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Analysis for Global

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.

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

21-Nov-2014 8:00 AM

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.

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.

WestJet Airlines faces capacity pressure as it still continues to record solid financial results

10-Nov-2014 4:44 PM

Canada’s WestJet is preparing to face some pressure from competitive capacity increases in CY2015 as rival Air Canada ratchets up its supply through the expansion of its low cost unit rouge and aircraft upgauging.

At the same time WestJet is facing cost pressure in CY2015 as the shorter stage lengths performed by its regional subsidiary Encore become more pronounced in the airline’s results. Even as Encore continues to create some cost headwinds for WestJet, the company believes its regional airline continues to stimulate demand in markets too thin for narrowbody aircraft.

Despite some external and internal pressures, WestJet’s fundamentals remain strong.  The company holds strong cash balances and favourable debt ratios while continuing to deliver shareholder returns.

Air Canada’s declining yields could continue as it prepares for a capacity push in CY2015

8-Nov-2014 9:16 PM

Air Canada is planning to grow its CY2015 capacity at higher levels than most of its North American global airline peers as its new low-cost airline rouge has exceeded expectations, which is giving the airline confidence that the lower cost capacity it plans to introduce should help the company reach its medium term cost reduction targets.

The airline is not yet offering unit revenue or yield guidance for CY2015, but given that its focus during the past couple of years has been adding capacity into leisure markets, the decline in yields Air Canada has recorded throughout CY2014 are likely to carry over into CY2015.

As Air Canada prepares for a capacity push in CY2015, it continues to record a solid financial performance in CY2014, posting strong results in 3Q2014 despite falling yields and unit revenues. 

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