Kingfisher Shuts Down Low-Cost Operation

Kingfisher Airlines, India’s second-largest airline by passengers carried, will close its low-cost operation, Kingfisher Red, Chairman Vijay Mallya says.

“We are doing away with Kingfisher Red because we don’t intend to compete in the low-cost segment. We believe there are more than enough guests who prefer to travel full-service, and that shows in our own performance, where the load factors in [full-service] Kingfisher Class are more than in Kingfisher Red,” Mallya says.

Kingfisher’s decision signals a pronounced shift in an industry where most full-service carriers are betting on low-cost business. Jet Airways, the country’s largest carrier by market share, recently announced plans to increase its low-cost operations and low-fare flights to short-haul overseas destinations. It said last month that it aims to boost domestic low-fare capacity to 85% of the total fleet from the current 72%.

In addition to dropping its low-cost flying, Kingfisher is considering the sale and lease-back of some of its aircraft and other assets, and converting part of its rupee loan into low-cost foreign currency loans, based on its current foreign exchange cash flow, to improve finances, Mallya said in a letter to shareholders.

The cash-strapped airline will also raise about 20 billion rupees ($410 million) through a rights issue to improve its cash flow.

“Timing is everything. We’ll obviously take all factors into consideration before we launch the rights issue. You must also appreciate the fact that the pricing of the issue will also be a determining factor in how attractive it is. Sometimes, in a bad environment, a lower price becomes an attractive investment,” Mallya’s letter said.

Dismissing concerns about the carrier’s survival, Mallya said promoters of the ailing airline are committed to supporting the carrier and are working out measures to further reduce its debt burden.

“Kingfisher has been working and continues to work aggressively to raise fresh capital,” Mallya said. “As you would appreciate, in a volatile global economic environment and with oil prices as high as they have been, it is not an easy task.”

It has board approval to raise $250 million through global depository receipts, but the proposal was pushed back because of a debt restructuring by lenders earlier this year. Kingfisher issued shares to lenders and founders, helping cut debt by 22% to 60.07 billion rupees. The company issued shares to 14 banks, including State Bank of India and ICICI Bank, which now own 29% of the airline.

Mallya said Kingfisher is also working with the consortium of banks to further reduce its interest cost.

The airline has not reported a profit since going public in 2008 through an acquisition. Since then, it posted cumulative losses of 42.83 billion rupees.

In anticipation of leaving the low-cost market, the company has already started reconfiguring its aircraft. The changeover is planned to be completed in the next few months. The new cabin layout is expected to increase capacity by 10% and significantly improve revenues, Mallya said. The airline operates 370 flights a day.

JAGM In Jeopardy Amid Budget Talks

After multiple attempts to field a single replacement for the Hellfire, TOW and Maverick missiles, the U.S. Army may once again find itself without support for the project.

The U.S. Army has been slated to select a contractor to build the so-called Joint Air-to-Ground Missile (JAGM) by year’s end. Raytheon and Boeing are pitted against Lockheed Martin for the work.

“It is a program that is in trouble right now and needs a lot of support,” says Lt. Gen. Terry Robling, U.S. Marine Corps commandant for aviation. He underscored that the capability is needed by his service at a Sept. 29 breakfast hosted by the Navy League.

Robling noted that JAGM was potentially endangered, owing to Pentagon efforts to substantially curb spending in light of debt reduction talks.

JAGM would incorporate a cutting-edge tri-mode seeker capable of using semi-active laser, millimeter-wave radar and imaging infrared to hit moving targets. Much of the development’s complexity involves mating the missile with high-end fixed wing aircraft, such as the F/A-18E/F Super Hornet and slower, low-altitude rotorcraft.

The weapon eventually would be used by all of the U.S. services and potentially sold to international partners.

Lockheed Martin won the precursor program, called the Joint Common Missile (JCM). But that effort was shelved owing to lack of support and problems with requirements. Because JAGM’s development has yet to begin and major funding has not yet been obligated, the program is more vulnerable to termination than efforts already under way. However, industry officials note that more than $900 million has been spent to date pursuing this capability through the JCM program, as well as on risk-reduction work leading up to JAGM.

Photo: Raytheon

Analysts Assess U.S. Defense Job Cut Impact

Defense Secretary Leon Panetta has warned that a potential $1 trillion cut to the Pentagon budget could raise U.S. unemployment by 1% but analysts differ on how many jobs could be lost and what that actually means for the economy.

The Pentagon estimates that defense spending supports about 6 million jobs—about 3.8 million directly and indirectly in the private sector, 700,000 directly by the Defense Department and about 1.5 million active duty military positions.

Under the August debt reduction deal between President Barack Obama and Congress, the Pentagon has been directed to reduce spending by more than $450 billion against projections based on the White House 2012 budget request.

The same reductions are about $350 billion when measured against a Congressional Budget Office projection of defense spending.

The Pentagon estimates those cuts, which would peak in 2013 and 2014, could result in 500,000 to 630,000 lost jobs, potentially raising the U.S. unemployment rate by four-tenths of a percent.

