ADAT, Moving Forward or ...

In early May 2014, Etihad Airways acquired or took over Abu Dhabi Aircraft Technologies (ADAT), formerly Gulf Aircraft Maintenance Company (GAMCO), from Mubadala except for the Engine Shop.

GAMCO was founded in 1987 as a partnership between the Government of Abu Dhabi and Gulf Air who owned a 40% stake, primarily to undertake the existing wide body and new technology aircraft (L1011, B767, A320, A330 and A340) fleets of Gulf Air. As Gulf Air's financial situation deteriorated in 1997, GAMCO expanded its third party business and aircraft maintenance capabilities beyond the Gulf Air requirements. As a result GAMCO expanded to become one of the top 15 MROs globally and number 1 in MENA (between Europe and Singapore) with more than seventy (70) customers ranging from North America through Europe and MENA all the way to the Far East. In early 2006, Gulf Air pulled its maintenance from GAMCO following the 2005 withdrawal of the Abu Dhabi Government from Gulf Air. The relationship between Gulf Air and GAMCO was at best very uneasy.

As a result the Abu Dhabi Government acquired Gulf Air's 40% share in GAMCO and turned it over to Mubadala, a government investment arm in the aerospace and technology sector. In 2007 Mubadala rebranded GAMCO as ADAT.

When Etihad was formed in 2003, GAMCO was entrusted with the total maintenance and support of Etihad's expanding fleet. Fast forward to the present; a decade later Etihad has withdrawn and brought inhouse a substantial amount of services leaving ADAT to perform airframe heavy maintenance and components/engines repair and overhaul activities.

Beyond the press releases and the great sentiments of moving forward there is an underlying desire for Etihad to take total control of its total maintenance activities for several reasons (punctuality, quality etc..) and to improve the synergies with its airline equity partners. The next step will be to bring in maintenance from Airberlin, Jet Airways, Air Serbia, Air Seychelles and who knows Alitalia in the future in order to reduce cost and safeguard its investment. As Etihad tightens the reins and demands more and more attention to its fleet and its partners fleets, other customers will shy away. The region has never been known for balanced relationship.

Whether this is really moving forward or a case of Deja Vu, only time will tell

EX-IM Bank Again...

EX-IM Bank is again in the news; Delta, A4A and ALPA are adamant about defunding it because it stifles competition by providing export facilities to competing airlines especially the Gulf carriers. The fact that Korean, a SkyTeam partner of Delta or GOL obtained an EX-IM guaranteed bond financing to support its engine work at Delta TechOps is of no consequence. Delta's assertion is; EX-IM Bank allows carriers like Emirate, Qatar and Etihad cheaper financing therefore allowing them to offer cheaper fares which creates unfair competition. Hence the defunding campaign, regardless of the requirements of any other economic sector such as Aerospace,Nuclear energy, etc. It would have been better for Delta to lobby for tighter rules on guarantees for aircraft purchases.

EX-IM Bank and Boeing have maintained that defunding is akin to unilateral disarmament. Airlines will just buy from Airbus and utilize whatever the European credit agencies have to offer. Defunding will not change the level of competition, just the type of aircraft used.

Delta has been risk averse when it comes to buying new technology aircraft. Delta's CEO is on record for the "preference of proven technology". They feel that buying at the end of the development and production cycle allows them to purchase aircraft at lower prices. Others, including the Gulf carriers prefer to be launch customers with all the technology risks and possible delays this entails. Being a launch customer allows an airline a greater say in the aircraft design, aircraft mission requirements and most importantly a much lower price ever.

Delta's acquisition and/or lease of older aircraft like the MD80s and B717 provides them with lower asset costs, their use on short and low utilization sectors offsets the fuel price and when maintenance is due the aircraft is parted out or retired. The preference to refurbish older aircraft with the latest interior and cabin IFE and Wi-Fi in Delta's thinking provides an equal level of comfort to newer technology aircraft and most importantly better profitability. This maybe true in the short term but cabin noise levels, ability of the aircraft systems to support modern IFE and  new ATM requirements and overall reliability will eventually catch up.

