UPDATE 2-Brazil’s airline Varig to go on auction block

By Denise Luna

RIO DE JANEIRO, Brazil, May 9 (Reuters) – Brazilian airline Varig's (VAGV4.SA: Quote, Profile, Research) routes and planes will be auctioned for a minimum price of $860 million under a plan approved by creditors and the government at a meeting on Tuesday, marking the latest chapter in a contentious bankruptcy saga.

"We were able to reconcile (different) interests and we took a big step" toward saving the carrier, Varig President Marcelo Bottini said at a hangar at Rio de Janeiro's Santos Dumont Airport.

Domestic and international routes will be sold together at the auction in about 60 days under the plan designed by consultants Alvarez & Marsal. The firm has been given the task of rescuing the traditional flagship airline from collapse.

Varig, which is operating under bankruptcy protection, has lost its domestic market leadership and now ranks third behind Brazil's biggest airline TAM (TAMM4.SA: Quote, Profile, Research)(TAM.N: Quote, Profile, Research) and No. 2 Gol (GOLL4.SA: Quote, Profile, Research)(GOL.N: Quote, Profile, Research).

If the minimum price is not met, the foreign and domestic routes will be sold separately. The domestic operation would go on sale at a minimum price of $700 million.

The auction will separate flying operations from the part of the company that deals with ticketing, reservations and the frequent flyer program.

Varig, with 10,000 employees, has debts of more than 7 billion reais ($3.38 billion).

Brazil's state-run BNDES development bank would provide a loan of nearly $100 million for the company to keep operating until the auction, said Marcelo Gomes, who is in charge of Varig's recovery plan at Alvarez & Marsal.

BNDES will offer the loan to interested companies which will then lend the money to Varig. An eventual Varig buyer can pay back the credit, or if the same lender buys Varig, the winning bidder can discount the sum from its offer.

The overall Varig fleet to be offered includes 46 planes. The domestic operation would consist of 30 aircraft

Financial investors can bid for the whole operation. But for the domestic part they must bid together with an operating airline. BNDES can finance up to half of the offer paid at the auction.

Gomes said 10 companies had already shown an interest, including former Varig unit VarigLog, which had offered $400 million for the operational part of the firm. He gave no other names, but said he expected a lot of bidders.

A data room, where potential bidders can obtain all crucial information about Varig and the sale, will be opened within 30 days.

The Varig brand name will be preserved for international flights but its use for domestic routes is still being discussed.

Original Article 

Airline Worker Loads Unscreened Bag To Highlight Risks

Man Says Screenings Of Employees, Belongings Lacking

POSTED: 7:29 pm EDT May 9, 2006

INDIANAPOLIS — In a demonstration for 6News, an airline employee loaded an unscreened bag onto an airplane to highlight what he says are security risks at Indianapolis International Airport.The ground crew employee, who spoke to 6News on condition of anonymity, said workers access the airport's restricted areas by swiping a badge through a machine but encounter no metal detectors or guards. They also can ship packages to friends and relatives by putting them with a plane's cargo without any security personnel checking the bag, he said.

The worker said he put an unscreened bag onto a plane bound for Cincinnati-Northern Kentucky International Airport. He gave 6News' Jeremy Brilliant the flight number, a claim ticket and a description of the bag.

Brilliant went to the Cincinnati airport and picked up the bag, which was unloaded with the rest of the flight's luggage.

The bag contained nothing sinister — it had a cell phone and some batteries — but the employee said he and other ground crewmen can send just about anything because they and their belongings are not physically checked.

"I know that my airline and the other airlines all kind of have the same act that takes place," the worker told Brilliant.Earlier this week, 6News reported that the worker used a hidden camera to record himself boarding two empty planes without submitting to physical checks.David Kane, the federal security director for Indianapolis International, said regular physical inspections aren't necessary, in part because workers are subject to random searches and undergo extensive background checks. He said workers' names are continually checked against terrorist watch lists.

