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Analysis for Global

Air Canada shakes out its network with high profile long-haul service and small domestic routes

17-Dec-2014 4:17 PM

Air Canada is to put the mission of the Boeing 787-9 to the test in late 2015 with the planned launch of new service to Dubai and the resumption of non-stop service to Delhi. International expansion is a pillar of the airline’s growth strategy as it seeks to leverage is still-leading position as Canada’s largest international airline.

At the same time Air Canada is making domestic adjustments, transferring some routes to its low-cost subsidiary rouge, and entering smaller markets in western Canada.

The long-haul international flights will not be a huge contributor to Air Canada’s planned system-wide capacity increase of 9% to 10% in 2015, which is higher than its North American peers. But Air Canada believes those targets are reasonable as it has not grown in line with available international opportunities during the last decade.

Hawaiian Airlines' bullish outlook is underpinned by slowing growth and a bolstered balance sheet

11-Dec-2014 12:30 AM

Moderating growth, maturing markets and less intense capital commitments are some of the main drivers of Hawaiian Airlines’ positive outlook for CY2015 that includes margin expansion and cost control.

After rapid long-haul international expansion that commenced in CY2010, Hawaiian during 2014 has entered into a slower growth period that should provide space for the airline to continue strengthening its balance sheet and meet its stated liquidity and leverage targets.

As it takes a breather from its ambitious network transformation, Hawaiian is scrutinising the role new Airbus narrowbodies will play in its route structure once the aircraft come online beginning in CY2017.

Brazilian airline Azul caps off an ambitious 2014 with another stab at accessing the public markets

10-Dec-2014 9:21 PM

Brazilian airline Azul continues to shake up the country’s aviation business in CY2014 through the launch of widebody operations, an order for Airbus narrowbodies and resuscitating its initial public offering that was shelved in CY2013.

Azul is basing its ambitions on the conclusion that there is significant upside for air travel in Brazil as growth projections over the medium to long term remain relatively robust. The airline believes it has built a solid network to accommodate the long-term demand, and is now making its case to potential investors that it is positioned to leverage the anticipated growth.

But the challenges Brazil’s airlines have faced in the short term – namely a fragile economy – remain intact, and it is not certain if the market will rise to meet Azul’s ambition.

Mexico's airlines continue transborder push as they await a new bilateral agreement to take effect

4-Dec-2014 10:08 PM

A newly revised air services agreement between Mexico and the US that eases limits on the number of airlines allowed to operate on routes between the two countries is a welcome development for airlines operating in both regions. But it is particularly interesting for Mexico’s airlines given that their penetration in the transborder space still pales in comparison to US airlines operating between the two countries.

The new pact does not take effect until Jan-2016, which means that the lifting of restrictions is some way in the future. But in the meantime Mexico’s airlines still have ample opportunity under the existing agreement, and are no doubt evaluating new opportunities created by the new air services arrangement.

Mexico and the US struck the new accord as all of Mexico’s airlines are making a transborder push to diversify from the domestic market, which has been weaker the last couple of years due to Mexico’s sluggish economy. Key to the execution of the expansion is ensuring demand is robust enough in transborder markets in order to maintain favourable yields on those routes.

Frontier Airlines opts to resize Denver Airport operations, citing higher operating costs

3-Dec-2014 9:59 PM

Frontier Airlines is in the midst of several network changes designed to aid its transition to becoming an ultra low-cost airline, and in the process appears to be challenging its headquarters Denver International Airport for what the airline perceives as operating charges that are rising faster than other major airports in the US.

The airline is eliminating numerous markets from Denver, mostly smaller routes that generate higher cost connecting passengers. Even as Frontier declares that higher airport costs make connecting traffic unprofitable for the airline, those markets were arguably not a good fit with the network Frontier is trying to create as it works to complete its business model transition.

Frontier is also opting to acquire larger gauge Airbus narrowbodies, a trend being adopted by major and low-cost airlines alike to drive down unit costs. All the moves Frontier is making show that the there are more chapters ot be written in its quest to attain ULCC status.

JetBlue holds its ground as other US airlines ramp up capacity to the Caribbean

23-Nov-2014 12:16 PM

US airlines are bolstering their service to the Caribbean as macroeconomic conditions in Latin American remain tenuous for the short term. With the current service and planned additions to the Caribbean, airlines may need to brace themselves for some pressure on yields due to oversupply.

Even with increases in industry capacity, two airlines that have recorded ample increases in their respective supply from the US to the Caribbean – JetBlue and United – feel reasonably confident however that the region will generate a performance that will make a positive contribution to each airline’s respective bottom lines.

JetBlue in particular stresses that it is prepared to weather the ebb and flows of industry capacity to the Caribbean since the region remains a key element in its overall network, reflected in its plans to open between three and five destinations from the US to Latin America and the Caribbean in CY2015.

This is Part 2 of a report on JetBlue's strategy.

IAG’s Willie Walsh, Etihad Airways and flydubai receive top CAPA World Awards

23-Nov-2014 12:00 PM

Etihad Airways has been named the CAPA Airline of the Year for 2014 at the 12th annual CAPA Aviation Awards for Excellence in Antwerp, at a gala industry function hosted by Travelport.

The CAPA Airline of the Year is awarded to the carrier that has had the greatest impact on the development of the airline industry, established itself as a leader, and the benchmark for others to follow.

Peter Harbison, Executive Chairman of CAPA, said: “The efficiency of the aviation industry is strangled by archaic ownership and control rules that prevent cross border mergers and rationalisation of airline offerings. More than any other factor this has effectively confined the industry to drastic financial underperformance. Faced with this roadblock, no single full service airline has done more than Etihad Airways to challenge the status quo with its remarkable strategic partnership model.

Asian aircraft lessor numbers grow as investors begin to recognise benefits and growth demand

22-Nov-2014 9:16 PM

There has been considerable interest in 2014 from the higher profile of aircraft lessors based in Asia, and specifically the emerging sector in China. A number of existing Chinese leasing companies are are being joined by new ones, including some affiliated with airlines, such as China Eastern and Spring Airlines. The move by Hong Kong billionaire Li Ka-shing and his Cheung Kong Holdings to enter the leasing sector has further stimulated interest for consumers looking to invest outside the traditional, and waning, property area.

Airbus firm orders from all lessors for the first ten months of 2014 have outpaced those of Boeing, but so far Asian lessor orders are about in line with 2012 levels at Airbus. Boeing meanwhile is accruing an increase in direct, disclosed orders from Asian lessors. Asia holds the single largest order backlog of commercial aircraft, with 3,517 according to CAPA's Fleet Database.

Opportunities within Asia could be mixed, although airline behaviour is changing: Chinese carriers are giving preference to Chinese lessors while Korean Air has only 17% of its fleet leased compared to 39% at Singapore Airlines and 67% at Qantas.

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