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Analysis for Global

Spirit Airlines takes first steps of ancillary dynamic pricing as supply growth continues unabated

13-Aug-2014 3:12 PM

US ultra low-cost airline Spirit Airlines has embarked on the first phases of adding sophistication to the revenue management of ancillary products. The foundation of its business model is based on maximising total revenue, which includes both revenues generated from fares and add-ons including carry-on and checked luggage and seat assignments.

Fort Lauderdale-based Spirit during 2Q2014 introduced some rudimentary dynamic pricing on bag charges during peak periods as it works to maximise its ancillary revenues. Spirit has previously stated that it could foresee non-ticket sales representing 50% of its revenues in the future; but concludes the growth will be more incremental compared with the rapid expansion of those sales during the past few years.

Spirit is gearing up for a high growth period as its capacity in CY2015 is growing roughly 30%. The increase may seem hefty for the mature US market place, but Spirit is repeatedly assuring there is enough stimulative demand to support its ambitious growth targets.

Hawaiian Airlines aims to generate positive results in its long-haul network during 2H2014

8-Aug-2014 7:02 PM

Hawaiian Airlines believes its long-haul international network could turn a corner in 2H2014 to become revenue positive on a unit level, a major accomplishment for geographies that have recorded negative results for the past year.

The main drivers for the improvement are network adjustments Hawaiian has made including eliminating service from Honolulu to Fukuoka and Taipei, and some flights the airline has introduced during the last four years reaching maturity.

At the same time a robust demand environment in North America is benefitting Hawaiian, which has re-deployed some capacity it cut from long-haul operations into seasonal flights to the US mainland from Kona and Lihue.

Hawaiian is also making other changes to its business as it starts to contemplate how it intends to allocate capital once it reaches positive free cash flow, which should occur in CY2015.

4th Dimension and CAPA partnership delivers new airfare analysis and aviation report

6-Aug-2014 7:00 AM

CAPA Australian Aviation Summit - Sydney - 6 August 2014

4th Dimension, Flight Centre Travel Group's new business travel consulting division, has partnered with CAPA - Centre for Aviation, to produce an in-depth report into the Australian aviation industry.

Called the Australian Aviation and Airfare Analysis, the report includes the results of a specialised airfare benchmarking analysis conducted by the team at 4th Dimension.

4th Dimension General Manager Virginia Fitzpatrick said her consulting practice had joined forces with CAPA and leveraged the extensive ticketing data of the Flight Centre Travel Group (FCTG) to produce an airfare analysis that was unrivalled in the Australian travel market.

Air Europa will need its lower costs and higher growth to face renewed competition from Iberia

5-Aug-2014 6:43 PM

IAG's recent announcement that Iberia is to receive 16 new widebodies marks a shift of emphasis for Iberia from internal restructuring towards a new competitive growth phase. Rival Air Europa has taken advantage of Iberia's capacity cuts in recent years to pursue international growth, particularly to Latin America. Parent company Globalia does not report profits for Air Europa, but the group's annual report shows 2013 was very successful for increased revenues, load factor and RASK. It also saw Globalia's return to profit, while Iberia was still posting losses in 2013. Moreover, Air Europa already has its own widebody order (eight Boeing 787-8s and options for eight more).

However, Iberia returned to profit in 1H2014 and its CEO Luis Gallego is relaxed about competing with Air Europa, saying Iberia is "three times [its] size at [Madrid Airport] and twice its size in Spain" and can now "compete with anyone" thanks to its new cost structure (Europa Press/Preferente, 22-Jun-2014).

This analysis of the available data on Air Europa's traffic and financial performance will be followed by our updated analysis of its strategic positioning.

CAPA Australia Pacific Aviation Summit: 600 registered attendees, 40 airlines, 100 corporate buyers

5-Aug-2014 4:39 PM

CAPA - Centre for Aviation is preparing to welcome some 600 attendees across the three-day Australia Pacific Aviation Summit at Sydney’s Sheraton on the Park Hotel on 6-8 August, making it the largest event CAPA has held to date.

The second annual Summit will be the biggest aviation strategy forum of its kind for this region. CEOs from airlines and airports across Australia, New Zealand and the Pacific Islands, plus a selection of leaders from airlines serving the region, will present on the industry's crucial issues. Over 100 corporate buyers will attend the Corporate Travel day.

The Summit will also feature Keynote Presentations from Qantas, Jetstar, Etihad Airways, United Airlines, Fiji Airways, Hawaiian Airlines, Royal Brunei Airlines and the Australian Department of Infrastructure and Regional Development.

JetBlue’s 2Q2014 financials leave investors seeking higher returns as its metamorphosis continues

30-Jul-2014 10:00 AM

JetBlue Airways recorded solid 2Q2014 financial results as it celebrated the debut of its new premium transcontinental product offering, Mint. The product remains in its infancy, but JetBlue is encouraged by the early responses to Mint, particularly among customers who have not previously travelled on the airline.

The company believes 2014 is shaping up to be one of its most profitable years, which in some ways is a testament to JetBlue’s attempts to carve out a niche that offers some frills free of charge while crafting an ancillary strategy based on the premise of creating products that customers value.

But underlying JetBlue’s favourable performance during the second quarter is an attempt by investors to understand the airline’s specific positioning in the market place and growing curiosity over how the company determines its return on invested capital targets. JetBlue may continue to face more scrutiny as some of its peers achieve ROIC levels that are measurably higher than the respectable 7% JetBlue is targeting for 2014.

Skymark Airlines A380 orders are in serious doubt as Airbus recommends an 'umbrella' solution

29-Jul-2014 4:55 PM

The allure of big boys' toys appears likely to cost Japan's low-cost Skymark Airlines its reputation, a lot of money and most importantly management focus at the very time when Skymark needed to respond to a raft of new LCC competition in its domestic heartland. Skymark is putting a bold face on the planned delay – or even cancellation – of six A380s it has had on order since 2010, taking the position that the best defence is a strong offence. A statement talked of Airbus imposing "an exorbitant penalty that evades common sense" if the order is cancelled. It appears from the statement that Airbus has sought to find a way out for independent Skymark, "to enter under the umbrella of a major airline."

Negotiations to delay delivery or cancel have, according to Skymark, been under way since Apr-2014. Skymark gives the reason for its move as a "business environment [that] has become severe due to increased competition and the depreciation of the yen in recent years".

Its international route plans had shortcomings for Skymark's first international excursion. Airbus has already begun trial flights with the first new aircraft, complete with Skymark's logo and partial interior. Two A380s were due for delivery in 2014, with another two in each of 2015 and 2016. The order – valued at USD1.3 billion at rack rates – was always a strange one that few in the industry considered a safe one.

There will be much to come out in the wash but Skymark can recover and emerge stronger. A cancellation of Skymark Airlines' six A380s would enable – and force – Skymark to hone the strengths it created in Japan's domestic market before it overly-ambitiously leaps from operating only domestically to long-haul all-premium A380 services.

Leasing companies have a Farnborough field day, committing to more than 400 aircraft

17-Jul-2014 8:15 PM

Leasing companies stepped into centre stage on the second day of the 2014 Farnborough Airshow, with a flurry of high value orders.

Since the beginning of the airshow, eight aircraft lessors announced a wide range of orders, totalling more than 400 aircraft, valued at over USD35 billion at list prices.

In particular, lessors have jumped on the chance for early orders for Airbus’ new A330neo. 65 of the 105 firm orders and commitments for the aircraft, launched on 14-Jul-2014, came from leasing companies.

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