Free Post Trial Brief - District Court of Federal Claims - federal

Case 1:96-cv-00408-LAS

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BASLER BT-67 IN THE ASIA] PACIFIC REGION

Pr~pa.mcl for PRKI'F & WHITNEY by AVMARK ASIA LIMITED 13 February Lq91

I ID, C'mdic Tow~. 128 Glouc=s~ Road. Ho~g Kong Tel: {R52) 89321 g2 Fu: {852) st34~626 Telex: 68726 AVASI HX

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TAB~ oF CO,m'ENTS.., I. INTRODUCT/ON

II. ASIA/PACI~C SURVEY 2.0 Introduction 2.2 Bnmgi 2.3 Burma 2.4 China 15 Hong Kong & Ma~u
2.6 India 2.1 Bangl~lesh

4
4
4

5
6

7 9
11

2.7 Indochina
2.8 Japan

12
I4

2.9 Korea 2.10 Malaysia 2.1 ] Micronesia 2.12 Nepal 2.13 Papua NEw Guinea
2.14 Ncw Z~aland 2.15 Oceania

15 15 16
17

2.16 P~istan 2.17 Singapor= 2.18 ThOled COUNTRY ANALYSIS
3.0 3.1 3.2 3.0 Introduction Austral3a Indonesia Philippines

18 19 19 20
20 21

23
23

23 26 30

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I. INTRODUCTION 1.0 Introduction m th~ R~pon AVMARK Asia Led. has been rr~lue.cte¢l by Pra~ & Whimcy u) provide a brief barkgmund and its opinion as ~o ~hc ~alcs pmspccta fro" th~ Basl~ Tm'bo 67 aircr~ (BT-67) in ~hc Ash~acific and oIh~r goveran~nt ope~tors, our r~marks ~rc largely ~ m tl~ application of th~ vquipmcn~ in comme~ial rol~s only. Th~ BT-67 is produced under a Supplemental Type Certificate (STC). issued by the FAA in ¯ 1988, pcrmJtlJng th~ muldpl~ installation of ~hc Prau & Whimcy PT6A-67R powr.rplant a~d a 40-inch stretch of th~ Douglas DC-3 or its military ¢zluivaleat, the C47. Th~ conve~l ah-cr~ has a higher useful load and longer l:~formance range dmn th~ piston-powcrrd DC-3. As th~ convrrsion process modifies and replaces many of th~ major airfranm parts and systems of thr original aircrafl, AVMARK cons/dens tho convmvd ~ m ~ equivalcm m..a n~w aircraft wi~h r~spccz to technical life ~xpccmncy. The holder of the STC is Bsslcr Tttrbo Convm'don {BTC) of Wisconsin, USA. I~ is ore" understanding tha~ plans am being mad~ for tim formation of a joim wnmz¢ company, breed in Taiwan, whose initial activity will b~ to pro'chase BT-67 conversion kits from BTC and to sell Tm%o-67 aircraft in Asla]Paci~c countrirs. By undrrtaldng this Rvpon, AVMARK is l:nOViding an oversdcw of sal~ Frospects for th~ BT-67 in the Asia region. The. Report is divided into two major sections, wifla the first offrrlng a br~f individual counu'y ovrrvlcw on d~ market ~nu7 pmspe, cts for the airrr~t and lh¢ second providing a mort in-&rpth analysis for Australia, Indonosia, and the Philippines.

The information contained hrrrln has been assrmblrd by AVMARK consultants from a vaHrry of sottrccs, including inmrdcws, pubfishrd matsrJal, govrmn~nt reports, collaborated with AVMARK Asia Ltd.'s knowl~g¢ of th~ region. W¢ believe it to bc ac~n-at~ at th~ dam of writing but ~cognise that it+ validity may change. 1.I Turbo-67 Charactrristics
Thr Turbo-67 ah'rnfft incorporates th~ l~rfonnancr and oI~ra~onal distinctions of the DC-3, including short- and unprrparrd-field ability and pn~vrn "work horse" r~labi.lity, with upgnui~ payload and rangr pmvich~l by the/h-an & Whimry PT6 and the modifi~l fuselage and wings.

We not~ that the main bc.nrfits of the BT-67, compm'rd ta the pis~n DC-3, is its inc~.asr.d maximum tak~-off wright and usdul load, fast~ craise ~ a comparable or long~" rangr.

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Th~ significan~ improvements in akrrafi p~ce and capabili~ i~ aff~d ~d~u~ ~" xmj~ mworking of ~hc DC-3's sm~crums and systems. The ~ ~ of the Turbo-6? convm'sion include:

A positioning of the engin~ exhaust over the uplx:r wing ~m'far~ has also be~n undrrm~n, eliminating th~ infra-red signam~ m the benefi! of militacy op::rations.
Beyond the basic conversion, a numLxn" of options am available, incl..uding cargo door, liner and floor capable of accommodating LD3 contaJncT~; ]ong range outm" fuel tanks accommoda~ng an

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~.arlicr research condnctr.d by AVMARK projected timt the operating con ~ block hour of th~ BT-67 was appmx£rnatcly 30% lowcr th~ tl~ for thr DC-3 (US$ 365 vorsus $535), based on spec~c operating and utilisationassumptions. Whilr some of thr cost assumptions, i.. furl, havr changed sinc~ this calculation was undm-m~n in tam 19R9, th= BT-6"/is =x-petted to afford op~a~rs sig~H~cant dlr~t cost savings compm'~ mth= older DC-3 types wi~h th~ additional b~ncfit of intrepid v/x:rafing puram~u~'s. Both th= DC-3 and th~ BT-67 bcnrfit from t~hnic.~ 'strpix~ f~m Douglas Airrr~ff, which rrinstst~d communication with I~-3 operators in 1988. with thr publication of a Supplrn~n .tal Inspection Document (SID), and an airf~am~ rn'ucturaI integrity unc'n~'umlx:rcd by lif~ limited componcnts. Howcvcr~ the DC-3 faces a dccrr.a.sing availabRivy of s'parr parts, particularly for lhc R-1830 enginrs. Th~ BT-67's PT6A engines arc fully suppm'w.d by the manufactm~r and it is ~ ~ technology applird by Baskr in thr convc~ion work will be fully suppormd. Likrwis~, th= r~lafively high ~ and decreased availability of aviation gasolin~ used by ~h¢ DC3 pu= its operation at a disadv~nm~ m ~h= BT-67,
Dur ~o thr lowrr cost and easior maintcnan~, coupled with thr increased lift and l~'fommnc~ capabilities, w~ view that thr BT-67 providc~ an am'arrive replacement for .ran'randy opm'at~i DC-3 ai~n'aft as w~li as a viablr means for rctm'nlng to serve~ those ~ cm'z~ntly in storagr. Thr converted airrraft is also appr.aling as an aiR.native candldat~ to highercost, nrwrr models of other turbo prol~ aircraft. For ~xampl~, thr Shorts 360, als0 pow=rd by thr PT6A rnginrs, is sirrdlarly sized to thr BT-67. While thr Shorts 360 has a sligSfly lowm" maxhnum utkc-off wrigh! and probably produc~s a higher spr,~ and low~r furl burn, thr BT-6"/offcxs a higher useful load and longer range. Th~ rxpcctcd acquisition cost of thr BT-67, at approxima~ly US$'3.6 million, is nearly half the cost of the tam model Shorts 360. Whiff noting that thr grncral trend of operators is to sock high w.chn01ogy, nrw content equipment for replacement aircraft, the of thr BT-67's acquisition pric~ alons" should am'act the consideration of o/x;.rators rclativrly low cos~, ~rliablc ~

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II. ASIA/PACIFIC SURVEY 2.0 Introduction In this s~.ction w~ pmvid~ a counrry-by.~otmtry survey for the. rdtlcs potential o~ th~ Baster Tm-bo 67. Th~ country overviews serve as gene~ commenuny on the main factors underlinin~ the. nuu~ potential for th~ Turbo 57. Thes~ fautms includr: pro~¢s of existing tm'bo-pr0p op~ratm~, nrquimmcnts for e~ds~ing and additional cargo and passenger s~'vic~s, l~wl of air infrastracnm: d~v~lopn~nt, government support for srcond- and third- level air s~rvi~es, and othm" matm~s which may inflncnc~ d~mand for turbo Iz~p aircraft.
Th~ countries included in this srction ar~:

Bangladesh Malaysia Mic~on=sia Bnm¢i Burma Nepal China N~w Guinr.a Hong Kong & Macau N~w Zealand ~ndia Occznia Indochina R~glon Pakisum Singapore Japan Thailand Korea Comm=ntary on thr sal~s potential in Ausu~lia, Ind~nrsia, and th~ Philippinrs is pr~srntr, d in S~ction Ill.
2.1 Bangladesh Bangladesh is vi~wr.d in a tarnished ligh.l when compared ~t4th its bctmr-~ndowed neighbors. Although consistently ranked on~ of the poorest n~ons in th~ world in ~ of GDP growth and mor~ rrc~ntly plagur.d with ficn~ d~mcnic political ~roublrs, thc country's aviation sr, cmr holds pmmis~ fro" funn~ d~vclopmcnL Th~ national govrnuncnt Ires a finn control oven" th~ country's a~-lin~, Bizmm Bangtadr, sh, which srrvrs 7 domestic and 23 inmmafional ports with 4 DC-10s, 2 F-28s imd most recently 3 BA~ ATPs, which ~placed an aging fl~t of 3 F-27s this yr~r. The F-28s arc rumourrA for rrplaccn~nt, probably w~th B737s ovrr the next few ye.~r~ Birmm began opcralions in 1972 with a singlc DC-3.

