< PreviousRADAR August-September 2020 · AVIATION BUSINESS 10 www.aviationbusinessme.com UAE’s Hope Probe blasts off in historic launch Arab world’s fi rst mission to outer space begins Sixty cancellations of Boeing’s 737 Max in June mean the planemaker lost 355 orders for its troubled jet in the fi rst half of 2020. Boeing confi rmed that June’s cancellations had come from a number of aircraft lessors, including Aviation Capi- tal, Avolon and BOC Aviation. European airline Blue Air and two other unidenti- fi ed customers also cancelled Max orders. Only recently, Boeing began fl ight test- ing its grounded 737 Max in an attempt to get the jet certifi ed and fl ying again. Cus- tomers’ frustration with the grounding of the jet combined with the coronavirus crisis and subsequent collapse in travel demand has seen Boeing’s best-selling jet struggle to keep favour with operators. Boeing’s deliveries for the fi rst half of 2020 also fell by 71% to 70 planes due to the ongoing Covid-19 crisis. June deliver- ies amounted to 10 aircraft, compared to just four in May. As of the end of June, Boeing’s gross orders for 2020 so far sat Boeing suffers 355 737 Max jet cancellations in fi rst half of 2020 ORDERS Airlines and lessors continue to cancel Max orders as global capacity remains low at 59 planes following an order for a 767 freighter from FedEx. “Our commercial airplane deliveries in the second quarter refl ect the signifi - cant impacts of the Covid-19 pandemic on our customers and our operations that included a shutdown of our com- mercial airplane production for several weeks,” said Greg Smith, Boeing execu- tive vice president of enterprise opera- tions, chief fi nancial offi cer and interim leader of communications. Airbus delivered just under 200 air- craft during the first six months of the year, roughly half of the amount the manufacturer achieved over the same period in 2019. That is according to the European airframer’s monthly update, which showed that Airbus handed over 36 commercial aircraft in June. June’s number was a slight increase compared to 24 aircraft delivered in May and 14 in April, bringing the total for the first half of the year to 196 de- liveries. Among the deliveries in June were four A350-900s for Iberia, Air France and SAS, which were the only long-haul jets delivered in June. The Airbus deliveries down 50% in fi rst half of 2020 DELIVERIES Airbus achieves zero new orders in June but deliveries have begun to increase as the world emerges from lockdown rest comprised 31 A320-family aircraft and one A220. A total of 11 A220s, 157 A320, five A330s and 23 A350s were delivered in the first half of 2020. Airbus once again achieved zero new aircraft or- ders in June, bringing its total orders for the first half of 2020 to 298. This compares to 389 aircraft in the first half of 2019. “The decrease [in orders] reflects the Covid-19 crisis,” Airbus said in a statement. Guillaume Faury, the Euro- pean planemaker’s CEO, said recently that Airbus’ 40% cut on production and deliveries will last for two years. Smith said that Boeing will work with its customers on specifi c timing and ad- justment to deliveries. “We continue to closely monitor the commercial marketplace by staying very engaged with our customers around the globe to fully understand short term and long term requirements,” he said. “All of this is informing current and future production rates and any further adjust- ments as needed to balance supply and demand going forward.” Airbus made a €481 million ($522 million) loss in the first quarter of this year and Faury does not expect output to return to normal levels until 2025. He said deliveries will catch up with production by the end of next year.RADAR 11 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com Dubai’s Emirates airline has vowed its pricing policy will remain “competitive” as the carrier gradually returns to levels of normality following the Covid-19-en- forced grounding of most of its fl eet for al- most three months. The International Air Transport Association (IATA) has said that airlines are in line to make a com- bined net loss of more than $84 billion this year in the wake of the pandemic crisis, the biggest in the industry’s history. However, Boutros Boutros, divisional senior vice president, corporate commu- nications, marketing & brand, Emirates Group, told the recent Ai Everything con- ference in Dubai that the airline is cur- rently focused on providing a service in the pandemic. He said: “I can say our prices are very competitive. Obviously you will realise Emirates vows to keep air fares ‘compet- itive’ in wake of coronavirus crisis PRICING Dubai-based carrier has returned to the skies with fl ights to over 50 destinations that Emirates is not looking at this stage at making money. We are looking at pro- viding a service, which started at the be- ginning of the pandemic with repatriation fl ights - we even brought people for free. Prices, of course, the market dictates the price, but of course the cost is much high- er. With the restriction of travel across the globe which is still going on, it becomes very diffi cult to fi ll an aircraft.” The Middle East’s largest carrier, which operates a fl eet of 270 wide-bodied aircraft, halted operations