The acquisition marks the latest restructuring efforts in South Korea’s aviation industry. However, the Jeju Air Eastar deal is still in the early stage of discussion. 

The country’s aviation industry is struggling on the back of losses incurred from low travel demand. The dip in travel demand is mainly attributed to the coronavirus epidemic in Southeast Asian countries over the last few months. 

It is reported that South Korea has recorded the highest number of coronavirus cases outside of China, with 4,212 as of this week. 

Another reason affecting South Korea’s aviation industry is the country’s feud with Japan last year. Last July, South Korean airlines slashed Japan flights impact travel volume between the two countries. 

Jeju Jet said in a statement, “With competition with smaller rivals getting tougher, the bottom line was affected by lower demand on Japanese routes due to local campaigns against Japanese products following Japan’s restriction of exports to South Korea since July.”

Currently, Jeju Jet owns and operates a fleet of 40 737 aircraft, media reports said. It offers both domestic and regional services for destinations including Japan, Taiwan, Hong Kong, and Guam. 

Jeju Jet was established in 2005 and is now South Korea’s largest budget airline. It is reported that the airline is currency under crisis and executives are willing to take a 30 percent pay cut.

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The deal will focus on flights between Japan and Singapore, Malaysia, Indonesia, India, and Australia.

Both Singapore Airlines and ANA also signed the deal to stay competitive in the busy and crowded Southeast Asian aviation industry.

The deal will focus on providing connectivity to both Singapore Airlines and ANA’s customers. The two carriers will offer joint mileage programmes to its customers and better coordination on check-in baggage and connecting flights.

The two carriers already have a codesharing agreement which allows them to sell seats on the other carrier’s flights. The new deal will allow the carriers to adjust flight timetables to make connections easier and also cut fares to boost demand.

The deal is subject to regulatory approval. Once approved, Singapore Airlines will become the third airline to have a joint venture agreement with ANA. The Japanese carrier has signed similar agreements with United Airlines in 2011 and Lufthansa Group in 2012.

Last year, Singapore Airlines signed an agreement with Malaysia Airlines to expand their existing codeshare routes. According to the agreement, SilkAir, which is owned by Singapore Airlines, will codeshare on 16 domestic locations with Malaysian Airlines, while allowing the former to codeshare on flights to Europe, South Africa, among other destinations.

During the same period, Vistara, in which Singapore Airlines owns a 49 percent stake, also signed a codeshare agreement with the Singapore-based carrier.

In a press release, Vistara said that Singapore Airlines and regional subsidiary SilkAir have signed an agreement with Vistara to expand codesharing to international routes.

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With regard to the Q4 results, in a statement, the airline said, “AirAsia X Malaysia charted a healthy passenger load factor (PLF) of 81 percent in 4Q19, which was three percentage points higher than the PLF recorded during the same period last year.”

Along with passenger capacity, AirAsia revealed that seating capacity was also up by 4 percent during the period.

According to AirAsia, the frequency of flights flying to destinations such as Bali, Taipei, Seoul, Perth, Sydney and the Gold Coast increased during the fourth quarter.

During the same period, AirAsia also added two new routes which resulted in an increase in passenger capacity. In November 2019, the carrier launched the Kuala Lumpur-Singapore flights that fly 14 times a week. It also added the Kuala Lumpur-Tokyo (Narita) route on top of the existing Kuala Lumpur-Tokyo (Haneda) services.

Recently, AirAsia launched flights between Kuala Lumpur and Okinawa, Japan. The aircraft will fly through Taipei and four times a week.

Tan Sri Rafidah Aziz, chairman of AirAsia X revealed that with the addition of the new flight route to Okinawa, AirAsia X now flies to 35 destinations.

Together with AirAsia Group, this takes the carrier’s combined fleet to over 250 aircraft connecting Okinawa with over 150 destinations across ASEAN, Asia Pacific, the Middle East, and the US.

