CAPA Leading Edge is the Centre for Aviation's general blog featuring airline strategy developments, market comparisons, executive interviews and airframer updates.
Planned Northern Mariana Islands flag carrier Saipan Air has indefinitely postponed its launch following its charter partner Swift Air failing to fulfil its contractual obligation to provide aircraft a mere week before Saipan Air's planned 01-Jul-2012 launch to Tokyo Narita. Swift Air subsequently filed for bankruptcy, leaving it unclear if Saipan Air can recoup any of the USD1.26 million it paid to the US charter operator.
At the same time of Saipan Air's collapse, Delta announced it would increase summer capacity between Tokyo Narita and Saipan from 14 weekly flights to 18, although this addition will still be less than what Saipan planned to introduce, and will leave other markets unserved. Delta is the sole operator between Tokyo and Saipan, an island commonwealth of the US that has been vying with Guam to increase tourists. The current wave of Japanese LCCs, as part of a larger North Asian LCC movement, may achieve that in Saipan Air's place.
The Republic of Macedonia is set to see greatly increased low-cost carrier penetration in winter 2012/13 with the upcoming expansion by Hungarian LCC Wizz Air. Rather than simply increasing competition, the services will open up a wide range of new routes from the Macedonian capital Skopje.
Wizz Air announced earlier this month that it would launch six services from Skopje to Munich, Dortmund, Basel, Eindhoven, Malmo and Milan. The services will commence from the start of the winter 2012/13 schedule. The airline already operates to Skopje from London Luton and Venice Treviso, three times weekly and twice weekly, respectively.
New long-haul service by Caribbean Airlines to London Gatwick has been plagued by disruption even before the initial launch, reflecting an overestimation by the carrier of easily adding widebodies to its fleet of Boeing 737s and turboprops, and gaining the necessary approvals to debut the flights in a timely manner. The carrier is also facing commercial challenges, having announced the routes only a few months before they were to launch, limiting sales time.
Caribbean detailed plans earlier this year to re-enter the UK market as Virgin Atlantic’s flights from Kingston, Jamaica to Gatwick were due to end in Apr-2012. The airline’s predecessor BWIA sold its London Heathrow slots to British Airways in 2007.
Delta Air Lines is continuing to slowly pare down its hub in Memphis, Tennessee as recent schedule changes show the carrier is cutting about 49 daily flights beginning Sep-2012 in markets largely operated with 50-seat regional jets. Delta has found a four-bank schedule at Memphis provided too much capacity, and is trimming it down to three banks.
Once the changes that are scheduled to start at the beginning of Sept-2012 are complete, Delta will serve four destinations from Memphis with just seven weekly flights: Cleveland, Ohio; Columbia and Springfield, Missouri; and Fort Smith, Arkansas. The cuts will also affect Milwaukee, Wisconsin; Omaha, Nebraska; and Philadelphia, Pennsylvania, which will have just 14 weekly flights each from Memphis. Delta deploys 50-seat jets in all those markets except Philadelphia, where the carrier operates 76-seat regional jets.
Peach Aviation, the first of a new wave of low-cost carriers to enter Japan, has reported a solid first month of operations, carrying in Mar-2012 approximately 67,000 passengers across three routes with a load factor of 83%, above initial projections.
This traffic, however, has come at the expense of parent company All Nippon Airways (ANA), which saw year-on-year traffic and load factor declines above the system average. The negative story at the mainline operation is the same when measured against traffic in Mar-2010. While Peach is young and ANA's other LCC, AirAsia Japan, is yet to launch, the presence of traffic cannibalisation is evident. While this is not unexpected and ANA has planned for it, the level of cannibalisation appears to be above ANA's projections. It is a sign of the changing North Asia market, and a worry for ANA, which holds by far the largest share of domestic Japanese capacity – and plans domestic growth in coming years.
British Airways is making one of its first significant network changes following the acquisition of bmi (by parent company International Consolidated Airlines Group) with the Dec-2012 resumption of services to South Korea's Seoul, which BA last served in 1998. BA will operate six weekly Boeing 777-200 flights on the route. "British Airways is delivering on its promise to increase long haul flying to Asia following IAG’s purchase of bmi," the carrier said in a statement.
Following the bmi acquisition IAG CEO Willie Walsh spoke of a number of routes BA would look to launch with the London Heathrow slots bmi would bring to IAG. Mr Walsh named South Korea, as well as Indonesia and Malaysia, as specific examples.
Frontier Airlines believes its tactic to target markets from its main Denver base not served by rival Southwest Airlines remains the best method in fortifying its major hub. But at the same time Frontier is looking to lessen its reliance on a single hub and is exploring new bases, two of which are opening this summer supported by a single aircraft.
Southwest returned to the Denver market dominated by United and Frontier in 2006, and since that time has built its presence at the airport to 159 daily departures to 51 destinations. Based on US Department of Transportation (DoT) data, Southwest had a 22.5% market share at the airport from Feb-2011 to Jan-2012.
Some members of the public were incredulous last year after Qantas announced it would cut its London capacity by over a third in Mar-2012, months before the summer 2012 Olympic Games being held in London. They saw the Games presenting a large traffic opportunity and thought Qantas should wait for the Olympics to pass before reducing London capacity. But in fact the Olympic Games or any sporting event when held in a large city present little uplift. While leisure demand increases, corporate traffic tends to whittle.
British Airways and Virgin Atlantic, some of the most exposed to London, expect no notable uplift from the Olympics. During the 2008 Olympic Games in Beijing, airlines recorded traffic – and financial – losses as security measures stunted growth.