in late March as part of global shutdowns to stem the spread of the virus. As a result, Emirates airline has cut a tenth of its workforce during the novel coronavirus pandemic in lay-offs that could rise to 15%, or 9,000 jobs, president Sir Tim Clark said in July. Emirates returned its iconic Airbus A380 Jetex could become the fi rst company to welcome supersonic jet passengers into its terminals since Concorde was retired in 2003, after the company struck a deal with US planemaker Aerion Supersonic. Jetex’s private jet terminals have been selected as the preferred arrival and departure points for Aerion, which is currently manufacturing AS2, the world’s fi rst supersonic business jet. “Since the retirement of the Concorde in 2003, the world has been eagerly waiting to return to the supersonic skies,” said Adel Mardini, CEO of Jetex. “Two decades later, we look forward to welcoming fi rst passengers traveling aboard AS2 at Jetex private jet terminals around the world.” As a preferred partner, Jetex will collaborate with Aerion to provide Jetex VIP terminals to serve world’s fi rst supersonic business jet FBO Jetex’s private jet terminals will serve Aerion’s supersonic business jet AS2 when it launches this decade aircraft to the skies in July and at the time fl ew to over 50 destinations, compared to about 157 before the crisis. However, Boutros said: “Over 50 desti- nations doesn’t mean the same frequencies as we used to travel before. We are trying to provide a service at a really minimal cost on us and a minimum cost on passen- gers. To be honest, our prices are still very low in comparison to our costs.” personalised travel arrangements for Aerion’s AS2 business jet customers at its private terminals. To mark the deal, Jetex has unveiled a new suite of services tailored specially for the launch of AS2. Aerion CEO, Tom Vice, said: “At Aerion we desire to bring humanity closer by reducing the time and inconvenience experienced in today’s transportation networks. We also believe air travel must be an exciting, enjoyable, effi cient and luxurious experience once again. The ultimate luxury is time and this partnership is a key step to help us realise our vision, allowing us to give even more time back to our customers. As an internationally recognised leader in the executive aviation industry with a network of locations at leading travel hubs around the world, Jetex are expertly positioned to ensure we collectively deliver an all-encompassing supersonic experience.” Jetex operates more than 35 private terminals and by 2025 plans to operate more than 50 terminals. Aerion’s AS2 supersonic business jet which will take fl ight in 2025. Designed to be inherently environmentally responsible from fi rst fl ight, the AS2 is the fi rst supersonic aircraft designed with the ability to accept 100% synthetic fuel and reach supersonic speeds without the need for an afterburner. Cathay Pacifi c Braces For $1.3bn hit Shareholders warned to expect record losses August-September 2020 · AVIATION BUSINESS 12 www.aviationbusinessme.com UAE ASTRONAUT Developers of Saudi Arabia’s highly anticipated ultra- luxury, sustainable airport have awarded a tender for airside infrastructure works to local contractors Nesma & Partners and Almabani. Set to open in 2022, the Red Sea International Airport will be the main point of entry to Saudi Arabia’s new tourism project, designed to make the Kingdom a global tourist hotspot and diversify the national economy. The value of the contract is not known but by the end of the first half of 2020, The Red Sea Development Company (TRSDC) - the firm behind the airport - had awarded 4.1 billion SAR of contracts. The contract covers the construction of airside infrastructure works, includ- ing the design and building of a Code F runway 3,700 meters, Code B seaplane runway, parallel and link taxiways SAUDI’S FUTURISTIC AIRPORT AWARDS AIRSIDE CONTRACT Nesma & Partners and Almabani win tender to support the gateway designed to make Saudi Arabia a global tourism hotspot. and pavement works, aeronautical navigational aids, aerodrome ground lighting, airside utilities, helipads, roads and associated buildings. “The Red Sea Development Company is making huge progress in the devel- opment of a world leading destination and by awarding our largest contract to date, we take another significant step in this direction,” said John Pagano, CEO of The Red Sea Development Company. The design contract for the airport was awarded to Foster + Partners in October 2019. Its architecture is in- spired by the surrounding landscape. The schematic design stage NOC was received from the General Authority of Civil Aviation (GACA) earlier this year. The location of Red Sea International Airport was accepted along with its airside master plan, and its orientation of 15/33, was approved. Additionally, GACA approved the conceptual air- space and aeronautical studies that draw the approach path for flights bound for the airport, domestically and internationally. In line with the company’s sustain- ability goals, the entire infrastructure of The Red Sea Project, including its transport network, will be powered by 100% renewable energy. The eco-friendly airport design focuses on using shaded areas and natural ventilation to mini- mise the reliance on air conditioning. Once complete, the airport will serve an estimated one million tourists per year catering to both domestic and international flights. Joseph Daher, CEO at Almabani, said: “For this project we will mobilise our most experienced airport resources and qualified experts to ensure we meet our customer’s expectation, and we are ready for the challenging delivery period, especially during this tough sanitary crisis currently affecting the entire globe.” 