Malaysia’s AirAsia Group plans air taxi, drone delivery service

KUALA LUMPUR (Reuters) – Malaysia’s AirAsia Group Bhd plans to launch an air taxi service and the country’s first drone delivery service as the budget carrier seeks to diversify amid the coronavirus pandemic, the company’s CEO said on Saturday.

As part of the group’s diversification push, it also aims to launch a ride-hailing service next month as COVID-19 continues to hit air travel.

“The air taxi will have a pilot and four seats. At the moment, we have our team working on this upcoming service by AirAsia,” Chief Executive Tony Fernandes said at the Youth Economic Forum 2021, state news agency Bernama reported on Saturday.

The service should start operating in about 18 months, Fernandes was quoted as saying.

He also announced that the airline’s logistics unit Teleport, which is currently testing an urban drone delivery service with state-backed firm Malaysian Global Innovation and Creativity Centre (MaGIC), would conduct its first commercial delivery by the end of this year.

“(The) idea was brought up three weeks ago and now it’s reality,” he wrote on Instagram.

Fernandes said the group was recovering from the impact of the pandemic and had used the opportunity to accelerate its digital transformation, Bernama reported.

The struggling airline, which reported a fifth straight quarterly loss in November, has been seeking to raise 2.5 billion ringgit ($613.95 million) from loans and investors.

Last month, it said its 33%-owned Japanese unit, which ceased operations last October, had begun bankruptcy proceedings.

($1 = 4.0720 ringgit)

Boeing looking for new $4 billion revolving credit facility – source

Boeing Co has approached a group of banks for a new $4 billion revolving credit facility, according to a person familiar with the matter, as the planemaker battles a prolonged slowdown in commercial air travel due to the COVID-19 pandemic.

Investment-grade rated companies use revolving credit facilities as backstop financing, with these facilities remaining undrawn for the most part.

The U.S. jet manufacturer has the option to raise the size of the two-year credit facility to as much as $6 billion, the person said on Thursday.

A Boeing spokesman declined to comment. The development was earlier reported by Bloomberg News.

Boeing Chief Financial Officer Greg Smith had discussed raising more debt at the company’s quarterly earnings call in January.

Smith said Boeing has “sufficient liquidity” currently, but it continues to consider all options to strengthen its balance sheet.

South Sudan plane crash kills all 10 on board

The authorities in South Sudan have confirmed that a small plane crashed on Tuesday evening in the eastern Jonglei State, killing all the 10 people on board.

The plane crashed at Pieri airstrip shortly after takeoff while heading to the capital, Juba.

A team of investigators will on Wednesday be sent to the site of the crash to conduct preliminary investigations, according to Transport Minister Madut Biar Yel.

The plane belonged to a local aviation company, the South Supreme Airlines. The firm has not yet issued a statement on the crash.

Jonglei State Governor Denay Jock Chagor said he received the news with “shock and horror” and sent condolences to the families and friends of the deceased.

South Sudan’s air safety profile is not yet rated by the International Aviation Safety Assessment Programme. 

But the database on Aviation Safety Network (ASN) shows that at least 10 planes crashed in different locations in South Sudan between 2018 and 2020, which caused about 30 fatalities.

By: Nichola Mandil, BBC News, Juba

U.S. budget airlines plot pandemic breakthrough

The COVID-19 pandemic has reshaped the global travel landscape and U.S. no-frills carriers are pouncing.

As legacy airlines shrink to contain costs, budget carriers Spirit Airlines, Allegiant Travel and privately-owned Frontier Airlines are resuming pilot hiring and expanding networks to seize turf dominated by larger rivals.

The three airlines’ combined U.S. market share, which barely topped 10% before the pandemic, could grow by 10 percentage points this year alone, said René Armas Maes of UK-based consultancy MIDAS Aviation.

“Ultra low-cost carriers want to attack head-to-head; they believe they’re in a better position to rebuild travel demand,” he said.

Las Vegas-based Allegiant has told prospective pilots whose hiring was halted as the pandemic unfolded: “We have recalled all of our furloughed pilots and are now planning for exciting growth opportunities.”

Spirit and Frontier have posted pilot job ads and are taking delivery of Airbus A320neo jets that could open longer routes, including coast-to-coast flying traditionally controlled by legacy, or full-service, carriers.

