Analysis for North America
24-Apr-2013 9:00 PM
US budget cuts, increased payroll taxes, currency fluctuations general uneconomic uneasiness would have crippled the country’s aviation business just a few short years ago. But Delta withstood all of those menaces during 1Q2013 to eke out a small profit even as high-yielding close-in bookings dropped near the end of the quarter and leisure travel demand softened.
Despite those headwinds lingering somewhat into 2Q2013 with predictions that its system unit revenues will be flat to down for the quarter, Delta remains bullish about recording an annual profit. Key to the carrier’s continuing positive outlook is its conclusion that fundamental shift has occurred in the business – tight capacity management has resulted in a stronger correlation between revenue and fuel prices. In the current operating environment, “the same economic factors that cause passenger revenue softness also pushed down oil prices,” declared carrier CEO Richard Anderson as he assessed Delta’s 1Q2013 performance.
24-Apr-2013 9:00 AM
Few have single-handedly changed the landscape of global airline alliances the way Willie Walsh has. As the CEO of International Airlines Group, the owner of British Airways and Iberia (and soon Vueling), Mr Walsh had an instrumental role in bringing Qatar Airways into the oneworld alliance.
The ascension of Qatar occurs at a time alliances are undergoing significant change: Qantas in Mar-2013 launched a partnership with Emirates; oneworld's airberlin may partner with Air France-KLM; and Etihad has a staggering number of partners. Mr Walsh is respected amongst fellow executives for his candid and direct views – which peers perhaps wish they felt at the same liberty to say.
During CAPA's recent Airlines in Transition conference in Dublin, Mr Walsh gave a number of his thoughts on global alliances. He supports bilateral relationships and thinks the Qantas-Emirates alliance will be good for both partners. Mr Walsh also noted the limits of alliances: they are mainly to deliver additional revenue, not cost savings, and perhaps exist only because global mergers are not permitted by regulators.
23-Apr-2013 9:20 PM
Caribbean Airlines’ 2010 acquisition of Air Jamaica ushered in high hopes that a strong flag carrier would finally emerge in a fragmented region where home airlines have been constantly propped up and protected by the governments. But roughly three years after the landmark deal that was supposed to seal Caribbean Airlines’ fate as the leading carrier in the market, the airline continues to be dragged down by financial challenges that are at least partially attributed to ill-advised expansion into a long-haul route with Boeing widebody aircraft and the continuing integration of Air Jamaica.
Although the carrier has reportedly indicated that it is seeing signs of a return to profitability, Caribbean is cautioning that a complete turn-around is two to three years away. As the carrier’s current plight illustrates, benefits of consolidation in the region have yet to surface as its weak performance continues unabated.
Stability has evaded Caribbean since its purchase of Air Jamaica as it endured a management shake-up in late 2010 with the abrupt resignation of CEO Ian Brunton, who held the position for a roughly a year.
23-Apr-2013 8:00 AM
One of the highest growth rates in North Asia in 2013 will be from South Korea's Asiana, which is projecting a 9% increase in RPKs. This compares to 4% RPK growth at Korean Air and modest growth from All Nippon Airways and Japan Airlines. Many Chinese carriers will have similar or higher growth, but notably Air China will be lower as it runs out of slots.
The focus in 2013 for Asiana, globally the 54th largest airline based on capacity and sixth largest for intra-Asia international capacity, is regional flights, increasing capacity to cities including Chongqing and Yangon and launching new services to Denpasar and Jakarta. This traffic will help feed its long-haul network, due to commence notable expansion beginning in 2014 as A380s replace 777-200ERs, facilitating their re-deployment to new routes.
19-Apr-2013 11:30 PM
Delta Air Lines has reignited its battle against the US Ex-Im Bank through new litigation that revives old arguments that the bank’s loans disrupt the competitive balance among global airlines. But the carrier and its co plaintiffs in the new litigation, Hawaiian Airlines and the Air Line Pilots Association (ALPA), are using a framework imposed on the bank in approving loans as their latest line of defence, claiming recently approved financings violate a new Congressional mandate that governs how the bank assesses loan approvals.
Delta is taking aim at familiar adversaries in its latest quest to squelch Ex-Im aircraft financing, arguing that the aircraft the bank plans to finance for the Gulf powerhouses of Emirates and Etihad will continue to hurt the viability of US carriers. But the airline is also setting its sights on financial support Ex-Im is evaluating for its SkyTeam partner Korean Air and Latin America’s new powerhouse LATAM Airlines Group.
17-Apr-2013 7:00 PM
American Airlines is joining its US legacy rival Delta during 2013 in making a push from Los Angeles International Airport, a strategic but highly fragmented market where no one carrier holds a dominant, commanding position. Presently United has a marginal edge over its two rivals in terms of seat share, but it appears that American and Delta are aiming to close that gap by adding new service from Los Angeles throughout the year.
Unlike Delta, which is launching service to some already-crowded markets from Los Angeles, American appears to be undertaking a different strategy, introducing service in markets served by only one other carrier. In some instances the only other competitor is Allegiant Air, which is a low-frequency operator whose business model is not built on competing with other airlines based on schedules. In other markets Delta is American’s lone competitor, introducing an interesting set of competitive dynamics into the Los Angeles market.
16-Apr-2013 7:00 PM
From the first US Open Skies agreement with the Netherlands in 1992, and the subsequent granting of antitrust immunity to the KLM-Northwest joint venture in 1993, the evolution of airline alliances has been rapid and far reaching. Bilateral codeshares, immunised JVs, multilateral branded global alliances, the Etihad equity alliance: why are there so many models? In the first of a series of reports based on CAPA’s recent Airlines in Transition conference in Dublin, we examine the history and evolution of airline alliances and partnerships.
After decades of strict regulation of international traffic rights post WWII, which controlled destinations, capacity, frequencies and prices, a campaign for more liberal air services agreements (ASA) between nations began to gather pace in the US from 1977. In the words of Jeffrey Shane, General Counsel, IATA and a former senior US aviation regulator, any attempt to modify an ASA was characterised by a "highly calibrated, tit-for-tat mode of negotiation".
16-Apr-2013 7:00 PM
After quietly allowing its rivals to grab headlines in 2012 with the unveiling of new subsidiaries, Canada’s Porter Airlines has followed through on plans to declare its long-term strategy, boldly proclaiming its ambitions to become a strong third force in Canada’s aviation market. Underpinning Porter’s efforts are the carrier’s plans to introduce Bombardier CSeries CS100 narrowbodies in a drive to broaden its reach to markets beyond the eastern half of Canada and the US.
Porter’s evolution follows hints dropped by the carrier in recent weeks that it would table its long-term vision going forward after Air Canada and WestJet dominated Canadian aviation discourse in 2012 by unveiling plans to create their respective subsidiaries Rouge and Encore. Porter now envisions the 107-seat narrowbody aircraft joining its existing fleet of Bombardier Q400 turboprops to allow for expansion into western Canada, and new transborder markets on the US west coast and Florida.