13 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com MEBAA The Middle East’s main business aviation event, the MEBAA Show, is set to return to Dubai on 8-10 December 2020 at DWC, Airshow Site. The event will showcase the latest technologies, insights and business opportunities shaping the future of business aviation in the Middle East and across the globe. Along with cutting-edge solutions and world-class aircraft on static display, the event will demonstrate, through a confer- ence element, the key trends aff ecting the industry especially following the impact of the Covid-19 pandemic. While commer- cial airlines are having a slow recovery, private-jet companies are seeing a surge in business from new customers. Private fl ights are running at up to 70% or more of normal according to recent studies. New customers are drawn to fl ying private because of health concerns and lower jet prices and this is driving the growth almost entirely. Ali Ahmed Alnaqbi, founding and exec- utive chairman of The Middle East & North Africa Business Aviation Association (MEBAA) said: “We are excited to an- nounce the return of the MEBAA Show, which will be one of the fi rst aviation industry events to run in physical form this year. We are continually monitoring the Covid-19 situation and are working to ensure all appropriate health and safety measures are in place. The health and safety of our exhibitors, attendees, and staff is our top priority.” He added: “The 2020 edition will high- light the tremendous opportunities that business aviation presents. It will also showcase the trends that the market is witnessing this year, and how we expect this to unfold in 2021 and subsequent years. By 2037, the Middle East and Asia- Pacifi c will be the fastest growing mar- kets, with an annual RPK growth rate of 5.7%. We look forward to demonstrat- ing the opportunities that exist as well as welcoming delegates, partners and friends to Dubai once again for this key industry event.” It is expected that more than 7,000 new jets will enter the global private jet industry, of which 10% will be based in the Middle East and North Africa with 682 currently operating in the region. Despite the positive signs, the impact of Covid-19 has been profound and Alnaqbi has called on governments to ensure that business aviation is supported along with commercial aviation. Alnaqbi recently highlighted that some business aviation fi rms are facing serious liquidity crunch following the pandemic. The MEBAA chairman has highlighted that business aviation is a sector that complements commercial travel and can restart much quicker than airlines so must be included in government recovery plans. A key part of business aviation’s recovery and growth will be based on cooperation between traditional competitors, who must exchange knowledge, information and best practices. MEMEMEMEMMMMEMEEMEEMEMMMEMMEEEBABABABABABABABAAAAAAAAAAAAAAAAAAAAAAAAAAAAABAAAAAABAAAAAAAAAAABBBAABABABABAAAAAAABBBAAAAAAAAAAAAAAAAAABAAAAAAAAAAAAAAAAAAAABBBBBAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA MEBAA SHOW TO OFFER GLIMPSE INTO FUTURE OF BUSINESS AVIATION Ali Ahmed Alnaqbi, founding and executive chairman of The Middle East & North Africa Business Aviation Association (MEBAA) December show will showcase the regional trends, technologies and insights in business aviationAugust-September 2020 · AVIATION BUSINESS 14 www.aviationbusinessme.com GALLERY QUEEN OF THE SKIES BOWS OUT AFTER 50 YEARS In July, two of the world’s most recognisable legacy carriers, Qantas and British Airways, became the latest airlines to retire their Boeing 747s. Here is a look back at the iconic jumbo jet, which has served world airlines for fi ve decades.15 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com GALLERYAugust-September 2020 · AVIATION BUSINESS 16 www.aviationbusinessme.com ROYAL JORDANIAN Royal Jordanian was just getting back on-track to good levels of profi tability when Covid-19 struck. CEO Stefan Pichler explains how the carrier has had to go back to the drawing board and come up with a new strategy focused solely on survival. Pichler’s battle to pull the airline through the crisis and Royal Jordanian’s fi ght for survival is of course not unique to the market. The coronavirus crisis and ensuing travel restrictions dealt fatal blows to a number of carriers. But few businesses have had to change strategy and focus so dramatically, from one extreme to the other. The challenge is tough enough for carriers that had high levels of liquidity before the crisis; but for the recovering Jordanian carrier the hurdle is higher still. But undeterred, Pichler is focused on the carrier’s new set of goals and im- mediately set to work to reach them. He explains that Royal Jordanian will begin to reboot