Thai Airlines: Interview with Teerapol Chotichanapibal

Thai people are famed for their friendly smiles, but given the violent political protests afflicting the country since 2008, one could forgive Thai Airways International employees if they were less than optimistic about travel demand in the coming year.

This article orginally appeared in Asian Aviation magazine, February 2011

Thai people are famed for their friendly smiles, but given the violent political protests afflicting the country since 2008, one could forgive Thai Airways International employees if they were less than optimistic about travel demand in the coming year.

Yet Teerapol Chotichanapibal, the airline’s acting commercial executive vice-president, is decidedly upbeat. The airline reported a net profit of 136.4 million baht (US$4.5 million) for the third quarter of 2010 – its first positive quarterly result since 2008. The carrier had previously never run at a loss.

The profit figure, although about seven times less than most Thai analysts predicted, came largely because of a recovery in tourist demand and aggressive cost-cutting. In the same July-September quarter a year earlier, the carrier lost 4.03 billion baht.

“We are not doing badly, despite everything, and we are looking forward to 2011,” Terrapol says.

He describes the protests by the United Front for Democracy Against Dictatorship, commonly known as the ‘red shirts,’ as being one of the biggest “dents” in annual figures for the 2010 business year. But he adds that the flight disruptions caused early in the year by the ash cloud from Icelandic volcano Mount Eyjafjallajökull caused a dent of equal or greater size.
Regardless of the protests and volcanic eruption, Thai had already had an eventful few years, including battling natural disasters and a coup d’état. Indeed, things could be much worse, Teerapol says.

“If you look at our books, we’ve not been doing too badly. We’ve been doing very well at controlling costs,” he says.

Catering –a department in which Teerapol is also managing director – was one element of the business affected by cost-cutting plans. Thai’s kitchens in Bangkok produce up to 80,000 meals per day for the airline’s own flights and for 50 other carriers. Many of those airlines have re-tendered recently, putting more pressure on the commercial kitchen to have lower costs while maintaining quality, the executive says.

But Teerapol is most proud of the 10 billion baht saved in fuel and indirect costs this year, which came in addition to 14.8 billion baht saved over the past two years. Better fuel-management has been the result of data reporting and analysis of the way the carrier uses jet fuel. Thai has managed to bring its average fuel burn down to 388ml/km, from 406ml/km in 2006.

All costs, including fuel, are down by 5 percent per available seat kilometre, he says. Much of this has been achieved by procedural changes to reduce controllable elements like off-block taxiing time and better use of flexible flight plans, he said. Minimising on-ground use of auxiliary power units was also given priority at Suvarnabhumi, which itself has energy saving design built in.

The carrier, which celebrated its 50th anniversary in May, has embarked on a plan for the next half-century, which it is calling its TG100 Strategy. The plan builds upon Thai’s heritage as an aviation pioneer in Asia to combat new threats – chiefly competition from low-cost carriers – and reduce its environmental impact.

Part of TG100 is the joint venture being formed with Singapore’s Tiger Airways to form Thai Tiger Airways, announced in August. This plan comes despite Thai already being a major shareholder in no frills airline Nok Air, which is based at Bangkok’s older Don Muang airport, Thai’s former base. In contrast to Boeing 737 operator Nok Air, Suvarnabhumi-based Thai Tiger will operate 14 Airbus A320 narrowbodies and is expected to commence services around March next year.

Thai Tiger will allow route expansion without overstretching the mainline carrier. Teerapol says that during the mid-2000s the airline got caught up in a race to announce new routes, in part to satisfy investors and the press.

“It’s not economical to have thin routes. Instead, we will solidify our existing routes, adding more frequencies,” he says. Services to Moscow’s Domodedovo airport will increase to a daily frequency, for example, as will flights to Madrid and Munich.

The slow, steady fleet expansion will go hand-in-hand with fleet renewal.

The carrier is momentarily stuck with its Airbus A340-500s, which are used for services to New York’s Newark Airport, where fellow Star Alliance carrier Continental Airlines has a hub. But under a government-backed four-year aircraft acquisition plan, Thai will retire its six ageing Boeing 747-400s, ten A300-600s, four Airbus A340-500s and three Boeing 737-400s.

To replace these, the airline will acquire seven A330-300s, eight 777-300ERs and a rumoured six A380-800s. A parallel aircraft-refurbishment program will see the entire fleet refitted over the coming five years.