To put the unfair competition of Gulf carriers in perspective, out of the 180 million international passengers that travel to and from the USA approximately 6 million (3.33%) hail from the Middle East of which 2.4 million (41%) are carried by US carriers and 3.6 million (59%) are carried by International carriers. There are seven carriers that operate non stop services to the USA; Etihad, Emirates, Qatar Airways, Saudia, Egypt Air, Royal Jordanian and Royal Air Maroc. Out of these, four are members of an alliance, but all of them code share with a US carrier for travel within the USA.
- American code shares with Etihad, Qatar Airways and Royal Jordanian (the latter two are members of
  OneWorld);
- Saudia code shares with Delta (a SkyTeam alliance member);
- Egypt Air code shares with United (a Star alliance memeber); and
- Emirates, Etihad and Royal Air Maroc code share with Jet Blue.
They bring revenue to the cities they serve in terms of employment, tourist traffic, use of the airport facilities (dedicated lounges) and most importantly better connections to the rest of the world.

All these MENA carriers come from relatively small countries with little or no domestic travel and have always relied on transit traffic that caters to holiday traffic, visiting friends and relatives and yes to the immigrant communities in the USA. For some reason US carriers do not pay much attention to the rising numbers of immigrants from MENA, India, Pakistan and Asia. these groups constitute the bulk of the traffic carried by these carriers, especially the Gulf Carriers. They compete on service, advanced entertainment systems and passenger amenities, high technology aircraft with high fuel efficiency and ultra long flights (12 to 16 hours/sector) that lower the asset cost per flight hour and most importantly very few or no ancillary fees.

US carriers have gained profitability in the last few years by:
- exercising capacity control (a 2% growth at best) while the Middle East was expanding at double digit
   rates (10% to 15%);
- lowering their labor costs, sometimes at the expense of customer service on ground and in flight;
- utilizing older aircraft (it was not until the last three to five years that US carriers embarked on fleet
  renewals, Delta not as much, and cabin upgrades); and of course
- escalating ancillary fees.

Hardly the stuff of fierce competition.

The Gulf carriers will expand into the USA by virtue of the open skies regimes they have with the USA and their global presence. They will compete with Delta and others; whether they use Airbus or Boeing aircraft is not an issue for them.

Malaysian MH370

Malaysian MH370 disappeard on March 7, 2014 and the search continues and no one is the wiser. This will not be the first aircraft crash whose wreckage may not be found. In the meantime the relatives of the passengers suffer the uncertainty and lack of closure. Our prayers and thoughts are with them.

The Media and CNN in particular has made this into a 24 hours a day drama, with experts upon experts speculating on what may have been; not that other networks were any less guilty.

The aircraft made a turn and headed back and then it was lost from the radar and satellites. The whole incident/accident questions what a lot of us in aviation took for granted:

• if an aircraft does not report to the next ATM center or disappears from the radar someone will raise an alarm; or
• if an unidentified aircraft shows up on a radar screen, someone would try to raise the flight or scramble an aircraft to have a look see. But for someone to assume and do nothing on the premise that if an airliner turns back it must have an ATC clearance is ridiculous.

However, some of the theories brought forward to explain the disappearance of MH370 are literally out of this world. The sad part was, they were seriously discussed on TV and social media, and these include:

• a black hole type disturbance in the atmosphere sucked the aircraft into space or another dimension;
• the flight was hijacked by US and Israeli agents because it carried some ultra secret technology on its way to the Taliban or North Korea; 
• there was mention of a cyber attack on the aircraft systems;
• the plane was destroyed by a Texas company because it had four Chinese engineers holding semi conductor patents worth billions of dollars. The patents will revert to the company in case of their death; and/or
• the pilot has gone suicidal because he had a failed love affair or was an Islamic zealot.

One good thing came out of this accident; countries were ready to cooperate to locate the aircraft, contributing resources from maritime surveillance aircraft, ships, satellites and underwater equipment capable of locating the pulses of the CVR and DFDR locators in a search effort that moved from one area to the other as investigators refined the flight path of the missing aircraft.   

When AF447 was lost in June 1, 2009 over the South Atlantic, it took two years to recover the DFDR and CVR and sadly we are facing the same problem. The calls to extend the battery lives of the DFDR/CVR came to nothing. There were even suggestions of floatable black boxes.

However, the solution must be a better aircraft tracking regime utilizing the available technology in               e-Enabling and connectivity in addition to the extended locators batteries operational life. A solution to switching off the ATC Transponders and ACARS in flight must be found.

As of today April 5, the Chinese news agency reported that one of its ships have detected a pulse at 37.5KHz which is the DFDR/CVR locator frequency and their pilots have photographed a debris field. 

