Skymark and missile risk – more stories where this service leads the way

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By admin July 29, 2014 13:25

Skymark and missile risk – more stories where this service leads the way

So once again, it is a case of read this news service if you wish to know what is going to happen many months down the line, and don’t be caught out paying for a service that really does not have the foresight to see what is going on, and to make a call based upon the facts to hand. Advert now over!

Today Airbus cancelled the Skymark A380 order stating: “Airbus has in accordance with its contractual rights, notified Skymark Airlines that the purchase order for the six A380s signed in 2011 has been terminated.” These events have transpired just as we said they would in February, in fact in February we stated clearly that Skymark could not raise the pre delivery payments and we stated that this presented Turkish Airlines with the opportunity to take the delivery slot and get the A380 it craves. In the here and now the deal for the slots is not yet done following the cancellation of the order today by Airbus, although THY are looking hard at a deal, but British Airways might wish to increase their delivery window speed on the A380 given their 98% load factors on the type at present.

As mentioned in February: Skymark could turn to Amedeo, but would either party wish to lock-in for a 12 year-plus deal with the other? If Skymark can come up with the finance then this is a deal that could save face for the airline. In February however Skymark informed this news service that it had not held any discussions with either THY or Amedeo in relation to the Turkish carrier wet leasing four A380s.

All of this means that Airbus has a Skymark A380 sitting on its apron, but there is nothing that Airbus could do, as under the terms of the agreement it had to fulfil its part in-full and wait for Skymark to default on the deal. So in the event Skymark should have lost its deposit on this A380 order, and it will have, so where does this leave the A380 program?

Well, six aircraft-orders down, but we knew that to be the case at the turn of 2014 as did Airbus in all reality, thus as far as the program is concerned this is both no big deal and no big shock and the future remains on getting the A380Neo up and running with more than one version at speed. Rolls Royce is ready, it is time Airbus got off of the pot, pushed the buttons and grabbed the Emirates launch orders for 60 orders with further options that are on the table. But of course Emirates currently run an Engine Alliance A380 fleet and it will be looking for more than one engine option while Rolls Royce will be looking for exclusivity as they did on the A330Neo. My guess is that Rolls Royce will carry the day in the end.

In other news: In the immediate wake of MH17 being shot down we told you that the real story now for the industry lay with the inevitable calls for aircraft to be prohibited to flying over war zones, and we stated that this meant that the Middle East majors were going to be hit hard with additional fuel and time allowances per-trip as they all route through Iraq for westbound flights.

This has come to pass this week, with Emirates diverting all flights from Iraqi airspace at great cost with other airlines most likely to be forced to follow suit by insurers and of course through their own risk management assessments. All the same IATA is meeting today to thrash-out a standard policy for all airlines on the matter of flying over conflict zones and this will most likely cause costs to increase for all airline routes that overfly a war zone.

What people forget though is just how many war zones are out there right now – I tell you this has the potential to seriously knock airlines’ shares in the future once people realise the importance of the policy decisions being discussed today. Ever tried flying from North to Southern Africa without crossing a war zone, or indeed over West or Northern African states? It means huge detours will have to take place. Then we have Syria, Iraq and Ukraine forming (as mentioned two weeks ago) a huge barrier between Europe and Asia, then we have to add Israel and Palestinian airspace to that blockade, and then we have the question – just what is a war zone in the 20th century?

Surely poor Lebanon would have to be added to the no fly over list given the insurgency risks there and the fact that fighters there do indeed have Soviet heavy weaponry to hand, as do factions in Syria and Iraq and what about the South China Sea, which is starting to resemble the Gulf of Oman during the late-1980s and early-1990s where you will recall, an Iranian A300 was shot down by accident by a US destroyer. It might be that the logical option is to raise the ceiling height again for all these areas of the world, but as insurers recoil from a dreadful 12 month period we have to wonder what they may force upon clients and what they may require from aircraft which are required to land in or close to war zones and thus cannot fly high.

It is all a bit of a mess, with no clear workable answer that will fit all situations and that in the real world may well mean that the current system of airlines determining the risks for themselves is the best policy, while insurers reiterate their war clauses & exclusions to clients. Airlines require the risk management skills of the insurance industry now more than ever and the insurance industry not IATA should be leading the way on this matter. Sure IATA has representation from insurance majors, but it does not have blanket inclusion. Maybe Lloyds of London and the company markets should get together with major aviation brokers and loss adjusters to form a global aviation risk panel that can give all airlines guidance and make statements to the industry at large whilst standardising policy wording with regard to war and terrorism risks. In-so-doing they would gain from being able to act with clarity and speed to global events. But alas such a move might be seen as anti-competitive.

admin
By admin July 29, 2014 13:25