Analysis for North America

Aeromexico faces formidable challenges in making new London Heathrow flights viable

Aeromexico’s planned inauguration of flights from Mexico City to London Heathrow in mid Dec-2012 marks the third destination in Europe served by the carrier. The choice is somewhat curious given that Heathrow is dominated by British Airways and the oneworld alliance, with Aeromexico’s SkyTeam partners offering connectivity to only a few global markets from the airport. The Mexico-UK market is also not a high origin and destination market as traffic to the UK represents about 1% of the international passenger traffic from Mexico.

The new service being offered by Aeromexico with Boeing 767-300ERs, scheduled to begin on 14-Dec-2012, will provide the airline’s passengers direct flights to London rather than connections through Madrid to London Gatwick (45km from the city versus 24km for Heathrow) operated by Aeromexico’s SkyTeam partner Air Europa and service from Paris to London Heathrow operated by SkyTeam anchor carrier Air France. Aeromexico’s flights to London Heathrow are complementing the carrier’s existing long-haul European service to Paris and Madrid, which is the main base for SkyTeam partner Air Europa. Air Europa is bolstering its service from Madrid as the weak Spanish economy is triggering other airlines to pare down their offerings from Barajas Airport.

Delta leverages its strength in Seattle and Alaska Airlines partnership to bolster service to Asia

Delta Air Lines aims to leverage its strong position in Seattle and the long-standing relationship the carrier has built with Alaska Airlines to expand its offerings to Asia. Through the expansion, Delta could intensify competition from the US west coast to Asia with United, which has recorded some sluggishness in its Asian performance during the last year. If Delta succeeds in launching proposed new services to Shanghai and Tokyo’s Haneda airport, Seattle will join the airline’s Detroit hub in becoming a major Asian gateway for the carrier.

If the requisite regulatory approvals for seven weekly frequencies are awarded, Delta intends to launch new service between Seattle and Shanghai in Jun-2013. The carrier is also seeking approval to launch flights between Seattle and Tokyo Haneda. Delta already serves Seattle from Tokyo Narita. Delta is seeking approvals to transfer to the Seattle-Haneda route the traffic rights and Haneda slot it had used for its Detroit-Haneda service, which it axed on 30-Sep-2012 after declaring that the route was underperforming. But American, Hawaiian and United have also all applied to use the Haneda slot originally awarded to Delta for Detroit-Haneda service.

oneworld bows to flexibility in accepting Qatar Airways; Gulf carriers at epicentre for aviation

Just a couple of years ago the Gulf carriers were under attack from almost the entire airline establishment. The old network carriers, threatened by the rapid expansion into their markets of Emirates and then Etihad and Qatar Airways, used every device possible to slow the onslaught of the Middle East operators on the traditional hub system, in which the major European gateways featured strongly. The Gulf carriers were "unfairly subsidised by their governments", they were "dumping capacity" into others' markets, they "should not be granted further bilateral access"; in short they were a threat to the established world order as we knew it.

How things can change in the blink of an eye. In the short space a month all three have been welcomed into the hearths of the world's biggest and oldest airlines - Emirates with Qantas (and probably soon with others); Etihad with Air France-KLM and now Qatar Airways in oneworld. It is not entirely coincidence. Once the first domino fell, it was always going to be a rush for the remaining partners.

As partners evolve – Qatar-oneworld, Air France-Etihad/airberlin – how promiscuous can airlines be?

The dominos are falling for airline partnerships breaking out of a mould and aligning with once sworn enemies in the Middle East as well as crossing alliance lines to find more strategic, and profitable, partners. The industry is getting a sudden rush with the oneworld alliance announcing on 08-Oct-2012 that Qatar Airways has been elected as a new member. The oneworld announcement came just a few hours after SkyTeam member Air France-KLM announced a partnership with Etihad Airways as well as Etihad partner and oneworld member airberlin.

