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Hawaiian Airlines is bracing for industry capacity increases on its North American routes during 2Q2015 ahead of the debut of new flights by Virgin America in 2H2015. At the same time the airline’s international routes are facing some pressure due to the elimination of fuel surcharges and currency fluctuations.
Despite those challenges Hawaiian maintains a bullish outlook for 2015 as it works to leverage its dominant position in the inter-island market and embarks on a course of de-levering its balance sheet now that it is taking a breather in aircraft deliveries and long-haul expansion.
After stating in late 2014 that it was examining various forms of capital allocation, Hawaiian has outlined a USD100 million share purchase programme now that it has achieved certain balance sheet targets, which provided the airline some flexibility to consider alternative uses of cash.
Sichuan Airlines is due to take delivery of an Airbus A320 family aircraft on 22-May-2015, giving the Chengdu-based carrier 100 aircraft. Sichuan becomes the seventh airline in China to have a fleet of 100 or more aircraft. Globally Sichuan will be the world's 50th largest airline by fleet size. Sichuan intends to take another 100 aircraft over the next decade.
Sichuan's hinterland is mostly in China's west, from Xi'an and Kunming to Chengdu and Chonqging, although it also has a large presence along China's eastern seaboard. Sichuan carried just under 20 million passengers in 2014, almost all domestic.International flying, which accounts for 9% of Sichuan's seats in May-2015, is mostly around Northeast and Southeast Asia but limited long-haul links extend to Australia, Moscow and Vancouver.
All of China's Big Three airlines – Air China, China Eastern and China Southern – have a direct or indirect stake in Sichuan Airlines, creating competing interests in China's booming west.
Azul believes Brazil-Buenos Aires service is unviable, partially driven by fifth freedom competition
As the major US airlines sought improved access to Latin America in the 1990s, Brazil and Argentina were persuaded - with some reluctance - to agree to open skies bilateral conditions. One consequence of this liberal environment has indirectly been to open up fifth freedom access between the two countries.
Brazil’s third largest airline Azul concludes now that it cannot profitably serve Buenos Aires, due in part at least to the participation of third country airlines. Buenos Aires is a market in high demand among its customers, but the abundant capacity, including from airlines operating fifth freedom services through Brazil to Argentina, puts this out of the question.
With Buenos Aires unviable for Azul in the short to medium term, it looks as if the airline will focus on more international expansion to the US until its Airbus A350s begin arriving in 2017.
Azul is also keen to strengthen its existing partnership with United and initiate a tie-up with JetBlue, which has a strong presence in Azul’s US markets. Those aspirations likely exclude any consideration by Azul of examining a potential partnership with Gulf airlines.
Spirit Airlines plans to introduce 24 new routes in 2Q2015 after adding Cleveland to its network earlier in the year. The biggest push during 2Q is from Houston Intercontinental, where the airline is adding eight new nonstop destinations that include seven to Latin America.
The rapid route expansion results in Spirit having a significant portion of its network under development, which along with some lingering pricing compression in other market is pressuring Spirit’s unit revenues. It projects a unit revenue decline of 14% to 15% for 2Q2015, which wider than the nearly 10% drop it recorded in 1Q.
Spirit has refined its FY2015 operating margin guidance to a still healthy 24% to 27% as it still faces some lingering pressure in Dallas, one of its larger markets. But it is still the reigning lowest cost producer in the US, which gives is some leverage to navigate the current competitive environment.
Canadian hybrid carrier WestJet has settled into another ambitious year during 2015 as it adds more service to Europe and introduces Boeing 767 widebodies into its fleet. That expansion accompanies further growth of its regional subsidiary Encore, which is growing in Canada’s eastern provinces.
But depreciation of the CAD against the USD and some economic pressure in Canada’s western provinces where WestJet has a large presence are posing challenges for the airline in 2015. At the same time WestJet is facing oversupply in the Caribbean and Mexico, which is creating pricing pressure in those regions.
With its underlying financial strength, WestJet should be able to withstand most of the challenges its faces in 2015 as the company continues to evolve from a traditional low-cost airline to a global competitor. This CAPA analysis of WestJet’s strengths, weaknesses, opportunities and threats continues a series of SWOT reports on global airlines.
Canadian airline Porter received a boost in early 2015 with the sale of its terminal at its largest base and headquarters Billy Bishop Toronto City Airport. The sale no doubt helped to shore up Porter's finances at it awaits a decision by the city on whether it can move forward with operating Bombardier CSeries narrowbody jets from the airport.
The city is not likely to render a decision until late in 2015 as studies of the proposal, that includes a runway extension, continue. But Porter’s rival Air Canada has recently raised staunch opposition to the operation of jets at the airport even as the airline in the past reportedly cited interest in using jets at the airport closest to Toronto’s city centre.
As Air Canada formally (and unsurprisingly) launches opposition to Porter’s plans, Porter is operating in a status quo scenario while likely facing some of the same challenges other Canadian airlines face in 2015 – primarily pressure from the decline of the CAD against the USD.