MIDWEEK UPDATE 27 NOVEMBER 2013



THIS WEEK IN MIDWEEK UPDATE

1 Weekend events.
2 Forthcoming events.
3 SAA's obsession with growth and expansion at taxpayers' expense
4 Korean Trainer Jets Exported To Indonesia. Botswana to follow?
5 New VIP Mi-171A2 and Mi-38 helicopters presented to Chief of the Presidential Property Management Directorate
6 Marenco Swisshelicopter announces the Premiere Roll out the Skye SH09 prototype helicopter
7 Denel JV awarded R5-billion contract for guided-missiles in United Arab Emirates
8 Advertising Rate Card



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WHATS HAPPENING THIS WEEKEND



29 to 30 November: Calvinia. We want the pilots to come in, spend the day at the carnival, have a braai at the Hotel and leave the next day (the braai will be included in the accommodation cost). The purpose is to get to know the pilots from surrounding areas build relationships and plan an event for next year that will be more elaborate and will include flips and demonstrations. Contact: Pierre Ferreira Tel: 027-341 1512 E-Mail: book@calviniahotel.co.za

30 November to 1 December: Sport Aerobatics ACE of Base - Baragwanath airfield. Contact Annie Boon e-mail:
hange@mweb.co.za



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SAVE THE DATES

7 & 8 December: Wings and Wheels airshow at AFB Ysterplaat CANCELLED


15 December: Plett Wings and Wheels aviation day.
Contact Harry de Villiers 082 807 2091 harry@htdevilliersatt.co.za


31 January to 01 February: SAC Western Cape regionals / AWAC finals at Mossel Bay. Contact Annie Boon e-mail: change@mweb.co.za


31 January to 02 February: Dias Festival airshow - Mossel Bay.
Contact Hans Potgieter e-mail:
airshowevents@gmail.com 082 768 1754


1 February: SAPFA Rand Airport challenge rally: www.sapfa.org.za Contact Mary de Klerk mary@expandingbranding.co.za


1 February: SAAF Museum flying training and open day. Contact Capt. Kobus Kapp 012 351 2342. E-mail: webmaster@saafmuseum.org


7 to 9 February: MISASA Shootout 2014 to be held at Tedderfield. Contact Donald Hicks e-mail: wendonair@wendon.co.za or John Boucher e-mail: comms@misasa.org Tel: 082 553 1105


FOR THE FULL 2013 CALENDAR GO TO EVENTS CALENDAR.




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SAA'S OBSESSION WITH GROWTH AND EXPANSION AT TAXPAYERS' EXPENSE DAMAGES PRIVATE AIRLINES AND FLIES IN FACE OF AIR TRANSPORT POLICY

Mark Mansfield reports

At a recent media briefing at the Free Market Foundation (FMF), it was stated that the cumulative sum of government financial support for South African Airways (SAA) was just under R24 billion and that government had reneged on its deregulation level playing field promise to the private sector.

From the start SAA had engaged in anti-competitive practices which led to the demise of six private domestic airlines namely, Flitestar, Sun Air, Phoenix Air, Nationwide, Velvet Sky, and 1time.

SAA's excuse of high cost of fuel being responsible for losses was pure fantasy and that there were other credible ways to rescue SAA other than taxpayer funds.

It was mentioned that SAA is actually capable of generating profits today and that SAA, Mango and SA Express (SAX) were obsessed with growth which would drive further domestic over-capacity and losses, that low cost Mango had not added more passenger traffic but had in fact cannibalised SAA's and that the competition authorities should investigate the merger of SAA, Mango and SA Express (SAX).

Professor Jackie Walters, University of Johannesburg Department of Transport and Supply Chain Management and member of the Transport Special Interest Group TSIG, said that the domestic aviation industry is mature and there is no need for the state to use taxpayers' money to support competition against private sector airlines. "All forms of state support have opportunity costs, money which could be used elsewhere where it is more deserving and could service a much wider and deserving population" he said and continued that the role of government in the domestic aviation industry in SA should be re-examined and policy reviewed and debated.

Current official government policy is set out in the Domestic Air Transport Policy of 1990/91, which states that SAA must operate autonomously and on a commercial basis: "The government will not in future guarantee new loans to SAA or any other airline with government interests, while private airlines have to borrow at their own risk". The then Competition Board defined "commercial basis" as that SAA should "conduct its business in such a manner as to yield an appropriate return on assets employed as well as to produce a dividend to its shareholder. This policy has not been amended by the proper Parliamentary process".