"The risk analysis that's been done for this location (indicates) the system we have is adequate," Kane said. Criticism of airline worker screenings isn't confined to Indianapolis. In an evaluation of security, the Coalition of Airline Pilots Association gave the aviation industry a failing grade for employee screenings. The report noted that badge-swiping is usually the most stringent measure workers face to gain access to restricted areas.

"A single plastic ID card — with not actually inspecting the people themselves and ensuring that the individual with the card is the real person and making sure that the ramp is secure — leaves openings," the coalition's Jay Norelius said.

Tim Ferrell, a former ramp agent with Indianapolis-based ATA Airlines, said he won't take commercial flights because he believes employee screenings are not stringent enough.

"I wouldn't encourage anyone in my family to fly commercially until they get something better done security-wise," Ferrell told 6News.

A few U.S. airports have physical screening programs in place for employees, Brilliant reported. They include San Francisco International Airport, Miami International Airport, and Denver International Airport.

Original Article 

Delta acknowledges threat of pilot strike cost airline millions

Associated Press

ATLANTA – Delta Air Lines asked a bankruptcy judge Tuesday to approve its agreement with pilots for about $280 million in annual contract concessions and acknowledged for the first time that the threat of a pilots strike had cost the carrier millions of dollars a week.

In a filing with the U.S. Bankruptcy Court in New York, Delta said the agreement will save its debtors hundreds of millions a year "which is vital to the Debtors' transformation and long-term survival."

Delta, which filed for bankruptcy protection in September, previously agreed to $1 billion in annual concessions, including a 32.5 percent wage cut, in a five-year deal in 2004. It then sought an additional $325 million in cuts from its nearly 6,000 pilots, who threatened to strike as an April 15 deadline for an agreement approached.

"Even the threat of a pilot strike was costing Delta millions of dollars per week in lost sales, as concerned passengers and shippers booked flights on other airlines," Delta said in its filing, adding to its argument that the court should accept the pilot agreement.

Royal Jordanian Airline Selects PROS for Revenue Management Solutions

HOUSTON –(Business Wire)– May 8, 2006 — PROS, the world's leader in pricing and revenue optimization science and software, and the pioneer and dominant provider of revenue optimization to the travel and transportation industry, today announced the signing of a new partnership with Royal Jordanian Airline. Royal Jordanian Airline licensed the PROS Airline Solutions Suite, which includes the PROS 6 Revenue Management System, the PROS Group System and the PROS Network Revenue Planning System (NRPS).
!– OAS_AD(‘Middle’); //–>

<A TARGET="_top" HREF="http://ad.doubleclick.net/click%3Bh=v5|33e1|3|0|%2a|b%3B25692241%3B0-0%3B0%3B12468814%3B4252-336|280%3B14507064|14524960|1%3B%3B%7Esscs%3D%3fhttp://www.getpacket8.net/vo/18668950445/"><IMG SRC="http://m.2mdn.net/982200/336_280_TMC_DEFLATE.gif" BORDER=0></A>

"After an extensive evaluation of all solutions available, Royal Jordanian is pleased to select the state-of-the-art PROS Revenue Management Airline Solutions Suite," said Royal Jordanian President and CEO Samer Majali. He further states, "As Royal Jordanian continues its expansion and prepares for membership in the oneworld alliance, our objective is to find the absolute best solution from the best provider. We are delighted that we have achieved this through our new partnership with PROS. Our expectation is that the PROS Suite of systems will enable us to maximize revenue from all segments of passenger business with renewed strategic and tactical focus."
With the PROS Airline Solution Suite, Royal Jordanian will benefit from proven scientific forecasting and optimization techniques and sophisticated decision support tools to establish a competitive advantage in formulating revenue management and pricing strategies. The solution maximizes revenue for Royal Jordanian by optimizing inventory with the appropriate fare mix, by evaluating the right price for groups and managing the entire group business process, and by rationalizing the pricing structure to leverage network traffic mix.