Teerapol acknowledges that Thailand has been experiencing turbulent times. But he also knows that Bangkok remains one of Asia’s foremost cities with world-class onward air connections, allowing the Thai flag carrier to face the future with confident optimism.

Summit Report: The 54th Assembly of Presidents of the Association of Asia Pacific Airlines

The folloiwng article originally appeared in

AAPA Summit Report

Even as the Asia-Pacific is poised to be a driver in global aviation growth over the next 20 years, airlines in the region are suffering from regulations being imposed overseas, writes Justin Wastnage

Asian aviation is in the ascendancy, but it risks leaving its regulation to other parts of the world. This, in essence, was the message given to delegates at the 54th Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA), held in Brunei in November.

Statistics from the International Air Transport Association (IATA) show that the Asia-Pacific region will overtake the world’s busiest air-traffic regions, North America and Europe, within 20 years. This year, passenger traffic in the Asia-Pacific region will grow by 15 percent and air cargo by some 30 percent, compared with more sluggish growth of 1-3 percent expected from the two mature markets.

The AAPA comprises some of the region’s biggest carriers: All Nippon Airways, Asiana Airlines, Cathay Pacific Airways, China Airlines, Dragonair, EVA Airways, Garuda Indonesia, Japan Airlines, Korean Air, Malaysia Airlines, Philippine Airlines, Royal Brunei Airlines, Singapore Airlines, Thai Airways International and Vietnam Airlines.

These carriers will see growth accelerate over the coming decades, said Chris Buckley, Airbus executive vice-president for Europe, Asia and the Pacific. “North America is actually saturated, and thus almost no growth will happen over the next two decades and most aircraft sales will be for replacement. Europe still has room to grow, but our focus is now on Asia,” he said.

New-aircraft demand

Over a third of the world’s requirement for 16,977 single-aisle aircraft will come from the Asia-Pacific region, Airbus estimates, and almost half of all demand for A380 or Boeing 747-class very-large airliners.
US airframer Boeing agreed, with Dr Fariba Aladari, Asian vice-president for the Chicago-based manufacturer describing the airlines of this region as “standout” in terms of traffic growth. “The airline industry made US$9 billion globally last year, of which US$5 billion was from Asia Pacific,” she said.

AAPA membership encompasses 60 percent of the Asia-Pacific region’s capacity, similar to its counterparts the US Air Transport Association (ATA) and the Association of European Airlines (AEA).

Yet unlike those groups, the AAPA has no single government to lobby for regulatory change. Most new aviation rulemaking comes either from Washington DC or Brussels, where the association now focuses most of its efforts. This leaves AAPA carriers at a disadvantage, notably since much of the regulation passed by the US Department of Transportation and the European authorities become global standards, said the association’s Director General Andrew Herdman.

There are several lead aviation safety regulators in the region, notably those from Australia, Hong Kong and Singapore, but little common lobbying against the raft of what Herdman views as "well-intentioned", but "ill-conceived and counterproductive" aviation legislation emanating from the old world.

“Aviation is a heavily regulated industry and this regulation is dominated by the US and European Union, because together they represent 60 percent of the industry. But as the emergence of the G20 [group of twenty finance ministers from major economies] as the world’s primary economic forum rather than the G8 [group of eight leading industrialised nations] shows, there’s a new world economic order. Asia has shown it can lead commercially, but it needs to take a larger role in shaping regulation,” he said.
The AAPA passed five resolutions at the assembly, all aimed at fighting a more concerted campaign in the face of this mounting legislative pressure. “Governments need to rethink unwarranted and ineffective policies on the environment, taxation and passenger services,” Herdman said in the assembly communiqué.

Passenger rights

The association’s chief fear is the spread of mandatory passenger protection rules. The European Union was the first to guarantee minimum customer service and compensation guarantees in the event of flight delays and cancellations.
The EU Regulation 261 on air-passenger rights has drawn criticism not only from low-cost carriers (Ryanair is locked in a court battle over its refusal to compensate for delayed flights) but also from Asian carriers. This irritation turned to anger during the volcanic-ash related European airspace shut-down earlier this year.

Tony Tyler, chief executive officer of Cathay Pacific pointed to the "absurdity" of his Hong Kong-based carrier having to pay for two weeks’ hotel accommodation in London for stranded passengers.

