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Air Zimbabwe needs USD368m to support operations, only three aircraft currently operational: reports
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 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 (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.
With the Farnborough International Airshow over, the major aircraft manufacturers have reported their July orders and deliveries and 2014 is shaping up as another exceptionally strong year for the global airliner market.
Despite the talk of an aircraft ordering bubble, demand remains strong despite some regional weaknesses, order backlogs continue to hit record highs and the major problem for manufacturers is getting their aircraft into the hands of their customers at rates that satisfy them.
Thai low-cost carrier Nok Air is expecting a recovery in 2H2014 after incurring a rare loss in 2Q2014. Political instability and intense competition made it virtually impossible for any Thai carrier to be profitable in 2Q2014. But Nok is optimistic market conditions are improving, enabling its existing short-haul operation to again be profitable in 2H2014.
The expected recovery of the Thai market also bodes well for its new long-haul low-cost joint venture carrier NokScoot, which plans to commence operations in 4Q2014 with two-class 777-200s operating routes to North Asia. Nok is also preparing to launch services to Vietnam, which will become its second international market after Myanmar.
Nok is currently the largest carrier in Thailand’s domestic market, which continues to grow rapidly this year despite the political turmoil but has become intensely competitive. Regional international expansion and the launch of NokScoot will unlock new growth opportunities for the until now domestic-focused 10-year-old LCC.
US ultra low-cost airline Spirit Airlines has embarked on the first phases of adding sophistication to the revenue management of ancillary products. The foundation of its business model is based on maximising total revenue, which includes both revenues generated from fares and add-ons including carry-on and checked luggage and seat assignments.
Fort Lauderdale-based Spirit during 2Q2014 introduced some rudimentary dynamic pricing on bag charges during peak periods as it works to maximise its ancillary revenues. Spirit has previously stated that it could foresee non-ticket sales representing 50% of its revenues in the future; but concludes the growth will be more incremental compared with the rapid expansion of those sales during the past few years.
Spirit is gearing up for a high growth period as its capacity in CY2015 is growing roughly 30%. The increase may seem hefty for the mature US market place, but Spirit is repeatedly assuring there is enough stimulative demand to support its ambitious growth targets.