Employing ovrr 5,000, Biman holds ~xclusiv~ fights domestically and" carrird 2,252 runs of" cargo

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5

(421,000 pax) in 1989, up 12% over 1988. It shan:s the in~-n~ional marl~t from Dhaka Zia In=rnational with a hanclful of Earope.~, Asian and Middle ~as=m cani~-s. I~in~n has .~ea a slightly lower percentage ris~ in intonational traft~, canyi~g 20,963 tons of cargo in 1989. a 9% increase owr 1988. On th~ mveriu~ side, cargo zWrrrsented about 13% of the tm'r~r's total n~venues. The governmcm has be~n actively ]:m:nnoting its export indnstries. Acx:onllngly, tlm main outbound commodities comprising Biman's. domestic cargo loads d~stined for in~mational uansshilm~nt at Dhaka includ~ gara~nts, l~th~r goods and, in~asingly, tx~hiabl~s (r, eafood,fruit and t~a), Th~ main inbound cargo shipped throughout the county az= ~, phanns~uticals, and spa~. lures. cut disl~rsion of thes~ goods (and is particularly ~ritical during the annual Themajor land tnatsp0rt' linksby air also occasionally submerge alrlXmS). wint~ floods which
Privat¢ participation in the country's aviation ~ i~ rurtrntly limited to ownorship of airline gene~ sales agencies, cargo forwa~ng companies, and travel ag~mi~s. While the government is exn'cm~-lY ~'itecl in ~mu~c~s available to assist in infrastt~Lenm~ d~velopme-nh prominent m~mbers of th¢ IocaJ business community, most notably Neo Me.holes of Omni Trans Inmmational, a conglomesa~ con~ of ghipping ~ Itirlin¢~sentiv¢ offices and t~xtil¢ manufacturing, r~cognis~s the ~.qttlrrm~nt for expanded domest~ ancl intm'national cargo to meet export growth and don~s~c demand. Discussion has been on-going for the estabIIshnmnt of a n~w, privatrly owned cargo carrier.

Bangi~esh is handicapped by the level of corruption and bm~au~ attendant to any d~allngs with lhe gow-rnment. While a general c.on~tion clean up has be~n promised folio.wing the downfall of President F2shad in December, the gown'm~nt will continu~ to inmrfer in the Frivat~
srcmr's commercial affairs. Ultimamly, any major equipment purchased by the privatz sector and impor~d for use in Bangl .ad~sh w~ b¢ subjected to a tangle of mqulxcd approvals, duties and tariffs. Fm-th~znom, strict exchange control and ovm~ras ~mittancz laws somzwhat hamper

The cumbersome import ~ can be short-circuited by appointing a local agency to "privately" handl~ the details or by bringing in imports undm" the official auspices of one of the major international aid agenclcs working in the counm/. Significantly, rnom than' 10% of all UN D~velopnmnt Pml~ram funds given to Banglacl~sh is allocate! to d~veloping civil aviation, a high~- Ix:rc~ntage than for any othea" country. Sinc~ 1985, Biman alon= has n:ccived over US$ 8.0 million in ~ UN financial assistanc~ adminisgced by ICAO. Although no civil aviation Fruj~ have be~n undertaken in Bangladesh r~.ntly by the organization, the Asian D~velopn~nz Bank (ADB), h~lqunrmr~ in Manila, woulcl lilmly'b¢ another major soun:e of funding for fu~ d~velopn~nt of aviation in the country.
The hr.ad of the Civil Aviation Authority is Air Commodore Azhaml Haq.

2.2 Brun~i

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The sales prospects for the BT-67 in the Sulzmu~ of Bnm~i on Borneo Island az~ arguably limRvd a.s 1) the siz~ ofthc country ]~r.cludvs an exmnsiw doz~stic air izffrast~czu~, and 2) the procu~ment policies of th~ wraflthy govca'nm~nt rends reward all n~w conw.nt, ~a~ of the arl r.quipmcnt. The gowrnmcnl-ownral cm~irr Royal Bnmei is an all B~ing opcrawr, with a handful of-B757 and B767 e.iz~'aIt, and based at the capital airp~ Bandar Scri Bcgawan. The airline still relies heavily on rxpatfiaz~ flight and teclmicifl c~w~. While thea~ am a number of military and civil heliports zhroughouz th~ counmy crpczawxl by the g0wzmnemt and the major oil compazdes, Brunci Shell pezxolucm and Jas!~t, the only other significant ~ wing ~ is local~l near Eladas in the southwesz. Until recently the military exclusively operated he2icopmrs. The Air Wing has re, cenfly commiv, ezl, however, m four CN'-P.~5 turbo props, de.silp~l by Casa/Spain and mantff~cttm~ by [Fern of Jakarta. Tlzr~ of the airczafz, which will b~ ~.uiFpvd with thca-mal imagcr camexas, will b¢ used for mazifim~
The oil induslry, wlfich contributes 60% of th~ GNP, prcsmmbly has a Idgnifiraml n'anspml lifl rr.quir~mvnl in servicing its off shor~ we.Hs. While most of this is fulfilled by rowe wing sea'vic~s, thvz¢ may b¢ int~st in r,.hc ~ capabilizy of an alrcragz zl~ zizv of tim B.T-67 by either Brunei Sh.~ll or Jasper fvr sm'vi~s bc~..vn ~he major airlx~ and, conceivably, on-shoz~ supply d~pots. The DL~cwr of Civil Aviation in Brunei is Dam Padulm Job Lira.

2.3 B tm'n____.~a
Burm~ is vm'iously known as Myanm~r or Bm'ma. The two majm" airporls an~ located at Rangoon (Yangoon) and Manchday with 6-7 other d~mestic airports receiving irmguhtr and sub-sumdmzl commcrc'lal s~rvices. Bmma'= r~cent poSrical strife, coupled with im modm'n isolationisl micntation, Ires caused a dr~clin~ in its economy, choking off a one: ,~m~ng expor~ muir in nanmd r~source.s and leading to a negative 11.4% growth in zh~ economy in 1988-89. Official inflation is at 20-28%, htrgely caused by the govcmm~nt'= ~ndrmcy to print mormy to pay for public works ext~ndimz~s. The UN estimates tha~ factories m~r working = only 10% of capariw.

The counu'y has b~n a socialist rrpubllc rlnc¢ 1974, ruled by the Burma Socialisl Prvgrammc Pan7. Opposition to one pant rnle in 1988 ~ a downfall of gowmmemt, which was z~-place.d by the military undm" C~nm'al Saw Muang. US and ECC sanction= against Burme~ expor~ in 1989/90 in part brought about general e.lex:tions in May 1990 in which the main opposition party the National League for Democracy won. The ruling milita.ry has ~fused to st~ down.

Despite the on-going international tb.mat of sanctions and intm'.ased tariffs on Burn~m exports, the counu'y promulgated n~w investment laws in 1988 which hav~ h~ a limited su~ss in

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The national airlin~ Myanmar Airways k~s suffc~-d a number of set backs in r~cnt yr.a~. As law as 1988, ~hc airline operated 8 F-27s, I ~-28 I000 and 2 F28 ~:)s. In 1988-~9 ~e airl~e orashcd 2 of the F-28s and I F,-27. La~ of spm'~ par~s Ires ~mundr.d most of th~ n:n~ining ]~2Vs. A~ b~, the airlin~ now has 3 ~-Z'/s and I F--28 olx:rablc a~ any on~ firm. In 1988 the cotmtry had 22,P~2 air arrivals. In 1989 this dropped m 2,854.

~~"~ilc ~ business climat~ is still fraught wit~ f~ ~qculties of con'upt snd in¢fflci~nt burraucracy, lark of banking facilities and tight currency control laws. commm'risl appro~h to Burma can b~ nmdc ~u~h the copulate in Hong Kong or Ban~Jcok, the ICAO representative in Monu'cal, or through Myanm~r Airways.

A anothrr good conm~t for Burma is ~ Pr-Win of th~ Sing Tao Group in Hong Kong, which has ~x~ensivr Burme~s~ holdings.

2.4 Chin.._.__~a D~spite the rcl:~'cusslons of the 1989 'r'mnann~n Square uprising, which has conrinu~l m darnlx:n Chin~'s international trad~ and foreign invcsrn~-nt, China ~ ~main~d commirt.ed to ~g md upgrading ks ~ and avintion infrasuucnn~. Westrxn acmspu~ manufacturers r~maJn optimistic about prospccls for fuRn~ mmsactions and the business climate bccomrs rclarlvcly mo~ bospimble for sales, in p~ due to the Bush Administration's ~storation of Mos~ Favored Nation smms in lain 1990. A not~ of caution should b¢ mad~ in doing business in China, howcvrr, as the development of dispum arbin'ation and enforcement of financial and conu'~cmal guarntc~s is still sub-standm'd by inun'natii:mal s1~ndmzls.

