Two of the world's regional aircraft makers are doomed to fail

I did an interview at last week's Singapore Airshow with Embraer's tech guru Satoshi Yokota where I posed the question 'which regional jet aircraft makers will be around 20 years from now?'
Satoshi stopped short of giving his forecast for the future but he did say he thinks the market can only support three.
Today the dominant players are Bombardier and Embraer (and not necessarily in that order).
There is also China Aviation Industry Corp. (AVIC) I, which is building the 90-seat ARJ21-700 and 105-seat ARJ21-900; Sukhoi with its 95-seat Superjet 100; and Mitsubishi Heavy Industries is developing the 70-80 seat Mitsubishi Regional Jet MRJ70 and the 86-96 seat MRJ90.
Satoshi says the industry consolidation that occurred with large aircraft manufacturers will also occur with manufactures in the regional jet aircraft market.
"Its like with the big jets...Lockheed, McDonnell Douglas and so on are all gone" and now there are only two major players, says Satoshi referring to today's industry heavyweights Airbus and Boeing and the withdrawal of Lockheed in 1984 and McDonnell Douglas' merger with Boeing in 1997.
"Can you have a third player" in the regional jet aircraft market?, Satoshi asks rhetorically.
"Probably", he says.
Who that third player will be is anyone's guess.
Satoshi is Embraer executive VP strategy planning and technology development.

Aussie regional carrier Rex has pilot attrition rate of 89%

Australian regional carrier Regional Express (Rex) is currently losing nearly 90% of its pilots each year and says this is because bigger Australian carriers such as Qantas Airways, Jetstar and Virgin Blue are poaching them.
Rex this week released an analysts' briefing document to the Australian stock exchange showing that - for the year to February 2008 - its pilot attrition rate was 89%.
This compares to an attrition rate of around 16% in the 12 months ending 30 June 2006, while in the 12 months ending 30 June 2007 it was nearly 60%.
The acute pilot shortage has forced Rex to suspend services on some routes such as Melbourne-Griffith, Sydney-Cooma and Maryborough-Brisbane.
Rex's rival QantasLink revealed this week it too has been some suspending services due to a shortage pilots.
Some of the routes QantasLink has suspended are Newcastle-Melbourne, Newcastle-Brisbane and Newcastle-Sydney.

To see Rex's briefing document for analysts go to: htt://www.asx.com.au/asx/statistics/announcementSearch.do

China Eastern's rejection of Air China puts it at odds with China's civil aviation minister

Li Jiaxiang was Air China chairman

but is now boss of the CAAC

China Eastern has formally rejected a proposal by Air China's parent China National Aviation (CNAC) for a tie-up between China Eastern and Air China.
In a rather frank letter to the Hong Kong stock exchange China Eastern accuses CNAC of being insincere, failing to properly think through its proposal and it says there is a lack of trust between the two sides.
Instead China Eastern says it has more to gain by working with an overseas strategic investor, namely Singapore Airlines.
What is puzzling is that China Eastern also says that it is rejecting the CNAC proposal on the grounds that there is uncertainty over whether the proposal would get the necessary regulatory approvals.
But the regulator is the Civil Aviation Administration of China which is now headed by Li Jiaxiang.
Li was effectively appointed to the top job in January and prior to that he was chairman of Air China and the chief architect behind the proposed tie-up between Air China and China Eastern.
Li's predecessor at the CAAC, Yang Yuanyuan, had wanted China's 'big three' carriers to remain separate and to compete against each other but Li is of the view that Air China and China Eastern should come together to create a much larger - and supposedly stronger - carrier that can compete more effectively against the foreign carriers moving into China.
If the head of the CAAC is behind the tie-up between Air China and China Eastern, I don't see how getting regulatory approval could be an issue.

Garuda and Lion Air's aircraft orders raises more questions

Garuda Indonesia and Lion Air recently placed orders for Boeing aircraft which raises questions over how these aircraft will be financed and, in the case of Lion, whether it really needs to order so many aircraft.

Prior to the 19 February announcements, Lion already had 122 Boeing 737-900ERs on order which means last week's order for 56 additional 737-900ERs raises its total commitment to 178.

Lion president Rusdi Kirana says the airline plans to only operate 60 737-900ERs in Indonesia and the rest will be for airlines it plans to start in other countries such as Australia, Malaysia and Thailand.

But these markets already have entrenched players who will undoubtedly try and make it hard for Lion to gain a foothold let alone build up a large local fleet.

Rusdi says he has been financing his aircraft by doing sale and leasebacks with GE Commercial Aviation Services.

He also says he been doing deals with financial institutions such as HSH Nordbank and Germany's DVB.

Garuda, meanwhile, is hundreds of millions of dollars in debt and has yet to state publicly what has been the outcome of its negotiations with European creditors.

A significant proportion of Garuda's total debts relates to monies borrowed earlier from European creditors when it bought Airbus A330s in the late 1990s.

Even though these debt matters appear to still be unresolved, the carrier on 19 February placed a firm order for 10 Boeing 777-300ERs.

But who is going to finance this acquisition?

All that one can assume is that the Indonesian Government will step in and pick up the tab although that would be contradictory to earlier efforts by the government to try and make the state-owned carriers less dependent on state aid.

Tycoon to capture Indonesia's airline market

Sometimes downturns can inadvertently create opportunities for new entrants. And it seems one of Indonesia's wealthiest businessmen, Hary Tanoesoedibjo, sees the downturn in Garuda Indonesia's fortunes as an opportunity to enter the Indonesian airline market and grab Garuda's hold over the higher margin business traffic.
Tanoesoedibjo's investment company Bhakti Investama already owns 50% of Indonesia's Adam Air and controls Indonesia Air Transport, a small but profitable charter operator that plans to branch into scheduled passenger operations by operating on small regional routes.
What is more interesting is Tanoesoedibjo's move to establish mainline carrier Star Eagle.
Star Eagle will be positioned as a full service carrier and plans to launch later this year using Bombardier CRJ900s and Boeing 737-800s.
This new carrier will target less price conscious consumers and operate on larger routes within Indonesia as well as from Indonesia to destinations in Asia.
It will be positioned differently to Adam Air, which markets itself as a 'boutique airline' but is perceived as a low-cost carrier.
Having three distinct airline brands targeted at different market segments means in future Bhakti Investama has the potential to be the lead player in Indonesia's airline market.
And Bhakti Investama, unlike other would-be entrants, has the money to achieve its goals.
Tanoesoedibjo is the 15th wealthiest business person in Indonesia according to Forbes magazines' 2007 survey which puts his wealth at $815 million.
Bhakti Investama, the company he founded, owns local TV and radio networks, a national newspaper, road tolls, real estate and other assets.
Garuda, meanwhile, is hundreds of millions of dollars in debt.

Singapore airshow has dearth of commercial aircraft

The Singapore Airshow 2008 is both a civil and a military airshow but you wouldn't know it going by the aircraft on display in the static display area.
The Airbus A380 (MSN 001) was certainly impressive and dominated the static display because if its size.
But the only other commercial aircraft on display was a Britten-Norman Islander, a tiny aircraft that only seats 10 passengers. Talk about going from one extreme to the other.

What was predominately on display was business jets and military aircraft.
Don't get me wrong. The selection of business jets on display was impressive because there were aircraft from the likes of Bombardier, Embraer, Hawker Pacific and others.
And the US and Singapore military was out in force with an impressive line up of fighter jets as well as a Boeing B-1 bomber and some military transports such as the Lockheed C-130.

But - because I am a journalist that focuses on commercial aviation - I was really hoping to see more commercial aircraft.