Dr Joachim Vermooten, Aviation and Transport consultant said that while the global aviation industry had recovered from the 2010 downturn, SAA continued to make losses. Yet according to Dr Vermooten at the same time SAA, Mango and SAX have embarked on expanding their loss making operations in the face of declining market demand. Both have launched new routes, which incur large start-up costs and thereby increase losses. SAA Cargo has also introduced larger aircraft with more capacity in direct competition to private operators. Mango has doubled its fleet from four to eight and was expecting to go to 15 aircraft. SAX was bringing on 30 new aircraft for new routes at a cost of R 8bn and opening a new Durban hub.

Dr Vermooten said that the true sum of government funding had to take into account the R 13.4 billion which came from Transnet in addition to recent government bailouts of nearly R 11.3 bn. Transnet had made a profit on the sale of SAA shares which gave a net sum of R 23.7 billion from the public purse. SAX had received R 1.12 bn.

"SAA losses are constantly being reimbursed by loans guaranteed by government. This effectively shields SAA and SAX from financial disciplines of the market and artificially enables SAA and SAX to stay in business and expand their loss making operations. In normal circumstances, SAA and SAX would have to reduce the scale of their operations in line with reduced financial resources (cash) due to the losses incurred," he said.

He said that SAA's argument that they would have been profitable but for the high fuel costs was simply not true. "SAA's claims that high fuel prices had caused its huge losses are pure fantasy. In fact SAA's losses are a direct result of under-recovery of the fuel hikes in passenger fares which other private airlines had to pass on to consumers. By not passing on these increases, SAA was engaged in predatory pricing by artificially deflating fares and using their market dominant position to force six private airlines out of business. This was blatant anti-competitive market distortion which the SA taxpayer was subsidising via the government bailouts".

Predatory pricing was not the only example of SAA's anti-competitive behaviour cited by Dr Vermooten. SAA's use of wide bodied long haul aircraft on domestic short haul routes meant over capacity at certain time slots. He said that SAA and state-owned subsidiary Mango had also introduced additional over supply of seats and research done by Professor Walters clearly showed that the launch of low cost airline Mango had not stimulated additional passenger demand but had in fact cannibalised SAA's own customer base.

SAA's constant restatement of financial results is another cause for concern. "Instead of looking forward as most companies do, SAA looks backwards and restates financials accordingly," he said. In 2010, a press release stated SAA profit as R 582 m. In the Audited Financial Statements (AFS) published in 2010, the figure was R 323 m, in the 2011 AFS the 2010 profit was re-stated as R 184 m and in the 2012 AFS it was changed to a loss of R 2021 m. (R 2 279 m on the same line item level)

Dr Vermooten said that SAA had the capability to produce profits from current operations and assets thus removing the need for government bailouts if prudent financial and operational decisions were taken in line with commercial reality.

Instead, Dr Vermooten said that SAA and SAX appeared to be obsessed with growth. "Growth is mentioned 43 times in SAA's 2012 AFS and eight times in SAX's 2013 AFS. Yet both SAA and SAX have negative (loss) operating margins. Therefore the more they grow the more money they lose," he said.

On the subject of SAA's Long Term Turnaround Strategy (LTTS), he said there were very few details available in terms of what it will cost and the outcomes expected. However, merging the three state owned airlines into one holding company would further reduce transparency and accountability and he questioned whether the competition authorities would take an interest. One known aspect, the Fly SA Programme, was based on an incorrect assumption. The US Fly America Act on which it is based compels US government officials to fly on airlines "owned by their state" where government is funding travel. Dr Vermooten said, "However no state owned airlines exist in the United States of America and the Act seeks to promote all US airlines. The Fly SA Programme aims to benefit SAA exclusively, to the exclusion of private sector airlines, which is contrary to Air Transport Policy. Is this exclusionary conduct under the Competition Act?"


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KOREAN TRAINER JETS EXPORTED TO INDONESIA. BOTSWANA TO FOLLOW?

In 2011, KAI (Korean Aircraft Industries) contracted 16 aircraft for export to Indonesia (worth of $400M). KAI has been developing the T-50i based on the latest T-50 family version to comply with the requirement of the Indonesian Air Force.



KAI T-50 Supersonic advanced trainer

Six pilots from the Indonesian Air Force have been training since February with the T-50 and TA-50 to return in August to Indonesia as flight instructors. Lt. Col. Wasum who completed is instructor flight training in June 24th from the RoKAF praised the manoeuvrability and stability of the T-50 and TA-50. Ground maintenance crews from the Indonesian Air Force are also getting on-hands training along with the pilots.

The first two aircraft departed for Indonesia and is Korea's first export of a supersonic trainer. Korea has now become only the sixth country in the world to export supersonic jets, following the United States, Russia, Britain, France, and Sweden. The balance of 14 more jets are scheduled to be delivered to Indonesia on seven separate occasions by December.