By contrast, American Airlines has gone from hiring 100 pilots a month before the pandemic to threatening 1,850 furloughs without fresh government assistance on labor costs.

Allegiant also stands to benefit if Congress approves a third round of COVID-19 payroll relief for U.S. airlines, but “would be just fine without it,” Chief Financial Officer Greg Anderson told Reuters.

“The leading indicators suggest that there is a nice growth trajectory for Allegiant,” said Anderson, citing Google searches, indices that track changes in city populations and infection and vaccination trends from the Institute for Health Metrics and Evaluation.

He said customer surveys also show an increased preference for smaller airports and non-stop flights, cornerstones of budget carriers’ business models.

TRIAL AND ERROR

Ultra low-cost carriers, or ULCCs, offer a no-frills experience at rock-bottom fares and charge heavily for extras like bags. They wage fare wars and are pervasive in Europe’s fragmented market but have lagged in the United States.

ULCCs are a tier below carriers like Southwest Airlines, which pioneered the low-cost concept in the 1970s and has grown to become the leading domestic airline. It provides free beverages and checked bags but keeps costs low in part by flying a single fleet-type of Boeing 737s.

U.S. mainline legacy carriers American, Delta Air Lines and United Airlines have diverse fleets that include expensive wide-body jets geared for the kind of business and international travel that has suffered most in the pandemic.

American’s unit costs excluding fuel, a key metric of efficiency, were $0.18 per available mile in 2020, more than double that of budget rivals like Allegiant, according to data compiled by financial services firm Raymond James.

This means Allegiant, which primarily uses second-hand planes and only flies on peak travel days like weekends, can more easily profit on discount fares.

And whereas legacy carriers use a hub-and-spoke network that shuttles people through costly big-city airports, the ULCC business model is based on point-to-point travel to smaller airports where they outsource much of their infrastructure.

Allegiant’s fixed costs account for just around a quarter of its total.

That flexibility helps budget carriers open new routes on a trial-and-error basis. During the pandemic, for example, they have pivoted toward beach and mountain destinations.

“Then if the route is not performing, they won’t hesitate to shut it down,” said George Dimitroff of consultants Ascend by Cirium.

But there are risks.

American, United and Delta have also shifted flights during the pandemic to pick up leisure demand and their market power and geographical reach remain formidable.

Competing with them can lure upstart airlines into relaxing cost discipline – a move described as a “path to hell” by budget airlines entrepreneur Bill Franke, who championed the ULCC model.

Together the three large airlines control around 60% of domestic travel and could chase away rivals on smaller routes if they choose, industry critics said.

But they are more burdened by debt than the ULCCs and continue to burn through millions of dollars every day, hampering their ability to grow, the critics said.

BUDGET SHIFT

Beyond low fares, experts said the pandemic has given budget carriers a fresh argument for previously wary customers.

Traditional airline perks like catering services have lost their luster in an era of masks, and budget airplanes feature the same hospital-grade aircraft filtration systems as others.

And they could benefit from more cost-conscious small and medium sized businesses changing travel policies to favor lower-cost airlines, albeit constrained by their more limited flying through large hubs.

“More price-sensitive travel will be the new normal for the next couple of years at least,” Armas Maes said.

Even so, today’s outsiders will face a competitive cycle.

After the last downturn, low-cost carrier JetBlue Airways grabbed market share from American on the U.S. east coast. Now it is grappling with competition from ULCCs and is teaming up with its old rival.

Boeing to build pilotless fighter jets for U.S. and Australian Air Force

Boeing Plane-maker will use a pilotless, fighter-like jet developed in Australia as the basis for its U.S. Air Force Skyborg prototype, an executive at the plane maker said on Tuesday.

The “Loyal Wingman”, the first military aircraft to be designed and manufactured in Australia in more than 50 years, made its first flight on Saturday under the supervision of a Boeing test pilot monitoring it from a ground control station in South Australia.

Boeing’s Loyal Wingman is 38 feet long (11.6 metres), has a 2,000 nautical mile (3,704 km) range and a nose that can be outfitted with various payloads. The plane can also carry weapons and act as a shield to help protect more expensive manned fighter jets.

The U.S. Air Force in December awarded multi-million dollar contracts to Boeing, General Atomics, Aeronautical Systems, Kratos Defense and Security Solutions to produce unmanned aerial prototypes that can team with crewed jets.

