Analysis for Latin America
5-Dec-2013 7:08 AM
Japan Airlines may seem to be reclaiming something of its former glory by bringing back a second-daily Tokyo-New York service, which it last offered prior to its bankruptcy and deep restructure. But the route will have a different strategy – and implications – when resumed on 30-Mar-2014. The service will be on JAL's relatively small 186-seat 787-8, not the 747-400s of past times. That represents a decrease in seat capacity, further aggravated by the service largely replacing American Airlines' recently-cancelled New York-Tokyo flight. The JV between AA and JAL makes that switch relatively easy, coupled with the convenience of being able to alter market profiles with the 787.
Whereas previously one of JAL's New York services continued to Sao Paulo, the re-introduced second daily service will have better connections to South America on partner airlines, not on JAL's own metal. The 787 will overnight at New York, allowing for an early return the next day. JAL will have the second earliest morning departure from JFK to Asia, allowing for more time in Tokyo with limited improved connections. This contrasts to ANA's second daily New York-Tokyo service, which leaves JFK in the evening and arrives in Tokyo even later when there are limited connecting opportunities and ground transport options.
23-Nov-2013 11:59 PM
JetBlue’s recent launch of new service from Fort Lauderdale to its southern most destination Lima, Peru, marks an important milestone in the carrier’s strategy in Southern Florida that entails building up Fort Lauderdale to roughly 100 daily departures. Once Fort Lauderdale reaches that point, its strategic importance in JetBlue’s network will be solidified as the carrier penetrates deeper into the Caribbean and Latin America from Southern Florida.
The airline’s expansion from Fort Lauderdale continues unabated during 2014 when it launches flights to Montego Bay, Punta Cana and Port of Spain, further pressuring Spirit and Caribbean Airlines.
JetBlue presently serves two out of the three destinations – Montego Bay and Punta Cana – from other points in its network, so it believes it is executing the expansion from Fort Lauderdale efficiently as highlights its method of “connecting the dots”.
19-Nov-2013 11:56 PM
Delta Air Lines appears to be attempting to take a chunk of JetBlue’s successful build-up at Boston Logan for itself as a round of new route launches Delta has planned beginning in Mar-2014 are in markets largely dominated by JetBlue. While it is not as aggressive as some of Delta’s latest moves including a full-blown assault on long-time partner Alaska Airlines at its hub in Seattle, the minor push from Boston does reflect Delta’s no holds barred approach in ensuring it has ample presence in strategic US domestic markets.
JetBlue is by no means unfamiliar with competition from Delta as the Atlanta-hubbed carrier holds a significant seat share from JetBlue’s JFK hub, and in late 2012 and early 2013 added pressure to JetBlue in markets from both JFK and New York LaGuardia.
The move to bolster competition with JetBlue in Boston is interesting, and Delta could be adding service to feed Virgin Atlantic’s Heathrow flights as its joint venture with Delta begins. Delta’s additions will do little to change JetBlue’s dominance in Boston, but it does send a message that the carrier will remain aggressive in leveraging its network as United, at some point, will presumably will reap the synergies of its merger and American and US Airways officially start combining their operations.
19-Nov-2013 7:44 PM
As CAPA predicted, IAG increased its operating profit target for 2015 at its recent capital markets day. This reflects better progress than previously expected at British Airways, the integration of Vueling into the group and additional growth at both BA and Vueling.
The group’s target has been raised from EUR1.6 billion to EUR1.8 billion. British Airways’ own 2015 operating profit target has been raised from GBP1.1 billion to GBP1.3 billion. This would bring BA to an operating margin in the region of its best-ever level of 10%.
The increase in the BA target, translated into EUR, is more than the increase in the group target. The implicit reduction in the Iberia target increases the pressure on its restructuring programme to create a competitive cost base. Nevertheless, the group as a whole now faces the real prospect of generating a return on capital ahead of its cost of capital.
19-Nov-2013 6:05 AM
Even as losses continued for Brazil’s second largest airline Gol during 3Q2013, there were some positive signs in the carrier’s results and its efforts to improve its financial leverage. Its work during the past year to beat back the effects of a weakening Brazilian economy and the resulting pressure that has had on demand were evidenced in improved passenger unit revenue and yields.
Gol also recorded positive margin improvement and made strides in its leverage ratios as its exposure to the Brazilian domestic market is more pronounced than its major rival TAM, who as part of the LATAM Airlines Group is leveraging the parent company’s ability to transfer some of TAM’s exposure to the falling BRL to the LATAM balance sheet.
Going forward it seems that Gol aims to focus on international expansion as a means to weather the tough market conditions within Brazil. While the carrier is not prepared to divulge the form that expansion will take, additional service to the US might be in the offing.
14-Nov-2013 12:50 AM
Latin America’s powerhouse LATAM Airlines Group believes it has turned a corner in its Brazilian operations after enduring weak margin conditions within Brazil’s domestic environment since the merger of LAN and TAM officially closed a little over a year ago.
The company’s overall 3Q2013 results were somewhat buoyed by a 19% improvement in Brazilian domestic unit revenues year-on-year as LATAM slashed its supply within Brazil by 6% during the quarter. For the 9M2013 time period LATAM’s ASKs within Brazil contracted by 9%.
While the rebound within Brazil in commendable LATAM still faces challenges with respect to the devaluing of the BRL, which fell 13% during 3Q2013 against the USD. LATAM is attempting to blunt the effects of currency fluctuations through hedging schemes and transitioning TAM’s debt to the LATAM balance sheet, which is denominated in the USD.
6-Nov-2013 7:29 PM
Profit growth of nearly 98% by Spirit Airlines in 3Q2013 was dampened by the carrier’s revelation that it will encounter some cost headwinds at YE2013 and into 2014. These are driven by possible expenses related to an engine failure incident that occurred in Oct-2013, increasing costs due to new flight duty and rest time regulations for pilots and a 22% average growth rate during the next couple of years.
As those warnings cause some uncertainty around the carrier’s unit cost containment, Spirit’s rapid expansion into the continental US during the past few years is resulting in a typical pattern of perhaps strong 1Q and 3Q profits, and 2Q and 4Q performances that do not quite reach the levels recorded in the peak periods. The airline has stated that its 4Q2013 results should be similar to 1Q2013 – when top-line revenue grew 23% and net income increased 31% year-on-year.
3-Nov-2013 9:05 PM
Mexico’s publicly traded carriers Aeromexico and Volaris battled tough economic conditions in the country during 3Q2013 as FY2013 GDP growth estimates for Mexico continue to fall. To compensate both carriers are adopting strategies to preserve passenger volumes at the expense of yield, with Aeromexico in particular emphasising it aims to defend its position in the domestic market.
Even as yield pressure lingers into 4Q2013, both airlines are seeing positive booking trends for the last quarter of the year and into 2014. And each carrier appears to be focusing on international expansion in the short term to combat some of the weakness created by Mexico’s sluggish economy.