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Rcccn~ msjor at.rotate d~wlopm~nts in China include: con~inu~l dccr.,ntralisation of CAAC into 6 r, cpara~ olx~dng cnd~s (Ah" ~ China Easr~-n, China Southern, Ckinn Southv,~ ~ Northwest, China Nonheas0, continu~l relative anwnomy m 2/~rowing 'Sndt=Ixmd~nt" canir.~ (Shanghai Airlines, Z~jiang Airline), UK CAA c~-~ficadon and ovm-~as sales of .d~ Yun 12-2 (Y12) rm'boprop, follow on ayrcnxrnt wilh IV~Dommll Douglas for d~ Iv[D-g0 off~cz assembly arrangcn~nt, and a ]xmding award for dom~dc ImXlnction of 150 v~smrn n'unklin~r jets. APl~ndix A reviews mum fully ~vc arrmpac~ veam~s in Chin~ as view~l by the Minis~'y of Aero-Spac~ Indusn'y.
While conceivably a pomnrial mmimt for th~ BT.-67 in China e, xis~, thm-~ may b¢ political and legal dif-ficulv! a! this tirn~ for selling Taiwan-ass~mbl~l BT-67s in China. The ~imafion is rapidly changing but at Im'rs~nt a variely of cmbargos and prohibitions still apply m n'ade ¯ b~rween Taiwan and the PRC. Chin~ and Taiwanes~ l~gal advic~ should b~ sought b~fom any saJes efforts am made.

The pot~ndal user~ of the aircrah includ~ China Air Cargo, which is a dom~sdc joint canlrr owned by CAAC and the siam Light forwardm" Sinomms; 7h~'.rLang Airlines which cm-~ntly op~rates d~ Havail]aad Dash-gs and Ohinesd made. Yun ~ and Wuhan Air Translx~ Scrvic~ which olx:rams mi'lita~ f~igh~ in commm-clal sm'vic~. Oth~r carrlrrs llke China Un]trd and Xinj~mg Airlines may Rlso b~ prospe~vc ~ of the BT-67 as would such concerns as the C-¢ncral Aviation Carpmation, a CAAC subsidim'y.
The military application of the BT-67 is also visible, as the Chiae.s~ Navy and Army cur~ndy ol~ratEs ova" 70 C..47 dm-ivadve Lusinoi Li.2.s in transport rol~s. While the technical ch~-cmrisrics of the BT.-67 comn~nd d~ems~Ives w Chinese us~, a amount of effort and xrsoumcs am likely to I~ required m acrualiy affecl any r, al~s. Becau~ of the presence of a heavy handel bumacracy and political infighling bclw~:~n government branches, it is important w insu~ tha~ the po~ndal cad usor of the ~luipmem has the backing of ministry or smm council cnchargrd with ultimata proctor approval. To do ~ it is advisible to mak~ concurrent sales l:n~s~nmdons m th~ e..nd umr organisan'on as w~ll as tl~ oversee.ing ~nriv/. In the cas~ of Air ~ CA.C, and d~ regional CAAC-aITcfliams, CAAC in Beijing is g~nrrally rr.cognizr~ as the sta~: organization handling fl~t acquisition for im afrdiams. In the case of th,. "ind~pcn~nt" carrlm's ~ Shanghai, Xinjiang, and Zhcjiang Airlines it is less clear who ultimately approves fl~t planning although it is thought that the municipal or provincial govrrnin~n~s, acting on th~ dlrr~ input of the ind~prnd~nm, hold that mspor~biliry.

The military-miam! car~ers like Wuhan Air "/Yanspon S~'vic~ and China Uni~l m~ ov~r~n by the r~gionsl ofi~c~s of the People's Libr.ralion Army (PLA). Thus, a prudent alq:rma~h m thos~ carriers would includ~ a~ inm~ar.rd apFroach to the appmp~am FLA officials. China's EffOrt to sell the Yun-12 un'~p dorne-stically and intmmsdooally may ~t as a coml~ddv¢ obsutcl~ w BT-67 sales within China. D~spim ~ bu~ of seven Shorts 360s and

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Most ommercial turboprop m~uufa~tumr~ haw mnd~ prvposals for li~nsexi production of th=ir r, quipm¢nt in China. The Ch~¢s¢ hay= shown no ina::r~st for thr~ Im~posals so it is do,,btful that BT-67 production arrangement could b~ se.,cmrd unl~s th~ proj~-'t was mrgcte.d at converting existing Li2 equipn~m. I-Lzrbin Aircraft, CATIC and tlm brmistry of Arro-Spacr Technology would have to b~ approached for further discussion on this possibili~. Mr Wang Da WCI, vice prrsi~nt'at CATIC, may b¢ appmprl~m to approach for n~gotiating arrangements for co-production or sales agent agrr~n~nts in China.
2.5 Hon~ Kon~ & Mac,a_U Although Hong Kong's c=ntnd location and high mLf~C throughput me~s it an imlxmant playrr in lh¢ r~gion's civil aviation, its small grographical b~s¢, capa~ity-consu'ainrd ~ and d~r service imbalance against it with China l~rcludea any potrnfial for sRlCs of the BT-67 to Hong Kong Thcrr ar~ cm'~ndy no rrgulay non-jet olx:rations al I~i Tak Ah'pon and while Talwan's Formosa Airlines smdir~l.s~rdng up a turboprop Olx:radon at Hong Kong w conduct passengrr s~dc~s to sr.condm'y cities in southrm Ckina. the govrrnn~nt actively discourages th~ allocation of the higkly-covcted airport slots to ~nd.lcr j¢l and turboprop exluipm~nt. Opiating bans also apply to all charter and non-schrdulrd operations bctwt~n I-4 pm daily and all aircraft b~tw~n 12-6 Th~ n~w airport, to built on Lantau hl~md, is schr, dul~l for completion in 1997/98. Whil¢ th= mastrr plan is not y~t comply= it is lil~ly m Ix: a two runway opcrmion. Thus, it is Cxpectexi that the govrrnrr~nt's d~scom-agrm~m of Rn'bopmp ~luipm~nt will change as the new airport will offrr subs~ntially mor~ hourly =lots.

S~viccs from Hong Kong to China am now exclusively Ol~a'amd by B737 and LI011 OlXa'ator Dragonair and thc CAAC afI'tlia~ airlines. Cargo card= Air Hong K~ng has applied for mut~s

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to ov~ a down Chin¢~ ci~s b,,~ it~ appRcadon i~ pending and'th~ (:1~n~s¢ ~a~riers s~ll oI~at~ al a 3:1 frequency advantag~ to th~ Hon~ Kong side. Th~ may change, however, wI~n ~h¢ UK CAA hands over r~spon~ibiHv{ for ASA negotiations with China Io the Hong K~ng govcmm~m ~oon. Th~ Dirr~or C~n~'al for th~ Civil Aviation D~paz~nc. n! in I-Iong ]~on~ is

Hong Kong is horn= to a large avi~ttion community. Operatinglcssm~ with offices in Hong K~ng include: Ans~tt Worldwide, ~ GATX, Polaris (rcp~sentafiw). Financhfl Ivssor~ and arrangers include: The Transportation O~oup,. Wardl~y Capital, Tri-]vasc, Chase Leasing and Asian Capitol Parmcx~. Major manufamm~ m~ n~m~cnted by McDonnell D~uglas; Saab, Short Bros., Avrospafiale (representative), Rolls-Royce, United Technologl=~, Aviall and others. John Murphy has a pdvat~ aircraft brokerage firm. Legal firms.active in air finance inc/udc: Baker & McKenzi¢ (pa~culaxly knowledgeable on China), Ric!m'ds Butlm', Frcshfield's, and Milbank, Twixt. Hadley & McCloy. M~-~:ham banks active in,~gional air finance include: ABN, Cifibank, Chase Manhattan, JP Morgan, Fi,~t Pa~fiv, Uailevm', Barclays, Wardlcy's, Fuji Bank, and Mimubishi Bank & Trust. M~cau's aviation sc~ne is being nrvivrxl afar laying dormant sinc~ World War II. The Portugesc colony's fir~! fixed base aizpon is bchag constructed" and is ex~ to bc completed in 1994. Th~ 24-hour Macau International Airport will consist of a .single N-$ 4000 mete" nmway with ramp space for up to 20 narrow-bodies c~ 12 B747-400 ~ ain:ra~ While th~ M~au Civil Aviation ]:Mparanen~, headed by director Jorgc Guimaracs, has not signed up any carrim's w ~rv¢ the airport yet, UPS, Federal Express and DIlL haw r, hown z~rvng interest in the ~gional and China hub possibilities offm~d by Macau.
Macau's location near the Ire'go regional c~des of Ouangzhou, Shenzhen,. Ouilin and I-~kiou - all with.in a 4(X) mile rmiius - as w~H as proxJ~ty to neighboring Zhtthai and Hong Kong, cotrpled with ~he Macau's warm political tic~ m ~ makes it an ~ airport to act as a hub for th~ south China region. Accordingly, tl~n: may be interest in that ultimately establishes a major prr.r~m~ ~z

The Undersecmtm'y for Transport and Public Wm'k~, Lvis Vasconc~Irs, is handling incorporation of the planned carricn Air Macau. Ah" Macau, whos~ Businrss Plan w~ wfitmn by AVMARK, is d~signed m bc primarily a pas.~ng~ carrier. -"

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India's trad~ pracd~s, howcv~, malta it a di~uh country for fo~ign busincssm~n. Consistently on thc U.S. Trad~ Negotiator's Watch List, India off~ a budncssman a myraid of tm'iff and nontariff trade barriers, import licensing ~sn~ctions and invcstn~m r~gulatious and exchange laws in addition to a gsncrally officious burr.ancracy. Conditions may b~ improving, how~wr. adminisu'ation of Pfim~ ~ V.P. $ingh, who ~sigu~d in October 1990, mn-=dm relax son~ restrictions, par~cluarly tho,~ covm'ing alvinstir tom, dijon .and foreign payments.