“The airpower teaming system is the basis for our Skyborg bid,” Boeing airpower teaming programme director Shane Arnott told reporters. “Obviously the U.S. market is a big market. That is a focus for us, achieving some sort of contract or programme of record in the United States.”

Defence contractors are investing increasingly in autonomous technology as militaries around the world look for cheaper and safer ways to maximise their resources.

Australia, a staunch U.S. ally, is home to Boeing’s largest footprint outside the United States and has vast airspace with relatively low traffic for flight testing.

The Australian government said on Tuesday it would invest a further A$115 million ($89 million) to acquire three more Loyal Wingman aircraft for the Royal Australian Air Force (RAAF) to develop tactics for using the jets with crewed planes, on top of its initial investment of A$40 million.

“Our aim with Boeing is to understand how we can get these aircraft to team with our existing aircraft to be a force multiplier in the future,” RAAF Air-Vice Marshal and head of air force capability Cath Roberts said.

Britain in January signed a GBP 30 million ($42 million) contract with the Belfast unit of Spirit AeroSystems for a similar type of pilotless aircraft to have a trial flight in the next three years.

During the test flight in Australia, the Loyal Wingman took off under its own power before flying a pre-determined route at different speeds and altitudes to verify its functionality and demonstrate the performance of the design.

Arnott said that three Loyal Wingman aircraft would be used for teaming flights this year and that the Australian government’s order would take the number available to six.

Boeing has said up to 16 Loyal Wingman jets could be teamed with a crewed aircraft for missions.

($1 = 1.2900 Australian dollars)

($1 = 0.7200 pounds)

U.S. manufacturing sector at three-year high, cost pressures mounting: ISM

U.S. manufacturing activity increased to a three-year high in February amid an acceleration in new orders, but factories continued to face higher costs for raw materials and other inputs as the pandemic drags on.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rebounded to a reading of 60.8 last month from 58.7 in January. That was the highest level since February 2018.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index edging up to 58.9 in February.

The increase was despite a global semiconductor chip shortage, which has hurt production at automobile plants.

The survey added to solid January data on consumer spending, building permits, factory production and home sales in suggesting that the economy got off to a strong start in the first quarter, thanks to nearly $900 billion in additional COVID-19 relief money from the government and a drop in new coronavirus infections and hospitalizations.

But the year-long pandemic has gummed up the supply chain, boosting production costs for manufacturers. The survey’s measure of prices paid by manufacturers jumped to a reading of 86.0, the highest since July 2008, from 82.1 in January.

This follows data last month showing a surge in consumers’ near-term inflation expectations, and fits in with views that inflation will accelerate in the months ahead. Economists are, however, split on whether the anticipated spike in price pressures will be transitory or not.

U.S. Treasury yields have risen, with investors betting that extremely accommodative monetary and fiscal policy will boost inflation. Federal Reserve Chair Jerome Powell has played down these fears, citing three decades of lower and stable prices.

There is also ample capacity in the labor market, with at least 19 million people on unemployment benefits. But Americans grounded at home by COVID-19 have accumulated excess savings, which can provide to a powerful tailwind to spending.

Manufacturing has been driven by strong demand for goods, like electronics and furniture, as 23.2% of the labor force works from home because of the virus. Demand could, however, shift back to services in the summer as more Americans get vaccinated, and slow manufacturing activity from current levels.

The ISM’s forward-looking new orders sub-index increased to a reading of 64.8 last month from 61.1 in January. Factories also received more export orders and order backlogs swelled. As a result, factories stepped up hiring last month.

The survey’s manufacturing employment gauge rose to 54.4, the highest reading since March 2019, from 52.6 in January.

That offers cautious optimism that employment growth picked up last month after nonfarm payrolls increased by only 49,000 jobs in January. The economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic.

China studies recertification plan for Boeing 737 MAX: Aviation regulator

China’s aviation regulator is studying a plan with Boeing Co on the recertification of Boeing 737 MAX, which has been grounded for nearly two years, the agency’s vice head Dong Zhiyi said on Monday.

The Civil Aviation Administration of China (CAAC) will conduct airworthiness tests in a orderly and planned way until the major safety concerns are properly addressed, Dong told a press conference.

