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CAPA Asia Aviation Summit 2016

Singapore, Singapore
15-16 Nov 2016
Malaysia Airlines CEO Peter Bellew discusses the group’s progress to date in the transformation plan and the target for completing the turnaround and returning to profitability. Mr Bellew also discusses plans for resuming fleet and network growth in 2017 with a focus on the booming Malaysia-China market. For at least the short to medium term there are no plans for resuming growth in Australasia and Europe or resuming operations to North America. Partnerships, premium economy, a new fare structure and plans for creating a new charter airline to operate high density A380s are among other topics addressed by Mr Bellew in this comprehensive interview.
Can the full service airline model survive in Asia, amidst rising low-cost long-haul penetration and adoption and pressure on corporate travel? Will multi-brand Airlines Groups dominate Asia within five years? New entrants have reduced cost bases, government backing and financial support. How to compete – or is it time to reinvent the full-service airline business? Should airlines keep buying aircraft?
Moderator: Moderator: CAPA - Centre for Aviation, Managing Director, Stephen Pearse
Panel Members:
  • ANA, Senior Executive Advisor to the Chairman, Keisuke Okada
  • DVB Bank, Senior Vice President Aviation Research, Albert Muntane Casanova
  • Hong Kong Airlines, Assistant Director Commercial, Michael Burke
  • Malaysia Airlines, CEO, Peter Bellew
  • Philippine Airlines, Senior Financial Advisor, Ian Reid
Alliances between LCCs are proliferating, further hybridising the model in Asia. Moderator: KPMG, Global Head of Aviation, James Stamp Panel Members:
  • Air Black Box, General Manager Asia Pacific, Mildred Cheong
  • HK Express, CEO, Andrew Cowen
  • Jeju Air, CEO, Ken Choi
  • Jetstar Asia, CEO, Bara Pasupathi
There are more JVs involving Asia than any other market. Yet these JVs range significantly in scope of markets and cooperation. This discussion explores how airlines see the strategy, value and potential of JVs. This includes the level of cooperation of JVs, from JVs where one airline flies all intercontinental flights (Singapore Airlines-SAS) to JVs with anti-trust immunity (ANA-United, JAL-American). JVs with Chinese airlines are growing but are still at an early phase.
  • What’s the difference between a revenue-sharing and profit-sharing JV?
  • Are airlines interested in region-to-region JVs like those across the Atlantic or do partners have different interests? Is it a regulatory problem?
  • Asian airlines are typically bigger on intercontinental routes than their foreign peers, but worry a deal may be unfair as their more experienced partner cuts a perceived better deal. How do airline relationships need to evolve to support JVs?
  • What is the role of global alliances? Can they accommodate JVs between members and non-members? What happens when a member is excluded from a JV between other members, or that JV precludes a participating member from codesharing with a member not in the JV?
  • Can there be regional JVs?
  • What is the risk of North America-Asia JVs overlapping with North America-Europe JVs for beyond markets, such as India?
Moderator:  Seabury Airline Consulting, Partner, John McCulloch
Panel Members:
  • Embry-Riddle Aeronautical University Asia, Assistant Professor, June Lee
  • National University of Singapore, Professor of Aviation Law, Alan Tan
  • Seabury Airline Consulting, Vice President & Delta Air Lines, Former Managing Director Alliances, David Bishko
As the Asia travel market enters maturity and growth rates ease differentiation between airlines (and their hubs) comes into sharper focus. Travellers in Asia also have expectations of a high quality experience. Airlines meanwhile sit on vast quantities of potentially valuable customer data, but developing the analytics to improve decision-making capabilities is the big challenge. Personalisation of messaging and collaborating with the right partners is vital. We navigate the opportunities and risks ahead in this session.
Moderator: CAPA - Centre for Aviation, Managing Director, Stephen Pearse
Panel Members:
  • Adara, VP Sales, Asia, Jonathan Hardy
  • Amadeus, Global Head of Sales & Commercial Travel Intelligence, Didier Mamma
  • HK Express, CEO, Andrew Cowen
  • Sabre, Head of Sales & Business Development, Asia Pacific, John Chapman
  • SITA, President, Asia Pacific, Ilya Gutlin
Spring Airlines VP Jonathan Hutt discusses the need to expand in Southeast Asia after a few years of successful and trend-setting growth in Japan. New aircraft will help open up more destinations. Spring expects to operate 100 aircraft in 2018 and will then formulate a new and more aggressive growth plan.
