Analysis for Global
23-Apr-2015 9:36 PM
Indianapolis International Airport has weathered US airline consolidation fairly solidly, posting an uptick in passengers during 2014 after a few years of modest declines. It is gaining traction during 2015 with new service from its largest airline Southwest and the entry of ULCC Allegiant Air into the market.
The airport should continue its growth in 2015 driven by Indianapolis hosting the NCAA final four men’s basketball tournament in Apr-2015 and one of the largest gaming conventions Gen Con held in 2H2015. Tourism is one of the drivers in the region’s economy, which ensures a certain level of passenger throughput at Indianapolis International.
Indianapolis’ airfares appear to be stable, and its cost per enplanement generally falls in the mid-range among US airports. After a push by Allegiant, the airport’s management is pursuing additional airlines, hoping to attract service from some of the US hybrid airlines and other ULCCs.
13-Apr-2015 11:06 PM
Virgin America has followed through on previous declarations that it could begin service to Hawaii by YE2015 with the firming of plans to launch flights from San Francisco to Honolulu and Maui during 4Q2015.
The airline is entering a crowded market with ample existing service from all three airports serving the San Francisco Bay area – San Francisco international, Oakland and San Jose. Virgin America is well aware of those competitive dynamics; but has concluded that the market can absorb more capacity.
Virgin America is opting to enter the Hawaiian market as it faces tough conditions in transcon markets during 2015 and with its new Dallas Love Field flights. At the same time its stock price has dropped and its unit costs are forecast to rise. All those factors are creating headwinds for Virgin America as it works to sustain its profitability in 2015.
13-Apr-2015 9:58 PM
Brazil’s third largest airline Azul opted to pursue an ambitious expansion to the US with Airbus widebodies during a time of economic unrest in the country and a rapid devaluation of the BRL against the USD. Those conditions drove Azul to drop plans for an initial public offering in early 2015 – the third time the airline has opted to cancel an IPO during the last couple of years.
Azul’s new flights from its Campinas headquarters to Fort Lauderdale and Orlando appear to be performing solidly, with average load factors near 90% for the first two months of 2015. But the airline could be trading yields for loads to ensure a strong showing for the start of its long-haul expansion.
Azul is also no doubt feeling pressure in its domestic performance, which still represents the bulk of its operations. High inflation and general weak conditions could continue to pressure yields for the foreseeable future, which could force Azul to push back its plans to access the public markets until 2016.
10-Apr-2015 11:12 PM
JetBlue Airways continues to exude confidence that its higher than average capacity expansion in 2015 is being executed profitably, arguing that its favourable experience with competitive pricing is a combination that few airlines are looking to exploit.
The airline faces the delicate balance of increasing shareholder returns and still maintaining a positive customer image, something that was dulled in late 2014 as it unveiled a seat densification and new fare families whose lowest priced option includes a first bag fee.
Now that some of the competitive capacity JetBlue faced in the Caribbean and Latin America in late 2014 has eased, the airline’s overall network diversification should create some advantages for the airline in 2015 as it works to deliver higher returns and strengthen its balance sheet.
3-Apr-2015 8:55 PM
The last of Europe's stock market-listed airlines recently reported financial results for 2014, providing the opportunity to compare levels of profitability. Ranking them by operating margin, there is a wide range of performance from healthy double digit to negative figures.
LCCs typically performed better than legacy airlines. Most of the higher margin airlines improved in 2014, while most of those at the lower end of the scale suffered a fall in margins. Convergence of business models does not show itself in convergence of financial performance.
Beyond the listed airlines, Europe has a large number of mainly small and unprofitable airlines, which drag down the aggregate margin of the continent's airline sector. Europe's traffic growth and load factors are relatively healthy by world standards, but its margins are held back by its fragmented market structure.
31-Mar-2015 7:19 PM
Oman Air is pursuing ambitious fleet expansion and simplification as part of a plan to double its fleet and add more than 25 new destinations over the next six years. The flag carrier has decided to phase out ATR turboprops and Embraer regional jets as it seeks to operate two or – at most – three aircraft types.
Oman Air plans to operate 25 widebody aircraft by the end of 2020 compared to 10 A330s currently and only seven A330s six months ago. It is now committed to acquiring eight 787s and is considering ordering more 787s and A330neos.
Oman Air's narrowbody fleet ended 2014 with 19 737NGs. It is adding six 737-800/900ERs in 2015 and recently committed to acquiring 20 additional 737s for delivery from 2017.
27-Mar-2015 1:00 AM
Pressures from depreciating currency and general macroeconomic weakness that LATAM Airlines Group faced throughout 2014 show no signs of abating in 2015 as the economies in some of its largest markets remain on shaky ground.
But despite those challenges, LATAM does see some opportunities to strengthen its network in 2015, reflected in its unchanged capacity forecast of 2% to 4% expansion with flat growth in the Brazilian domestic market. Even with its sustained capacity discipline in Brazil, LATAM is making a new push from Brasilia in 2015 to leverage smaller regional markets that could help improve its overall performance in Brazil’s domestic market.
LATAM also plans to grow its long-haul international capacity as some North American and European airlines have slowed capacity growth, which is a positive development for LATAM as it continues working to mitigate some of the weakness within South America.
16-Mar-2015 9:19 PM
Two of Mexico’s largest airlines are encouraged by the country’s economic uptick and what appears to be capacity discipline in the domestic market, which should further help a recovery in yields that both Aeromexico and Volaris began to see in late 2014.
Despite the challenging conditions, Mexico’s domestic market remained fairly stable in 2014 reflected in roughly 8% passenger growth for the year, with the country’s major airlines retaining or growing their market share year-on-year.
Although the positive momentum is a welcome sign after a challenging 1H2014, there is an air of cautiousness underlying the optimism expressed by Aeroemexico and Volaris as the yield improvement is off a low base. As a result each airline plans to direct the bulk of their 2015 capacity growth to international markets.