Australian government to spend $50 million on MH370 search in 2015/2016

Australia will spend $50 million in 2015/16 as part the ongoing search effort for missing Malaysia Airlines flight MH370, budget papers show.

The funding allocation for the coming financial year would provide the necessary funding to the Australian Transport Safety Bureau (ATSB) to increase the search area should the aircraft not be found within the initial 60,000 square kilometre search zone.

“The Government will provide $79.6 million over two years from 2014-15 to continue the search for Malaysia Airlines flight MH370 should the aircraft not be located in the current search area,” the budget papers said.

“The cost of this measure will be offset by financial contributions to the search from other countries.

“The actual cost will depend on a number of factors, including the length of the search.”

The most recent update from the Australian Transport Safety Bureau (ATSB) published on May 6 said about 75 per cent of the existing 60,000 square kilometre search area had been covered. There has been no sign of the Boeing jet.

If the aircraft is not found within that initial search area, Malaysia, China and Australia have agreed to extend the search area by a further 60,000 square kilometres to 120,000 square kilometres.

The expanded search area could take up to a year to complete given the adverse weather conditions in the upcoming winter months, a joint communique released after the April 19 gathering of Australia’s Deputy Prime Minister Warren Truss, Malaysia’s Transport Minister Liow Thiong Lai and China’s Minister of Transport Yang Chuan Tang said.

“All three countries reiterated their commitments to use best efforts in the search for the aircraft,” the joint communique said.

The ATSB said on May 6 the search strategy working group was continuing to review evidence associated with MH370 which “may result in further refinement of the search area”.

The Malaysia Airlines Boeing 777-200ER disappeared enroute from Kuala Lumpur to Beijing on March 8 2014. Based on an analysis of satellite tracking data, investigators believe the aircraft, which had 239 passengers and crew on board, was flown back across the Malaysian peninsula and crashed in the Indian Ocean.

Australian Aviation

Government plans combined tender process for Norfolk and Christmas/Cocos (Keeling) Islands services

An aerial image of Cocos (Keeling) Islands Airport. (PalawanOz/Wikimedia Commons)
An aerial image of Cocos (Keeling) Islands Airport. (PalawanOz/Wikimedia Commons)

Government contracts to operate air services to Norfolk Island, Christmas Island and the Cocos (Keeling) Islands will be up for tender together in 2016, budget papers show.

Currently, the Department of Infrastructure and Regional Development pays Air New Zealand a subsidy to fly to Norfolk Island, located about 900nm off Australia’s east coast in the Pacific Ocean.

The Department also underwrites Virgin Australia’s flights from Perth to Christmas and the Cocos (Keeling) Islands, about 1400nm north of Perth in the Indian Ocean.

“The Government will provide funding over three years from 2015-16 to underwrite essential air services to Norfolk Island and the Indian Ocean Territories respectively,” the budget papers published on Tuesday evening said.

“To enable a combined tender process in 2016, the Government has varied the contract with Air New Zealand for the provision of air services to Norfolk Island to align its expiry date with that of the contract for the Indian Ocean Territories services provided by Virgin Australia.”

The amount of subsidy to be paid for the three years to 2017/18 was not disclosed because the contracts with the two airlines were commercial-in-confidence, the government said.

Air NZ commenced service to Norfolk Island in March 2012, taking over the route from Norfolk Air. The airline currently flies to Norfolk Island twice a week from Sydney, twice a week from Brisbane and with one flight a week from Auckland, in March 2012.

In June 2014, Air NZ’s contract was extended to July 31 2016.

Meanwhile, Virgin Australia began serving Christmas and the Cocos (Keeling Islands) in April 2010, when it was operating as Virgin Blue. It succeeded Cobham Aviation Services on the route.

Currently, Virgin flies non-stop from Perth to Christmas Island on Thursdays and operates a triangular Perth-Christmas Island-Cocos Island-Perth service on Saturdays and Perth-Cocos Island-Christmas Island-Perth on Mondays with Airbus A320s.

In 2009, the now defunct SkyAirWorld was awarded the contract to operate the services with an E-190, but the airline collapsed before it operated any services.

The budget papers also said the government planned to close the Phosphate Hill and Construction Camp detention centre on Christmas Island.


Australian Aviation

Qantas tips $550 million reduction in fuel costs for 2014/2015

Qantas says domestic and international yields improving. (Rob Finlayson)

Qantas has forecast a reduction in its fuel bill of at least $550 million in 2014/15 and says its cost-cutting targets for the full financial year have been met or exceeded.

The details were published in a slide presentation senior Qantas management, including chief executive Alan Joyce, delivered to the financial community during the company’s investor day on Tuesday.

The Qantas group’s fuel costs were expected to dip below $4 billion in 2014/15, a reduction of at least $550 million from $4.5 billion in 2013/14. The total cost of fuel was tipped to come in between $3.92 billion and $3.95 billion.

Moreover, Qantas said its hedging program meant fuel costs were expected to be be no worse in 2015/16 and had the potential to reduce even further.