HK Express CEO Andrew Cowen discusses fleet plans following delivery of its first A321 and in advance of its first A320neo. In the near future HK Express will take delivery of five A320neos and eight A321s. Deploying the aircraft is becoming complicated as its home base, Hong Kong, seeks to restrict night time movements. Mr Cowen sees Japan growth from sister airline Hong Kong Airlines allowing the two to build market share.
Ken Choi is the CEO of Korea's largest LCC, Jeju Air, and discusses expanding its presence in Busan, competing with the new LCC Air Seoul, and prospects for the needed but difficult Korean consolidation and open skies with China.
Japan Airlines in Apr-2017 is due to be free of business restrictions following its bankruptcy rehabilitation. JAL VP Akira Mitsumasu discusses JAL's next business strategy, including supporting Japan's increase in visitors, especially from Asia. JAL is planning new routes and new markets and will have double-digit ASK growth. JAL is also looking to grow its business outside of capacity expansion, and believes digital disruption will help JAL better understand its customers and become more relevant.
China, thanks to its vast population, has already reshaped tourism goals of many destination countries, with over 50% year on year increases in some cases. But China will also reshape the way the aviation industry works – for example with multiple interest tourism and travel equity acquisitions, usually linked to China’s expected tourism expansion. And as China’s airlines proliferate they are opening new gateways. The growth of China's airlines internationally has been based on mostly outbound traffic flows and has meant sometimes large influxes of new capacity in several markets. As well as being mostly outbound, traffic is typically low yielding and seasonal, making competition for foreign airlines difficult. Subsidy at national and local level also helps distort the market in the short term. Many foreign carriers are seeking partnerships, even acquiring equity, but the big three, Air China, China Eastern and China Southern, are often ambivalent, able to flex their muscles and exercise choices. Meanwhile, there is a flourishing body of new entry from low cost airlines, led by the highly successful Spring Airlines.
  • Which are the markets Chinese airlines will target for growth?
  • Will other airlines/travel groups seek equity purchases globally?
  • How important will LCCs - short and long haul - be in China’s tourist expansion?
  • What are China’s airline partnerships likely to look like in 2025?
  • "One belt one road” connectivity. Aviation could play an enabling role, but how big will the impact be?
Moderator: The Chinese University of Hong Kong, Director of Policy, Aviation Policy and Research Center, Dr. Law Cheung Kwok
Panel Members:
  • CAPA - Centre for Aviation, Senior Analyst, Will Horton
  • ForwardKeys, Chief Marketing Officer, Laurens Van Den Oever
  • National University of Singapore, Professor of Aviation Law, Alan Tan
  • Spring Airlines, President, Stephen Wang
Hong Kong Airlines is growing in complexity as expansion sees its overlap with sister HK Express while accelerated A350 deliveries in 2017 potentially allow new long-haul routes. Assistant Commercial Director Michael Burke believes Hong Kong Airlines has an important role to further strengthen the city's hub.
AirAsia X CEO Benyamin Ismail discusses the fleet plan for 2017 including the possibility of brining in a new aircraft type to support the resumption of flights to Europe. He also discusses the performance of new routes launched in 2016 and the airline’s plan for launching services to the US, starting with Honolulu in Jun-2017. He also shares his views on other network opportunities, partnerships, the A330neo and increased passenger service charges at AirAsia X’s Kuala Lumpur International Airport Terminal 2 hub.
Malindo Air CEO Chandran Rama Muthy discusses the airline’s rapid fleet and network expansion in 2016 and its plans for continued rapid growth in 2017. Mr Chandran also discusses the new 737 MAX fleet, Malindo’s increased focus on transit traffic, new partnerships and rebranding plans.