Last week, the Malaysian Aviation Commission imposed financial penalties on AirAsia Group, AirAsia X and Malaysia Airports Holdings.

According to media reports, AirAsia Group and AirAsia X were charged around RM2 million each as they charged processing fees passengers who used credit, debit cards, and online banking to book tickets.

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Five prospective buyers are in the fray, said Malaysian Prime Minister Mahathir Mohammed, although he did not disclose their identities.

According to sources, among those are Air France-KLM that is expected to bid for a 49 percent stake while Japan Airlines is eyeing a stake of 25 percent.

Apart from these prospective foreign investors, there are also indigenous airline carriers that aspire to purchase a stake in Malaysia’s national airline. One is AirAsia Group and the other is Malindo Air, which is a subsidiary of Indonesia’s Lion Air in Malaysia.

Although the proposals from overseas airline carriers are indeed pretty lucrative, the government of Malaysia has discovered that the sovereign wealth fund that runs Malaysia Airlines prefers a transaction with AirAsia.

The source went on to say that the proposals from foreign investors are more all-inclusive as they seek to leverage the geographical advantage that Malaysia Airlines offers their services.

Following the double setbacks it suffered in 2014 – the strange vanishing of the airplane MH370 and the airplane MH17 being shot down over eastern Ukraine, Malaysia Airlines has been struggling to stay afloat.

And ever since, the Malaysian government is endeavouring to get a strategic alliance for its national airline. The same year, sovereign wealth fund Khazanah Nasional Bhd acquired the airline by paying RM1.4 billion ($345 million) for the 30 percent of shares which did not belong to it.

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According to reports, the regulators will decide whether to revoke or not revoke Hong Kong Airlines’ licence on Saturday.

Hong Kong Airlines must fulfill two conditions put forward by the regulator in order to retain its licence. The airline must secure an undisclosed cash injection set by ATLA, and then raise and maintain cash and cash equivalents, also at an undisclosed level.

Even though Hong Kong Airlines has not made its financials public since it is not a listed company, the Air Transport Licensing Authority confirmed in a statement that Hong Kong Airlines’ financial position has deteriorated rapidly.

Things are so bad for the carrier that it was forced to delay salary payments to its staff and also cut flight routes.

The carrier’s business has been heavily affected by the ongoing anti-government protests on the streets of Hong Kong. Due to the protests, which started in the month of August, the number of passengers travelling to the former British colony has reduced drastically.

According to media reports, arrivals from mainland China tumbled a record 46 percent in October. Overall, the number of passengers travelling to Hong Kong dropped by 44 percent during the period.

Recently, the Hong Kong Airlines Group announced that it has secured a loan of $568 million from state-owned banks.

According to the carrier, it will use the funds to clear salary dues, aircraft leases, airport charges, fuel dues as well as other costs incurred by the carrier.

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AirAsia’s market share in its domestic market in Malaysia has increased by 3 percent year-on-year to reach 60 percent.

With regard to the increase in market share, AirAsia Group’s president Bo Lingam told the media, “This was in spite of intense competition in the domestic market, as we saw irrational fare dumping as well as baggage unbundling by competitors. We nonetheless expect to see a reversal of this behaviour in the fourth quarter of 2019, with our average fares seen higher year-on-year in the upcoming quarter.”

He also added, “We are also determined to bring all Asean AOCs (Air Operator Certificate) into profitability this year, with particular focus on reshaping AirAsia Thailand, by realigning routes and enhancing efficiency while additionally exploring new routes to India as well as Cambodia, Laos, Myanmar, and Vietnam markets.”

Reportedly, the loss in the third quarter is attributed to hefty accounting charges on its aircraft and fuel hedge contracts, as well as foreign exchange volatility.

However, revenue for the quarter increased by 17percent to RM3.07 billion from RM2.61 billion during the same period last year.

According to Tan Sri Tony Fernandes, chief executive officer at AirAsia, the carrier is repositioning its business by adapting new accounting treatment and restructuring the ownership and aircraft leasing process.