Brian Johnson, the European Parliament's transport-committee chairman, defended the regulation, which guarantees stranded passengers between 125 euros and 600 euros compensation, depending on flight distance and the delays incurred when rerouted.
“It’s like drunk-driving laws. I would never drink and drive, but laws let people know it’s wrong. So airlines now know it’s wrong to overbook and then bump passengers off,” he said.

However, he also admitted that the rules as they stand were not designed for such extended periods of disruption as the ash cloud and said that “his bet” was that 261 would now be altered to limit the duration of any payments as well as being extended to other forms of transport, levelling the playing field.

Nonetheless, Herdman points out that in the US there is a notice of proposed rulemaking passing through Congress on similar broad passenger-protection regulations for US airlines. The rulemaking on enhancing airline-passenger protection proposes a minimum of US$650 compensation for overbooked flights and similar penalties for severe delays and lost bags.

Within the AAPA’s own region, China, the Philippines and Thailand are all, for example, tentatively considering passenger-protection rules.

Herdman said these minimum levels of compensation amount to a "compulsory insurance" that would raise air fares and effectively take choice away from consumers. Asian airlines are known for better service than US and European carriers, but these rules could make them lose that competitive advantage, he warned.

"Introducing overly prescriptive legislation to regulate customer care constrains the airlines' ability to innovate and use superior level as a point of difference," he said.

Urging restraint

“The AAPA calls on governments to refrain from introducing legislation that would act as a disincentive to compete freely on customer service standards, and also [to] ensure mandated regulations related to passenger processing and treatment are designed from the outset to be practical, cost-effective, efficient and sustainable,” the 17-member association agreed.

Many of the calls for passenger-protection regulations arise from the varying service standards allowed by airline deregulation.

“We used to have standardised baggage allowance rules but we were accused of collusion, so every airline went [its] own way and now we see passengers confused when they interline from one carrier to another and get fined when there are different allowances. So now the regulators say we should standardise our baggage allowances,” Herdman said.

He further argued that if any denied-boarding compensation standards or passenger-protection regulations are needed, the right forum for such discussions would be the International Civil Aviation Organization (ICAO), ensuring that globally harmonised rules can be formulated.

The AAPA’s preferred solution would be to push for better adoption of travel insurance that covers force majeure and other airline eventualities. “If you want to stop bad things happening, then you have to insure against it. In other areas of life people take chances, risking not insuring, so why not travel?” Herdman said.

Discriminatory taxes

The AAPA also railed against a series of new taxes being imposed, largely by European countries, many of which are distance-based, thus discriminating against Asian carriers flying into the Old Continent. Austria, Germany and the UK were singled out as worst offenders.

The taxes, often dressed up as security charges or departure fees, do not go to fund airport infrastructure or even rival transportation like fast trains, instead ending up in general consolidated government revenue, Herdman said.

“These taxes are paid by the passenger and collected by the airline on their behalf. They come under a number of different labels and are contained within the ticket price, so whether it’s an arrival fee, a departure fee, security surcharge, airport passenger duty, visa processing fee or whatever, these all appear to the passenger as being part of the ticket. Around 15 percent of most tickets are taxes of some kind,” he added.

The AAPA is “very concerned about the proliferation of new taxes,” he continued. Such government charges are counterproductive and could lead to fewer new routes as the cost of flying rises. It is now cheaper, for example, for passengers travelling to London from much of the Asia-Pacific to fly into Brussels and take the Eurostar high-speed train.

The Netherlands is alone among European nations to realise the negative impact of high airport taxes. The country was praised at the Brunei meeting for having scrapped its passenger-movement charge after a study showed its negative effect on business traffic.
"Unjustified taxes do untold damage to the economy of the state imposing [them]," Herdman said. “Fortunately economies in this part of the world know the value of tourism and aviation to their economies.”

Environmental rules

Another example of European legislation that has generated much industry opposition is the emissions trading scheme, which will apply to airlines for the first time from 2012.

All airlines must buy carbon credits for the entire duration of any flight entering the EU, not just that part flown over European airspace. Asian airlines object to the plan, arguing that on a flight from Seoul to Paris, for example, the majority of the emissions would occur outside EU airspace.

Singapore Airlines' outgoing Chief Executive Chew Choon Seng, said the scheme discriminated against Asian carriers whose journey into Europe was far longer than those of their Middle-Eastern rivals. "We are halfway around the world. Why not pay at point of entry [into the EU]?" he asked European parliamentarian Johnson.

