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jetBlue’s Mint a great example of innovation; next phase now tests its premium model more widely

15-May-2016 9:10 PM

Nearly two years ago jetBlue debuted its Mint premium product, which was a bold move for a low cost, hybrid-like North American airline. The company is the only low cost airline in the Americas that offers a dedicated premium product, and the success of Mint has even surprised jetBlue’s senior management.

In an increasingly vanilla US marketplace, largely driven by Wall Street analysyt demands for short term profits, Mint’s success has beaten jetBlue’s own expectations, and now the airline is planning a massive expansion of Mint routes from its three largest bases – New York, Boston and Fort Lauderdale. jetBlue is undertaking the spread of Mint as Alaska and Virgin America work to gain approval for their merger, then to embark on a years-long integration process of the two. During that time jetBlue will leverage its strengths to inject a premium product into some of Alaska and Virgin America’s important transcontinental markets.

There is much for jetBlue to digest as it works to roll out Mint in several additional markets. But with Mint’s current track record, jetBlue is not surprisingly remaining open-minded about its scope.

Copa Airlines margins compressed by continued economic deterioration in Latin America

13-May-2016 10:39 PM

Copa Airlines has revised its 2016 capacity targets downwards to 2% growth, which is half of the expansion the airline recorded in 2015. The cuts are against a backdrop of the IMF forecasting a 0.5% contraction in Latin America’s economy in 2016, which is deeper than the 0.3% decrease in 2015.

Given the effects of Latin America’s deteriorating economy on market demand, Copa has cut its margin forecast for 2016. The company is warning that operating margins for 2Q2016 could fall to the low single digits, which is a significant drop from Copa’s historical highs.

The company admits that it has little visibility beyond 2Q2016, but believes that unit revenues in 2H2016 will be slightly lower than the year prior. Although conditions remain historically weak, there is some easing of currency depreciation and capacity cuts by other airlines, but it remains to be seen when the benefits of those changing dynamics will materialise.

Air Canada's outlook lifted by slowing domestic capacity as it works to maximise fleet flexibility

13-May-2016 1:49 PM

Air Canada believes that changes it is making to business strategy – aircraft densification and the expansion of its low cost subsidiary, rouge – are positioning the airline to weather uncertain economic conditions in Canada and in other geographical regions.

A decline in industry domestic capacity later in 2016 should benefit Air Canada and rival WestJet, but Air Canada’s yields will continue to decline because certain components of its strategy blueprint – longer stage length and a higher proportion of leisure travellers – dictate a decrease in yields.

Although Air Canada has ceased offering capacity guidance, most of its planned expansion of supply in 2016 is pegged for international markets as it works to craft a global network that rivals that of its large North American peers. Perhaps to reassure investors that it is prepared to act rationally if conditions suddenly worsen, Air Canada is stressing the flexibility it retains to adjust its fleet and redeploy capacity from underperforming markets to other regions of its network.

WestJet after 20 years. The new LCC challenges: preserving the culture but rising to the business

9-May-2016 5:25 PM

The Canadian airline WestJet has been confronted by paradoxes in early 2016, a period in which the company celebrated its milestone 20th anniversary. After attaining an investment grade rating from Standard & Poor’s in 2014, in 2016 WestJet has secured that coveted status from a second ratings agency, Moodys. WestJet and Alaska joined Southwest Airlines in obtaining investment-grade status in 2014, followed by Delta Air Lines in 2016.

But as it marks two decades in business WestJet is facing challenges. In the short term, economic weakness in the resource-driven province of Alberta dragged down its revenue performance in 1Q2016, and in the long term, WestJet needs to ensure that the employee sentiment that helped propel it to its 20 year anniversary remains intact. It has faced union drives in recent years, which is inevitable as the company continues to expand.

WestJet has evolved from a pure low cost airline to a hybrid company that caters to both leisure and corporate customers. At times the transition has not been easy on its culture. Cultural preservation will be key as WestJet forges a path for the next decade and beyond.

US airlines use JVs to expand Asia presence, but dissenting voices: CAPA Americas Summit (VIDEO)

9-May-2016 4:55 PM

The year 2016 marks the third consecutive year of high single-digit growth between Asia and North America, and the third year of approximately 20% annual growth between China and the United States. Between 2012 and 2016, trans-Pacific flights have grown from 150 a day to 193 while those just between China and the US have doubled from 21 to 42. One in five trans-Pacific flights is travelling between China and the US, and one in four from China to Canada/US.

Although demand is strong, capacity has arguably grown slightly faster. This pressure, combined with wanting to secure a strategic foothold, has the result that airlines on both sides are considering deeper partnerships, including joint ventures. CAPA's recent Americas Aviation Summit held in Las Vegas brought together airlines representing the spectrum of trans-Pacific alliance developments: ANA, which has a joint venture with United and wants to expand it to include Air Canada; Air China, which wants closer ties to its Star partner United, and equity partner Cathay Pacific; Korean Air, which has been aggressively courted by Delta; and Hainan Airlines, which is seeking a partnership solution. Hainan opposes any JVs that foreign airlines may seek to establish with state-owned airlines, such as Air China. Hainan's worries of protectionism could gain ground with the US DoT, which permits JVs so long as there is open skies and no barriers to entry. US-China open skies is one of the most pressing aeropolitical matters.

Chinese airlines' widebody orders signal China's expanding impact on global aviation

6-May-2016 12:36 PM

There can be no doubt about the long-term growth opportunity for Chinese airlines in long haul markets. But the short term is challenged by air traffic rights being exhausted or nearly utilised in key markets such as Canada, Germany and the US. The foreign parties have sticking points – slots, overflight rights – that are not easily solved, meaning that Chinese airlines could face a few years of dancing around bilaterals that are maximised, or they may experience only incremental growth.

Yet widebody aircraft deliveries are growing. The four main Chinese airlines – Air China, China Eastern, China Southern and Hainan – will take 22 further widebodies in 2016, 18 in 2017 and then 37 in 2018. These are official figures and exclude pending deals (10x 777-300ERs for China Eastern) as well as aircraft that appear on order books at the last minute. This also excludes the growing widebody operation at secondary airlines such as Beijing Capital Airlines, Tibet Airlines and Xiamen Airlines. Air China and China Eastern have 50-80% as many widebodies on order as they do in service.

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This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

This content is exclusively for CAPA Membership Subscribers

CAPA Membership gives you the latest aviation news and alerts, access to CAPA articles, reports, and our leading aviation data with optional premium add-ons.

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