The country's l~imary third ]~vc] can'i~" Vay~doot, which is plagued by mismangcn~nt and ol~radonal difficulties, opera,s I0 Domim" DO-2~s, 3 Fok.k~ ~.Z'/s and I0 HS748s. T~e airline is sr~king r~placrmrnt aircra~ fro" th~ 748 fl~L In 1989 Vayudoot Ix:gan negotiations for 50 Do228 with Hindustan Aeronautics L~ (HAL), which manuf~ the aixrr~ under license. Ironically, Vayudoot's financial n-oublcs h~v¢ Ix~n connrcted to the high d~bt loading asso~ialcd with th~ acquisition of lh~ original 10 Do-228s in 1985. h is advisibl¢ to considrr ban~r an'angcn~n~s ff any aHn'vechrs m'~ mad~ to W'.ay'n~t or any of th¢ nationalized industrial concvrns. Two oldcr carriers, Bombay-based Air Win'ks and Bharatair,comFdsc the sole known.ope~mrs of DC-3s in comm~ial service. Air Win'ks uses im 3 DC-3s f~r air mpply drops, photography, cloud seeding, and gcnrral cargo mms]x~ 1171086 ~I. 612 4448). It would b¢ prudent to contact Capt. Mrnon as he ha~ informed us thal

h= is in~-rs~cd in cxpu~ding his cargo opcmions, ¢ith= through ~ Work~ or by establishing
an affflat¢ company. Bh,a.ra~ i~ not known to u~. Thc Di~ctor General of Civil Aviation is Shri Sivaraman.

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12 2.7 Indochina

The Indochina countries of Lans, Cambodia (Kampuch~a) and Viemam art: being cotmed with increased cnthusia.sum by Western tmbopmp manufacna-e~. However, ~erious conc~as r~main about the countries ability to pay for and ztrpport equipment. Vi~lzutm gtzffm.~ from the added difficulty of still l~ing targeted by the U.S. ~. Department's "a"ad~ with th~ enemy" embargo. 2.7.1 Laos Laos is s~rved by its previously state-owned carrier Laa Aviation, which s~rves Phnom Penh, Bangkok, Hanoi and Ha Chi Minh from th~ capital Vi~ntimm. I.,aa Aviation also serves the country's four domes'de airports at Luang Prabang, Phonsavan, Pak~ ~nd Savanaldaet. Lao Aviation's fluzt coasists of 6 An-24s, 2 Yak 40s amt 2 Y-12s. 2 ATR42-300s arc on order and it is expected that they will be delivexr, d undor better ami a Ftr.ach aid package. The USSR has been the largest aid donor to Laos, providing over 250 million rubles sink 1985~ This has come to an vad, however, and the Lao governamnt has taimn st~ps to strr.amlin~ and sell off stare-owned entt:rprises. As a r~sult, it was announced in early De4:mmlxa- 1990 that Lao Aviation and its air righ~ are w be sold m a group of Chinese invvstors in Miami. While Laoarlan law allows for 100% foreign ownership of companies, the mmsaction is still p~nding. US aid to Laos has b~n limimd to small rural d~velopm~nt projects and ~ money for an anifica~ limb factory. However, as LWs provides mm~ ~tion in providing information on US MZAs and fighting drug kraffi~king the aid packag~ is rx]x~'md to inc~as~. The BT-6? would be an approlniate ~ of rquipm~m w include in fum~ packages.
Organizations in Laos to contact include Lao Aviatidn, the Asian Development Beak (Manila), and U.S. based Hunt Oil, which has an oil roncessioa in Lans. Bangkok-based organizations which may be belpful are Indo-Swiss Aviation and Ammican $om'cing.

2.7.2 Cambodia (Kampuchea)
Th~ economic and political unstability in Cambodia disqualifies the country as a prospect for BT67 sales at this tirac.

Air Kampuchca is the state-owned airline which serves Ho Chi Minh from Phenom Penh and provides domestic sm'vice to Siem Reap and Stung Tmng with Soviet-buih turboprop equipment. Cambodia's civil war, following the pull out of Vi,tnan~se troops in 1989, has crippled Cambodia's economy which suffers from a virtually free-falllng riel currency, 200% inflation and dropping in'~uction of rice, the foodstuff staple.

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13

Wesu=rn aid packages to ~uznbodia az~ cuz~ndy lin~t~l m a US$6 mRlion grant from Canada, a t~.l~ommunications assistanc~ p~g~'zun fzx~z Auszz~lL~ and a US$5 miI~on huzns~mfian ~d package from th~ US. Until th~ aid packages inc:x~sc it is ~ly that Cambodia wil] be ~ a posidon to aCClUi~ any new u=chnology ~uipmen~.
The official in charge of the Ministry of ~ Communications and Posts is l~:~s Chun.

2.73
OivCn ~ larg~ siz~ of th~ coun~-y and tl~ rul~w strength of its economy, compared to I.ams and Cambodia, Vi~mazn is in th~ bes~ position m acqulz~ th~ BT.-6'7 and would undoubtedly haw a prodigious app~tit~ for them. D~spix~ the interest shown for Viemam by Asian investors, its . business climat~ is h-aught with difficulties and no mor~ so than for U.S.v.ompanies, whose govcnxn~nt has y~t to r,~ a trad~ ~mhargo with the country. While the govm'nm~nt is commitmd to improving th~ country's infrastm~m~ and su.v.amlin~g obstacles to foreign investment, Viemam's banking and 1~gal sym.ms ar~ su'll sub-standard and its modm-aization program has bern hit by a cut back in Soviet aid. The US govexnment is incrrasingly undm" l:n~ss'u~ f:mm comme:r~ imrr~st groups to rrl~tl its trad~ embm'go with Viemam. Un~l it d~s, major invrsunents by Vietnam in.arms-pare m~ difficulx and haw caus~:l confusion for all West=n a~mspa~ manufa~tur=s, lessors and suppliers. Although the state carrier Hang Khong Vi~mam is ~ lismd as holding m-dm~ for 2 ATR72s it is unc~-tain ff cl~vcrics will be mack:. Airbus aunounc~l in early 1990 that it had x~ached agreement to supply two A310 alrctaft to the stare e.an~ and subsequently indicated that it was pulling out of the purchase agrrcmemt for fear of ~ US govm'nment retaliation against the company and opposition by the C.o-oniinafing Committre on Multilat=al Export Controls A handful of other aircraft procm~nx:nt plans have been mad¢, the latrst being otto for the wet lease of ~vo Trans Aria B737s a~-ang~ by Hong Kong-based "IYinity Av~tion. The status of" these an-angements is unco~ Our dlscuss~ons with othm" Hong Kong-bascd l~asing companies show a r~lucumc~, on the part of th¢.~ large ~ to u'an~a_~t aixcu-afz in Vi~mam, again, for fern" of jropa~dising their activities in the US.

While legal cons=l should be sought..it may be possible to structo~ transactions with sales to Thai shell companies, wIfich would in ann wet lease equipment to Vietnamese corporations like Hang Khong. Aviation activities in Viemam still rr.main somewhat a mystrzy. Regular announcements a~ rnad¢ on the establishment of new ovrrseas aviation inwstor g~ups and joint vcutmrs to work with

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14

Hang Khong and the y~t-to-b~ established Air SaigoR, an rngimatic Ho Chi Miah municipal company. To date, nothing concern has come of such mmounc=m~nts and Air Saigon is rvport~dly unloading i~ off~es.

Companies a~sociatrd with the~ joint ventures inclu& SAS and Hong Kong-bascd" New D~v¢10pment Corporation.
Possible contacts for v~nttm~s in Vi=mam includ= Tun Eckrs at Indaswiss Aviation, Stvv¢ Millrr. at Trinity Aviation; ind~l~nd=m aviation consulumt Bill W'dson, who is located at the Floating Ho~] in Ho Cld Mirth, Ho C~i Minh-bas~l Vungtan Touri~ Cv~pany and Hang Khong Viemam. As' w~II, Fntnk Shin of Sharpland ].nv¢snn~nts in Hong Kong acts on the Vi~man~s~ govrrnment's b~half on som~ co~ ventmrs. TIm Transport Minist= for Viemam is Bui Danh Lnu.

As in the ca~ of Laos and Cambodia, co~on of barmr arrangen~nts is appropriat~ for Viemam.

2.8 Ja_p...~
The biggest Asia-Pacific m~rk~t for manufacnnx~ of tmbopmp equipment is pot=ntially Japan. Locally-built Nihon Y$-l Is a~ finally being r~laced and Saab, Fok]~ and CASA have begun to mak~ sales in Japan. Howevrr, the u~nd~ncy far Japanese Iv =mphasiz= new genemtlnn equipmrnt may b¢ an obstacl~ to BT-67 utles effom. Obviously domestic aviation is d~n~atext by All-Nippon, Japan Air Lines and Japan Air Sysmm. Th~ is, however, a growing network of ind~nd~nt and zfFflamd commuter ot~rators, including Japan Air Commuter, Nagasaki Airways, Asahi Ah'ways, N~w C~nu'al Aviation, Ryukyu Air Commuter, and Honda Airway~. The =mpha~ of th=~ carrier~ has largely been pass~ngcr services.

