne and returning to land safely.  There were no injuries among the 257 passengers, 14 cabin crew and four flight crew.. There was damage to the aircraft and to infrastructure at the airport as the aircraft overrun.

Investigators also said that the variations experienced by the crew in flying mixed-fleet operations increased the difficulty for the pilots to spot suspect outputs from the electronic flight bag readings.

“Those erroneous parameters were themselves a result of an incorrect takeoff weight being inadvertently entered into the electronic flight bag during the pre-departure preparation. Due to a number of factors, the incorrect data entry passed through the subsequent checks without detection,” it continued.

“These sorts of errors have potentially serious safety consequences,” said ATSB Chief Commissioner Martin Dolan.

In its report the ATSB said: “"Previous investigations into similar data entry error and tail-strike occurrences have highlighted the inability of flight crew to conduct a 'rule of thumb' or reasonableness check of speeds when moving between aircraft types.

"An unintended consequence of mixed fleet flying appears to be a reduction in a flight crew's ability to build a model in long-term memory to facilitate recognition of 'orders of magnitude', or a 'rule of thumb', in respect of take-off performance data."

Airbus has said that it plans additional development to include functions checking that the aircraft has sufficient runway length to conduct a safe take-off, the ATSB added. The system was shown at last month's ACI event in Abu Dhabi. The European Aviation Safety Agency (EASA) is co-operating with the European aviation equipment organisation EUROCAE to examine whether common standards could be developed.

Emirates is also understood to be working with an avionics OEM to develop a tool to alert the crew if there in as anomoly in take-off speeds.

This contrasts with the US FAA view - sought by the ATSB - that such systems, given "all of their inherent complexity", would be "more problematical than reliance on adequate airmanship".