its network at the end of the third quarter and start of the fourth. The airline will open “a couple of routes” from August and aim to re- sume around 10 before the end of 2020, Pichler says. “Basically, we will probably end 2020 with around 40%, if that, of our capac- ity. What we try to do is to manage In November, Aviation Business interviewed Stefan Pichler, CEO of Royal Jordanian, to learn about how the airline had successful begun to implement a turnaround plan which had seen the carrier get on-track to desired profi tability. In 2019 the airline achieved a profi t for the fi rst time in years, securing JD10.4 million ($14.7 million) in net profi ts after tax, compared to a JD5.9 million ($8.5 million) net loss in 2018. Operating profi ts increased 174% between 2018 and 2019 thanks to a low-cost, high- revenue strategy that combined the best elements of the budget and legacy models. Six months later, Pichler’s turna- round plan hit the Covid-19 roadblock, plunging the airline back to square one. Jordan’s main airport, Queen Alia International, ceased international fl ights in mid-March, causing revenues to evaporate. Revenues generated by air- lines in the Jordanian market will fall by at least $700 million (52%) compared to 2019, according to the International Air Transport Association (IATA). Royal Jordanian incurred a JD25.5 million ($36 million) net loss in Q1 this year due to a 19% drop in passenger numbers and 22% decline in turnover. And Pichler reckons the impact will be felt even stronger in the remaining quarters of 2020. “We were on target until the end of February this year,” he says wistfully. “Suddenly, more than 90% of your rev- enue breaks away.” Frustratingly for Pichler, he has had to set an entirely new target and the turnaround plan has had to be com- pletely reset: “It was all going in the right direction. We were improving our load factor, we were fi ghting off EasyJet and Ryanair, we had great revenues, we reduced unit costs by up to 4%. And then suddenly our priority now is cash preservation to survive. We had [in July] maybe 8% to 10% of our workforce working, mainly those operating our cargo and repatriation fl ights.” SURVIVAL MODE17 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com ROYAL JORDANIAN our fi xed costs. We have managed to lower our monthly cash outfl ows sig- nifi cantly; it’s now about a third of normal operations. Of course, it’s not sustainable because you can ask lessors to delay payments but in the end you have to pay, for example. Our plan now is basically that by 2023 we will have a demand and capacity off ering which is more than 2019. The recovery will last through 2021 and 2022.” While Pichler has set a timescale for recovery, he assumes that traffi c streams will come back in a staggered manner. He forecasts that domestic and short-haul fl ights – people travel- ling to visit family – will return much quicker than holiday and long-haul travel. Similarly, business travel will take longer to come back, he thinks. This trend could weight on Royal Jordanian, given that much of its pre-Covid busi- ness came from European tourists, who are expected to take more local holidays over the next couple of years. Imagining what the airline industry will start to look like as the market wades into the recovery period, Pichler predicts that there will be an oversupply and overcapacity in the sector. Partly blaming lingering travel restrictions, he envisages low load factors, even when carriers start to open up their networks more fully. In spite of the over-demand, the sector could also see low fares designed to stimulate the market. Naturally, blunted revenues during the recovery period will make it doubly hard for airlines to fl y profi tably and meaningfully and start to pay off the government bailouts that so many have received. Pichler notes matter-of-factly: “It’s survival of the fi ttest. Some [carriers] will face further issues and there will be further consolidation. Those who can manage a bit better, who have a better balance sheet and more cash, will last longer.” Royal Jordanian itself has had to go cap in hand to the Jordanian govern- ment, which is also part owner of the company. The airline recently told its shareholders that it cannot survive the coronavirus crisis without state support. Chairman, Said Darwazeh, noted in a June trading update that Royal Jordanian’s HQ has been all but deserted in recent months as staff work remotely.August-September 2020 · AVIATION BUSINESS 18 www.aviationbusinessme.com ROYAL JORDANIAN “It will change the landscape, you will have further consolidation, the bigger guys will become more powerful and some of the smaller guys will disappear” Stefan Pichler, CEO of Royal Jordanian the airline needs “direct and indirect” support from the government in order to overcome the crisis. While Pichler envisages Royal Jordanian being back on-track by 2022, the business will continue to operate at a smaller size for the remainder of this year and next, and that will likely include the carrier’s fl eet. He notes: “We have lease contracts that run out and we will probably stick with a smaller size in 2022; although we will aim to expand our revenues and profi ts. In 2022 we should be able to get back to a good profi t