As well, thr I~ capability and sho~ field pcu'formancv of the BT-67 nud~ it m~itabl¢ for many of the morn rrmo~ co~ial and supply mutts in Hokkaido and the Ryukyu Islands, on which Okinawa is locatr.d. Japan Air Systrm. which luts ord~rrd 8 Saab 340Bs, tin,rides most of the intrr-island Ryukyu r,~rvic~s out of Natm, Okinawa and Kagoshimz and interior Hokkaido services from Hakodat~ and Chims= thnaugh its Japan Air Commutm" subsidiazy. Business practices in Japan m'~ r~lativcly s~ghtforw~[, despiu: the emphasis placed on personal inn'oductions, client attrntion, and afar sal~ srrvicr. Mo~ foreign n:mufactm'r~ appoint trading

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15

Even ff no sal=s effort is motmmd in ~apan far tbe BT-67, i~ would b~ pmd~m m launch an aggrrssiv= public r~ladons campaign in Tokyo ~ rh~ Tokyo banks and leasing companies quickly becoming th~ premier pmvide~ of air finance and equipm, nt throughom Asia. This can be done cost effectively by having infommtion on th~ BT-67 ine.lm:l~l in th~ Japanese language "Arrospace" and "Japan Aviation Press" and the English language "Wings Newsletmr". ConsicL-rration should also be given on pmicipation in tim Japan Intmmational Exhibition, to be held every oth~ ye~ at Tm~ab.a, near Tokyo. 2.9 Korea rezluimm=nt for freight capacity BT-67 sales in Kozcaby larger airtnaft and roadtremendous view that th~ prospects for but this is being filled arc marginal. Thtr~ is a .transport.
The importance of air cargo is not lost on Korea. Its export, driven economy drlmnds on ~liable and abundant .freight capacity. Tho major shareholder of Kmv.an Air, which OlXa.ams 9 747 frrightrrs and 2 AL, bus freighters, is the t-hnjin 'IYanspormtion group, the rounn'y's major land-air mmsponadon conglomcram which also includes I-imjin Shipping and Korean Freight Transportation. At present, however,.thrr¢ is no significant tm'boprop cargo capacity offcre.d. In part, this is due to the fact that the m~fiv¢ly short distan~ between $oul tnd P~an, the. major industriM city, makes it more e~onomical for air cargo m be n-u .cked to S¢oul's Kimpo Airport for onwm'd shipping, d~spite the prrs~nc~ of an interrmional a.h'port ~t Pusan. If discussions art undertaken in K.o~a, it would be advisabl~ to talk with Korean Aiz. which has xr, cenfly rrlaunchrd it~ SPX eXl:nrss pae2mt service domestically. While Asiana has a B747 fmighmr on order it is unlikely that the company would have any immediate tequi~mrnt for the BT-67. Further information may be obtain~ f:rom Smmung Aerosptm~ Industries, which has ¢xt~nslv¢ contzacts with Pratt & Whimry. The Director General of the Civil Aviation Bureau is Heon Seok Lee. 2.10 ,Malay.sia

While Malaysian civil aviation it ch~ by few carders a.m:l low-yielding mrvices, its geographical formation and network of rcmot~ villages rrquiring air services make it ideal for equipment affording .txa'f'ormance reliability, unprepared air strip ability, and cargo EfL

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16

D~spit~ discussion bc~ce~n the gov~-amen! and cvmpany ¢xccutiws to halve the largely unprofitabl~ domestic services, Malaysia AirLines x~mains the dominant domestic carrier, hs d~n~stic turboprop fl~t consists of Foklmr 50 a~"raft, 9 of wkk:h hav~ bc~n ordered to r~plac~ an ageing fl~ of F-27s. Malaysia AirLinvs has also b~n encharg~d with pmvidi~.g Rural Air Servic~ (RAS) in Sabah and Sarawak in ~ Malaydi. Thee obligatm-y and unprofitable z~-vi~s to mostly ~motv tmprvpar~d mips m~ imckctake.n with 5 DHC-6$. The carriage of egs~ntial goods - comFdsvd of chic~n, salt, pepper, aui~, jungl~ lavducts and building i~atm-ials - is consicl~-re.d an important mission of RAS and is on~ f~r which th~ BT-67 is well suitvd. svaior director of planning a~ Malaysia is B~-amd Thom~os. The newes~ do,~-sdc carrier is Pclangi A~. Pdangi, 10~ owaed by Malayxia, also ol~raxes a small flec~t of DHC-6 aircraft. It is the successor to the now-defun~ MACair and would bc the most l~kely carrier to iahm'h most of Malayfia's domestic mutes ffii finally pulls out of d0mvsfic Ol~ra6ons. Another candidau~ flint is sometimes m~nfioned is Malayfia H~licopm" S=~iccs of .which Malaysia owns 41%. The managing" dirr,,ctor of Pclangi is Capt. Ismail Baker.

In addition, them are a few small carriers owned by the individual stat~s. One ~f thes~ is Hornbill. Airways, based in Kuching and owned by the Sarawak smt~ government. It provides sexzices similar to RAS intrastate with a Shorts Skyvan. Pr~..~ntations to this ty~ of carrier and its supervising stats office would be advisible. In the Ffivate sector, ther~ ar~ a number of f~.ight forwm-dm's on the Malaysian p~aiasula who act as genm-al sales agents for a.irl~es us well as operating trucking firms, Occasionally they express aspirations to develop their own air arms as well. Maekt Airfieight' the OSA for Air Hong Kong in Kuala Lumpur, may be a possible contact. The manager for Maria is Muhammad lqbal Huq. Another possible contact in Kuala Lumpur is Muk'unan Hair, ~ of Indair Cargo Sercices. Indair is associated with Air WoPc.s in India and may br me.king to put together its own fleet of cargo aircraft for charter se~ic~s.
The Director General of Civil Aviation is Zatkipli bin Abdul. 2.11 Micronesia Micronesia consists of fou~ semi-indelxmdent political entities including the Commonwealth of Guam, the RepubLic of the Marianas, the FtxL-Tat¢~! States of Mica~nesis (FSM) in the Camlin~ Islands, the Republic of the Ma~hall Islands. The Republic of Palau in the Weitera Camlines remains trchhically O.S, Trusl Territory. At1 of the islands of Micronefia m'~ aligned with the U.S., which handles de, f~ns~ and fm'rign r~lations for the islands in exchange for aid and the fight to plac~ militmy installations in the ~gion Guam is the major hub for the. region and is served by Northwest, All Nippon and Japan Air Lines from Japan and Continental from Man~ New Guinea, Aust~lia, Honolulu and Japan.

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17

Hawaiian ha~ served Ouam from Honolulu with a DC-SC bm this rout, was sold to Northwes~ last month. Continental is ~portedly t~ying to :~11 its operations at Guam to D~lta.
Int~risland services ttm provided by Air Micronesi& a joint vcntm~ betwce.n Omtincntsl and the Mic~on=~ia Developn~nt Trust ~mpany. This sta-vice i~ condtmted with dedicated B727 in p~ng~r and combi configuration. Sm'vlces thmughtmt the FSM and Marshall ~ am charactefi.~l by long ~ ovmw~ter routes ~quiring cquipmvnt with a high lift capacity and excellent engine ~liability. While $otm of th=s, routes may be beyond the extended twin engine olxa'afio-t range of tim BT-67, we would view that the aircraft would be a~ for many of tim cum:nt services.

The i~lands of the Mafianas, which smrvund Guamand ate home to Saipa~, require cargo Lift to supply tbeir burgeoning resort businesses established largely for. Japanese touris~. Northwest and Continental provid~ connecting service between Saipan antl Guam. As well, a smeller cartier Guam Mafianas Aizways has been established with a fleet of CA~A C.212 to provide services ex-Guam. It would be an appropriate carrier to contact.

The U.$. Interior Dcpazmuent ha, adminis't~'~ r~lations with Miczonesia ~ince the early 1970s. As the islands become mo~ autonomous, however, this responsibility faJ.Is increasingly on th~ state and d~fens¢ ~partments. All of the iflands have xwrcscntatlv~ offices in Washington D.C. through which more information can be sought.

Like Btmglad~sh and Burma. Nepal has been subjceted to political un~st ov~ tht past year which has dampened the ~:onomy and choked important tourist re'rivals. '1"his follows soon after th~ ttsolution of a trad~ and trmuit dirpute with India, which clostxt all but 2 bord~ ca'ossings with Nepal in 1989-90. Although Nepal's economic problems wi]J continue to effect the level of infras~uctme d~velopmcnt which can be unde~ake.n, th~ government appea~ to ~main committed to modcmising and mfom~, g Royal Nepal Airlines (RNAC) which ..pyovid~s the sol~ dott~stic sm-~ices in the country as well as Limited international flights.

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18 RNAC's fl~ consist~ o1'2 B727, l B757 and 1 B757Combi for intonational ~ic~ and 10 DHC-6-3OOs, 3 Hawker Siddl~y 748s and a f~w PHatm Pormr~. Onr discussions with a I~IAC board mcml~r rrc~ndy r~vcalrd that the airline is consid~ing replacement typ~s for the Twin Otlm's a~d 748s.