Interestingly, the carrier’s income for non-ticket sources increased by 26 percent to RM686milion year-on-year.

Recently, the carrier took the delivery of its first Airbus A321neo in Germany. It has also collaborated with Kiwi.com to sell flight tickets of other carriers on its website.

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The airline will list about 400 million of its shares either in the Ho Chi Minh City Stock Exchange or Hanoi Stock Exchange.

According to Nguyen Khac Hai, Deputy Chief Executive Officer at Bamboo Airways, the initial trading price of Bamboo Airways’ shares could be around $2.59 per share. The shares are expected to trade in the first quarter of 2020.

With regard to its IPO, Bamboo Airways’ chairman Trinh Van Quyet told the media that, “The fundraising will help us to expand our fleet as we want to take 30 percent of the domestic market next year.”

With the funds raised in its IPO, Bamboo Airways’ also plans to become the first Vietnamese carrier to fly direct flights to the US. The company expects to begin US operations by the end of 2020.

According to reports, the carrier is also expecting to receive its first Boeing 787 aircraft by the end of this month. It also announced that it will soon begin flying to Prague in Czech Republic from Hanoi. It will operate its Boeing 787-9 to Prague thrice a week starting in the first quarter of 2020.

Bamboo Airways was launched earlier this year with an investment of around $56 million. Bamboo Airways currently operates 13 leased aircraft on 25 domestic and international routes. After acquiring permission from Vietnam’s Ministry of Transport, the carrier plans to expand its fleet to 30 by March 2020. It also plans to expand its fleet to 100 aircraft by the end of 2024.

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Speaking exclusively to International Finance, the representative added that using advanced technologies was part of its digitisation strategy aimed at generating operational data that can be used to find better efficiencies. “The more things we can digitise, the better we can improve our efficiency and our operations,” he said.

With regard to the use of IoT, AirAsia has pre-installed some of its planes with over 1,000 sensors each. Using IoT, these sensors capture various operational and non-operational data, which is further analysed by the company to boost efficiencies. As an example, the representative said, sensors were being used to help in monitoring its aircraft engines to ensure they are not dirty as they could then end up burning more fuel, which would translate to increased spending for the company.

“Dirty engines consume more fuel, and while engine cleaning is regularly scheduled, monitoring the data allows for adjustments and cleaning. What we can do now is if an engine is starting to burn more fuel, we can go ahead and send it in for washing earlier. Now, we can be more proactive and these things will save us money,” the representative explained.

Apart from this, data received from these sensors is also being used to implement predictive maintenance, a tool built for the company’s defect analysts to determine what is to be done on specific aircraft component or systems prior to them becoming a failure. Such maintenance is said to help the company save costs as it aims to mitigate all operational disruption that could happen from technical delays and turn it into planned maintenance activities.

The representative explained that for every flight, these IoT sensors would help fetch up to 24,000 data parameters related to aircraft systems or component sensors. The data is obtained as soon as the aircraft power is switched on, after which it is transmitted on ground to the cloud server, then captured by the maintenance management systems and eventually analysed by the predictive maintenance machine learning algorithm to predict the failure of a specific target system, like for instance, the depletion of oxygen from the crew oxygen bottle.

IoT aside, the Malaysian airline is also using AI to save costs. In this regard it has partnered with American conglomerate General Electric to use its Flight Efficiency Services (FES) to help make its aircrafts more fuel efficient which helps save both costs and reduce its carbon footprint. This technology by GE, uses the power of the Industrial Internet to help AirAsia make significant savings, through the implementation of precision navigation services, flight data analytics, and fuel management services. The representative explained that the FES helps its airlines improve and follow better navigation routes, that are otherwise estimated to be about 20 percent inefficient across the industry, apart from also helping analyse flight data to optimise aircraft utilisation and fuel consumption. AirAsia forecasts that it will save between $30 million and $50 million over the next five years by using this technology.