Rumour has it that Botswana might become KAI's first customer on the African Continent and second export country. The Botswana Air Force currently operates F-5A and F-5D fourteen of which it had bought from Canada in 1996 and if true will order a batch off sixteen T-50s / FA-50s

The FA-50, which is a light combat derivative of the T-50 supersonic advanced jet trainer, was developed to replace the aging Korean fighter fleet that consisted of F-5E/F, A-37.



KAI FA-50 Light combat Aircraft

The FA-50 combat aircraft is capable of carrying up to 4.5 tons of weapons including air-to-air/air-to-surface missiles, machine guns, precision guided bombers such as the Joint Direct Attack Munitions (JDAM), and the CBUs. Also, the FA-50 is equipped with the Night Vision Imaging System (NVIS) allowing mission capability for day and night, and it also boasts improved self-protection ability with the Radar Warning Receiver (RWR) and the Counter Measure Dispenser System (CMDS).


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NEW VIP MI-171A2 AND MI-38 HELICOPTERS PRESENTED TO CHIEF OF THE PRESIDENTIAL PROPERTY MANAGEMENT DIRECTORATE

Russian Helicopters, a subsidiary of Oboronprom, part of Rostec State Corporation, carried out testing of the new Mi-171A2 and Mi-38 helicopters at the National Helicopter Building Centre (NHBC) in Tomilino, Moscow Region. The tests were attended by Vladimir Kozhin, Chief of the Presidential Property Management Directorate. The NHBC is currently carrying out the first round of testing on the medium multi-role Mi-171A2 and the third round of tests on the transport and passenger Mi-38. The helicopters were demonstrated at the MAKS-2013 airshow in August, and can be used for VIP transport and corporate purposes.

In line with the testing programme, the Mi-171A2 successfully completed testing of its on-board systems and new Klimov BARK-6S-7V automatic engine management system, which increases engine efficiency in various modes of operation. It is expected that the developer will start ground tests and flight-testing of the Mi-171A2 by the end of December 2013. The NHBC is simultaneously carrying out the latest stage in the third phase of testing for a prototype Mi-38 fitted with Russian-made TV7-117V engines by Klimov, including ground-based testing.

Vladimir Kozhin was briefed on the progress of testing of the new Russian-built helicopters. He praised the potential of the Mi-38 and Mi-171A2, and noted that Russia has always been a leading producer of medium and heavy-lift helicopters. Kozhin stressed that today's Mi-8 series helicopters are the mainstay of the fleet of the Russia Special Flight Detachment, which provides air transport services for senior state officials.



Mi-17 of the Chinese Air Force

The new multi-role Mi-171A2 and the new transport and passenger Mi-38 are core projects for Russian Helicopters in the medium sector and can be configured in specialised VIP versions.

The Mi-171A2 is the latest addition to the Mi-8/17 series, and combines the long operating experience of these helicopters with the latest technologies. It provides the highest levels of reliability, safety and comfort.



Mi-17 VIP version interior

The legendary Mi-8/17 series is a firm favourite in the corporate and VIP transport market. Its spacious, full-height cabin offers unique possibilities for tailored fitting-out and finishing and provides the greatest possible comfort for passengers. Combining the traditional qualities of this famous series with the latest technologies, the latest Mi-171A2 offers more possibilities than ever before. Thanks to a whole range of innovations, the helicopter's flight capabilities have been significantly improved, including greater range, cruising speed and lift capacity, while noise levels have been significantly reduced. A suite of modern on-board radio-electronic equipment reduces pilots' workload and makes flying more efficient.

Following the successful testing of the first Mi-171A2 prototype, it is planned to complete work and start testing of the second prototype. Work is currently on going at Ulan-Ude Aviation Plant. Russian Helicopters plans to obtain certification for the Mi-171A2 by the end of 2014 and to start deliveries to customers from 2015.

The Mi-38 also has a whole range of competitive advantages for use as a corporate and VIP helicopter. It can operate in a range of climatic conditions. Thanks to its capacious passenger cabin, low levels of noise and vibration and numerous innovations, the Mi-38 offers the highest levels of comfort in its class. A high cruising speed of 385 km/h and range of 1,200 km when using auxiliary fuel tanks give the Mi-38 an edge on its competitors.



MI-38 Civilian version

The Mi-38 programme is financed by the Russian government. The fourth prototype - the final version before the helicopter enters serial production - will be assembled at Kazan Helicopter Plant. It will differ from the third prototype in having a shock-resistant fuel system by Aerazur and larger window openings. The Mi-38 is slated to enter serial production in 2015.

In August 2013, Russian President Vladimir Putin visited Rostvertol, a Russian Helicopters company, during an official visit to Rostov-on-Don. The President was briefed on the latest developments in military and commercial helicopters, and was also shown a model of the passenger cabin of the VIP version of the Mi-38 being designed in collaboration with AirTaxi-Service, which creates VIP interiors for Russian-built helicopters.



