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787 and A350 airline operators will open up new Europe-US routes - despite some inertial resistance

17-Sep-2014 8:50 PM

The development of the new generation wide body aircraft such as Boeing's 787 and Airbus' A350 may soon lead to direct services from European hubs to a growing number of secondary cities in North America. The EU-US Open Skies agreement opened up the market to a large degree, but hub economics mean that most EU airlines still focus their large wide body operations on the major gateways. In practical terms, once they land at the main US hubs, access to airports beyond remains restricted.

It may be some time before European airlines can operate from and to secondary cities at both ends of the route, but operators of these more fuel efficient and smaller wide bodies can offer direct flights from their hubs in Europe to US cities that were once only 'beyonds'.

Criteria for choosing US cities are likely to include population, importance as a tourist destination, airport size and the presence of network carriers to add feed (possibly in preference to LCCs). New cities such as San Antonio, Nashville, Memphis, New Orleans and even Honolulu may be under consideration in the coming years.

Japan Airlines to re-open Osaka-Los Angeles, consider New York-Sao Paulo, cut during restructuring

13-Sep-2014 9:00 PM

Japan Airlines' international growth in recent years has been focused on new services, such as to Boston and San Diego. But now Japan's second largest international airline is reviving routes it cut during financial difficulties. JAL has re-instated its second daily New York service and will re-open an Osaka Kansai-Los Angeles route in Mar-2015. That will be JAL's only long-haul route outside of Tokyo, and the carrier has mooted re-opening Osaka Kansai-London Heathrow as well. Also under consideration is resuming Sao Paulo service, likely via New York.

JAL is looking to grow international services as its domestic market faces limited growth prospects. And with 30 787s on order, and later A350s, there are aircraft that will need new routes, even if many orders are for replacement. The drawback to international growth is financial pressure. JAL in 1Q2014 (the three months to 30-Jun-2014) fared much better in its international network than All Nippon Airways, whose rapid expansion at Tokyo Haneda created over-capacity that weakened load factors and yield. JAL's challenge will be to gradually build international services, but further capacity should still dampen international financial performance. However, with margins being in the double digits, there is room to give in exchange for larger profits. 

Fiji Airways plans modest growth and focus on local market as profitability continues to improve

9-Sep-2014 11:13 AM

Fiji Airways is planning modest growth over the next five years as it focuses on further improving its profitability. The flag carrier has been profitable for four consecutive years and recorded a record half year profit in 1H2014 but CEO Stefan Pichler sees potential for even higher margins.

Mr Pichler just completed his first year at Fiji Airways and has been concentrating on improving the group’s management structure and customer service. He also has implemented a new five-year business plan that focuses on sustained profitability with an average growth of only 3.5% per annum.

Fiji Airways, which was known as Air Pacific until mid-2013, has benefited from widebody fleet renewal following the delivery of three A330-200s in 2013. In 2014 it has turned its attention to renewing the fleet at recently rebranded turboprop operation Fiji Link.

Brazil’s domestic aviation market remains stable despite macroeconomic uncertainty

30-Aug-2014 6:48 PM

Brazil’s domestic airline market appears to remain in a rational state as the country continues to battle economic weakness. Its two largest airlines TAM and Gol are maintaining capacity discipline, which is helping each company’s respective performance in the domestic market.

The country’s other two main airlines, Avianca Brazil and Azul, are continuing their solid growth trajectories, but their supply expansion and traffic growth appear in line, which does not seem to be triggering a scenario of oversupply within Brazil.

Brazil’s economy could take a slight upswing in CY2015 as its GDP growth is forecast  at 2.7% versus a more sluggish 1.8% in CY2014, according to estimates from the IMF. If capacity remains rational in the market place, then Brazil’s slightly more promising economy should create some positive momentum for the country’s airlines.

Allegiant cites strong opportunities in the US market as new Mexico service falls in importance

29-Aug-2014 11:36 AM

Allegiant Air continues to stress there are ample opportunities to expand in the US domestic space as its planned transborder service to Mexico appears to be diminishing in priority.

The company believes that its niche is still highly relevant within the US market, highlighting its major advantage of being largely shielded from competition in its markets, a theme consistent with Spirit's thinking too. The logic is prominent in Allegiant’s new routes coming online in late 2014 from Florida leisure markets to small cities, which epitomise Allegiant’s strategy.

But despite strong top line financial results Allegiant is facing cost headwinds in FY2014 from a transaction it concluded earlier in the year to acquire Airbus narrowbodies and crew training expense that could drive up unit costs excluding fuel in 2014 by as much as 8%.

Royal Brunei Airlines outlook brightens as fleet is renewed and regional network expands

28-Aug-2014 7:22 PM

Royal Brunei Airlines (RBA) should start to see improvements over the next year in its long-haul operation after completing the transition to an all-787 widebody fleet. The long-haul network, which has been highly unprofitable and relies heavily on transit traffic, will also benefit from new regional feed from Bali and Ho Chi Minh.

RBA’s short-haul operation, which is not nearly as unprofitable as it relies primarily on higher yielding point to point traffic, should also see improvements as the network is expanded. Larger gains will come in 2017 when the airline starts to take delivery of A320neos, which will reduce operating costs and open up new medium-haul routes that are too thin for widebodies.

RBA is looking at using the A320neo to resume expansion in Australia and launch services to South Asia. Beijing, Seoul and Tokyo may also be added as part of a new five-year plan. Modest expansion is a realistic scenario for RBA as the flag carrier is now tracking ahead of the targets set in its last five-year plan, which was prepared in 2011 and initially focused on a restructuring.

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