We remain hopeful that this may be the successful end of the search.

RAK Airways, Full Circle.

On January 1, 2014 RAK Airways suspended operations for the second time, citing rising costs, the conditions of the aviation industry and geopolitics. The airline indicated that the board will review the state of the airline and decide whether the airline will resume operations.

As usual things move fast in MENA. On February 2, 2014 Ras Al Khaimah Directorate of Civil Aviation signed an agreement with Air Arabia, designating it the National Carrier of Ras Al Khaimah. This morning February 4, 2014 Adel Ali, Air Arabia Group CEO confirmed to Dubai Eye that Ras Al Khaimah will be the airline's fourth hub and will be basing its aircraft there to operate to destinations in the Middle East and the Indian Sub Continent.

RAK Airways was founded in 2006 as the fifth UAE national carrier based in Ras Al Khaimah. It started operating in 2007. By 2009 the airline suspended operations. It announced the resumption of operations in 2010 but actually restarted in 2011. The second time around the airline was more organized and operated to ten (10) cities  (Abu Dhabi, Riyadh, Jeddah, Doha, Amman, Peshawar, Lahore, Islamabad, Calicut and Katmandhu) using two A320s in two (2) class configuration 8 Business and 160 in Economy.  RAK Airways operated to Abu Dhabi and had a code share with Etihad to London Heathrow, Manchester, Dublin, Geneva and Bangkok.

RAK Airways never had a defined business plan, other than the usual rhetoric of development of tourism and aviation in Ras Al Khaimah, and if it did it was never published. The airline had 7 CEOs in as many years.

Ras Al Khaimah is emerging as a tourist destination with 1.2 million visitors last year and global hotel chains like Hilton, Waldorf Astoria, Crowne Plaza, Rotana and others opening hotels and resorts in the emirate. These tourists preferred to fly to Dubai, since the majority of them came from destinations not served by RAK Airways.

Ras Al Khaimah government realized that going it alone in the Northern Emirates with their 800,000 inhabitants is not going to work out. Developing tourism using limited regional destinations does not work when most of the tourists hail from Europe and North America.

The question that raises itself now is how would Fujairah react to all of this, if at all? The emirate is developing into an important oil terminal with oil related industrial activities after the inauguration of the pipeline from Abu Dhabi to Fujaira. It boasts tourist areas like Khor Kalba, Massafi and the proximity to Khor Fakkan, the Sharjah resort on the Gulf of Oman. It is linked by a modern super highway to the major cities of the UAE, reducing travel times.

Another interesting issue will be the Ajman International Airport (under construction) which is in close proximity to Sharjah International Airport and Dubai International Airport and is raising ATM concerns within the UAE.

We wait and see

The Saga of Abu Dhabi's CBP Pre-Clearance Facility

Finally on Friday, 24 January 2014 the US Customs and Border Protection Pre-Clearance facility opened in Abu Dhabi International Airport. A4A, Pilots' Associations and of course the ever present Delta spearheaded the opposition to open the facility. So the UAE government, more likely the Abu Dhabi Government, paid up 85% of the cost includingy the salaries of US CBP officials. There were a lot of reasons cited opposing the facility; the investment could have been used to alleviate congestion in US international gateways and unfair competition to US carriers, who by the way do not serve Abu Dhabi.

Personally, I would have preferred the facility in Dubai, where there are more flights to the USA including Delta and United.

To put things in perspective approximately 180 million international passengers pass through US International Airports of which 58% are carried by US carriers and 42% by international carriers. Of these passengers 6 million come from the Middle East of which 41% (2.4 million) are carried by US carriers and 59% (3.6 million) by international carriers. At this time Etihad operate to JFK, IAD and ORD. 2014 will see a double daily to JFK and operation into LAX and DFW. All things considered Etihad will probably carry around 750 thousand passengers who will go through the pre-clearance facility, out of a total of more than 90 million passengers, less than 1%. The investment in the facility is minimal and will hardly dent the congestion problem.

Delta and others screamed about unfair competitive advantage, well they do not operate to Abu Dhabi, and it is unlikely that anyone will travel from Europe or Israel to fly Etihad just to avoid congestion. If anything Emirates, Qatar Airways and maybe Royal Jordanian, Saudia and Kuwait Airways should have lobbied against the facility. They are more affected by it than any US carrier.

The CEO of Norwegian lately said US carriers are afraid of competition, I tend to agree, but then this is another story.