The BT-67 in either a cargo- or combi-configm'ation would appear m b~ ~ .for the rough opt'ruing cnvimm~nt of Nepal. The~ is a v~ry Hmi~l ~uad sys=m in the counu7 a~l population rrntr~ m'~ separated by rugged ~ Nepal ha~ 38 airports, most nnpr~paz~d and x~qttizing STOL equipment. Int~rna~ government documents identify 18 of these a.q having comm~-cia] cargo pownfial. However, Ix~ause of flooding many of the~ airports a~ ~rvic~able only 9 months t~r year. An internal ~clxm ~ssu~I by the govrrnn~nt in 1985 identified the following aimrafl attributes as b~ing d~sh'able for futm~ a~'craft bring d~ployed in don~stir comn~ial sen'vice: large cargo door, capable of oprnuing to/f~m STOL fields with a minimum payload 4 tin~s that of the DHC-6, s-~pply drop capability, and a minimum range at maximum payload' of at le~t 400 m£1¢s. NepaJ off~cs a comn~rcial chall~ng~ Io foreign businessmen. While exchange control laws and high tariffs apply to most imports,, political favors elimlnat~ tlm burrauorafic tangles with amazing spc~d. The Director G-~n~al of Civil Aviation is LB. Shah.
Approaches to Nepal should I~ mad~ to RNAC, th~ King's VVIP Fright Wing or the Un.it~l Nations I~vel.opment P~ogram agency, which has a large offi~ in Kathmandu. AVMARK can assist in making, contacts within the .counn'y. 2.13 Papua New Guinea (PNG) New Guinea has owr 280 air strips ~rving remora m'bal villages, mining camps and administrative centrcs. As such, th= vcrsatilh7 of th~ BT-67 could mak~ it a very appmpriat~ equipment ty'p~ for New Guinea's a~luous operating enviromenL However, the commercial climat~ in New Guinea is cun'rntly described as "x~nophobic" and prone to "obsn'uctionism by the PNO public service". On~ a n-ust t~-riu~-y of Australia, the PNG gained incL-pend~nce in 1973 bu! continues Io r~ly heavily on Ausn'alian support in running its civil aviadon affairs. The Secretary of Deparn'nent of Aviation and Tom'ism is JJ.. K~k~h3. The largest domestic cerrie~ is Talair, established 41 yea.cs ago and still o~ned by Australian Dennis Buchanan. h operams a fl~t of over 50 ah~raft, comprise'largely of Twin Otmrs, Bandcirantos, C¢:ssna 402s and Islanders. Talah" was briefly closed down by Buchanan in 1990 after a dispu~ with the govrrnn~m but the can'i= is operating again, albeit to a h'action of the former 271 air snips it srrved ~sxli~. Government-owned Douglas Airways, ".he other large third l~v~l carrie:r, was placed in

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19

Further information on doing business in the PNG can bc sought through COOl~:rs & Lybrand and ANZ Bank. ~n Port Mo~sby.
2.14 New Z~aland Applications for the BT-67 ar~ limiu~d at present as conm~mlal aviation is in a con~on phase. New 2r.,aland's civil aviation sector has be~n dogg~l by the counuy's sagging economy and the dcc~as~ in inRrrnadonal touris~ m~ivals, following th~ Australian pilots' sn-ik~ wh'~ch negatively affrcmd all of the South Pacific. Against this backdrop, Air New Zealand and Ansert New Z~aland hav~ b~n fiercely coml~fing in the domestic market, offm~ng too many seats, and rcgisu=ing rrxord losses on the domestic s~.rviccs, To sum d~s~ losses, Air New Zealand has withdrawn from many second and third level services on the North Island, sold off ks flrct of 15 F,-27s, and cut staff by up xo 10% and generally plonrd a mor~ conservative growth plan. Safe Air, a cargo carrier opiating Argosys, has bc~n acq~ by Ai~ New Ze~l~d and its fl~ght dspartment and aircraft liquJdar~L Its services have bccn pick~l up Air Nelson. Mt Cook A£rlines has also I~en acquixrd by Air New Zcalaad and h continues w op~a~ a rourisl oricn~d network on the South Island with BAe748s and a Twin Ot~r. One possible home for the BT.-67 is with a cm'ric:r ca]led Airwork (1984), headq~ in Auckland. Ah-work operates a rfigh~'n~ maJJ server for the Nl Post. Its fle~! consists of two Men~ Ills. and it serves Auckland, Wcllingzon, ~wn North and Ckristchurrh, The carrier is expected to eventually Ix: the pdmm'y can'icr with deditmtcd aircraft for air mai], taking over the role from Air New Zeala~

It should b~ noted tha~ a few yra~ ago a carri~ called Classic Air opm'atc~l out of Paln~rston North with 3 DC-3 f:~ighu~rs. I~ is unccmdn whethc~ the company is still in oix:radon.
2.15 Ocr~mi____~a

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2O

It is unfair to lump all of the islands in tbe South Pacific in~ one heading as ~ach has a uniqueform of gove~zrnent, laws and customs. Stretching from the Solomon Islands through the Tonga Islands to th~ Line Islands, Oceaz~ has a xignLficant ru:lUk=z~nt for ah" lift. WhLI~ tourism is increasing l~..coming the biggest money spinn~, r~lacing fro-ruing and miring on most of the islands, aircraft requirements t'till appem" firmly gmand~d in ~zrgo m" comb] configured ~uipmont to connect the multiur:l~ of idands.

Carriers in the r~gion inclu& Solair (Solomons), Air Tnngaru (Tung=u), Air Vanuatu (Vanuam), Friendly Island Airways (Tonga), Air Pm:L~ (Fiji), Air Tahiti, Cook ]gland Int~'nafional, and Polynesian Airlines (Wes=rn Samoa). Air Pacific is the huge.st, with 1 B747 and 2 B767s. A possible useful contact ~ ~ r~gion is Andz~w Drysd~, mamging dizr.c~ of Air Pacific and chairman of th~ Association of South Pacific A~riines.
2.16 pakistan

Commercial aviation in Pakistan is controlled by PIA, the state,-owned cartier, which serves 32 domestic points in ~ddhion to 40 inzmzaziozml cites. PIA c]z.ims to hav~ ~ a ]~ofit evez'y yrau" since 1954 except in 1971 but it is widely known that I:~Hsz~'s duzz=stic routes have the distinction of being some of the Iov~ yiekHng in tbe world at some US$.03 per tuLle-equivalent to the local bus fast. PIA's local scrvic~ obligations for both passe.rigor and fmlght r, rrvires az~ ~ly to diminish, even after a partial pfivafiz.afion plan for th~ ~ is impl=m~nted. Cunc~ivably, th~r~ could be a requirement for the BT-67 to supple~a~nt PIA's present fl~t of 15 F-27s (4 acquired in 1990) and 2 Twin Otto.

PIA, whose fl~t is also comprised of 8 B747, 8 A30Os, 6 B737-300s and 5 B707s, is a substantial carrier. Thus, it is unlikely thaz it would have any problems financing the costs of an sircral'z the size of a BT-67, however, it has inczr.asingly shown a mnd~ncy to bring aircraft in under ol~rating l,-as~s. h should bo noted that incrr.asingly high~ import dudus are being assigned to aizrzaft being r, old in Pakistan. 2.17 Singapo~ Despite Singapore's role as an imixrmnt Southeast Asian hub, in part due to its country's "open sides" policy, it is unlik,-ly that ¢ith~r the dominant ca.rz'~ Singapor~ Airlines (SIA) or its

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21 ~ubsidia.ry Trad=winds would have any us~ for the BT-67. While $IA, does operate a ~747 freight=r, it has not ~hown Iz~h innovation or aggzrssiv¢ dcv~lopmrm in its cargo r, crvicrs. There is a large amount of trans-shipmcnt between. Malaysia and. Singapore, .with Prnang shipping 65% of its commc~cc through Singapore's Changi Aixport, for which three may be an application for the BT-67. In addition, many of the oil and mining companies tl~oughou! Southeast Asia use Singapore as a supplying point for their operations Imwhsz¢. There has b~n s growing cargo charmr budn~ss which has evolved from this.