Mi-38 VIP version interior

The Russia Special Flight Detachment is a federal state aviation enterprise reporting to the Presidential Administration. It provides air transportation services for state officials, and has high requirements for all aircraft.

Russian Helicopters, JSC is a subsidiary of UIC Oboronprom, which in turn is a part of State Corporation Rostec. It is one of the global leaders in helicopter production and the only helicopter design and production powerhouse in Russia. Russian Helicopters is headquartered in Moscow. The company comprises five helicopter production facilities, two design bureaus, a spare parts production and repair facility, as well as an aftersales service branch responsible for maintenance and repair in Russia and all over the world. Its helicopters are popular among Russian ministries and state authorities (Ministry of Defence, Ministry of Internal Affairs, Emergency Control Ministry), operators (Gazpromavia, UTair), major Russian corporations. Over 8000 helicopters of Soviet/Russian make are operated in 110 countries worldwide. Traditionally the demand is highest in the Middle East, Africa, Asia-Pacific, Latin America, Russia, and CIS countries. Russian Helicopters was established in 2007. In 2012 its IFRS revenues increased 21% to RUB 125,7billion. Deliveries reached 290 helicopters.


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MARENCO SWISSHELICOPTER ANNOUNCES THE PREMIERE ROLL OUT
OF THE SKYE SH09 PROTOTYPE HELICOPTER



Marenco Swisshelicopter is proud to announce the World's Premiere Roll Out of the prototype of the Skye SH09 prototype helicopter.

"Our teams have made outstanding progress in completing the first prototype and in processing the certification of the SKYe SH09" said Martin Stucki, Chief Executive Officer and designer of the helicopter. He noted "This important achievement is the result of combined efforts from our staff and from our suppliers".

The prototype aircraft is shown in a matt-grey livery paint but the carbon-composite airframe is revealed on key areas such as the tail-boom and the shrouded tail-rotor.

Mathias Senes, Commercial Director, points out that it is rather unique to reach such detailed quality in a first prototype and ads "our prospects and clients will witness our commitment to quality and will certainly value what we meant by High Visibility Cockpit".

Announced to the market during the 2012 Heli-Expo in Dallas, the High Visibility Cockpit concept is now fully applied to the P1 and the outcome is solid and just stunning, certainly an inspiration for new helicopters to come.



With a Maximum Take-Off Weight of 2,650 kg (5,842 lbs) the SKYe SH09 helicopter offers exceptional hot and high performance, a flexible engine concept and a low noise signature thanks to the newly developed dynamic assemblies and shrouded tail-rotor.

The modularity of the cabin makes the most of the flat floor and the unique high ceiling concept, offering multiple seating arrangements of 1 Pilot + up to 7 passengers, all with individual crashworthy seats. The rear access to the cabin is facilitated by the large clamshell doors; addressing the passenger transport and emergency evacuation roles of the helicopter.

With a fast cruise speed of 260 km/h (140 knots) it will also offer very long range - in excess of 800km (430 nautical miles) with standard fuel tanks. SKYe SH09 is of particular interest to operators who wish to avail of a remarkably versatile machine with additional power, greater payload capacity, and an augmented sling load capability of 1,500 kg (3,300 lbs).


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DENEL JV AWARDED R5-BILLION CONTRACT FOR GUIDED-MISSILES IN UNITED ARAB EMIRATES

The Al Tariq is a family of strap-on bomb kit systems manufactured by Tawazun Dynamics, a joint venture between Denel SOC and the UAE Company, Tawazun. The announcement was made at the annual Dubai Air Show where the Al Tariq was on display.

The Group Chief Executive Officer of Denel, Riaz Saloojee, says the decision to equip the Mirage fighters with the Al Tariq bombs demonstrate Denel's global competence in designing world-class precision-guided munitions and missile systems. The guided-bombs have a range of up to 100km and are used against tactical and strategic targets.

"The new contract also confirms the wisdom of Denel's strategic decision to enter into an international long-term partnership with Tawazun. It strengthens our global profile and opens new markets for Denel's growing range of defence and security-related products and services," says Mr Saloojee.

Tawazun Dynamics is a joint venture of which Denel owns 49%. A state-of-art manufacturing facility was opened in the UAE in 2012 and its flagship project, the Al Tariq, is currently entering high volume production.

The Al Tariq recently successfully completed a range of tests designed to measure its efficiency against static and moving targets. The targets were hit with an accuracy of more than 1.5 metres. Weapon navigation was by means of the advanced GPS-aided inertial navigation system which gives the weapon all-weather and day and night capabilities.

The integration of the Al Tariq with the Mirage, manufactured by Dassault Aviation is an important milestone for both Denel and Tawazun, and expectations are that the bomb systems will in future also be fitted onto other fighter jets.


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