Avoiding disaster

   In mid-August, the International Civil Aviation Organization convened the first meeting of the special task force authorized to study aviation safety in conflict zones, a need that arose after the downing of Malaysia Airlines flight MH 17 in eastern Ukraine on July 17.
   In addition to its own experts, ICAO brought together leaders from other top aviation organizations, such as the International Air Transport Association, Airports Council International and Civil Air Navigation Services Organization, to review events leading to the passenger plane’s demise.
   The downing of MH 17, in addition to the loss of Malaysia Airlines MH 370 in March, has spurred international aviation bodies to look into improving the worldwide landscape for airlines. In response to the loss of MH 370, ICAO called for an immediate improvement in flight tracking capabilities. 
   The parties said the MH 17 task force will study conflict data sharing among stakeholders, the production of anti-aircraft weapons, and implementation of a secure information channel to share information when other methods fail. 
   “While aviation is the safest form of transport, the MH 17 incident has raised troubling concerns with respect to civilian aircraft operating to, from and over conflict zones,” the organizations said in a statement.
   “We recognize the essential need for information and intelligence that might affect the safety of our passengers and crew,” they continued. “This is a highly complex and politically sensitive area of international coordination, involving not only civil aviation regulations and procedures but also state national security and intelligence gathering activities.”
   During a news conference, IATA Director General and Chief Executive Officer Tony Tyler characterized the downing of MH 17 as an attack on the entire industry. 
   “Civil aircraft are instruments of peace. They should not be the target of weapons of war. That is enshrined in international law through the Chicago Convention,” he said.
   In calling for better communication about conflict aviation — the best routes, and at what altitude planes should fly — Tyler said airlines have been told flying over Ukranian airspace at a height of more than 32,000 feet would keep them above missile range. The Malaysia plane, which was shot down by an anti-aircraft missile capable of reaching more than 32,000 feet, was flying at the accepted height. 
   “It is essential that airlines receive clear guidance regarding threats to their passengers, crew and aircraft. Such information must be accessible in an authoritative, accurate, consistent and unequivocal way,” Tyler said. “Even sensitive information can be sanitized and still remain operationally relevant.”
   Tyler went on to note there’s a gap in the international law regarding war-time weaponry. Governments address the use of nuclear, chemical and biological weapons, but there are entire subsets of weapons used in conflicts that are not subject to international conventions. 
   “MH 17 shows us that this is a gap in the international system which must be closed. Under ICAO’s leadership, I am confident that we can find ways within the UN system to augment the international law framework to ensure that states fully understand and discharge their responsibilities in this regard,” he said.
   While these disastrous events will create new international laws regarding civil aviation, Malaysia Airlines is struggling to survive from under the weight of two large crashes. 
   Khazanah Nasional Berhad, the investment arm of the Malaysian government and the majority stakeholder in Malaysia Airlines, has issued a proposal to buy all of the airline’s outstanding shares and remove it from public trading in a move worth a reported $430 million. The government body was to issue a full restructuring plan for the airline by the end of August. 
   After the disappearance of MH 370 in March, airline industry watchers said Malaysia needed a big change to right the ship. Analysts at RHB recommended the airline could start by thinning its employees by 19 percent and capacity by 10 percent. A cut to Malaysia’s workforce is likely a starting point for Khazanah Nasional Berhad.    
   “We reiterate that the proposed restructuring will critically require all parties to work closely together to undertake what will be a complete overhaul of the national carrier on all relevant aspects of, inter alia, the airline’s operations, business model, finances, human capital and regulatory environment,” the investment entity said in a statement. “Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity.”
   Malaysia Airlines experienced a RM443 million loss ($138 million) during the first quarter. Airline officials said traffic had been rising and the airline had cut costs, but these programs were “overshadowed by pressure on yields, under-performing non-core activities and negative sentiment on the airline.” 
   The airline’s cargo subsidiary, MASKargo, has also undergone some recent cost-cutting changes. The cargo team reorganized in July to “streamline” its daily operations, according to a note from Ahmad Luqman Azmi, MASKargo’s senior vice president of global sales and government affairs. At the time, officials introduced two new departments, Cargo Corporate Services and Cargo Strategic Management.
   “The re-alignment and re-assigning of certain tasks and functions will enhance efficiencies and effectiveness within the company towards achieving greater revenue growth and ultimately providing better services to our customers,” he said in the letter.
   So far this year, MASKargo has seen its overall activity decline as bellyhold capacity has increased. During the second quarter, freighter activity fell 11 percent year-over-year, despite officials reducing capacity 5 percent. The cargo arm experienced an overall year-over-year volume decline of 3.7 percent during the second quarter; capacity rose 3.6 percent during the same period. Cargo load factor declined 5.1 points. Belly cargo activity rose 0.7 percent during the period, but capacity increased 9.1 percent. 
   These second-quarter belly numbers are somewhat of a reversal from those seen in the first quarter, when the carrier measured a 14.2 percent increase in volume, as capacity increased 15 percent. Freighters saw much of the same, though; volume dropped 24.1 percent, and capacity was reduced 21.6 percent during the first quarter.

This column was published in the September 2014 issue of American Shipper.