If a congressional “super committee” fails to reach an agreement on steep deficit reductions, that could trigger automatic across-the-board cuts that would require another $600 billion cut in national security spending.

That, the Pentagon estimates, could result in the loss of 1 million to 1.5 million jobs, further raising unemployment by up to 1%.

Tom Captain, head of the aerospace and defense unit at Deloitte LLP consultancy, said about 1 million people were directly employed in the defense industry.

A 2010 Deloitte study of the industry found that each employee generates an average of $313,000 in revenue. Assuming that level of spending is required to support a defense industry worker, then every $1 billion cut in procurement and contracting could reduce employment by nearly 3,200 jobs.

If the Pentagon is ultimately forced to cut spending by $1 trillion over 10 years, about half of the annual reduction, or $50 billion, could come from procurement and contracting. A $50 billion cut would translate into more than 160,000 lost jobs, Captain said.

The staff of the House Armed Services Committee issued a memo last week estimating 200,000 civilian Defense Department employees could be furloughed as a result of cuts of $1 trillion, with large impacts felt in Virginia, Texas and California. It did not explain how it reached that figure.

Gordon Adams, an American University professor who worked on defense at the White House during the Clinton administration, said jobs would be lost due to program cuts but it missed the point to look at the numbers in isolation.

The package on debt and deficit reduction is aimed at cutting government spending with a view to encouraging overall economic growth and job creation, he said, so cuts in one area are intended to spur growth in another.

“A down-slope in one set of jobs and an up-slope in another set of jobs says the end employment effect might be zero or even positive,” he said.

No Rise in Japan Defense Budget Request

Japan’s Defense Ministry said Sept. 30 its request for funding for the fiscal year from next March is virtually unchanged from the current year as the country faces China’s military buildup while trying to rein in massive public debt.

The ministry said it requested 4.69 trillion yen ($61 billion) in budget appropriations for 2012/13, up 0.6 percent from this year’s actual budget.

Its shopping list for the new year includes a 119 billion yen destroyer, 56.5 billion yen submarine and four next-generation combat planes, the first batch of about 40 fighter jets that will replace aging F-4 Phantoms.

Japan plans to choose its next-generation fighter jet by December. The choice is between Boeing’s F/A 18 Super Hornet, Lockheed Martin’s F-35 Joint Strike Fighter and the Eurofighter Typhoon made by a consortium of European countries.

China recently started sea trials for its first aircraft carrier and is developing radar-evading combat jets, unnerving its neighbors, some of which have bitter territorial disputes with the world’s second-largest economy.

While China’s defense budget has shot up nearly 70% over the past five years, that of Japan, which is constrained by a public debt twice the size of its $5 trillion economy, has fallen 3% over that period, the defense white paper said. The submission of the budget request marks the start of haggling between the Defense and Finance Ministries. The 2012/13 budget will likely be finalized around the end of the year.

Last year, the Defense Ministry initially requested a 0.6 percent annual increase in its 2011/12 budget, but funding was eventually shaved by 0.4 percent.

EBAA, ERA Target Proposed EC Slot Regs

An independent study to evaluate the potential damage to intra-European airlines and the regions and businesses they serve has been commissioned by the European Business Aviation Association (EBAA) and the European Regions Airline Association (ERA).

The two organizations say the study is needed as the European Commission (EC) moves ahead with its plans to amend the current slot allocation regulation. An EC report written in June by U.K.-based consultancy Steer Davies Gleave (SDG) found that changing the rules that allocate slots at Europe’s busiest airports could yield more than $7.1 billion in economic benefit by 2025.

But EBAA and ERA assert that the study was based on the purely theoretical objective of maximizing passenger throughput at coordinated airports by forcing out smaller aircraft and replacing them with larger ones.

The organizations are still searching for a company to do the independent study, says Gamba, with the results released by January.

Cessna Unveils New CJ1+ Variant

Cessna Aircraft on Sept. 26 introduced a new version of the CJ1+, which it calls the M2. It will have a Garmin 3000-based “Intrinzic” flight deck and a fiber optic “Clairity” cabin infotainment system with a wireless router, allowing passengers to use their iPads and other devices.

CEO Scott Ernest says he is pricing the first 47 aircraft at $4 million.

Deliveries of CJ1+ plummeted over the past three years, with 14 delivered in 2009, three in 2010 and only one in the first half of this year. The aircraft was hurt in large measure by the market arrival of Embraer’s Phenom 100, with a larger cabin and lower price tag. The initial surge of Phenoms has ebbed, however, and Cessna believes the time is right to regain share with the M2, which cruises faster, has more range and better hot and high performance.

Photo credit: Cessna

Beechcraft 1900D Crash In Nepal Kills All 19 On Board

A Beechcraft 1900D aircraft, operated by Nepal’s Buddha Air, crashed in the Kathmandu Valley on Sept. 25, killing all 19 people on board.

Flight BHA-103 lost contact with the Tribhuvan International Airport tower in the capital of Kathmandu at 7:31 a.m. local time, soon after it had made a flight around Mount Everest. It crashed 4 min. later about 15 km (9.5 mi.) south of the airfield, according to Civil Aviation Authority of Nepal (CAAN). The turboprop plane was broken into pieces, and the rescue efforts were hampered by bad weather.