Philippine Airlines president Jaime Bautista discusses the performance of PAL’s seven destinations in the Middle East, all of which have been added since 2013, and new daily service to London. PAL is now planning to increase capacity to the US and China and is looking at potential new destinations in Europe. PAL is expanding and modernizing its fleet over the next few years with the delivery of A321neos, A350-900s and Dash 8-Q400s. PAL now faces capacity constraints at its main hub in Manila but has been pursuing expansion at Cebu and other secondary cities and is confident potential projects to squeeze more capacity out of Manila will eventually be implemented.
BOC Aviation CEO Robert Martin discusses the Singapore-based leasing company’s 2Q2016 initial public offering and how BOC plans to use the proceeds. BOC Aviation has over 200 aircraft on order and plans to take delivery of 67 aircraft in 2017. Its current portfolio is evenly distributed with approximately 25% of the fleet in each of four main regions.
This award is given to the airline, airport or supplier responsible for the most powerful innovation in the industry over the past 12 months. Air New Zealand Senior Manager Customer Experience Nikki Goodman received the award from Mr Harbison. The judges selected Airband for addressing challenges related to unaccompanied minors – a real-life issue that airlines throughout the world have struggled with for years. The Airband is a wristband issued to children who are travelling alone, giving parents and guardians the opportunity to follow each step of their young one’s journey from wherever they are in the world. It was developed in-house at Air New Zealand and has been in use for just over a year, since Oct-2015. The first product of its kind in the airline industry, Airband is embedded with a near-field communication (NFC) chip which prompts text alerts when Air New Zealand crew members scan the wristband with a mobile device at four key stages during a child’s journey. CAPA noted that Airband is one of several technological innovations introduced by Air New Zealand in recent years. “Air New Zealand has once again come up with an impactful and pioneering new invention, cementing its position as a leader in the strategic innovation space”, Mr Harbison said.
This award is given to the low cost airline that has been the biggest standout strategically, has established itself as a leader, has been the most innovative, and provided a benchmark for others to follow. Spring Airlines President Stephen Wang accepted the award from Mr Harbison. Spring was selected for its recording-breaking initial public offering and ability to grow steadily – and profitability – in a challenging market. "Spring became China’s first LCC in 2005 and has since grown steadily, despite a challenging regulatory and political environment”, Mr Harbison said. “What Spring has been able to accomplish as a private company in China is remarkable and its success has led to a more supportive LCC policy from the once reluctant Chinese government.” CAPA noted that Spring had been a pioneer in China and had also now launched a joint venture in Japan. Spring has been consistently profitable over the last several years and currently operates over 60 aircraft in China across a network of more than 80 destinations, including 22 international destinations. In late 2015 Spring became the launch operator of the 186-seat A320 and ordered 60 A320neos.
This award is given to the regional airline that has been the biggest standout strategically, has established itself as a leader, and demonstrated innovation in the regional aviation sector. This award is intended to recognise smaller airlines or airline groups with annual passenger traffic of less than 10 million. Malindo CEO Chandran Rama Muthy accepted the award from Mr Harbison. Malindo was selected for adjusting its strategy to focus on network traffic and embracing the full service model. “Over the last year Malindo has taken advantage of opportunities in the Malaysian market created by the restructuring of Malaysia Airlines and positioned itself as a full service network airline”, Mr Harbison said. “With rapid international expansion Malindo has significantly raised the profile of the Lion Group, which previously was almost entirely domestic focused. Malindo has become a rare example of a new full service airline growing rapidly and shaking up the marketplace.” CAPA noted that transit traffic now accounts for nearly 40% of Malindo’s traffic at Kuala Lumpur International Airport (KLIA), a remarkable figure for an airline that is only three years old. Malindo passenger traffic grew by 50% in 2015 and is on track to achieve similar growth in 2016, following the delivery of an astonishing 11 aircraft over the last six months. CAPA also noted that Malindo had moved this year from KLIA2 to the main terminal and had forged partnerships with several foreign airlines, including Etihad Airways, Qatar Airways and Turkish Airlines. Malindo has also pursued rapid network expansion and now has 27 international destinations – 14 of which have been launched over the last 13 months.