As airlines find themselves in this new and relatively uncharted territory, they must seek to integrate their new partners with existing ones – a complex and contradictory process. Overlap will be common, giving rise to an airline's partners mistrusting each other. Incredible potential and synergies could be unlocked from them all, but airlines must find the limit: if Qantas, aligned with Emirates, can work with Qatar; if Emirates can work with American and JetBlue; and if American can bypass British Airways for Qatar's African network? How promiscuous can they be?

Credibility of American Airlines management diminishes as labour and operational strife mushrooms

American Airlines during the last couple of weeks has dealt with a raft of operational disruptions and labour strife that has pushed consumer confidence in the carrier to an all-time low. Management during this time has conducted itself the same way it has throughout the Chapter 11 bankruptcy process that began in Nov-2011 – in a largely aloof manner that continues to be a detriment to its credibility while US Airways waits in the wings to move forward with a merger of the two carriers.

The inability of American’s management to publicly address the mounting problems provides an unexpected boon for US Airways, which has to end its public rhetoric about the benefits of the merger after signing a non-disclosure agreement in Aug-2012 that prohibits the carrier from publicly discussing the merger as the two carriers examine confidential information exchanged to undertake a deeper analysis of a possible tie-up.

Air Canada pairs low-cost carrier with vacations business to battle package operators

Air Canada’s plans to create a new leisure group business, pairing its existing vacations business and its new low-cost subsidiary, is set to debut in Jun-2013 and should prove an interesting strategy to combat some of the heavy hitters in the Canadian tour business – including the carrier’s familiar rival WestJet and other competitors Sunwing and Transat.

To illustrate it is serious, Air Canada has appointed a seasoned travel industry veteran to head the new venture, which appears to have the dual role of shoring up the performance of some lacklustre markets and its existing vacations business.

The carrier is also adjusting its mainline fleet as it plans to launch the new low-cost carrier with two Boeing 767 widebodies and two A319 narrowbodies. Two Boeing 777-300ER aircraft are scheduled to join Air Canada’s fleet in Jun-2013 and Sep-2013.

With Qatar Airways as new member, oneworld seeks to regain momentum but may become more divisive

The global upheaval in airline alliances and partnerships will only intensify with the oneworld alliance expected to announce in New York City on 08-Oct-2012 the membership of Qatar Airways, sponsored by International Airlines Group (IAG). oneworld will seek to regain momentum after failing so far to secure an Indian and mainland Chinese member. It is also the smallest and loosest of the three marketing alliances and in recent years has had carriers frequently in financial straits, including Mexicana (now defunct), Malev (now defunct) Japan Airlines and American Airlines.

While Qatar's addition would indicate unanimous approval from oneworld carriers, it would not have been attained easily and does not guarantee all carriers are pleased. Qatar for IAG's British Airways and Iberia will be a deep partner while for others – chiefly Cathay Pacific, Finnair and Qantas – it will be a competitor and they must sort through how to integrate Qatar into their web at a time marketing alliances are losing lustre to a Middle East-centric approach. For this redirection of global aviation strategy, there is no guide. Qatar and oneworld are writing a new rulebook.

Allegiant makes push from Phoenix-Mesa as ultra-LCC rivals Frontier and Spririt move in

Allegiant Air is planning rapid expansion from one of its largest bases during the final weeks of 2012 and into early 2013 as it introduces flights from Phoenix-Mesa Gateway Airport in Arizona to four new markets. The push is occurring as two of Allegiant’s closest rivals – Frontier Airlines and Spirit Airlines – are enlarging the airport’s scheduled service footprint. As it looks to maintain its leading position at Phoenix-Mesa, Allegiant is also looking at potentially launching services to Mexico in 2013, using its recently acquired fleet of A319s.

Five years ago, in Oct-2007, Allegiant introduced scheduled service at Phoenix-Mesa, and selected the airport as its third base, joining Las Vegas and Orlando. At that time it launched service to 13 markets from Phoenix-Mesa. Allegiant has since steadily expanded its operation at Phoenix-Mesa and by Feb-2013 the carrier will offer flights to 35 destinations, including Honolulu. In the Phoenix-Honolulu market, Allegiant will compete against US Airways and Hawaiian Airlines, which operate from nearby Phoenix Sky Harbor International Airport.