Johnson replied that the emissions trading scheme was the responsibility of the parliament’s environmental committee, not his own transport committee. The environmental committee comprises ecological fundamentalists, he said.
His is the voice of reason within the European Parliament, watering down the initial proposals for a 100% charge for aviation, he claimed. "You want to see what the Taliban – I mean the environmental committee – first proposed and believe me, this is a whole lot better," he said.

No matter. The AAPA wants a global approach for the global industry. ICAO should be the forum where a new global standard should be decided, Herdman said.

Rather than shy away from the need to control emissions, Asian carriers have more incentive to work towards greener fuel initiatives, since they fly longer stage lengths than European and North American counterparts, he said. Just as with passenger-rights legislation, the AAPA fears emissions trading schemes in Australia and California may seek to include aviation and could be followed by a series of other such schemes.

“Even though governments reached a consensus at the ICAO 37th Assembly last month, this may not prevent the introduction of a patchwork of nationally- or regionally-imposed, market-based measures,” Herdman said.

Aviation safety

The final two resolutions passed by AAPA covered safety and security. On safety, too, European and US legislation putting pressure on Asian carriers. But unlike the costly consumer-protection or emissions-trading legislation, the AAPA is broadly supportive of the US Federal Aviation Administration’s (FAA’s) Category 2 watch-list of airlines and even the blacklist of carriers banned from European airspace due to fears over their safety records.

But safety problems often originate not with airlines themselves, but with national aviation safety agencies and their relative lack of oversight, Herdman argued. “You’re only as good as your regulator,” he said.

Johnson, who personally signs off the blacklist after consultation with the European Aviation Safety Agency (EASA), pointed to the case of Garuda Indonesia, which undertook the International Air Transport Association’s Operational Safety Audit (IOSA) and was able to demonstrate acceptable standards using its own procedures-led safety standards, despite the country’s overall record being poor.

As a result, Garuda became the first Indonesian carrier to resume flying to Europe after the country’s airlines received a blanket ban from the EU in 2007, due to concerns over the safety culture within Indonesia’s National Transportation Safety Committee.
Johnson said the EU’s latest area of concern is the Philippines, where the national carrier Philippine Airlines (PAL) has been subject to Category 2 status since 2008, despite completing its own IOSA. PAL’s tentative plans to return to Europe with the restoration of it services to Zurich and Paris was dealt a blow in September when all Philippines-based airlines were prohibited from operating within the EU. Similar concerns exist for a number of other, smaller Asian nations, Johnson said.

Herdman said the Asia-Pacific region needs properly resourced safety regulators. “All our member countries are signatories of ICAO, but the track record in implementing its aviation safety regulations has been imperfect and some need help to pull up,” he said. A pooling of oversight capabilities across the region, similar to what has happened in Europe and is now taking place in the South Pacific would be one potential solution, albeit politically unlikely.

Staff secondment from the region’s leading oversight bodies was another short-term option, he proposed. However, since much of the role of the aviation authorities is to ensure international treaty obligations are met and that the intricate texts of annexes are made into national law, Herdman said the issue remains largely about recruiting and retaining good government employees.

“[In the] long term, the pay scales need to be high enough to retain staff and take away the temptation for corruption,” he said.

Airline security

Similarly, Asia must work with Europe and the US on the issue of security, Herdman said.

The presidents’ assembly came just days after the attempt to ship liquid explosives hidden inside printers from Yemen to two Chicago synagogues using airline belly freight and the association was anxious that governments should not leap to rash decisions. Martin Eran-Tasker, the AAPA’s technical director, said airlines should be grateful that key lawmakers including the US secretary of homeland security Janet Napolitano, were attending the IATA aviation security conference AvSec World in Frankfurt when the attempt took place, allowing experts to counsel them immediately.

The fear of knee-jerk reactions to the latest attempted act of terrorism is greatest for Asian carriers, who together carry some 40 percent of all air cargo. Eran-Tasker said the most extreme counter-terrorism idea being considered in some world capitals is to ban all unaccompanied cargo from passenger aircraft.

In the US, where there are dedicated freighters and a vast segregated air-cargo infrastructure, this would be a terrible idea, he said, but in Asia it would be catastrophic. Only half of all air cargo is carried by freighters, he said.
Luckily, Herdman said, reaction to the latest incident appears calmer than in the past.

“We long ago learned that it is human nature that each new security incident prompts a desire to introduce yet more security measures, but it takes a certain political maturity to remain calm and not fall into the trap of knee-jerk reactions by the imposition of new security measures of unproven effectiveness,” he said.