British Airways owner IAG calls for digital health passes

British Airways owner IAG has called for digital health passes “to reopen our skies safely” as it posted a record loss for 2020 due to Covid disruption.

British Airways plane interior

IAG posted an operating loss of €7.4bn (£6.5bn) for last year after the pandemic grounded many of its flights.

UK-focused airlines got a boost this week from government plans for travel markets to possibly reopen from mid-May, prompting a flood of bookings.

But uncertainty remains about what routes will be available.

The airline group – which also owns Iberia, Aer Lingus and Vueling – called for “a clear roadmap for unwinding current restrictions when the time is right.”

“We’re calling for international common testing standards and the introduction of digital health passes to reopen our skies safely,” said IAG’s boss Luis Gallego.

IAG said that the ongoing uncertainty and duration of the pandemic meant that it could not provide a forecast for future profits.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: “There’s no getting around just how ugly IAG’s final results are.

“With the coronavirus crisis clearing the skies for over a year, it’s not unexpected to see IAG operating as just a shell of its former self.

“Management has responded in the only possible way – by securing new funding and slashing costs – but ultimately the group is at the mercy of the government’s travel restrictions.”

The government is in the process of talking to to G7 and other countries to try to build a consensus on how to allow more foreign travel.

Greek tourism minister Haris Theoharis told the BBC last week that early technical discussions were underway with UK officials about how a potential passport scheme might work.

Planes parked

The International Air Transport Association (IATA) also said this week that it expects its digital Covid Travel Pass will be ready soon.

The pass is an app that verifies a passenger has had the Covid-19 tests or vaccines required to enter a country. It also verifies they were administered by an approved authority.

Transport Secretary Grant Shapps said a review of how to return to international travel while managing risk from imported cases and virus variants would report on 12 April.

Capacity cut

IAG said that revenues last year sank by 69% from €25.5bn to €7.8bn amid the coronavirus-related restrictions on travel.

During 2020 it operated at a capacity of just 33.5% of the levels seen in 2019, and for January to March this year it expects capacity will drop to just 20% of pre-pandemic levels.

The airline group has been trying to boost its finances as it burns through cash in the pandemic.

Most recently, BA secured an extra £2.45bn through a UK government-backed loan and from deferring pension contributions.

Last October, IAG got shareholder backing for a €2.74bn rights issue, adding to savings made from 12,000 planned job cuts.

Despite the hefty losses, IAG has stuck to its plan to buy Spain’s Air Europa, announcing in January the price tag had halved to €500m, with payment deferred for six years.

Boeing 777 makes emergency landing in Moscow after engine sensor problem

A Rossiya Airlines Boeing 777 cargo plane made an emergency landing at Moscow’s Sheremetyevo airport on Friday due to a problem with an engine control sensor, said airline said.

The plane was a 15-year-old 777-300ER, according to flight tracking website FlightRadar24, which means it has General Electric engines.

Those are different from the Pratt & Whitney PW4000 engines under scrutiny after an engine fire aboard a United Airlines 777 on Saturday which prompted the suspension of operations involving planes using those engines.

General Electric did not immediately respond to a Reuters request for comment.

Russian airlines operate Boeing 777-300ER planes equipped with General Electric GE90-115B engines, federal aviation agency Rosaviatsiya said on Wednesday said, adding it was not considering suspending operation of those aircraft.

Rossiya Airlines Flight 4520, travelling from Hong Kong to Madrid, touched down in Moscow at 0444 local time (0144 GMT), data from Flightradar24 showed. Rossiya Airlines, a unit of Russian state carrier Aeroflot, said the crew requested the landing at the airline’s base airport in Moscow.

“The landing took place normally,” Rossiya said in a statement, adding that the flight would continue to Madrid after 0900 GMT on Friday.

Czech airline group Smartwings returns Boeing 737 MAX to service

(Reuters) – Czech airline group Smartwings said on Thursday it had returned Boeing’s 737 MAX 8 to service after a nearly two-year absence.

European regulators in January lifted a 22-month ban on flights of the 737 MAX airplane after a design and pilot training overhaul in the wake of crashes that had killed 346 people.

Smartwings has seven of the planes in its fleet and returned the first to service on a regular flight from Prague to Malaga. It aims to have the other six planes in operation by the summer season, it said.