My Account Menu

CAPA Login


Register to trial CAPA Membership!

DoT proposes to deny Delta/Virgin Blue antitrust immunity; ANA to launch LCC in autumn 2011

9-Sep-2010

US Department of Transportation (DoT) proposed to deny an application for antitrust immunity made by Delta Air Lines and affiliates of the Virgin Blue Group with respect to joint services between the US and Australia. Shares in Virgin Blue gained 3.5% yesterday, following a 6.2% gain the previous day.

The Department tentatively concluded that Delta and Virgin Blue had not demonstrated that the alliance would produce sufficient public benefits to justify a grant of antitrust immunity. In reaching its tentative decision, the Department noted Delta and its partners have only recently entered the US-Australia market, have not shown developed plans to operate as commercial partners, and have limited their cooperation to a handful of routes, thereby limiting the public benefits their alliance might produce.

The DoT added Delta and Virgin Blue had failed to show that their alliance would have positive effects for consumers, such as lower fares or increased capacity. Interested parties have been invited to show cause why the proposed decision should not be made final. Objections are due in 14 calendar days, and answers to objections seven days after that. Following the comment period, the Department will review all filings and issue a final decision.

Virgin Blue, today, stated, both airlines would be working with DoT over the next 14 days to respond to the concerns raised, adding that it strongly believes the proposed alliance with Delta will be good for consumers. Delta also stated it believes the agreement will benefit consumers. 

Air New Zealand pays dividend; shares weaker

Also in the South Pacific, shares in Air New Zealand slumped 5.2% yesterday, following a 3.8% gain the previous day. The carrier reportedly paid a final dividend of NZD0.04 per share on 08-Sep-2010. 

ANA LCC to launch in autumn 2011

In North Asia, shares in ANA were neutral yesterday, ahead of a reports, and an expected decision, on the carrier’s LCC plans today. The planned LCC will reportedly be established at the end of 2010, with operations to commence in autumn 2011. 

Reported details of ANA LCC plans

Area

Full Details

Launch

The new airline will reportedly commence operations in autumn 2011

Ownership

ANA will be the majority shareholder with a roughly 30% stake in the new company. It has been reported that Hong Kong businessman Victor Chu's First Eastern Investment Group will take a stake in the carrier, to become the second largest shareholder in the company. The company reportedly made the investment on expectations for growing travel demand between Japan and China. A range of domestic firms, including travel agencies and trading houses, will also be invited to take stakes in the new company

Capitalisation

Expected at JPY10 billion-15 billion (USD119 million-179 million);

Branding

Will reportedly operate under a brand other than ANA

Base

The carrier will reportedly be based at Kansai International Airport. Following ANA’s decision, Kansai is expected to proceed with a plan to invest approximately JPY10 billion to construct a new terminal building exclusively for use by the new firm’s passengers, with an aircraft parking apron and a fueling facility

Management

The carrier will reportedly appoint an experienced international LCC executive to head the company

Domestic destinations/fares

The carrier may charge JPY5,000 (USD60) – compared with JPY14,050 charged by Central Japan Railway for Nozomi Shinkansen services – for services between Kansai Osaka and Tokyo Narita. The carrier may also offer Kansai-Fukuoka and Kansai-Naha services for roughly JPY5,000 and JPY8,000 (USD95). Other potential destinations include Sendai, Niigata, Nagasaki and Kagoshima. The LCC is reportedly planning to attract customers away from railway and bus operators

International operations

The new LCC will also offer heavily discounted international airfares on services from Kansai to other Asian destinations (including China and South Korea), although these services will reportedly be launched following the commencement of domestic operations

Cost-reduction efforts

As part of efforts to reduce the LCC's cost base, the carrier will reportedly hire foreign pilots and cabin crew (with a new wage structure), simplify the in-flight product and use small to mid-size aircraft

EVA Air and China Airlines report significant revenue gains in Aug-2010

Meanwhile, shares in EVA Air declined 3.3%, with China Airlines’ shares 3.7% weaker, building on declines of 4.0% and 3.3% the day earlier.  The declines occurred despite both carriers reporting significant revenue gains in the month, with China Airlines’ revenues increased 45% to USD388 and EVA Air’s revenues increasing 49% to USD308 million, EVA Air also reported double-digit passenger and cargo yields in the month of 39% and 32% respectively.

EVA Air traffic highlights: Aug-2010

Currency: USD

EVA Air

% change

Total Revenue

308.3

+49%

     Passenger revenue

175.4

+32%

     Cargo revenue

113.2

+92%

Passenger numbers

573,783

-0.5%

Passenger load factor

82.7%

-3.8 ppts

Passenger yield (cents)

8.2

+39%

Cargo traffic (tonnes)

83.676

+43%

Cargo load factor

82.1%

-2.5 ppts

Cargo yield

25.0

+32%

 Asia Pacific selected airlines daily share price movements (% change): 08-Sep-2010


Want more analysis like this? CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find out more and take a free trial.