Need for co-operation

The AAPA has consistently emphasised the need for government agencies and the aviation industry to work together to ensure a secure supply chain.

“This plot was foiled after Saudi Arabia tipped off British authorities. The lesson from this incident is that the biggest pay-offs come from intelligence gathering and sharing,” Herdman said.

The US is now calling for 100 percent cargo screening, which would also place Asia at a disadvantage, since few airport terminals have the equipment to process LD3 containers. Similarly, much freight starts off in remote locations, consolidated only at major hubs. Total freight screening would further complicate and delay procedures, Herdman said.

Much of the Asia-Pacific region’s exports are fresh produce or perishable goods, which would spoil if left in containers awaiting scanning, he said.

“The Americans are great believers in technological solutions, not procedural. But a technology that works in the US might not work in Fiji and might not be affordable across our region,” he said.

The fear of unfeasible security regulations being imposed from afar symbolises the AAPA’s wider struggle to be heard. There is no central regulator in Asia, although those in Hong Kong and Singapore act as leading regulators for the region and are “more engaged in the international debate,” Herdman said.

One potential heavyweight national regulator is the Civil Aviation Administration of China (CAAC). However, the problem for the AAPA is that it has no mainland Chinese member airlines. On this, Herdman is pragmatic: the association was set up for international airlines, and the Chinese market, while representing some 7 percent of global passenger traffic in revenue passenger kilometres (RPK) and 2 percent of cargo traffic in freight tonne kilometres (FTK), is still largely domestic in focus.

Herdman said that while “obviously” he would like a Chinese carrier “or two” to join the AAPA, he is prepared to wait for them to see the value the association brings.

Open to LCCs

The same view holds for the lack of low-cost carriers in the association. The AAPA was established as a flag-carriers’ club 54 years ago and today its members still reflect the old world order of full-service, scheduled international airlines.

Herdman said he would like to see Asia’s new long-haul low-cost carriers join, just as hybrid airlines have joined the EAA. However, rather than recruit new members, his focus this year has been to prevent existing members from leaving. Australia’s national carrier Qantas Airways let its membership lapse earlier this year, citing lack of value for money. Herdman said the door is still open to Qantas to cooperate in any AAPA meetings.

With no regional regulator to lobby, the association needs to try and influence each national regulator to move in the same direction.

“We are not naive enough to think that the world will change as a result of our resolutions. We’re part of a debate and we try to engage in dialogue and at a time when most regulation in our region is still domestic, we would like to help shape sensible policy in the region,” Herdman said.

The AAPA is certain about one thing: next year, fares will rise across the region. After a year of super-low fares, the association expects to see ticket prices rise as demand for air travel outstrips supply next year.

Still, many other external factors, in the form of taxes and charges, still lie beyond the control of an Asia-Pacific association, leaving the AAPA still beating a path to Brussels and Washington.

JAL’s Onishi targets turnaround

Japan’s most recognisable recent Prime Minister, Junichiro Koizumi, succeeded in large part because he was a pragmatist. By confronting several of Japan’s structural problems, he won a landslide election for his Liberal Democratic Party.

This article orignally appeared in Asian Aviation magazine in December 2010

Masaru Onishi, president of Japan Airlines (JAL), has a similar task ahead of him: facing up to the structural issues that saw the former national carrier of Japan file for bankruptcy protection in January, after losses of nearly 100 billion yen (US$1.2 billion) in a single quarter. His main priority is to change the mindset of JAL employees from that of quasi-governmental salarymen to employees of a competitive, efficient airline.

Onishi avoids comparisons with US Chapter 11 bankruptcy-protection laws that have been criticised for unfairly sheltering failed carriers from outside competition.

“I don’t know Chapter 11 rules well enough. I know our own corporate rehabilitation law better,” he says. These conditions include a pledge to repay the 300 billion yen cash injection the company has received within seven years and slash its workforce by a third.
JAL’s 730 billion yen debts were also wiped out as part of the deal with the government-backed stimulus fund, the Enterprise Turnaround Initiative Corporation of Japan, thus reducing working capital to zero.
Onishi has experience in working with cash-strapped entities, having come in to the presidency from running JAL’s regional airline subsidiary Japan Air Commuter. He is joined at the helm of JAL by new Chief Executive Kazuo Inamori, founder of both ceramics giant Kyocera and telecommunications supplier KDDI.