"We are extremely honored that Royal Jordanian selected the PROS Airline Solution Suite for their revenue management mission," said Benson Yuen, President Airline Group at PROS. "With the deployment of the PROS revenue maximizing business solution, this is the beginning of a long and successful partnership with one of the most established airlines in the Middle East," he added.

About Royal Jordanian

Established in 1963 as Jordan's national carrier, Royal Jordanian is a pioneer in the airline industry and continues its journey to become the airline of choice connecting Jordan and the Levant with the world.

For the past 43 years, Royal Jordanian represents the epitome of luxury, safety, and convenience in air travel. The airline is recognized for its innovative strategies and policies that result in efficient and reliable service.

Royal Jordanian has developed an extensive network expanding to 51 destinations that connect the Middle East to the world. In 2002 the airline embarked on a fleet renewal program with the Airbus 340 aircraft giving its passengers an experience of luxury. In 2005 the airline received new aircraft such as the turbo-propeller Q400 which is the aircraft of choice for short-haul destinations. The new Airbus 320 and 321 are designed with the passenger's convenience in mind in all classes on regional and medium-haul routes. With the all new Audio-Video on Demand (AVOD) System, every passenger can choose from the vast collection of recently released movies or listen to their choice of music from our diverse modern music library. Royal Jordanian Airline recently signed a contract acquiring seven Embraer 195s from the Brazilian manufacturer Embraer.

Royal Jordanian is a public shareholding company that saw the privatization process begin in February 2001, under the name of "Alia" the Royal Jordanian Airline Public Shareholding Company. A testimony of Royal Jordanian's commitment to excellence, Royal Jordanian has been invited to join the oneworld global alliance in October 2005 – making Royal Jordanian the first airline in the region to be given such a prestigious honor that will benefit both oneworld and Royal Jordanian Airline.

Website: http://www.rj.com

About PROS

PROS is the world's leader in pricing and revenue optimization solutions and the pioneer and dominant provider of revenue optimization to the travel and transportation industry. PROS is the world's leader in pricing and revenue optimization solutions with over 250 deployed solutions across 12 major industries, optimizing millions of pricing decisions every day. PROS has more than 110 clients in 39 countries. PROS' clients include 17 of the top 25 carriers in the airline industry.

The PROS mission is to maximize the revenue of each client using PROS' industry-leading revenue optimization science, enterprise profit optimization, and pricing optimization solutions. PROS' clients report annual incremental revenue increases of 6-8% as a result of demand forecasting and revenue optimization. PROS' solutions forecast demand, optimize inventory, and provide dynamic pricing optimization to maximize revenue.

Founded in 1985 in Houston, Texas, PROS has 29 straight quarters of profitability, in large part due to the intellectual capital of its staff. Over 100 of PROS professional staff have advanced degrees including 22 Ph.D.s., and the staff speaks a cumulative total of 26 languages.

To learn more about pricing and revenue management, please visit our website: www.prosrm.com.

More airline chaos threatened

Beleaguered airline passengers in Norway had better prepare for more trouble reaching their destinations. Talks have broken down between air traffic controllers and their employer, Avinor, and they may strike in a few weeks.

More airport scenes like this can occur if the air traffic controllers go out on strike. PHOTO: ERLEND AAS/SCANPIX

Work slowdowns and a spate of air traffic controllers calling in sick paralyzed airline traffic through Norwegian airports last year. The Civil Aviation Administration (formerly Luftfartsverket, now Avinor) underwent a management change, a truce was called and negotiations ultimately began over a new labour contract.

The union representing the air traffic controllers (Norsk Flygelederforening) broke off talks with Avinor, however, just before the weekend. The reason: A chronic shortage of air traffic controllers.

"Avinor has acknowledged that there's a staffing crisis," said union leader Rolf Skrede. "The negotiations involve getting some offers on the table to ease the chaos."