level, even if we are a bit smaller. Right now our major concern is getting rid of capacity. We will have to see further down the line [what hap- pens to the fl eet’s size]. With the cur- rent low fuel price you can operate less effi cient aircraft, the diff erence is not as big when it comes to costs.” Perhaps the only good thing to have come out of the coronavirus pandemic for Royal Jordanian is its impact on European competitors, who had prior to the crisis, been expanding into Jordan. With Air France, Ryanair and EasyJet re- ducing their networks, Royal Jordanian is in theory able to command more routes between Amman and Europe. Pichler predicts that in the immedi- ate aftermath of Covid-19, airlines in Europe will continue to focus on their core routes and revenue streams, which might open the door to some opportuni- ties for Royal Jordanian. It is perhaps this opportunistic thinking which is partly responsible for Pichler’s success at various airlines over the years. Specifi cally appointed by boards to turn carriers around, Pichler is indeed a valuable asset for Royal Jordanian during the current crisis. Casting his mind back to his experience of other crises in the aviation industry, Pichler mentions his time at Thomas 19 August-September 2020 · AVIATION BUSINESS www.aviationbusinessme.com ROYAL JORDANIAN CARRIER ‘CANNOT OVERCOME COVID-19 CRISIS WITHOUT STATE SUPPORT’ Royal Jordanian in June told its shareholders, who include the Jordanian government, that the carrier cannot survive the coronavirus crisis without state support, despite the airline having achieved profi tability in 2019 for the fi rst time in years. The national carrier is in the midst of a turnaround plan led by CEO Stefan Pichler, who reduced the airline’s losses by hundreds of millions of dollars and brought it back to profi tability prior to the Covid-19 pandemic. But in the company’s annual general meeting with shareholders, Royal Jordanian’s chairman, Said Darwazeh, said the closing of Queen Alia International Airport in mid-March and the halting of all passenger fl ights had hit the carrier hard. Darwazeh said the airline needs “direct and indirect” support from the government in order to overcome the industry-wide crisis. Revenues generated by airlines in the Jordanian market will fall by at least $700 million (52%) compared to 2019, according to the International Air Transport Association (IATA), which has backed Royal Jordanian’s calls for fi nancial relief. “The consequences for the Jordanian economy are severe,” said Muhammad Albakri, IATA’s regional VP for Africa and the Middle East, in a statement in May. “Urgent fi nancial support from the government is needed now to keep the sector alive.” Royal Jordanian incurred a JD25.5 million ($36 million) net loss in Q1 this year due to a 19% drop in passenger numbers and 22% decline in turnover. Pichler warned that the impact of Covid-19 will be felt even stronger in Q2 of this year and subsequent months. “Even if the company resumes partial and gradual operations, one can expect a sharp decrease in the demand for travel regionally and globally,” he said. Pichler has turned several high profi le airlines around in his career, including Thomas Cook AG, Virgin Australia, Fiji Airways and Jazeera Airways, and was on-track to return Royal Jordanian back to “desired profi tability”. Last year, the airline achieved JD10.4 million ($14.7 million) net profi ts after tax, compared to a JD5.9 million ($8.5 million) net loss in 2018. Operating profi ts increased 174% between 2018 and 2019 thanks to a low-cost, high- revenue strategy that combined the best elements of the budget and legacy models. Pichler said: “The positive fi nancial results of the company were obtained through the eff orts exerted by all employees who worked together to implement the pillars of the turnaround plan…and make them a reality despite the fi erce competition from low-cost airlines that have been operating regular fl ights to Amman and Aqaba for more than a year now.” He said that Royal Jordanian “would not be spared” from the impact of Covid-19 on the global air transport industry. “It will be directly and negatively aff ected by the outbreak of this disease this year and in the following years, due to the complete stop of operations for a long period of time and to the strict restrictions imposed in Jordan and globally,” he said. Cook when the September 11 attacks took place in the US. “9/11 happened and tourist demand collapsed by 80%,” he said. “Out of fi ve tourists, four stayed at home. This was a tough time. It’s a similar shock now but it’s lasting much longer. You see the same kind of things and we know what we need to do. It will change the landscape, you will have further con- solidation, the bigger guys will become more powerful and some of the smaller guys will disappear.” Royal Jordanian may be considered among ‘the smaller guys’ in the market but with Pichler behind the helm and with a proven ability to boost profi tabil- ity against all the odds, Jordan’s national carrier stands a chance of emerging from Covid-19 as a stronger player on the Middle East scene. That is providing of course that the government is will- ing to back the airline – a story all too common across the globe. Next >