While Inamori has an outsider’s view of the restructuring, Onishi has the aviation experience to ensure the carrier does lose more market share to All Nippon Airways (ANA), which already leads domestically. Onishi and his board are waiting for the Japanese courts to authorise JAL going into administration, although work has started already to transform the company.

Onishi is bullish. “We will try to repay the loan quicker than the seven years,” he says. He adds he is confident that other developments in Japan’s aviation sector, such as the opening up of Tokyo’s Haneda airport to international routes, will help in reviving the carrier’s fortunes.

The airport’s new international terminal opened in October and airlines were queuing up to get their services into the airport, which is just 14km away from central Tokyo, compared with 58km for Narita International Airport. Around 100 new services to points in Europe, North America and Asia are scheduled to start before mid-2011.

JAL is in the best position to capitalise on the airport’s development, Onishi says. “We have the biggest domestic network and our hub is Haneda,” he points out.

Still, Onishi’s top priority is to change the mindset of the workforce, which will be a challenge given JAL’s history as a government-owned carrier. “The mentality was not only to pursue profit but only to be cautious. We have to realise that we’re a commercial business and this needs to be the priority for all staff,” Onishi says.

There will be casualties, with the workforce set to be reduced by 15,700 employees. Onishi and Inamori must then try to expand the business without replacing these staff members. The airline chief’s second priority is to keep the business as small as possible, running on minimal costs.

“We need to be a very lean company; at a business unit level and at an individual level as well as an enterprise,” he says.

The third priority on Onishi’s list is to establish a system of communicating feedback throughout the company, so that every employee knows the current standing of their business unit, their department and the entire company. “Everyone needs to know the results to be involved,” he says.

Such thinking would be typical of a US firm, but is still radical in a Japanese business, especially one that started out as a government-owned enterprise. Onishi’s plan is to reset the priorities of workers more familiar with bureaucratic procedures than chasing business opportunities.

Onishi would clearly like to go further than the airline’s rather conservative restructuring programme sets out. He talks of setting up California-style thinking cells within business units to drive new projects, and the ruthless pursuit of cost savings. Yet he says no other airline in the world offers an adequate business model to follow.

“Our management studied lots of models but did not find one to base ourselves on,” he says.

The new board of JAL is promoting a “bottom-up” flow of ideas, attempting to shape an agile, lean company that takes good ideas from workers on the ground. Such practices work at egalitarian outfits like Ireland’s Ryanair, but in a hierarchical structure such as JAL’s this may be tougher to put into practice.

Yet Koizumi proved that the Japanese can accept change – once convinced, coerced or charmed into doing so. The former prime minister was capable of all three approaches. At JAL, Onishi will have to emulate Koizumi’s skills if he is to turn the business around.

Hawaiian Airlines eyes Asian expansion

Over a million Japanese visit Hawaii every year, drawn by the tropical beaches, the US culture and relative proximity.

This article appeared in July 2010's Asian Aviation

There is one particular quirk of Japan’s love affair with Hawaii that visitors never forget: Hawaii’s favourite snack is the ‘Spam musubi’ – a Japanese-style ‘onigiri’ roll of rice and seaweed, but with pink processed meat replacing the traditional raw fish.

Over a million Japanese visit Hawaii every year, drawn by the tropical beaches, the US culture and relative proximity. There are about a dozen daily flights between the US island chain and Japan, divided among two US carriers – United Airlines and Delta Air Lines – and two Japanese – Japan Airlines (JAL) and All Nippon Airways (ANA).

Despite being based in Hawaii’s capital Honolulu, Hawaiian Airlines has never had rights to serve the route under the existing bilateral air services agreement. This is about to change, as Hawaiian, along with American and Delta, is now set to begin operations to Tokyo’s downtown airport Haneda in October once the airport’s fourth runway is completed. The US Department of Transport has now granted Hawaiian access to the market in order to stimulate competition.
Hawaiian has been growing in competitive strength over the past five years, expanding to become the tenth-biggest US airline. In the mid-2000s the carrier expanded its services to the mainland USA, building up a network of ten destinations on the US West Coast connecting to Hawaii’s three main islands.

Westward Ho

But for Hawaiian Airlines Chief Executive Officer Mark Dunkerley the future is west. Westward from Hawaii lies Asia, offering potentially fatter yields than the carrier could gain by chasing its US rivals for a larger slice of the leisure traffic to the archipelago.

