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Analysis for Global

JetBlue Airways’ 3Q2014 results dampened by excess capacity in the Caribbean and Latin America

29-Oct-2014 11:20 PM

Competitive pressure in JetBlue’s Latin American and Caribbean markets has led to a revision of the airline’s ROIC targets for 2014, which will result in the second consecutive year that the company has missed its stated goals in that metric.

The airline is taking the long view with respect to the industry capacity additions in its international markets that have historically been a point of strength in JetBlue’s network, and believes Latin American and the Caribbean remain key to its network diversification strategy.

On a broader scale, JetBlue faces the same challenges going forward that it has encountered for the better part of a year – making investments that seem to take longer to generate returns than investors would prefer. Even as the airline prepares for an executive leadership change, investor impatience remains strong.

Southwest Airlines draws questions about raising return targets after posting strong 3Q2014 results

29-Oct-2014 12:30 AM

Robust US domestic demand helped to drive a strong 3Q2014 financial performance at Southwest Airlines as nearly 99% of the airline’s total capacity is deployed in the domestic market. Southwest delivered solid results across the board, in both top-line revenue growth and cost performance and in other important metrics including passenger unit revenue growth and unit cost.

The airline recorded a pre-tax 19% return on invested capital (ROIC) for the 12 months ending 30-Sep-2014, which is leading to questions about the possibility of raising its targets in that metric as Southwest seems poised to reach its stated goal of 15% pre-tax ROIC for CY2014.

Southwest’s limited international exposure could continue to benefit the airline in the short term as large US network airlines American, Delta and United are refining their capacity in certain global regions in an attempt to restore a favourable supply-demand balance.

American Airlines records solid 3Q2014 results, but continues to have capacity pressure in regions

27-Oct-2014 9:40 PM

American Airlines is sticking to its overall bullish view on demand going forward, buoyed by strong top-line 3Q2014 results despite its outsized exposure to Venezuela and the run-on effects of capacity cuts it has made on service to the country.

The airline is taking steps to mitigate oversupply in some of its geographic entities. But some of its peers are not following suit, which could create some short term headwinds until a rational supply-demand balance is restored.

American in particular will start to see relief from Venezuela’s currency issues in early 2015 after its network adjustments to the country pressured unit revenues in 2H2014.

United Airlines continues its efforts to close the gap with peers after posting solid 3Q2014 results

25-Oct-2014 1:10 AM

United Airlines admits there is still much work ahead to close the gap with its large network airline peers in key metrics such as margin performance. But efforts United has undertaken to improve its revenue performance showed promise in 3Q2014 as it out-performed its peers in passenger unit revenue growth.

Even as it faces some unit revenue headwinds in 4Q2014, United believes it will sustain profitability during the last quarter of 2014 as the US domestic market remains robust.

Similar to rival Delta, United could grow its capacity to upwards of 2% in 2015, which may cause some concern among investors. But United stresses that much of the growth stems from aircraft up-gauging, improved utilisation and increasing density of certain aircraft.

Expansion at Air Canada rouge continues unabated as mainline pilots embrace their low cost sibling

24-Oct-2014 12:00 AM

Air Canada continues to expand the network of its low-cost subsidiary rouge with the planned resumption of service from Vancouver to Osaka, Japan in May-2015, which marks the first Asian market for rouge. rouge is also planning to take over Air Canada mainline fights from Toronto to Lima in Peru during 2015, which will be the low-cost airline’s first destination in Latin America.

Meanwhile expansion of rouge's European network will continue in summer 2015 with the launch of services from Montreal to Venice.

As rouge continues its expansion, the low-cost airline has appeared to have gained the support of mainline pilots, who once fiercely opposed rouge’s creation. Now that rouge has logged a year in operation, pilots believe the airline is an important part of Air Canada’s long-term viability.

Air cargo: few other industries would tolerate its structural overcapacity

22-Oct-2014 5:48 PM

IATA's most recent air freight market analysis, published 1-Oct-2014, said "The outlook for air freight markets has started to look better again", but it added that "the extent of future gains could be limited". IATA cautioned that trade volumes are expanding at a slower pace than global economic growth and that gains in business confidence have been slow due to the presence of political and economic risks. Recent concerns in the financial markets about the outlook for global economic growth add to this note of caution about future air cargo demand.

However, air cargo faces much more fundamental problems. It accounted for just 8.6% of total airline industry revenue in 2013, down from 12.4% a decade earlier. Freight load factor was just 45.3% in 2013, compared with almost 80% for the passenger business.

Very few other industries would tolerate such a degree of overcapacity. Perhaps the approach of many LCCs - to ignore cargo - is the right one.

Delta Air Lines defends its capacity increases as special items trigger a drop in 3Q2014 profits

20-Oct-2014 11:41 PM

Delta Air Lines continues to trumpet capacity discipline even as it fields questions about a projected 2% rise in CY2015 supply, particularly increases in the trans-Atlantic where airlines are facing industry oversupply.

The airline assures that most of its trans-Atlantic push is directed to London in conjunction with its joint venture partner Virgin Atlantic, and its supply growth in the North Atlantic is in line with demand.

Overall Delta still remains on strong financial footing. But there are specific pockets of geography where is faces challenges that could create revenue pressure during 2015.

ANA and Cebu Pacific scoop top Asian airline awards at CAPA gala. Emirsyah Satar exec of the year

15-Oct-2014 1:25 AM

The CAPA Awards for Excellence in Aviation are awarded to airlines and airports that are not only successful but have also provided industry leadership in adjusting to a new environment. At a time of industry upheaval, our winners are adopting strategies that offer new directions for others to take up.

All Nippon Airways (ANA) has been named the CAPA Asia Pacific Airline of the Year at a gala reception at the CAPA Asia Aviation Summit in Singapore.

Hiroyuki Ito, Senior Executive Vice President of ANA, accepted the award from CAPA Executive Chairman, Peter Harbison. The CAPA Asia Pacific 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.

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