Newly educated air traffic controllers won't be cleared for duty until 2008. There's now a reported shortage of 100 air traffic controllers in Norway, and 30 of those currently on the job are due to retire soon.

The union is arguing for higher pay and benefits that might lure back around 40 air traffic controllers who have left Norway to work for higher pay in other countries. While annual pay for air traffic controllers in Norway ranges from NOK 350,000 to 600,000 (USD 57,000-98,000), air traffic controllers can earn as much as NOK 950,000 in England or more in the United Arab Emirates.

Avinor officials said they believe their dialogue with the air traffic controllers will pick up again. A strike can be called from May 22.

Original Article 

Airline criticism of Airbus A350 forces airframer to make radical changes to fuselage, wing and engines

^{By Guy Norris in Los Angeles}

Airbus is working on a dramatic redesign of its planned A350 long-range widebody twin that is aimed at an all-new aircraft family capable of leapfrogging the rival Boeing 787 as well as the 777, Flight International reveals in this week’s issue.

Airbus went back to the drawing board on the A350 after vocal criticism from key customers such as International Lease Finance, and is expected to reveal details of the initiative in July.

The new family is expected to comprise three versions, the A350-800, -900 and -1000. Key design changes from the earlier A350 include a wider fuselage cross-section, larger all-composite wing, higher Mach 0.85 cruise speed and more powerful engines in the 85,000-90,000lb (380-400kN) thrust class.

The -800 is aimed at the 787-3/8/9 and will continue to be billed as Airbus’s A330-200 replacement. The -900 is similarly aimed at the 777-200ER and 787-10, while the -1000, with seating for around 350, will for the first time give Airbus a very large twin with the range and similar payload capability of the 777-300ER.

Flight International understands Airbus internal planning documents claim new technology engines and lighter structural weight will enable it to achieve up to 20% lower fuel burn than the 777-300ER. The adoption of the new cross-section, the first change for any new Airbus single-deck widebody since the original A300 design of the late-1960s, is particularly significant.

The new fuselage, although close to the 777 diameter with the addition of around 500mm (19in), is expected to retain the same materials technology as the original A350. The move to the larger twin concept also means the formal abandonment of Airbus’s fundamental belief in its long-range four-engined policy.

It is understood that the common cross-section is likely to be adopted over an alternative study that favoured retaining the original diameter for the smaller -800/900 and increasing it for the -1000.

While dramatically enhancing the product’s overall competitiveness against both the 777 and 787 families, it will also inevitably delay the development schedule. Under the original A350 plan, Airbus expected to put the first aircraft into service in late 2010. Under the revised schedule, first delivery is expected to be no earlier than 2012.

The new plan would call for the introduction of the -900 first, with the -800 following and the -1000 coming last in late 2013 or early 2014. The move is also pivotal on the engine makers which, in the case of General Electric and Rolls-Royce, were already  well-advanced on powerplants. The thrust requirement is now well above the mid-70,000lb level originally expected.

One option would be to retain the existing GEnx-1A72 and Trent 1700 engines for the new A350-800/900 – taking advantage of integration work already completed – and develop modified, higher-thrust derivatives for the -1000. Another would be to develop new baseline engines in the 90,000lb-thrust class and derate them for the smaller models.

The engine requirement for the revamped A350 has also attracted the attention of the GE Pratt & Whitney Engine Alliance (see related story).

Airbus says: “There has definitely been no decision on the A350 taken yet. We have an A350 already which has been successful in the marketplace. We are talking to customers to see if we should do any optimisation. When we have a clearer picture we will take an internal decision on this.”

Original Article 

Thai Airways cargo plan may include creating freight airline

^{BRENDAN SOBIE/SINGAPORE}

Thai Airways International is to implement a new cargo strategy that could include the creation a dedicated freight arm. The airline is seeking to lease two Airbus A300-600Fs and two Boeing 747 freighters and will also convert some of its passenger aircraft to cargo.

According to a source at the airline, the carrier’s cargo department is considering launching a dedicated freighter operation at the end of 2006 with two A300-600s and two 747-200s or 747-400s.

