Analysis for North America
16-Dec-2012 10:30 AM
Qantas and China Eastern are nudging each other for a deeper partnership to cover Australia-China traffic flows. Feelings are warm on both sides; all that is missing is the time and resources to complete a deal. Qantas is busy with its Emirates partnership as well as continuing network improvements, including its loss-making international network, while China Eastern is a slower moving company and concentrating on its own rapid expansion. The two of course are also busy with their joint venture LCC, Jetstar Hong Kong.
Their thunder may be stolen by a more agile Virgin Australia, which has set as its next strategic development a partnership with another Asian carrier – and one most likely to be in North Asia to facilitate better connections around the region than Virgin can achieve with its Asian partner Singapore Airlines.
Cathay Pacific could be a strong partner for Virgin: besides network synergies, they both share a common competitor in Qantas. A stumbling block is that Cathay and Qantas are both members of oneworld, but Cathay is an ambivalent member, and either way global marketing alliances are losing muster as partnership dynamics revert to a bilateral focus.
13-Dec-2012 2:53 PM
Cathay Pacific's short-term focus is regional Asia, which it will continue to grow in 2013, although overall the airline expects a slight decrease in capacity as it looks to improve profitability on its long-haul network by replacing maintenance-intensive 747-400s with new 777-300ERs.
But in the long-term the carrier's focus is very much on leveraging its short-haul network to feed long-haul flights, meanwhile re-examining its short-haul strategy.
Cathay is once again evaluating the A380 and 747-8I to see if it needs to grow through capacity increases, stick to its preference for frequency and/or consider new destinations many of its passengers currently reach via connections. The airline is also considering how it might tap into the lucrative Asia-Latin America market. And of course, Cathay must consider what role it will have with alliances.
Yet underpinning these growth possibilities is the fact that Cathay's short-haul market is under pressure, and this will only intensify as Chinese airlines and LCCs continue to gain strength in its home market – an uncomfortable reality Cathay has been shy of admitting.
12-Dec-2012 5:35 PM
Delta’s purchase of Singapore Airlines’ 49% share in Virgin Atlantic for USD360 million continues the massive US airline’s international expansion and opens up a major front in the battle for Heathrow’s valuable traffic flows. For Virgin, it once again means the airline has been saved from decline and even oblivion. The previous saviour, Singapore Airlines, paid almost three times as much, but had no prospect of leveraging the deal in the way Delta potentially may.
Almost since the day it acquired the stake for GBP600 million, Singapore Airlines has been trying to sell out of its barren partnership with Sir Richard Branson’s Virgin Group. It has been a long and painful – not to mention embarrassing – saga. SIA has long since stopped trying to leverage its relationship.
Delta meanwhile is in global expansion mode, growing organically at home and investing in Gol and Aeromexico over the past year, as it sees a window of opportunity in the evolution of world aviation. The mega-airline is also expanding through metal neutral agreements on the Atlantic and the Pacific. This is a time when seemingly anything is now possible, where Air France can combine with one of the despised Gulf airlines, Qatar Airways can join oneworld and Emirates can team up with arch rival Qantas.
30-Nov-2012 8:00 PM
Air Canada is banking on continued strength in its Pacific network into 2013 as it aims to expand its reach into Asia during the summer high season next year through new service to Seoul from its Toronto hub and an expansion of offerings to Beijing and Tokyo Narita. At the same time the carrier is introducing flights between Toronto and Istanbul, Turkey as a means to tap the strength of fellow Star Alliance member Turkish Airlines’ network across central Asia, Africa and the Middle East.
The new flights to Istanbul could be Air Canada’s answer to the growing partnerships that airlines participating in other large global alliances are forging with Gulf carriers, something Air Canada and its major Star partner Lufthansa have so far refused to explore as both carriers have been the most critical of the rapid expansion of Middle Eastern airlines during the last few years.
