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Analysis for Global

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.

JetBlue outlines strategy to appease investors, but still offer customers a differentiated product

22-Nov-2014 2:00 PM

After defending its business model from the onslaught of analysts for the better part of a year, JetBlue has outlined a clear cut plan to shore up revenue and keep its units cost growth at roughly 2% or lower beginning in CY2015.

In a nod to persistent prodding by investors to densify its aircraft, JetBlue plans to add 15 seats to to 130 Airbus A320 narrowbodies beginning in CY2016 while deferring some narrowbody deliveries to pare down its capital expenditure commitments.

JetBlue is placing itself in a sensitive position – looking for ways to appease  shareholders while preserving its image as one of the more customer friendly airlines. It is turning out to be a tough, but seemingly inevitable predicament for the airline. But that is only normal for any business seeking to buck the ternd.

Virgin America's powerful market debut. Corporate travel will be a key part of its business model

19-Nov-2014 11:23 PM

Virgin America will be well pleased with its timing in accessing the public markets as airline stocks are currying favour with investors after consistent capacity discipline and lower fuel prices have drawn attention to airline stocks, driving up the sector’s performance during CY2014.

The airline is enjoying a trading price well above expectations after recording a profit for 3Q2014 and the 9M ending Sep-2014, setting the stage for its second consecutive year of profitability. Much of Virgin America’s recent financial success rests on capacity reductions and debt restructuring, so arguably the real test of its ability to generate profits is yet to unfold.

Virgin America becomes a newly traded public company at an interesting time in the US airline business as the completion of consolidation among the major airlines creates space for smaller airlines to fill gaps created by those mergers. It is not totally clear how Virgin America intends to position itself in the new environment, but it could scarcely have chosen a better time to be exploring new territory, much of it newly vacated.

LATAM Airlines Group 3Q2014 loss follows World Cup woes and currency challenges

17-Nov-2014 9:38 PM

Previous warnings by LATAM Airlines Group that reduced corporate demand during the FIFA World Cup soccer tournament would pressure 3Q2014 results came to fruition as the company posted net loss for the quarter.

Other more familiar factors also dragged down the company’s results including an overall weak macroeconomic environment and currency devaluations that are eroding LATAM’s pricing traction.

Even as the macroeconomic weakness seems likely to persist into 2015, LATAM for now plans a system wide capacity growth of 2%-4%, which is an increase over its overall capacity projections for CY2014. LATAM’s planned expansion of supply next year is raising some eyebrows given the sluggish conditions it continues to face.

ULCCs Canada Jetlines & Jet Naked struggle to build adequate warchests in a competitive marketplace

15-Nov-2014 1:47 PM

Two upstart ULCCs aiming to execute the model within Canada – Canada Jetlines and Jet Naked – have gone somewhat quiet since making a splash earlier in 2014 with their plans to interject a new level of competition within the Canadian market place.

Many airlines with similar plans have come and gone, leaving Air Canada and WestJet in a comfortable duopoly, that on paper, seems ripe for breaking.

But many of the market dynamics that have driven other Canadian start-ups out of business still exist, and the country’s tenuous economy could make it difficult for the new airlines to attract investors for what is still a risky business venture.

Gol's 3Q2014 losses widen even as the airline continues working to improve its financial leverage

14-Nov-2014 9:45 PM

Despite continuing to improve its performance in some key financial metrics, profitability remains elusive for Brazilian airline Gol, which widened its net losses year-on-year during 3Q2014.

The drivers behind Gol’s loss are now quite familiar – a tenuous Brazilian economy, weakened corporate demand and foreign exchange rate volatility. Gol has been battling the majority of those challenges for the last couple of years, and despite improving its leverage ratios and restructuring its debt, the airline continues to rack up losses.

Gol continues to drive forward in its network diversification to reduce exposure to the domestic market while awaiting the outcome of vote by Brazilian legislators on an initiative to subsidise regional flights within the country.

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