The Ong Bcng Seng Hotel Pmpcr~cs Group is also conddcfing the cstablisban~nt of a new passenger can'irr based in $1-gapor¢. Tentatively railed R~gionair, the carfi¢~ would Irrovid¢ r~gionsl char~ services. R~£ion~'s m~nsging dir~tor ~ ~ De Va~ who is a~o a w~]]known .l~ivat~ aviator in Southeast Asia. Business practices in Singapore are straightforward, With many U.S. banks, leasing'companies and law fn'm_s having rrprcsentasiv¢ ofE~ts lhe~. ALso, the Association of Singapore Aorosp~ Industries ha~ been succcss'ful in attracting many avionics and components rcpai~ and assembly facilities to Singapo~. The Director General of Civil Aviation is Lira Hock San. 2.1 g Thailand Thailand's r, conomy has l~d Southr.an Asia in Ix:turning gruwth in zr, c~n! yraxr~, which has placed a strain on its infrastructure and given rise m demand for more can'irrs, more services and more airports. Generally, the n~tary, which'ran the government from 1976 until dviHan Priznc Minister ChatichaJ was elected in 1988, has r~sponded positively m the nell far ah" in£mstrucRndevdopm~nt by, for example, op~ning trp tb~ large U-repro Air Base, near Panaya. m co~ial flights, building new airp4~ at Chang Mai and Chang Rai, expanding Bangkok:s Dorn Munag A£rport, and giving clearance for the consn'ucdon of Bangkok Airway's l~ivat~ a.irpon on th~ popular mmisl island of IG3h SamuL The country's fl~g carries, Thai ALways International, l~s been the r, ccnc of undue poHdcal infighting, with factions representing miliun'y and civilian power cliques attrmptlng to exert conlzol over opcratiom, mm'k~dng and procurrm~nL While the cartier" has continued to expand and still ranks higMy in international cu,t'tcnx~ a~'cnesS, it appea~ that th~ politlcd wrangles have taken th¢~" mid un the airline. Engin~-ing staff" a~ staging work slowdowns; some scrvi~s, pm'dcular]y to the sub-continent, arc habitually delayed, and a major recent order for Ocn~al

E]~c~c engines was La=r sp]~t ,, the rcquc,~ of the military to tnclu..~ Pr~ & Wkitncy.

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22

While obtrusive poetical favoritism and th~ infl~n~ of d~ mRitary in co .remedial affairs continues to char~-Irri~ Thailand, the int~l'e~rnc¢ of govrrnn~m on private affa.~ is not expr.nt~l to d.m'np~n the country's r.conomi~ growth, We view that Thailand may hold particular promis~ .for the BT-67. Thai's dom'esti¢ fl~t consists largely of Airbus, B737 and Shorts 330 and 360s, ATR42s, and ATR72s. The BAe 146 is gradnally b~ing inmxinc~xl m upgrad~ r, on~ of the mums cnnrntly s=~axi by the Shorts and Bo~ing ~luipn~nt. It is un~'u~n wha~ Thai's r~-~ption would be to the BT-67. However, while a h~ndful of ind~l~nd~nt don~ can~s exist, Thai will con6nue to hold prlmm'y responsibility for th~ nation's air ~-vi~e.s, mn~h of which invulv~s nn'al and genera] transporl e-~sentio] s~rvi~s. Thai ~ oRan w~l-l~as~d fi~ight~a" ~ from" the military. and. currently, a DC-SC £rom C-~arge B~helor's A.,'mw Air. It would probably consider a ~asing arrangement of the BT-67 if it we~ to ~ognize th~ ah~raft as providing additional reach within the country. The Di~ctor of Cargo & ~ a~ Thai is Kawin Asawachan'oj.
Traffic l~ows in the country a~ north-south, with {~hlang Mal a~llng as ~h~ end point in Northern Thailand, Bangkok the main onnoting point, and Smi Thani and Phuket sezving as the southern end points. Thcm may I~ a role for thr BT-67 in providing f~e_.clrr ronne~ing srrvi~eS to the main n'unk routes as well as providing cl~re~t p~int-~.point services ex-Banglmk tothe co~stal and Mekong River valley a~as.

Bangkok is inc~a~ingly Ixring recognized as location for financial and legal finns, sotn~ of whom deal with aimraft mmsactions. It should I~ not~l that exchange control laws still apply which ~ornetin~s retard money mmimmces. The Thai govrrnmenl en~.~, ~I later rescinded a l~w last ye~ rrquiring Thai to raise funds for aircraft pumhasrs in Tlmi Baht.

As well Bangkok is increasingly rrcogniz~ as the comm~ria] COnL~.t point for trad~ with Laos, Cambodia. Vietnam. and Burma. Thai Flying S~:rvic~, a Bangkok based company ~ by

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23

ThJd~j ~v~aJthai, has b~n actiwly involvr.d with varying ~ucc~s in putting mg~ther.~nv~stor groups for avia~on v~ntur~s both domestically and in the r~gion. Alan Jansen, form~ly a ,~l~s ~x~cu~w al Saab in Hong Kong, has r~locan=d ~ Banglmk and w.mains involw~d in r~gionh] aviation wntm~s. Jim Eckcs at Ind.-Swiss Avimlon in I-Iong Kong also has comply a~sociat~s in Bangkok..
Th~ Director C~n=raJ of Civil Aviation is Sr~sook ChandxanEsu.

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24

3.0Int:roducdon

This sccrlon provides further background information on Aush'alia, Indonesia, and th~ Philippines. Like Section lI, Section IIl id~ndfies oppommidcs for the Baslcr Turbo 67 and provides an in=oducdon to ~ t'acu~s which may affect pomnda~ sal~s of th~ aircr~ in the countries Rcguhum-X (pro-doml~ti~v~, aircra~ c~dficadon, other logal, and financial), Opm'amr (~xis~ng and proposed airlines) and Comm~mial (financial institutions; sa!es ag=nm, lessors). 3.1 Australia Given the im~anr~ that air mmspo~ plays dn'~ughout Australia, th~ BT-~? is an aHrropriat~ aircraft w m~t a variety of ro~s, hinging fi'om co~ial cargo, m agricuhural and industrial supporz. Howev~. the ountry is g¢n~ally faring economic difiSculdes which m-~ cbnsrmlnlng corporam expansion in mos~ se.cton of indu~y.
General

In ]990 the Hawke Labor Party govrrnmrm conc~Ird that Australia is. in arr.~ssion. The country has boca plagued by a rise in unemployment to nearly I0%, an inca-~as~ in probl~.m loans and bad bank debt, the collaps~ of the governmcnt-own~l Siam Bank of ~ri~tmia, and sagging wool ~xports. However, the country's downturn exhibits th~ regional natun~ of its economy, with the agriculture and mining exporborirnmd states of Qu~rnshnd and West Austzalia showing resilience W the economic malaise. The problems of Ausmdia's economy compound the negative inflnrnce of the Australian pilots; sn~kr, which dislocate1 the country's air transport system in late 1989 tlia-ough the first half of 1990. During the strike international touri~ re'rivals plumm~md and most clon~s~ discretionary ~'av¢! was avoidccL Domestic airline a~viry for the year ended Jun~ 1989 was 14,000,000 passeng¢r embarkn~:ms. In 1990 the figure fell 29% w 9,ff70,000 passengers" Air cargo traffic was also n¢gafiv¢ly impactr.d by the stri~, failing ~ 171,.300 tons in 1989 to 99,800 wns in 1990, a drop of 42%.

1991 should record a reverse incrr.ase in traf~ figures and w~ furdm~expe.ct the transportation sector to b¢ helped by airline d~rrgulation, which took ~ff¢ct on Ocmlx::r 31, 1990. Until the rr.c~ssion passes, we would no~ ~ n-al~ to exceed th~ 1989 figures.
Regulatory

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25

The de~gula~on of tbe commercial Indunry, which occurred in October 1990, effectively ends th~ two d~mcstic airLin~ policy which has x~stric~d th~ domestic natlonal~ w Australian and Ansett for owe two de.cad, s. In addidon to allowing th~ establishn~nt ot" new jet olx:razors, d~r~gulation Cows flexib]e pricing, ]:~htov} marketing, and inw.ased freedom in scheduling, capacity conrail, and route development. De~gul~on has hastened a~quisitions and alliances between the established jel operators and the country's meny commercial turboFrop operators. Soon following comm~cial de~gulation, Minister of TranslmXt Kim Beazley announced the govcmm.snt's intention to fully privatizc Ausmdian and offer up to 49% of Qantas locally and overseas. While neither carriers' rr, qttizr.me.nts for accessing private funding have diminished, privatization now appr.ars to be delayed fn~n'th¢ orighud tarot daze of 1991 by the r~onomic r~cession. In a welcome move by privam and co~ operator, tim CAA also announced' its intention of revising its rigid system of maintenance and safety supeawision. New Icgiflation is intended to rcfle~ ICAO prance and earlier Australian industry r~spon.~ by 1) recognizing in~rnationally accepted attitudes to aircraft maintenance 2) increasing reliance on n:mnufactu~r-specLfied maintenance sysmm.s and re, commendations, and 3) inctr.a.~tg self-r=gulation within th= industry, As of January I, 1991 the CAA camgoriz~ all a.hxa'aft anthodmd by the Air Operators Certificat~ for commcmia] use as Typ~ A aixcraft. All other ah'ca-aft az~ categorized as Type B aimrafk Type A ~ will continue to be required to be maintained by a CAA-approved n:pa.Lr facility, however, the application of Civil Aviation Regulations to maintenance ~s is promised to be imposed morn in line with int~rnationaIly recognized standards. Pra~caIly, for example, an aircraft like the BT-67 will no longer rC~luiz~ tin'ce separate log books for a.kfraxne, engines, and props. Type B aimraft will no longer be s~..quired to undea'go thtte yearly inspections and may be maintained under differt:nt options. In line with a re.orientatlon of the ~ attitude from "The Department Knows Best" to a more internationaJly consistent (and less cosily) one, the gow~'nmcnt is taking important stops to eliminate pmcedm-cs of F'n's't of Type (FOT) certification. Previously, the ~ and its prede.cessor, the Department of Civil Aviation, required independent assessments of certification granted by the US FAA and the Em'opean JAR. The duplication costs incmTcd by Australian, for example, on the B737-300 mnounmd to A$3.7 million. In another cas~, tim Hawlmr Pacific, the Beech distributor spent A$1.7 million to cea'tif-y the B1900C (and the cu~ ultlmatcly canceled the pm'cha.~ due to the delay). This system will now be ovcrhatdcd, however, and it it likely that foreign type c~tificams will be genca'ally rcco~ Ftmhcr background on the revision to the cea-tification ImX:edu~ is provid~ in Appendix B.