This award is given to the airline that has had the most impressive turnaround while establishing an innovative strategic direction for its business and the industry. Philippine Airlines (PAL) CEO and chairman Dr Lucio Tan and PAL president & COO Jaime Bautista received the award from Mr Harbison. PAL was selected for its return to profitability and strong financial performance over the last two years, ending a string of losses. PAL has launched a remarkable 15 destinations outside Asia over the last three years. Usually such ambitious expansion has a negative impact on financials but for PAL it has been able to complete an ambitious expansion phase while returning to profitability”, Mr Harbison said. “Since Lucio Tan took back control of PAL two years ago, the airline has been remarkably successful and significantly improved its long-term position and outlook.” PAL has invested in fleet renewal and new in-flight products, and has implemented several other service enhancements. CAPA noted that PAL had experienced improvements in its expanded international operation and is now planning a new phase of international growth. Domestically PAL has resumed expansion under a new strategy for the regional subsidiary PAL Express, which is also profitable again now.
This award is given to the regional airport that has been the biggest standout strategically, has established itself as a leader, and done the most to advance the progress of the aviation industry. This award is intended to recognise smaller airports with annual passenger traffic of less than 10 million. GMCAC President Louie Ferrer and GMAC CEO Advisor Andrew Harrison received the award from Mr Harbison. The judging panel selected Mactan-Cebu for its rapid growth since a successful privatisation in late 2014. The new owners, GMR-Megawide Cebu Airport Corporation (GMCAC), have secured several new international routes and have invested in a new terminal which will open in 2018, boosting the airport’s capacity by 12.5 million passengers per annum. “Mactan-Cebu has quickly proven to be a successful airport privatisation project, silencing sceptics and winning praise from airlines”, Mr Harbison said. “Mactan-Cebu has emerged as a leader among small to medium sized airports while GMCAC’s strategy of positioning Cebu as an alternative hub to Manila for domestic to international connections is starting to pay dividends.” CAPA noted that Mactan-Cebu had become one of the fastest-growing airports in Asia, recording 14% growth in 2015 to 7.8 million passengers. International growth has been particularly fast, with a 20% rise in 2015 and a 19% increase through the first nine months of 2016. In Mar-2016 Mactan-Cebu attracted its first long haul routes with Los Angeles (launched by Philippine Airlines) and Dubai (launched by Emirates). EVA Air and Xiamen Airlines have also launched services to Cebu this year, giving the airport 15 foreign airlines. Meanwhile Cebu Pacific and Philippine Airlines have both pursued rapid domestic growth at Mactan-Cebu, with several new routes and additional capacity aimed at bolstering connectivity.
This award is given to the executive who has had the greatest individual influence on the aviation industry, demonstrating outstanding strategic thinking and innovative direction for the growth of their business and the industry. Mr Martin accepted the award from Mr Harbison. Mr Martin was selected for leading BOC Aviation through a successful expansion programme which culminated in its public listing on the Hong Kong Stock Exchange on 1 Jun-2016. “Under Robert Martin, BOC Aviation has emerged as one of the world’s largest and most successful leasing companies”, Mr Harbison said. “BOC’s portfolio has grown over the remarkable nearly 20-year tenure of Robert Martin from 10 aircraft to more than 270 aircraft, and BOC now has another 200-plus aircraft on order. Perhaps even more impressively Robert Martin has been a key player in the emergence of Singapore as an aircraft leasing and financing hub.” CAPA noted that BOC Aviation’s IPO was a major accomplishment, given the company’s highly regulated parent company Bank of China, requiring several years of work. BOC Aviation raised over USD1 billion from the listing, which will be used to fund further expansion. Mr Martin first joined BOC Aviation, then known as Singapore Airline Leasing Enterprise (SALE), in 1998. Mr Martin is now one of the longest-serving CEOs of the same company in the aircraft leasing industry. This is the first time a non-airline CEO has been the recipient of the CAPA executive of the year award – a testament to Mr Martin’s accomplishments in the aircraft leasing sector and the wider aviation industry.