Investigators found the flight data recorder several hours after the accident, and the police say an investigation is under way to establish the cause of the crash. Buddha Air has initiated an internal investigation while CAAN has formed a three-member inquiry committee headed by its former chief Rajesh Raj Dali.

Aviation experts said the crash was a typical case of Controlled Flight Into Terrain (CFIT). According to an aviation expert Hemant Arjyal, clouds were low but not moisture-laden. The aircraft would have taken the visual approach and the pilot must have flown “in and out” of the cloud. The aircraft seemed to have been too close to a hill and touched it.

According to estimates, 95% of aviation crashes in Nepal — a landlocked Himalayan state bordering India and China — are due to CFIT, and occur in the rainy season when clouds cover the mountains. Some 201 people have been killed in Nepal in 22 domestic airplane accidents, including Sunday´s Buddha Air crash, since the country adopted the Liberal Aviation Policy in 1992 to ease the emergence of private-sector air transport companies, according to reports reaching from Kathmandu. Eighteen of the aircraft in the 22 accidents were operated by private companies, the report said.

Mount Everest photo: Pavel Novak via Wikipedia

USAF Beech 1900D Photo credit: Alan Rapacki

MROs, Boeing Target 787 Support Market

Two European airline MROs unveiled Boeing 787 component support programs during Aviation Week’s MRO Europe Conference & Exhibition here, but both appear to be planning broader 787 support.

Air France Industries KLM Engineering & Maintenance will offer 787 component pool access, maintenance services and logistics support. Its Epcor subsidiary will offer auxiliary power unit support for the Hamilton Sundstrand APS 5000 on the 787. While it’s still in the definition phase, AFI KLM says it also is working on structures solutions.

Lufthansa Technik (LHT) announced that it has signed a long-term contract with Hamilton Sundstrand, the largest systems supplier on the 787, to service a broad range of its components, including bleedless systems. This agreement also enables LHT to become part of Hamilton Sundstrand’s MRO supplier network for the aircraft.

This follows last week’s news that Japan Airlines selected LHT to provide 787 component support, including repair and logistics services, for its fleet.

So far, Boeing has only announced one airframe GoldCare service provider, Monarch Aircraft Engineering, which Larry Levine, a Boeing executive VP for fleet management, says will still provide that MRO capability despite the fact Monarch Airlines canceled its 787 order. He told Aviation Week that Boeing “is in the process of establishing and formalizing its GoldCare network.”

While AFI KLM has ordered the 787 and Lufthansa has not, if either of their MRO divisions are pursuing GoldCare network status, he said they would be evaluated on a number of technical capability criteria.

In July, Hamilton Sundstrand signed an aftermarket support agreement with Mubadala Aerospace for 787 integrated component support and rotable financing. Mubadala’s MRO companies, SR Technics and Abu Dhabi Aircraft Technologies, will service Hamilton Sundstrand’s components and systems through a licensing agreement, and Sanad, Mubadala’s leasing arm, will provide component financing.

Photo credit: Boeing

Boeing and ANA begin 787 Service Ready Operational in Japan

Dear World Design Team Member, Boeing and ANA officially began an important validation of their readiness for the 787 Dreamliner's entry into service. The week-long service ready operational validation (SROV) will simulate in-service operations across several airports in Japan. ANA pilots, together with Boeing, will fly a 787 on actual airline routes in Japan using airline dispatch and flight rules. ANA's maintenance crews will perform typical ground servicing activities, fit checks of airplane jacks and maintenance hangar stands, towing and refueling the airplane and other routine maintenance operations. This marks the 787 Dreamliner's first visit to Asia and is an important milestone for the airplane as it gets closer to first delivery. See highlights of the 787's service readiness validation athttp://www.newairplane.com/787/firstDelivery.  We've also updated the 787 Design Highlights and launched a new feature with photos and video of the 747-8 Freighter's visit to Cargolux in Luxembourg. Check out all of this new content athttp://www.newairplane.com. Follow us on Twitter at: http://www.twitter.com/boeingairplanes/. Check out the official Boeing YouTube Channel at:http://www.youtube.com/boeing Sincerely, Boeing You have received this newsletter because you opted to be a member of the World Design Team and receive e-mail updates from Boeing. If you'd like to be removed from our mailing list, or have received this e-mail in error, click the unsubscribe link below.  You can change your World Design Team preferences by visiting the WDT Registration Page on the website, http://www.newairplane.com/. Please do not flag the Boeing newsletter as spam or you will no longer receive updates from us.  To view our privacy policy, click here.  (c) Copyright 2011, The Boeing Company. All rights reserved.  Boeing Commercial Airplanes | P. O. Box 3707 | Seattle | WA | 98124  This email was sent to aircraftdesignerkiki@yahoo.co.id. Click here to unsubscribe from the WDT mailing list.

Sunny Summer 787 Sortie

BOE006 lifts off from Boeing Field on the first day of summer