Apart from using AI to save costs, AirAsia is also using it to boost efficiencies. One such example is its introduction of AVA (AirAsia Virtual Allstar), an AI powered chatbot that is part of its website and mobile app facelift. This was developed by the company using technology from Ada, a Toronto based company that specialises in AI-powered customer experiences.

The company representative said that this chatbot is aimed at delivering a more seamless, user-friendly experience to airasia.com and the app’s 3.3 million monthly active users, from flight bookings to browsing for deals to online shopping and customer support. AVA, which speaks eight languages, including English and Bahasa Malaysia is helping boost efficiencies by being available on the company’s new live chat feature and responding instantly to inquiries from guests.

Apart from AI and IoT, the company also uses other technologies such as biometric and facial recognition technology. An example is Fast Airport Clearance Experience System (F.A.C.E.S.), a technology that AirAsia introduced in 2018 in an effort to improve the boarding process of its guests.

The representative explained that F.A.C.E.S uses facial recognition technology to identify enrolled guests as they approach the automated boarding gate, allowing them to board their flight without having to present any travel documents, thus helping them save time. While this is already operational at Senai International Airport in the Malaysian city of Johor Bahru, it is expected to be rolled out soon at Malaysia’s Kuching Airport and Melbourne’s Avalon Airport.

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However, analysts believe that it would be a logical move for Air China to acquire the remainder of Cathay in the future. 

Currently, Air China is Cathay Pacific’s second largest shareholder with a 29.9 percent stake. The airline’s first largest shareholder is Swire Pacific with a 45 percent stake. 

According to the South China Morning Post, Air China has four representatives on Cathay’s board. That said, its Chairman Cai Jianjiang is Cathay’s deputy chairman. 

Both Air China and Cathay Pacific work together on flights in addition to their cargo joint venture. The airlines have decided to extend their working relationship until December 2022. 

“Considering Air China’s proposed cooperation with Cathay Pacific was always set to be a more long-term relationship, I don’t think the recent shifts in [Cathay’s] management would really derail things,” Bocom International transport analyst Luya You told the South China Morning Post. 

Air China Non-Executive Director Stanley Hui said any movies initiated by Beijing changing Cathay Pacific’s ownership would give foreign investors a wrong message. 

Last month, Air China ceased its Hawaii operations by cancelling the route between the United States and China as a result of the trade war. According to a media report, the average passenger load on Air China’s Beijing-Honolulu route was 66.37 percent last year, compared to 76.69 percent on average for its international routes.  This is not the first time the trade war has impacted China  national carrier’s decision, the media said.  

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The reasons cited for the lower yield is a weakening yuan which has caused inflation in the country, lower demand from passengers and uncertainty in trade market and economic slowdown due to the on-going trade war between China and the US. The rise in oil prices have also added to the fall in trade In China.

The Chinese airlines’ profit earlier witnessed a decline for the January- June period last week.

China Southern reported a 20.9 percent drop to 1.69 billion yuan in its net profit in 2019 when compared over the same time period in 2018. Meanwhile China Eastern reported a 14.9 percent drop in profit to 1.94 billion yuan in 2019.

Air China, the country’s flagship carrier reported a smaller fall in profit when compared to the other two airlines. Air China’s net profit dropped 9.5 percent to 3.14 billion yuan. Air China’s investments in Hong Kong’s Cathay Pacific Airways produced positive returns which enabled the airlines to reduce the steep decrease in its profits.

All three airlines witnessed a decrease in their passenger yields, with China Southern suffering the steepest decline of 1.65 percent when compared to 2018.

Ivan Su, an equity analyst at Morningstar told the media that the on-going trade war will lead to further decline in profit resulting in a 2.3 percent drop in yield for the year 2019.

The grounding of Boeing 737 MAX by the three airlines has constrained their ability to expand capacity which has led to a failure in achieving the targets.

The three state owned airlines had earlier announced that they would be purchasing 35ARJ21-700 regional jets, a product of Commercial Aircraft Corporation of China.

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