“Asia is a growth-region economically and with that will come a desire to travel among the middle class,” Dunkerley says. He points to Australia, a country that has successfully lured Asian tourists, with massive inflows not only of Japanese, but also Chinese, Korean and Thai visitors.

The expansion plans are underlined by the aircraft orders Hawaiian has placed. The carrier ordered six Airbus A330-200s in November 2007, as part of a Memorandum of Understanding with the European manufacturer covering 24 long-range jetliners in a US$4.4 billion deal.

In addition to the six A330s, the airline also took purchase rights on a further six, the first of which it exercised in March for a 2011 delivery. The deal was completed with six firm orders and six options for Airbus’s planned long-range A350-800, which Hawaiian hopes to fly non-stop to US east coast cities after it enters operational service in 2013.

Deliveries of the A330s have already started. Two will be in service this year, with the remainder joining the fleet over the next two years. But Asia’s potential is such that Dunkerley cannot wait that long. Hawaiian has now agreed to lease two additional A330-200 aircraft from Ansett Worldwide Aviation Services (AWAS), beginning in 2011, and one from CIT Aerospace, which arrived in April.

Hawaiian Airlines officially welcomed the first of the widebody twinjets into its fleet on 1 June, saying that the aircraft heralds “a new era” in the company’s history. The 294-seat aircraft completed its first commercial service from Honolulu to Los Angeles on 4 June.

Long-range capability

The new aircraft has been named ‘Makali’i’, the local term for the constellation of the Pleiades, or Seven Sisters, which guided ancient Polynesian voyagers across the Pacific and was seen high in the sky when Inter-Island Airways (renamed Hawaiian Airlines in 1941), launched its first scheduled flight on 11 November, 1929. Each of the new aircraft will be named after a constellation used for astral navigation by Polynesian voyagers.

The aircraft first arrived in Honolulu on 3 May and had been undergoing final preparations for service since then. Hawaiian’s second A330, named ‘Hokule’a’ (‘Star of Gladness’), arrived from the manufacturer’s Toulouse plant on 29 May.

“The A330 provides Hawaiian with an increased operating range of 6,050 nautical miles and the capability to expand its service area on both sides of the Pacific by offering non-stop flights between Hawaii and points in eastern Asia and all of North America,” the airline says.

The only long-haul routes Hawaiian currently flies, other than to the mainland US and Samoa, are to Manila in the Philippines, Papeete in French Polynesia and Sydney, Australia. However, the new A330s open up new choices.

For the moment, the airline has made an economic decision not to fly to the US East Coast with the A330s, due to operational restrictions, Dunkerley says. “We review the economics all the time,” the airline chief says.

The US has bilateral Open-Skies agreements with South Korea, Malaysia, Singapore and Thailand, which are all markets ripe with further tourism potential, Dunkerley says. Still, some markets will have to wait until delivery of the A350s in 2017.

“The A350-800s have a range of 8,000 nautical miles [15,000km] so we could even go direct to Europe, but we will certainly go deeper into Asia,” he says.

China hurdles

China, however, is a less likely prospect, having a “less progressive” air services regime that favours the larger US carriers, Dunkerley says. Also, the USA is not on the Chinese government’s list of approved destinations, making visas for travel to Hawaii hard to obtain for the ordinary tourists the island chain wants to attract.

Hong Kong, on the other hand, with its special autonomous region status, might be a suitable target market, Dunkerley says. Similarly, Taiwan has much of the same economic and cultural potential of South Korea and of Japan some 20 years ago. The carrier will weight up the merits and may launch services later this year, he says.

Hawaiian is also betting on the strength of the Virgin name to aid it in the wider Asia-Pacific region. It has signed a code-share agreement with Virgin Blue, Virgin America and V Australia that extends to frequent flyer reciprocity. The move will see Hawaiian codes placed on connecting flights to Adelaide, Brisbane and Melbourne from its daily Sydney service and Virgin Blue codes on Hawaiian’s inter-island routes.

Dunkerley says the deal will have “enormous impact” since the Virgin Blue brand is one of the best-known leisure brands in Australia, one of Hawaiian’s biggest source markets.

Australian passengers are also being targeted with stopover services to Las Vegas, Seattle or the eight other US West Coast ports served by Hawaiian. These destinations will also be promoted to the Tokyo market when it opens, with Honolulu a hassle-free alternative to Los Angeles.

The airport had better start stocking up on Spam musubi.