The source says that Thai is evaluating both dry- and wet-lease options for starting freighter operations, but “after two years we plan to convert our passenger aircraft”, starting with two A300-600s and two 747-400s.

Another source says the carrier’s planning department has recently begun a separate review of its 21-strong A300-600 fleet. The source says that Thai is considering replacing eight of its oldest A300-600s in two to four years and may convert them into freighters.

The source says that Thai has already received briefings on the new Airbus A350 and Boeing 787, but that the carrier will also consider acquiring additional A330s or 777s. The review has just begun and will take about another six months to complete.

An initial order for eight aircraft could be placed in 2007 with further orders to follow as the remaining 13 A300-600s are phased out. Thai uses its A300-600s for domestic and intra-Asia routes, but the source says Thai is interested in acquiring a replacement that has the flexibility to also operate some long-haul routes.

Thai now has A300s, A330s, A340s, 747s and 777s in its widebody passenger fleet plus A380s on order but currently does not operate any freighters.

It has long considered establishing an all-cargo operation and the new freighter study was launched earlier this year at the urging of the government, which is trying to promote the new Suvarnabhumi International airport into a regional cargo hub. Suvaranabhumi is due to open late this year, or roughly the same time that Thai will launch freighter operations, pending board approval.

Sources say Thai’s first priority is to launch long-haul freighter services, preferably with 747-400Fs, but it may be forced to lease 747-200Fs if no -400s are available. The A300-600Fs would be used for regional cargo services. Industry sources say Thai also has inquired with conversion companies about converting some of its 737-400s.

Original Article 

China airline fleet to almost double to 1,580 aircraft by 2010 – report

BEIJING (AFX) – China will increase the size of its civilian aircraft fleet to 1,580 from the current 863 by 2010, the China Daily reported, citing a senior official.

Over the weekend, the official newspaper cited Gao Hongfeng, vice-minister of the Civil Aviation Administration of China, as saying that the fleet would grow to 4,000 aircraft by 2025 to support robust growth in the domestic travel market.

He projected that the mainland's domestic air travel market will grow 14 pct annually until 2010, with the rate averaging about 11 pct a year from 2011-20.

A total of 27 airlines in China last year handled 138 mln passengers, up 15.5 pct from a year earlier. The amount of cargo handled rose 13.8 pct year on year to 3.06 mln tons.

The paper noted that Boeing has projected that China will need 2,600 new aircraft, worth about 213 bln usd in total, over the next two decades. It expects China's fleet to reach 3,200 aircraft by 2024.

Original Article 

Politics hijack Japan’s airline industry

TOKYO – The new $3 billion Kobe airport has been open for just two months, but already there are lines of planes waiting to take off and land.

 

In the first weeks of operation, air-traffic controllers were forced to order an unusually high number of incoming flights to circle the airport so planes on the ground could get safely in the air. The new airport in Kobe is the third major airport within a 25-mile radius.

 

The crowded skies over Osaka Bay are a symptom of a wider problem of scattered airports that is turning Japan, once the biggest hub in Asia, into a destination international air travelers increasingly avoid. In a country with so many airports competing with one another, critics ask, just how many airports can Japan sustain?

Japan has 97 airports. And counting. Throughout the last decade of dismal economic growth, municipalities and prefectures continued to cut ribbons on new airports at a breathless pace.

The proliferation of airports has not resulted in lower prices for consumers here. In a country of 126 million highly mobile people, transportation remains expensive — whether by plane, train or automobile.

Japan's problem, analysts say, is that airports have been built to satisfy the desire of local politicians to showcase an airport in their own backyard, without much thought given to integrating Japan's highly efficient rail system with the network of international and domestic flights. They describe it as a perfect illustration of Japan's addiction to massive public works projects.

"Local politics is hijacking good sense," says Anthony Concil, spokesman for the International Air Transport Association.

Original Article