The outlook for fuel had improved slightly since February, when Qantas said during its first half results presentation it expected fuel costs to be “no more than $4.0 billion at current prices”.

Meanwhile, the slide presentation said Qantas expected to achieve $875 million in savings from its transformation program by the end of 2014/15. The forecast was unchanged from February.

Qantas said all targets to date had been met or exceeded, while the most challenging initiatives had been front-loaded. The company also had “high visibility” on the $1.125 billion in savings still to be realised in 2015/16 and 2016/17 as part of its three-year, $2 billion transformation program.

The program also included the loss of 5,000 jobs. Qantas said 4,000 jobs would have been cut by the end of 2014/15.

Qantas said it was on track to reduce net debt, including operating lease liabilities measured on a constant currency basis, by the previously announced target of $1 billion by the end of 2014/15.

And the airline said it expected to return to an “optimal capital structure” by the end of the current financial year.

Qantas said the reduction in net debt, lower fuel prices and the ongoing cost reductions meant the airline group was “well placed” for the board to consider shareholder returns, with the extent and timing dependent on prevailing operating conditions and outlook.

“The group will remain disciplined with capital allocation, delivering sustainable returns to shareholders alongside investment in growth, by maintaining its optimal capital structure,” Qantas said.

Qantas was expected to announce a bumper full year net profit when it hands down its 2014/15 financial results in August, with market consensus sitting somewhere north of $600 million as the airline group benefitted from lower fuel prices, a more benign domestic market and slower capacity growth on international routes into and out of Australia.

News of the $550 million fuel benefit and encouraging outlook sent Qantas’s share price to its highest level since 2008 on Tuesday, with the stock sitting at $3.62 in afternoon trade, a gain of nine per cent on the day.


Australian Aviation

Malaysia Airlines encouraged by recent Australian traffic growth

Malaysia Airlines (MAS) has described as encouraging recent statistics which showed the airline is growing passenger numbers into and out of Australia.

The Bureau of Infrastructure, Transport and Regional Economics (BITRE) figures showed MAS carried 127,719 passengers between Kuala Lumpur and its Australian ports Adelaide, Brisbane, Darwin, Melbourne, Perth and Sydney in February, up 7.8 per cent from the prior corresponding period.

The airline, which is the Australian market’s eighth largest international carrier by passengers carried, increased its market share to 4.8 per cent in February, from 4.7 per cent in the prior corresponding period.

While MAS regional senior vice president PK Lee said the figures were pleasing, he stressed there was more work to do.

“This is our main market outside of Malaysia and connecting our continents is our ultimate goal,” Lee said in a statement on Tuesday.

“We have been flying in and out of Australia for more than 40 years and are committed to helping this region build closer ties with Asia for mutual benefit.”

MAS suffered two tragedies in 2014, with the disappearance of MH370 enroute from Kuala Lumpur to Beijing and the shooting down of MH17 when over Ukraine on the way from Amsterdam to the Malaysian capital.

The airline is also in the middle of a painful restructuring program that was expected to result 6,000 jobs losses – representing about 30 per cent of its workforce – in addition to the withdrawal of long-haul routes and the disposal of excess aircraft in a bid to turnaround recent heavy losses.

Leeham News and Comment reported on April 30 MAS was offering for sale or lease its six Airbus A380s, as well as six freighter aircraft and a number of other widebodies.

In response to the report, new MAS chief executive Christoph Muller said the airline was exploring fleet options to enhance the viability of long haul routes, adding it was just one area that was currently being looked at.

“As such, recent speculations on the airline offering some of its fleet for sale or lease is too premature when nothing concrete has been achieved,” Muller said in a statement.

“MAS needs to operate and utilize its fleet at an optimum level besides maximizing revenue on the route it flies. The market needs to give Malaysia Airlines room to explore various options in determining the most viable strategy.”

MAS operates about 80 flights a week into Australia with a combination of Boeing 777-200ER and Airbus A330s.

The airline has boosted its presence in Australia through not just a strong schedule of flights, MAS has also signed up Malaysian-born, Adelaide-based television chef and cookbook author Poh Ling Yeow to design a signature dish served on board flights Down Under and lent its support to rising local tennis star Nick Kyrgios, whose mother was born in Malaysia.


Australian Aviation

United Airlines appoints new director of sales for Australia and New Zealand


United Airlines has appointed a former manager at Cathay Pacific at its new director of sales for Australia and New Zealand.

Julie Reid, who has been sales and marketing manager for Australia at Cathay for the past three years and has also worked at travel services provider HRG, takes up her new role on May 20, United said in a statement on Tuesday.

She replaces Alison Espley, who has been appointed as managing director for Japan and Pacific sales and is moving to United’s Tokyo office.

“Julie brings to her role nearly 30 years of extensive global experience within the aviation, travel and hotel sectors,” Espley said.

“I am confident that she will provide strong and inspiring leadership to the Australia and New Zealand sales team and I look forward to working with her in her new role.”

United flies from Los Angeles to Melbourne and Sydney, as well as from San Francisco to Sydney and Cairns to Guam.


Australian Aviation