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26 Information and assistanc~ on ~gulatory marm~ can b~ ~ught f:rom John King al AVMA.RK's representative office in Melbom'nc, or by contacting Blak~ Dawson Waldron, a group of aviation solicitors in Sydney. A good conmc~ within the CAA is Dick Smith, who has b¢~n recently appointed its communications advi~-r.

As of Sepmmb~r 1990, 15 DC-3s w.maln=l on CAA xr~istry. Ir is estimal~l that 6 ~ in commm'chl .~rvic¢, opm'ating as multi-purpose .ai~raR .far Air North (2), Oold~n West (I), Nozth East (1),. Shortstop Jet Chafer (1) and Rebel Air (I). Thee mmll olxrmm~ m~ based at Darwin (Air North), Chinchilla (Gold~n West), Cairns (North ~tst), Moorabb~n (Shortstop) and Sydney (Reb~l Air).

The'prirms7 all-freight cm'rirrs in Austra/is m~ TNTLimir~t, .Ansm Air Pr~ight, IPEC, md l~IAir Services. TNT Lim~l i.~ own~l by Sir l~=r Abelra, who is also joint owner of Arisen Transport Indus~es w~th News Corp.'s Rulx~ Mm'dx~ Hr.adquanrmd in Melbom-ne, TNT primar~y up,rams BAe 146-300QTs in Australia. TNT also .m, rang~ Frocurrm~nt for most cquip~nt olx~rate..d or own~! by Anon Ah'Hnes. An~.~ A~r r-r~g~t, Ea.rtwest Airlines, and the Ansctt leasing company AWAS, which is headq~ in Sydney. Ans~tt ~ F~i.ght op~-a~s a B727-200C. Sir P~tcr Abeles is sm~ng]y ¢onm~tted to d~ BAe f~ighm" equipment, howev~, it would be appropria~ to conta~ him dlrcct]y in Melbourne to confirm his futm~ fleet r~iui~ments. IPEC Aviation is an ind~p~ndu~t cargo carrier, based a Sydney, pmvding overnight cargo srrviee. It bases one DC-9C at Brisbane and one DC9C al Mrlbom'ne. P~viously, IPEC op~ra~:l 2 Sydney,ahrnft which Brisbane,Irstsrd ., TownsvRl~, and Mackay, son~ under contra~ fzom An.~u Argosy Melbourne, ar~ now Cairns out. It ol~rams ~gular sm~vic~s w Launceston, Ad~-la~de, Air Freight. It pot~ntia!ly could r~quh'~ Ru'boFroP eq.uipment to feed its ~rvic~s at Brisbane or Melbom'ne. However. i! ci~l the slow 200kt. cruising ~ and 12 mn uplift of the Argosy as reason for the a£rcraft's disposa!. The cm'irr held a stalin in Band~irant~ operator Secmity Express Country Courier, but it is unknown ff ~]~ ~ll opcmms. The genm-al manager of is R. Tayles. Pel-Air Services is a small cargo carrier paslia.lly owned by Au.m'alian A.h'lines. I-Ir~lqum-t~-~l in Sydn¢y, the carrier provides cargo fr.~l to Ausn-alian with s fleet of 4 IAI 1124 Weswcind freighters, one Shorts 330 and 4 Falcon jets. In the fac~ of domestic deregulation, uhe national carriers m~ quickly ~tbso~bing or aligning with the ~giona] turboprop op~awr~. Mosl of these r~gionals concentra~ primarily on pas~ngrr services in th~ populamd smms of New ,South Wales, Vicmxia and Qu~nsland. As such, it is doubtful that tbeir r~luirrn~nts would include BT-67 type ~luipm~nL Ans~tl aligned carriers include Air NSW (whoIly-ownrxl; Pukka-50). Ausu'alian has agmsfively pursued a numbrx of carriers, including: Australian R~gional (wholly-owned; DHC-6)0 S .u~. mt~ (wholly-owned; 360, -330, Bandierant~, DHC--6), Eastern Australian (subnantia!ly-ownrd~ Dash-g, BAe

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Bandm-ianm, Titan). While th~s~ carriers are still largely managed by their former independen! mana~rr~n! r~.ms, ~h¢ head office of Ausu'a]hm will increasingly excrcls~ conzrol of managcrncn~ and proc~rmmcnt.
Two othrr carrien, Haz~hon and Krndall, opcram as Australian afffliatvs bul ar~" ~xpectvd ~o continue control of their cotlx~t~ expansion. Haz~lwn opcrams in New South Wales with 2 B 1900Cs, 13 Pipe~ Chieftains, an Embraex Bandzlranm, 2 Shorts 360s and :2 Saab.340B~. l~ndall is a Saab o1~'rator in New South Wale.s headed by Don Krndall. Haz~lwn is owned by Max Haz~lwn and mmaagexl by Bcvan Cvou:.

Thrr~ r~mains a large n~mbcr of indtrpcndrn~ can'lrrs fln'oughou~ Australia, with fl~ts consisfinff of a single Islandar to 20 or mor~ muld-ahx:raft. Two ind~pvndvnts of parficluar not~ a~ Ffigh~ West Ah'linc-~, he~dquarmngl zt Brisbane, and LLoyd Aviation, wkich has ~ntly udmn ovrr Skywrsz Aviation. Flight West is ownexl by Dennis Buchanan, who also owns PNG's Talair, and appears to b¢ w~ll managed and caplmlizcd, Buchamm h~ a.mpumtion for aggrrssiv¢ rxpansion and the BT-67 may m~¢l some of his fumr~ growth ~quh~man~. LLoyd has recently bre.n award~d s fiw year general rams-port ronu'a~ in m~PlX~ of oil ~xpl~ation at Tmughlon Island, off Darwin. h also operates Shorts ~0 ¢on~numr scrcic~s ou~ of Ad~laick and contracl air coastal watch services for the govm'nmcnt

It may bc adv~sab!E to app~Lnt a sales agcnl for Australia. Two possible Rrms to contain are Hawker Pacific in SydnEy, which is the OSA for Bccchcraft and othm% and CSW in MclbotmuE. which r~prrs~nts CASA. Schun Ahrr~a~ Moorabbin provides ovr~haul work on DC-3s. All major financial institutions ~nd lrasing companies h~vE officrs or x~pr~sEntativEs in Australia. Thr largESl domestic companies providing le~s~ and loan finan~ for ~ includ~ ANZ Bank, WardlEy Capital (a subsidiary of WardlEy'~ in Hong Kong), ALLCO Capital and ALLCO
3.2 IndonEsi,a

Indonesia has long rccognized the ce.pabi.~ty of the DC-3, with '7 ~rhn'~ s~lt operating the equipment. We view that the T~T-67 would also bc an am'actlvE ahzn'afl with which to fn]fd] a variety of transport roles ranging from cargo to pass~ngrr to combi r, crvices. Despite the promising intrust which ah'linEs rrmy =how for ~hE BT-67, mark~l entry may be hinde~d by govcrnm~n~ supp~ of turboprvp ~quipmcm lm'vducrd by IPTN.

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2B of development among Indonesia's far-flung islands. Batam, ¢astcm Sumaa'a, Java and Bali hav= largely b~n~fited ~ the ~x]x~ boom led by increased demand for ]ndonesia's tcxdl~s, j~w~lry, ~a and' engineering goods. While contributing to the mining m~l ag~i .c~mral economy, Irian, T'm~or, the C¢lcbcs, Floras, and Kalimantan on Borneo Ixland s~.la~gor. The nuiuir~ments for air s~rvic~s are r~ogniz~l throughout the country, although the IvI of air infr~u-uctm¢ development ~flcc~ the general ¢onom~ imbaian~ between island. However, the gov~-nmcnt has taken some mcasurus to imFrov¢ air u:rvic~, including initiating a USfunded muhi-milIion dollar study of the nation's air requirements and authorizing de~gulation of conm31, forsome aspects of civil aviation. Some critics, howev=, view that the Indonesian govern~nt's exccsdve favoritism,, don~sdc Frotcction~sm fos¢~l by R~scar~h and Technology MinL~r Dr BJ. Habibi¢, and commercial concessions mad~ w I~sid~nt Suharm'~ family --embers wi~ continue to n:umt mod~mLzadon and dcv¢lopm~nt o£.the county's a~r system.

Regulatory In Dccemb= 1989 Dr Habibk and the ~torat¢ Gcnrral for Air Communications withdrrw the longstanding pollcy of banning jet ainaaft ~a'atlons by the country's 18 private can'i~rs. Prrviously, only stat~-oww.d Oaruda Indonesia and M=pati Nusanmra wm' anthmiz.~, to oprrat¢ jet equipment. It is widely undrmood tha~ the Frcviotts ban had been put in place to lmote, ct the two can-iers, as w11 as elim~u: i.n~ competition for the state-owned IFTN aircraft mahufacturcr, widch builds the NC-212 and CN-235 under license fi'om CASA and is plann~g production of the large.r CN-250 turboprop. Following the 1989 aanounc~ment. $¢mpati Air sought and r~c~ived approval to import