The moves by Air Canada into Asia during 2H2013 follow the carrier’s strong performance in its existing markets in the region throughout 2012. Presently, Air Canada serves five destinations in the Asia Pacific region – Beijing (from Toronto and Vancouver), Shanghai (from Toronto and Vancouver), Hong Kong (from Toronto and Vancouver), Tokyo Narita (from Vancouver and Toronto) and Seoul (from Vancouver). Asia currently accounts for 10% of Air Canada’s international seats on offer and 26% of its international ASKs.
30-Nov-2012 3:00 AM
A steady downsizing by Delta at its Memphis hub is continuing into 1Q2013 as the carrier plans to slash roughly 96 weekly frequencies from its scheduled offerings from the airport. After pulling down Memphis significantly since its 2008 merger with Northwest, the airport has shrunk to Delta’s smallest domestic US hub, bypassing Cincinnati, which has also faced its share of service cuts during the same time period.
Memphis suffers from a geographical disadvantage in relation to Delta’s mega hub in Atlanta, and also has a fair number of markets operated with 50-seat regional jets, an aircraft Delta is busy ridding itself of in favour of larger-gauge aircraft. Those elements continue to work against Memphis, leaving the airport to search for new carriers to fill the service gaps Delta’s downsizing continues to create.
The new reductions to Delta’s operations beginning in Jan-2013 follow elimination of approximately 56 weekly frequencies by Delta in Memphis in Aug-2012. Between Aug-2012 and Nov-2012 Delta’s peak day departures in Memphis fell from 125 to 115 after averaging 147 in Jul-2012.
28-Nov-2012 11:30 PM
In a curious move JetBlue is boldly taking on Alaska Airlines in one of Alaska’s core markets – Seattle-Anchorage – without having a strong anchor base on either side. JetBlue is also introducing new service to Albuquerque in New Mexico and Charleston in South Carolina and is expanding its intra-Caribbean network with new flights from its San Juan focus city to Punta Cana and Santiago in the the Dominican Republic. The expansion at San Juan appears to be a move by JetBlue to backfill some flights likely being eliminated by American Eagle as it winds down its long-standing San Juan hub.
The recently announced new markets for 1H2013 runs somewhat counter to statements recently made by JetBlue management that Boston would continue to play a major role in the carrier’s network as it continues work to add attractive markets to business travellers. Charleston is the only new market which will be served from Boston, where JetBlue will offer roughly 109 daily departures during 4Q2012. JetBlue will serve Charleston from Boston with one daily flight and from New York JFK, its largest hub, with two daily flights.
26-Nov-2012 5:54 PM
Airline passengers’ primary needs are to get to their desired destination on time, whether it’s for business, personal or leisure reasons, without losing their baggage, and
at reasonable fares. If a passenger living in Austin, Texas wants to
fly to Kathmandu, Nepal and their favourite airline (say, American) does not fly there, then the primary need is not met.
If they are able to fly to their desired destination with minimal hassle and have a pleasant experience, then the carrier has succeeded in meeting the passenger’s secondary need.
This article, one of a series, is provided by Professor Nawal Taneja and extracted from the latest issue of Airline Leader, distributed this week in hard copy to aviation CEOs around the world.
23-Nov-2012 9:00 PM
Intrigue around the potential American-US Airways merger has been resurrected during the last couple of weeks as current management from each carrier has reportedly met with American’s creditors' committee to persuade its members to lean towards their preferred outcome – in the case of US Airways a merger, and with American, possibly an emergence from Chapter 11 as a stand-alone entity. But as creditors weigh the merits of the business plans laid out to them, each airline continues to face challenges in their current labour relations that stand to snowball if the creditors ultimately bless a combination of the fourth and fifth largest US carriers based on domestic share.
US Airways was forced to tone down its public push for a merger with American beginning in Aug-2012 when the two companies signed a non-disclosure agreement that allowed the airlines to trade more in-depth information in their due diligence to determine if a merger was the best course to take going forward. American’s initial strong opposition to the tie-up has waned significantly over the course of the last few months, but publicly management is still pushing to emerge from its year-long bankruptcy reorganisation as a stand-alone entity.