The Legend award is an occasional award given to individuals who have stood out as making a substantial long-term difference to the industry in which they work. They display rare talent and people skills, so that not only do they change the external environment, they invariably also generate substantially positive corporate improvements. Spring Airlines VP Jonathan Hutt accepted the award on behalf of Ms Zhang. Ms Zhang co-founded Spring and served as CEO from its establishment in 2004 until earlier this year. “Under Ms Zhang Spring expanded rapidly and profitably, culminating in a highly successful IPO in 2015”, Mr Harbison said. “Spring was able to overcome local challenges and regulatory constraints to emerge as North Asia’s largest LCC. “ CAPA noted that as China’s first LCC Spring had been a pioneer. It also became the first Chinese LCC with an overseas JV when it launched Spring Japan in 2014. During her 12-year tenure as CEO Ms Zhang has been instrumental in helping Spring develop a strong market presence in China’s booming aviation sector, catering not only to China’s first-time flyer market but also offering a new range of travel products targeting the increasingly more sophisticated and price-conscious business segment. In 2010 Ms Zhang worked to ensure that Spring became the first private airline to be granted a licence to fly internationally by the Civil Aviation Authority of China. A staunch advocate of the low-cost aviation model, Ms. Zhang has defied the critics and illustrated that not only could the LCC model work in China – it could thrive. "In this way, Ms Zhang has truly secured a place as a national treasure and a pioneer in the evolution of China's increasingly important aviation industry. By creating, with Spring, a role model for others to follow, her legacy will endure", said Mr Harbison. CAPA does not present a Legend Award every year, and only occasionally decides an executive’s career accomplishments merit induction into the CAPA Hall of Fame. Ms Zhang becomes only the eleventh inductee into the CAPA Hall of Fame, joining Seri Bashir Ahmad, Dr Cheong Choong Kong, Sir Tim Clark, Brett Godfrey, Tan Sri Tony Fernandes, Sir Maurice Flanagan, Rob Fyfe, Rusdi Kirana, CW Lee and Ray Webster.
Jetstar Asia CEO Barathan Pasupathi discusses the airline’s record profit in the fiscal year ending Jun-2016 (FY2016) and the outlook going forward. The Singapore-based LCC has not added any aircraft in three years and plans to continue refraining from fleet expansion due to overcapacity concerns. However, Jetstar Asia continues to pursue opportunities for network expansion with a focus on underserved secondary markets and is keen to add capacity on routes where it generates significant interline and codeshare traffic. An increase in the portion of tickets sold by full service airline partners has helped Jetstar Asia boost yields and therefore profitability while limiting direct competition with other LCCs in oversupplied markets.
Indigo Partners co-founder and managing partner William Franke discusses the prospect of an ultra low cost airline in Southeast Asia. Indigo was a founding shareholder of Tiger but currently does not have any airline investments in Asia. It is assessing LCC investment opportunities in Southeast Asia and India but thinks the timing is not yet right for pursuing opportunities in North Asia. Outside Asia, Indigo is keen on Latin America and Canada, supplementing its existing investments in the US and Mexico, while it is too premature to invest in African LCCs.
This award is given to the airline that has been the biggest standout strategically during the year, has had the greatest impact on the development of the airline industry, has established itself as a leader, and provided a benchmark for others to follow. China Eastern EVP Li Yangmin accepted the award from Travelport Senior Commercial Director Chris Ramming. China Eastern was selected by the judging panel for its rapid international expansion and successful implementation of a new strategy which includes a multi-brand model and equity partnership with Delta Air Lines. “China Eastern has grown rapidly and evolved strategically, adopting a new brand, forging a ground-breaking partnership with Delta and embracing the multi brand model”, said CAPA – Centre for Aviation Executive Chairman Peter Harbison. “China Eastern has been transformed and has emerged as a leader strategically in the key Chinese market.” CAPA noted that the China Eastern subsidiary China United had been converted into an LCC and grown rapidly. The parent airline has itself expanded rapidly, with several new international destinations over the last year. Its international passenger traffic was up 27% in 2015. China Eastern has also implemented a new strategic partnership with China Eastern and expanded its cooperation with Air France-KLM. The group has been consistently profitable since 2010.