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Royal Brunei Airlines focuses on regional growth as restructuring phase ends, new 5-year plan begins
Royal Brunei Airlines is preparing a new five year business plan which will see it pursue expansion of its regional network within Asia-Pacific. The government-owned flag carrier, which recently celebrated its 40th anniversary, enters a new chapter after completing a restructuring and renewing its widebody fleet.
Royal Brunei (RB) is now evaluating several potential new destinations for 2016 and beyond. Expansion will be made possible mainly by a larger narrowbody fleet, which will grow from six to nine aircraft in the new five-year plan, as well as the delivery of a fifth 787.
The focus will be on expanding regional operations within Asia as RB is unlikely to expand its long-haul network despite performance improvements following the transition to 787s. But the new A320neo fleet will open up opportunities for new medium-haul routes to Australia, South Asia and North Asia.
SAS narrowed its underlying loss in 2QFY2015, after stripping out the gain on the sale of two slot pairs at London Heathrow. The Scandinavian airline is enjoying a more benign capacity environment this year, particularly in short and medium-haul markets, and is cutting its own capacity. This allowed it to grow its unit revenue at a faster pace than its unit cost, prompting a modestly more positive outlook for FY2015.
Although SAS has invested in product improvements and is growing its revenues from members of its Eurobonus scheme, low cost competition in Europe is making short-haul markets increasingly price-based. FY2015's positive unit revenue conditions may not last, especially within Europe.
Looking into 2016, SAS is planning to return to capacity growth, through long-haul expansion. It is looking at adding further long-haul aircraft to its fleet, beyond the four A330s and eight A350s currently on order. However, competition on long-haul markets is also fierce.
Indonesian flag airline Garuda Indonesia is resuming international expansion as it takes its last batch of four 777-300ERs and acquires 30 787-9s along with 30 A350s. The expansion comes as Garuda's outlook improves after a challenging 2014, which led to a restructuring of its international network and a hiatus from international growth.
The additional 777-300ERs will support international capacity growth in the near-term, including more capacity to Saudi Arabia in 2H2015 and new services to Frankfurt and Paris in 2016. The 787-9s and A350s will partially be used to replace Garuda’s fleet of A330s from 2020 but will also enable further growth of the carrier’s medium and long-haul networks.
Meanwhile Garuda is adjusting its widebody fleet plan by opting not to include a first class cabin in its additional 777s, although at least for now it will maintain a first class product in its original fleet of six 777-300ERs. Garuda also plans to remove the business class cabin on six A330s, giving it an all-economy product similar to the A330s operated by low-cost rivals Indonesia AirAsia X and Lion Air.
Philippine Airlines (PAL) is leasing two additional 777-300ERs and is looking to acquire four to six new-generation widebody aircraft, most likely A350-900s. The group’s new widebody fleet plan envisions phasing out six recently acquired A340-300s over the next three years while also potentially pursuing relatively modest long-haul growth.
PAL is keen to offer a standard product across its long-haul operation, which currently consists of one destination in Europe and five in North America. Los Angeles and San Francisco could transition to an all-777-300ER operation by the end of 2016, while A350s could be used to introduce non-stops to New York, which was launched in Mar-2015 with service via Vancouver.
PAL is also planning to standardise its A330-300 fleet by retrofitting the eight aircraft which currently are in all-economy configuration. PAL may sublease two of its 15 A330-300s but growth of the medium-haul network could still be pursued using A321neos.
It was not Japanese aviation's proudest day when All Nippon Airways was selected to sponsor the re-rehabilitation of bankrupt Skymark Airlines, the country's third-largest airline. Putting Skymark under the wing of ANA thereby returned air transport to an ANA-JAL duopoly that the Japanese government has for years worked in vain, and perhaps unenthusastically, to prevent.
Now foreign forces may reverse the situation in a challenge to Tokyo's preferred political outcome. Airbus and lessor Intrepid represent the majority of Skymark's debt, allowing them considerable weight over Skymark's restructuring plan – if a Tokyo court, undoubtedly under political pressure, gives airtime to non-Japanese concerns. At the centre of the dispute are Skymark's discarded A330 and A380s that are customised and difficult to place with other airlines. It appears Airbus and Intrepid expected ANA to offer a satisfactory solution for the aircraft but now there is none.
Airbus and Intrepid may prefer Skymark to restructure with the help of a different airline that will remedy the A330/A380 situation. Skymark has been shopped around to most of the world's airlines; China's HNA put in an offer; Delta could be a candidate, still lacking a Japan solution. A Skymark independent of ANA is in Japan's interest, if the country can accept a foreign airline as its partner.
Canada’s two major airlines have adopted divergent - but ultimately converging - paths during the last few years to lay the foundation for expanding margins and ensure sustained positive financial results. WestJet has opted to create a product mix to attract a higher percentage of business travellers while attempting to avoid alienating its core cost conscious customer base. Air Canada has decided to increase its reach among leisure passengers.
Overall, each airline’s respective strategy appears to be paying off in the form of solid returns, margin expansion and increased profitability. But both airlines in the short term are facing unit revenue and yield pressure for different reasons.
Similar to most US airlines, WestJet and Air Canada continue to deliver strong top-line results even if unit revenues remain under pressure. But if oil prices, which are slowly ticking upwards, suddenly start to rapidly rise, Canada’s airlines may need to revisit their capacity projections as overall supply in some regions is exceeding GDP growth.